* District Judge of the Eastern District of Louisiana, sitting by

designation. UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________________

No. 98-11102

_______________________

ELEVEN LINE, INC., d/b/a

PERMIAN BASIN SPORTS CENTER,

Plaintiff-Appellee,

versus

NORTH TEXAS STATE SOCCER

ASSOCIATION, INC., A TEXAS

NON-PROFIT CORPORATION,

MIDLAND SOCCER ASSOCIATION,

INC., A TEXAS NON-PROFIT

CORPORATION, AND ODESSA

SOCCER ASSOCIATION, INC., A

TEXAS NON-PROFIT CORPORATION,

Defendants-Appellants.

_________________________________________________________________

Appeal from the United States District Court

for the Northern District of Texas

_________________________________________________________________

May 26, 2000

Before DAVIS and JONES, Circuit Judges, and L EMELLE, * District

Judge.

EDITH H. JONES, Circuit Judge:

This case concerns allegedly exclusionary, anticompetitive conduct by non-profit volunteer-run soccer

organizations against a fo r-profit indoor soccer facility that

operated in the Midland-Odessa community of West Texas. A jury2

found that the organizations’ implementation of a membership rule

requiring players, coaches and referees to play soccer only at

“sanctioned” facilities essentially put the plaintiff, Eleven Line,

Inc., out of business. Several federal antitrust and state law

causes of action were sustained by the jury, and judgment was

rendered for $100,000 in lost profits before trebling. The court

enjoined enforcement of the unsanctioned play rule.

On appeal, North Texas State Soccer Association (“NTSSA”)

seeks a defense in the Amateur Sports Act, a law passed by Congress

to enhance this country’s competi tiveness in the Olympics by

eliminating organizational factionalism in amateur sports. See

H.R. Rep. 95-1627, 95th Cong., 2d Sess. 1 978, 1978 U.S.C.C.A.N.

7478 (hereinafter “H.R. Rep.”). Failing that, NTSSA questions

every significant aspect of the verdict on the Sherman Act § 1 and

§ 2 claims and the Texas tortious interference claims. NTSSA also

challenges the sufficiency of Eleven Line’s proof of damages.

Although a number of issues raised by NTSSA cast doubt on the

judgment, we ultimately conclude that Eleven Line failed to show

that it su ffered compensable damages resulting from NTSSA’s

conduct.

I. BACKGROUND

Tom Higginson, San Diego-based president of Eleven Line,

Inc., parlayed his lifelong love of soccer into several ventures,

including a string of indoor soccer arenas in various parts of the1 Eleven Line, Inc., is the corporate successor of another Higginsonowned company that actually managed PBSC for sev eral years. Because the

corporate identity is immaterial to this opinion, we refer to the plaintiff as

PBSC throughout.

2 After PBSC entered the market, the other indoor arena folded.

3 country. In 1990, Higginson opened The Permian Basin Sports Center

(“PBSC”), an indoor arena in Midland, in a building formerly

occupied by an 84 Lumber discount home improv ement warehouse. 1

Higginson bought the building and its parking lot after a four or

five-day visit to M idland-Odessa. He became persuaded, by

attending one semi-pro soccer game, visiting a small indoor arena

already in business there, and talking with local soccer

enthusiasts, that the Midland-Odessa area would welcome a bigger

and better indoor soccer arena. 2

PBSC’s operation was modeled on Higginson’s other indoor

arenas. Most of his youth customers were outdoor soccer players,

ranging from youth six years old to nineteen, who wanted to

maintain their skills during the winter and summer off-seasons for

outdoor soccer. The adult leagues ran year-round. PBSC ran

leagues of a minimum of four teams, grouped according to age or

skill level. Each team consisted of about 10 players, fewer than

an outdoor soccer team because the arenas are smaller. PBSC

furnished player ID ca rds, maintained league standings, ran

competitions, disciplined players, and coordinated with other

Higginson-run facilities on interstate tournaments. While PBSC did

not formally train referees, it required them to pass a written3 Many members of outdoor teams either decided to rest through the offseason or to participate in other sports and leisure and extra- curricular

activities.

4 To become a sanctioned arena, PBSC would have to pay a nominal fee

($25) to NTSSA each year and would have to purchase and charge NTSSA-registered

players about $12 for ID cards, remitting part of the charge to NTSSA for player

insurance and NTSSA’s overhead.

4 qualifying test. For officiating services, the facility drew from

its managers and from the more numerous pool of referees trained by

the NTSSA-affiliated organizations. The arena similarly depended

on coaches from the outdoor teams to organize teams of youth

interested in continuing playing during the off-seasons. 3 But PBSC

would also form teams of play ers who signed up singly at its

facility.

