September 29, 1994
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 94-1031
WILLIAM H. SULLIVAN II,
Plaintiff - Appellee,
v.
PAUL TAGLIABUE, ET AL.,
Defendants -Appellees.
NATIONAL FOOTBALL LEAGUE, &
MEMBERS OF THE NATIONAL FOOTBALL LEAGUE
Defendants - Appellants.
ERRATA SHEET
The opinion of this Court issued on September 16, 1994, is
amended as follows:
The caption on the coversheet should read: "William H.
Sullivan II, Plaintiff - Appellee v. National Football League, &
Members of the National Football League." "Paul Tagliabue, et
al., Defendants - Appellees" should be deleted.
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 94-1031
WILLIAM H. SULLIVAN II,
Plaintiff - Appellee,
v.
NATIONAL FOOTBALL LEAGUE, &
MEMBERS OF THE NATIONAL FOOTBALL LEAGUE
Defendants - Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Edward F. Harrington, U.S. District Judge]
Before
Torruella, Circuit Judge,
Coffin, Senior Circuit Judge,
and Stahl, Circuit Judge.
John Vanderstar, with whom Sonya D. Winner, Ethan M. Posner,
Covington & Burling, Jeremiah T. O'Sullivan, Sarah Chapin
Columbia, Choate, Hall & Stewart, Joseph W. Cotchett, and
Cotchett, Illston & Pitre were on brief for appellants.
Joseph L. Alioto and Frederick P. Furth, with whom Angela M.
Alioto, Law Offices of Joseph L. Alioto, Alan R. Hoffman, Lynch,
Brewer, Hoffman & Sands, Bruce J. Wecker, Michael P. Lehmann and
Furth, Fahrner & Mason, were on brief for appellees.
September 16, 1994
TORRUELLA, Circuit Judge. The National Football League
and twenty-one organizations owning NFL franchises (referred to
collectively as the "NFL") appeal the judgment entered against
them after a jury found that the NFL violated the antitrust laws
by restricting owners of member football clubs from selling
shares in their teams to the public. Plaintiff-appellee, William
H. Sullivan, former owner of the New England Patriots football
team (the "Patriots"), was awarded a total of $51 million in
damages for the losses Sullivan incurred when he had to sell the
Patriots to a private buyer after the NFL prevented him from
offering 49% of the team to the public in the form of publicly
traded stock. Because several prejudicial errors were committed
during the trial, we vacate the judgment and remand for a new
trial.
I. BACKGROUND
Under Article 3.5 of the NFL's constitution and by-
laws, three-quarters of the NFL club owners must approve all
transfers of ownership interests in an NFL team, other than
transfers within a family. In conjunction with this rule is an
uncodified policy against the sale of ownership interests in an
NFL club to the public through offerings of publicly traded
stock. The members, however, retain full authority to approve
any given transfer by a three-quarters vote according to Article
3.5.
Sullivan owned the Patriots from the team's inception
in 1959 until October of 1988. When Sullivan formed the
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Patriots, he and his partner sold non-voting shares of the team
to the public beginning in 1960. At that time, the Patriots were
in the old American Football League ("AFL"), which was separate
from the NFL, and which had no policy against public ownership of
teams. In 1966, the AFL and the old NFL merged into a single
league. Under the terms of the merger, the new NFL would adopt
the old NFL's policy against public ownership. The Patriots,
however, were allowed to retain their level of public ownership
as a special exception to the rule under a grandfather clause.
In 1976, Sullivan sought to acquire the publicly held
shares of the Patriots through a merger of the club into a new
Sullivan-owned company. Stockholders approved the transfer and
the transaction was subsequently consummated, although some
shareholders subsequently brought suit, challenging the
sufficiency of the purchase price. After protracted litigation,
the shareholders obtained a judgment requiring Sullivan to pay
them a higher price for their shares. The Patriots then became a
fully privately owned club.
Sullivan and his son, Chuck Sullivan, who owned the
stadium where the Patriots played, began to experience financial
difficulties and increasing debt burdens in the mid-1980s. The
Sullivans decided that they needed to raise capital to alleviate
their financial problems. After the Boston Celtics professional
basketball franchise made a public offering of 40% of the team in
December of 1986, the Sullivans decided to pursue a similar deal
with the Patriots in order to raise cash to cover some of their
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debts.
On October 19, 1987, the Sullivans met with Stephens,
Inc., a small investment banking firm in Little Rock, Arkansas.
They discussed a debt financing deal whereby Stephens would loan
the Sullivans $80 million dollars, with half going to the
Patriots and the other half to Chuck Sullivan's company which
owned the Patriots' stadium. The Patriots' portion of the loan
would be repaid out of the proceeds of the sale of 49% of the
Patriots through the offering of public stock. Stephens agreed
to look into the possibility of arranging the deal, but informed
the Sullivans that they would first have to get NFL approval.
Sullivan ultimately never obtained NFL approval and the deal with
Stephens never progressed beyond some preliminary discussions.
At a meeting of the NFL owners on October 27, 1987,
Sullivan raised his stock sale idea with the other owners and
asked for a modification of the NFL's policy against public
ownership to allow for certain controlled sales of minority
interests in NFL clubs. Alternatively, Sullivan requested a
waiver from the public ownership policy for his contemplated
public offering of the Patriots. Sullivan's request was
eventually tabled at this meeting. Discussions continued among
the owners and, at one point, Sullivan counted 17 of the 21
owners needed for approval as being in favor of allowing him to
make his public offering (seven owners were still undecided).
Pete Rozelle, NFL Commissioner at the time, told Sullivans that
he was not in favor of Sullivan's proposals and that league
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approval was "very dubious." Sullivan ultimately never asked for
a vote on amending the ownership policy or on waiving the policy
for the Patriots, and the NFL never held such a vote. Sullivan
claims that he did not ask for a vote because it would have been
futile.
In October of 1988, Sullivan sold the Patriots for
approximately $83.7 million to KMS Patriots L.P. ("KMS"), a
limited partnership owned by Victor Kiam and Francis Murray.
Sullivan alleges that, absent the NFL's public ownership policy,
he would have been able to retain a majority share of a rapidly
appreciating asset with a high potential for future profits.
Instead, Sullivan asserts, he was forced to sell the Patriots at
a depressed price to private buyers.
On May 16, 1991, Sullivan sued the NFL claiming that,
among other things, the NFL had violated the Sherman Antitrust
Act, 15 U.S.C. 1-2, by preventing him from selling 49% of the
Patriots to the public in an equity offering. Sullivan alleged
that, as a result, he was forced to sell the entire team to a
private buyer at a fire sale price in order to pay off existing
debts. Prior to trial, the district court dismissed Sullivan's
claim under 2 of the Sherman Act along with various state law
claims. After a trial on Sullivan's claim under 1 of the
Sherman Act, the jury rendered a verdict for Sullivan in the
amount of $38 million, which the judge later reduced through
remittitur to $17 million. Pursuant to 15 U.S.C. 15, which
provides for treble damages for antitrust violations, the court
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entered a final judgment for Sullivan of $51 million.
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II. ANALYSIS
The NFL has raised a number of issues on appeal
concerning the application of 1 of the Sherman Act to the facts
of this case, which, according to the NFL, entitle it to judgment
as a matter of law. We address these issues first to see if the
present case should be dismissed, and we ultimately conclude that
it should not. We next address the NFL's allegations of trial
error and we find that several of them require that we overturn
the verdict in this case and order a new trial.
The first set of issues involves the district court's
denial of the NFL's motions for judgment as a matter of law under
Fed. R. Civ. P. 50. We review the court's decision de novo,
using the same stringent decisional standards that controlled the
district court. Gallagher v. Wilton Enterprises, Inc., 962 F.2d
120, 125 (1st Cir. 1992); Hendricks & Assocs., Inc. v. Daewoo
Corp., 923 F.2d 209, 214 (1st Cir. 1991). Under these standards,
judgment for the NFL can only be ordered if the evidence, viewed
in the light most favorable to Sullivan, points so strongly and
overwhelmingly in favor of the NFL, that a reasonable jury could
not have arrived at a verdict for Sullivan. Gallagher, 962 F.2d
at 124-25; Hendricks, 923 F.2d at 214.
III. ISSUES ALLEGEDLY REQUIRING JUDGMENT FOR THE NFL
A. Lack of Antitrust Injury
To establish an antitrust violation under 1 of the
Sherman Act, Sullivan must prove that the NFL's public ownership
policy is "in restraint of trade." Monahan's Marine, Inc. v.
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Boston Whaler, Inc., 866 F.2d 525, 526 (1st Cir. 1989). Under
antitrust law's "rule of reason," the NFL's policy is in
restraint of trade if the anticompetitive effects of the policy
outweigh the policy's legitimate business justifications. Id. at
526-27 (citing Business Electronics Corp. v. Sharp Electronics
Corp., 485 U.S. 717, 723 (1988)). Anticompetitive effects, more
commonly referred to as "injury to competition" or "harm to the
competitive process," are usually measured by a reduction in
output and an increase in prices in the relevant market.
