Brown v. Pro Football, Inc.

This case poses a conflict between the policies underlying federal labor law and antitrust law in the context of a labor dispute involving professional football. In the Sherman Act, 15 U.S.C. Sec. 1 (Supp. II 1990), enacted in 1890, Congress proscribed certain practices and agreements inimical to free trade as a means "to promote the national interest in a competitive economy." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 635, 105 S.Ct. 3346, 3358, 87 L.Ed.2d 444 (1985) (internal quotations omitted). There was no unified federal labor policy at the time of the passage of the Sherman Act. However, over fifty years later, when Congress passed the National Labor Relations Act ("NLRA"), 29 U.S.C. Sec. 151 et seq. (1988), "it set down a federal labor policy ... plainly meant to do more than simply alter the prevailing substantive law. It sought as well to restructure fundamentally the processes for effectuating that policy, deliberately placing the responsibility for applying and developing this comprehensive legal system in the hands of an expert administrative body [the National Labor Relations Board ("NLRB") ] rather than the federalized judicial system." Amalgamated Ass'n of Street, Elec. Ry. & Motor Coach Employees v. Lockridge, 403 U.S. 274, 288, 91 S.Ct. 1909, 1918, 29 L.Ed.2d 473 (1971). A principal tenet of this federal labor policy is that settlement of collective bargaining disputes should be achieved by "subjecting labor-management controversies to the mediatory influence of negotiation," not litigation. Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203, 211, 85 S.Ct. 398, 402, 13 L.Ed.2d 233 (1964). In this case, we must determine whether the nation's labor laws or antitrust policy control where, after bargaining in good faith to a point of impasse, an employer group takes unilateral action to impose a fixed salary for a category of employees as an otherwise lawful step in the collective bargaining process established by the NLRA.

In 1989, the 28 clubs of the National Football League ("NFL") were engaged in collective bargaining with the NFL Players Association ("NFLPA"), the players' collective bargaining representative. During the course of bargaining, the NFL proposed to pay a fixed salary of $1,000 per week to any player assigned to newly formed practice squads. Had the parties been able to reach a settlement on this issue, they could have concluded an agreement establishing $1,000 per week as the salary for practice squad players, and this agreement would have posed no legal problems under the federal labor or antitrust laws. Such was not to be the case, however, for the parties bargained to impasse over the issue, after which the clubs unilaterally imposed the fixed salary for the 1989 NFL season. In response to the clubs' action, nine players who had been assigned to practice squads filed this class action antitrust lawsuit against the clubs and the NFL in the District Court, alleging that the fixed salary constituted an unreasonable restraint of trade in violation of the Sherman Act. During four years of ensuing litigation, the District Court held that the defendants' agreement on a fixed salary violated the Sherman Act, and, after a trial to determine damages, entered a judgment against the clubs and the NFL in the amount of $30,349,642, and enjoined them from ever again setting a uniform salary for any class of players.

While the clubs and the NFL raise a number of challenges to the District Court's actions, we need not address most of them, for we hold that the District Court erred in rejecting the appellants' claim that the nonstatutory labor exemption shields them from liability in this case. This exemption, a judicially-created doctrine designed to reconcile federal labor and antitrust policies, has had an important place in federal jurisprudence for almost 30 years. Although there has been much debate over the years regarding the scope of the exemption, there is at least one principle that seems clear: restraints on competition lawfully imposed through the collective bargaining process are exempted from antitrust liability so long as such restraints primarily affect only the labor market organized around the collective bargaining relationship. Thus, employees confronted with actions imposed lawfully through the collective bargaining process must respond not with a lawsuit brought under the Sherman Act, but rather with the weapons provided by the federal labor laws.

The NFL was free to take unilateral action after impasse (just as the NFLPA was free to strike), because the action was a legitimate economic weapon available to be used in an attempt to force a settlement. This is exactly what federal labor policy condones, as the Supreme Court has often recognized:

[A] particular activity might be 'protected' by federal law not only [where it falls] within Sec. 7 [of the NLRA], but also when it [is] an activity that Congress intended to be 'unrestricted by any governmental power to regulate' because it [is] among the permissible 'economic weapons in reserve ... actual exercise [of which] on occasion by the parties, is part and parcel of the system that the Wagner and Taft-Hartley Acts have recognized.'Lodge 76, Int'l Ass'n of Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S. 132, 141, 96 S.Ct. 2548, 2553, 49 L.Ed.2d 396 (1976) (quoting NLRB v. Insurance Agents' Int'l Union, 361 U.S. 477, 488, 489, 80 S.Ct. 419, 426, 427, 4 L.Ed.2d 454 (1960)). And, as the Second Circuit has recently held:

[T]he antitrust laws do not prohibit employers from bargaining jointly with a union, from implementing their joint proposals in the absence of a [collective bargaining agreement], or from using economic force to obtain agreement to those proposals. What limits on such conduct that exist are found in the labor laws.

