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Grizzlies v. National Football League

decided: November 4, 1983.

THE MID-SOUTH GRIZZLIES (A JOINT VENTURE), JOHN EDWARD BOSACCO, MID-SOUTH GRIZZLIES (A LIMITED PARTNERSHIP), AND CONSOLIDATED INDUSTRIES, INC., APPELLANTS
v.
THE NATIONAL FOOTBALL LEAGUE, AN UNINCORPORATED ASSOCIATION, BALTIMORE FOOTBALL CLUB, INC., BUFFALO BILLS, INC., CHARGERS FOOTBALL COMPANY, CHICAGO BEARS FOOTBALL CLUB, INC., CINCINNATI BENGALS, INC., CLEVELAND BROWNS, INC., DALLAS COWBOYS FOOTBALL CLUB, INC., DETROIT LIONS, INC., FIVE SMITHS, INC., GREEN BAY PACKERS, INC., HOUSTON OILERS, INC., KANSAS CITY CHIEFS FOOTBALL CLUB, INC., LOS ANGELES RAMS FOOTBALL COMPANY, MIAMI DOLPHINS, LTD., MINNESOTA VIKINGS FOOTBALL CLUB, INC., NEW ENGLAND PATRIOTS FOOTBALL CLUB, INC., NEW YORK FOOTBALL GIANTS, INC., NEW YORK JETS FOOTBALL CLUB, INC., NEW ORLEANS SAINTS LOUISIANA PARTNERSHIP, OAKLAND RAIDERS, LTD., PHILADELPHIA EAGLES FOOTBALL CLUB, INC., PITTSBURGH STEELERS SPORTS, INC., PRO-FOOTBALL, INC., ROCKY MOUNTAIN EMPIRE SPORTS, INC., SAN FRANCISCO FORTY NINERS, SEATTLE PROFESSIONAL FOOTBALL, A GENERAL PARTNERSHIP, ST. LOUIS FOOTBALL CARDINALS COMPANY, TAMPA BAY AREA NFL FOOTBALL, INC. AND PETE ROZELLE



On Appeal from the United States District Court for the Eastern District of Pennsylvania.

Seitz, Chief Judge, Gibbons and Rosenn, Circuit Judge.

Author: Gibbons

Opinion OF THE COURT

GIBBONS, Circuit Judge.

Mid-South Grizzlies, a joint venture, and its members (the Grizzlies) appeal from a summary judgment in favor of the defendants in their suit against the National Football League (NFL), the league members, and League Commissioner Pete Rozelle, seeking damages under Section 4 of the Clayton Act, 15 U.S.C. § 15 (1973). The suit concerns the defendants' refusal to grant the plaintiffs a football franchise. On appeal the Grizzlies contend that the district court erred: (1) in granting summary judgment while the Grizzlies' discovery requests were outstanding; and (2) in granting summary judgment when there were disputed issues of material fact.*fn1 We affirm.

I.

Background

The NFL is a not-for-profit business league, qualified for exemption from federal income tax under section 501(c) 6 of the Internal Revenue Code, 26 U.S.C. § 501(c)(6) (1967). The league has 28 members, each of which is an entity organized for profit, engaged in the business of fielding a professional football team. The NFL was formed by the merger of two predecessor football leagues. That merger took place following the enactment, in 1966, of Pub. L. 89-800, § 6(b)(1), 80 Stat. 1515, which amended Pub. L. 87-331, § 1, 75 Stat. 732 (1961), 15 U.S.C. § 1291. Section 1291, enacted in 1961, granted to certain professional sports leagues a limited exemption from the antitrust laws with respect to the joint sale of television broadcast rights for league games, and the 1966 amendment permitted "a joint agreement by which the members of two or more football leagues combine their operations in expanded single leagues . . . if such agreement increases rather than decreases the number of professional football clubs so operating." The 1961 exemption with respect to joint sale of television broadcasting rights, intended to overrule the judgment in United States v. National Football League, 116 F. Supp. 319 (E.D. Pa. 1953), does not "otherwise affect the applicability or nonapplicability of the antitrust laws" to any other activities of persons engaged in professional team sports. 15 U.S.C. § 1294. The 1966 exemption does no more than permit the combination of members of two or more leagues into one.

Under the 1974 constitution and by-laws of the NFL each member obliges itself to operate a professional football club which is a member of the league. Each member has a designated "home territory" within which it has "the exclusive right . . . to exhibit professional football games played by teams of the League," and "no club in the League shall be permitted to play games within the home territory of any other club unless a home club is a participant." Home territory is defined as a designated city and "the surrounding territory to the extent of 75 miles in every direction from the exterior corporate limits of such city."*fn2 Constitution and By-Laws, Article IV, Appendix at 1129a, 1138a. The addition of a new league member within the home territory of any member requires unanimous consent of the league members. Id. Article 3.1(b). Elsewhere, applicants for membership may be admitted by the affirmative vote of not less than three-fourths or 20 members, whichever is greater. Id. Article 3.3(c). No league member may have a financial interest, direct or indirect, in any other league member. Id., Article 9.1(B)(1).

