Russell Hairston Frank Garcia Jaime Weindl Jovan McCoy Kyle Roberts Scoreboard, Inc., a Washington Corporation Team Spirit, Inc., a Washington Corporation Graham S. Anderson v. Pacific 10 Conference, an Unincorporated Association National Collegiate Athletic Association, an Unincorporated Association
Docket: 95-35309
Court: Court of Appeals for the Ninth Circuit; December 18, 1996; Federal Appellate Court
Plaintiffs-appellants Russell Hairston, Frank Garcia, Jovan McCoy, and Kyle Roberts, former and current University of Washington (UW) football players, appeal a district court ruling that granted summary judgment in favor of the Pacific-10 Conference (Pac-10). The court had jurisdiction under 15 U.S.C. §§ 15 and 26 and 28 U.S.C. § 1367, while the Ninth Circuit Court of Appeals has jurisdiction over the appeal under 28 U.S.C. § 1291.
The Pac-10, an unincorporated association of ten universities, imposed sanctions on UW following an investigation into recruiting violations linked to star quarterback Billy Joe Hobert's receipt of loans. The sanctions included a two-year bowl ban, a one-year television revenue ban, a limit on football scholarships, and reduced permissible recruiting visits. These penalties significantly affected the players and fans.
In response, the appellants filed a complaint alleging antitrust violations under Section One of the Sherman Act and breach of contract, arguing that the sanctions were excessively harsh and indicative of a conspiracy among other Pac-10 schools to undermine UW’s football program for competitive gain. They sought both injunctive relief and damages related to travel expenses for a post-season bowl game.
The Pac-10 filed a motion to dismiss all claims, arguing that the players lacked both constitutional and antitrust standing. The court partially granted this motion, dismissing certain plaintiffs but allowing the players to pursue their antitrust claims due to demonstrated direct injury. However, the players' breach of contract claim was dismissed because they were not considered intended third-party beneficiaries of the relevant contracts among Pac-10 schools.
Subsequently, the Pac-10 sought summary judgment, arguing that the appellants had not presented evidence of an anticompetitive conspiracy. The court agreed and granted the motion, leading to an appeal. On appeal, the Pac-10 maintained that the summary judgment should be affirmed due to the appellants' lack of antitrust standing under the Clayton Act. While the appellate court found the district court's reasoning unpersuasive, it did not need to address the standing issue because the appellants failed to establish any antitrust violation.
The court noted that if no violation exists, the question of standing becomes irrelevant, as antitrust injury must result from a threat to competition underlying the alleged violation. The Sherman Act requires proof that the Pac-10's actions had an anticompetitive effect for the claim to succeed. The requirements under Section 1 of the Sherman Act necessitate demonstrating a contract or conspiracy, unreasonable restraint of trade, and an impact on interstate commerce. The players' claims ultimately failed on the merits due to insufficient evidence of anticompetitive effects.
The Pac-10 members' agreement to sanction the University of Washington (UW) satisfies the 'contract, combination, or conspiracy' requirement under antitrust law, indicating a horizontal restraint among competitors. The agreement's impact on interstate commerce is acknowledged, leaving only the determination of whether the sanctions constitute an unreasonable restraint of trade, analyzed under the rule of reason.
Under this analysis, the plaintiff must first demonstrate significant anticompetitive effects within relevant markets. The plaintiffs established their initial case by showing that UW was banned from bowl games for two years. The Pac-10 countered with evidence of procompetitive benefits associated with punishing rule violators. The burden then shifted back to the athletes to prove that the Pac-10's objectives could be achieved through less restrictive means, which they failed to do. They argued the penalties were disproportionate to UW's violations but provided no substantial evidence to support this claim. Testimony from a law professor indicated that the sanctions were appropriate, and a report on the sanctions stated they were too lenient, not harsh.
Consequently, the court ruled that the athletes did not present sufficient evidence for a jury to find in their favor, upholding the summary judgment. Additionally, the athletes' breach of contract claim was dismissed, as they asserted that the Pac-10's governing documents constituted a contract with third-party beneficiaries—the players themselves. However, the claim of unreasonable sanctions as a breach was not substantiated.
To establish a third-party beneficiary contract under Washington law, the contracting parties must intend for the promisor to have a direct obligation to the intended beneficiary at the time of the contract's formation, as outlined in Postlewait Constr. Inc. v. Great American Ins. The determination of this intent is based on an objective standard, focusing on whether the contract's performance would directly benefit the third party, rather than the altruistic motives of the parties involved. The contract should be interpreted in its entirety, considering the circumstances of its creation.
