Were Analytics the Real MVP of the Super Bowl?

As the Eagles readied to celebrate the franchise’s first Vince Lombardi trophy, an unlikely candidate basked in the glow of being declared the game’s Most Valuable Player. Surely it was Nick Foles who, on his way to upsetting one of the NFL’s elite franchises threw and caught a touchdown in the same big game, was the true MVP. But was he?

In the days leading up to the Super Bowl, the New York Times published an article about how the Eagles leveraged analytics to secure a Super Bowl berth. The team relied, in part, on probabilistic models that leveraged years of play data to calculate likely outcomes, given a specific set of circumstances. They found that while enumerating outcomes and optimizing for success, the models would, in many cases, recommend plays that bucked the common wisdom. Indeed, we saw the Eagles run plays and make decisions throughout the season that, to the outside observer, may have seemed mind-boggling, overly-aggressive, or risky. Of course, the outside observer did not have access to the play-by-play analytics. Yet, in many instances, these data-driven decisions produced favorable results. So it seems that analytics were the real MVP, right? Well, not entirely.

As we have written in the past, the most effective analytics platforms provide guidance and should never be solely relied upon by employers when making decisions. This analytics concept rings as true in football as it does in business. The New York Times article talks about how mathematical models can serve to defend a playmaking decision that defies traditional football logic. For example, why would any team go for it on fourth and one, deep in their own zone, during their first possession in overtime? What if the analytics suggested going for it was more likely to result in success? If it fails, well, the football pundits will have a lot to talk about.

Coaches and players weigh the analytics, examine the play conditions, and gauge on-field personnel’s ability to perform. In order words, the team uses analytics as a guide and, taking into account other “soft” variables and experience, makes a decision that is right for the team at that time. This same strategy leads to success in the business world. Modern companies hold a wealth of data that can be used to inform decisions with cutting edge analytics, but data-driven insights must be balanced with current business conditions in order to contribute to success. If this balancing act works on the grand stage of professional football, it can work for your organization.

Indeed, we may soon see a day when football stars raise the Super Bowl MVP trophy locked arm-in-arm with their data science team. Until then, congratulations, Mr. Foles.

 

Jackson Lewis P.C. © 2018
This post was written by Eric J. Felsberg of Jackson Lewis P.C. 

Athletes and Employees Speak Out: Do Your Employment Practices Drop the Ball in Addressing Diversity, Controversial Speech, or Tensions at Work?

With the 2017-18 National Football League (NFL) regular season and National Basketball Association (NBA) pre-season underway, many spectators are excited to don their favorite players’ jerseys and cheer on their teams. Yet in recent years, many fans also find themselves equally entrenched in controversial debates that have little to do with who wins or loses the game.

Rather, these dialogues relate to the frequent media coverage over the alleged “blacklisting” of former San Francisco 49ers quarterback Colin Kaepernick after he took a knee during the national anthem last season to protest police brutality against minorities, related demonstrations held in front of the NFL’s corporate offices, and actions of solidarity on football fields across the country by athletes like Marshawn Lynch and members of the Cleveland Browns virally trending with the hashtag #ImWithKap. Most recently ESPN sports host, Jemele Hill, drew the attention of the White House and placed her own employment in the cross-hairs by stating in a series of tweets that President “Donald Trump is a white supremacist who has largely surrounded himself w/ other white supremacists” and is “unqualified and unfit to president.” and in In response, the White House press secretary called Hill’s statements a “fireable offense.”

As athletes and other public figures use their careers to bring awareness to social movements and other world events such as the Charlottesville tragedy, the implications of social movements on employee relations remains a hot topic that poses challenging issues for employers related to diversity, inclusion, and free speech. Here are a few of those related topics and some practical suggestions of ways employers can address these issues in the workplace:

Does the First Amendment Apply to Athletes or Employees Generally?

People often mention their First Amendment guarantees without understanding that this right is not without certain limitations, especially in the employment context. Specifically, while this protection covers federal, state, and local government employees, courts have held that First Amendment protections do not generally extend to the employees of private-sector employers.

Does Social Media Change Things?

As evidenced by legendary athletes Dale Earnhardt Jr.’s and Kareem Abdul-Jabbar’s Twitter posts in response to the Charlottesville tragedy, many athletes and employees use social media to vocalize their positions on social issues. The National Labor Relations Board (NLRB) has taken on cases where employers have fired or taken disciplinary actions against employees who have engaged in certain protected speech via various social media platforms. On the agency’s website, the NLRB states: “The National Labor Relations Act protects the rights of employees to act together to address conditions at work…. [t]his protection extends to certain work-related conversations conducted on social media”.

This raises the question: Can an employee be disciplined for making racially- or politically- charged speech via social media?

The standard that the NLRB considers is whether the employee is engaging in “protected concerted activity” involving the terms and conditions of employment. Courts have used a multi-factor assessment to determine whether discipline or discharge violates Section 8(a)(1) of the NLRA, which evaluates whether:

  1. the activity in which the employee was engaged was “concerted” within the meaning of Section 7 of the NLRA;
  2. the employer knew of the concerted nature of the employee’s activity;
  3. the concerted activity was protected by the NLRA; and
  4. the discipline or discharge was motivated by the employee’s protected, concerted activity.

If the employer alleges that an employee engaged in misconduct during otherwise protected activity, the NLRB generally considers four factors in determining whether speech is protected:

  1. the place of the discussion;
  2. the subject matter of the discussion;
  3. the nature of the employee’s outburst; and
  4. whether the outburst was, in any way, provoked by an employer’s unfair labor practice

In many instances, purely individual speech about a social or political topic that in no way involves an employee’s work conditions will not be protected by the NLRA. Because of the fact-specific nature of the inquiry, a determination must be made on a case-by-case basis.

So What Now?

Even employers not covered under the First Amendment and NLRA’s protections are finding themselves examining some weighty questions. For example:

  • Although there may be legally sanctioned limitations to free speech in the workplace, does the modern day work culture require employers to facilitate an employment experience that goes beyond what the law requires?
  • Are employers tasked with creating a workplace that is inclusive but also allows people to express unique (and sometimes controversial) viewpoints on social or political issues?
  • If so, how does this work and does it ultimately help the business to thrive long term?

Last year the NBA and the NBA’s Players Association (NBAPA) appeared to have answered this question in the affirmative and implemented this approach with its players. Despite having player agreements with language that can, in some cases, regulate players’ conduct, NBA athletes have expressed their positions on social issues both on and off the court.  For example, during pre-game warm ups LeBron James wore a t-shirt stating “I Can’t Breathe,” bringing awareness to the death of Eric Garner. Similarly, Carmelo Anthony and Dwyane Wade made a social action appeal during the 2016 ESPY awards.

Many players have been so outspoken that last year NBA Commissioner Adam Silver and NBPA Executive Director Michele Roberts penned a letter noting that both organizations were addressing the best ways they could move forward in “developing substantive ways . . . to come together and take meaningful action.” The letter noted that, in recent weeks, many teams had reached out to the organizations to figure out how they could “create positive change” and garner support with team efforts.

Employers may want to take note of the ways that the NBA and the NBAPA are attempting to address this topic. Additionally, employers may also want to review the following considerations.

Be Aware of Blacklisting Laws

Many states have blacklisting laws that, generally, prohibit employers from limiting former employees’ opportunities. The following are a handful of state laws regulating blacklisting:

  • North Carolina law prohibits employers from preventing or attempting to prevent any “discharged employee from obtaining employment with any other person, company, or corporation” whether by verbal or written action.
  • The California Labor Code also prohibits any person from preventing or attempting “to prevent the former employee from obtaining employment” by misrepresentation and punishes any manager or employee who knowingly “fails to take all reasonable steps to prevent” such action.
  • Indiana law makes it illegal for an employer to prevent a “discharged employee from obtaining employment with any other person” or employer.
  • Florida law makes it illegal for two or more people to “agree, conspire, combine or confederate together for the purpose of preventing any person from procuring work . . .  or to cause the discharge of any person.” The law also prohibits verbal, written, or printed communication that “threaten[s] any injury to life, property or business of any person for the purpose of procuring the discharge of any worker . . . or to prevent any person from procuring work”.
  • New York Labor Law says it is an unfair labor practice “[t]o prepare, maintain, distribute or circulate any blacklist of individuals for the purpose of preventing any of such individuals from obtaining or retaining employment because of the exercise by such individuals of any of the rights guaranteed by section seven hundred three,” which discusses the right to join a labor organization or to bargain collectively.
  • Arizona law explicitly defines the term “blacklist” as “any understanding or agreement whereby the names of any person or persons, list of names, descriptions or other means of identification shall be spoken, written, printed or implied for the purpose of being communicated or transmitted between two or more employers of labor, or their bosses, foremen, superintendents, managers, officers or other agents, whereby the laborer is prevented or prohibited from engaging in a useful occupation. Any understanding or agreement between employers, or their bosses, foremen, superintendents, managers, officers or other agents, whether written or verbal, comes within the meaning of this section and it makes no difference whether the employers, or their bosses, foremen, superintendents, managers, officers or other agents, act individually or for some company, corporation, syndicate, partnership or society and it makes no difference whether they are employed or acting as agents for the same or different companies, corporations, syndicates, partnerships or societies.”