The combined league began functioning in 1970 with 26 members. Thereafter new home territories were designated for Tampa, Florida, and Seattle, Washington, and member teams with franchises for those home territories began participating in league play in 1976. The uncontradicted affidavit of Commissioner Rozelle establishes that the initiative for establishing those franchises came from the NFL, which negotiated for a stadium location, determined methods of providing the franchise with players, and only then evaluated and selected owners. See, e.g., Rozelle Deposition, Appendix at 1290a, 1431a-1440a.

As authorized by 15 U.S.C. § 1291, the NFL has made a joint sale to three major television networks of the regular season and post-season television rights. Television revenues are divided equally among all members. Receipts from the sale of tickets are shared between the home team, 60% and the visiting team, 40%. Each home team retains other revenues, derived from its local operations.*fn3 On average, however, more than 70% of each team's revenue is derived from sources other than its operations at the home location. See Defendants' Motion for Summary Judgment, Affidavit of Pete Rozelle, Appendix at 188a.

In 1974 and 1975 the Grizzlies participated in the World Football League from a home team location in Memphis, Tennessee. The members of that league could be found to have been competitors of the members of the NFL in the national market for network television revenue. The World Football League disbanded, however, halfway through the 1975 football season. The NFL had no franchise at Memphis, and a home team designation for that location would not infringe upon the home territory of any NFL member. Upon the demise of the World Football League the Grizzlies applied to the NFL for admission to the league with a designated home territory at Memphis.

At meetings with the NFL Expansion Committee, and with the full NFL membership, the Grizzlies urged that it had in place at Memphis an established, functioning professional football enterprise. The application was rejected. This lawsuit followed.

II.

The Complaint

The Grizzlies' complaint, filed on December 3, 1979, does not charge that the provisions of the NFL's Constitution and By-Laws reserving to its members franchise exclusivity for designated home territories violates the antitrust laws. Indeed, the Grizzlies sought such an exclusive franchise for themselves. Thus this case does not present any issue of possible antitrust violation from the exclusion of potential competitors in the designated exclusive home territories.

Nor do the Grizzlies complain that the NFL's 60-40 home team-visitor revenue sharing arrangement, which is not exempted from antitrust scrutiny by 15 U.S.C. § 1291, caused any injury to their business or property. Indeed, the Grizzlies sought to participate in that arrangement. Moreover, the Grizzlies make no complaint about the operation of the NFL arrangements for joint sale of television rights. They do not charge, for example, that the demise of the World Football League was caused by the NFL's television marketing practices. Nor do they charge that if they had been admitted those practices should have been changed. Rather, as with the 60-40 split of ticket sale revenue, they sought to participate.

Determining what the Grizzlies do not charge as antitrust violations is somewhat easier than determining what is charged. The complaint alleges that Memphis is a highly desirable submarket for major league professional football, that the refusal to consider it as a home territory for a franchise was made pursuant to an agreement or understanding or conspiracy among NFL members, the NFL and the Commissioner, that no valid basis for rejection of the Grizzlies was articulated or formulated by the defendants, and that the rejection amounted to an unreasonable restraint of trade, or a group boycott. One motive for that conspiracy is alleged to have been a desire to punish, intimidate and restrain plaintiffs from participation in major league professional football because they had entered into competition with NFL members by participating in the World Football League. The exclusion, so motivated, and having the effects alleged, is said to be a violation of Section 1 of the Sherman Act, and an attempt to monopolize interstate trade and commerce in professional football in violation of Section 2 of that Act.

III.

The Summary Judgement Record

The defendants moved for summary judgment on March 2, 1981, supporting their motion with affidavits by Commissioner Pete Rozelle and by Daniel M. Rooney, Chairman of the NFL Expansion Committee, to which defendants attached 12 supporting exhibits. At the time of the motion there was outstanding a motion by the Grizzlies to compel answers to certain interrogatories, and to compel production of documents. In opposition to the summary judgment motion the Grizzlies filed an extensive brief addressing the merits, and the affidavits of William R. Tathan, I. B. Rowe and Steve Alexander, Esq. The Grizzlies contended that the summary judgment motion should not be considered until the completion of discovery.

On August 13, 1981 the trial court filed a memorandum and order declining to consider the motion for summary judgment until the completion of the Grizzlies' discovery, but restricted the scope of discovery to "matters relating to the NFL's decision not to grant the plaintiffs an NFL franchise at Memphis, Tennessee, and to the NFL's prior practices and standards with respect to the admission of new franchises into the league since the merger of the NFL and the American Football League." 4 App. at 894. The Grizzlies were permitted to depose Mr. Rozelle, Mr. Rooney, and the other members of the NFL Expansion Committee, but solely with respect to ...


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