1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-9-1999

Shaw v. Dallas Cowboys

Precedential or Non-Precedential:

Docket 98-1629

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Recommended Citation

"Shaw v. Dallas Cowboys" (1999). 1999 Decisions. Paper 94.

http://digitalcommons.law.villanova.edu/thirdcircuit_1999/94
Filed April 9, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

Nos. 98-1629 and 98-1887 

CHARLES SHAW; BRET D. SCHWARTZ; STEVE 

PROMISLO, INDIVIDUALLY, AND ON BEHALF OF ALL 

PERSONS SIMILARLY SITUATED 

v. 

DALLAS COWBOYS FOOTBALL CLUB, LTD.; NEW 

ENGLAND PATRIOTS FOOTBALL CLUB; NEW YORK 

GIANTS FOOTBALL, INC.; PHILADELPHIA EAGLES 

LIMITED PARTNERSHIP; SAN FRANCISCO FORTYNINERS, LTD.; NATIONAL FOOTBALL LEAGUE, 

 Appellants 

Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

(D.C. Civ. No. 97-cv-05184) 

Argued March 11, 1999 

Before: MANSMANN, SCIRICA and NYGAARD, 

Circuit Judges. 

(Filed April 9, 1999) 

 Howard J. Sedran, Esquire 

 (ARGUED) 

 Donald E. Haviland, Jr., Esquire 

 Levin, Fishbein, Sedran & Berman 

 510 Walnut Street 

 Suite 500 

 Philadelphia, PA 19106 
 On the Brief: 

 Michael D. Hausfeld, Esquire 

 Daniel Small, Esquire 

 Cohen, Milstein, Hausfeld & Toll 

 1100 New York Avenue, NW 

 Suite 500, West Tower 

 Washington, D.C. 2005 

 William Bernstein, Esquire 

 Joseph R. Saveri, Esquire 

 Lieff, Cabraser, Heimann & 

 Bernstein, LLP 

 Embarcadero Center West 

 275 Battery Street, 30th Floor 

 San Francisco, CA 94111 

 Samuel D. Heins, Esquire 

 Daniel E. Gustafson, Esquire 

 Heins, Mills & Olson, P.L.C. 

 700 Northstar East 

 608 Second Avenue South 

 Minneapolis, MN 55402 

 David T. Shulick, Esquire 

 Frank & Rosen 

 1601 Market Street, Suite 2230 

 Philadelphia, PA 19103 

 Roberta D. Liebenberg, Esquire 

 Liebenberg & White 

 The Pavilion, Suite 810 

 261 Old York Road 

 Jenkintown, PA 1910-46 

 Allyn Z. Lite, Esquire 

 Goldstein, Lite & DePalma 

 Two Gateway Center, 12th Floor 

 Newark, NJ 07102-5003 

 2 
 Ira Neil Richards, Esquire 

 Trujillo, Rodriguez & Richards, 

 LLC 

 The Penthouse 

 226 West Rittenhouse Square 

 Philadelphia, PA 19103 

 Dennis Stewart, Esquire 

 Milberg Weiss Bershad Hynes 

 & Lerach 

 600 West Broadway 

 1800 One Americas Plaza 

 San Diego, CA 92101-5050 

 March Edelson, Esquire 

 Hoffman & Edelson 

 45 West Court Street 

 Doylestown, PA 18901 

 Joseph C. Kohn, Esquire 

 Kohn, Swift & Graf, P.C. 

 1101 Market Street, Suite 2400 

 Philadelphia, PA 19107 

 Bruce McNew, Esquire 

 Taylor Gruver & McNew, P.A. 

 3711 Kennett Pike, Suite 210 

 Greenville, DE 19807 

 Gregory Veith, Esquire 

 P.O. Box 378 

 Wynnewood, PA 19096 

 COUNSEL FOR APPELLEES 

 Peter J. Nickles, Esquire 

 Timothy C. Hester, Esquire 

 (ARGUED) 

 Neil K. Roman, Esquire 

 Covington & Burling 

 1201 Pennsylvania Avenue, N.W. 

 P.O. Box 7566 

 Washington, D.C. 20044-7566 

 3 
 Richard P. McElroy 

 Blank Rome Comisky & McCauley 

 One Logan Square 

 Philadelphia, PA 19103 

 COUNSEL FOR APPELLANTS 

OPINION OF THE COURT 

MANSMANN, Circuit Judge. 