National Collegiate Athletic Ass'n v. Board of Regents of Univ.
of Okla., 468 U.S. 85, 104-07 (1984) ("Restrictions on price and
output are the paradigmatic examples of restraints of trade")
(hereinafter "NCAA"); Chicago Professional Sports Ltd.
Partnership v. National Basketball Association, 961 F.2d 667, 670
(7th Cir.), cert. denied, 113 S. Ct. 409 (1992). Injury to
competition has also been described more generally in terms of
decreased efficiency in the marketplace which negatively impacts
consumers. Town of Concord v. Boston Edison Co., 915 F.2d 17,
21-22 (1st Cir. 1990), cert. denied, 499 U.S. 931 (1991);
Interface Group, Inc. v. Massachusetts Port Auth., 816 F.2d 9, 10
(1st Cir. 1987). Thus, an action harms the competitive process
"when it obstructs the achievement of competition's basic goals -
- lower prices, better products, and more efficient production
methods." Town of Concord, 915 F.2d at 22.
The jury determined in this case, via a special verdict
form, that the relevant market is the "nationwide market for the
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sale and purchase of ownership interests in the National Football
League member clubs, in general, and in the New England Patriots,
in particular." The jury went on to find that the NFL's policy
had an "actual harmful effect" on competition in this market.
The NFL argues on appeal that Sullivan has not
established the existence of any injury to competition, and thus
has not established a restraint of trade that can be attributed
to the NFL's ownership policy. The league's attack is two-fold,
asserting (1) that NFL clubs do not compete with each other for
the sale of ownership interests in their teams so there exists no
competition to be injured in the first place; and (2) Sullivan
did not present sufficient evidence of injury to competition from
which a reasonable jury could conclude that the NFL's policy
restrains trade. Although we agree with the NFL that
conceptualizing the harm to competition in this case is rather
difficult, precedent and deference to the jury verdict ultimately
require us to reject the NFL's challenge to the finding of injury
to competition.
Critically, the NFL does not challenge on appeal the
jury's initial finding of the relevant market and no
corresponding challenge was raised at trial.1 As a result, the
1 The NFL argues in passing that certain expert testimony
related to the relevant market issue was inherently unreasonable
and thus could not support the jury's relevant market finding.
We do not consider this passing argument to be sufficient to
raise the relevant market issue on appeal as matters averted to
in a perfunctory manner, unaccompanied by some effort at
developed argumentation, are deemed waived on appeal. United
States v. Innamorati, 996 F.2d 456, 468 (1st Cir. 1993). More
importantly, the NFL did not challenge the relevant market issue
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NFL faces an uphill battle in its attack on the presence of an
injury to competition. Given the existence of a relevant market
for ownership interests in NFL teams, it is reasonable to presume
that a policy restricting the buying and selling of such
ownership interests injures competition in that market. The NFL
nevertheless maintains that NFL teams do not compete against each
other for the sale of their ownership interests, even if we
accept that a market exists for such ownership interests.
1. No Competition Subject to Injury as Matter of Law
The NFL correctly points out that member clubs must
cooperate in a variety of ways, and may do so lawfully, in order
to make the football league a success. See United States
Football League v. National Football League, 842 F.2d 1335, 1372
(2d Cir. 1988); Los Angeles Memorial Coliseum Comm'n v. National
Football League, 726 F.2d 1381, 1391-92 (9th Cir.), cert. denied,
469 U.S. 990 (1984) (hereinafter "L.A. Coliseum"); North American
Soccer League v. National Football League, 670 F.2d 1249, 1251
(2d Cir.), cert. denied, 459 U.S. 1074 (1982) (hereinafter
"NASL"). On the other hand, it is well established that NFL
clubs also compete with each other, both on and off the field,
for things like fan support, players, coaches, ticket sales,
local broadcast revenues, and the sale of team paraphernalia.
Mid-South Grizzlies v. National Football League, 720 F.2d 772,
in either its directed verdict motion or in its motion for
judgment as a matter of law. We will not consider arguments
which could have been, but were not, advanced below. Domegan v.
Fair, 859 F.2d 1059, 1065 (1st Cir. 1988).
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786-87 (3d Cir. 1983), cert. denied, 467 U.S. 1215 (1984); L.A.
Coliseum, 726 F.2d at 1390, 1393, 1395, 1397. The question of
whether competition exists between NFL teams for sale of their
ownership interests, such that the NFL's ownership policy injures
this competition, is ultimately a question of fact. The NFL
would have us find, however, that, as a matter of law, NFL teams
do not compete against each other for the sale of their ownership
interests. We decline to make such a finding.
The NFL relies on a series of cases which allegedly
stand for the "well established" rule that a professional sports
league's restrictions on who may join the league or acquire an
interest in a member club do not give rise to a claim under the
antitrust laws. Seattle Totems Hockey Club, Inc. v. National
Hockey League, 783 F.2d 1347 (9th Cir.), cert. denied, 479 U.S.
932 (1986); Fishman v. Estate of Wirtz, 807 F.2d 520 (7th Cir.
1986); Mid-South Grizzlies, 720 F.2d at 772; Levin v. National
Basketball Ass'n, 385 F. Supp. 149 (S.D.N.Y. 1974). These cases,
all involving a professional sport's league's refusal to approve
individual transfers of team ownership or the creation of new
teams, do not stand for the broad proposition that no NFL
ownership policy can injure competition. See, e.g., NASL, 670
F.2d at 1259-61 (finding that the NFL's policy against cross-
ownership of NFL teams and franchises in competing sports
leagues, which also effectively barred certain owners who owned
other sports franchises from purchasing NFL teams, injured
competition between the NFL and competing sports leagues and thus
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violated 1 of the Sherman Act).
None of the cases cited by the NFL considered the
particular relevant market that was found by the jury in this
case or a league policy against public ownership. Seattle Totems
and Mid-South Grizzlies considered potential inter-league
competition when a sports league rejected plaintiffs'
applications for new league franchises. Seattle Totems, 783 F.2d
at 1349-50; Mid-South Grizzlies, 720 F.2d at 785-86. Those
decisions found no injury to competition because the plaintiffs
were not competing with the defendant sports leagues, but rather,
were seeking to join those leagues. Seattle Totems, 783 F.2d at
1350; Mid-South Grizzlies, 720 F.2d at 785-86. Mid-South
Grizzlies left open the possibility that potential intra-league
competition between NFL football clubs could be harmed by the
NFL's action, but found that the plaintiff in that case had not
presented sufficient evidence of harm to such competition. Mid-
South Grizzlies, 720 F.2d at 786-87.
The Fishman and Levin cases concerned the National
Basketball Association's ("N.B.A.") rejection of plaintiffs'
attempts to buy an existing team. Fishman, 807 F.2d at 525-31;
Levin, 385 F. Supp. at 150-51. Those cases also based their
finding that there was no injury to competition on the fact that
the plaintiffs were seeking to join with, rather than compete
against, the N.B.A. Fishman, 807 F.2d at 544; Levin, 385 F.
Supp. at 152. Neither case considered whether competition
between teams for investment capital was injured. As pointed out
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in Piazza v. Major League Baseball, 831 F. Supp. 420 (E.D.Pa.
1993), Fishman explicitly recognized the potential for
competition in the market for ownership of teams, although the
plaintiff had failed to raise the issue, and Levin simply
presumed, incorrectly, that there could never be any competition
among league members. Piazza, 831 F. Supp. at 430-31 & n.16
(citing Fishman, 807 F.2d at 532 n.9; and Levin, 385 F. Supp. at
152).
The important distinction to make between the cases
cited by the NFL and the present case is that here Sullivan
alleges that the NFL's policy against public ownership generally
restricts competition between clubs for the sale of their
ownership interests, whereas in the aforementioned cases, a
league's refusal to approve a given sale transaction or a new
team merely prevented particular outsiders from joining the
league, but did not limit competition between the teams
themselves. To put it another way, the NFL's public ownership
policy allegedly does not merely prevent the replacement of one
club owner with another -- an action having little evident effect
on competition -- it compromises the entire process by which
competition for club ownership occurs.2
2 This same argument distinguishes cases cited by the NFL for
the proposition that a franchisor's disapproval of a proposed
sale of a franchise does not give rise to an antitrust injury.
See Kestenbaum v. Falstaff Brewing Corp., 514 F.2d 690 (5th Cir.
1975), cert. denied, 424 U.S. 943 (1976); McDaniel v. General
Motors Corp., 480 F. Supp. 666 (E.D.N.Y. 1979). Individual
decisions to block the sale of a franchise do not implicate the
harm to competition that is caused by a policy restricting all
sales of a certain type of ownership interest. Only the broad-
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We take a moment to briefly address a related argument
raised by the NFL to the effect that NFL clubs are unable to
conspire with each other under 1 of the Sherman Act because
they function as a single enterprise in relation to the league's
public ownership policy. The NFL asserts that the Supreme
Court's holding in Copperweld Corp. v. Independence Tube Corp.,
467 U.S. 752 (1984), controls the facts of this case and
overturns prior caselaw holding that NFL clubs do not constitute
a single enterprise but rather, are separate entities which were
capable of conspiring with each other under 1. See L.A.