Be Proactive

Do not wait for your company to become the next trending hashtag on social media as a result of a workplace controversy! Instead, be prepared and take proactive measures in the event employees take a stand on controversial issues. Some options are to proactively address and be sensitive to diversity issues, and to recognize and understand the benefits of workforce diversity both as a source of varied ideas and a competitive advantage. Employers may also want to consider hiring a Chief Diversity and Inclusion Officer or diversity and inclusion team responsible for addressing equity issues.

Be Current

Consider reviewing your employee handbooks, in addition to contracts you might have with individual employees (or athletes) and third parties to ensure your company’s policies regarding diversity and inclusion, nondiscrimination and harassment, and professional development are up to date. Employers may also want to consider evaluating successes and areas for growth in the following areas:

Finally, employers may want to examine records to determine whether all employees, especially management employees, have participated in appropriate diversity and inclusion trainings, particularly on implicit or unconscious bias.

Be Careful

Employer-created bans on any socially- or politically-related speech rarely if ever actually work and may create exposure to liability under the First Amendment, the NLRA, or state-specific laws. Rather than imposing an outright ban on certain conduct, employers may want to slow down and engage in careful thought at the outset prior to taking any action on behalf of the organization. Employers may also find it beneficial to acknowledge that what happens in the world impacts the workplace. Accordingly, employers may want to develop affinity or employee resource groups, and/or maintain a diversity committee that facilitates well-thought-out inclusion initiatives. With many issues at play from reducing the risk of unlawful discrimination charges to preventing social media reputational harm, planning ahead may help to avoid potential risks.

This post was written by Karla Turner Anderson & Dawn T. Collins of Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved. © 2017
For more Labor & Employment legal analysis go to The National Law Review

0.44% of NFL Brains

When The New York Times reports that 110 out of 111 NFL brains (99.09%) have chronic traumatic encephalopathy (CTE), everyone pays attention. Mothers worry about their kids. Some worry about their jobs. Senate subcommittees investigate. The Times article covers Dr. Ann McKee’s recent article in the Journal of the American Medical Association, “Clinicopathological Evaluation of Chronic Traumatic Encephalopathy in Players of American Football” (JAMA. 2017;318(4):360-370) in dramatic fashion, illustrated with pathology slides of tissue samples from the brains of former football players and anecdotal information about them. Such claims are certain to be fuel for CTE litigation and cries to ban tackle football.

Let’s put this in perspective. About 25,000 men have played American professional football. So, 110 is roughly 0.44%. Even if the real number is double, the outcome remains a statistical nonentity.

In all fairness, the study points out some of its limitations; for example, “Ascertainment bias associated with participation in this brain donation program.” Inclusion was based entirely on exposure to repetitive head trauma eliminating any form of “control” group, a necessary element of any scientific study. The authors also disclose that “public awareness of a possible link” between head trauma and CTE “may have motivated” some participants. Finally, the authors acknowledge that the study is not representative of the population of all American football participants, as most play only at the youth or high school level, whereas the majority of the donors played at the professional level. The study data somewhat illustrates that point: CTE was found in none of two pre−high school participants and three of 14 high school participants (21%).

Breaking It Down

The 800-pound gorilla in this room is suicide. Suicide among former football players gets major media attention (Junior Seau and Aaron Hernandez) and has spawned a cottage industry of CTE litigation against every level of the sport from NFL down to Pop Warner. The study tries to correlate neuropathology with “clinical observations” − information drawn from “retrospective interviews” with family members of deceased donors. Observations are grouped as cognitive, behavioral or mood or both, and signs of dementia. Suicide was identified as the cause of death in 10% of the study group. “Suicidality” (ideation, attempts or completion) is identified among 33% of the study group. Some might conclude that if you play football you are 33% more likely to contemplate or attempt suicide and 10% more likely to succeed.

In fact, the rate of suicide mortality among retired NFL players is substantially lower than in the general population. An investigation performed at the National Institute for Occupational Safety and Health (NIOSH) and published in 2016 (Lehman, et al.) found that among players retired since 1987, the suicide rate is 6.1 / 100,000. Among players retired since 2005, it’s 12.5 / 100,000. Among average American men, the rate since 2014 is 20.1 / 100,000. One would conclude that since 2005, NFL players are 48% less likely to commit suicide than the general population, and since 1987, 70% less likely. The study covered those who played for five years or more.

Of note, drugs are assessed by standardized mortality ratio – the increase or decrease in mortality with respect to the general population. “If playing in the NFL (for a minimum of five seasons) were treated like taking a drug, it would reduce the standardized mortality (measured 30 years later) by half!” Samadani, Brain Injury and Football, Reality v. Perception. THSCA presentation, 2016.

Similar studies have been done at the college level where the NCAA maintains a robust database. A nine-year study published in October 2015 (Rao, et al.) observed that as against a rate of 12 / 100,000 among 18−22-year-old non-college individuals, the suicide rate among college students was 7.5 / 100,000. Among male NCAA athletes, the suicide rate was 2.25 / 100,000.

Another study dispels the notion that CTE is a path to neurological deficit. Published in Acta Neuropathol, “Histological Evidence of CTE in a Large Series of Neurodegenerative Diseases” (Ling, et al., 2015) observed that (1) CTE prevalence in people with neurodegenerative diseases (11.8%) was the same as in controls (12.8%); (2) patients with CTE died at a mean age of 81 years and “most positive cases [were] likely to be clinically asymptomatic”; and (3) CTE is found under the microscope in equal proportions of healthy, normal, asymptomatic people as it is in people with dementia and other diseases. For those worried about doing the right thing by their kids, a study published in December 2016 in Mayo Clinic Proceedings (Savica, et al., “High School Football and Risk of Neurodegeneration: A Community-Based Study”) found that among 438 football players followed for 50 years, the risk of dementia was the same as for members of the chorus, glee club or band.

Facts and Findings

Fortunately, in court science matters. The notion that football causes CTE has been rejected by at least one United States District Court, the Eastern District of Pennsylvania, and the Third Circuit Court of Appeals. See In re NFL Players Concussion Injury Litig., 307 F.R.D. 351 (EDPA, 2015), aff’d 821 F.3d 410 (3d Cir. 2016). Judge Brody’s key findings, based on current scientific knowledge and affirmed by the appellate court, negate causation: (1) the study of CTE is nascent, and the symptoms of the disease, if any, are unknown; (2) medical research has not reliably determined which events make a person more likely to develop CTE; and (3) research has not determined what symptoms individuals with CTE typically suffer from while they are alive. In re NFL Players Concussion Injury Litig., 821 F.3d at 441.

The point: Media should not lead science. The health and psychosocial benefits of athletic activity at all ages far outweigh any perceived risk. As parents, we should encourage healthy activity. As professionals, we need to peel back what the media pushes, read the literature and understand the fundamentals.

This post was written byAnthony B. Corleto of Wilson Elser Moskowitz Edelman & Dicker LLP.
For more legal analysis check out The National Law Review.

NFL Commissioner’s Powers Affirmed in Eighth Circuit Ruling on Adrian Peterson Suspension

Adrian PetersonNFL-appointed Arbitrator Harold Henderson’s decision to uphold Commissioner Roger Goodell’s suspension of Minnesota Vikings running back Adrian Peterson for alleged child abuse was proper, The U.S. Court of Appeals for the Eighth Circuit has ruled. NFL Players Association v. National Football League et al., No. 15-1438 (8th Cir. Aug. 4, 2016).

The decision marks a further affirmation of Commissioner Goodell’s authority and almost unlimited power to discipline players pursuant to the terms of the current collective bargaining agreement between the League and its players association.

As Boston College Law Professor Warren K. Zola commented, “The power of the NFL commissioner strengthens as 8th Circuit determines ‘fundamental fairness’ is subordinate to collective bargaining.”

The Eighth Circuit’s decision overturned U.S. District Judge David Doty’s February 2015 decision vacating Arbitrator Henderson’s decision to uphold Goodell’s suspension of Peterson for the remainder of the 2014 season after Peterson pled no contest to a charge of misdemeanor reckless assault child abuse charges in November of that year.

The National Football League Players Association (NFLPA) had filed a grievance against the NFL on Peterson’s behalf following the suspension, asserting that Peterson should have been disciplined under the League’s prior conduct policy, which authorized only a maximum two-game suspension. Goodell’s appointed arbitrator rejected that argument and upheld the suspension.

The NFLPA had argued before the Eighth Circuit that Judge Doty had properly ruled that the League misapplied a domestic abuse policy enacted after Peterson’s alleged wrongful conduct in violation of the League’s collective bargaining agreement. A three-judge Eighth Circuit panel disagreed, reversing Judge Doty’s decision and concluding the district court had improperly vacated Arbitrator Henderson’s decision upholding the suspension.

