Deutscher Tennis Bund v. Atp Tour, Inc.

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 08-4123

DEUTSCHER TENNIS BUND,
German Tennis Federation;
ROTHENBAUM SPORTS GMBH;
QATAR TENNIS FEDERATION,
Appellants

v.

ATP TOUR, INC.; ETIENNE DE VILLIERS;
CHARLES PASARELL; GRAHAM PEARCE;
JACCO ELTINGH; PERRY ROGERS;
IGGY JOVANOVIC;
JOHN DOE 7; JOHN DOE 8; JOHN DOE 9

On Appeal from the United States District Court
for the District of Delaware
D.C. Civil Action No. 07-cv-00178
(Honorable Gregory M. Sleet)
 Argued November 2, 2009

Before: SCIRICA, JORDAN and
GREENBERG, Circuit Judges.

(Filed: June 25, 2010)

ROBERT D. MacGILL, ESQUIRE (ARGUED)
PETER J. RUSTHOVEN, ESQUIRE
STANLEY C. FICKLE, ESQUIRE
HAMISH S. COHEN, ESQUIRE
MATTHEW B. BARR, ESQUIRE
Barnes and Thornburg
11 South Meridian Street
Indianapolis, Indiana 46204

C. BARR FLINN, ESQUIRE
KAREN E. KELLER, ESQUIRE
Young Conaway Stargatt & Taylor
The Brandywine Building, 17th Floor
1000 West Street, P.O. Box 391
Wilmington, Delaware 19899-0391
Attorneys for Appellants

BRADLEY I. RUSKIN, ESQUIRE (ARGUED)
JENNIFER R. SCULLION, ESQUIRE
COLIN A. UNDERWOOD, ESQUIRE
ROBERT D. FORBES, ESQUIRE

2
Proskauer Rose
1585 Broadway
New York, New York 10036

LAWRENCE C. ASHBY, ESQUIRE
CAROLYN S. HAKE, ESQUIRE
TONI-ANN PLATIA, ESQUIRE
PHILIP TRAINER, JR., ESQUIRE
Ashby & Geddes
500 Delaware Avenue, 8th Floor
P.O. Box 1150
Wilmington, Delaware 19899
Attorneys for Appellees

OPINION OF THE COURT

SCIRICA, Circuit Judge.

Men’s professional tennis is a worldwide enterprise and
every year, professional tennis players compete in various
tournaments around the world. The principal men’s professional
tennis events are the four Grand Slams, the Davis Cup, and the
ATP Tour, a worldwide professional tennis circuit organized by
the Association of Tennis Professionals (“ATP”). This lawsuit
arises out of the reorganization of the ATP Tour—known as the
Brave New World plan—designed to revitalize its popularity,

3
enabling it to better compete with other sports and entertainment
events. The redesigned format channeled more top-tier players
to the top-tier ATP tournaments and also redesignated the tier
categories of some tournaments. The changes included a
downgrade of the Hamburg, Germany tournament from the first
tier to second tier status.

Dissatisfied with the downgrade, Hamburg tournament
owners, the German and Qatar Tennis Federations (the
“Federations”), sued ATP and certain of its officers and
directors. The suit alleged that the Brave New World plan
violated §§ 1 and 2 of the Sherman Act and that ATP’s
Directors breached fiduciary duties owed to the Federations. At
trial, the District Court granted ATP’s motions for judgment as
a matter of law, dismissing the personal liability claims against
the Directors for alleged antitrust violations and breach of
fiduciary duty. The antitrust claims against ATP were submitted
to a jury, which returned a verdict for ATP. The jury found the
Federations failed to prove ATP entered into a contract,
combination, or conspiracy with any separate entity under § 1 of
the Sherman Act, and did not establish a relevant product market
under § 2.

The Federations appeal the jury verdict on § 1 of the
Sherman Act, asserting the District Court erred in instructing the
jury on a “single entity or enterprise defense,” and in failing to
instruct on the “quick look” mode of analysis. The Federations
also appeal the judgment as a matter of law dismissing the
antitrust claims against the Directors and the breach of duty of

4
loyalty claim against Director Charles Pasarell. We will affirm
the jury verdict on the Sherman Act § 1 claim based on the
Federations’ failure to prove the relevant market. Consequently,
the question of personal director liability for antitrust claims is
moot. We also will affirm the judgment as a matter of law
dismissing the breach of duty of loyalty claim against Director
Pasarell because neither he individually nor the ATP Board of
Directors as a whole were materially self-interested when they
voted in favor of the Brave New World plan.

I.

A.

Initially an association of the world’s top men’s
professional tennis players, ATP evolved into a non-profit
corporation consisting of a membership of men’s professional
tennis players and organizers of men’s professional tennis
tournaments. ATP operates a worldwide tennis tour composed
of the member tournaments, culminating in ATP’s end-of-
season championship tournament, the Tennis Masters Cup.1
Tennis players earn prize money and ATP ranking points
through playing in ATP tournaments.

ATP ranking points determine each player’s world
ranking. The player rankings are important because they govern

1
In 2009, the Tennis Masters Cup was replaced by the
Barclays ATP World Tour Finals.

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entry into and seeding in the Grand Slams 2 as well as ATP top-
tier tournaments—the most important professional tennis
tournaments. In turn, these tournaments award the most prize
money and ranking points.

ATP tournament members are divided into three
categories: (1) Tier I (formerly “Masters Series”); (2) Tier II
(formerly “International Series Gold”); (3) Tier III (formerly
“International Series”). The categories of tournaments are
distinguished by different levels of minimum prize money and

2
The four Grand Slams (Australian Open, French Open,
Wimbledon, and US Open) and the Davis Cup are not ATP
tournaments and are regulated by the International Tennis
Federation (“ITF”). But the Grand Slams have agreed to use
ATP entry and ranking systems as the basis for determining
entry and seeding of men’s professional players into their events
(Wimbledon has its own method of seeding calculation, which
also takes into account players’ past performances on grass over
the previous two years, as well as their ATP ranking). In return,
playing in the Grand Slams is mandatory for top ATP players.
The Grand Slams also agreed not to organize a year-end event
competing with the ATP’s Tennis Masters Cup and ATP agreed
not to combine the Masters Cup with the Women’s Tennis
Association’s year-end event. Additionally, ATP has an
agreement with ITF not to schedule ATP events against Davis
Cup matches and to award ATP ranking points to Davis Cup
tournaments.

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different amounts of ranking points awarded on the basis of
performance.

ATP is governed by a seven-member Board of
Directors—three elected by tournament members (representing
different geographic regions), three elected by player members,
and a Chairman/President. ATP’s Bylaws give the ATP Board
discretion over the Tour’s format.

In 2007, the Board voted to adopt several changes to the
ATP Tour. According to ATP, this restructuring was
necessitated by market changes and conditions: ATP was losing
ground in the sports and entertainment markets. ATP’s market
research revealed that tennis fans wanted to see the top tennis
players play against each other more often. ATP perceived that
a growing decline in player participation in its top-tier events
undermined its prestige and also the profile of the sport, leading
to a decline in ticket sales and weakening the member
tournaments’ ability to secure television coverage and
sponsorships. By strengthening its top-tier events and
simplifying its tournament structure, ATP believed it could
better compete with other sports events and other forms of
entertainment, and also award more prize money to the players.