The arena charged $350 per team for each eight-game

session. The teams paid small separate fees to the scorekeeper and

one referee at each game. PBSC earned additional revenues from

snack and drink sales and private rentals of the facility. Players

were not insured at PBSC, which required a waiver of liability from

each of its customers.

Higginson chose not to join NTSSA as a “sanctioned”

facility because he disagreed with some of the organization’s rules

and felt that NTSSA would raise his costs and interfe re with his

management prerogatives. 4

The arena’s business lurched along for five years, but

its annual gross revenue peaked at $108,000 in 1991. Higginson or

his inv estors transfused capital into the business nearly every5 OSA’s official history reports that there were 700 registered players

in 1990, and Barbara K. Peterson testified to the number registered at time of

trial. In Midland, Connie Stahl testified, there were over 3,000 registered

players at the date of trial.

5 year. Nevertheless, the company periodically fell behind in its

payroll and p roperty taxes. In 1995, because of insufficient

revenue and a manager “who was not very good at depositing

[revenue] in our account,” Higginson closed the arena from June

through October. Events surrounding the ill-fated re-opening of

the facility in November 1995 are the basis for this lawsuit.

PBSC’s business potential was directly attributable to

the growing popularity of organized soc c er in Midland-Odessa.

Making inroads into a locality saturated by the American football

ethos, the Midland (“MSA”) and Odessa (“OSA”) soccer associations’

enrollment grew from about 2,700 in 1990 to over 4,500 registered

playe rs at the date of trial in early 1998. 5 The success of

outdoor soccer resulted from thousands of hours’ effort by unpaid

volunteers, many of whom began as soccer moms and dads seeking a

sports activity for their children. The volunteers ran the MSA and

OSA literally from the ground up, building soccer fields in the

hard west Texas caleche soil, coordinating the league, training

p l ayers, coaches and referees, fund raising, and disciplining

players. Neither organization had more than one full-time paid

employee during the period covered by the lawsuit. MSA and OSA ran

the only significant youth socc er programs in their respective

communities.6 MSA and OSA are members of the North Texas State Soccer

Association, also a volunteer-run, non-profit corporation, which is

a “national state association” member of the United States Soccer

Federation ( “USSF”). USSF, the national governing body for the

sport of soccer, oversees United States par ticipation in the

Olympic games pursuant to the Amateur Sports Act of 1978. Its work

is carried out by 55 national state associations (Texas, like a

c ouple of other large states, being subdivided into two such

organizations). NTSSA is the fifth largest national state

association, and it has the largest adult registration am ong the

USSF’s members. The USSF prescribes rules of soccer, determines

qualifications for coaches and referee s, and oversees the

o perations of the national state associations. It has the

obligation to approve the local rules of national state

associations and may enact eligibility standards for players. The

overriding purpose of these organizations is to encourage the game

of soccer, promoting its popularity as a recreational and

competitive sport and enhancing the skills, safety and

sportsmanship of the participants.

Notwithstanding the lofty goals of the volunteer soccer

organizations, PBSC alleged that their attempted hegemony over the

sport fatally wounded its business.

NTS SA passed an eligibility rule in the 1980's, which

stated that:7 3.2 Youth and amateur players or teams who

participate with unregistered pl ayers or

engage in unsanctioned play shall void their

NTSSA registration and must apply for

reinstatement to their appropriate Youth or

Amateur Commissioner, along with a refiling

fee of $2 per player.

3.2.1. Unsanctioned play shall include, but

not be limited to:

1. Outdoor/indoo r league not sanctioned by

NTSSA or another USSF affiliate.

2. Outdoor/indoor tournament not sanctioned

by NTSSA or another USSF affiliate.

3. Any game (friendly or scrimmage) with a

non-USSF affiliate.

This is the “unsanctioned play” rule, and it was reviewed and

approved by USSF according to USSF’s regulations.

The local organizatio ns were paid registration fees by

each player for each season, spri ng and fall, a portion of which

was remitted to NTSSA for player insurance a nd NTSSA’s overhead

costs. During PBSC’s existence, the fee was $35 per player per

season, and NTSSA’s share of th at was $8, half of which paid for

insurance. For indoor soccer in NTSSA-sanctioned facilities, NTSSA

received revenue from player ID cards.

In early 1995, a newly-elected president of the Midland

Soccer Association says he decided it was time to align local

practices more closely with NTSSA rules. He began discussing the

unsanctioned play rule with NTSSA’s indoor commissioner and brought

the subject up at MSA’s board meetings. If the unsanctioned play

rule were enforced, MSA players and coaches could not utilize PBSC,6 On November 22, 1995, PBSC’s attorney sent a letter demanding that

NTSSA not enforce the unsanctioned play rule.