National Basketball Ass'n v. Williams, 45 F.3d 684, 693 (2d Cir.1995). We agree.

Because the NFL in this case acted lawfully within the framework of the collective bargaining process when it unilaterally imposed a fixed salary for practice-squad players, and because this action affected only the market for professional football player services, the nonstatutory labor exemption precludes any finding of liability under the Sherman Act. Accordingly, we reverse the decision of the District Court.

This case arises from a labor dispute over salaries for a limited number of professional football players whose jobs required them to practice with regular NFL players, and to replace regular players who became injured, but not otherwise to play in NFL football contests. In 1987, a collective bargaining agreement governing the terms and conditions of employment for all professional football players expired, and the NFL and NFLPA began negotiations for a new agreement. In early 1989, with the two sides making little progress toward such an agreement, the owners adopted an amendment to the NFL Constitution that altered the rules governing players on the clubs' injured-reserve lists and established new Developmental Squads of practice and replacement players. The amendment, known as Resolution G-2, allowed each club to maintain a Developmental Squad of as many as six rookie or "first-year"1 practice and replacement players in addition to its usual 47-player roster. Resolution G-2 departed from the customary NFL practice of setting player salaries through individual negotiation. It anticipated a fixed salary for the Developmental Squad players, though it did not establish the amount of that salary.

The NFL and NFLPA engaged in fruitless negotiations over Resolution G-2. On April 7, NFL Management Committee ("NFLMC") Executive Director Jack Donlan solicited a meeting with NFLPA Executive Director Gene Upshaw to negotiate the terms and conditions of employment for Developmental Squad players. On May 17, 1989, a league management committee proposed that the salary for Developmental Squad players be set at $1,000 per week. On May 18, Donlan again sought a meeting with Upshaw. Subsequently, on May 30, 1989, Upshaw responded with a letter stating that the NFLPA agreed only "that players can be listed on a developmental squad of an NFL club if they have all of the benefits and protections which players on the Active List have," including "the right to negotiate their own salaries." Letter from Gene Upshaw to Jack Donlan (May 30, 1989), reprinted in Joint Appendix ("J.A.") 54. Donlan and Upshaw met on June 16, 1989, to discuss the Developmental Squad portion of Resolution G-2. In a letter to Donlan memorializing the discussions at that meeting, Upshaw rejected the fixed salary component of the Developmental Squad proposal, holding to the position that "all players, including developmental, should have the right to negotiate salary terms, and that no fixed wage for any group of players is acceptable to the NFLPA." Letter from Gene Upshaw to Jack Donlan (July 6, 1989), reprinted in J.A. 58. As a result, Donlan concluded that the issue was "clearly at impasse" for "implementation purposes." Letter from Jack Donlan to Hugh Culverhouse et al. (June 16, 1989), reprinted in J.A. 55.

The NFL then unilaterally implemented the Developmental Squad program by distributing uniform contracts for Developmental Squad players to all teams. Club officials were advised that paying any such player more or less than $1,000 per week would result in disciplinary action, including loss of future draft choices. See Memorandum from Pete Rozelle, NFL Commissioner, to NFL General Managers, Player Personnel Directors (Aug. 24, 1989) at 1, reprinted in J.A. 2538. Resolution G-2 allowed the clubs to form their Developmental Squads from players remaining available after each club reduced its regular roster to 47 players on September 4. Under the resolution, the clubs could sign Developmental Squad players to contracts after 4 p.m. on September 5, 1989. During the 1989 season, 236 players signed Developmental Squad contracts.

On May 9, 1990, appellee Antony Brown and eight other Developmental Squad players2 ("the Players") brought a class action lawsuit against all 28 NFL clubs and the NFL itself on behalf of 235 of the 1989 Developmental Squad players, alleging that the defendants engaged in price-fixing in violation of the Sherman Act by setting a $1,000 fixed salary for such players. On June 4, 1991, the District Court granted the Players' motion for partial summary judgment, and denied the NFL's cross-motion, on the issue of whether the Players' suit was precluded by the nonstatutory labor exemption to the antitrust laws. Brown v. Pro Football, Inc., 782 F.Supp. 125 (D.D.C.1991). The District Court relied on three alternative rationales to support its judgment. First, it held that the exemption ended when the parties' collective bargaining agreement expired in 1987. Id. at 130-34. Second, the court held that, even if the exemption survived the expiration of the collective bargaining agreement, it ended when the parties reached impasse regarding the issue of Developmental Squad player salaries. Id. at 134-37. Finally, the District Court held that, in any event, the exemption was inapplicable because it protects only restraints on competition contained in collective bargaining agreements, and the fixed salary had not previously been encompassed in any agreement between the NFL and NFLPA. Id. at 137-39.

