Opinion ID: 195635
Heading Depth: 2
Heading Rank: 1

Heading: Equal Involvement Defense

Text: The NFL argued before the district court that Sullivan was a complete and substantially equal participant in the NFL's ownership policy which he now challenges in the present lawsuit. As a result of Sullivan's involvement, the NFL claimed, Sullivan was barred from bringing a damages action under the antitrust laws pursuant to the equal involvement defense doctrine. The district court denied motions for summary judgment and a directed verdict on this issue and, further, refused to instruct the jury on the availability of the defense because it found that the 6 The court's failure to instruct on the complete involvement defense was prejudicial error and, by itself, sufficient grounds for reversal and a new trial. We do not decide whether any of the other errors, standing alone, are prejudicial. We do hold, however, that all the errors taken together are prejudicial. -36- evidence showed that Sullivan had very little, if any, involvement in the formulation of [the public ownership] rule, and because the rule was imposed on [Sullivan] by a preexisting National Football League rule. This ruling constituted prejudicial error because the equal involvement defense is an absolute defense to an antitrust claim and because the evidence warranted sending the issue to the jury. A plaintiff's complete, voluntary, and substantially equal participation in an illegal practice under the antitrust laws precludes recovery for that antitrust violation. CVD, Inc. v. Raytheon Co., 769 F.2d 842, 856 (1st Cir. 1985), cert. denied, 475 U.S. 1016 (1986); General Leaseways, Inc. v. National Truck Leasing Ass'n, 830 F.2d 716, 720-23 (7th Cir. 1987); THI-Hawaii, Inc. v. First Commerce Financial Corp., 627 F.2d 991, 995 (9th Cir. 1980); see also Bateman Eichler, Hill, Richards, Inc. v. Berner, 472 U.S. 299, 310-11 (1985) (applying equal involvement defense in securities law context). In order to establish an equal involvement defense, an antitrust defendant must prove, by a preponderance of the evidence, that the plaintiff bears at least substantially equal responsibility for an anticompetitive restriction by creating, approving, maintaining, continually and actively supporting, relying upon, or otherwise utilizing and implementing, that restriction to his or her benefit.7 General 7 The Supreme Court in Bateman added an additional requirement to the equal involvement defense: that preclusion of suit would not significantly interfere with the effective enforcement of the antitrust laws. Bateman, 472 U.S. at 311. We do not see a preclusion of Sullivan's damages action as presenting any -37- Leaseways, 830 F.2d at 720-26; CVD, 769 F.2d at 856. It is not essential to the defense that the plaintiff actually helped author or create the policy, although such facts would be highly probative, as long as the plaintiff was substantially responsible for maintaining and otherwise effectuating the policy. See, e.g., General Leaseways, 830 F.2d at 723 (applying equal involvement defense in case where plaintiff did not participate in the actual adoption of the policy although plaintiff was substantially involved in supporting, enforcing and maintaining the policy).8 On the other hand, proof that the plaintiff benefitted from the challenged policy or failed to object to the policy, without more, is not sufficient to show substantially equal participation. See id., 830 F.2d at 725 (noting that mere participation in the challenged policy is not enough). Moreover, proof that the plaintiff was coerced (economically or significant interference with antitrust law enforcement. The NFL's policy is still subject to challenge under the antitrust laws. Because the equal involvement defense only precludes a damages action, Sullivan could have requested injunctive relief when the public ownership policy was allegedly preventing him from selling 49% of his team. In addition, other owners who were not involved in the adoption or support of the policy may still bring suit should they desire to sell ownership interests in their team to the public. 8 To the extent this conflicts with the but for standard applied in THI-Hawaii, 627 F.2d at 995 (finding that a plaintiff's recovery is not barred unless the illegal conspiracy would not have been formed but for its participation), we decline to follow that portion of the case. There is no evidence of such a rigid but for requirement in the Supreme Court's formulation of the equal involvement defense in Bateman, 472 U.S. at 310-11 (finding the defense applies where as a direct result of his own actions, the plaintiff bears at least substantially equal responsibility for the violations he seeks to redress). -38- otherwise) into supporting the policy, that the plaintiff attempted to oppose the illegal conduct, or that the plaintiff's participation was otherwise not voluntary, is highly probative of the absence of complete and equal involvement by the plaintiff in an antitrust violation. E.g., CVD, 769 F.2d at 856. In this case, the evidence in the record was sufficient to support a jury instruction on the equal involvement defense. Sullivan was one of the three AFL members on the Joint Committee that established the policies, including the ownership policies, that were to govern the new expanded NFL. That Committee agreed, in a merger agreement signed by Sullivan, to adopt the NFL's policy against public ownership for the new NFL. Sullivan's son, Chuck, stated that Sullivan was the central figure in the merger negotiations. Sullivan subsequently relied on the NFL's public ownership policy to justify his purchase, through the merger of his team into a wholly owned company, of the outstanding stock of the Patriots in 1976. In the proxy statement for that transaction, Sullivan listed the NFL's policy against public ownership as one of the Reasons for the Merger, and he attached a letter from the NFL justifying the public ownership policy and explaining that the continued presence of public stockholders conflicted with the interests of the league. Sullivan also affirmatively supported the policy in sworn testimony during the litigation with his former shareholders following the Patriots merger. Sullivan stated that the NFL's public ownership policy, and the justifications underlying the policy, were the reasons -39- for his desire to purchase all outstanding shares of the team. There is no evidence that Sullivan ever opposed or objected to theownership policypriorto thecircumstances surroundingthis case. Taken together, this evidence is sufficient for a reasonable jury to conclude that Sullivan bears substantially equal responsibility for the NFL's public ownership policy because Sullivan