FIRST ONE @ ONE FIRST

Post-Needling

Posted in Case Reports by Mike Sacks on January 13, 2010

Today’s argument in American Needle Inc. v. NFL offered two lessons to the packed courtroom: first, the Solicitor General’s office can rob both parties of a clear victory; second, if Justice Breyer isn’t kept on a tight leash, he will crack jokes all morning.

American Needle was a hotly anticipated case that asked whether the thirty-two teams in the NFL served as a single entity when they granted Reebok an exclusive license to market NFL apparel.  American Needle, Inc., a sportswear company that once did business with the NFL, argued that the NFL violated the Sherman Antitrust Act because the league’s thirty-two teams, all independent companies, acted together to limit the market in their agreement with Reebok.

Whereas American Needle petitioned for certiorari seeking a reversal of the Seventh Circuit’s holding that the NFL constituted a single entity for intellectual property and trademark purposes, the NFL, rather than oppose American Needle’s petition, decided to run up the score.  It urged the Court to grant certiorari and expand the Seventh Circuit’s holding beyond trademark and intellection property.  NFL wanted the Supreme Court to find that the league is a single entity in general, which could potentially shield the NFL from anti-trust scrutiny.

Faced with these two extremes, the Court called for the views of the Solicitor General’s office, which responded in amicus by adopting the Seventh Circuit’s more modest approach.  This morning, the Court made clear its ambivalence towards both parties’ arguments, suggesting its ultimate allegiance to the Solicitor General’s approach.

Indeed, at no point did any justice clearly come down for or against either party.  Rather, they all seemed interested, though non-committal, in testing the limits of the rule of reason–antitrust law’s case-by-case balancing test to determine what is and isn’t an unreasonable restraint on the market–in NFL teams’ relationship with the league itself.

For instance, during American Needle’s argument, Justice Alito wondered whether certain teams, under NFL’s rules, are allowed to schedule more games for themselves to get more money.  Chief Justice Roberts inquired whether the NFL’s rules and regulations are horizontal rules among the teams or issued by a single, central entity.  Justice Stevens followed up by exploring–and subsequently repeating throughout the argument–the idea that NFL’s licensing agreement with Reebok could actually have an overall “pro-competitive” effect on the market by giving more public attention, and therefore more sales, to less popular or successful teams.

Glen Nager, American Needle’s lawyer, responded by stating that the anti-competitive aspects of the NFL’s control over each team’s merchandizing outweigh the possible pro-competitive situations.  Teams, Nager argued, should get together to forge an agreement in which each team will individually market its own logos.

And this is when Crazy Legs Stevie Breyer grabbed the ball and ran.  After fumbling to think of the Patriots’ arch-rival, first settling on the Saints, and then inventing inter-sport play by replacing the Saints with the Red Sox, Breyer threw up his hands and proclaimed, “I know baseball better.”  Laughter filled the Courtroom.  And for the rafter-swinging Breyer, who scans the audience with satisfaction after almost every one of his questions, laughter proves a potent drug:

Breyer: I don’t know a Yankees fan who will take a Red Sox sweater if you gave it to them!

Nager: A three-year-old could be persuaded.

Breyer: They have very small allowances, those three-year-olds.

Irked by his roadshow adversary‘s getting all the guffaws, Justice Scalia grumbled, “Why am I worried about this other stuff?”  Nager dead-panned: “because Counsel has an obligation to engage justices’ questions.”  After making the case for the relevance of his comical questions, Crazy Legs Breyer took himself out of the game, giving Nager permission to “blow off” his questions.

By the time Gregg Levy, the NFL’s lawyer, took to the lectern, the courtroom had returned to its silent decorum.  Levy argued that, among other reasons, the NFL deserved single entity status because its primary purpose is to centrally and cohesively promote the game of football as authorized by all thirty-two teams.  Justice Scalia did not buy that line and pithily stated that the NFL’s purpose–particularly through its licensing deal with Reebok–”is to make money.”  Sotomayor piled on: “you are seeking through this hearing what you haven’t got through Congress: an absolute bar to anti-trust claims.”  Yet the old ambivalence soon overtook the momentary shot of antagonism.  The justices went back to their exploration of the rule of reason and Scalia admitted that the individual teams constituting the NFL would be “worthless if the NFL disappears.”

American Needle came into the Court as potentially transformative of sports law, if not anti-trust law in general, but by the time Chief Justice Roberts banged his gavel and submitted the case, it was clear that the case, to switch to Justice Breyer’s sport of choice, would be sent back down to the minors for further development.

UPDATE: The official transcript is available here.  Excoriate my own transcription prowess in the comments.

Saints Quarterback Needles the NFL

Posted in Anticipation by Mike Sacks on January 8, 2010

Drew Brees, quarterback for the New Orleans Saints, penned an op/ed for this coming Sunday’s Washington Post regarding next Wednesday’s case, American Needle Inc. v. NFL. He argues that if the Supreme Court affirms the Seventh Circuit’s decision that the 32 NFL teams operate as a single business entity, therefore cannot violate antitrust laws, the ramifications for pro sports would be ruinous:

[I]f the Supreme Court agrees with the NFL’s argument that the teams act as a single entity rather than as 32 separate, vigorously competitive and extremely profitable entities, the absence of antitrust scrutiny would enable the owners to exert total control over this multibillion-dollar business.

What might the owners do? They could agree to end or severely restrict free agency, continue to enter into exclusive agreements that will further raise prices on merchandise, lock coaches into salary scales that don’t reward them when they’re promoted and set higher ticket prices (including preventing teams from competing through ticket discounts). These and other concerns prompted the NFL Players Association — along with the players associations of Major League Baseball, the National Basketball Association and the National Hockey League — to file an amicus brief with the Supreme Court last fall, arguing against the notion of the NFL as a single entity.

F1@1F will be out on the pavement early Wednesday morning for American Needle.  Be sure to follow the F1@1F Twitter feed, viewable under “On the Ground” in the sidebar, for updates from the line.   If some pro football player who couldn’t score a reserved seat inside the Court tries to muscle his way past me in line, you will hear here first.  And if I survive the morning frost and any mad footballers, then check back here later that day for a full write-up of what went on inside and outside the Court.

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