Coliseum, 726 F.2d at 1387-90; NASL, 670 F.2d at 1256-58.
We do not agree that Copperweld, which found a
corporation and its wholly owned subsidiary to be a single
enterprise for purposes of 1, Copperweld, 467 U.S. at 771,
applies to the facts of this case or affects the prior precedent
concerning the NFL. See McNeil v. National Football League, 790
F. Supp. 871, 879-80 (D.Minn. 1992) (holding that Copperweld did
not apply to the NFL and its member clubs and finding the clubs
to be separate entities capable of conspiring together under
1). Copperweld's holding turned on the fact that the subsidiary
of a corporation, although legally distinct from the corporation
itself, "pursue[d] the common interests of the whole rather than
interests separate from those of the corporation itself."
Copperweld, 467 U.S. at 770. As emphasized in City of Mt.
based policy has the potential to compromise the entire
competitive process for the buying and selling of a good in a
relevant market.
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Pleasant, Iowa v. Associated Elec. Co-op., Inc., 838 F.2d 268
(8th Cir. 1988), upon which the NFL relies for the application of
Copperweld to this case, the critical inquiry is whether the
alleged antitrust conspirators have a "unity of interests" or
whether, instead, "any of the defendants has pursued interests
diverse from those of the cooperative itself." Id. at 274-77
(defining "diverse" as "interests which tend to show that any two
of the defendants are, or have been, actual or potential
competitors"). As we have already noted, NFL member clubs
compete in several ways off the field, which itself tends to show
that the teams pursue diverse interests and thus are not a single
enterprise under 1.
Ultimately, the NFL's Copperweld challenge is subsumed
under the question of whether or not the evidence can support a
finding that NFL teams compete against each other for the sale of
their ownership interests. Proof of such competition defeats
both the NFL's challenge to the existence of an injury to
competition and the NFL's Copperweld argument as well.
Insufficient proof of such competition would require a judgment
in favor of the NFL anyway, regardless of the implications under
Copperweld. As we discuss below, the jury's finding that there
exists competition between teams for the sale of ownership
interests was based on sufficient evidence.
2. Insufficient Evidence of Harm to Competition
The NFL contends that Sullivan did not present
sufficient evidence concerning: (1) the existence of competition
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between NFL clubs for the sale of ownership interests, or (2) a
decrease in output, an increase in prices, a detrimental effect
on efficiency or other incidents of harm to competition in the
relevant market, from which a reasonable jury could conclude that
the NFL's policy injured competition. Although we agree that the
evidence of all these factors is rather thin, we disagree that
the evidence is too thin to support a jury verdict in Sullivan's
favor.
With respect to evidence of the existence of
competition for the sale of ownership interests, one of
Sullivan's experts, Professor Roger Noll, testified that "one of
the ways in which the NFL exercises monopoly power in the market
for the franchises and ownership is by excluding certain people
from owning all or part -- any type part of an NFL franchise."
Dr. Noll explained that this "enables a group of owners, in this
case, you only need eight owners, to exclude from the League and
from competing with them, people who might be more effective
competitors than they are." The record also contains statements
from several NFL owners which could reasonably be interpreted as
expressions of concern about their ability to compete with other
teams in the market for investment capital in general, and for
the sale of ownership interests in particular. For example,
Arthur Rooney II of the Pittsburgh Steelers stated in a letter
that he did not "believe that the individually or family owned
teams will be able to compete with the consolidated groups."
Ralph Wilson of the Buffalo Bills stated that big corporations
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should not own teams because it gives them an "unfair competitive
advantage" over other teams since corporations will funnel money
into the team and make it "more competitive" than the other
franchises. Former NFL Commissioner Pete Rozelle admitted that
similar sentiments had been expressed by NFL members.
Although it is not precisely clear that the
"competition" about which Noll, Rooney, and Wilson were
discussing is the same competition at issue here -- that is
competition for the sale of ownership interests -- a jury could
reasonably interpret these statements as expressing a belief that
the competition exists between teams for the sale of ownership
interests. The statements of the two NFL owners imply that
greater access to capital for all teams will put increased
pressure on some teams to compete with others for that capital,
and all the statements reveal that the ownership rules,
particularly the rule against public ownership, is the main
obstacle preventing such access. The fact that ownership by
"consolidated groups" is not necessarily the same as public
ownership does not affect the conclusion that teams face
competitive pressure in selling their ownership interests
generally to whoever might buy them. We also note that evidence
of actual, present competition is not necessary as long as the
evidence shows that the potential for competition exists. See L.
A. Coliseum, 726 F.2d at 1394 (discussing significance of
potential competition, especially where challenged policy limits
such competition so that it is not evident in practice). It
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would be difficult indeed to provide direct evidence of
competition when the NFL effectively prohibits it.
The NFL focusses on the fact that Professor Noll
testified that many of the purchasers of Patriots' stock would be
New England sports fans and others in the New England area. The
NFL points out that other NFL teams would not compete with the
Patriots for the sale of stock to their own fans. This argument
slightly distorts Professor Noll's testimony. Professor Noll
stated that local souvenir buyers would be one portion of the
market for Patriots stock. Professor Noll also testified several
times that other investors would buy Patriots stock as well, for
investment purposes. Noll's point was that the souvenir buyers
would serve to bid up the price of the stock above what the price
would normally be if the Patriots were a regular company. His
testimony did not preclude a finding that NFL teams compete
against each other for investment capital via the sale of
ownership interests.
The record also contains sufficient evidence of the
normal incidents of injury to competition from the NFL's policy -
- reduced output, increased prices, and reduced efficiency -- to
support the jury's verdict. As Dr. Noll pointed out in his
testimony, the NFL's policy "excludes individuals . . . who might
want to own a share of stock in a professional football team."
Several NFL officials themselves admitted that the policy
restricts the market for investment capital among NFL teams.
There is thus little dispute that the NFL's ownership policy
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reduces the available output of ownership interests.
The NFL is correct that, in one sense, the overall pool
of potential output is fixed because there are only 28 NFL teams
and, although their value may fluctuate, the quantity of their
ownership interests cannot. However, the NFL's public ownership
policy completely wipes out a certain type of ownership interest
-- public ownership of stock. By restricting output in one form
of ownership, the NFL is thereby reducing the output of ownership
interests overall. In other words, the NFL is literally
restricting the output of a product -- a share in an NFL team.
There was considerable testimony concerning the price
effects of the NFL policy. Both of Sullivan's experts testified
that the policy depressed the price of ownership interests in NFL
teams because NFL franchises would normally command a premium on
the public market relative to their value in the private market,
which is all that the league currently permits. Professor Noll
testified that fan loyalty would push up the price of ownership
interests if sales to the public were allowed. Even former
Commissioner Pete Rozelle acknowledged that "it was pointed out,
with justification, it has been over the years, that [the
ownership policy] does restrict your market and, very likely, the
price you could get for one of our franchises if you wanted to
sell it, because you are eliminating a very broad market . . . .
And they have said that there is a depression on the price they
could get for their franchise."
The NFL points out that the alleged effect of its
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ownership policy is to reduce prices of NFL team ownership
interests, rather than to raise prices which is normally the
measure of an injury to competition. E.g., Town of Concord, 915
F.2d at 22. We acknowledge that it is not clear whether, absent
some sort of dumping or predatory pricing, see, e.g., Monahan's
Marine, Inc. v. Boston Whaler, Inc., 866 F.2d 525, 527 (1st Cir.
1989), a decrease in prices can indicate injury to competition in
a relevant market. The Supreme Court has emphasized, however,
that overall consumer preferences in setting output and prices is
more important than higher prices and lower output, per se, in
determining whether there has been an injury to competition.
NCAA, 468 U.S. at 107. In this case, regardless of the exact
price effects of the NFL's policy, the overall market effects of
the policy are plainly unresponsive to consumer demand for
ownership interests in NFL teams. Dr. Noll testified that fans
are interested in buying shares in NFL teams and that the NFL's
policy deprives fans of this product. Moreover, evidence was
presented concerning the public offering of the Boston Celtics
professional basketball team which demonstrated, according to
some of the testimony, fan interest in buying ownership of
professional sports teams. Thus, a jury could conclude that the
NFL's policy injured competition by making the relevant market
"unresponsive to consumer preference." Id.3
3 The NFL maintains that price and output are not affected
because its ownership policy does not limit the number of games
or teams, does not raise ticket prices or the prices of game
telecasts and does not affect the normal consumer of the NFL's
product in any other way. Such facts might be relevant to an
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As for overall efficiency of production in the relevant
market,4 Sullivan's experts testified that the NFL's policy
hindered efficiency gains, and that allowing public ownership
would make for better football teams. Professor Noll stated that
the NFL's public ownership policy prevented individuals who might
be "more efficient and much better at running a professional
football team" from owning teams. Dr. Noll also stated that
publicly owned NFL teams would be better managed, and produce
higher quality entertainment for the fans. Noll testified that
the ownership rule excluded certain types of management
structures which would likely be more efficient in running the
teams, resulting in higher franchise values. One NFL owner,
Lamar Hunt, acknowledged that increased access to capital can
improve a team's operations and performance. A memorandum
prepared by an NFL staff member stated that changes to the NFL's
inquiry of whether the NFL's policy harms overall efficiency, see
infra note [4], but it is not relevant to whether the policy
affects output and prices in the relevant market for ownership
interests. Just because consumers of "NFL football" are not
affected by output controls and price increases does not mean
that consumers of a product in the relevant market are not so
affected. In this case, two types of consumers are denied
products by the NFL policy: consumers who want to buy stock of
the Patriots or other teams, and consumers like Sullivan who want
to "purchase" investment capital in the market for public
financing.