The Eighth Circuit stated,

“We conclude that the parties bargained to be bound by the decision of the arbitrator, and the arbitrator acted within his authority, so we reverse the district court’s judgement vacating the arbitration decision.”

Jackson Lewis P.C. © 2016

NFL vs. Brady: NFL Wins Initial Venue Battle

Round One of Deflategate has concluded…it’s now time for Round Two.

The initial battle over judicial forums between the National Football League and the National Football League Players Association (NFLPA) to find the most favorable venue to support their legal position has ended with U.S. District Court Judge Richard Kyle ordering the NFLPA’s Petition To Vacate The Arbitration Award rendered by Commissioner Roger Goodell(Goodell) to be transferred to the United States District Court for the Southern District of New York.

Within hours after Goodell upheld the four-game suspension of New England Patriots quarterback Tom Brady, the League’s Management Council had launched a preemptive strike against the NFLPA by filing a complaint in the U.S. District Court for the Southern District of New York, where the NFL is headquartered, seeking to confirm Goodell’s “Final Decision on Article 46 Appeal of Tom Brady.” (Article 46 of the NFL-NFLPA collective bargaining contract allows discipline of a player for conduct “detrimental to the integrity of, or public confidence in, the game of professional football.”) . The case has been assigned to Judge Richard Berman and he already has ordered the NFLPA to respond to the NFL’s filing by August 13th, well before the standard period to answer a complaint.

Brady and the NFLPA attempted an end run around the New York action in the historically player-friendly federal district court in Minnesota. They filed a Petition To Vacate Goodell’s Arbitration Award. Relying on a history of success in this venue, Brady and the NFLPA sought to vacate Goodell’s award. They were blocked, however, on July 30th when the Minnesota court said the Brady and his union must do battle with the NFL in New York in light of the league’s earlier, first-filed suit.

Absent any change in the NFPLA’s litigation, Brady and the NFLPA may be expected to respond to the NFL action directly, contending (as they attempted to do in Minnesota) that Goodell:

  • disregarded the “law of the shop” which requires NFL players to have advance notice of potential discipline,

  • disregarded the “law of the shop” that conduct detrimental discipline be fair and consistent,

  • denied Brady access to evidence and witnesses central to his appeal and his rights to a fundamentally fair hearing, and

  • was incapable of serving as an impartial arbitrator as a result of his handling Brady’s initial discipline and appeal.

Specifically, the NFLPA asserts that there was no direct evidence of Brady’s culpability cited in the report prepared by NFL-appointed investigator, attorney Ted Wells, and his investigative team, and that Goodell’s discipline was based on a “general awareness” standard created by the Commissioner to justify an “absurd and unprecedented punishment”. The NFLPA also asserts that no NFL player has ever served a suspension for “non-cooperation” or “obstruction,” as Goodell has imposed upon Brady.

The NFLPA had hoped that its action would be heard before U.S. District Judge David S. Doty, in Minneapolis. In February, Judge Doty vacated an award in the Adrian Peterson child abuse disciplinary matter when he determined that the discipline issued to Peterson was inappropriate for lack of notice and that the discipline imposed was based upon a policy that didn’t exist at the time of the Peterson’s alleged rule violation. But Brady’s case was assigned to Judge Richard Kyle, instead, who “perceive[d] no reason for this action to proceed in Minnesota.”

Here, based on its previous Minnesota claims, the NFLPA had hoped to reprise a similar argument on behalf of Brady. Now the union will be forced to assert those arguments in the NFL’s selected venue. The union will assert similar arguments to U.S. District Court Judge Richard Berman and allege that Brady was never informed he could be punished for his refusal to turn over his cellphone to Wells and his team. It may also ask the New York court to vacate the Goodell arbitration decision before the Patriots’ regular-season opener against the Pittsburgh Steelers — or issue an injunction that allows Brady to play.

The dual filings of the NFL and NFLPA presented an interesting legal issue: which lawsuit has priority? Typically, when federal judges are faced with the issue of deciding which of twocompetinglawsuits filed in separate federal jurisdictions has priority, they usually invoke the first-to-file rule. While this rule is not codified, the rule is generally considered an appropriate case management mechanism within the federal system. In general, the first-to-file rule gives priority to the first action filed over the subsequent action. The general judicial interpretation of the rule gives the decision making authority of the precedence of the first filed action to the district court judge assigned to that suit.

Federal courts have applied exceptions to the first-to-file rule if its application would create an injustice upon the party that filed the second action. One such exception that presents a strong argument against giving the first filed suit priority is the “anticipatory suit” exception. The purpose of this exception is to discourage procedurally unfair suits filed to frustrate settlement discussions, or to engage in brinkmanship, or to transform a party from defendant to plaintiff not to pursue a claim or right.

One specific rationale that supports the application of “anticipatory suit” exception is the court’s pursuit of procedural fairness. This specific rationale reflects the general judicial concern that a plaintiff should not lose its choice of the forum because the defendant anticipated the impending suit and preemptively struck by filing suit first in a different court.

Here, Judge Kyle specifically acknowledged that the NFL’s filing of the New York action “triggered application of the first-filed rule.” Judge Kyle acknowledged that the rule recognizes “comity between coequal federal courts and promotes the efficient use of judicial resources by authorizing a later-filed, substantially similar action’s transfer, stay or dismissal in deference to an earlier case”.

Judge Kyle concluded that the actions filed in Minnesota by the NFLPA and the NFL’s action filed in New York were almost duplicative and that the two cases and the issues presented in both were “flip-sides of the same coin.” In conclusion, Judge Kyle stated that the “cases are part and parcel of the same whole and should be heard together in the most appropriate forum: the Southern District of New York, where the arbitration occurred, the Award issued, and the first action concerning the Award was commenced.”

While acknowledging the order that the case should be heard in New York, NFLPA attorney Jeffrey Kessler stated, “We are happy in any federal court, which unlike the arbitration before Goodell provides a neutral forum, and we will now seek our injunction in the New York court.”

Jackson Lewis P.C. © 2015

“REDSKINS” US Trademark Registrations are Canceled for Disparaging Native Americans

MintzLogo2010_Black

A three-judge panel of the US Trademark Trial and Appeal Board (TTAB), for the second time and in a 2-1 decision, has held that the REDSKINS trademark used in connection with professional football and related services by the Washington Redskins National Football League team was disparaging to a substantial composite of Native Americans between 1967-1990, the time during which the registrations issued. It also held that the defense of laches did not apply to a disparagement claim where the disparagement pertains to a group of which the individual plaintiff or plaintiffs comprise one or more members. Accordingly, it ordered the registrations at issue canceled as violations of Section 2(a) of the Trademark Act. The cancellation of the registrations has no effect on the team’s ability to continue to use the REDSKINS marks.

Efforts to cancel the REDSKINS registrations have been ongoing for many years. The first petition to cancel the registrations was filed in 1992 and, after seven years of litigation, the TTAB canceled the registrations on grounds that the marks were disparaging to Native Americans. After several rounds of appeals and remands through the DC federal courts, the case was dismissed on grounds of laches.

While the above proceedings were still pending, six new individual petitioners, all Native Americans, initiated the current case seeking to cancel the same REDSKINS registrations. The matter was suspended pending a final decision in the above proceedings, and resumed in March 2010. After four more years of litigation, the TTAB again cancelled the registrations for disparaging Native Americans.

The Trademark Act prohibits registration of a trademark which may disparage persons or bring them into contempt or disrepute. A two-pronged test was used by the TTAB to decide the issue of disparagement as follows:

  1. What is the meaning of the matter in question, as it appears in the marks and as those marks are used in connection with the goods and services identified in the registrations?
  2. Is the meaning of the marks one that may disparage Native Americans?

Both questions are required to be answered as of the various dates of registration of the marks involved, which was between 1967 and 1990, considering the views during that time of a substantial composite of Native Americans, not the American public as a whole. The questions are not to be determined based on current views on the subject.

The TTAB found that first prong was satisfied by evidence that the term REDSKINS when used by the Washington Redskins football team retained its Native American meaning and imagery inherent in the original definition of the word. It stated that the football team “has made continuous efforts to associate its football services with Native American imagery.”

The second prong of the test required a determination of whether the use of the word was disparaging within the context of its use. “Context of use” can consist of several types:

  1. One which turns an innocuous term into a disparaging one;
  2. One which strips the disparaging meaning from the disparaging term; and
  3. One which has no effect on the disparaging meaning.

The TTAB held that as used by the football team, the word “Redskins” retained its original meaning and the context of the use had no effect on the disparaging nature of the word. It noted that the team’s “alleged honorable intent and manner of use of the term” did not change this finding.

In reaching its decision to cancel the registrations, the TTAB considered expert reports and testimony, dictionary definitions, and reference books. In considering the specific views of Native Americans, it considered the National Congress of American Indians’ (NCAI) 1993 Resolution 93-11, deposition testimony of several Native Americans, and various newspaper articles, reports, official records, and letters of protest filed at the Trademark Office. It concluded that the NCAI Resolution represented the views of a substantial composite of Native Americans who believed the term was disparaging, that the trend in dictionary usage labels corroborated the time frame of objections from Native Americans starting in the late 60s and continuing through the 90s as lexicographers began and finally uniformly labeled the term as “offensive” or  “disparaging,” and that, at a minimum, approximately 30% of Native Americans found the term used in connection with football services to be disparaging at all the times at issue.