On March 10, 1992, the District Court granted the Players' motion for summary judgment on the issue of antitrust liability. Brown v. Pro Football, Inc., 1992-1 Trade Cas. (CCH) p 69,747, 1992 WL 88039 (D.D.C.1992), reprinted in J.A. 422. With liability established, the District Court on September 21, 1992, began a ten-day jury trial on the issues of antitrust injury and damages. The jury awarded damages to the players in the class that, when trebled in accordance with section 4 of the Clayton Act, 15 U.S.C. Sec. 15 (1988), totaled $30,349,642. Brown v. Pro Football, Inc., Civ.Action No. 90-1071 (D.D.C. Oct. 5, 1992) (judgment on the verdict), reprinted in J.A. 2714. In the wake of this verdict, the District Court denied the clubs' motion for judgment as a matter of law, or a new trial, and granted the Players' request for a permanent injunction barring the clubs from ever again setting a uniform regular season salary for any category of players. Brown v. Pro Football, Inc., 821 F.Supp. 20 (D.D.C.1993), reprinted in J.A. 2911. Finally, on March 1, 1994, the District Court awarded the Players' counsel $1,744,578.41 in attorney's fees. Brown v. Pro Football, Inc., 846 F.Supp. 108 (D.D.C.1994).3

On appeal, the clubs and the NFL challenge each of the District Court's decisions. However, we address only the District Court's rejection of appellants' nonstatutory labor exemption defense, because we deem it dispositive. We review de novo the District Court's entry of summary judgment on this issue. SEC v. Bilzerian, 29 F.3d 689, 695 (D.C.Cir.1994).

Appellants contend that the nonstatutory labor exemption applies to all restraints on competition imposed through the collective bargaining process, even those imposed unilaterally by an employer. In their view, any other rule would disrupt the balance of power between unions and employers that exists under federal labor law. The Players, meanwhile, argue that the exemption applies only where a union has consented to a restraint on competition. They contend that the exemption must be narrowly construed to apply only where unions act in tandem with employers, as, for example, by entering into collective bargaining agreements.

After reviewing relevant Supreme Court precedent and the policies underlying both the NLRA and the Sherman Act, we conclude that the nonstatutory labor exemption shields from antitrust challenge alleged restraints on competition imposed through the collective bargaining process, so long as the challenged actions are lawful under the labor laws and primarily affect only a labor market organized around a collective bargaining relationship. Because the fixed salary for Developmental Squad players is such an action, we hold that the exemption shields the clubs and the NFL from liability in this case.

An exemption to the antitrust laws for activities related to collective bargaining traces its origin to sections 6 and 20 of the Clayton Act, 15 U.S.C. Sec. 17 (1988), 29 U.S.C. Sec. 52 (1988), and to the Norris-LaGuardia Act, 29 U.S.C. Sec. 101 et seq. (1988). Clayton Act section 6 excludes human labor from the definition of a commodity and provides that the antitrust laws do not prohibit labor organizations. Section 20 of that Act, along with the Norris-LaGuardia Act, limits the authority of federal courts to enjoin specified union activities. While none of these statutory provisions is phrased in terms of an exemption from the Sherman Act, the Supreme Court has interpreted them generally to waive antitrust liability for unilateral union conduct such as boycotts and picketing. See H.A. Artists & Assoc., Inc. v. Actors' Equity Ass'n, 451 U.S. 704, 714-15, 101 S.Ct. 2102, 2108-09, 68 L.Ed.2d 558 (1981); United States v. Hutcheson, 312 U.S. 219, 232, 61 S.Ct. 463, 466, 85 L.Ed. 788 (1941). This exemption, known as the statutory labor exemption, does not exempt bilateral activity, such as "concerted action or agreements between unions and nonlabor parties." Connell Constr. Co., Inc. v. Plumbers & Steamfitters Local No. 100, 421 U.S. 616, 622, 95 S.Ct. 1830, 1835, 44 L.Ed.2d 418 (1975). However, the Supreme Court has recognized

that a proper accommodation between the congressional policy favoring collective bargaining under the NLRA and the congressional policy favoring free competition in business markets requires that some union-employer agreements be accorded a limited nonstatutory exemption from antitrust sanctions.