The Brave New World plan’s objective was to increase
the value and appeal of top-tier tournaments by channeling top
players to compete in them. It also aimed to make the
progression of the Tour easier for fans to follow by clearly
communicating each tournament’s tier and differentiating

7
between the different tiers. To achieve these goals, the Brave
New World plan altered the number of ranking points awarded
to winning players in different tiers of tournaments. Tier I
tournaments would award 1000 points instead of 500; Tier II
tournaments would award 500 points instead of a range between
250 and 300; Tier III tournaments would award 250 points
instead of a range between 175 and 250. Additionally, the
Brave New World plan renamed the tournament tiers to
correspond to the new ranking points system: Tier I became the
“ATP World Tour Masters 1000”; Tier II became the “ATP
World Tour 500”; and Tier III became the “ATP World Tour
250.” The new ranking point distribution was designed in part
as an incentive for the top tennis players to play the ATP top-tier
events.

The Brave New World plan also reconfigured the Tour
calendar to create geographic “swings” or “seasons” around the
Grand Slams because of their size, prestige, history, and
popularity, and their significantly greater amount of prize
money. Thus, the Brave New World plan scheduled the top-tier
ATP tournaments in the weeks before the Grand Slams with
corresponding court surfaces—e.g., the Tier I tournament in
Madrid, Spain on a clay surface was scheduled in the weeks
before the French Open, a Grand Slam tournament also on clay.
According to ATP, scheduling their tournaments in this way
attracts the top tennis players because of their desire to play on
the same surface as the upcoming Grand Slam tournaments.

Notably, the Brave New World plan also amended ATP

8
rules so that qualifying players were required, under threat of
sanctions—suspension, loss of ranking, and loss of ability to
earn ranking points—to play all Tier I events, at least four Tier
II events, and at least two Tier III events. Further, all qualifying
players were also required to play in the year-end Tennis
Masters Cup championship. In addition, the Brave New World
plan imposed a “Special Events” rule on the top 50 players,
prohibiting them from participating in any non-ATP, non-Grand
Slam events during the weeks of and surrounding ATP events.
As noted, these changes were prompted by the decline in top
player participation in ATP tournaments. In turn, ATP
increased the tournaments’ minimum prize money levels to
benefit the players.

The Brave New World plan also spurred significant
capital investments in facilities on the part of the
tournaments—the Tier I and Tier II tournaments committed to
approximately $864 million in capital investments. ATP
undertook to create a more unified branding approach for the
Tour and increased spending on promotion and marketing. It
projected a $9 million marketing amount for 2009; previous
budgets provided for only $800,000 in 2005 and 2006, and $5
million in 2007 and 2008. It also enhanced pooling for existing
broadcast and digital media rights.

In sum, ATP designed the Brave New World plan as a
comprehensive plan to address the perceived decline of ATP in
the sports and entertainment markets. Concluding that fans
desired a better structured Tour, featuring the best players

9
playing against each other more often, ATP decided to simplify
the Tour’s format and to introduce regulations ensuring top
player participation in ATP top-tier tournaments. Both ATP and
the member tournaments committed to make investments to
improve the quality of the Tour and promote it more effectively.
The tournament members agreed to increase the prize money
levels to compensate the players for agreeing to play in more
top-tier events.

B.

Plaintiff German Tennis Federation promotes tennis in
Germany and claims to be the world’s largest national tennis
federation, with approximately 1.7 million members. It stages
an annual clay-court tournament in Hamburg, Germany. From
1990 to 2009, Hamburg tournament was a Tier I ATP
tournament. Under the Brave New World plan, the Hamburg
tournament was demoted to Tier II. The overall number of Tier
I events remained at nine, with the addition of Shanghai, China.3
In Tier II, the number of events was increased from nine to
eleven. Plaintiff Qatar Tennis Federation was established in
Qatar and has owned and operated a Tier III tournament in
Doha, Qatar. It also owns a 25% stake in Hamburg tournament.

3
The Federations contend that initially the Brave New World
plan downgraded the Monte Carlo tournament to Tier II. But
after Monte Carlo sued ATP, the parties settled with Monte
Carlo having a hybrid status—it awards 1,000 ranking points but
is not a mandatory tournament for players.

10
 ATP contends the Hamburg tournament was demoted to
Tier II because of its lack of significant investment, a decrease
in attendance, unfavorable weather, and the decline of interest
in tennis in Germany. ATP asserts that Hamburg tournament
can succeed as a Tier II tournament.

C.

The Federations sued ATP alleging its adoption of the
Brave New World plan violated §§ 1 and 2 of the Sherman Act
and constituted a breach of the directors’ fiduciary duties. The
§ 1 claim contended defendants conspired and combined to
control the supply of top men’s professional tennis players’
services, establishing a favored class of tournaments in which
top-player participation was mandatory, while precluding other
tournaments from competing for such player services.
Similarly, the § 2 claim alleged monopolization, attempt to
monopolize, and conspiracy to monopolize the market for men’s
professional tennis players’ services. Plaintiffs also asserted the
ATP directors’ adoption of the Brave New World plan breached
their fiduciary duties of due care, loyalty, and good faith owed
to the Federations.

The case was tried to a jury. At the close of the
Federations’ case, the District Court granted ATP’s Fed. R. Civ.
P. 50(a) motions for judgment as a matter of law on all claims
of personal liability against the Directors for alleged antitrust
violations and breach of fiduciary duties. The court held that
personal civil liability for antitrust violations is limited to

11
participation in inherently unlawful acts. The court reasoned
that under antitrust law, only per se violations are inherently
unlawful. Finding that the alleged conduct could not be
classified as classic per se violations, the court concluded that
individual directors could not be liable. Addressing the breach
of fiduciary duty claims against the Directors, it found the
Federations failed to satisfy their initial burden of rebutting the
presumption of the business judgment rule by showing the
Directors violated any of their fiduciary duties. Accordingly, the
District Court granted defendants’ motion for judgment as a
matter of law and dismissed all claims against the individual
Directors.

The court then addressed proposed jury instructions.
ATP submitted a proposed instruction on the “single entity or
enterprise defense,” stating that where entities “are commonly
controlled or substantially integrated in their operations, they
may be considered a ‘single entity’ or ‘single enterprise’ under
the antitrust laws.” The Federations objected, arguing that the
instruction misstated the law and created a significant risk of
confusion. Overruling the Federations’ objections, the District
Court gave the “single entity or enterprise defense” jury
instruction as proposed by ATP. The court also considered
whether the alleged restraints should be analyzed under “quick
look” or the full rule of reason analysis. The court instructed the
jury on the latter.

The jury returned a verdict for ATP on all claims. On the
Sherman Act § 1 claim, it found the Federations did not prove

12
ATP “entered into contract(s), combination(s) or conspiracy(ies)
with any separate entity or entities.” And on the Sherman Act
§ 2 claim, it found the Federations did not establish “the
existence of any relevant product market(s) within any
geographic market(s).”

The Federations filed a timely appeal of the Sherman Act
§ 1 claim against ATP and the Directors and the breach of
fiduciary duty of loyalty claim against Director Charles Pasarell.
Specifically, they contend the District Court erred by instructing
the jury on the single entity defense, refusing to instruct the jury
to apply “quick look” analysis, and granting defendants’ motion
for judgment as a matter of law on all claims against the
individual Directors.4

II.

A.

Even assuming, arguendo, that the District Court erred in
instructing the jury on the single entity defense, the Federations
could not have succeeded on their Sherman Act § 1 claim
because they failed to prove “the existence of any relevant

4
The District Court had subject-matter jurisdiction under 28
U.S.C. §§ 1331 and 1337 based on claims alleged under
Sherman Act, 15 U.S.C. §§ 1, 2 and 26, and under 28 U.S.C.
§ 1367 for supplemental state law claims. We have appellate
jurisdiction under 28 U.S.C. § 1291.