4 Although the product at issue in the relevant market is
"ownership interests," efficiency in production of that product
can be measured by the value of the ownership interest. That is,
an improved product produced more efficiently will be reflected
in the value of the output in question (regardless of the price).
In this case, the value of the product depends on the success of
the Patriots' football team, the overall efficiency of its
operations, and the success of the NFL in general.
-21-
public ownership policy could contribute to each NFL team's own
financial strength and viability, which in turn would benefit the
entire NFL because the league has a strong interest in having
strong, viable teams.
The NFL presented a large amount of evidence to the
contrary and now claims on appeal that Sullivan's position was
based on nothing more than sheer speculation. We have reviewed
the record, however, and we cannot say that the evidence was so
overwhelming that no reasonable jury could find against the NFL
and in favor of Sullivan. We therefore refuse to enter judgment
in favor of the NFL as a matter of law.
B. Ancillary Benefits
The NFL next argues that even if its public ownership
policy injures competition in a relevant market, it should be
upheld as ancillary to the legitimate joint activity that is "NFL
football" and thus not violative of the Sherman Act. We take no
issue with the proposition that certain joint ventures enable
separate business entities to combine their skills and resources
in pursuit of a common goal that cannot be effectively pursued by
the venturers acting alone. See, e.g., Broadcast Music, Inc. v.
Columbia Broadcasting System, Inc., 441 U.S. 1 (1979). We also
do not dispute that a "restraint" that is ancillary to the
functioning of such a joint activity -- i.e. one that is required
to make the joint activity more efficient -- does not necessarily
violate the antitrust laws. Broadcast Music, 441 U.S. at 23-25;
Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210,
-22-
at 223-24 (D.C. Cir. 1986), cert. denied, 479 U.S. 1033 (1987);
see also Northwest Wholesale Stationers, Inc. v. Pacific
Stationery & Printing Co., 472 U.S. 284, 295-96 (1985). We
further accept, for purposes of this appeal, that rules
controlling who may join a joint venture can be ancillary to a
legitimate joint activity and that the NFL's own policy against
public ownership constitutes one example of such an ancillary
rule. Finally, we accept the NFL's claim that its public
ownership policy contributes to the ability of the NFL to
function as an effective sports league, and that the NFL's
functioning would be impaired if publicly owned teams were
permitted, because the short-term dividend interests of a club's
shareholder would often conflict with the long-term interests of
the league as a whole. That is, the policy avoids a detrimental
conflict of interests between team shareholders and the league.
We disagree, however, that these factors are sufficient
to establish as a matter of law that the NFL's ownership policy
does not unreasonably restrain trade in violation of 1 of the
Sherman Act. The holdings in Broadcast Music, Rothery Storage,
and Northwest Stationers, do not throw the "rule of reason" out
the window merely because one establishes that a given practice
among joint venture participants is ancillary to legitimate and
efficient activity -- the injury to competition must still be
weighed against the purported benefits under the rule of reason.
See, e.g., Broadcast Music, 441 U.S. at 24 (holding only that a
particular ancillary restraint did not constitute a per se
-23-
violation of the Sherman Act and remanding for a determination of
the case under a rule of reason analysis); Northwest Stationers,
472 U.S. at 293-98 (same); see also SCFC ILC, Inc. v. Visa U.S.A.
Inc., 819 F. Supp. 956, 979-80 (D.Utah 1993) (finding that the
existence of a joint venture may save a restraint from per se
illegality but not from the normal rule of reason scrutiny).
One basic tenet of the rule of reason is that a given
restriction is not reasonable, that is, its benefits cannot
outweigh its harm to competition, if a reasonable, less
restrictive alternative to the policy exists that would provide
the same benefits as the current restraint. L.A. Coliseum, 726
F.2d at 1396. The record contains evidence of a clearly less
restrictive alternative to the NFL's ownership policy that would
yield the same benefits as the current policy. Sullivan points
to one proposal to amend the current ownership policy by allowing
for the sale of minority, nonvoting shares of team stock to the
public with restrictions on the size of the holdings by any one
individual. Dividend payments, if any, would be within the firm
control of the NFL majority owner. Under such a policy, it would
be reasonable for a jury to conclude that private control of
member clubs is maintained, conflicts of interest are avoided,
and all the other "benefits" of the NFL's joint venture
arrangement are preserved while at the same time teams would have
access to the market for public investment capital through the
sale of ownership interests.
C. Causation of Injury in Fact
-24-
The NFL next argues that Sullivan did not present
sufficient evidence to support a finding by the jury that the
NFL's public ownership policy caused injury in fact to Sullivan.
An antitrust plaintiff must prove that he or she suffered damages
from an antitrust violation and that there is a causal connection
between the illegal practice and the injury. Associated General
Contractors, Inc. v. California State Council of Carpenters, 459
U.S. 519, 532-33 & n.26 (1983); Blue Shield of Virginia v.
McCready, 457 U.S. 465, 476-78 (1982); Engine Specialties, Inc.
v. Bombardier Ltd., 605 F.2d 1, 13 (1st Cir. 1979), cert. denied,
446 U.S. 983 (1980). "Plaintiffs need not prove that the
antitrust violation was the sole cause of their injury, but only
that it was a material cause." Engine Specialties, 605 F.2d at
14.
Sullivan asserted at trial that the NFL's ownership
policy forced him to sell the Patriots at a depressed price, far
below what the team would have been worth in a market that
included public ownership of the team. "But for" the NFL's
policy, Sullivan claims, he would have been able to offer 49% of
the Patriots to the public for $70 million, pay off his debts,
and retained ownership of a much more valuable and profitable
team.
The NFL contends that Sullivan failed to establish a
causal connection between his "forced" sale of the Patriots and
the NFL's ownership policy because (1) Sullivan never officially
requested a vote on his proposals to amend or waive the policy so
-25-
there is no way of knowing whether the policy would have
prevented a public offering in the first place; and (2) Sullivan
never established that the public stock sale was feasible or
potentially successful and thus an alternative to what ultimately
happened (i.e., even if the NFL did not have a policy against
public ownership, Sullivan would still have had to sell his team
because the Patriots stock sale would not have happened or would
not have raised enough money to pay off Sullivan's debts and
prevent a fire sale of the team). Although the evidence of
causation is not overwhelming, it is nevertheless sufficient to
support the verdict.
Regarding the NFL's first claim that Sullivan never
called for a vote from the owners to change or waive the
ownership policy, Sullivan presented sufficient evidence to show
that the NFL essentially rejected Sullivan's request, even though
no official vote was taken. Under certain circumstances, an
antitrust plaintiff must make a demand on the defendant to allow
the plaintiff to take some action or obtain some benefit, which
the defendant's challenged practice is allegedly preventing the
plaintiff from taking or obtaining, in order to prove that the
practice caused injury in fact to the plaintiff. See Wells Real
Estate, Inc. v. Greater Lowell Bd. of Realtors, 850 F.2d 803, 816
(1st Cir.), cert. denied, 488 U.S. 955 (1988); Out Front
Productions, Inc. v. Magid, 748 F.2d 166, 170 (3d Cir. 1984).
Such a requirement only applies, however, where the plaintiff
cannot otherwise prove that the illegal practice exists or that
-26-
the practice is preventing the plaintiff from competing in the
relevant market; in such cases, a refused demand is the only
reliable evidence of causation. Out Front, 748 F.2d at 169-70.
In cases like the present one, an official request and official
refusal is not necessary to establish causality because there is
other evidence showing that defendant's practice caused injury in
fact to the plaintiff. Zenith Radio Corp. v. Hazeltine Research,
395 U.S. 100, 120 n.15 (1969); Continental Ore Co. v. Union
Carbide & Carbon Corp., 370 U.S. 690, 699-702 (1962). There is
certainly no blanket requirement, as the NFL maintains, in Wells
or any other case, that Sullivan must call for a vote and obtain
an official refusal from the NFL, even if such a request would be
futile. See, e.g., Wells, 850 F.2d at 816 (finding failure to
request access to multiple listing service was critical because
"[t]here was no evidence of a group boycott;" although court
noted request "may have been futile," there was no evidence to
indicate that it would have been, so an actual request was
required); Chicago Ridge Theatre Ltd. Partnership v. M & R
Amusement Corp., 855 F.2d 465, 470 (7th Cir. 1988) (futility
obviates the need for a demand). Certainly, if Sullivan can
prove futility independent of any official request, he need not
show that he actually called for a vote and received a denial
from the other NFL owners.
