Robertson v. National Basketball Association

OPINION

History of the Litigation

A. Nature of the Action

This action was instituted in 1970 pursuant to Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26 1 , to recover treble damages, costs and injunctive relief for violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. 2 Defendants are the National *873 Basketball Association (NBA) and the American Basketball Association (ABA). All the named plaintiffs, William Bradley, Joseph Caldwell, Archibald Clark, Melvin Counts, John Havlicek, Donald Kojis, Jon McGlocklin, McCoy McLemore, Thomas Mesehery, Jeffrey Mullins, Oscar Robertson, Westley Unseld, Richard Van Arsdale and Chester Walker were active players with, 3 and the elected player representative of, one of the then 14 clubs of the NBA. 4 Plaintiffs sue on behalf of themselves, all presently active players, those who were active at the time the action was originally commenced, and future players of the NBA. Jurisdiction is asserted under 28 U.S.C. §§ 1331 and 1337.

B. Background Facts

This litigation began after reports in the spring of 1970 of a proposed merger between the NBA and the ABA. Plaintiffs’ amended complaint 5 charges defendants with conspiring to restrain competition for the services and skills of professional basketball players through such devices as the college draft, the reserve clause in the Uniform Player Contract (the Uniform Contract), the compensation plan attached to the reserve clause, and various boycott and blacklisting techniques. The complaint further alleges that the NBA and the ABA seek to effectuate a non-competition agreement, merger or consolidation.

In May, 1970, this court (Tenney, J.) preliminarily enjoined the defendants from entering into “any merger, consolidation, or acquisition or combination by any means,” except that defendants were permitted to negotiate a proposed merger for the sole purpose of petitioning Congress for antitrust exemption legislation. The Senate Judiciary Committee’s recommendation that an exemption conditioned on substantial elimination of the various intra-league restraints be granted was not acceptable to the defendants, and no legislation on the matter has been promulgated.

In August, 1973, Judge Tenney’s earlier order was modified by allowing the two leagues to negotiate a merger or consolidation on the condition that any merger or consolidation agreement “deal specifically with and indicate the disposition of uniform player contracts, the common draft, and the reserve clause . ,” and that the negotiations relating to those matters be conducted in the presence of plaintiffs’ counsel or the general counsel of the National Basketball Players Association (Players Association). No agreement among the parties has yet been reached.

II

The Immediate Controversy

A. Plaintiffs’ Claims

1. Count One

Count One of the complaint alleges that at least since its inception in 1946, the NBA has engaged in a concerted plan, combination or conspiracy to monopolize and restrain trade and commerce in major league professional basketball by: (1) controlling, regulating and dictating the terms upon which professional major league basketball is *874 played in the United States; (2) allocating and dividing the market of professional player talent; and (3) enforcing its monopoly and restraint of trade through boycotts, blacklists and concerted refusals to deal. NBA’s purported objective is the elimination of all competition in the acquisition, allocation and employment of the services of professional basketball players — all in violation of Sections 1 and 2 of the Sherman Act.

The following practices are cited as among the means used by the NBA to effectuate and advance the underlying objectives of the conspiracy:

(1) The College Draft is allegedly designed to prevent competition among member NBA clubs for what is virtually the exclusive source of basketball talent in the country. The system operates so that each NBA club is given the exclusive right to choose specific college players with whom it desires to negotiate. If the college player does not wish to negotiate or play for the NBA club which “owns” his rights, the player may not negotiate with or for any other NBA club;

(2) The Uniform Contract, entitled the “National Basketball Association-Uniform Contract” 6 must be signed by every college player who agrees to play with one of the NBA clubs after he is “drafted,” and by every veteran player each year. The contract provides that the player shall play basketball for his club or its assignees exclusively until “sold” or “traded”; that the club has the absolute right to sell, exchange, assign or transfer the Uniform Contract on the same terms to another club; and that if the player refuses to play, the club may either terminate the Uniform Contract or seek an injunction to prevent the player from playing basketball for anyone else;

(3) The Reserve Clause is a part of the Uniform Contract which, if a player refuses to sign the Uniform Contract for the next playing season, empowers the club unilaterally to renew and extend the Uniform Contract for one year on the same terms and conditions including salary. 7 Any “traded” or “sold” player is bound to his new club by the reserve clause. Plaintiffs contend that the reserve clause gives the NBA clubs the express and unilateral right to keep renewing the Uniform Contract each year so long as the player refuses to execute the Uniform Contract, thus binding the player to one club for his entire playing career.