13
product market(s) within any geographic market(s).” 5 On the
§ 1 claim, the jury found no concerted action, so it did not reach
the issue of relevant market. But on the Sherman Act § 2 claim,
the jury did find the Federations failed to prove the existence of
a relevant market.

The Federations contend that market definition and proof
under § 2 differ from those under § 1, arguing that insufficient
§ 2 market proof does not establish insufficiency under § 1. In
Columbia Metal Culvert Co., Inc. v. Kaiser Aluminum & Chem.
Corp., 579 F.2d 20 (3d Cir. 1978), we said that “inquiries into
the scope of competition under § 1 and § 2 are not precisely the
same.” Id. at 27 n.11. But in this case, the Federations asserted
identical market definitions under §§ 1 and 2, as evidenced by
the jury instructions.6 Cf. Tunis Bros. Co., Inc. v. Ford Motor

5
Because the Federations did not carry their burden of
proving a relevant market, we do not need to decide whether the
District Court’s single entity instruction was given in error. See
infra Part III.
6
Giving the jury an overview of the rule of reason analysis
for the purposes of § 1, the court stated: “[Y]ou must first
determine whether Plaintiffs have carried their burden to show
that any challenged restraint has resulted or is likely to result in
a substantial harm to competition in a relevant product or
geographic market(s).” App. 257 (Antitrust Jury Instruction
10—Antitrust Claims: Sherman Act Section 1—Rule of

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Reason–Overview). Explaining the requirement of proof of
competitive harm, the court repeated: “[I]t is Plaintiffs’ burden
to show that the harm to competition occurred in an identified
market, known as a ‘relevant market.’ There are two aspects to
a relevant market. The first aspect is known as the relevant
product market. The second aspect is known as the relevant
geographic market.” Id. at 258 (Antitrust Jury Instruction
11—Antitrust Claims: Sherman Act Section 1—Rule of
Reason–Proof of Competitive Harm). Closely following the
Model Jury Instructions, the court then instructed the jury on the
substance of the relevant market inquiry. Id. at 261 (Antitrust
Jury Instruction 13—Rule of Reason–Proof of Relevant
Market). Later, describing the elements of the monopolization
claim under § 2, the court explained: “Plaintiffs must prove by
a preponderance of the evidence that the defendants had
monopoly power in a relevant market.” Id. at 272 (Antitrust
Jury Instruction 21— M onopoliza tion: R elevant
Market–General). Using the nearly identical language as for the
rule of reason instructions, the court continued: “There are two
aspects you must consider in determining whether plaintiff has
met its burden to prove the relevant market by a preponderance
of the evidence. The first is the relevant product market; the
second is the relevant geographic market.” Id. No relevant
market inquiry instructions specific to § 2 claims were proposed
or provided. See also ABA Section of Antitrust Law, Model
Jury Instructions in Civil Antitrust Cases A-6 (2005) (suggesting

15
Co., 952 F.2d 715, 724 n.3 (3d Cir. 1991) (“On this record,
however, the plaintiffs do not present a sufficiently close factual
issue to demarcate a distinction between product market
definitions in section 1 and section 2 cases . . . .”). The jury
verdict forms posed the same question regarding proof of the
relevant market for the purposes of §§ 1 and 2 claims: “Have
Plaintiffs proven by a preponderance of the evidence the
existence of a relevant product market within a relevant
geographic market?” App. 5, 10, 14, 18. Therefore, the jury’s
conclusion that the Federations failed to prove a relevant market
under § 2 is equally applicable to § 1 analysis. See Fraser v.
Major League Soccer, L.L.C., 284 F.3d 47, 59–61 (1st Cir.
2002) (affirming the judgment on § 1 claims based on the jury
finding that plaintiffs failed to establish a relevant market under
§ 2).

B.

The Federations also contend they did not need to prove
a relevant market because the District Court should have
instructed the jury to conduct a “quick look” analysis, which
does not require detailed market analysis. The Federations
proposed a “quick look” jury instruction that the alleged
restraints caused substantial harm to competition as a matter of
law, so that the jury needed only consider “whether the restraint

that the instruction describing the relevant market for the
purposes of § 1 claim incorporate the § 2 relevant market
instructions).

16
produces countervailing competitive benefits,” and if so,
“balance the competitive harm against the competitive benefit.”
App. 451. But the District Court reasoned that “[t]he evidence
[presented] could perhaps be evidence of . . . antitrust violations,
but only after one engaged in a detailed examination of the
industry in question, and furthermore, only after taking the
industry in question to be top-tier men’s professional tennis,
rather than, for example, professional sports or spectator events
more generally.” Id. at 25. The court concluded that “the
plaintiffs failed to show evidence [of acts] that have no purpose
except to stifle competition . . . .” Id. Accordingly, the court
required the jury to analyze the alleged restraint under full rule
of reason principles and rejected the proposed “quick look”
instruction.7 Because even beneficial legitimate contracts or
combinations restrain trade to some degree, § 1 of the Sherman
Act has long been interpreted to prohibit only those contracts or
combinations that are “unreasonably restrictive of competitive
conditions.” Standard Oil Co. v. United States, 221 U.S. 1, 58
(1911). Historically, “[t]hree general standards have emerged
for determining whether a business combination unreasonably
restraints trade under [§ 1].” United States v. Brown Univ., 5
F.3d 658, 668 (3d Cir. 1993).

“Most restraints are analyzed under the traditional ‘rule

7
The selection of a mode of antitrust analysis is a question of
law over which we exercise plenary review. See Arizona v.
Maricopa County Med. Soc’y., 457 U.S. 332, 337 n.3 (1982)).

17
of reason.’” Id. (citing Continental T.V., Inc. v. GTE Sylvania
Inc., 433 U.S. 36, 49 (1977)); see also Texaco Inc. v. Dagher,
547 U.S. 1, 5 (2006) (“[T]his Court presumptively applies rule
of reason analysis . . . .”); State Oil v. Khan, 522 U.S. 3, 10
(1997). “The rule of reason requires the fact-finder to ‘weigh []
all of the circumstances of a case in deciding whether a
restrictive practice should be prohibited as imposing an
unreasonable restraint on competition.” Brown, 5 F.3d at 668
(quoting GTE Sylvania, 433 U.S. at 49). The inquiry is whether
the restraint at issue “is one that promotes competition or one
that suppresses competition.” Nat’l Soc’y of Prof’l Eng’rs v.
United States, 435 U.S. 679, 691 (1978). “The plaintiff bears an
initial burden under the rule of reason of showing that the
alleged combination or agreement produced adverse, anti-
competitive effects within the relevant product and geographic
markets.” Brown, 5 F.3d at 668. “The plaintiff may satisfy this
burden by proving the existence of actual anticompetitive
effects,” or defendant’s market power. Id. “If a plaintiff meets
his initial burden of adducing adequate evidence of market
power or actual anti-competitive effects, the burden shifts to the
defendant to show that the challenged conduct promotes a
sufficiently pro-competitive objective.” Id. at 669. “To rebut,
the plaintiff must demonstrate that the restraint is not reasonably
necessary to achieve the stated objective.” Id.