The jury in this case heard evidence that would allow
it to conclude that the NFL effectively denied Sullivan's request
for a waiver or amendment of the public ownership policy, and
-27-
that an official vote would indeed have been futile. The NFL's
policy against public ownership was long-standing, and the policy
withstood several efforts to change it over the years as
proffered amendment proposals were never brought to a vote.
Sullivan requested a wavier of, or amendment to, the policy at a
meeting of the owners on October 27, 1987. His request was
tabled. After further discussions, then-Commissioner Pete
Rozelle said that he opposed the proposal and that the chances
for league approval were "very dubious." Although Sullivan was
only four votes shy of winning a vote, with seven votes still
undecided, the jury could reasonably conclude that, in light of
the Commissioner's statement, Sullivan tried but failed to
convince those undecided owners to vote in his favor and that an
actual vote would have been futile. The evidence is thus
sufficient to support a finding that the NFL's policy was
effectively enforced against Sullivan and that the policy did in
fact, when considered with the evidence discussed below, prevent
Sullivan from making his public offering of 49% of the Patriots.
Sullivan also presented sufficient evidence to support
a finding that the Patriots stock sale was both feasible and
potentially successful. Sullivan met with Stephens, Inc., an
investment banking firm, to discuss a deal whereby Stephens would
arrange for a loan of $80 million to Sullivan and his son, half
of which would be paid back out of the proceeds of the Patriots
stock offering, which Stephens would also arrange. In a
subsequent letter, Stephens stated that it had been retained to
-28-
assist in the "private placement of $80 million of debt" and set
out some preliminary terms and conditions. Although specifics of
the public offering were not discussed, and Stephens did not
determine whether the stock offering was ultimately feasible,
Stephens repeatedly made it clear to Sullivan that NFL approval
was required -- indeed Stephens specifically singled out NFL
approval as the prerequisite -- before Stephens could proceed any
further with efforts to prepare for the placement of Patriots
stock.
As discussed above, NFL approval was never obtained.
Therefore, the jury could conclude that lack of approval was the
reason Stephens was unwilling to proceed with the deal, even
though Stephens also expressed some concern about Sullivan's
financial and legal troubles. The jury also heard testimony that
Charles Allen, a prominent investment banker in New York, thought
the Patriots public offering was feasible and that he was
potentially interested in arranging the deal. Sullivan himself
testified that the stock sale was feasible based on his
experience with the previous public offering of Patriots stock in
1960, and based on the public offering of the Boston Celtics.
Finally, one of Sullivan's experts, Patrick Brake, testified that
the public offering would have been feasible had the NFL not
blocked it.
In addition, despite significant financial and legal
problems with the Patriots, the evidence is sufficient to support
a finding that Sullivan could have solved these problems in the
-29-
course of the public offering and, further, that he could have
brought off a successful stock sale that would have raised at
least $70 million.
The NFL focusses its challenge to the potential success
of Sullivan's offering on the testimony of Patrick Brake, who
provided the $70 million figure as the value for the stock sale.
According to the NFL, Brake's testimony could not support the
jury's finding on causation because it was not supported by any
facts, it was not grounded in any rational methodology, and it
ignored important factors indicating that the Patriots offering
would not be a success. The NFL does not challenge the
admissibility of Brake's opinion but, instead, claims that his
opinion cannot support the jury's finding that the Patriots stock
sale would have been a success if the NFL had allowed it to
happen.
"When an expert opinion is not supported by sufficient
facts to validate it in the eyes of the law, or when indisputable
record facts contradict or otherwise render the opinion
unreasonable, it cannot support a jury's verdict." Brooke Group,
Ltd. v. Brown & Williamson Tobacco Corp., 113 S. Ct. 2578, 2589
(1993); accord Price v. General Motors Corp., 931 F.2d 162, 165
(1st Cir. 1991); Richardson v. Richardson-Merrell, Inc., 857 F.2d
823, 829 (D.C. Cir. 1988), cert. denied, 493 U.S. 882 (1989). A
jury verdict cannot rest solely on an expert's "bottom line"
conclusion, without some underlying facts and reasons, or a
logical inferential process to support the expert's opinion.
-30-
Mid-State Fertilizer Co. v. Exchange National Bank, 877 F.2d
1333, 1339 (7th Cir. 1989).
We agree that the facts and reasoning underlying
Brake's opinions and testimony leave much to be desired from the
standpoint of a factfinder charged with determining the facts.
As a matter of law, however, Brake provided enough of a basis for
his opinions and had sufficient facts to back his opinions up, to
support, in combination with the evidence from other sources, a
jury finding of potential success of the Patriots stock sale
venture. To begin with, Brake stated in his testimony that his
opinion was based on a review of documents and depositions in the
case, a review of the prospectus for the Boston Celtics public
offering, the fact that future television revenues for the
Patriots were likely to increase due to the Patriots' appearance
in the Super Bowl, and the fact that the public stock for NFL
teams, like the Patriots, would trade at a premium value over
what the club would otherwise be worth. Brake also stated that
he looked at a financial statement of the Patriots and was
apprised of some of the debt and loss history of the club. Other
testimony and evidence at trial supported the claim that stock of
NFL teams would sell for a premium above the club's private sale
value and the claim that TV revenues to the NFL teams would
increase. Sullivan himself testified that a public offering
would be successful based upon the success of his earlier
offering of Patriots stock and on the results of the Celtics
public offering. There was also testimony -- highly disputed,
-31-
but potentially credible testimony nonetheless -- to the effect
that the Celtics' stock offering was a success and that the
Patriots stock offering could be patterned after the Celtics
offering.
As for the source of Brake's specific $70 million
figure for the likely proceeds from a sale of 49% of the
Patriots, Brake explained a two-step public offering process
which, after subtracting underwriting fees, would yield the
Sullivan's $70 million. Brake arrived at this figure after
starting with a base value of $150 million for the Patriots.
Given the $80 million private sale price of the Patriots obtained
by Sullivan when he actually sold the team, and given the
testimony by Brake and others that public stock of NFL teams
would sell at a premium, we cannot say that the opinion by Brake,
an investment banking expert, was unreasonable or "not supported
by sufficient facts to validate it in the eyes of the law."
Brooke Group, 113 S. Ct. at 2589.
Brake's testimony was not merely conclusory. Rather,
it was embellished by various explanations and justifications.
His testimony was also not overwhelmingly contradicted by the
weight of the evidence or inherently contradictory, unreasonable
or irrational. Brake did overlook some important factors that
contradicted his opinion, but he was questioned about these
factors on cross-examination and the NFL argued them before the
jury. The factors do not invalidate Brake's opinion as a matter
of law; rather, they merely go to the weight and credibility of
-32-
his opinions which are matters for the jury to consider. The
basis of the opinion regarding the success of the Patriots public
offering may be flimsy, but it is not nonexistent or irrational
as a matter of law.
Although we share the NFL's skepticism that Sullivan
would have succeeded in his public offering if the NFL had
allowed him to try it, we cannot say that, as a matter of law,
the evidence was so overwhelming that no reasonable jury could
find that the NFL's policy harmed Sullivan by preventing him from
doing something he would otherwise have been able to do. We
therefore reject the NFL's claim that it is entitled to a
judgment in its favor on the basis that Sullivan failed to prove
his injury was caused by the alleged antitrust violation.
D. Assignment of Antitrust Claim
The NFL argues that Sullivan cannot bring this lawsuit
because he sold his antitrust claim when he sold the Patriots.
The sale contract between Sullivan and KMS Patriots, L.P.,
provided that Sullivan transferred to the buyers "all other
assets" of the Patriots' and its holding company,5 besides those
specifically listed and those specifically excluded. None of the
listed or excluded assets include an antitrust claim. According
to the NFL, the term "all other assets" should be interpreted
5 The language of the contract actually states "all other assets
of Selling Group," which includes Sullivan himself. However,
neither party asserts that Sullivan intended to transfer all his
personal assets with this clause and, anyway, the "all other
assets" clause is number seventeen on a list of items referred to
by the contract as "the following assets of the Club and Holdco
[the Patriots' holding company]."
-33-
broadly to include the present antitrust cause of action. We
disagree. Absent some express language to the effect that
Sullivan was selling his football related "antitrust claims" or,
at the very least, "causes of action," we cannot find that
Sullivan assigned the present antitrust claim to the buyers of
the Patriots. Gulfstream III Assocs., Inc. v. Gulfstream
Aerospace Corp., 995 F.2d 425, 437-40 (3d Cir. 1993); see also
Lerman v. Joyce Int'l, Inc., 10 F.3d 106, 112 (3d Cir. 1993)
(affirming requirement in Gulfstream that assignment of claim
must be "express" but expanding definition of "express" language
to include a grant of "all causes of action, claims and demands
of whatsoever nature"). As no such express language appears in
the contract for the sale of the Patriots, Sullivan did not
transfer his interest in the present lawsuit to KMS Patriots when
he sold the team.