(4) Boycotts, Blacklisting and Refusals to Deal are allegedly utilized as well. Plaintiffs contend that no NBA club will negotiate with a player to play for another club who has signed or refused to sign the Uniform Contract, and is thus under “reserve”. Nor will any NBA club negotiate for the services of a player who is voluntarily retired from another club, under suspension, in military service, disabled or injured. Any NBA club which contracts or negotiates with such a player is similarly boycotted, blacklisted or otherwise penalized;

(5) The New League is off-limits to NBA players. Plaintiffs assert that the NBA has used the practices summarized in (1) through (4) above to prevent the players not only from negotiating freely with member clubs of the NBA, but also from negotiating with or playing for clubs in any rival league. 8

In sum, Count One sets forth the acts and practices of the NBA which are purportedly designed “to prevent in perpetuity any player from playing profes *875 sional basketball for anyone other than the NBA club to which the exclusive rights to his services have been granted by defendants for his lifetime.” 9

2. Count Two

The circumstances which give rise to Count One 10 also underlie Count Two. Plaintiffs contend that even if the reserve clause is not deemed to be a perpetual right of renewal, and instead is interpreted and enforced as a one-year option after the Uniform Contract term expires, nonetheless, the contract is still in violation of Sections 1 and 2 of the Sherman Act. The same combination and conspiracy alleged and described in Count One prevent any other NBA club from negotiating with or hiring a player during this one-year option period. After the expiration of the one-year period, the player who would try to negotiate with another NBA club, or the club which agreed to negotiate with the player, would be subjected to boycott, blacklisting, refusals to deal, or other penalties which the defendants allegedly impose to enforce their combination to monopolize and restrain trade.

This count additionally attacks what is designated “predatory” tactics waged by the NBA on the ABA. After the expiration of the one-year option provided under the Uniform Contract, the existence of a rival league is said to provide an “escape route” from the anti-competitive structure of the NBA since a player eould attempt to negotiate with clubs of that league. Since 1967, however, the complaint states that the NBA' has unlawfully combined or conspired to preserve its monopoly position and further its illegal restraints by employing certain devices to destroy the ABA. Those attempts have failed, according to the plaintiffs, and the rival league now flourishes to the decided and obvious financial advantage of present and future NBA players. 11

This failure to destroy the ABA has allegedly led to a new combination or conspiracy by the NBA to suppress competition by an attempted merger or consolidation of the two leagues which will lead to the demise of the ABA as a competitive force. Among the means employed by the NBA, even prior to actual merger, is the enactment of a non-competition agreement between the leagues and their clubs, and secret negotiations with the ABA to effectuate the merger of the two leagues.

*876 3. Count Three

Count Three joins the ABA as a defendant and is based on the aforesaid merger plans and non-competition agreement. Essentially it charges both the NBA and the ABA with violations of Sections 1 and 2 of the Sherman Act. Consummation of the merger, it is alleged, would eliminate all actual and potential competition between the defendants; and the effectuation of the non-competition agreement would have this effect prior to a formal merger. The unlawful practices described in Counts One and Two would continue either in the surviving league, or if no merger occurs, would remain in effect in the NBA. 12

4. The Remaining Counts

Count Four embraces an asserted violation by the NBA defendants of New York’s antitrust law. 13

Count Five is similarly brought against the NBA for common law violations in each state in which it exhibits professional basketball games, and jurisdiction is asserted on both Counts Four and Five on pendent jurisdiction.

Plaintiffs seek declaratory and injunctive relief, against both intra- (reserve clause, player draft, compensation plan, boycotts and blacklisting) and inter-(merger or non-competition agreement) league restraints and treble damages, costs and attorneys’ fees.