Appellants reference the Pac-10 Constitution's 'Statement of Purpose,' which aims to enhance the experiences of student-athletes and maintain integrity among members. Member institutions are required to align their athletic programs with the conference's standards and values, promoting academic and athletic achievement.
However, the district court dismissed the appellants' claim, characterizing the Constitution's language as vague and insufficient to indicate that the Pac-10 intended to assume direct obligations to student-athletes. The appellants failed to demonstrate that a contractual obligation existed between the Pac-10 and the students, relying solely on the Constitution's statements without providing further evidence.
Furthermore, the appellants could not show that the Pac-10's penalties constituted an unreasonable restraint of trade or that any breach of contract occurred, leading to an affirmation of the district court's ruling. Circuit Judge Trott concurred, emphasizing that the appellants lacked antitrust standing to pursue the lawsuit, a threshold issue that, if not addressed, could lead to unwarranted litigation attempts by others.
The district court's analysis may inadvertently prompt antitrust lawsuits from individuals feeling harmed by conference sanctions, suggesting that potential litigants lack standing for such claims. Despite the current plaintiffs failing on the merits, there's no guarantee that future plaintiffs will refrain from filing similarly meritless lawsuits, which burden the court and defendants. Antitrust standing must be established before a plaintiff's case proceeds, as emphasized by the Supreme Court's interpretation of the Clayton Act. Antitrust standing differs from constitutional standing; it is a prerequisite for an antitrust case and hinges on demonstrating "antitrust injury." The plaintiffs must also qualify as appropriate antitrust litigants, a criterion not met in this instance. The assessment of whether a plaintiff is proper considers their injuries' connection to the alleged antitrust violation. Although antitrust violations can affect the economy broadly, liability should not extend indefinitely. The determination involves various factors, including the nature of damages, potential for duplicative recovery, the conspiracy's intent, the injury's directness, and the presence of more suitable plaintiffs.
The analysis begins with the nature of the damages claimed, which are minimal and easily attributable to an all-expense-paid trip to a bowl game, including airfare, lodging, and meals. This simplicity means there is no need for extensive evidence or complex legal theories, favoring the plaintiffs. However, the intent behind the Pac-10's actions is detrimental to the athletes' claims, as there is no indication that the Pac-10 sought to punish the players. The athletes concede that penalties were imposed without consideration of their impact. Furthermore, the athletes fail to establish a direct causal link between the alleged violations and their injuries, as their situation mirrors that of employees in a related case where the injury was derivative of the vessel owners' losses. In this instance, the University of Washington is identified as the directly injured party, with the players’ injuries stemming from that loss. A significant flaw in the plaintiffs' position is the existence of a more appropriate plaintiff, the University of Washington, which suffered greater financial losses due to the sanctions. The players' argument that the University would lack incentive to pursue legal action against the Pac-10 is unconvincing, as other colleges have successfully challenged similar associations without detrimental consequences. The court agrees that not every restraint warrants a private antitrust action, especially when those directly impacted do not seek such remedies.
The players lack antitrust standing to pursue their lawsuit against the Pac-10 following sanctions imposed on the University of Washington (UW), which has already incurred significant economic losses. Allowing the players to challenge these sanctions would set a precedent for numerous indirectly affected parties to file similar lawsuits, complicating the enforcement of sanctions. Different player groups would push for varying sanctions based on their interests, potentially leading to further disputes and detracting from the university's ability to manage these competing interests effectively. The conclusion is that the players did not demonstrate they are suitable antitrust plaintiffs, prompting a recommendation to reverse the district court's previous order that recognized their standing. Additionally, the claims for injunctive relief are moot since the penalty period has ended, and only the Pac-10 remains as a defendant after the NCAA was dismissed. The excerpt also references the Supreme Court's acknowledgment of the NCAA's role in maintaining the integrity and appeal of college football, which distinguishes it from professional sports. The passage emphasizes that the players failed to establish significant anticompetitive effects resulting from the Pac-10's actions.
The Pac-10 presented evidence demonstrating that enforcing amateurism rules on football programs yields significant procompetitive benefits. The onus shifted back to the athletes to prove that these objectives could be achieved through less restrictive means, a burden which they did not meet at the summary judgment stage, requiring only more than a minimal amount of evidence. The athletes argued that the Pac-10's penalties against the University of Washington (UW) were excessively harsh but failed to substantiate this claim. Testimony from law professor Robert Aronson indicated that the penalties were appropriate, and a NCAA report suggested the sanctions were too lenient, contradicting the athletes' assertions. Consequently, the court found no basis for a jury to rule in favor of the athletes, justifying the summary judgment.