Some categories of restraints, such as horizontal price-
fixing and market allocation agreements among competitors,
“because of their pernicious effect on competition and lack of

18
any redeeming virtue are conclusively presumed to be
unreasonable.” Id. (quoting N. Pac. Ry. Co. v. United States,
356 U.S. 1, 5 (1958)). “Such ‘plainly anticompetitive’
agreements or practices are deemed to be ‘illegal per se,’” id.
(quoting Prof’l Eng’rs, 435 U.S. at 692), without an “elaborate
inquiry into the reasonableness of a challenged business
practice,” id. (quoting Arizona v. Maricopa County Med. Soc’y,
457 U.S. 332, 343 (1982)). “Per se liability is reserved for only
those agreements that are ‘so plainly anticompetitive that no
elaborate study of the industry is needed to establish their
illegality.’” Dagher, 547 U.S. at 5 (quoting Prof’l Eng’rs, 435
U.S. at 692); see also State Oil Co., 522 U.S. at 10 (“Per se
treatment is appropriate ‘[o]nce experience with a particular
kind of restraint enables the Court to predict with confidence
that the rule of reason will condemn it.’” (quoting Maricopa
County Med. Soc’y, 457 U.S. at 344)). Accordingly, the courts
are reluctant “to adopt per se rules . . . where the economic
impact of certain practices is not immediately obvious.” State
Oil Co., 522 U.S. at 10 (internal quotation marks omitted).

“In addition to the traditional rule of reason and the per
se rule, courts sometimes apply what amounts to abbreviated or
‘quick look’ rule of reason analysis.” Brown, 5 F.3d at 669; see
NCAA v. Bd. of Regents, 468 U.S. 85, 109 n.39. It is “an
intermediate standard” and “applies in cases where per se
condemnation is inappropriate but where no elaborate industry
analysis is required to demonstrate the anticompetitve character
of an inherently suspect restraint.” Brown, 5 F.3d at 669

19
(internal quotation marks omitted); see FTC v. Ind. Fed’n of
Dentists, 476 U.S. 447, 459 (1986); NCAA, 468 U.S. at 109
(1984); Prof’l Eng’rs, 435 U.S. at 692. In such cases, “an
observer with even a rudimentary understanding of economics
could conclude that the arrangements in question would have an
anticompetitive effect on customers and markets.” Cal. Dental
Ass’n v. FTC, 526 U.S. 756, 770 (1999). In other words,
“quick-look analysis carries the day when the great likelihood of
anticompetitive effects can easily be ascertained.” Id. Under
“quick look” analysis, the competitive harm is presumed, and
“the defendant must promulgate ‘some competitive justification’
for the restraint.” Brown, 5 F.3d at 669 (quoting NCAA, 468
U.S. at 110). “If no legitimate justifications are set forth, the
presumption of adverse competitive impact prevails and ‘the
court condemns the practice without ado.’” Id. (quoting
Chicago Prof’l Sports Ltd. P’ship v. NBA, 961 F.2d 667, 674
(7th Cir. 1992)). “If the defendant offers sound pro-competitive
justifications, however, the court must proceed to weigh the
overall reasonableness of the restraint using a full-scale rule of
reason analysis.” Id.

“[T]here is often no bright line separating” the different
modes of analysis. NCAA, 468 U.S. at 104 n.26. “‘There is
always something of a sliding scale in appraising
reasonableness, but the sliding scale formula deceptively
suggests greater precision than we can hope for. . . .
Nevertheless, the quality of proof required should vary with the
circumstances.’” Cal. Dental, 526 U.S. at 779 (quoting Philip

20
E. Areeda, Antitrust Law ¶ 1507, at 402 (1986)). “[The]
categories of analysis of anticompetitive effect are less fixed
than terms like ‘per se,’ ‘quick look,’ and ‘rule of reason’ tend
to make them appear.” Id. Regardless of the standard used, the
purpose of the inquiry is always to assess the effect of the
conduct on competition: “Whether the ultimate finding is the
product of a presumption or actual market analysis, the essential
inquiry remains the same—whether or not the challenged
restraint enhances competition.” NCAA, 468 U.S. at 104. As
the Supreme Court summarized:

[T]here is generally no categorical line to be
drawn between restraints that give rise to an
intuitively obvious inference of anticompetitive
effect and those that call for more detailed
treatment. What is required, rather, is an enquiry
meet for the case, looking to the circumstances,
details, and logic of a restraint. The object is to
see whether the experience of the market has been
so clear, or necessarily will be, that a confident
conclusion about the principal tendency of a
restriction will follow from a quick (or at least
quicker) look, in place of a more sedulous one.

Cal. Dental, 526 U.S. at 780–781. Thus, the three modes of
analysis should be viewed as a single inquiry that, depending on
the circumstances, may sometimes be conducted by applying
various presumptions. See generally 7 Philip E. Areeda &
Herbert Hovenkamp, Antitrust Law ¶ 1511, at 418 (2d ed.

21
2000).

C.

The Federations contend that the Brave New World plan
“allocates and divides the player services market among
horizontal competitors” and “[t]his obviates competition among
favored tournaments for the player services vital for success,
while making it impossible for other tournaments . . . to compete
for such services.” Appellant’s Br. 48. The Federations allege
an output-limiting horizontal restraint. Nevertheless, the per se
rule does not apply because for a tennis tour, like other sports
leagues, “horizontal restraints on competition are essential if the
product is to be available at all.” NCAA, 468 U.S. at 101; see
also Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S.
1, 23 (1979) (rejecting per se treatment “where the agreement on
price is necessary to market the product at all”); Worldwide
Basketball & Sports Tours, Inc. v. NCAA, 388 F.3d 955, 959
(6th Cir. 2004) (“Because there is no doubt that horizontal
restraints are necessary to make the kind of league competition
at issue available, the rule of reason applies.”); Law v. NCAA,
134 F.3d 1010, 1019 (10th Cir. 1998) (“[C]ourts consistently
have analyzed challenged conduct under the rule of reason when
dealing with an industry in which some horizontal restraints are
necessary for the availability of a product . . . .”).

Under “quick look,” the rationale for presuming
competitive harm without detailed market analysis is that the
anticompetitive effects on markets and consumers are obvious.

22
Cal. Dental, 526 U.S. at 770. Although the Federations
contended the Brave New World Plan restrained the “top player
services” market, the definition of the relevant market was one
of the most contested issues at trial—so much so that after all
the evidence was presented the District Court saw the bounds of
the relevant market as “ambiguous.” App. 25. Because “the
contours of the market” here are not “sufficiently well known or
defined to permit the court to ascertain without the aid of
extensive market analysis whether the challenged practice
impairs competition,” “quick look” is not appropriate and proof
of relevant market is required under full-scale rule of reason.
Worldwide Basketball & Sports Tours, 388 F.3d at 961.