B. The Instant Motions

Plaintiffs move for a class action determination which NBA opposes. NBA, on its part, moves for summary judgment, pursuant to Rule 56, F.R.Civ.P., in respect of Count One, part of Count Two, and Counts Four and Five. NBA has also moved, pursuant to Rules 12 and 19, F.R.Civ.P., to dismiss the complaint for failure to join an indispensable party. ABA moves for summary judgment in respect of Count Three and seeks dissolution of the preliminary injunction in effect since 1970. Both defendants claim jurisdiction is lacking since primary jurisdiction rests with the National Labor Relations Board. 14

Ill

Does Primary Jurisdiction Lie with the NLRB ? 15

In Local 189, Amalgamated Meat Cutters & Butcher Workmen of North America, AFL-CIO v. Jewel Tea Co., 381 *877 U.S. 676, 85 S.Ct. 1596, 14 L.Ed.2d 640 (1965), review was limited to two questions. The first concerned labor exemption, which will be considered hereafter; the second was

“[w]hether a claimed violation of the Sherman Antitrust Act which falls within the regulatory scope of the National Labor Relations Act is within the exclusive primary jurisdiction of the National Labor Relations Board.” 381 U.S. at 684 n. 3, 85 S.Ct. at 1599.

Justice White, without dissent, rejected the primary jurisdiction contention and refused to stay the case to await a NLRB determination as to whether the uniform closing hours was a “term or condition of employment.” The Court based its conclusion on three grounds. First, “courts are themselves not without experience in classifying bargaining subjects as terms or conditions of employment.” Second, “the doctrine of primary jurisdiction is not a doctrine of futility.” It does not require the expense and delay of an administrative proceeding when “the case must eventually be decided on a controlling legal issue wholly unrelated” to that which was referred for administrative determination. Third, there may be lacking an available procedure for obtaining a NLRB determination. The Board “does not classify bargaining subjects in the abstract but only in connection with unfair labor practice charges of refusal to bargain.” 381 U.S. at 686-87, 85 S.Ct. at 1600. 16

Additionally, the defendants’ contentions are unsupported by the decisional law in this Circuit. This court in Intercontinental Container Transport Corp. v. New York Shipping Association, 312 F. Supp. 562 (S.D.N.Y.) (Mansfield, J.), rev’d on other grounds, 426 F.2d 884 (2d Cir. 1970), rejected the argument that jurisdiction was lacking since the plaintiff had raised the same issues as unfair labor practices before the NLRB. The court said:

“We are faced not with potential conflict between state regulation and national labor policy, but with the intersecting provisions of two federal statutes. That certain activities may arguably constitute an unfair labor practice . . . does not oust a federal court of jurisdiction over a Sherman Act claim arising out of the same activities as part of a combination with employers to restrain competition against the latter, and this is true whether or not the Sherman Act plaintiff has invoked the jurisdiction of the Board over his unfair labor practice claims.” 312 F.Supp. at 571.

The Second Circuit affirmed this holding, and, citing Jewel Tea, stated that an independent claim of preemption was erroneous. 426 F.2d at 887.

In any event, the antitrust issues involved here are not within the “special competence” of the NLRB, and therefore the doctrine of primary jurisdiction is inapplicable, see United States v. Western Pac. R.R., 352 U.S. 59, 64, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956); Denver Union Stockyard Co. v. Denver Livestock Commission Co., 404 F.2d 1055, 1059 (10th Cir. 1968), cert. denied, 394 U.S. 1014, 89 S.Ct. 1631, 23 L.Ed.2d 40 (1969); Fischer v. Kletz, 249 F.Supp. 539, 544 (S.D.N.Y.1966), and the factual disputes to be resolved concerning the history of collective bargaining between the players and the NBA are unquestionably proper subjects for determination by the court. See Philadelphia World Hockey Club, Inc. v. Philadelphia Hockey Club, Inc., 351 F.Supp. 462, 481-86, 506-507 (E.D.Pa.1972) (hereafter Philadelphia Hockey); Boston Professional Hockey Association, Inc. v. Cheevers, 348 F.Supp. 261, 267-68 (D. Mass.), remanded, 472 F.2d 127 (1st Cir. 1972). The two cases relied upon *878 by defendants, International Association of Heat and Frost Insulators and Asbestos Workers v. United Contractors Association, Inc., 483 F.2d 384, 402-403 (3d Cir. 1973), and Carpenters District Council v. United Contractors Association of Ohio, Inc., 484 F.2d 119, 122-23 (6th Cir. 1973), are inapposite. They involved situations in which the Board, in contrast to the instant situation, had particular expertise. Accordingly, defendants’ contentions are rejected.