Id. Unlike the statutory exemption, this nonstatutory exemption is available to both unions and employers. See Scooper Dooper, Inc. v. Kraftco Corp., 494 F.2d 840, 847 n. 14 (3d Cir.1974); see also, e.g., Powell v. NFL, 930 F.2d 1293, 1303 (8th Cir.1989), cert. denied, 498 U.S. 1040, 111 S.Ct. 711, 112 L.Ed.2d 700 (1991).

Although the Supreme Court has recognized a nonstatutory labor exemption to the antitrust laws, the scope of the exemption never has been conclusively delimited. Instead, the Court's cases in this area mark out only the general boundaries of the doctrine. The Court's first major decision addressing a restraint on competition imposed through the collective bargaining process came in Allen Bradley Co. v. Local No. 3, Int'l Bhd. of Elec. Workers, 325 U.S. 797, 799-800, 65 S.Ct. 1533, 1535-36, 89 L.Ed. 1939 (1945), in which a local union of electrical workers in New York City reached an agreement with local manufacturers and contractors requiring the contractors to buy equipment only from manufacturers employing union members, and the manufacturers to sell only to contractors employing union members. This arrangement severely curtailed competition from firms outside the city, inflating prices for electrical equipment in the local market. Id. at 800, 65 S.Ct. at 1535. When excluded manufacturers challenged the agreement under the Sherman Act, the union claimed an exemption from antitrust liability. The Supreme Court rejected this claim, concluding that "Congress never intended that unions could, consistently with the Sherman Act, aid non-labor groups to create business monopolies and to control the marketing of goods and services." Id. at 808, 65 S.Ct. at 1539.

The Court reached a similar conclusion two decades later in United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965), in which it addressed an antitrust challenge to a contract between a union and large coal mining companies by which the union agreed to impose a new, higher wage upon smaller coal companies as part of a concerted effort to drive the smaller firms from the industry. A majority of the Court rejected the union's claim to an exemption from the Sherman Act. Id. at 661, 85 S.Ct. at 1588. While Justice White's opinion for the Court acknowledged that "a union may conclude a wage agreement with [a] multi-employer bargaining unit without violating the antitrust laws and ... may as a matter of its own policy, and not by agreement with all or part of the employers of that unit, seek the same wages from other employers," it held that "a union forfeits its exemption from the antitrust laws when it is clearly shown that it has agreed with one set of employers to impose a certain wage scale on other bargaining units." Id. at 664-65, 85 S.Ct. at 1590-91.

Pennington 's promise of a nonstatutory labor exemption to the Sherman Act was realized in a companion case, Local No. 189, Amalgamated Meat Cutters & Butcher Workmen v. Jewel Tea Co., Inc., 381 U.S. 676, 85 S.Ct. 1596, 14 L.Ed.2d 640 (1965). There, the Court, in opinions by Justices White and Goldberg, applied the exemption to shield from antitrust liability a multi-union, multi-employer agreement to close food store meat departments at 6 p.m. so as to prevent butchers from being replaced by self-service markets or unskilled workers during night hours. Justice White, writing for three justices, balanced the interest of union workers against the impact on the product market, finding the restriction on working hours to be of "immediate and direct" concern to union members and noting that the subject matter of the agreement--employees' working hours--was "well within the realm of 'wages, hours, and other terms and conditions of employment' about which employers and unions must bargain" under the NLRA. Id. at 691, 85 S.Ct. at 1602. Justice Goldberg, writing for three other justices, went further, concluding that all "collective bargaining activity concerning mandatory subjects of bargaining under the Labor Act is not subject to the antitrust laws." Id. at 710.

Finally, in its most recent opinion on the subject, the Court in Connell Construction, 421 U.S. at 616, 95 S.Ct. at 1832, held the nonstatutory exemption inapplicable where a plumbers union forced a general contractor to sign an agreement requiring the contractor to subcontract construction work only to firms maintaining collective bargaining agreements with the union. The Court found that this arrangement "indiscriminately excluded nonunion subcontractors from a portion of the market, even if their competitive advantages were not derived from substandard wages and working conditions but rather from more efficient operating methods." Id. at 623, 95 S.Ct. at 1835. The Court stated:

This kind of direct restraint on the business market has substantial anticompetitive effects, both actual and potential, that would not follow naturally from the elimination of competition over wages and working conditions. It contravenes antitrust policies to a degree not justified by congressional labor policy, and therefore cannot claim a nonstatutory exemption from the antitrust laws.

Id. at 625, 95 S.Ct. at 1836.