8 an unsanctioned facility. No action was taken to enforce the

unsanctioned play rule, however, because PBSC voluntarily shut its

doors in June of that year. The facility was not expected to reopen.

The unsanctioned play rule went right back on MSA’s board

meeting agenda in November, 1995, however, shortly after Troy

Skinner arrived in Midland as Higginson’s manager to reopen PBSC.

Troy had begun calling coaches and play ers who had previously

patronized the arena, soliciting their business for an immediately

impending winter season. The MSA board discussed the application

of the unsanctioned play rule to players, coaches and referees who

might consider returning to PBSC. A rumor spread that anyone who

played at PBSC without authorization would be suspended from NTSSA

soccer for a year. Meanwhile, at the OSA, the coaches’ coordinator

distributed a letter reporting a controversy surrounding

unsanctioned play and the filing of a lawsuit by PBSC (on December

19, 1995), and recommending that OSA members should not play there

until the dust settled.

Within a month, NTSSA board members were discussing the

unsanctioned play rule at their meeting. 6 NTSSA’s president David

Messersmith sent a letter to both the MSA and OSA in early

December, advising board members and any other local administrators

who were asked about the unsanctioned play rule simply to quote or7 The record d o es contain a half dozen or so letters from soccer

players or their parents, attaching requests for “reinstatement” together with

the $2 refiling fee. There is no evidence that any player was denied permission

to play on account of not paying the refiling fee.

9 read the rule. This was the “only appropriate response[s]” to such

inquiries.

Confusion persisted. Nearly all of the MSA, OSA and

NTSSA Board members testified that they did not publicize

Messersmith’s letter or direct any players or coaches not to play

at PBSC. No one testified that the unsanctioned play rule was

actually enforced against anyone, a nd the soccer board members

uniformly testified that before it could be enforced, a formal

complaint would have to be brought against an alleged violator, and

a hearing must be held. No such complaints or hearings

materialized. 7 But the horse was out of the barn, because the

Messe rsmith letter was posted at the OSA offices, the Odessa

coaches’ coordinator sent out his interpretation of the events on

OSA stationery, and the potential applicability of the unsanctioned

play rule was made known. Several coaches from Midland and Odessa

testified that they were reluctant to allow their teams to play at

PBSC and to jeopardize their standing for future outdoor soccer

competition.

PBSC’s business declined precipitously. Instead of the

105 youth and adult teams that had been registered for the 1994-95

winter season, only 43 signed up for 1995-96. Within six months,8 PBSC also alleged tortious interference with contract and business

relations claims dependent on the finding of antitrust violations, which would

vitiate defendants’ right to rely upon the unsanctioned play rule.

10 PBSC had closed for good, and Higginson sold the facility. The

lawsuit continued.

When this case came to trial, PBSC contended that NTSSA,

MSA and OSA were one entity running organized soccer in North Texas

and that this entity conspired with the pla yers, coaches and

referees to “enforce” the unsanctioned play rule and prevent PBSC

from obtaining business at its unsanctioned facility. Whether the

eligibility rule effected a per se federal antitrust violation or

not, it was alleged to constitute a vertical restraint imposed by

the soccer organizations on their members/consumers that

unreasonably restrained trade by de priving the soccer players of

the opportunity to play at unsanctioned facilities. 8 PBSC also

contended that the soccer organizations form a monopoly that used

its market power to exclude “competitors” like PBSC from the market

for soccer in the Midland-Odessa area. PBSC contended its damages

consisted of discounted lost cash flow for a ten-year period

projected forward from 1995.

NTS SA defended the unsanctioned play rule as a device

originally intended (1) to deter fraudulent or mistaken insurance

claims on the policy that covers players, (2) to maintain uniform

discipline over the players, and (3) to control the quality and

safety of facilities. Although the court denied NTSSA’s motion for9 The court first entered judgment on the verdict finding a per se §

1 violation, but on reconsideration, he wisely chose the alternate ground of an

unreasonable restraint of trade. See

, e.g. Nat’l Soc’y of Prof’l Engineers v.

United States , 435 U.S. 679, 691, 98 S.Ct. 1355, 1365 (1978).

11 summary judgment based on an implied antitrust exemption created by

the Amateur Sports Act, the defendants we re permitted to explain

that the national state associations’ rules were subject to express

approval by the U.S. Soccer F ederation. Defense witnesses

discussed the benefits of their organization’s oversight of indoor

arenas where thousands of NTSSA-registered players compete in the

off-seasons. Defense witnesses also asserted that none of the

organizations had directly enforced the unsanctioned play rule,

that no complaints were brought to enforce the rule, and that they

never sought to id entify who played at the PBSC. Finally, they

emphasized that their organizations would reap at best a minuscule

financial benefit from the closing of PBSC.