In this appeal involving a certified question, we must 

determine, as a matter of first impression, whether an 

agreement among members of the National Football League1 

to sell broadcast rights jointly to satellite distributors is 

exempt from scrutiny under the Sherman Act, 15 U.S.C. 

SS 1 et seq. Citing the Sports Broadcasting Act (the "SBA"), 

15 U.S.C. S 1291, the NFL sought dismissal of a class 

action antitrust suit brought by Charles Shaw, Bret D. 

Schwartz, and Steven Promislo ("Shaw"). The NFL asserted 

that the rights being sold were "residual" rights in a 

"sponsored telecasting" and therefore within the SBA's 

exemption to the antitrust laws. The District Court rejected 

this characterization, holding that the statutory exemption 

turns on the nature of the broadcast in question and that 

the phrase "sponsored telecasting" exempts only a 

commercially sponsored free broadcast. The District Court 

further observed that the SBA's legislative history

contradicts the NFL's interpretation and that exceptions to 

the antitrust laws must be narrowly construed. 

Accordingly, we must first determine whether the SBA 

unambiguously exempts from antitrust law scrutiny only 

the right to sell those images for commercially sponsored 

free broadcast. If not, we must turn to the Act's legislative 

_________________________________________________________________ 

1. The members of the National Football League which are parties to the 

agreement and to this action are the: Dallas Cowboys Football Club, 

Ltd.; New England Patriots Football Club; New York Giants Football, 

Inc.; Philadelphia Eagles Limited Partnership; and San Francisco FortyNiners, Ltd. We refer to these members and the League itself collectively 

as the "NFL". 

 4 
history. Because we agree with the District Court that it 

does, we will affirm. 

I. 

The NFL and its member teams own all rights to make

and distribute images of football performances (the

"games") between the teams. By agreement, they permit the 

broadcasting of approximately a dozen NFL games each 

week on free television networks, such as NBC or Fox. 

Because different games are broadcast within different local 

markets, however, any television viewer has free access to 

only two or three NFL games.2 This leaves an unserviced 

market for those NFL games outside a viewer's local

broadcast area (e.g., the Pittsburgh Steelers fan who lives in 

Los Angeles). With the development and expansion of

satellite distribution, that market can now be tapped. The 

NFL and member teams entered into a pooled agreement to 

sell jointly their rights in all football games broadcast 

nationwide to a satellite broadcast distributor (DIRECTV) 

which in turn offers those games as an all-or nothing 

package (the "NFL Sunday Ticket") to individual viewersubscribers at a fixed cost per season.3 

Shaw filed this class action suit, alleging that the NFL's 

joint agreement with the satellite distributor violates 

Section 1 of the Sherman Act4 and seeking declaratory and 

injunctive relief. Specifically, Shaw alleges that the 

combined agreement causes artificially high and 

_________________________________________________________________ 

2. Shaw v. Dallas Cowboys Football Club, Ltd. , 1998 WL 419765, *1-2 

(E.D. Pa. June 23, 1998). 

3. This cost is in addition to the subscriber's monthly satellite access 

fee. 

Id. at *2. 

4. The antitrust laws were designed for the protection of the public. 

Under Section 1 of the Sherman Act, as interpreted by the Supreme 

Court, agreements which unreasonably restrain trade are illegal. See, 

e.g., Standard Oil v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 

619 (1911). To make out a Section 1 violation, plaintiffs must prove: (1) 

a contract, combination or conspiracy; (2) a restraint of trade; and (3) 

an 

effect on interstate commerce. See Fuentes v. South Hills Cardiology, 946 

F.2d 196, 198 (3d Cir. 1991). 

 5 
noncompetitive prices for NFL satellite broadcasts and 

restricts the options available to NFL fans. 

The NFL filed a motion to dismiss pursuant to Fed. R. 

Civ. P. 12(b)(6), alleging that (1) the pooled sale to the 

satellite distributor is a sale of "residual" rights in a 

"sponsored telecast" exempted from antitrust law under the 

SBA, and (2) Shaw failed adequately to allege the necessary 

joint action. The District Court denied the NFL's motion on 

both grounds and, at the NFL's request, certified the 

question of SBA exemption for interlocutory review. 5 

II. 