In rejecting the laches defense, the TTAB stated that it was difficult “to justify a balancing of equities where a registrant’s financial interest is weighed against human dignity.”  Moreover, both it and the courts have routinely held that when a broader public policy concern is at issue, the laches defense does not apply.

The dissenting judge disagreed with the majority’s decision on the claim of disparagement arguing that the dictionary evidence relied upon was inconclusive and there was no reliable evidence to corroborate the membership of the National Counsel of American Indians. However, he stated that he wanted to make clear that the case was “not about the controversy, currently playing out in the media, over whether the term “redskins,” as the name of Washington’s professional football team, is disparaging to Native Americans today.” He disagreed with the majority that the evidence of record proved that the term was disparaging “at the time each of the challenge registrations issued.”

According to the Washington Post, the Redskins plan to appeal the decision and the team has no plans to discontinue use of the REDSKINS mark. Unlike the last proceeding, any appeal of this decision will not go to the DC federal courts but must now go to the United States District Court for the Eastern District of Virginia. This change was implemented in the America Invents Act which was enacted in September 2011 and it is not clear how a different court will decide these issues. The cancellation of the registrations will be stayed pending any appeal.

©1994-2014 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

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Football and Antitrust Law: American Needle v. NFL and It's Meaning for Combinations in Restraint of Trade and the Rule of Reason in the 21st Century

Posted in the National Law Review on November 30th an article by the  Winner Winter 2011 Student Legal Writing Contest, Michael Sabino of Brooklyn Law School regarding  the commonality of antitrust law and the NFL:

 

NFL football.  And antitrust law.  What, if anything, do they have in common?  A great many things, one might say.  Both conjure up images of powerful contestants vying for control on the field of play.  Each participant utilizing its skills, its knowledge, and its intuition to gain an edge and dominate the game.  Competition in its purest form.  Unless somebody cheats, of course.

But rules —- that is why we must have rules.  Otherwise competition descends into chaos, battle descends into barbarism, and injuries inevitably follow.  Football, for all its controlled violence, has rules that must be followed.

In the realm of business, and the controlled violence we call “competition,” antitrust law provides these rules, in large part to keep the game fair and provide the proverbial level playing field.  Thus, even from this small comparison, we can see that professional football and antitrust law have something in common, after all.[1]

Now add to the aforementioned confluences the recent Supreme Court decision inAmerican Needle, Inc. v. National Football League, et al.,[2] where the underdog, a maker of sporting apparel, decided to challenge on antitrust grounds the loss of its right to manufacture league-sanctioned hats and headwear.  Given that the high Court’s decision lacked finality, this case has not yet reached the level of a Super Bowl victory.  Nonetheless, it is akin to a playoff win that well positions the upstart hatmaker on the road to a possible upset win over what is arguably America’s best organized and most formidable sports league.

The first half of this Article will introduce, in pertinent part, the essentials of antitrust law relevant to understanding the Supreme Court’s decision, including a brief overview of the preceding landmarks that formed the basis of the Justices’ ultimate ruling.

The second half of the Article shall be devoted to the actual “play by play” of the Court’s decision, and how it was arrived at.  And just like any given Sunday, the conclusion will mimic a postgame report as to what this decision means, and where do the contestants go from here.  But far more important, a forecast for what American Needle means, for the business of sports other than football, and the business of business itself, shall be the coda.  That said, it is time for the kick off.

I.

ANTITRUST LAW – THE BASICS

Antitrust law did not evolve in a vacuum.  Quite to the contrary, it is deeply entwined with American history, its roots going back to the progressive President Theodore Roosevelt, and his goal of stamping out or at least curtailing the monopolistic business practices that so dominated late-Nineteenth Century America.[3]

Antitrust law in the United States essentially begins with the Sherman Act, promulgated in 1890.[4]  The Sherman Act was intended to be a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition” by assuring that natural competitive forces interact freely, without manipulation or restraint.[5]

The Supreme Court has been steadfast in regarding the Sherman Act as akin to a common law statute, and, in interpreting that body of law, the federal courts act more as common law courts than in other areas governed by federal statute.  This is so the antitrust law “adapts to modern understanding and greater experience… to meet the dynamics of present economic conditions.”[6]

Its three foremost weapons against restraint of trade are firstly Sections 1 and 2 thereof.  Section 1 explicitly prohibits “[e]very contract, combination in the form of trust or otherwise, or, conspiracy, in restraint of trade.” [7]  Section 2, in turn, makes illegal any monopoly or attempt to monopolize.[8] But the true weapon of mass destruction found in the antitrust arsenal is the provision for an award of treble damages to prevailing private plaintiffs.[9]  Since the singular focus of this Article is Section 1, as exposited by American Needle, henceforth the following analysis shall be limited to that statutory prohibition.

It is essential to remember that the Sherman Act “prohibit[s] only unreasonable restraints of trade.” [10]  It is axiomatic that Section 1 outlaws “only restraints affected by a contract, combination, or conspiracy.”[11]

To be certain, Section 1 liability has been limited to concerted conduct for nearly a century.[12]  Therefore, it maintains a fundamental distinction between concerted and independent action.[13]  The penultimate question is then whether allegedly anticompetitive conduct stems from independent decisions or from an agreement between otherwise distinct actors.[14]

The federal courts have judiciously employed Section 1 to condemn business combinations or more nefarious conspiracies that unlawfully restrain competition.[15]  Basic prudential concerns relevant to Section 1 enforcement are premised upon the reality that exclusive contracts are commonplace, and therefore any firm with a modicum of market power that enters into such an exclusionary accord risks an antitrust suit.  The unacceptable and unjustified risk of such a litigious free-for-all must be counterbalanced against the real need to ensure vigorous and freely competitive markets via judicious and rational enforcement of  the provisos of Section 1.[16]

For these reasons, combinations such as joint ventures have always been adjudged under the Rule of Reason.[17]  As we shall see below, the Rule of Reason has assured the sensible enforcement and adjudication of the antitrust laws for over a century now.

An icon of antitrust law, historically as well as jurisprudentially, is of course Standard Oil Co. of New Jersey v. United States.[18]  Ironically for this Article, we cite this case nearly on the day of its centennial.  And as well discussed in the last one hundred years, Standard Oil caused the breakup of the insidious Rockefeller oil monopoly, only in recent decades to see the once independent “Seven Sisters” turn back the clock via merging into the handful of “supermajor” oil companies left on the American scene.[19]

In pertinent part, the legal truisms of Standard Oil are easily related to Section 1 enforcement.  The Justices of that era declared that the statute “should be construed in the light of reason.”[20]  To be certain, said the high Court, Section 1 is not aimed to interrupt all collaboration in business; rather, its explicit and rightful goal is to protect the free flow of commerce “from contracts or combinations… which would constitute an interference with, or an undue restraint upon [commerce].”[21]  And to achieve a just and sensible result when enforcing the statute, Standard Oil decreed that “the standard of reason which had been applied at common law should be applied in determining whether particular acts [are] within its prohibitions.”[22]

Not surprisingly, such fidelity to reason extends to the remedies to be accorded when Section 1 is violated.  As characterized by the Standard Oil Court a hundred years ago, the specific remedy to an unlawful combination is two-fold: first, enjoin the continuation of the offending behavior; and two, abolish the combination or conspiracy, so as to rob it of its unlawful power.[23]  In dispensing this remedy, the Supreme Court cautioned, courts must consider the actual results of their decrees, and therefore refrain from inflicting serious injury on the public by a needless and deleterious interference with commerce.[24]

And in a final, precautionary reminder, Standard Oil confirms that the objective of American antitrust law is never to deprive business of the power and the right to make “normal and lawful contracts,” but instead solely to restrain malefactors from engaging in illegal combination or conspiracies aimed at the unlawful restraint of trade.[25]

In closing out this section of our discussion, it is only appropriate to end with a final word on The Rule of Reason from the legendary Justice Brandeis, who provided the classic formulation of the Rule of Reason in Chicago Board of Trade:[26]

The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.  To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint is imposed; the nature of the restraint and its effect, actual or probable.  The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts.  This is not because a good intention will save an otherwise objectionable regulation or the reverse; but because knowledge of intent may help the court to interpret facts and to predict consequences.[27]

The foregoing primer on antitrust law now concluded, we can turn to the actual Supreme Court decision in American Needle, and how it represents the newest landmark in this important, century-old field of law.

II.

GAME TIME: AMERICAN NEEDLE VS. THE NFL

At the time of this writing, American Needle has attained outsized prominence, partly for reasons we shall discuss below.  Much of that has to do with the prime defendant, the NFL.  And given the enormous popularity of professional football in the United States today, only a brief exposition of the relevant facts is necessary.