The jury found the soccer organizations guilty of a

Sherman Act § 1 conspiracy to perpetrate an unreasonable restraint

of trade, § 2 illegal monopolization and “leveraging,” and state

tortious interference claims. 9 The jury awarded most of the

damages sought by PBSC.

This appeal will address several of the sign i ficant

issues raised by NTSSA.10 Congress wished to address the disorganization and

factionalism of amateur sports organizations in the United States,

a disorganization which it felt had contributed to the overall

decline of American achievement in international competition. S ee

H.R. Rep.; Behagen v. Amateur Basketball Ass’n of the United

States , 884 F.2d 524, 527 (10th Cir. 1989).

12 II. AMATEUR SPORTS ACT

Congress passed the Amateur Sports Act (“ASA”), 36 U.S.C.

§ 220501 et seq

., in 1978, c reating a vertical structure for the

management of certain amateur sports in the United States. 1 0 S ee

36 U.S.C. § 220503; H.R. Rep. At the head of this vertical

structure is the U.S. Olympic Committee, which Congress intended as

a coord inating body for amateur sports that Americans compete in

internationally. S ee H.R. Rep.. At the next level are National

Governing Bodies (“NGBs”) f or each sport included in the Olympic

Games or the Pan-American Games. See 36 U.S.C. § 220521.

The NGBs are crucial to carrying out the ASA’s purpose.

In order to be reco gnized as a NGB, a sports organization must

demonstrate autonomy in the governance of its sport

– it must

“independently decide[] and control[] all matters central to

governance;” “not delegate decision-making and control of matters

central to governance;” and be “free from outside restraint.” S ee

36 U.S.C. § 220522(a)(5). Once established, a NGB has broad

authority. In addition to other powers, it may establish national

goals for the sport, act as the coordinating body for amateur

athletic activity in the United States, c onduct amateur athletic13

competition and establish procedures for determining eligibility

standards. S ee 36 U.S.C. § 220523. In addition, it is responsible

for tasks like developing interest and participation in the sport,

minimizing scheduling conflicts through coordination, and

disseminating information. See 36 U.S.C. § 220524.

Appellants argue that the ASA exempts fro m the federal

antitrust laws their actions in promulgating and threatening

enforcement of the unsanctioned play rule. They base their

argument on Behagen v. Amateu r Basketball Ass’n of the United

States , 884 F.2d 524, 529-30 (10th Cir. 1989). In that case, the

Tenth Circuit held that, in passing the ASA, Congress intended for

NGBs to exercise mo nolithic control over a particular sport, and

NGBs could exercise such control without fear of violating the

federal antitrust laws. Id

.

To be sure, Congress did not expressly exempt act ion

taken under the ASA’s direction from the federal antitrust laws.

See Behagen

, 884 F.2d at 529. An ASA exemption must be implied,

and implied exemptions are not favored. S ee Silver v . New York

Stock Exchange , 373 U.S. 341, 357, 83 S.Ct. 1246, 1257 (1963). A

court should only find an implied antitrust exemption where it is

necessary to the operation of another statutory scheme, and then

only to the minimum extent necessary. See id.

Despite the narrow range of implied exemptions, Behagen

e xtrapolated from the ASA’s purpose and structure that Cong ress11 USSF is the NGB for soccer

.

14 intended that action taken under its direction be exempt from the

federal antitrust laws. See Behagen , 884 F.2d at 529. Like PBSC

here, Behagen complained of an alleged group boycott. S ee Behagen

,

884 F.2d at 527. He alleged that the amateur eligibility rules of

the international basketball association, Federation Internationale

de Basketball Ama teur (“FIBA”), and the U.S. NGB for basketball,

the Amateu r Basketball Association of the United States

(“ABA/USA”), effected an illegal group boycott of players like him

who had played American professional b asketball more than once.

See Behagen

, 884 F.2d at 525-26. The Tenth Circuit rejected his

claim after concluding that the ABA/USA, as the NGB for basketball,

could promulgate amateur eligibility rules exempt from the

application of the federal antitrust laws. See Behagen , 884 F.2d

at 528.

This Court believes Behagen was correctly decided; but it

does not cover the case at bar. Behagen sued the NGB itself for

its action taken pursuant to its rule about player eligibility. In

this case , however, USSF 1 1 neither issued the NTSSA unsanctioned

play rule nor explicitly ap proved it. In fact, NTSSA is USSF’s

only national state association to have such a rule, which suggests

that the rule is not necessary to the local management of amateur

soccer. Appellants argue that USSF’s rule requiring that USSF

review the original and any amendments of the charter, bylaws,15

rules and regulations of a national state association mean that

USSF has effectively endorsed the unsanctioned play rule. S ee USSF

Official Administrative Rule Book, R. 2011 § 2 (1996-1997). This

Court is not persuaded; the supposed approval is simply too

tenuous.