Further, even where anticompetitive effects are obvious,
“quick look” condemnation is proper only after assessing and
rejecting the logic of proffered procompetitive justifications.
Cal. Dental, 526 U.S. at 771; see N. Tex. Speciality Physicians
v. FTC, 528 F.3d 346, 362 (5th Cir. 2008). Although
competitive harm is initially presumed under “quick look,” “[i]f
the defendant offers sound procompetitive justifications, . . . the
court must proceed to weigh the overall reasonableness of the
restraint using a full-scale rule of reason analysis.” Brown, 5
F.3d at 669; see also Cal. Dental, 526 U.S. 756, 771 (1999)
(holding that full rule of reason analysis was required where
challenged restraint “might plausibly be thought to have a net
procompetitive effect, or possibly no effect at all on
competition”); Bogan v. Hodgkins, 166 F.3d 509, 514 n.6 (2d
Cir. 1999) (observing that courts must apply the full rule of

23
reason once defendant has introduced “sound allegations of
procompetitive benefit”). Where procompetitive justifications
are proffered, their logic must be assessed and rejected in order
to avoid reverting to full-scale rule of reason analysis. “[T]he
burden remains on the challenger to demonstrate that the
proffered procompetitive effect does not plausibly result in ‘a
net procompetitive effect, or possibly no effect at all on
competition.’” N. Tex. Speciality Physicians, 528 F.3d at 362
(quoting Cal. Dental, 526 U.S. at 771). “If, after examining the
competing claims of anti- and procompetitive effects, it remains
plausible that the net effect is procompetitive or that there is no
effect on competition, then “[t]he obvious anticompetitive effect
that triggers abbreviated analysis has not been shown.” Id.
(quoting Cal. Dental, 526 U.S. at 778); see also 11 Areeda &
Hovenkamp, supra, ¶ 1911c, at 305 (2d ed. 2005) (explaining
that when defendant offers preliminary evidence suggesting that
the challenged restraint is justified, and the court finds such
evidence plausible, the restraint must be “subjected to general
rule of reason analysis requiring full consideration of power and
anticompetitive effects”).

ATP proffered evidence of procompetitive justifications
for the Brave New World plan. The plan was developed to
make the ATP Tour more competitive with other spectator
sports and entertainment products by improving the quality and
consistency of its top-tier events. The modifications to the tour
calendar, increase of investment, higher payments to players,
and expanded geographic reach were all designed to improve the

24
Tour. Such rules and regulations can be procompetitive where
they enhance the “character and quality of the ‘product.’”
NCAA, 468 U.S. at 102.

In fact, the Federations seem to concede that ATP offered
procompetitive justifications. But they would have the jury
balance the proffered procompetitive justification against the
presumed anticompetitive harm. They argue that under “quick
look,” the jury’s inquiry “starts from the premise—already
determined by the court as a matter of law—that the restraint’s
anticompetitive effect is evident without need for detailed
market analysis, requiring no proof by plaintiff of market
definition or power.” Appellant’s Reply Br. 7. The Federations
misapprehend the reasonableness analysis. Once a defendant
comes forward with plausible procompetitive justification for
the challenged restraint, the “quick look” presumption
disappears and the overall reasonableness of the restraint is
assessed using a full-scale rule of reason analysis. Brown, 5
F.3d at 669. “The application of the quick look analysis is a
question of law to be determined by the court,” and therefore the
concept of “quick look” has no application to jury inquiry. ABA
Section of Antitrust Law, Model Jury Instructions in Civil
Antitrust Cases A-8 n.2 (2005). The jury was properly
instructed to analyze the alleged restraints under the rule of
reason, and their finding that the Federations failed to prove the

25
relevant market defeats the Sherman Act § 1 claim.8

8
The Federations also appeal the District Court’s grant of
judgment as a matter of law on all antitrust liability claims
against individual ATP directors. Relying on Murphy Tugboat
Co. v. Shipowners & Merchs. Towboat Co., 467 F. Supp. 841
(N.D. Cal. 1979), aff’d sub nom. Murphy Tugboat Co. v.
Crowley, 658 F.2d 1256 (9th Cir. 1981), the District Court held
“that civil liability for antitrust violations is limited to
participation in inherently unlawful acts, that is, [] per se
violation[s] of antitrust law.” App. 24. It concluded that “the
evidence [in this case] shows the individuals’ conduct was not
the type of inherently wrongful activity that gives rise to
personal liability under antitrust law,” but “seem[s] within or at
least bordering that gray area of socially acceptable
economically justifiable business conduct that the law, in fact,
permits.” Id. at 25.

The Federations argue that the District Court’s limitation
of directors’ personal liability to per se antitrust violations is
legally incorrect. We question the persuasive value of Murphy
Tugboat. See, e.g., Monarch Mktg. Sys., Inc. v. Duncan Parking
Meter Maint. Co., No. 82 C 2599, 1986 WL 3625, at *2 (N.D.
Ill. Mar. 13, 1986); Gregory Walker, Note, The Personal
Liability of Corporate Officers in Private Actions Under the
Sherman Act: Murphy Boat in Distress, 55 Fordham L. Rev. 909
(1987) (criticizing Murphy Tugboat approach to corporate
officers’ personal liability for antitrust violations). But we need

26
 III.

A.

On the Sherman Act § 1 claim, the jury also found the
Federations did not prove that ATP entered into “contract(s),
combination(s) or conspiracy(ies) with any separate entity or
entities.” In other words, the jury did not find the requisite
concerted action to support a § 1 claim. The Federations assert
the jury reached this conclusion based on the “single entity or
enterprise defense” instruction, which allowed the jury to find
that defendants’ actions were undertaken as a single entity,
instead of as independent actors. The Federations contend the
instruction misstated the law and thus was given in error.9

not decide whether the District Court erred in imposing a
limitation on directors’ personal liability and dismissing the
antitrust claims against them. Because the Federations could not
sustain their antitrust claims and failed to prove an antitrust
violation, they would not be able to sustain the same claim
against the Directors. Therefore, even assuming the District
Court erred in granting summary judgment on the antitrust
claims against the directors, plaintiffs cannot prevail on these
claims.
9
“We exercise plenary review to determine whether jury
instructions misstated the applicable law . . . .” Cooper Distrib.
Co. v. Amana Refrigeration., Inc., 180 F.3d 542, 549 (3d Cir.
1999).

27
 To prevail under § 1 of the Sherman Act, a plaintiff must
first establish a “contract, combination . . . or conspiracy.”
Section 1 applies only to concerted action and does not proscribe
independent action by a single entity, regardless of its purpose
and effect on competition. Am. Needle, Inc. v. NFL, No. 08-
661, 2010 WL 2025207, at *5 (U.S. May 24, 2010); Monsanto
Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984).10

Under Copperweld Corp. v. Independence Tube Corp.,
467 U.S. 752 (1984), in certain cases, distinct legal entities are
incapable of concerted action for the purposes of § 1 and must
be viewed as a single entity.11 Although Copperweld did not set

10
Independent action by a single entity can still be scrutinized
under § 2 of the Sherman Act. Fineman v. Armstrong World
Indus., Inc., 980 F.2d 171, 205 (3d Cir. 1992).
11
In Copperweld, the Supreme Court held that “the
coordinated activity of a parent and its wholly owned subsidiary
must be viewed as that of a single enterprise for purposes of § 1
of the Sherman Act.” 467 U.S. at 771. The Court reasoned that
§ 1 scrutiny is not justified because “[a] parent and its wholly
owned subsidiary have a complete unity of interest,” and when
they agree to a course of action, “there is no sudden joining of
economic resources that had previously served different
interests.” Id. The antitrust laws treat concerted behavior more
strictly than unilateral behavior because “[c]oncerted activity
inherently is fraught with anticompetitive risk.” Id. at 768-69.