The National Football League (“NFL”) includes 32 separately owned professional football teams, each with its own distinctive names, colors and logos, as well known to millions of fans.[28]  In 1963, the constituent clubs organized National Football League Properties (“NFLP”), an unincorporated entity, to develop, license, and market their intellectual property.  From its inception until 2000, NFLP granted nonexclusive licenses to a number of vendors, permitting them to manufacture and sell apparel adorned with team logos.[29]  American Needle was one of those licensees.[30]

All this changed at the end of 2000, when the teams voted to authorize NFLP to enter into exclusive licenses, and NFLP then granted such an exclusive deal for 10 years to Reebok International Ltd.  Reebok now had the sole right to manufacture and sell trademarked headwear for all 32 NFL teams.  As a direct consequence, NFLP did not renew American Needle’s nonexclusive license.[31]

Understandably chagrined, American Needle filed an antitrust action against the NFL and others, alleging that the exclusive contracts violated Sections 1 and 2 of the Sherman Act.[32]  As their key defense, the NFL, the teams, and NFLP replied that they constituted a single economic enterprise, and therefore were incapable of conspiring to restrain trade within the meaning of Section 1.[33]

On this singular question, the district court sided with the league, concluding that the NFL and its constituent members comprised a single entity.[34]  The Seventh Circuit affirmed, finding, inter alia, that football can only be carried out jointly, and the league can function only as one source of economic power when presenting NFL football.[35]   But it was not “game over” just yet.  Certiorari was granted,[36] and the matter came before the high Court.

Delivering the final opinion of his storied career, Justice John Paul Stevens[37] began by reciting the language of Section 1 of the Sherman Act, in that every contract, combination or conspiracy in restraint of trade is illegal under American antitrust law.[38]  But the first question to be asked is “whether an arrangement is a contract, combination, or conspiracy” before inquiring if it unreasonably restrains trade.[39]

Writing for a unanimous Court, Justice Stevens framed the precise issue here as that “antecedent question” in relation to the NFL and its formation of NFLP to manage its intellectual property.[40]  Wasting no time, the Supreme Court declared that the league’s action “is not categorically beyond the coverage of [Section] 1,” and the legality — or lack thereof — “must be judged under the Rule of Reason.”[41]

Having posited and then answered the question before it in such a delimited fashion, the Court confirmed that it had but one, narrow issue to adjudicate; whether the NFL and its affiliates were a single enterprise or, conversely, were independent actors capable of contracting, combing or conspiring in restraint of trade, as such activity is defined by the Sherman Act.[42]

Invoking the hallowed distinction the Sherman Act makes between Sections 1 and 2, the Court reminds that the former only applies to concerted action that restraints trade.  In contradistinction, the latter covers both concerted and independent action, but only if that action monopolizes or threatens to monopolize, by definition a narrower category than restraint of trade.[43]

In the high Court’s view, this stricter oversight for concerted behavior is rooted in Congress’ recognition that joint action is inherently fraught with anticompetitive risk.[44]  Moreover, since concerted action is but a “discrete and distinct” category of endeavor, restricting that segment only leaves unmolested “a vast amount of business conduct.”[45]

Thus, opined Justice Stevens, action done in concert is easier to examine, and easier to remedy.  Indeed, the high Court has judged collaborative action much more harshly.[46]  But of course the inquiry must be made as to whether the actors are in fact working in concert, and to that the Court now turned.[47]

To find concerted action “does not turn simply on whether the parties involved are legally distinct entities.”[48]  Justice Stevens set out the Court’s long held view disregarding overly formalistic distinctions, instead relying upon “a functional consideration of how the parties … actually operate.”[49]  Mere labels do not persuade, said the learned Justice, but the reality of identities can and should motivate the Court’s deliberations.[50]

Therefore, business organizations that hold themselves out as formally distinct actors can still be encompassed by Section 1’s oversight.[51]  It is the rule, posited Justice Stevens, rather than the exception, for the Court to look beyond the form of a purported single entity when nominal competitors come together to form professional organizations or trade groups.[52]

Function rules over form, declared Justice Stevens, and a functional analysis is justified by the Sherman Act’s goal of regulating substance, unswayed by mere formalisms.[53]  Calling upon the landmark of Copperweld, the American NeedleCourt adhered to the axiom of substance over form in determining if an entity is capable of conspiring pursuant to Section 1.[54]

Justice Stevens found it a misconception to describe such an inquiry as simply asking if the alleged malefactors are a single entity.  No one merely asks if it “seems” like the parties are one or independent in any metaphysical sense, observed the Court.[55]  “The key,” according to Justice Stevens, is whether the concerted action “joins together separate decision makers.”[56]

Putting a finer point upon the inquiry is to ask if there is a contract, combination or conspiracy amongst individual economic units who would normally be pursuing individual economic interests.[57]  If the accord between these entities deprives the marketplace of independent decisionmaking and chills the diversity of separate entrepreneurial interests, then it is violative of the antitrust law.[58]

Summarizing this portion of the opinion, the high Court emphasized that “the inquiry is one of competitive reality,” and not artificial formalisms.[59]  The conjoining of formerly legally distinct entities under a single label is not a bulwark against appropriate inquiry.[60]

The paramount question, declared American Needle, is whether the former independence of once distinct centers of decisionmaking is compromised into something lacking the normal vigor of competitive business.[61]  If so, the actors so united now have the capability to conspire in violation of Section 1, and it is then appropriate for courts to decide “whether the restraint of trade is an unreasonable and therefore illegal one.”[62]

Against these rubrics, the Justices now turned to the controversy before them.  Without equivocation or apology, the unanimous Court found that “[d]irectly relevant to the case, the [NFL] teams compete in the market for intellectual property.”[63]  Whenever each team licenses its valuable logos and trademarks, it is not acting for the league’s greater good.  Quite to the contrary, each franchise is motivated solely by its own corporate aims to enhance individual wealth.[64]

With a reference specific to the case at bar, here American Needle’s disenfranchisement from the lucrative ballcap manufacturing trade, Justice Stevens invoked the imagery of the then-reigning Super Bowl contestants.  “[T]he [New Orleans] Saints and the [Indianapolis] Colts are two potentially competing suppliers of valuable trademark…. [t]o a firm making hats.”[65]  In making business decisions as to who to grant such remunerative licenses to, each club is an independent economic entity pursuing individual economic interests.  A fortiori, each team is capable of making independent business decisions.[66]

Therefore, from all this the Court reached the inescapable conclusion that “[d]ecisions by NFL teams to license their separately owned trademarks collectivelyand to only one vendor … depriv[e] the marketplace of independent centers of decisionmaking.”[67]

In this context, the high Court made short shrift of the NFL’s defense that, by incorporating NFLP as a single entity to market the entirety of the league’s intellectual property as a unitary whole, the actors escaped antitrust scrutiny.  It is not dispositive, opined Justice Stevens, that those competitors on the field of play combined on the field of business to organize a fresh legal entity to market their valuable logos and colors.[68]

“An ongoing [Section] 1 violation cannot evade [Section] 1 scrutiny simply by giving the ongoing violation a name and label,” said the Court.”[69]  Indeed, in once again declaring that in antitrust cases form can never subdue substance, the Justices remind in one voice that condoning such facile labeling could condemn antitrust law to impotence.[70]

To be sure, the high Court acknowledged that “NFL teams have common interests” in promoting the league as a unified brand.  Nevertheless, the clubs “are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned.”[71]

Justice Stevens went on to characterize the teams’ common interests in the league’s brand as a partial unification of their separate economic agendas, “but the teams still have distinct, potentially competing interests.”[72]  And therein lies the danger, heldAmerican Needle, for reason that “illegal restraints often are in the common interests of the parties to the restraint, at the expense of those who are not parties.”[73]  Such harm to others is precisely what the antitrust law is designed to prohibit.[74]

The Supreme Court continued by taking up the Seventh Circuit’s view that “without [the teams’] cooperation, there would be no NFL football.”[75]  The high Court acknowledged this element of the league’s defense, duly noted that some degree of collective action is inherent to the NFL’s business, as well as in taking the field of play.  Nonetheless, the Justices found the appellate tribunal’s reasoning unpersuasive.[76]

Here Justice Stevens coined an analogy sure to be enshrined in the pantheon of antitrust jurisprudence.  The learned justice posited that “a nut and bolt can only operate together, but an agreement between nut and bolt manufacturers is still subject to [Section] 1 analysis.”[77]  Wisdom for the ages, to be sure.  Thus,American Needle declared unequivocally that while the teams may work in unison in some sense, they are surely not immune from antitrust scrutiny when they do collaborate economically.[78]

Given this conclusion, it was but a short step for the high Court to likewise declare NFLP subject to inquiry pursuant to Section 1, “at least with regards to its marketing of property owned by the separate teams.”  The Justices based that holding upon the fact that the promotional entity’s licensing decisions are made by 32 potential competitors, each of which is the actual owner of its share of this jointly managed intellectual property.[79]

Decisive here, indicated the Court, is that if NFLP had never been created, “there would be nothing to prevent each of the teams from making its own market decisions” with regard to their trademarked apparel businesses.[80]