IV

The Motion to Dismiss

NBA has moved under Rule 19, F.R. Civ.P., 17 to dismiss the complaint because of failure to name the Players Association as a party. In the alternative, the NBA contends that the Players Association should be joined as a party in this action. I find that the Association is neither an indispensable party under Rule 19(b) nor one that ought to be joined pursuant to Rule 19(a).

The purpose of Rule 19(a) has been defined as a requirement “to bring before the court all persons whose joinder would be desirable for a just adjudication of the action . . . .” Wright & Miller, Federal Practice and Procedure: Civil § 1604, at 32 (1972). Rule 19(a) is applicable when (1) failure to join an absentee would prevent complete relief or (2) where an absentee “claims an interest relating to the subject of the action and is so situated” that its absence will impair its ability to protect that interest or will leave any of the parties subject to multiple or inconsistent obligations, and the risk of the latter is substantial. See, e. g., Morgan Guaranty Trust Co. v. Martin, 466 F.2d 593, 598 & n. 6 (7th Cir. 1972); FTC v. Manager Retail Credit Co., 357 F.Supp. 347, 354 (D.D.C.1973); hut see Window Glass Cutters League of America, AFL-CIO v. American St. Gobain Corp., 47 F.R.D. 255, 258 (W.D.Pa.1969), aff’d, 428 F.2d 353 (3d Cir. 1970).

The practical, and not the theoretical, controls. See Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 106-107, 110, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968). 18 The As *879 sociation has claimed no interest relating to this action. 19 The possibility of harm to the Association, see Zwack v. Kraus Bros. & Co., 93 F.Supp. 963 (S. D.N.Y.1950), or the risk of multiple obligations has not been demonstrated. The mere fact that a decision in this case could conceivably affect the Association does not automatically require its joinder. See, e. g., Provident Tradesmens Bank, supra, 390 U.S. at 110, 88 S.Ct. 733; ACLU v. Board of Public Works, 357 F.Supp. 877, 884 (D.Md. 1972); Hoots v. Commonwealth of Pennsylvania, 359 F.Supp. 807, 822 (W. D.Pa.1973), appeal dismissed, 495 F.2d 1095 (3d Cir. 1974). If it later appears that joinder is desirable or necessary, it can then be effectuated. See Advisory Committee’s Note to Rule 19, reprinted in 39 F.R.D. 89, 93 (1966); ACLU v. Board of Public Works, supra, 357 F. Supp. at 885.

Cases holding that a union which has negotiated a collective bargaining agreement with an employer is an indispensable party in a suit by an employee against the employer, are cited by the NBA to support its contention that joinder of the Association is required under Rule 19(b). It is conceded that a union should be joined when the suit will directly affect the union’s interest in the operation of a bargaining agreement. See Lynch v. Sperry Rand Corp., 62 F. R.D. 78 (S.D.N.Y.1973); Neal v. System Board of Adjustment, 348 F.2d 722 (8th Cir. 1965); Hodgson v. School Board, New Kensington-Arnold School District, 56 F.R.D. 393 (W.D.Pa.1972); Reyes v. Missouri-Kansas-Texas R.R., 53 F.R.D. 293 (D.Kan.1971); Morris v. Steele, 253 F.Supp. 769 (D.Mass.1966). Those cases, however, have no application here where it is yet uncertain that the restraints involve the operation of a collective bargaining agreement. The statement of Judge Bryan in Lynch, supra, 62 F.R.D. at 86, that “[h]aving negotiated with . . . [the employer] over the contents of the collective bargaining agreements, the absent unions clearly have an interest in litigation which seeks to rewrite portions of those agreements” is inapplicable.