The NFL's arguments concerning the application of 1
of the Sherman Act to the facts of this case raise a substantial
challenge to the jury verdict and are certainly weighty enough to
give us pause. Upon careful consideration of the issues,
however, we find Sullivan's theory of the case to be a plausible
one and ultimately find the evidence sufficient to support it.
For the foregoing reasons, therefore, we see no justification, as
a matter of law, for ringing the death knell on this litigation.
IV. TRIAL ERRORS
Having reviewed those issues which would have warranted
a judgment in favor of the NFL, had we decided any of those
-34-
issues in the NFL's favor, we now turn to the NFL's claim that it
is entitled to a new trial because of allegedly erroneous jury
instructions and other trial errors. In particular, the NFL
asserts that the district court failed to provide the jury with
several crucial jury instructions that were required in order to
present to the jury certain legal theories that were potentially
dispositive of the verdict. The NFL argues that the court's
failure to give the instructions was prejudicial error requiring
a new trial.
Determining whether the failure to give proffered jury
instructions is error depends on whether the instructions
actually given to the jury, taken as a whole, adequately
explained the law or whether they tended to confuse or mislead
the jury on the controlling issues of the case. Davet v.
Maccarone, 973 F.2d 22, 26 (1st Cir. 1992); Transnational Corp.
v. Rodio & Ursillo, Ltd., 920 F.2d 1066, 1070 (1st Cir. 1990);
see also L.A. Coliseum, 726 F.2d at 1398 ("The question, then, is
whether, viewing the jury instructions as a whole, the trial
judge gave adequate instructions on each element of the case to
insure that the jury fully understood the issues."). We must
also consider whether the NFL's proposed instructions are
accurate or misleading. Shane v. Shane, 891 F.2d 976, 987 (1st
Cir. 1989). "As long as the judge's instruction properly
apprises the jury of the applicable law, failure to give the
exact instruction requested does not prejudice the objecting
party." Brown v. Trustees of Boston Univ., 891 F.2d 337, 354
-35-
(1st Cir. 1989), cert. denied, 496 U.S. 937 (1990) (internal
quotations omitted). A party, however, is entitled to have its
legal theories on controlling issues, which are supported by the
law and by the evidence, presented to the jury. Jerlyn Yacht
Sales, Inc. v. Roman Yacht Brokerage, 950 F.2d 60, 68 (1st Cir.
1991); L.A. Coliseum, 726 F.2d at 1398. An error in the jury
instructions will warrant the reversal of the judgment and a new
trial only if, upon review of the record as a whole, the error is
determined to be prejudicial. Davet, 973 F.2d at 26; Jerlyn
Yacht Sales, 950 at 69; Transnational Corp., 920 F.2d at 1070.
In this case, we find that the failure to give certain
instructions was prejudicial error6 and we therefore vacate the
judgment and order a new trial.
A. Equal Involvement Defense
The NFL argued before the district court that Sullivan
was a complete and substantially equal participant in the NFL's
ownership policy which he now challenges in the present lawsuit.
As a result of Sullivan's involvement, the NFL claimed, Sullivan
was barred from bringing a damages action under the antitrust
laws pursuant to the "equal involvement defense" doctrine. The
district court denied motions for summary judgment and a directed
verdict on this issue and, further, refused to instruct the jury
on the availability of the defense because it found that the
6 The court's failure to instruct on the complete involvement
defense was prejudicial error and, by itself, sufficient grounds
for reversal and a new trial. We do not decide whether any of
the other errors, standing alone, are prejudicial. We do hold,
however, that all the errors taken together are prejudicial.
-36-
evidence showed that Sullivan "had very little, if any,
involvement in the formulation of [the public ownership] rule,"
and because the rule "was imposed on [Sullivan] by a preexisting
National Football League rule." This ruling constituted
prejudicial error because the "equal involvement defense" is an
absolute defense to an antitrust claim and because the evidence
warranted sending the issue to the jury.
A plaintiff's "complete, voluntary, and substantially
equal participation" in an illegal practice under the antitrust
laws precludes recovery for that antitrust violation. CVD, Inc.
v. Raytheon Co., 769 F.2d 842, 856 (1st Cir. 1985), cert. denied,
475 U.S. 1016 (1986); General Leaseways, Inc. v. National Truck
Leasing Ass'n, 830 F.2d 716, 720-23 (7th Cir. 1987); THI-Hawaii,
Inc. v. First Commerce Financial Corp., 627 F.2d 991, 995 (9th
Cir. 1980); see also Bateman Eichler, Hill, Richards, Inc. v.
Berner, 472 U.S. 299, 310-11 (1985) (applying equal involvement
defense in securities law context). In order to establish an
"equal involvement" defense, an antitrust defendant must prove,
by a preponderance of the evidence, that the plaintiff bears at
least substantially equal responsibility for an anticompetitive
restriction by creating, approving, maintaining, continually and
actively supporting, relying upon, or otherwise utilizing and
implementing, that restriction to his or her benefit.7 General
7 The Supreme Court in Bateman added an additional requirement
to the "equal involvement" defense: that "preclusion of suit
would not significantly interfere with the effective enforcement
of" the antitrust laws. Bateman, 472 U.S. at 311. We do not see
a preclusion of Sullivan's damages action as presenting any
-37-
Leaseways, 830 F.2d at 720-26; CVD, 769 F.2d at 856. It is not
essential to the defense that the plaintiff actually helped
author or create the policy, although such facts would be highly
probative, as long as the plaintiff was substantially responsible
for maintaining and otherwise effectuating the policy. See,
e.g., General Leaseways, 830 F.2d at 723 (applying equal
involvement defense in case where plaintiff did not participate
in the actual adoption of the policy although plaintiff was
substantially involved in supporting, enforcing and maintaining
the policy).8 On the other hand, proof that the plaintiff
benefitted from the challenged policy or failed to object to the
policy, without more, is not sufficient to show "substantially
equal participation." See id., 830 F.2d at 725 (noting that
"mere participation" in the challenged policy is not enough).
Moreover, proof that the plaintiff was coerced ("economically" or
significant interference with antitrust law enforcement. The
NFL's policy is still subject to challenge under the antitrust
laws. Because the equal involvement defense only precludes a
damages action, Sullivan could have requested injunctive relief
when the public ownership policy was allegedly preventing him
from selling 49% of his team. In addition, other owners who were
not involved in the adoption or support of the policy may still
bring suit should they desire to sell ownership interests in
their team to the public.
8 To the extent this conflicts with the "but for" standard
applied in THI-Hawaii, 627 F.2d at 995 (finding that "a
plaintiff's recovery is not barred unless the illegal conspiracy
would not have been formed but for its participation"), we
decline to follow that portion of the case. There is no evidence
of such a rigid "but for" requirement in the Supreme Court's
formulation of the equal involvement defense in Bateman, 472 U.S.
at 310-11 (finding the defense applies where "as a direct result
of his own actions, the plaintiff bears at least substantially
equal responsibility for the violations he seeks to redress").
-38-
otherwise) into supporting the policy, that the plaintiff
attempted to oppose the illegal conduct, or that the plaintiff's
participation was otherwise not voluntary, is highly probative of
the absence of complete and equal involvement by the plaintiff in
an antitrust violation. E.g., CVD, 769 F.2d at 856.
In this case, the evidence in the record was sufficient
to support a jury instruction on the equal involvement defense.
Sullivan was one of the three AFL members on the Joint Committee
that established the policies, including the ownership policies,
that were to govern the new expanded NFL. That Committee agreed,
in a merger agreement signed by Sullivan, to adopt the NFL's
policy against public ownership for the new NFL. Sullivan's son,
Chuck, stated that Sullivan was the central figure in the merger
negotiations. Sullivan subsequently relied on the NFL's public
ownership policy to justify his purchase, through the merger of
his team into a wholly owned company, of the outstanding stock of
the Patriots in 1976. In the proxy statement for that
transaction, Sullivan listed the NFL's policy against public
ownership as one of the "Reasons for the Merger", and he attached
a letter from the NFL justifying the public ownership policy and
explaining that the continued presence of public stockholders
conflicted with the interests of the league. Sullivan also
affirmatively supported the policy in sworn testimony during the
litigation with his former shareholders following the Patriots
merger. Sullivan stated that the NFL's public ownership policy,
and the justifications underlying the policy, were the reasons
-39-
for his desire to purchase all outstanding shares of the team.
There is no evidence that Sullivan ever opposed or objected to
theownership policypriorto thecircumstances surroundingthis case.
Taken together, this evidence is sufficient for a
reasonable jury to conclude that Sullivan bears substantially
equal responsibility for the NFL's public ownership policy
because Sullivan helped adopt the policy, he relied upon it, and
he actively supported it. The jury, however, was never given an
opportunity to consider this evidence in light of the equal
involvement defense.