In assessing the relevance of these cases to the issue before us, we note initially that the Court never has considered whether the exemption applies where, as here, an antitrust claim arises from a dispute over a negotiable condition of employment between parties to the collective bargaining process. Nevertheless, the Players contend that the Supreme Court's precedents dictate a rule to govern this case. They seek to extract from the Court's opinions a rule that the exemption applies only where a union has manifested its consent to a restraint on trade by signing a collective bargaining agreement. They emphasize that both the Connell Construction and Jewel Tea opinions refer to the nonstatutory exemption as a shield from antitrust liability for union-employer "agreements."4 Jewel Tea Co., 381 U.S. at 689, 85 S.Ct. at 1601 (White, J.); Connell Constr. Co., 421 U.S. at 622, 95 S.Ct. at 1835. Absent union consent, the Players contend, the exemption is inapplicable. We disagree. Indeed, we believe that the Players' view is based on a distorted reading of the case law.

The language in the opinions upon which the Players rely must be read in context. As the previous discussion indicates, each of the pertinent Supreme Court cases involved an antitrust challenge to a union-employer agreement. In such circumstances, the Court's reference to the nonstatutory labor exemption in terms of a potential shield from antitrust liability for such agreements is hardly surprising.5 Certainly, no Supreme Court case expressly limits the exemption in the manner suggested by the appellees. Thus, nothing in any of the Court's opinions, from Allen Bradley to Connell Construction, disposes of the issue before us.

While not dispositive, however, the Court's opinions do provide significant guidance for our reconciliation of the competing antitrust and labor policies in this case. First, in its most extensive discussion of the nonstatutory labor exemption, the Court characterized the doctrine as representing a "proper accommodation between the congressional policy favoring collective bargaining under the NLRA and the congressional policy favoring free competition in business markets." Connell Constr. Co., 421 U.S. at 622, 95 S.Ct. at 1835 (emphasis added). Thus, the Court recognized that the juxtaposition of policies giving rise to the exemption focuses on collective bargaining as a process, not merely on the product of that process--the collective bargaining agreement.

We also observe that, in applying the nonstatutory labor exemption, the Court consistently has struggled to balance the interests of those involved in collective bargaining against the impact of their activities on the product market, paying little attention to any impact on the labor market. See, e.g., Pennington, 381 U.S. at 663, 85 S.Ct. at 1589 (stating that union and mining companies who agreed on price at which companies would sell their coal would be unshielded by exemption because "the restraint on the product market is direct and immediate"); Jewel Tea, 381 U.S. at 690 n. 5, 85 S.Ct. at 1602 n. 5 (stating that "crucial determinant" for application of exemption to an agreement is the agreement's "relative impact on the product market and the interests of union members"); see also Wood v. National Basketball Ass'n, 809 F.2d 954, 963 (2d Cir.1987) ("Each of the [Supreme Court's] decisions [applying the nonstatutory labor exemption] involved injuries to employers who asserted that they were being excluded from competition in the product market." (emphasis omitted)). Nothing in the Court's opinions supports appellees' attempt to import antitrust principles into a labor market organized around a collective bargaining relationship. "Quite the contrary, the issue has been whether even to go so far as to impose antitrust sanctions for the kind of product market activities involved in Pennington." Michael S. Jacobs & Ralph K. Winter, Jr., Antitrust Principles and Collective Bargaining by Athletes: Of Superstars in Peonage, 81 YALE L.J. 1, 27 (1971). In short, we agree with those commentators who have observed that

[f]rom Allen Bradley to Pennington, the majority of the Court has insisted that one factor be present before the Sherman Act applies to arrangements arrived at through collective bargaining: one group of employers must conspire to use the union to hurt their competitors. The line the Court has consistently sought to draw, therefore, is the line between the product market and the labor market.

Id. at 26.

Thus, from the Court's opinions we derive two principles to guide our application of the nonstatutory labor exemption. First, the exemption must be broad enough in scope to shield the entire collective bargaining process established by federal law. Second, the case for applying the exemption is strongest where a restraint on competition operates primarily in the labor market and has no anti-competitive effect on the product market. We believe these principles find support not only in the Supreme Court's precedents, but also in the policies underlying both the NLRA and the Sherman Act.

The NLRA makes clear that federal labor policy focuses on collective bargaining as a process, rather than collective bargaining agreements alone. In the NLRA, Congress established "the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment." 29 U.S.C. Sec. 158(d). This obligation "is premised on the belief that collective discussions backed by the parties' economic weapons will result in decisions that are better for both management and labor and for society as a whole." First Nat'l Maintenance Corp. v. NLRB, 452 U.S. 666, 678,