Opinion ID: 791481
Heading Depth: 2
Heading Rank: 3

Heading: Plaintiffs' Claim of a Conspiracy Among Defendants

Text: 21 With these principles in mind, we turn to Count I of Plaintiffs' second amended complaint, which alleges a conspiracy among the member teams of the OHL to adopt the Van Ryn Rule in violation of the Sherman Act.
22 A threshold requirement of the Sherman Act is that the challenged agreement be entered into by multiple parties. 15 U.S.C. § 1; see Copperweld Corp., 467 U.S. at 769-70 & n. 15, 104 S.Ct. 2731. While Defendants do not contend that the OHL acted as a single actor in this case, we nonetheless will briefly explain our conclusion that the OHL and the various member teams of the OHL represent multiple actors. 23 Other courts considering the actions of professional sports leagues have found the leagues to be joint ventures whose members act in concert (i.e., agree ) to promulgate league rules, rather than one solitary acting unit. N. Am. Soccer League v. Nat'l Football League, 670 F.2d 1249, 1257 (2d Cir.1982); see also Fraser v. Major League Soccer, 284 F.3d 47 (1st Cir.2002); Bd. of Regents, 468 U.S. at 100-101, 104 S.Ct. 2948. The Second Circuit explained that to hold otherwise would create a loophole [that] would permit league members to escape antitrust responsibility for any restraint entered into by them that would benefit their league . . . even though the benefit would be outweighed by its anticompetitive effects. N. Am. Soccer League, 670 F.2d at 1257. We are persuaded that this logic applies in the instant case. Just as the National Football League could not accurately be characterized as a single economic entity, id., neither could the OHL, which exists only as constituted by its twenty member teams. We therefore conclude that when they adopt eligibility rules, the member teams of the OHL constitute multiple actors who act in concert. Thus, the adoption of the Van Ryn Rule represents an agreement between multiple actors, as required by Section 1 of the Sherman Act. 24 B. Whether the district court erred in determining that Plaintiffs failed to identify a relevant market, as required to state a rule of reason anti-trust claim
25 As we noted in NHLPA I, Plaintiffs' first complaint did not attempt to define a relevant market. NHLPA I, 325 F.3d at 720. Nevertheless, in granting the preliminary injunction, the district court determined that the relevant market was the market for competition among OHL and CHL teams for player services. We rejected that holding, explaining that: 26 [t]he market for player services in the OHL . . . is not a market that involves economic competition. The OHL rules clearly limit the amount a player may be paid to schooling and a limited stipend. 2 . . [T]he effect on the market as defined by [Plaintiffs] is on athletic competition, which is not protected by the antitrust laws. The application of the Van Ryn Rule does not result in any economic injury to the `market for competition among OHL and CHL teams for player services,' but merely substitutes one arguably less skilled player for another arguably more skilled player. While a player barred by the Rule is precluded from taking advantage of the benefits of playing on an OHL team, numerous other categories of players, including anyone under sixteen or over twenty, are similarly barred. 27 Id. (citations omitted). 28 Plaintiffs argued before the district court on remand, and now before this Court, that the determination by the Sixth Circuit in NHLPA I that the OHL market for player services is not an economic market is not binding under the law of the case doctrine because it was made on appeal from a preliminary injunction. We disagree. The district court is bound by the determinations of this Court unless one of three circumstances is met: 1) substantially different evidence is subsequently raised; 2) a subsequent contrary and controlling view of the law is decided; 3) or a decision is clearly erroneous and would work a manifest injustice. Hanover Ins. Co. v. Am. Eng'g Co., 105 F.3d 306, 312 (6th Cir.1997). On remand from NHLPA I, Plaintiffs filed a second amended complaint which added some general allegations regarding the OHL and/or CHL as a market for player services, including the assertion that the OHL and CHL Clubs provide unique developmental opportunities for players like Aquino and Caron. Other professional leagues in North America and Europe are inferior developmental opportunities and/or are unwilling to sign players like Aquino and Caron. However, these broad allegations only confirm this Court's earlier holding that with respect to the market for player services in the OHL and/or CHL, the harm alleged is to athletic and not economic competition. Furthermore, these allegations do not constitute substantially different evidence. 