Moreover, most of the cases relied upon by defendants concerned claims by employees whose interests conflicted with other groups of employees in the same bargaining unit, or with the union itself. Neal, supra; Lynch, supra; Hodgson, supra; Steele, supra; Reyes, supra; and English v. Seaboard Coastline Ry., 465 F.2d 43 (5th Cir. 1972). It is undisputed for purposes of the motion for summary judgment that all the members of the Association have a common interest in the success of this action. 20 Finally, determination of whether a party should or must be joined can only be arrived at in the context of the particular litigation; a flexible case by case approach must be employed consonant with what the equities and facts require. Provident Tradesmens Bank, supra, 390 U.S. at 118, 88 S.Ct. 733; Wright & Miller, supra, Civil § 1612, at 122.

There is no need to join the Players Association at this time, especially where the interest of the Association appears to be adequately represented by the plaintiffs. See Gilbert v. General Electric Co., 59 F.R.D. 273 (E.D. Va.1973). Accordingly, the motion to dismiss is denied.

V

The Motion to Dissolve the Preliminary Injunction

ABA seeks dissolution of the preliminary injunction to prevent the merger or agreement of non-competition *880 between the two leagues. That injunction was issued more than four years ago. The argument, that Section 1 of the Norris-LaGuardia Act, 29 U.S.C. § 101, mandates its dissolution is patently meritless. The Norris-LaGuardia Act does not apply in an antitrust case, even one which arguably involves a labor dispute. Allen Bradley Co. v. Local 3, IBEW, 325 U.S. 797, 65 S.Ct. 1533, 89 L.Ed. 1939 (1945); Los Angeles Meat & Provision Drivers Union v. United States, 371 U.S. 94, 83 S.Ct. 162, 9 L. Ed.2d 150 (1962); International Container Transport Corp., supra; Anderson-Friberg, Inc. v. Justin R. Clary & Son, 98 F.Supp. 75 (S.D.N.Y.1951). The contention that the injunction consented to by the ABA when issued initially in 1970 and in continuous effect since, should be lifted now is obviously makeweight; made, apparently, in the hope that the court might be caught nodding and in a state of somnambulism sign the order lifting the ban. The motion is denied.

VI

The Motions for Summary Judgment A. The State Law Counts

NBA argues that summary judgment should be entered in its favor in respect of Counts Four and Five because the interstate nature of professional basketball precludes state antitrust regulation. I agree.

In Flood v. Kuhn, 316 F.Supp. 271 (S.D.N.Y.1970), aff’d, 443 F.2d 264 (2d Cir. 1971), aff’d, 407 U.S. 258, 92 S.Ct. 2099, 32 L.Ed.2d 728 (1972), the petitioner raised state statutory and common law challenges to baseball’s reserve system, which encompassed many of the practices in dispute in this litigation. 21

Judge Cooper denied both state claims on the ground that baseball’s unique exemption from federal antitrust law, see Toolson v. New York Yankees, Inc., 346 U.S. 356, 74 S.Ct. 78, 98 L.Ed. 64 (1953), compelled similar exemption from state antitrust regulation. 316 F. Supp. at 279-80; see State v. Milwaukee Braves, Inc., 31 Wis.2d 699, 144 N.W.2d 1, 16-18, cert. denied, 385 U.S. 990, 87 S.Ct. 598, 17 L.Ed.2d 451 (1966). The Court of Appeals affirmed, but on the ground that state antitrust regulation would be an impermissible burden on interstate commerce. 443 F.2d at 268. The United States Supreme Court held that “[a]s applied to organized baseball . [the statements of the District Court and the Court of Appeals] adequately dispose of the state law claims.” 407 U.S. at 284-85, 92 S.Ct. at 2113.