The athletes also contended that the district court incorrectly dismissed their breach of contract claim. Under Rule 12(b)(6), such dismissals are reviewed de novo. The players claimed that the Pac-10's Constitution, Bylaws, and Articles constituted a contract, with the players as third-party beneficiaries. They argued the Pac-10 breached this contract by imposing unreasonable sanctions on UW, thereby harming the players. Under Washington law, establishing a third-party beneficiary contract requires an intention from the contracting parties to directly benefit the third party. The court assesses intent objectively, focusing on whether the contract’s performance directly benefits the third party. The players referenced the Pac-10 Constitution's "Statement of Purpose," which aims to enhance the educational and athletic experiences of student-athletes, asserting that member institutions must adhere to the conference's standards to uphold its integrity.
The Pacific-10 Conference is committed to integrating its intercollegiate athletic program with the educational goals of its member institutions, emphasizing values such as academic and athletic achievement, educational opportunities for youth, competitive quality for student-athletes, and maintaining amateurism in sports. The district court dismissed the appellants' contract claim, determining that the conference's language consisted of vague statements that did not create direct legal obligations towards individual football players. The court found no evidence of intent to form contractual obligations, rendering the claims meritless. Furthermore, the appellants failed to demonstrate that the Pac-10's penalties constituted an unreasonable restraint of trade, leading to the conclusion that no antitrust violation occurred. The breach-of-contract claim was similarly dismissed due to a lack of contractual language indicating obligations to students. Consequently, the court affirmed the dismissal.
Judge Trott concurred with the result but highlighted an additional concern regarding the appellants' lack of antitrust standing to bring the lawsuit, suggesting that the district court's ruling could mislead future litigants into pursuing unfounded antitrust claims. He emphasized the importance of establishing antitrust standing before allowing a case to proceed, cautioning against the potential for frivolous lawsuits that burden the courts and the parties involved.
Antitrust standing requires plaintiffs to demonstrate they have suffered "antitrust injury," which is a distinct threshold element necessary for antitrust cases, separate from constitutional standing that pertains to court jurisdiction. The Supreme Court has clarified that Congress did not intend for the antitrust laws to remedy all injuries linked to antitrust violations. Therefore, the alleged injury must align with the types of harm the antitrust statute aims to prevent. Additionally, plaintiffs must be appropriate antitrust plaintiffs, a requirement that evaluates the connection between their injuries and the alleged violation.
Key considerations for determining if a plaintiff is proper include: (1) the character of the damages, focusing on issues such as duplicative recovery and complexity; (2) the specific intent behind the alleged conspiracy; (3) the directness of the injury; and (4) the presence of more suitable plaintiffs. In the case at hand, the damages sought—expenses for an all-expense paid trip—are straightforward to apportion from the school's losses, indicating no complex proceedings are necessary. This analysis underscores the necessity of a clear link between the plaintiff's injury and the antitrust violation for standing to be established.
The plaintiffs, comprising athletes from the University of Washington (UW), lack antitrust standing as their injuries stem from a broader institutional loss rather than direct harm. The Pac-10 query was not intended to punish the athletes, and the players themselves acknowledge that penalties were imposed without consideration of their impact. The court likens the players’ situation to that of fishing crewmembers in Eagle, where the injury was deemed derivative of the vessel owners' loss. The court emphasizes that the UW itself is the more appropriate plaintiff, as its financial losses far outweigh the athletes' claims regarding their missed postseason opportunity. The players argue that without their lawsuit, antitrust violations would go unpunished, but the court counters that other institutions have successfully challenged similar organizations while maintaining their membership. Furthermore, the court warns that allowing the players to sue could lead to a flood of lawsuits from various indirectly affected parties, complicating the resolution of antitrust issues. The UW, having accepted the sanctions, is in the best position to address these competing interests and pursue any necessary antitrust actions.
The players have not demonstrated that they possess antitrust standing, leading to the conclusion that their claims are invalid as antitrust plaintiffs. Consequently, the court intends to reverse the district court's order from May 20, 1994, which held otherwise. The penalty period for the University of Washington has concluded, rendering the appellants' requests for injunctive relief moot. Prior to the appeal, the players agreed to dismiss the NCAA as a defendant, leaving only the Pac-10 as the remaining defendant-appellee. The NCAA's role in marketing college football is crucial due to its connection to an academic tradition, which enhances the sport's appeal compared to professional alternatives. This necessitates specific regulations, such as not compensating athletes and requiring academic attendance, to maintain the integrity of the product. The NCAA's actions are viewed as procompetitive, expanding consumer choices for both sports fans and athletes. The nature of the claimed injury by the plaintiffs is relevant to the antitrust injury analysis.