Congress passed the Sports Broadcasting Act in 1961 in 

response to a federal court ruling6 that the NFL's package 

sale of games to a commercial television network (CBS) 

violated the Sherman Antitrust Act, 15 U.S.C. S 1. Its 

purpose was to preserve the availability of NFL games on 

free broadcast television.7 The SBA therefore exempts from 

the antitrust laws: 

 any agreement by or among persons engaging in or 

 conducting the organized professional team sports of 

 football, . . ., by which any league of clubs participating 

 in professional football . . . contests sells or otherwise 

 transfers all or any part of the rights of such league's 

 member clubs in the sponsored telecasting of the games 

 of football, . . . engaged in or conducted by such clubs. 

15 U.S.C. S 1291 (emphasis added). Our first task is to 

consider the plain meaning of the statute, heeding the 

_________________________________________________________________ 

5. Our appellate jurisdiction lies pursuant to 28 U.S.C. S 1292(b). 

6. See United States v. National Football League, 116 F. Supp. 319 (E.D. 

Pa. 1953). 

7. See, e.g., S. Rep. No. 1087, 1961 U.S.C.C.A.N. at 3044 (noting the 

Senate Judiciary Committee's concern for "the public interest in viewing 

professional league sports"). See generally U.S. Football League v. 

National Football League, 842 F.2d 1335, 1346-7 (2d Cir. 1988) 

(discussing history of agreements between the NFL and major television 

networks and history of the SBA). 

 6 
Supreme Court's direction that exceptions to the antitrust 

laws must be narrowly construed.8 

As the District Court explained and as the NFL does not 

dispute, the phrase "sponsored telecasting" refers to 

broadcasts which are financed by business enterprises (the 

"sponsors") in return for advertising time and are therefore 

provided free to the general public. Shaw, 1998 WL 

419765, *3. Although the NFL concedes that a package of 

satellite broadcasts sold to individual subscribers is not a 

"sponsored telecasting", it asserts that its pooled sale to the 

satellite distributor is nonetheless within the SBA's 

antitrust law exemption because it constitutes a sale of 

residual or retained rights in the sponsored telecasts, i.e., 

that it is "part of [those] rights." 

The NFL correctly asserts that it "still own[s] a partial 

right to the games broadcast by the free networks." Id. at 

*2. It errs when it characterizes its remaining rights as 

rights in the sponsored telecasts. The NFL's underlying 

rights are in the games themselves and, more specifically, 

they include the right to sell the images of those games for 

broadcast through various media. The broadcast rights sold 

to sponsored telecasters do not subsume the separate 

broadcast rights sold to a non-sponsored medium. 9 Each 

_________________________________________________________________ 

8. See, e.g., Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 126, 102 

S. Ct. 3002, 73 L.Ed.2d 647 (1991) (holding that exceptions to the 

antitrust laws are narrowly construed, as they circumvent Congress's 

commitment to open competition). 

9. The NFL attaches great significance to the fact that the satellite 

broadcasts utilize the same images as the sponsored telecasts, fed from 

the same network television cameras. The use of the same signal for 

broadcast over two media, however, does not render the rights in one 

broadcast derivative of rights in the other. One could just as readily 

conclude that the network television broadcast rights are derivative, and 

constitute part of the NFL's rights in the non-sponsored satellite 

broadcast. The network's provision of cameras and commentary does not 

remove the arbitrariness of calling one broadcast derivative of the other. 

Exemption from the antitrust laws cannot be predicated on the simple 

expedient of assigning ownership of cameras or payment of camera 

crews and commentators to a television network. Rather, it is predicated 

on the "sponsored telecast" of the image, i.e., its transmission in a form 

freely receivable by the public. 

 7 
transaction is a sale of a part of the NFL's underlying right 

in the images of the games, but only the former is exempt 

from antitrust scrutiny. We agree with the District Court 

that one looks to the nature of "the broadcast which goes 

to these particular plaintiffs." Id. at *3. As that court 

observed, to hold otherwise - to adopt the construction 

urged by the NFL - would allow the exception to swallow 

the rule: a sponsored telecast to a limited geographic area 

would secure an antitrust law exemption for nationwide 

sales.10 

III. 

In light of the NFL's contentions regarding the meaning of 

the statutory provisions, the District Court considered the 

SBA's legislative history and concluded that it 

demonstrated that the Act did not exempt the challenged 

sale. See id. at *4. Although we need not turn to the Act's 

legislative history, we do so because the District Court 

examined it in detail. 