29 Neither this Circuit nor the Supreme Court, subsequent to the opinion in NHLPA I, has issued an opinion contrary to that case. Finally, we are satisfied that our prior decision in NHLPA I was not only not clearly erroneous, but in fact was correct. Thus, none of the conditions announced in Hanover Insurance are met in this case, and both the district court and this Court are bound by our holding in NHLPA I that the OHL market for player services is not a market that involves economic competition. NHLPA I, 325 F.3d at 720. 30 However, this Court expressly refused to apply a rule of reason analysis to other markets for player services, as they had not been alleged in the complaint. Id. Nonetheless, in dismissing the case on remand, the district court concluded that Plaintiffs have not made any persuasive arguments or cited any authority that would lead the Court to a different conclusion than the Sixth Circuit's that `the market for player services,' whether it is in the OHL, CHL, or NHL, is not a market that involves economic competition within the meaning of the Sherman Act. J.A. at 64. (emphasis added). This is an erroneous and overbroad reading of NHLPA I. In NHLPA I, this Court's determination that the OHL market for player services is not an economic market was grounded in the fact that OHL players are paid fixed stipends and thus OHL teams do not compete with each other economically for players. Again, this Court expressly refused to consider whether other markets for player services might constitute relevant markets. NHLPA I, 325 F.3d at 720. The holding in NHLPA I therefore does not bar a finding that another market for player services is a relevant market if Plaintiffs can establish that it does involve economic competition, and the district court's apparent conclusion to the contrary was in error. 31 2. The market for sixteen- to twenty-year-old hockey players in North America is a relevant market 32 We consider whether any of the remaining four proposed relevant markets alleged by Plaintiffs in their second amended complaint constitute relevant markets under Section 1 of the Sherman Act. They are the market for player services among teams in the Canadian Hockey League; the market comprised of North American organizations that compete for the services of twenty-year-old hockey players; the market comprised of North American organizations that compete for the services of hockey players ages sixteen through twenty; and the market for player services in the National Hockey League. 33 Generally, a relevant market is one which includes products or services that are reasonably interchangeable with, as well as identical to, defendant's product affected by the rule or regulation being challenged. Am. Council of Certified Podiatric Physicians and Surgeons v. Am. Bd. of Podiatric Surgery, Inc., 185 F.3d 606, 622 (6th Cir.1999); see also Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962); United States v. E.I. duPont de Nemours & Co., 351 U.S. 377, 404, 76 S.Ct. 994, 100 L.Ed. 1264 (1956). A similar rule applies to supplier markets such as the employment market in the instant case: the relevant market is one where employment positions are reasonably interchangeable with those offered by defendant. See, e.g., NHLPA I, 325 F.3d at 719; Todd v. Exxon Corp., 275 F.3d 191, 201 (2d Cir.2001); see also Alabama Power Co. v. Fed. Power Comm'n, 511 F.2d 383, 389 n. 10 (D.C.Cir.1974). Reasonable interchangeability may be gauged by (1) the product uses, i.e., whether the substitute [employees] can perform the same function, and/or (2) [employer] response (cross-elasticity); that is [employer] sensitivity to price levels at which they elect substitutes for the [employees'] service[s]. White & White, Inc. v. Am. Hosp. Supply Co., 723 F.2d 495, 500 (6th Cir.1983). 34 We conclude that the relevant market in this case is the pool of players from which the OHL draws its players, i.e., the market for sixteen- to twenty-year-old hockey players in North America. This market includes the NHL, the OHL, and other North American leagues. This market meets the requirement of reasonable interchangeability of employees with Defendants' employees, as there is significant substitution between the market for player services in the NHL and that for sixteen-to twenty-year-old players in other North American leagues, including the OHL. Indeed, as the NHLPA alleges in its complaint, [t]he NHL and OHL share players and have detailed rules providing for the loan and recall of players between the OHL and NHL. J.A. at 42. 