28
clear parameters for what constitutes a single economic entity
beyond the parent-subsidiary context, “it nonetheless
encouraged the courts to analyze the substance, not the form, of
economic arrangements.” 12 Siegel Transfer, Inc. v. Carrier
Express, Inc., 54 F.3d 1125, 1132 (3d Cir. 1995); see Am.
Needle, 2010 WL 2025207, at *8 (“As Copperweld exemplifies,
‘substance, not form, should determine whether a[n] . . . entity
is capable of conspiring under § 1.’” (quoting Copperweld, 467
U.S. at 773 n.21)). Courts have applied the single-entity concept
to joint ventures of separately owned entities. In determining

Concerted action “deprives the marketplace of the independent
centers of decisionmaking that competition assumes and
demands.” Id. at 769. But although parent and wholly owned
subsidiaries are distinct corporate entities and independent legal
persons, they nevertheless compose a single economic entity for
antitrust scrutiny because “[t]hey share a common purpose,” id.
at 771. Since they always have a “unity of purpose or a common
design,” id., they are “incapable of conspiring with each other
for purposes of § 1 of the Sherman Act,” id. at 777.
12
Courts have extended Copperweld to situations involving
sibling-subsidiaries of the same parent corporation, see Eichorn
v. AT&T Corp., 248 F.3d 131 (3d Cir. 2001), subsidiaries owned
by the same co-owners who maintained control over them, see
Century Oil Tool, Inc. v. Prod. Specialties, 737 F.2d 1316 (5th
Cir. 1984), and franchisors and franchisees, see Williams v. I.B.
Fischer Nev., 999 F.2d 445 (9th Cir. 1993).

29
whether Copperweld applies to joint ventures, courts have
focused primarily on whether the venture “bring[s] together the
economic power of actors which were previously pursuing
divergent interests and goals.” 13 Siegel Transfer, 54 F.3d at
1137. “The key is whether the alleged ‘contract,
combination . . . , or conspiracy’ is concerted action—that is,
whether it joins together separate decisionmakers.” Am. Needle,
2010 WL 2025207, at *8. “The relevant inquiry, therefore, is
whether there is a ‘contract, combination . . . or conspiracy’
amongst separate economic actors pursuing separate economic
interests, such that the agreement deprives the marketplace of
independent centers of decisionmaking, and therefore of
diversity of entrepreneurial interests, and thus of actual or
potential competition.” Id. (internal quotation marks omitted).
Indisputably, joint ventures can be economically beneficial. But
“the fact that joint venturers pursue the common interests of the
whole is generally not enough, by itself, to render them a single

13
See, e.g., Jack Russell Terrier Network of N. Cal. v. Am.
Kennel Club, Inc., 407 F.3d 1027, 1035 (9th Cir. 2005) (holding
that a national club and its regional affiliates were incapable of
conspiring as separate entities because they were not
competitors and maintained an economic unity); City of Mt.
Pleasant v. Associated Elec. Coop., 838 F.2d 268 (8th Cir.
1988) (holding that a rural electrical cooperative consisting of
three tiers of cooperatives with interlocking ownership was a
single entity because member cooperatives shared a common
goal of providing low-cost electricity).

30
entity.” Freeman v. San Diego Ass’n of Realtors, 322 F.3d
1133, 1148 (9th Cir. 2003). “[A] commonality of interest exists
in every cartel.” Id. (quoting L.A. Mem’l Coliseum v. NFL, 726
F.2d 1381, 1389 (9th Cir. 1984)). The formalities should not
detract from the necessity to examine the economic realities of
the restraints imposed on competition by a joint venture. See
Am. Needle, 2010 WL 2025207, at *6 (“[W]e have eschewed
such formalistic distinctions in favor of a functional
consideration of how the parties involved in the alleged
anticompetitive conduct actually operate.”). The focus of the
inquiry under § 1 of the Sherman Act centers on diminution of
competition that would otherwise exist. Id. at *8. When the
agreement joins together independent centers of
decisionmaking, “the entities are capable of conspiring under
§ 1, and the court must decide whether the restraint of trade is an
unreasonable and therefore illegal one.” Id. at *9.

B.

At trial, ATP contended it constitutes a single enterprise,
and under Copperweld, its internal decisions cannot violate § 1
of the Sherman Act. It asserted each of its tournament members
is dependent on the others to produce a common product—a
marketable annual professional tennis tour that competes with
other forms of entertainment, within and without the sports
arena. ATP maintained its members do not compete but instead
cooperate to produce the Tour, and its adoption of the Brave
New World plan was the core activity of producing this product.
For their part, the Federations contended ATP operates in the

31
market for top tier men’s professional tennis players, and
individual tournaments compete to attract top players. They
asserted the Brave New World plan was an agreement
unreasonably restraining trade in this alleged market. Both
parties presented expert testimony. The District Court
concluded “there [were] at least underlying facts that [were]
critical to” a determination of “whether the ATP and its
members function as a single business entity,” and that these
facts are “beyond [the] Court’s purview and in need of attention
by a jury.” App. 36. Accordingly, the court gave the jury ATP’s
proposed single enterprise instruction.

C.

In the context of the professional sports industry, courts
have historically subjected sports leagues to antitrust scrutiny
under § 1 of the Sherman Act. In NCAA v. Board of Regents,
468 U.S. 85 (1984), decided eight days after Copperweld, the
Supreme Court considered a § 1 challenge to the NCAA’s
restrictions on member institutions’ ability to enter into separate
contracts to televise their football games. The Court
acknowledged that “a certain degree of cooperation is
necessary” to preserve the “type of competition that [the NCAA]
and its member institutions seek to market.” Id. at 117. But the
Court concluded that because the challenged plan “prevent[ed]
member institutions from competing against each other,” they
had “created a horizontal restraint—an agreement among
competitors on the way in which they will compete with one
another.” Id. at 99. After analyzing the reasonableness of the

32
alleged restraint, the Court held it violated § 1 of the Sherman
Act. Id. at 120.

Many other courts have resisted single entity arguments
involving sports industries.14 But the Court of Appeals for the

14
See e.g., NHL Players Ass’n v. Plymouth Whalers Hockey
Club, 419 F.3d 462, 470 (6th Cir. 2005) (holding that the hockey
league’s adoption of a players-eligibility rule was “an agreement
between multiple actors”); Sullivan v. NFL, 34 F.3d 1091, 1099
(1st Cir.1994) (refusing to hold as a matter of law that the NFL
is a single entity under Copperweld); L.A. Mem’l Coliseum
Comm’n v. NFL, 726 F.2d 1381, 1388–89 (9th Cir. 1984)
(rejecting the NFL’s argument for single entity treatment
because “[w]hile the NFL clubs have certain common
purposes . . . NFL policies are not set by one individual or parent
corporation, but by the separate teams acting jointly”); Mid-
South Grizzlies v. NFL, 720 F.2d 772, 778, 787 (3d Cir. 1983)
(describing ways in which NFL teams compete with each other);
N. Am. Soccer League v. NFL, 670 F.2d 1249, 1257–58 (2d Cir.
1982) (refusing to treat the NFL as a single economic entity and
exempt it from liability under § 1 of the Sherman Act); accord
Volvo N. Am. Corp. v. Men’s Int’l Prof’l Tennis Council, 857
F.2d 55, 71 (2d Cir. 1995) (holding that an association
consisting of representatives of national tennis associations,
tournament owners and directors, and professional tennis players
was a joint venture, consisting of multiple entities, and able to
conspire under § 1 of the Sherman Act). But see Seabury