Although the facts of this case do not support an implied

exemption from the antitrust laws, an implied exemption wou ld be

appropriate in many other situations. For example, if national

state associations all over the country had a similar rule, one

could infer that the rule was necessary to the management of the

sport. If NTSSA’s insurers had required that it have such a rule,

then its existence would be necessary to the continued successful

operation of amateur soccer in the area. If USSF had promulgated

the rule or expressly approved NTSSA’s rule in such a way as to

indicate an awareness of its consequences, it would be a player

eligibility rule exempted under Behagen

. Or if NTSSA faced a spate

of facilities that refused to become sanctioned facilities, NTSSA

could face a freeridi ng problem that would threaten its

effectiveness as a national state association. Any of these

circumstances, and no doubt others not described here, would merit

an implied exemption.

None of these situations present themselves, however.

Rather, NTSSA promulgated a rule that could be found nowhere else

in the country, that was not explicitly approved by the USSF, and

for which it was unable to articulate a convincing rationale12 For similar reasons, PBSC’s state law actions are not preempted by

the ASA. The ASA has not totally occupied the field, and the state law actions

are not inconsistent with the ASA’s statutory scheme.

13 See

, e.g.

, Aspen Skiing Co. v. Aspen Highlands Skiing Corp.

, 472 U.S.

585, 105 S.Ct. 2847 (1985); NCAA v. Bd. of Regents of the Univ. of Okla. , 468

U.S. 85, 104 S.Ct. 2948 (1984); Chicago Prof’l. Sports, Ltd. v. NBA

, 95 F.3d 593

(7th Cir. 1996); McCormack v. NCAA

, 845 F.2d 1338 (5th Cir. 1988); United States

Trotting Ass’n v. Chicago Downs Ass’n, Inc.

, 665 F.2d 781 (7th Cir. 1981); Hatley

v. Am. Quarter Horse Ass’n.

, 552 F.2d 646 (5th Cir. 1977); B ridge Corp. of

America v. Am. Contract Bridge Leag ue, Inc. , 428 F.2d 1365 (9th Cir. 1970);

Washington State Bowling Proprietors Ass’n v. Pacific Lanes, Inc.

, 356 F.2d 371

(9th Cir. 1966); Seabury Mgmt., Inc. v. Prof’l Golfers’ Ass’n of Am., Inc.

, 878

F. Supp. 771 (D.Md. 1994), aff’d in part & rev’d in part

, 52 F.3d 322 (4th Cir.

1995), cert. denied

, 516 U.S. 867, 116 S.Ct. 184 (1995); Medlin v. Prof’l Rodeo

Cowboys Ass’n., Inc. , 1991 WL 340303 (D.Colo. 1991).

16 related t o its management of amateur soccer in the area. Given

these factors, the ASA does not exempt the NTSSA from antitrust

scrutiny related to the unsanctioned play rule. 12

III. ANTITRUST CLAIMS

For reasons other than the impact of the Amateur Sports

Act, the jury’s findings rendered this a most unusual antitrust

case. First, the conspirators include, on one hand, the defendant

soccer organizations, and, on the other hand, the moms and dads who

serve as coaches and referees for the youthful players. Second,

treating the soccer orga nizations as a monopolist seems to make

little sense because of the minimal gains they could claim by

eliminating P BSC from the Midland-Odessa market. After an

exhaustive search of antitrust law pertaining to league sports, we

have been unable to identify any really analogous case. 1 3 The

unique feature of th is case, which pervades the issues of

conspiracy and monopoly, is the involvement of defendants and

c onspirators none of whom has an economic motive for17

a nticompetitive activity because none participates in soccer fo r

profit.

It appears to be a novel claim by PBSC that a volunteer

sports league can conspire with its volunteer players and coaches.

In a for-profit league, no similar conspiracy could exist because

the coaches and players are employees of the league or its teams.

See Copperweld Corp. v. Independence Tube Corp.

, 467 U.S. 752, 769,

104 S.Ct. 2731, 2741 (19 84). Similarly, C opperweld renders

infeasible any claim of conspiracy among NTSSA, MSA, and OSA, which

function jointly a s one entity under the auspices of USSF. I d.