From this analysis of what the licensing entity is capable of (and, conversely, what its existence forestalls the clubs from doing individually in competition with each other), the Supreme Court ruled that “decisions by the NFLP regarding the teams’ separately owed intellectual property constitute concerted action.”[81]  Justice Stevens sharply refuted the notion that the league members acting through NFLP is akin to components of a single entity meshing to create a collective profit.  In actuality, foundAmerican Needle, the 32 football teams retain independence, operate as individual profit centers, distinct from each other and NFLP, and are at least potential (if not actual) competitors.[82]

To be sure, the Supreme Court reached this holding with a view towards preserving the integrity of the antitrust laws.  The Justices hypothesized that if potential competitors could share profits or losses in a joint venture without worry of Section 1 inquiry, “then any cartel could evade the antitrust law simply by creating a joint venture to serve as the exclusive seller of their competing products.”[83]  The high Court made clear that it would never permit colluding parties to circumvent the antitrust laws by acting through the artifice of some straw third-party or a so-called joint venture.[84]

Drawing to the end, Justice Stevens offered some words of comfort to the NFL and others similarly situated.  Certainly, ‘[f]ootball teams that need to cooperate are not trapped by antitrust law.”[85]  A “host of collective decisions,” such as scheduling and then producing games, “provides a perfectly sensible justification” for concerted action without needless fear of incurring Section 1 liability.[86]  To discern sensible, neutral joint action as opposed to unlawful restraint of competition, the Supreme Court pledged that the axiomatic and flexible Rule of Reason would be applied, explicitly to the football league, and, implicitly, to others similarly situated in the world of sport business, as well as business in general.[87]

Finally, having refined and then applied the parameters of concerted action subject to Section 1 scrutiny, and having confirmed the proven Rule of Reason is to be the yardstick for evaluating same, the Supreme Court reversed the holding below, and cleared the path for the case to continue on remand.[88]  And so ended the Supreme Court’s newest landmark of antitrust law.

III.

ANALYSIS & COMMENTARY

We now come to the concluding portion of this Article, the customary analysis and commentary upon the case that has been the subject under discussion.  Before proceeding, however, circumstances call for the issuance of a caveat.

Certainly, and as well noted above, American Needle is, technically speaking, an interlocutory decision.  It lacks finality, as it makes no decision as to the ultimate winners and losers in the subject litigation.  It is a preliminary decision, one that sets the rules, and remands to the lower courts for further determinations consistent with its holdings.

As candidly noted at its outset by Justice Stevens, American Needle is delimited to a threshold inquiry, here, what concerted action is subject to Section 1 scrutiny.  But this self-imposed limitation of the question presented does not diminish one bit the vigor and the precedent-setting aspect of this new holding.

It can well be said that threshold determinations often presage the outcome of an entire case.  Opening the door to further inquiry, as American Needle unquestionably does here, might be all that is needed to turn the tide of battle in favor of one side.  At the least, the guarantee of further litigation compels a change in tenor for both sides: akin to a turnover of ball possession, the NFL, seeking a quick dismissal, has had its hopes dashed.  The plaintiff American Needle may now renew its offensive, and all that comes with it.

As with so many notable Supreme Court edicts, American Needle of today may prove to be the last time these contestants take the field before the high Court.  Thus, the Justices’ decision might prove to be the first, and the last, contemporary word on the case at bar.  There then is a reminder not to underestimate the importance of this holding to the field of antitrust law, its supposed preliminary nature notwithstanding.

Let us now proceed to the more sanguine elements of our analysis, and placeAmerican Needle in perspective.  Our first point is timing, as purely a happenstance as that may be.

We noted early on how this Article is written more or less on the centennial of that most famous of American antitrust cases, that of Standard Oil.  Ironically, American Needle has been, in most likelihood, the most quoted and publicly visible antitrust ruling of the Supreme Court since the turn of the last century.  We would be hard pressed to think of an antitrust case decided since Standard Oil that has consumed as much newsprint and garnered as much notoriety in the popular press as the instant case.  The reason for that is well known.

At the time of this writing, the NFL owners and the NFL Players’ Association (the “NFLPA,” distinguished, to be sure, from NFL Properties as discussed herein) have been embroiled in an epic labor dispute.  We need not provide a citation here, since this struggle has been reported daily on the front of the sports page (if not the main page) of every media outlet in the nation.  It is an apt demonstration of the American psyche, that with all of the pressing issues of the day about the Recession, the price of gasoline, and health care, just to name a few, so much ink is spilled on coverage of whether or not there shall be NFL football this year.

As is equally well known, American Needle is mentioned in nearly every news article on football’s labor strife, been the subject of radio and television sports talk, and has thereby captured the attention of the general population like few other Supreme Court cases.  Among other examples, various pundits have offered it in support of the players, relied upon it as exposing the supposed vulnerability of the NFL to antitrust claims, and cited it as evidence that judicial intervention may ultimately decide if there will be a football season.

To be sure, this is a nonsubstantive observation.  But the inescapable point remains that the public’s awareness of American Needle is far more attenuated than the vast majority of Supreme Court cases.  Be that as it may, however, the paramount concern of this Article is legal substance, so to that we now turn.

Having noted above the public’s fascination with American Needle vis-à-vis professional football, of what note has or should the NFL take of the high Court’s decision?  A great deal, one would say, and not just because the underlying antitrust action is alive and well.  Obviously, how the NFL markets its intellectual property in the years to come will be largely determined by the final outcome (be it in court or via settlement) of the instant case.  But there is much more.

As in all modern professional sports, the NFL engages in concerted action on a number of fronts, not just marketing its team logos for hats and tee shirts.  Two that immediately come to mind are television broadcast rights and the drafting of collegiate players into the professional ranks.  While those aspects of professional football’s business are far too intricate to make a worthwhile comparison here, the undeniable point remains, and it is that the NFL shall henceforth be deemed to be a collection of independent economic forces that, from time to time, band together and act in economic concert in order to enhance their corporate profits.

Given such, when these formerly independent economic actors band together and act as one, American Needle makes plain that they have thus deprived the marketplace of the free competition brought about by maintaining separate centers of financial autonomy.  That step taken, the teams cannot escape antitrust scrutiny, pursuant to Section 1 at the least, when they engage in joint endeavors.  Put in football terms, it is early in the season.  As the “game changer” of American Needle takes firmer hold within the federal courts, it remains to be seen who will emerge the victor, the league or its opponents.

The above is one emerging issue for the NFL.  What of the other leagues in the business of sports?  One need not be a legal scholar to rightly conclude that they have the same exposure.

The other professional associations, whether in the acknowledged major American sports or the ones of lesser stature, all have operating characteristics similar to that of the NFL, in one form or another.  Generally, each individual competitive team willingly accedes its rights as an independent economic actor, and collaborates with its on-the-field rivals in joint endeavors aimed at increasing each constituent’s profits.

To be sure, the case law predating American Needle, and this new landmark itself, make plain there is a safe harbor for appropriate collaboration.  Once again, Justice Stevens echoes high Court landmarks of years past in acknowledging that presenting professional sporting events requires cooperation.  The Supreme Court has long acknowledged that league sports intrinsically need to cooperate and take concerted action in order to function.[89]  Clearly, there shall be no break in that continuity.

American Needledoes nothing to upset the truism that a team cannot play itself.  Thus, all leagues in all sports can proceed with general confidence that not every collaborative action will subject its members to an antitrust lawsuit.  That is as it has always been, as it should be, and it shall clearly remain so.

Nonetheless, all professional sports leagues must proceed mindful that American Needle is as applicable to badminton as it is to NFL football.  Each and every professional league must take due note that when collaboration exceeds the boundaries of what is essential and appropriate to put on an exhibition of their sport, and crosses the line into a stifling of competition, to the injury of others, then antitrust scrutiny shall be next week’s opponent.  And unlike a regularly scheduled game, the teams do not profit when playing inside a staid courthouse.

As we alluded to early on in this writing, the field of sports is often a metaphor for the field of business.  The similarities abound, and we Americans are oft times guilty of borrowing the strategies and tactics of one, and applying them to the other (and this interchange, most certainly, works in both directions).  What then, does American Needle  portend for American business, not the business of sports to be sure, but the business of business, be it high-tech, low-tech or anywhere in between?

Not to be unduly repetitive, but the firm conclusion is that the lessons remain the same.  Competing businesses may not play in an organized “league,” and they may not sell team jerseys with the name of your favorite CEO on the back, but they most certainly do compete.  Yet sometimes they put aside their competitive fervor, to act for their common good in trade associations or as lobbyists, to deal with common problems, or to act in concert in certain combinations or joint ventures.  And that is where business lines up on the field against American Needle and its teammates, also known as legal precedents.

Here are the headlines for American business generally, as drawn from American Needle.  First, what some might characterize as the “bad news,” or at least the one with potentially negative implications for some of the players:  just as in professional football, combinations that rob the free market of independent centers of competing economic interests are illegal.