Sullivan claims that he was not at the meetings in
which Lamar Hunt, the chairman of the AFL committee, agreed to
the NFL's public ownership policy, and that he did not know in
advance that the old NFL's public ownership rule would be adopted
by the new NFL. Mr. Hunt himself testified, however, that he
always spoke for the entire AFL committee at his various meetings
with NFL owners, and that he discussed various negotiating points
with the other AFL owners, including Sullivan, before any
decisions were made. Moreover, Sullivan's own team obtained a
specific waiver from the ownership policy, which, a reasonably
jury could infer, indicates that Sullivan was involved in the
decision to adopt the policy. In any event, it is the jury's
responsibility to weigh the evidence and make a choice in
circumstances like this where the same evidence supports two
different yet reasonable conclusions.
The district court erred by failing to give the jury
-40-
the opportunity to choose between these versions of the facts.
The court's "finding" that Sullivan's involvement in the public
ownership policy was minimal ignores evidence in the record. The
court's view that the NFL imposed the ownership policy on the AFL
owners, rendering their participation involuntary, is largely
unsupported by the record. Ultimately, however, these are
factual questions for the jury and none of the instructions
provided by the district court served to adequately instruct the
jury on this issue or send the issue to the jury. Therefore, the
district court erred in refusing to give the NFL's proffered
instruction on the "equal involvement" defense.
The error was prejudicial. By refusing to instruct the
jury on the equal involvement defense, the district court
deprived the NFL of a complete defense from Sullivan's lawsuit.
The NFL presented facts that could have led to a dismissal of the
case if they were believed by a properly instructed jury. While
the NFL could have highlighted, and in fact did highlight, some
of the facts concerning Sullivan's support of, and reliance upon,
the ownership policy in its closing argument before the jury,
this effort was limited to the argument that the NFL's policy was
"reasonable" for purposes of the rule of reason analysis. The
NFL did not, and could not, argue to the jury that it should rule
in favor of the NFL because Sullivan's participation in the
adoption and maintenance of the public ownership policy was
complete, voluntary and substantially equal. Without the
proffered instruction, the jury had no occasion to consider
-41-
whether Sullivan should be deprived of a damages remedy because
of his involvement in the policy he now challenges. As a result,
the district court's refusal to send the equal involvement
defense to the jury was prejudicial error requiring a new trial.
B. Failure to Request an Official Vote of the Owners
As discussed in Section II.C. above, in order to
establish that the policy actually caused injury to himself,
Sullivan must prove that the NFL effectively denied his request
to waive or amend its policy against public ownership. While
there is evidence that supports a finding that the NFL's policy
effectively blocked Sullivan from pursuing his public offering,
there is also sufficient evidence to support a contrary finding.
Sullivan's failure to request a vote from the owners after he
discovered that he was four votes shy of obtaining a waiver with
seven owners still undecided, combined with former Commissioner
Rozelle's testimony that he told Sullivan that Rozelle would put
to the owners any plan that Sullivan wished, could support a
finding that Sullivan was a "dormant plaintiff" who did not
"spring into action" until it was "time to file suit." Out
Front, 748 F.2d at 170. As such, a jury could conclude that the
NFL did not prevent Sullivan from pursuing his stock sale, but
instead, Sullivan simply dropped the idea for reasons unrelated
to the NFL's policy. If the jury had reached such a conclusion,
Sullivan would have failed to prove that his injury was caused by
the antitrust policy, and judgment for the NFL would be required.
The NFL proposed instructions concerning Sullivan's
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failure to ask for a vote essentially stating that such a failure
would result in judgment for the NFL if it was reasonable to
require Sullivan to make such a request. The court refused to
give the instruction because it felt that to do so would be to
comment on the evidence, and the court did not want to comment on
any of the evidence presented at trial. We understand the
court's concern but believe that, under the facts of this case,
there is a crucial point of law contained in the NFL's
instruction that was not otherwise provided to the jury.
The jury was instructed generally on the issue of
causation, but it was not told that it had to determine whether
the NFL's policy against public ownership was actually enforced
against Sullivan; that is, whether the policy, the alleged
antitrust restraint, actually restrained Sullivan in any way from
making a 49% public offering of his team. Although the NFL
could, and did, argue that Sullivan's failure to ask for a vote
was evidence that the policy did not cause injury to Sullivan,
there was no legal hook upon which the jury could hang the NFL's
argument. The failure of Sullivan to request a vote is a
critical and potentially dispositive issue in this case. If the
alleged restraint of trade does not even exist in practice, the
whole case essentially disappears. Therefore, the jury should
have been directed to make a specific finding as to whether the
public ownership policy was enforced against Sullivan.
If the jury is instructed that Sullivan must prove that
the NFL's policy was enforced against him, the jury will have
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cause to consider the crucial matter of whether the NFL actually
enforced its policy against Sullivan or rather, whether the NFL
never had the chance to enforce its policy because Sullivan was
never prepared to pursue his public offering. The instructions
as proffered by the NFL may need to be tailored to avoid
commenting on the evidence surrounding the "missing" vote by the
NFL owners, but that does not excuse the court from giving no
instruction at all on the issue. The failure to give some
instruction concerning the failure of Sullivan to request a vote
was error.
C. The Murray Option
In 1986, prior to Sullivan's decision to sell Patriots
stock to the public, Sullivan sold Fran Murray an option to buy
the entire club. The NFL took the position that the Murray
option would have been an absolute bar to any public sale of
Patriots stock and that Sullivan therefore could not prove
causation. The NFL's position was supported by evidence
introduced at trial. Sullivan proffered evidence that the option
was not a bar to sale because the option could be bought out and
because it could not be legally enforced. The issue of whether
Murray could have, or would have, blocked a public offering by
the Patriots was ultimately disputed.
The option agreement and Murray's deposition testimony
were received into evidence. The district court, however,
refused to admit Murray's statement that he would indeed have
stopped any public stock sale of the Patriots from going forward
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if he had been told about it. The court found the testimony to
be too speculative to be admissible. While the court's decision
to exclude Murray's "speculative" testimony is well within the
court's wide latitude of discretion in making such evidentiary
rulings, United States v. Abel, 469 U.S. 45, 54 (1984); Doty v.
Sewall, 908 F.2d 1053, 1058 (1st Cir. 1990), we note that
Sullivan's entire case as to the causation of injury was equally
speculative. Whether Sullivan's proposed stock sale could have
proceeded and would have been successful in the absence of the
NFL's public ownership policy was a matter of considerable
conjecture. Fairness would seem to militate towards allowing the
NFL to present its own version of the probable course of future
events to counter Sullivans' theorizing.
In any event, the court's subsequent refusal to give
the NFL's proffered jury instruction on the law of options,
specifically the legal consequences of options under
Massachusetts law, erroneously removed another crucial issue from
the jury's purview. The Murray option was a key defense for the
NFL, because if Sullivan did not have a legal right to sell
Patriots stock to the public, he did not suffer any harm from the
NFL's ownership policy and the NFL would have been entitled to
judgment in its favor. Again, the NFL could make this argument
to the jury, but the jury would still lack crucial information
concerning the legal underpinnings of a crucial defense for the
NFL.
Sullivan argues that the NFL's proposed instruction
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would have singled out one factual issue related to causation for
the jury's special attention, something that would have unfairly
prejudiced Sullivan. Sullivan adds that allowing the instruction
would have generated countering instructions on other legal
facets of option law that were relevant to Sullivan's position on
the option issue and ultimately would have confused the jury.
These arguments notwithstanding, we feel that, as long as
suitable instructions are provided covering the basic legal
points relevant to each party's arguments, the jury would not be
unduly confused. Furthermore, the risk of prejudice from the
instruction -- due to the added attention afforded one of the
NFL's defenses -- is not sufficient to justify effectively
depriving the NFL of a crucial defense. Ultimately, it was for
the jury to decide whether the Murray option constituted an
insurmountable obstacle to Sullivan's case on causation, and the
district court's refusal to instruct on the law of options
virtually removed this issue from consideration by the jury.
D. Balancing Procompetitive and Anticompetitive Effects
in the Relevant Market
As we noted above, the rule of reason analysis requires
a weighing of the injury and the benefits to competition
attributable to a practice that allegedly violates the antitrust
laws. Monahan's Marine, 866 F.2d at 526. The district court
instructed the jury on its verdict form to balance the injury to
competition in the relevant market with the benefits to
competition in that same relevant market. The NFL protested,
claiming that all procompetitive effects of its policy, even
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those in a market different from that in which the alleged
restraint operated, should be considered. The NFL's case was
premised on the claim that its policy against public ownership
was an important part of the effective functioning of the league
as a joint venture. Although it was not readily apparent that
this beneficial effect applied to the market for ownership
interests in NFL teams, the relevant market found by the jury,
the NFL argued that its justification should necessarily be
weighed by the jury under the rule of reason analysis. Sullivan
responded, and the district court agreed, that a jury cannot be
asked to compare what are essentially apples and oranges, and
that it is impossible to conduct a balancing of alleged
anticompetitive and procompetitive effects of a challenged
practice in every definable market.