There are no organized teams within the league that could be

identified as co-conspirators. This situation leaves as the only

possible co-conspirators the moms and dads, since their children

who play soccer are too young to conspire. Moms and dads are

acting independently of the soccer organizations, but inasmuch as

they are not economically motivated, it is difficult to conclude

that they are more like joint venturers than a functional entity as

contemplated by Copperweld

. Copperweld

, 467 U.S. at 768, 104 S.Ct.

at 274. Whether moms and dads can conspire with NTSSA, MSA, and

OSA decides whether section 1 of the Sherman Act, proscribing a

“conspiracy” in restraint of trade, applies to their conduct. The

nature of the concerted action does not, howe ver, remove the

defendants’ conduct from the purview of section 2 if they are

monopolizing.14 NTSSA received a $25 annual fee from each sanctioned indoor soccer

facility and could earn, at most, a few thousand dollars (net of insurance costs)

from player registrations at an indoor arena like PBSC. Presumably, NTSSA did

earn some small sums after PBSC closed, because a san ctioned indoor facility,

Sticks and Kicks, took the place of PBSC in the market.

15 FTC v. Indiana Fed. of Dentists

, 476 U.S. 447, 106 S.Ct. 2009 (1986);

NCAA v. Bd. o f Regents , 468 U.S. 85, 104 S.Ct. 2948 (1984); Arizona v.

Maricopa County Med. Soc. , 457 U.S. 332, 102 S.Ct. 2466 (1982); National Soc’y

of Prof’l Engineers v. United States , 435 U.S. 679, 98 S.Ct. 1355 (1978).

18 But therein lies another rub. These soccer organizations

had no economic motive for vio lating the monopolization

prohibitions of the antitrust laws. No evidence suggested that MSA

or OSA would gain a single dollar by eliminating PBSC from the

market, while the maximum revenue that NTSS A might earn from

exclusion was paltry. 14 Contrary to the economic theory of

monopolistic co nduct, none of the defendants had a motive to

increase prices or limit output of soccer. The development of the

sport, to wh ich the organizations are committed, depends on

increasing player participation, creating more teams and offering

more soccer games. The organizations’ fees are kept in check

internally because the volunteers who are also consumers of the

services set their own fees. In a relevant market that consisted

of soccer alone, the defendant organi zations may have been a

functional monopolist, but they gained only minimal value by

eliminating PBSC. It is true that the Supreme Court has exempted

neither the NCAA, for-profit sports leagues (apart from baseball),

or profes sional associations from the reach of antitrust laws. 1 516 We decline t o endorse and do not rule on the district court’s

application of a § 2 “monopolistic leveraging” theory of liability. This theory,

based on Berkey Photo, Inc. v. Eastman Kodak Co.

, 603 F.2d 263, 275 (2d Cir.

1 979), cert. denied , 444 U.S. 1093 (1980), is the subject of a circuit split.

See M & M Medical Supplies and Service, Inc. v. Pleasant Valley Hosp., Inc.

, 981

F.2d 160, 168-69 (4th Cir. 1992) (en banc), cert. denied

, 508 U.S. 972, 113 S.Ct.

2962, 125 L.Ed.2d 662 (1993) (declining to determine whether there exists a claim

for monopoly leveraging that differs materially from the classic claim for

monopolization); Fineman v. Armstrong World Industries, Inc.

, 980 F.2d 171, 204-

06 (3d Cir. 1992), cert. denied . 507 U.S. 921, 113 S.Ct. 1285, 122 L.Ed.2d 677

(1993) (rejecting monopoly leveraging); Alaska Airlines, Inc. v. United Airlines,

Inc.

, 948 F.2d 536, 547 n.16 (9th Cir. 1991), cert. d enied , 503 U.S. 977, 112

S.Ct. 1603, 118 L.Ed.2d 316 (1992) (rejecting monopoly leveraging). In addition

to the leveraging theory, the district court’s judgment rested on § 2

monopolization and attempt to monopolize claims, which is affected by our refusal

to endorse the leverating theory Because the jury instructions regarding § 2

violation allowed the jury to find a violation if the defendants used their

monopoly power “to gain a competitive advantage” even if the defendants did not

attempt to monopolize the second market, the jury’s verdict regarding the § 2

violation is completely tainted and must be overturned.

19 In none of those cases, however, was there such a complete absence

of evidence of profit incentives as in this case.

Although this case poses ponderous and unusual antitrust

questions, which may not have been fully explored below because of

the limited resources available to both sides, we note them to

preserve the issu es for a future day. For even if affirmance of

the judgment of liability is compel led by antitrust law, 1 6 the

judgment for damages is not, and the deficiencies of the damage

judgment are much easier to explain.

IV. DAMAGES

The general principles governing antitrust damages are

settled. A plaintiff must first prove the fact of antitrust

damages, some “element of actual damages caused by the defendant’s

violation of the antitrust laws.” M ultiflex, Inc. v. Samuel Moore

& Co ., 709 F.2d 980, 989 (5th Cir. 1983), cert. denied , 104 S.Ct.17 This court has defined the two methods as follows:

The before and after theory compares the plaintiff’s profit record

prior to the violation with that subsequent to it. The before and

after theory is n ot easily adaptable to a plaintiff who is driven

out of business before h e is able to compile an earnings record

suffic ient to allow estimation of lost profits. Therefore, the

yardstick test is sometimes employed. It consists of a study of the

pr ofits of business operations that are closely comparable to the

plaintiff’s. Although allowances can be made for differences

between the firms, the business used as a standard must be as nearly

identical to the plaintiff’s as possible.