33
Seventh Circuit in Chicago Professional Sports Limited
Partnership v. NBA, 95 F.3d 593 (7th Cir. 1996) (“Bulls II”),
suggested that a sports league can sometimes be viewed as a
single entity for antitrust purposes. Id. at 598 (“We see no
reason why a sports league cannot be treated as a single
firm . . . .”). The court concluded that Copperweld’s rule is not
limited to the circumstances where cooperating parties have a
“complete unity of interest.” Id. Recognizing that whether the
NBA “is more like a single firm . . . or like a joint venture . . . is
a tough question” because “it has characteristics of both,” the
court concluded that “the league looks more or less like a firm
depending on which facet of the business one examines.” Id. at
599. “From the perspective of fans and advertisers . . . ‘NBA
Basketball’ is one product from a single source,” “[b]ut from the
perspective of college basketball players who seek to sell their
skills, the teams are distinct,” and “the league looks more like a
group of firms acting as a monopsony.” Id. Remanding to the
district court for determination of the issue, the court observed:
“Sports are sufficiently diverse that it is essential to investigate
their organization and ask Copperweld’s functional question one

Mgmt., Inc. v. PGA of Am., Inc., 878 F. Supp. 771, 778 (D. Md.
1994) (holding that the PGA could not conspire with its regional
sections as a matter of law), aff’d in relevant part, 52 F.3d 322
(4th Cir. 1995) (Table); NFL v. N. Am. Soccer League, 459 U.S.
1074, 1077 (1982) (Rehnquist J., dissenting from denial of
certiorari) (arguing that the NFL is a single entity because it
“competes as a unit against other forms of entertainment”).

34
league at a time—and perhaps one facet of a league at a
time . . . .” Id. at 600.

The parties in Bulls II settled after the case was
remanded, but the Court of Appeals for the Seventh Circuit
revisited the issue in American Needle, Inc. v. NFL, 538 F.3d
736 (7th Cir. 2008), rev’d, 2010 WL 2025207 (U.S. May 24,
2010). Guided by principles enunciated in Bulls II, the court
affirmed the district court’s grant of summary judgment for the
NFL on a claim stemming from its practice of centralized
licensing of intellectual property. Id. at 744 (concluding “the
NFL teams are best described as a single source of economic
power when promoting NFL football though licensing the
teams’ intellectual property”). But the Supreme Court reversed,
finding the court’s reasoning unpersuasive. 2010 WL 2025207,
at *10. The Court observed that each of the teams in the NFL
is a “substantial, independently owned, and independently
managed business.” Id. at *9. The Court further noted the NFL
teams “compete with one another, not only on the playing field,
but to attract fans, for gate receipts and for contracts with
managerial and playing personnel.” Id. Specifically relevant to
the case, the Court found “the teams compete in the market for
intellectual property.” Id. at *9. Therefore, the Court concluded
“[d]ecisions by NFL teams to license their separately owned
trademarks collectively and to only one vendor are decisions
‘that depriv[e] the marketplace of independent centers of
decisionmaking,’ and therefore of actual or potential
competition.” Id. (quoting Copperweld, 467 U.S. at 770).

35
 Similarly, the agreement among the ATP’s tournament
members in the Brave New World Plan might have deprived the
marketplace of potential competition. Professional sports teams
or tournaments always have an interest in obtaining the best
players possible. Brown v. Pro Football, Inc., 518 U.S. 231
(1996). The record in this case indicates that the individual
tennis tournaments traditionally compete for player talent. An
agreement restricting this competition should not necessarily be
immune from § 1 scrutiny merely because the tournaments
cooperate in various aspects of producing the ATP Tour. “The
justification for cooperation is not relevant to whether that
cooperation is concerted or independent action.” Am. Needle,
2010 WL 2025207, at *11. The necessity of cooperation does
not “transform[] concerted action into independent action.” Id.
“The mere fact that the teams operate jointly in some sense does
not mean that they are immune.” Id.

But we need not decide whether the single enterprise
instruction was given in error. As noted, even if the jury had
found concerted action, the Federations’ antitrust claims still fail
because they did not satisfy their burden of proving a relevant
market.15

15
In American Needle, the Supreme Court emphasized that
“teams that need to cooperate are not trapped by antitrust law,”
id. at *12, because “‘[t]he special characteristics of this industry
may provide a justification’ for many kinds of agreements.” Id.
(quoting Brown, 518 U.S. at 252). “When ‘restraints on

36
 IV.

A.

In their complaint, the Federations asserted claims of
breach of fiduciary duties of loyalty, due care, and good faith
against six individual directors of ATP, all of whom voted in
favor of the Brave New World plan. The District Court granted
ATP’s motion for judgment as a matter of law on these claims.
The Federations appeal the judgment only in relation to their
claim of breach of duty of loyalty by Director Charles Pasarell.
Notably, they do not appeal the judgment in relation to their
breach of fiduciary duty claims against the other five directors.

As noted, ATP is governed by a seven-member Board of
Directors—three elected by tournament members, each
r e p re s e n tin g a g e o g ra p h ic re g io n (“ T o u r n a m e n t
Representatives”), three elected by player members (“Player
Representatives”), and a Chairman/President. Section 12.9 of
ATP’s Bylaws requires certain corporate actions to be approved
by two affirmative votes of both the three Tournament

competition are essential if the product is to be available at all,’
per se rules of illegality are inapplicable, and instead the
restraint must be judged according to the flexible Rule of
Reason.” Id. (quoting NCAA, 468 U.S. at 101). As we
explained supra Part II.C, given the circumstances of this case,
the District Court correctly instructed the jury to evaluate the
alleged restraints under the full rule of reason.

37
Representatives and the three Player Representatives. The
Brave New World plan required such an approval. The
European Tournament Representative, Zejlko Franulovic, voted
against most provisions of the Brave New World plan, citing
concerns about restrictions on competition. Accordingly, the
votes of the other two Tournament Representatives were
necessary for adoption of the Brave New World plan.

Director Pasarell served as a Tournament Representative
from 1990. At the same time, he also was employed as
Tournament Director of the Indian Wells Masters Series Event
and held a 24% ownership in the Indian Wells tournament.
Indian Wells is a tournament member of ATP. The Federations
claimed that his vote in favor of the Brave New World plan
constituted a breach of duty of loyalty because it was self-
interested.

The District Court rejected the Federations’ argument,
concluding that they failed to rebut the business judgment rule
presumption with sufficient evidence that Pasarell was
materially self-interested in the Brave New World transaction.
The District Court observed that although Pasarell, like other
tournament owners, stood to benefit from any projected success
of the Brave New World plan, Indian Wells was already among
the most financially successful tournaments, and did not need
the Brave New World plan to make money. Further, the court
also held that the other directors were not materially self-
interested and the Federations do not appeal that finding.

38
 B.

Under Delaware law, the business judgment rule “is a
presumption that in making a business decision the directors of
a corporation acted on an informed basis, in good faith and in
the honest belief that the action taken was in the best interests of
the company.” Aronson v. Lewis, 473 A.2d 805, 812 (Del.
1984), overruled on other grounds by Brehm v. Eisner, 746
A.2d 244 (Del. 2000). Thus, “[t]he burden is on the party
challenging the decision to establish facts rebutting the
presumption.” Id. The business judgment rule presumption can
be rebutted by establishing “that the board was either interested
in the outcome of the transaction or lacked the independence to
consider objectively whether the transaction was in the best
interest of its company and all of its shareholders.” Orman v.
Cullman, 794 A.2d 5, 22 (Del. Ch. 2002).16 “To establish that

16
The presumption can also be rebutted by showing that “one
or more directors less than a majority of those voting” suffers
from a material and disabling interest and that “the interested
director controls or dominates the board as a whole or [that] the
interested director fail[ed] to disclose his interest in the
transaction to the board and a reasonable board member would
have regarded the existence of the material interest as a
significant fact in the evaluation of the proposed transaction.”
Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156, 1168 (Del.
1995) (“Technicolor III”) (alteration in original) (quoting
Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1134, 1153 (Del.