Though somewhat ambiguous, I read the statement in Justice Blackmun’s opinion as approving both bases for the lower courts’ rejection of Flood’s state law claims. Judge Cooper’s decision would not be controlling here, since professional basketball is subject to federal antitrust regulation. See Haywood v. National Basketball Association, 401 U. S. 1204, 1205, 91 S.Ct. 672, 28 L.Ed.2d 206 (1971), and as a result no danger exists of diversity of treatment if state law were also to apply. But the opinion of the Court of Appeals is unquestionably applicable and controlling. 22

*881 When Flood was decided, baseball had 24 teams operating in 24 “home” cities with the teams divided into two leagues. NBA has 18 teams operating in 18 “home” cities, and those teams are divided into two conferences. Baseball and basketball are in the same business, which is the staging of sports contests for public view, and there is no dispute that “professional basketball involves substantial volumes of interstate trade and commerce.” Complaint at f[ 17. The motion for summary judgment in respect of Counts Four and Five is granted.

B. The Labor Issues

Taken together, the ABA and NBA motions for summary judgment effec-

tively challenge plaintiffs’ claims in their entirety. Both defendant Associations assert that plaintiffs are precluded from seeking through antitrust litigation the right to negotiate freely with any team of their choice and a bar to any merger or combination between the two leagues.

The two leagues claim that the complaint has tried to cast in antitrust terms a series of demands and issues which naturally and lawfully belong on the bargaining table. The intent of the suit is to increase plaintiffs’ individual bargaining power. This, it is argued, conflicts with the policy announced in the National Labor Relations Act, 29 U. S.C. § 151. 23 The defendants’ more fundamental contention, however, is that *882 they are protected against the impact of the antitrust laws by a labor exemption.

1. Plaintiffs’ Standing to Sue Under the Antitrust Laws

It is undoubtedly true that the intent of Congress was and is to encourage collective bargaining as the means of settling labor disputes. See, e. g., Section 2 of the Norris-LaGuardia Act, 29 U.S.C. 102; the National Labor Relations Act, 29 U.S.C. § 151; Fibreboard Paper Products Corp. v. NLRB, 379 U.S. 203, 211, 85 S.Ct. 398, 13 L.Ed.2d 233 (1964). Surely, this policy constitutes a federal commitment to a bargaining system which “of necessity subordinates the interests of an individual employee to the collective interests of all employees,” Vaca v. Sipes, 386 U.S. 171, 182, 87 S.Ct. 903, 912, 17 L.Ed.2d 842 (1967); see also NLRB v. Allis-Chalmers Manufacturing Co., 388 U.S. 175, 180, 87 S.Ct. 2001, 18 L.Ed.2d 1123 (1967). In fact, Section 9(a) of the National Labor Relations Act provides that the representative of the bargaining unit shall be the exclusive agent for bargaining relating to wages, hours and other conditions of employment. 29 U. S.C. § 159(a); see generally NLRB v. Allis-Chalmers, supra; J. I. Case v. NLRB, 321 U.S. 332, 64 S.Ct. 576, 88 L. Ed. 762 (1944); Western Addition Community Organization v. NLRB, 158 U.S. App.D.C. 138, 485 F.2d 917, 924 (1973).

Section 4 of the Clayton Act, 15 U.S. C. § 15, grants standing for antitrust suits to any “person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws.” Courts have consistently allowed plaintiffs to sue their employers for alleged antitrust violations of the nature here asserted. In Anderson v. Shipowners’ Association, 272 U.S. 359, 47 S.Ct. 125, 71 L.Ed. 298 (1926), a seaman sued for himself and for all other members of the Seaman’s Union against the Association, challenging the use of an employment registry. 24 The Supreme Court reversed a dismissal of the complaint, sustaining, inter alia, the right of the plaintiff to assert his claim. *883 That Anderson was a union member, or that a bargaining agreement may or may not have been in effect, did not appear to be determinative.

In Nichols v. Spencer International Press, Inc., 371 F.2d 332 (7th Cir.