Lehrman v. Gulf Oil Corp ., 500 F.2d 659, 667 (5th Cir. 1974).

20 1594 (1984). If he does so, a more relaxed burden of proof obtains

f or the amount of damages than would justify an award in other

civil cases. S ee Pierce v. Ramsey Winch Co.

, 753 F.2d 416, 434

(5th Cir. 198 5). “But this tolerant view is limited by our

responsibility not to allow damages to be determined by ‘guesswork’

or ‘speculation;’ we must at least insist upon a ‘just and

reasonable estimate of the damage based on relevant data.’ L ehrman

v. Gulf Oil Corp

., 464 F.2d 26, 46 (5th Cir. 1972) (quoting Bigelow

v. RKO Radio Pictures, Inc. , 327 U.S. 251, 264, 66 S.Ct. 574, 580

(1946)), cert. denied 409 U.S. 1077, 93 S.Ct. 687 (1972).

While the two most common methods of quantifying

antit rust damages are the “before and after” and “yardstick”

measures of lost profits, 17 a plaintiff may prove d amages by a

different measure tailored to the facts of the case, so long as the

estimates and assumptions used rest on adequate data. S ee Lehrman

v. Gulf Oil Corp.

, 500 F.2d 659, 668 (5th Cir. 1974) (hereinafter,

“ Lehrman II ”).18 Lost profits is a measure of proof recognized by Texas courts for

tortious interference claims. Under state law, such damages must be proved with

reasonable particularity. See Kevin S. Marshall & Kurt J. Beron, Statistics &

the Law: Proving Lost Profits, 2 Texas Wesleyan L.R. 467, 468 (1996)

(hereinafter, “Beron”). Because the Texas standard appears to be more demanding

than the antitrust standard, it follows that PBSC’s proof would be inadequate to

support the state law portion of the verdict.

21 This opinion will not dwell on whether the “fact” of

antitrust injury has been proved, because PBSC’s evidence of actual

injury impermissibly consists of estimates based on assumptions

that are bas ed on estimates and assumptions. PBSC never made a

profit during the five and one-half yea rs it was open before the

unsanctioned play rule was invoked by the defendants. It was

allowed to put before the jury, however, a damage estimate that

ignored the arena’s past track record entirely by projecting a net

operating margin of 8.6% for two years, 17.7% for a third year, and

20% for each of the following seven years of hypothetical revenues.

PBSC’s brief explains its novel calculations as “evidence of lost

net income, based upon cash flow projections,” urging that because

Tom Higginson did not utilize customary measures of profitability

in running his arenas, neither should the courts.

At least two elements of the dam age proof cannot be

reconciled with even the lenient standard approved by antitrust

law. 18 First, the jury was instructed to find lost profits, not

lost net income, yet the arena’s evidence was b ased only on the

latter concept. Second, even if PBSC’s calculations were based on

future lost profit, the “yardstick” measure of rates of return19 The long-term debt owed by the facility to Higginson’s group and 84

L umber increased from $183,000 in 1990 to $231,000 in the last fu ll year of

operation.

22 employed by the plaintiff’s economist w as too speculative to

support a verdict. These conclusions warrant further discussion.

As Higginson explained it, he computed the success of his

indoor arenas by a hand-to-mouth technique. He considered an arena

successful if it generated sufficient n et revenue to pay current

operating expenses each year and yielded enough extra to pay down

debt acquired w hen the arena was purchased. He did not include

depreciation in his calculation of net revenue, because he felt it

was “not real.” PBSC, however, did not perform even according to

this optimistic strategy. It did not pay payroll and property

taxes timely and only rarely reimbu rsed Higginson for his firm’s

services. It never generated extra revenue to pay down the

acquisition cost of the real estate. Instead, Higginson’s investor

group continued contributing funds to cover that cost. In effect,

Higginson kept the property open by borrowing from himself and his

investors , but the evidence does not indicate that they ever

received a return on their loans or investment. 19

Consistent with Higginson’s view of his business’s

welfare, PBSC took the position at trial that evidence of lost net

revenue was a valid measure of damages. Lost net revenue was

computed as the excess of revenue over current operating expenses

with no deduction for depreciation. PBSC’s economist acknowledged20 Compare Beron

, supra note 18, at 471-72 (evidence that a plaintiff’s

business lost money from the very beginning, never turned a profit or never got

out of red ink will preclude recovery of lost profits in Texas law) (citations

omitted).