At a minimum, those that submerge their competitive vigor in return for collaboration open the doors wide to antitrust scrutiny pursuant to Section 1.  Such examination, accompanied by the threat of treble damages under the Sherman Act, might be enough by itself to drive such noncompetitors from the field of play.  To be sure, bad for them, but good for competition.

Businesses, regardless of what their precise occupations are, must hereafter be mindful that joint ventures, combinations and other forms of concerted action can expose them to antitrust liability.  They are on notice to monitor their collaborations accordingly, and scrupulously avoid any conspiratorial urges that might fatten their bottom lines at the expense of normal competitive forces.

If that is the bad news, one must candidly admit it is not all the bad, for at the least it is merely today’s iteration of the laws of antitrust that have ruled for at least a century.  In sum, no one is really changing the size and shape of the playing field.  Potential malefactors confront, more or less, the same law and penalties that they always did.  In that regard, the news is only bad if you were intent on violating the law.

That said, let us turn to the good news.  American Needle maintains the same consistency within antitrust jurisprudence that has abounded for over a century.  It is beyond cavil that business hates uncertainty more than anything else.  By reaffirming tried and true maxims, this latest Supreme Court landmark maintains that much valued consistency, and business can act accordingly and with certitude that the rulebook has not been altered from seasons past.

Next, this latest pronouncement acts in defense of full and fair competition.  The American economy, probably more so than any other in the world, is profoundly based upon free competition.  This is reflected in our laws, in our history, and indeed in the very mindset of how we conduct business in these United States.

American Needlecontinues and reinvigorates this rich and storied tradition, by giving paramouncy to the fostering of free and unfettered competition.  American businesses have always worked within this framework, and this new case encourages them to continue to do so, and with confidence that free competition will not be compromised.

American Needlefurthermore reaffirms the notion that not every combination is bad.  Business, quite naturally, sometimes draws competitive forces together, whether by contract, joint action or via some other form of mutually beneficial combination.  That, by itself, is not evil, and today’s case says so.  Justice Stevens makes clear that the law has always reserved its scrutiny for joint ventures that truly act to restrain competition, in this case the elimination of nominal and healthy competitive forces by restraining these erstwhile combatants from truly engaging each other in the marketplace.

That unification leads to our next point, that of actors usually engaged in stiff competition who, shall we say, strip off their opposing colors and join under one banner for concerted action.  In this and all other respects, American Needle confirms the long held and undeniably just maxim that substance rules over form.  Mere labels have no sway in antitrust cases, nor should they, says the high Court.

As in the preceding century, the next hundred years of antitrust jurisprudence will exalt the substance of any subject activity over the mere accident of its form.  For those whom the substance of their business activity conforms to the laws fostering free competition, that is good news.  Conversely, it is only detrimental to those who would attempt to cloak their lawbreaking ways under the guise of a meaningless label.  Put in sports terms, it does not matter what jersey you wear; it is what you do on the field of competition that counts.

Now to our last, and possibly the greatest, point of American Needle.  As described above, the Rule of Reason has dominated the process of antitrust analysis since the law’s inception well over a century ago.  We need expend few words to affirm the rightness and sagacity of that precept.  Suffice to say that truly free enterprise is a cathedral of rationality, of decisions made for good reason, and not based upon emotion, ideology nor other factors.

Therefore, the law overseeing same, and seeking to justly assure that the market remains free and fair to all participants, should likewise, in the main, examine its doings in the light of that same reasonability.  In its own way, American Needle is the modern implementation of Chief Justice Hughes’ maxim that “[realities] must dominate the judgment in antitrust cases.”[90]

In sum, American Needle does more than just declare the Rule of Reason is applicable to the case at bar; its fundamental adjudication confirms the ongoing and essential role of such a mode of analysis in all such cases to come.

Conclusion

 

In conclusion, American Needle has gone from making headlines in the field of law to now the field of professional football.  It affirms that even the obvious need for collaboration in the business of the NFL has its just limits, those boundaries to be measured by the nation’s longstanding antitrust laws.  So too for other professional sports, and so too for the rest of American business.  But in doing so, we find the Supreme Court affirming basic notions that not all collaboration is illegal, rather only concerted action that unlawfully drives out competition.  Tried and true rules, above all the proven and just Rule of Reason, will dominate the field when measuring such actions for their propriety.  It is still early in the game, but American Needle makes certain that, in the end, the real winner will be justice.[91]

[1] Over a half-century ago, the Supreme Court declared that the NFL falls “within the coverage of the antitrust laws.”  Radovich v. National Football League, 352 U.S. 445, 448 (1957) (Clark, J.) (holding baseball’s antitrust exemption inapplicable to professional football).  See also Brown v. Pro Football, Inc. dba Washington Redskins, 518 U.S. 231, 233 (1996) (Breyer, J.) (dealing with “the intersection of… labor and antitrust laws” in the context of professional football).  Professional basketball and boxing also fall under the purview of the antitrust laws, to name but a few sports.  See Haywood v. N.B.A., 401 U.S. 1204 (1971); U.S. v. International Boxing Club of New York, 348 U.S. 236 (1955).  Of all the major American sports leagues, only Major League Baseball (“MLB”) enjoys an exemption from the antitrust laws.  To appreciate the rich but convoluted history of the immunity enjoyed by the National Pastime, see Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, 259 U.S. 200, 209 (1922); Toolson v. New York Yankees, Inc., 346 U.S. 357, 357 (1953); Flood v. Kuhn, 407 U.S. 258, 282-84 (1972).

[2] __ U.S. __, 130 S.Ct. 2201 (May 24, 2010) (hereinafter “American Needle” at 130 S.Ct.).

[3] See Edmund Morris, THEDORE REX (Random House 2001).  In this, the second of three installments chronicling the life of America’s twenty-sixth Chief Executive, Roosevelt’s preeminent biographer Edmund Morris devotes substantial discussion to President Roosevelt’s determination to utilize the still nascent Sherman Act to curb the monopolistic practices then prevalent in the American economy, for instance, Roosevelt’s initiation of the groundbreaking Northern Securities case.  THEODORE REX, inter alia, at 88-89, 314-316, 427-28; See Northern Securities Co. v. U.S., 193 U.S. 197 (1904) (pluralityopinion), cited by Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 761 n.4 (1984).  See also Northern Securities, 193 U.S. at 361 (Brewer, J., concurring in the result) (proposing the Rule of Reason in order to contain the antitrust laws within the walls of rationality in a free enterprise system).

[4] See Anti-Trust Act of July 2, 1890, ch. 647, 26 Stat. 209.

[5] Northern Pacific R. Co. v. U.S., 356 U.S. 1, 4-5 (1958), quoted by N.C.A.A. v. Board of Regents of the University of Oklahoma, 468 U.S. 85, 104 n. 27.

[6] Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 885-87 (2007).

[7] 15 U.S.C. § 1.

[8] 15 U.S.C. § 2.

[9] 15 U.S.C. § 15(a).

[10] N.C.A.A. v. Board of Regents of the University of Oklahoma, 468 U.S. 85, 98 (1984)(Stevens, J.); State Oil Co. v. Kahn, 522 U.S. 3, 10 (1997); Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006) (Thomas, J.).

[11] Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 775 (1984),  cited by Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 553 (2007) (while substantively an antitrust case, Twombly has become the modern age’s preeminent holding on the pleading standard for federal cases).

[12] U.S. v. Colgate & Co., 250 U.S. 300 (1919), cited by Copperweldsupra, 467 U.S. at 775-76.

[13] Monsato Co. v. Spray-Rite Service Corp., 465 U.S. 752, 761 (1984).

[14] Twomblysupra, 550 U.S. at 555, quoting Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537, 540 (1954).  See also Copperweldsupra, 467 U.S. at 769.

[15] Seee.g. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 49 (1977);Chicago Board of Trade v. United States, 246 U.S. 231, 238-39 (1918).

[16] See United States v. Microsoft Corp., 253 F.3d 34, 82 (D.C. Cir. 2001) (per curiam).

[17] See Continental T.V., Inc.supra, 433 U.S. 36 (1977); Chicago Board of Trade,supra, 246 U.S. 231 (1918).

[18] 221 U.S. 1 (1911).

[19] See Wysocki, “The Progeny of Standard Oil,” Wall Street Journal (Wednesday, December 2, 1998) at p. B1 cl. 4.  See also Lavelle, “Rockefeller’s Revenge,” U.S. News & World Report (December 14, 1998) at p. 27 cl. 1 (charting and discussing the disassembly of the Rockefeller empire into the colloquially known “Seven Sisters” of the U.S. oil industry, and detailing how the “merger mania” of the 1990s drove them to reunite, leaving essentially only three surviving siblings (ExxonMobil, BP, and Chevron).

[20] Id. at 1.

[21] Id. at 3.

[22] Id. at 3.

[23] Id. at 3-4.

[24] Id. at 4. Cf.  Business Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 724-26 (1988) (Rule of Reason presumed to apply in Section 1 cases).

[25] Id. at 4.

[26] Supra, 246 U.S. 231 (1918).