3 35 Furthermore, unlike the market for player services in the OHL, this market is economically competitive. This is so because while the member teams of the OHL may not compete economically with each other for players within their league, they do have an economic impact on the market for sixteen- to twenty-year-old hockey players in North America, as do the other relevant leagues. 36 Because of the cross-elasticity of demand between the NHL, OHL, and other leagues in North America for the services of sixteen- to twenty-year old hockey players, the remaining markets alleged by Plaintiffs (the market for player services among teams in the Canadian Hockey League; the market comprised of North American organizations that compete for the services of twenty-year old hockey players; and the market for player services in the National Hockey League) are overly narrow. The Eighth Circuit confronted a similar issue, albeit in a products market rather than a services market, in Brookins v. Int'l Motor Contest Ass'n, 219 F.3d 849, 854 (8th Cir.2000). In that case, a manufacturer of auto transmissions sued an automobile race sanctioning body over its restrictions on the types of transmissions which could be used in sanctioned races. Plaintiffs attempted to define the products market narrowly, as transmissions used in modified car racing sanctioned by Defendants. The court rejected that assertion because it required proof, which Plaintiffs failed to provide, that there is no cross-elasticity of demand between this [sanctioned] game and other games that modified car racers might choose to play. Id. (citations omitted). The court instead defined the relevant market as transmissions used in all oval track racing. 37 We similarly conclude that the alternative markets proposed by Plaintiffs must fail because in each instance, Plaintiffs have failed to show that there is no cross-elasticity of demand between the market as narrowly defined (i.e., limited to the market for player services in the CHL, or the NHL, or limited to twenty-year-old players) and the broader market definition we accept today. See also Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 437-41 (3d Cir.1997) (finding the market for a particular brand of pizza ingredient to be too narrowly defined to constitute the relevant market); TV Communications Network, Inc. v. Turner Network Television, Inc., 964 F.2d 1022, 1025 (10th Cir.1992) (finding the market for TNT channel to be too narrow to constitute a relevant market; a company does not violate the Sherman Act by virtue of the natural monopoly it holds over its own product). 38 C. Whether the district court erred in determining that plaintiffs failed to identify anti-competitive effects of the Van Ryn Rule 39 Although we conclude that the district court erred in determining that Plaintiffs had failed to identify a relevant market, we decline to reverse the district court's dismissal of Count I of the complaint because Plaintiffs have failed to sufficiently identify anti-competitive effects of the Van Ryn Rule. As noted above, a plaintiff alleging an unreasonable restraint on trade under the rule of reason theory must show significant anti-competitive effects of the challenged restraint. NHLPA I, 325 F.3d at 718; see also Worldwide Basketball, 388 F.3d at 959. 40 Plaintiffs essentially allege two types of anti-competitive effects of the Van Ryn Rule: an effect on competition among OHL teams, and an effect on player salaries in the relevant market because some players who might otherwise have achieved free agency in the NHL are unable to do as a result of the Van Ryn Rule. For the reasons that follow, both of these arguments fail. 41 1. Harm to athletic competition is not a cognizable anti-competitive effect under the Sherman Act 42 Plaintiffs allege in their second amended complaint that the Van Ryn Rule has an actual and significant impact on quality. By the OHL's own admission, 4 the Van Ryn Rule substitutes less skilled hockey players for more skilled hockey players, which has an actual and detrimental impact on the quality of the players in the OHL labor pool and the quality of the hockey games produced as a result. J.A. at 46. 