23 that lost net revenue is different from lost profits. According to

PBSC, since generally accepted accounting principles (GAAP) do not

have to be maintained by a small, privately held business, any old

measure of “profit” will do.

This reasoning is unconvincing. It is inconsistent with,

and the proof is therefore insufficient pursuant to, the court’s

definition of profits . “Profits” was defined in the jury

instructions as “gain which is in excess of all expenses, costs,

depreciation and other operating expenses and the like.” PBSC has

not challenged on appeal this instruction, which accords with the

conventional understanding of profit. PBSC’s computations,

however, excluded depreciation entirely (although the firm’s income

statements consistently reflected depreciation charges). If

depreciation charges are added to PBSC’s costs, as the court’s

instruction required, PBSC never made a profit in five full years

of operation. Moreover, its lack of profitability is accentuated

by PBSC’s failure to pay local property taxes when due. Under the

c ourt’s definition, then, PBSC never made a profit before the

enforcement of the unsancti oned play rule. Lost future profits

could hardly be demonstrated by an entity that never made profits

to lose. 2024 Even if we were to accept lost net revenue as a measure

of damages, however, the projections by PBSC’s economist Dr. Beron

a re not based on a satisfactory “yardstick” of performance by

“closely comparable” businesses. S ee Lehrman II

, 500 F.2d at 667.

Dr. Beron applied average rates of retu rn (more precisely, rates

based on n et revenues over current expenses) derived from the

experience at Higginson’s other indoor arenas around the country.

The purpose of averaging, the economist said, was to gauge PBSC’s

future performance by the blended performance of Higginson’s moreand less-profitable facilities. One analytical problem and failure

of this proof lies in the fact that an average of unknowns is also

an unknown. An antitrust plaintiff who uses a yardstick method of

determining lost profit bears the burden to demonstrate the

reasonable similarity of the business whose earning experience he

would borrow. See

, e.g.

, Lehrman II , 500 f.2d at 667. Here, the

only evidence of comparability was that Higginson owned the other

indoor soccer arenas. No evidence was offered of the geographical

location, size or attractiveness of those facilities, the size and

type of the soccer player market that they served, the relative

costs of operation, the amounts charged per team, or the number of

seasons run. To apply those arenas’ average “rates of return”

indiscriminately to PBSC is like arguing that bec ause McDonald’s

franchises earn a certain average rate of return, a particular

franchise will perform to t he average. Neither the yardstick

arenas’ rat es of return nor their average was shown to be “as21 Perhaps the projections of PBSC’ s lost net revenue were to be

increased based on Higginson’s testimony that he plan ned to move to flex

scheduling and thus add more seasons of adult play. If so, however, Dr. Beron’s

estimates do not account for this change in any way, as the estimated “profit”

margins and lost “profits” are based solely on the experienc e of other indoor

arenas, which was not shown to be comparable.

25 nearly identical to (PBSC) as possible.” Lehrman II

, 500 F.2d at

667.

The yardstick measure was also unsupporte d in light of

the record of PBSC’s consistently negative cash flows. The trial

exhibits based on PBSC records show that “true cash flow” measured

by PBSC’s method ( i.e

., excluding any charge for depreciation) was

“even” in two of its five full years of operation, about 10% and 6%

in the next two years and substantially negative in the first eight

months of 1995. These figures are a far cry from the estimates of

years of 20% net cash flow accepted as a yardstick by Dr. Beron.

Damage assumptions that find no support in the actual facts of the

case cannot support a verdict. S ee Metrix Warehouse, Inc. v.

Daimler-Benz Aktiengesellschaft

, 828 F.2d 1033, 104 3 (4th Cir.

1987); Keener v. Sizzler Family Steak Houses

, 597 F.2d 453, 456

(5th Cir. 1979) (a “verdict for damages may not be based on

speculation and guesswork”). 21

To shore up the flaws in its proof, PBSC takes refuge in

the lenient standard fo r quantifying antitrust damages and its

underlying policy, which is to assure that anticompetitive conduct

does not go unpunished for mere uncertainty in the amount of loss

inflicted. But the lenient standard does not allow a plaintiff to26

mask its consistent lack of business success by using arbitrary

measures of loss and counterfactual estimates of future “rates of

return”. The lenient standard does not permit the affirmance of a

verdict on evidence that does not satisfy the court’s instructions.

Moreover, insofar as the purpose of the antitrust laws is to

protect co m petition rather than competitors, competition in a

market is not e roded when an entity fails that could not really

compete because of its financial instability.

V. CONCLUSION

For the foregoing reasons, the damage judgment in favor

of PBSC is REVERSED; th e injunction order, not having been

appealed, is unaffected by this reversal.

AFFIRMED in part, REVERSED in part

.