39
a board was interested[,] . . . a plaintiff must allege facts as to
the interest . . . of the individual members of that board.” Id.
Thus, a plaintiff must normally demonstrate “that a majority of
the director defendants have a financial interest in the
transaction . . . .” Id. (internal quotation marks and citation
omitted); see also Malpiede v. Townson, 780 A.2d 1075,
1084–85 (Del. 2001) (concluding that the claim of breach of
fiduciary duty of loyalty was insufficient because it alleged self-
interest of only one director); Brehm v. Eisner, 746 A.2d 244,
257 (Del. 2000) (determining whether a majority of the board
was disinterested and independent); Cinerama, Inc. v.
Technicolor, Inc., 663 A.2d 1156, 1168 (Del. 1995)
(“Technicolor III”) (affirming Court of Chancery determination
that “if actual self-interest is present and affects a majority of
directors approving a transaction, the entire fairness standard
applies” (emphasis added)).

C.

The Federations cannot prevail on their claim of breach
of duty of loyalty because they failed to rebut the business
judgment rule presumption. The District Court found that

Ch. 1994)); see also In re Transkaryotic Therapies, Inc., 954
A.2d 346, 363 (Del. Ch. 2008). Because the Federations do not
allege Pasarell controlled the ATP Board or failed to disclose his
interest in Indian Wells, the only issue relevant to this appeal is
whether the Board as a whole was interested and/or lacked
independence. See Orman, 794 A.2d at 23.

40
Pasarell was not materially self-interested in his Brave New
World vote. The Delaware Supreme Court has defined
“interest” to “mean[] that directors can neither appear on both
sides of a transaction nor expect to derive any personal financial
benefit from it in the sense of self-dealing, as opposed to a
benefit which devolves upon the corporation or all stockholders
generally.” Aronson, 473 A.2d at 812. “[I]n the absence of self-
dealing, it is not enough to establish the interest of a director by
alleging that he received any benefit not equally shared by the
stockholders. Such benefit must be alleged to be material to
that director.” 17 Orman, 794 A.2d at 23 (citing Cede & Co. v.
Technicolor, Inc., 634 A.2d 345, 363 (Del. 1993), modified, 636
A.2d 956 (“Technicolor II”)). “Materiality means that the

17
The materiality requirement is not applicable to cases
involving “classic self-dealing” where a director “stand[s] on
both sides of a transaction.” HMG/Courtland Props., Inc. v.
Gray, 749 A.2d 94, 113–115 (Del. Ch. 1999). Although the
Federations label Pasarell’s vote as “self-dealing” instead of
“self-interested,” such characterization is misleading because
Pasarell’s Brave New World vote did not involve Indian Wells
transacting with ATP. Pasarell’s financial stake in Indian Wells
was not “antithetic to the corporate interest in a . . . proposed
course of action.” 1 David A. Drexler et al., Delaware
Corporation Law and Practice § 15.05[1]. The Federations
allege that Pasarell received a special benefit. Thus, they must
show materiality of the interest to rebut the business judgment
rule presumption. See generally id.

41
alleged benefit was significant enough ‘in the context of the
director’s economic circumstances, as to have made it
improbable that the director could perform her fiduciary duties
to the . . . shareholders without being influenced by her
overriding personal interest.’” Id. (omission in original)
(quoting In re Gen. Motors Class H S’holders Litig., 734 A.2d
611, 617 (Del. Ch. 1999)). “In determining the sufficiency of
factual allegations made by a plaintiff as to . . . a director’s
interest . . . the Delaware Supreme Court . . . requires the
application of a subjective ‘actual person’ standard to determine
whether a particular director’s interest is material and
debilitating . . . .” Id. at 24 (quoting Technicolor III, 663 A.2d
at 1167).

Pasarell was not materially self-interested because he did
not stand to obtain any unique benefits from the Brave New
World plan. “A director is considered interested where he or
she will receive a personal financial benefit from a transaction
that is not equally shared by the stockholders.” Rales v.
Blasband, 634 A.2d 927, 936 (Del. 1993); see also Aronson, 473
A.2d at 812. The Brave New World plan was designed to
benefit all the ATP top tier tournaments—Pasarell’s supposed
benefits from the Brave New World plan were not unique.
Moreover, Pasarell’s alleged interest could not be subjectively
material because the evidence showed that Indian Wells was
already doing well financially, attracting top tennis players
before the Brave New World plan was adopted. Therefore, the
alleged benefit was not “significant enough in the context of the

42
director’s economic circumstances” to interfere with Pasarell’s
ability to perform his fiduciary duties “without being influenced
by [his] overriding personal interest.” In re Gen. Motors Class
H S’holders Litig., 734 A.2d at 617. Because the Federations
failed to show Pasarell was self-interested, his vote is entitled to
the protection of the business judgment rule.18

18
Further, regardless of whether Pasarell’s vote was
materially self-interested, to rebut the business judgment rule
presumption, the Federations would need to show that the ATP
Board was materially self-interested. But because the
Federations do not now dispute that the remaining five directors,
who voted for the Brave New World plan, were not materially
self-interested, the disinterested directors made up the majority
of the Board (six out of seven) and the majority of directors
voting to approve the Brave New World plan (five out of six).
Therefore, the Federations cannot establish that the majority of
the ATP directors were materially self-interested. The
Federations emphasize that the Brave New World plan could not
have been adopted without Pasarell’s vote. They argue that the
disinterested majority rule should not apply here because the
ATP Bylaws’ “super-majority” voting provisions made simple
majority approval insufficient to adopt the Brave New World
plan.
Because we hold the District Court was correct in its
finding that Pasarell was not self-interested, we do not need to
decide how the super-majority voting provisions might affect the
self-interest inquiry. However, we note that the Delaware

43
Supreme Court has previously addressed a similar issue. In
Technicolor III, the corporation’s certificate of incorporation
included a provision which could be repealed with a
recommendation made through a unanimous vote of qualified
directors. 663 A.2d at 1170–71. The directors voted
unanimously to recommend repealing the provision, but one of
the directors was found to have been interested, and plaintiffs
argued that the transaction was therefore voidable. The
Delaware Supreme Court affirmed the Court of Chancery’s
conclusion that the unanimity provision in the charter “should
not be construed to include an implied exclusion of interested
directors from eligibility to participate in the unanimous vote.”
Id. at 1171. Similarly, Pasarell’s necessary vote, even if
materially interested, is not excluded by the super-majority
provision of the ATP Bylaws. The provision states that “two
affirmative votes of the Tournament Tour Board
Representatives plus two affirmative votes of the Player Tour
Board Representatives” are required. App. 2692 . Like the
provisions in Technicolor III, the bylaws here do not require
exclusion of the interested votes, and Technicolor III suggests
that no such exclusion can be implied. But although in
Technicolor III the board’s actions were examined under the
business judgment rule and found not to have breached the duty
of loyalty, neither the Court of Chancery nor the Delaware
Supreme Court explicitly stated that the super-majority voting
requirement does not affect the applicability of the business

44
 V.

For these reasons, we will affirm the jury verdict for
defendants on the Sherman Act § 1 claim, and the District
Court’s judgment as a matter of law for defendant Pasarell on
the breach of fiduciary duty of loyalty claim.

judgment rule presumption. As noted, because Pasarell was not
self-interested, we do not need to decide this issue.
45