Our review of the Act's legislative history also leads us to 

conclude that it clearly reflects Congress's intent, and the 

NFL's express contemporaneous concurrence, that the Act 

address only the sale of games to a sponsored television 

network. See Telecasting of Professional Sports Contests: 

Hearing before the Antitrust Committee of the House

Committee on the Judiciary on H.R. 8757, 87th Cong. 1st 

Sess. at 4 (Sept. 13, 1961) (stating that the bill applies to 

"sponsored telecasting" and "does not apply to closed 

circuit or subscription television");11 Id. at 36 (Aug. 28, 

_________________________________________________________________ 

10. See id. ("Were the rule otherwise, the NFL could circumvent the 

statutory confines, nullify the statutory scheme, simply by always using 

earlier broadcasts with commercials. . . . [T]o construe the statute that 

way would cause [it] to self-destruct -- an absurd result."). 

11. Subsequent congressional hearings characterized subscription 

television as a "program to be received by members of the public only 

upon the payment by such members of a charge, fee, or other form of 

direct compensation." See Subscription Television, Hearings Before the 

Subcommittee on Communications and Power of The Committee on 

Interstate and Foreign Commerce, House of Representatives, 90th Cong., 

1st Sess. at 2-3 (1967) (quoting H.R. 12435, 90th Cong., 1st Sess., para. 

(hh)). 

 8 
1961) (wherein the NFL Commissioner acknowledged 

"absolutely" under oath his understanding that the bill 

"covers only the free telecasting of professional sports 

contests, and does not cover pay T.V.").12 As the District 

Court observed in its well-reasoned opinion, the NFL 

obtained in the 1961 Act an expressly limited exception to 

"the normal prohibition on monopolistic behavior"; one 

which permitted it to sell pooled rights to sponsored 

telecasters and which expressly did not apply to 

subscription television. The NFL got what it lobbied for; it 

cannot now expect the federal courts to transform"narrow, 

discrete, special-interest" legislation into a far broader 

exemption. Shaw, 1998 WL 419765, *5.13 This is 

_________________________________________________________________ 

12. See also Chicago Pro. Sports Ltd. Partnership v. NBA, 808 F. Supp. 

646, 649-50 (N.D. Ill. 1992) (reviewing legislative history and concluding 

that the SBA's legislative history showed that sponsored telecasting was 

limited to free commercial television); Letter from Charles F. Rule, Asst. 

Atty. Gen., Antitrust Division, U.S. Department of Justice, to the Hon. 

Howard M. Metzenbaum, Chairman, Senate Subcommittee on Antitrust, 

Monopolies, and Business Rights, March 30, 1988, reprinted in Antitrust 

Implications of the Recent NFL Television Contract: Hearing Before the 

Subcommittee on Antitrust, Monopolies, and Business Rights of the 

Commission on the Judiciary, 100th Cong., 1st Sess. 67 (1987) (citing 

legislative history and concluding - as did the FTC - that the SBA 

provides no antitrust immunity to the NFL for its contract with ESPN, a 

cable operator, as that programming is not within the "sponsored 

telecasting" exemption). 

The NFL argues on appeal that references in the House records to 

sales to networks and "other potential purchasers" of television rights 

conflicts with a finding that the exemption was not intended to extend to 

broadcasts requiring payment by viewers. This is not so. In the context 

of the 1961 Act, the "other potential purchasers" were quite probably 

other sponsored (but non-network) purchasers, such as local and 

regional television stations. 

13. See also Chicago Pro. Sports Ltd. Partnership v. NBA, 961 F.2d 667, 

671 (7th Cir. 1992), cert. denied, 506 U.S. 954, 113 S. Ct. 409, 121 

L.Ed.2d 334 (1992) (holding that it is "inappropriate to extend [special 

interest laws] to achieve more of the objective the lobbyists wanted") 

(citations omitted). The Court of Appeals observed that "When special 

interests claim they have obtained favors from Congress, a court should 

ask to see the bill of sale." Id. 

 9 
particularly so, once again, because the Act must be 

narrowly applied.14 

IV. 

Because we find that the subscription satellite broadcast 

of NFL games is not a part of the NFL's rights to the 

sponsored telecasting of those games and therefore not 

within the Sports Broadcasting Act's exemption to the 

antitrust laws, we will affirm the District Court's decision. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

_________________________________________________________________ 

14. See supra note 8; see also Chicago Pro. Sports, 961 F.2d at 672 

(noting that "courts read exceptions to the antitrust laws narrowly, with 

beady eyes and green eyeshades") (citations omitted). 

 10