27] Id. at 238, cited by American Needle,  supra, 130 S.Ct. at 2217 n. 10.  See alsoLeegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 885-87 (2007);National Soc. of Professional Engineers v. United States, 435 U.S. 679, 688-91 (1978).

[28] American Needlesupra, 130 S.Ct. at 2207.

[29] Id.

[30] Id.

[31] Id.

[32] Id.  The NFL is no stranger to antitrust litigation.  In addition to the cases citedanteseee.g.United States Football League v. N.F.L., 842 F.2d 1335, 1340 (2d Cir. 1988) (affirming the famous jury verdict whereby the NFL, although found guilty of violating the antitrust laws, had to pay only one dollar to the defunct upstart USFL).

[33] Id.

[34]Id., citing American Needle, Inc. v. New Orleans Louisiana Saints, 496 F. Supp. 2d 941, 943 (N.D. Ill. 2007), affirmed sub nom., 538 F.3d 736 (7th Cir. 2008), reversed and remandedsupra, 130 S. Ct. 2201 (2010), where Senior District Judge Moran found that “in the jargon of antitrust law…. [the NFL teams] so integrated their operations that they should be deemed to be a single entity.”

[35] Id. at 2207-08, citing American Needle Inc. v. National Football League, 538 F.3d 736, 737 and 744 (7th Cir. 2008) (Kanne, J.) (holding intrinsic nature of NFL football “requires extensive coordination and integration between the teams,” and thus “the NFL teams are best described as a single source of economic power when promoting NFL football through licensing the teams’ intellectual property”).  But compare Fraser v. Major League Soccer, L.L.C., 284 F.3d 47, 55-56 (1st Cir. 2002) (Boudin, C.J.) (“Single entity status for ordinarily organized [sports] leagues has been rejected in several [of the] circuits.” (summarizing  cases).

[36] Id. at 2208.

[37] Of the then-sitting Justices, no one was better suited to the task at hand than Justice Stevens.  Before his appointment to the nation’s highest court, he was renowned as an antitrust law attorney and scholar.  The only other Justice who might have been a worthy candidate to craft this opinion was the by-then-retired Justice Byron “whizzer” White, who was the high Court’s only member to have achieved stardom as a collegiate football player.  See Biskupic, “Justice Stevens to Retire from the Supreme Court,” (April 12, 2010) USA Today.  See also Biskupic, “Stevens Ascends to His Final Day on Bench,” (June 27, 2010)  USA Today.

[38] Id. at 2006.  See 15 U.S.C. § 1.

[39] Id.

[40] Id.

[41] Id. at 2206-07.

[42] Id. at 2208.

[43] Id. at 2208-09, citing Copperweldsupra, 467 U.S. at 777 (abolishing so-entitled “intraenterprise conspiracy” theory).  See also 15 U.S.C. § 1 and § 2.

[44] Id. at 2209, citing Copperweldsupra, 467 U.S. at 768-69 (“This not only reduces the diverse directions in which economic power is aimed but suddenly increases the economic power moving in one particular direction.”).

[45] Id. at 2209.

[46] Id., citing Copperweldsupra, 467 U.S. at 768.

[47] Id.

[48] Id.

[49] Id.

[50] Id., citing U.S. v. Sealy, Inc., 388 U.S. 350, 353 (1967).

[51] Id. at 2209-10, citinginter aliaN.C.A.A.supra, 468 U.S. 85 (1984).

[52] Id. at 2210 (footnotes omitted).

[53] Id.

[54]Id. at 211, citing Copperweldsupra, 467 U.S. at 773 n. 21.

[55] Id. at 2211-12.

[56] Id. at 2212.

[57] Id., quoting Copperweldsupra, 467 U.S. at 769.  Copperweld was limited to the very narrow question of whether a parent corporation and its wholly owned subsidiary were capable of conspiring in violation of Section 1.  Copperweldsupra, 467 U.S. at 767.  The Court there declared no, because “the coordinated activity of a parent and its wholly owned subsidiary must be viewed as that of a single enterprise” for Section 1 purposes.  Id. at 771.  Noteworthy with regard to better understanding American Needle today, consider the stress by Chief Justice Burger in writing in Copperweldthat coordination between a parent corporation and an internal division “does not represent a sudden joining of two independent sources of economic power previously pursuing separate interests,” and  thus immunizing such activity from Section 1 scrutiny.  Id. at 770-71.  As we will see, the harmlessness of the parent/subsidiary coordination in Copperweld stands in sharp contradistinction to the joint endeavors of the league and teams in American Needle.

[58] Id. (citations omitted).

[59] Id.

[60] Id.

[61] Id.

[62] Id.  In some ways, in writing for the high Court in American Needle, Justice Stevens revives the observation made in his dissent in Copperweld, whereby he questioned absenting two or more corporations from Section 1 scrutiny when “they are controlled by the same godfather.”  Copperweldsupra, 467 U.S. at 796 (Stevens, J., dissenting).  Criticizing that Supreme Court of over twenty five years ago for not confronting the question, Justice Stevens took a step towards answering it in his penultimate opinion as a Justice.

[63] Id. at 2213.

[64] Id. at 2213.

[65] Id.

[66] Id.

[67] Id.  (quotations omitted) (emphasis supplied).  See also Areeda & Hovenkamp, VII ANTITRUST LAW 2d ed. at  ¶ 1478a, at 318 (unquestionably, the most pernicious threats to competition arise when actual or potential competitors join forces in a joint endeavor).

[68] Id.

[69] Id.

[70] Id.

[71] Id.  Furthermore, while allowing there is some similarity between the NFL and a single enterprise that owns several pieces of intellectual property which chooses to license them jointly, that outward similarity is wholly undercut here because in “the relevant functional sense” the NFL’s constituent teams compete against each other for revenue from intellectual property as much as they vie for dominance on the field of play.  Id.

[72] Id. (citations omitted).

[73] Id.

[74] Id.  Here, the Court quickly disposed of another of the NFL’s defenses, that it had marketed its intellectual property in this unitary fashion for some time.  The Court’s unanimous rejoinder: “a history of concerted activity does not immunize conduct from [Section] 1 scrutiny.”  Id. at 2213-14.

[75] Id. at 2214.  Seesupra, 538 F.3d at 737 and 744.

[76] Id.

[77] Id. (emphasis supplied).

[78] Id.

[79] Id.

[80] Id. at 2214-15.  Parenthetically, we acknowledge the Court’s observation that the law “generally treat[s] agreements within a single firm as independent action on the presumption that the components of the firm will act to maximize the firm’s profits.”  Id. at 2215.  Notwithstanding that convention, the Court allowed that in “rare cases” said presumption must be discarded, such as where intrafirm agreements impact economic interests wholly apart from the firm itself.  Section 1 scrutiny is therefore called for when such an intrafirm agreement is merely “a formalistic shell for ongoing concerted action.”  Id. at 2215.

[81] Id. at 2215.

[82] Id.  The Court widened the gap separating NFLP from league members, finding the former to be an instrumentality of the latter, with regard to licensing decisions.  Id.  Clearly this separation undergirds the holding that the NFL, the teams, and NFLP are actors with distinguishable economic interests, and were taking concerted action in licensing their intellectual property.  Id.

[83] Id., quoting Major League Baseball Properties, Inc. v. Salvino Inc., 542 F.3d 290, 335 (2d Cir. 2008) (Sotomayor, J., concurring in judgment) (internal quotations omitted).

[84] Id. at 2215-16.

[85] Id. at 2216.

[86] Id.

[87] Id.  See also Brownsupra, 518 U.S. at 252 (Stevens, J., dissenting).  Presaging his opinion for the majority in American Needle, there Justice Stevens advocated applying the Rule of Reason in benchmarking the NFL’s activity vis-à-vis the league’s potential for restraining the market.

[88] Id. at 2217.

[89] See N.C.A.A.supra, 468 U.S. at 101-02, quoting R. Bork, “The Antitrust Paradox” 278 (1978).

[90] Appalachian Coals, Inc. v. United States, 288 U.S. 344, 360 (1933), quoted byCopperweldsupra, 467 U.S. at 774.

[91] As of this writing, recent events in professional football have ordained an extraordinary role for the precedents cited above.   See Brady, et al. v. National Football League, et al., 11 CV 00639 (SRN) (D. Minn.), a class antitrust action brought by professional football players against the NFL and its constituent teams, seeking, inter alia, monetary damages and injunctive relief.  Complaint at p. 48-50.  In pleadings headlining Super Bowl winning quarterbacks Tom Brady, Peyton Manning, and Drew Brees, the players charge the league with engaging in “group boycotts, concerted refusals to deal and price fixing,” alleging same as per se violations of Section 1 of the Sherman Act.  Complaint at Para. 4, page 3.  Most pertinent to this Article, the plaintiffs allege these actions “constitute an unreasonable restraint of trade under the rule of reason.”  Id.   Thus, we witness two of the linchpins of the foregoing discussion as being highly determinative in this new lawsuit.  And so,American Needle may yet prove to be the catalyst for a day of reckoning for the NFL and the players.

Michael Sabino @ Copyright 2011