The issue of defining the proper scope of a rule of
reason analysis is a deceptive body of water, containing
unforeseen currents and turbulence lying just below the surface
of an otherwise calm and peaceful ocean. The waters are muddied
by the Supreme Court's decision in NCAA -- one of the more
extensive examples of the Court performing a rule of reason
analysis -- where the Court considered the value of certain
procompetitive effects that existed outside of the relevant
market in which the restraint operated. NCAA, 468 U.S. at 115-20
(considering the NCAA's interest in protecting live attendance at
untelevised games and the NCAA's "legitimate and important"
interest in maintaining competitive balance between amateur
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athletic teams as a justification for a restraint that operated
in a completely different market, the market for the telecasting
of collegiate football games).9 Other courts have demonstrated
similar confusion. See, e.g., L.A. Coliseum, 726 F.2d at 1381,
1392, 1397, 1399 (stating that the "relevant market provides the
basis on which to balance competitive harms and benefits of the
restraint at issue" but then considering a wide variety of
alleged benefits, and then directing the finder of fact to
"balance the gain to interbrand competition against the loss of
intrabrand competition", where the two types of competition
operated in different markets).
To our knowledge, no authority has squarely addressed
this issue. On the one hand, several courts have expressed
concern over the use of wide ranging interests to justify an
otherwise anticompetitive practice, and others have found
particular justifications to be incomparable and not in
correlation with the alleged restraint of trade. Smith v. Pro
Football, Inc., 593 F.2d 1173, 1186 (D.C. Cir. 1978); Brown v.
Pro Football, Inc., 812 F. Supp. 237, 238 (D.D.C. 1992); Chicago
Pro. Sports Ltd. Partnership v. National Basketball Ass'n, 754 F.
9 The Supreme Court did not expressly consider the issue
presented here. Therefore, it is impossible to tell whether the
Court was consciously applying the rule of reason to include a
broad area of procompetitive benefits in a variety of markets, or
whether the Court was simply not being very careful and
inadvertently extended the rule of reason past its proper scope.
There is certainly no language, as Sullivan suggests, indicating
that the Court was considering the alleged benefit of
"competitive balance" only to the extent that it had
procompetitive effects in the market for televised football
games.
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Supp. 1336, 1358 (N.D.Ill. 1991). We agree that the ultimate
question under the rule of reason is whether a challenged
practice promotes or suppresses competition. Thus, it seems
improper to validate a practice that is decidedly in restraint of
trade simply because the practice produces some unrelated
benefits to competition in another market.
On the other hand, several courts, including this
Circuit, have found it appropriate in some cases to balance the
anticompetitive effects on competition in one market with certain
procompetitive benefits in other markets. See, e.g., NCAA, 468
U.S. at 115-20; Grappone, Inc. v. Subaru of New England, Inc.,
858 F.2d 792, 799 (1st Cir. 1988); M & H Tire Co. v. Hoosier
Racing Tire Corp., 733 F.2d 973, 986 (1st Cir. 1984); L.A.
Coliseum, 726 F.2d at 1381, 1392, 1397, 1399. Moreover, the
district court's argument that it would be impossible to compare
the procompetitive effects of the NFL's policy in the interbrand
market of competition between the NFL and other forms of
entertainment, with the anticompetitive effects of the intrabrand
market of competition between NFL teams for the sale of their
ownership interests, is arguably refuted by the Supreme Court's
holding in Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S.
36 (1977). Continental T.V. explicitly recognized that positive
effects on interbrand competition can justify anticompetitive
effects on intrabrand competition. Id. at 51-59. Although
Continental T.V. can reasonably be interpreted as referring only
to interbrand and intrabrand components of the same relevant
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market, Hornsby Oil Co., Inc. v. Champion Spark Plug Co., 714
F.2d 1384, 1394 (5th Cir. 1983), there is also some indication
that interbrand and intrabrand competition necessarily refer to
distinct, yet related, markets. Continental T.V., 433 U.S. at 52
n.19 ("The degree of intrabrand competition is wholly independent
of the level of interbrand competition."). Arguably, the market
put forward by the NFL -- that is the market for NFL football in
competition with other forms of entertainment -- is closely
related to the relevant market found by the jury such that the
procompetitive benefits in one can be compared to the
anticompetitive harms in the other. Clearly this question can
only be answered upon a much more in-depth inquiry that we need
not, nor find it appropriate to, embark upon at this time.
Finally, we note that although balancing harms and
benefits in different markets may be unwieldy and confusing, such
is the case with a number of balancing tests that a court or jury
is expected to apply all the time. Indeed, Justice Brandeis'
famous formulation of the rule of reason seems to contemplate the
balancing of a wide variety of factors and considerations, many
of which are not necessarily comparable or correlative:
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 was imposed; the nature of
the restraint and its effect, actual or
probable. The history of the restraint,
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the evil believed to exist, the reason
for adopting the particular remedy, the
purpose or end sought to be attained, are
all relevant facts.
Board of Trade of the City of Chicago v. United States, 246 U.S.
231, 238 (1918).
Although the issue of the proper scope of the rule of
reason analysis is more appropriately resolved in a case where it
is dispositive and more fully briefed, we can draw at least one
general conclusion from the caselaw at this point: courts should
generally give a measure of latitude to antitrust defendants in
their efforts to explain the procompetitive justifications for
their policies and practices; however, courts should also
maintain some vigilance by excluding justifications that are so
unrelated to the challenged practice that they amount to a
collateral attempt to salvage a practice that is decidedly in
restraint of trade.
In any event, we need not enter these dangerous waters
to resolve the instant dispute. The NFL wanted the jury to
consider its proffered justifications for the public ownership
policy -- namely that the policy enhanced the NFL's ability to
effectively produce and present a popular entertainment product
unimpaired by the conflicting interests that public ownership
would cause. These procompetitive justifications should have
been considered by the jury, even under Sullivan's theory of the
proper scope of the rule of reason analysis. As we point out in
note [4] above, and as Sullivan himself points out, to the extent
the NFL's policy strengthens and improves the league, resulting
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in increased competition in the market for ownership interests in
NFL clubs through, for example, more valuable teams, the jury may
consider the NFL's justifications as relevant factors in its rule
of reason analysis. The danger of the proffered instructions on
the verdict form is that they may have mislead the jury into
thinking that it was precluded from considering the NFL's
justifications for its ownership policy. Therefore, the relevant
market language on the verdict form should be removed, or else
the jury should be informed that evidence of benefits to
competition in the relevant market can include evidence of
benefits flowing indirectly from the public ownership policy that
ultimately have a beneficial impact on competition in the
relevant market itself.
E. References to Prior Antitrust Cases Against the NFL
Despite a pretrial motion in limine and repeated
objections by the NFL, the district court allowed the jury to
hear numerous references to prior antitrust cases against the
NFL. Evidence about prior antitrust violations by the defendant
may, in appropriate cases, be admissible to show things like
market power, intent to monopolize, motive, or method of
conspiracy. United States Football League v. National Football
League, 842 F.2d 1335, 1371 (2d Cir. 1988) (hereinafter "USFL").
Because of the inherently prejudicial nature of such evidence,
however, evidence of prior antitrust cases involving the NFL are
only admissible if Sullivan can demonstrate that the conduct
underlying those prior judgments had a direct, logical
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relationship to the conduct at issue in the present case. USFL,
842 F.2d at 1371; International Shoe Mach. Corp. v. United Shoe
Mach. Corp., 315 F.2d 449, 454 (1st Cir.), cert. denied, 375 U.S.
820 (1963) (plaintiff must show "that his claimed injury stemmed
directly and proximately from the same type of practice condemned
in the prior Government action"); see also Coleman Motor Co. v.
Chrysler Corp., 525 F.2d 1338, 1351 (3d Cir. 1975). In many of
the instances where Sullivan or his counsel made references to
prior antitrust cases at trial, Sullivan failed to satisfy this
burden.
Sullivan argues that the prior cases were relevant
either to certain testimony regarding the reasonableness of the
NFL's ownership policy and voting requirements or to the issue of
defining the relevant market. Because none of the cases
mentioned at trial concerned the NFL's ownership policy at issue
here, evidence of those prior cases is not relevant to the
reasonableness of the NFL's policy against public ownership. The
general voting requirements are not in dispute, so cases touching
solely upon them are also not relevant. Certain limited portions
of some prior antitrust decisions are relevant to the issue of
defining the relevant market. The testimony and commentary at
trial concerning these prior cases, however, was not limited to
the relevant market portions of these cases and, on the contrary,
focussed primarily on the issue of whether the NFL's public
ownership policy was unreasonable. As such, that evidence was
prejudicial, without any balancing relevance to justify its
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admission into evidence.
The references to prior NFL cases were made in a number
of different contexts during the trial (including during direct
examination, cross-examination, and at closing argument), and
they contained a variety of different information. These
references are not likely to be repeated in precisely the same
context upon a new trial. Therefore, instead of identifying
which particular pieces of evidence were inadmissible, we think
it would be more useful to point out more generally that
references to prior NFL cases are not relevant to the issue of
the reasonableness of the NFL's public ownership policy and such
references should be excluded if they contain information about
the unreasonableness of other policies of the NFL which were at
issue in the other cases.
Reversed and remanded.
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