43 This is exactly the argument that was rejected by this Court in NHLPA I, which noted that athletic competition is not protected by the antitrust laws. 325 F.3d at 720. Plaintiffs do not allege that diminished quality of athletic competition results in an economic injury. The district court correctly rejected Plaintiffs' claim that the diminished level of play in the OHL as a result of the Van Ryn Rule is an anti-competitive effect within the meaning of the antitrust laws. 44 2. Any harm caused by some players' inability to achieve free agency in the NHL is caused by the NHL's Collective Bargaining Agreement, and not the Van Ryn Rule 45 The other anti-competitive effect alleged by Plaintiffs is that players who would have become NHL free agents by spending one year in the OHL must now enter the NHL through its draft system. The district court found that this effect had no detrimental economic effect on the markets identified by Plaintiffs, concluding that Plaintiffs continue to confuse injury to competitors, which is not protected by antitrust laws, with injury to competition.  J.A. at 67. 46 In our view, the district court's analysis mischaracterizes Plaintiffs' argument. Plaintiffs contend that the Van Ryn Rule eliminates one path to NHL free agency, thereby limiting the competition between NHL clubs for these players' services and rendering the market for NHL players, and, presumably, the market for all other young professional hockey players in North America, less competitive. Such an injury is an injury to competition within the meaning of the Sherman Act. See Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 338, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990) (The antitrust laws were enacted for `the protection of competition, not competitors. ') (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962)) (emphasis in original). 47 However, we must still consider whether the Van Ryn Rule can fairly be said to be the cause of this injury. Defendants argue that the alleged effects of the Van Ryn Rule are actually caused not by the Rule but by the NHL's collective bargaining agreement (CBA), which sets forth the rules governing eligibility for free agency. Any anti-competitive effect of a properly bargained collective bargaining agreement is excluded from antitrust scrutiny by a non-statutory antitrust exemption. See, e.g., Clarett v. Nat'l Football League, 369 F.3d 124 (2d Cir.2004). Therefore, if Defendants are correct that the injury complained of by the NHLPA is actually caused by the CBA, and not the Van Ryn Rule, then Plaintiffs have not stated a cause of action under the Sherman Act. (And certainly have not stated one against Defendants, who bear no responsibility for the CBA). We agree with Defendants that any anti-competitive effect caused by a restriction on the means by which players may achieve free agency in the NHL must be ascribed to the CBA and not the Van Ryn Rule, and that Plaintiffs have consequently failed to state a claim upon which relief can be granted. 48 This Court has not articulated a standard for determining when an injury to competition can be said to have been caused by an alleged restraint on trade. Indeed, we have been unable to uncover any cases addressing the issue of whether a defendant is subject to antitrust liability for secondary anti-competitive effects of the defendant's actions. We consider the alleged anti-competitive effects of the Van Ryn Rule to be secondary, at best, because although the Van Ryn Rule has had the effect of closing one formerly open route to NHL free agency, it is the CBA which prescribes the ways in which a player may achieve free agency in the NHL. 49 We decline, in this case, to establish definitive rules regarding whether or when an anti-competitive injury that is only secondarily or indirectly caused by a defendant's alleged restraint on trade may ever support a viable claim under the Sherman Act. We decline to do so because any definition we adopt would not permit us to conclude that the Van Ryn Rule causes the anti-competitive effect alleged by Plaintiffs. Plaintiffs' quarrel is about who gets to be a free agent in the NHL, and it is the CBA that permits free agency for players drafted by the NHL who subsequently spend a year in the OHL and prohibits it, for example, for players who stay in the NCAA or go to a European league for the year following their selection in the NHL draft. 50 The reason Anthony Aquino and Edward Caron (assuming they possessed the requisite talent) were unable to achieve free agency in the NHL is not that the Van Ryn Rule prohibited them from playing in the OHL; it is that the CBA governing eligibility for NHL free agency says that they are not eligible for free agency. We would draw this conclusion under even the most lenient proximate cause standard. Ultimately, we draw this conclusion because common sense requires it. Only indefensibly circuitous logic would blame the rules governing who can play in the OHL, and not the rules governing who can become an NHL free agent, for preventing players from achieving free agency in the NHL. 51