helped adopt the policy, he relied upon it, and he actively supported it. The jury, however, was never given an opportunity to consider this evidence in light of the equal involvement defense. Sullivan claims that he was not at the meetings in which Lamar Hunt, the chairman of the AFL committee, agreed to the NFL's public ownership policy, and that he did not know in advance that the old NFL's public ownership rule would be adopted by the new NFL. Mr. Hunt himself testified, however, that he always spoke for the entire AFL committee at his various meetings with NFL owners, and that he discussed various negotiating points with the other AFL owners, including Sullivan, before any decisions were made. Moreover, Sullivan's own team obtained a specific waiver from the ownership policy, which, a reasonably jury could infer, indicates that Sullivan was involved in the decision to adopt the policy. In any event, it is the jury's responsibility to weigh the evidence and make a choice in circumstances like this where the same evidence supports two different yet reasonable conclusions. The district court erred by failing to give the jury -40- the opportunity to choose between these versions of the facts. The court's finding that Sullivan's involvement in the public ownership policy was minimal ignores evidence in the record. The court's view that the NFL imposed the ownership policy on the AFL owners, rendering their participation involuntary, is largely unsupported by the record. Ultimately, however, these are factual questions for the jury and none of the instructions provided by the district court served to adequately instruct the jury on this issue or send the issue to the jury. Therefore, the district court erred in refusing to give the NFL's proffered instruction on the equal involvement defense. The error was prejudicial. By refusing to instruct the jury on the equal involvement defense, the district court deprived the NFL of a complete defense from Sullivan's lawsuit. The NFL presented facts that could have led to a dismissal of the case if they were believed by a properly instructed jury. While the NFL could have highlighted, and in fact did highlight, some of the facts concerning Sullivan's support of, and reliance upon, the ownership policy in its closing argument before the jury, this effort was limited to the argument that the NFL's policy was reasonable for purposes of the rule of reason analysis. The NFL did not, and could not, argue to the jury that it should rule in favor of the NFL because Sullivan's participation in the adoption and maintenance of the public ownership policy was complete, voluntary and substantially equal. Without the proffered instruction, the jury had no occasion to consider -41- whether Sullivan should be deprived of a damages remedy because of his involvement in the policy he now challenges. As a result, the district court's refusal to send the equal involvement defense to the jury was prejudicial error requiring a new trial. B. Failure to Request an Official Vote of the Owners As discussed in Section II.C. above, in order to establish that the policy actually caused injury to himself, Sullivan must prove that the NFL effectively denied his request to waive or amend its policy against public ownership. While there is evidence that supports a finding that the NFL's policy effectively blocked Sullivan from pursuing his public offering, there is also sufficient evidence to support a contrary finding. Sullivan's failure to request a vote from the owners after he discovered that he was four votes shy of obtaining a waiver with seven owners still undecided, combined with former Commissioner Rozelle's testimony that he told Sullivan that Rozelle would put to the owners any plan that Sullivan wished, could support a finding that Sullivan was a dormant plaintiff who did not spring into action until it was time to file suit. Out Front, 748 F.2d at 170. As such, a jury could conclude that the NFL did not prevent Sullivan from pursuing his stock sale, but instead, Sullivan simply dropped the idea for reasons unrelated to the NFL's policy. If the jury had reached such a conclusion, Sullivan would have failed to prove that his injury was caused by the antitrust policy, and judgment for the NFL would be required. The NFL proposed instructions concerning Sullivan's -42- failure to ask for a vote essentially stating that such a failure would result in judgment for the NFL if it was reasonable to require Sullivan to make such a request. The court refused to give the instruction because it felt that to do so would be to comment on the evidence, and the court did not want to comment on any of the evidence presented at trial. We understand the court's concern but believe that, under the facts of this case, there is a crucial point of law contained in the NFL's instruction that was not otherwise provided to the jury. The jury was instructed generally on the issue of causation, but it was not told that it had to determine whether the NFL's policy against public ownership was actually enforced against Sullivan; that is, whether the policy, the alleged antitrust restraint, actually restrained Sullivan in any way from making a 49% public offering of his team. Although the NFL could, and did, argue that Sullivan's failure to ask for a vote was evidence that the policy did not cause injury to Sullivan, there was no legal hook upon which the jury could hang the NFL's argument. The failure of Sullivan to request a vote is a critical and potentially dispositive issue in this case. If the alleged restraint of trade does not even exist in practice, the whole case essentially disappears. Therefore, the jury should have been directed to make a specific finding as to whether the public ownership policy was enforced against Sullivan. If the jury is instructed that Sullivan must prove that the NFL's policy was enforced against him, the jury will have -43- cause to consider the crucial matter of whether the NFL actually enforced its policy against Sullivan or rather, whether the NFL never had the chance to enforce its policy because Sullivan was never prepared to pursue his public offering. The instructions as proffered by the NFL may need to be tailored to avoid commenting on the evidence surrounding the missing vote by the NFL owners, but that does not excuse the court from giving no instruction at all on the issue. The failure to give some instruction concerning the failure of Sullivan to request a vote was error. C. The Murray Option In 1986, prior to Sullivan's decision to sell Patriots stock to the public, Sullivan sold Fran Murray an option to buy the entire club. The NFL took the position that the Murray option would have been an absolute bar to any public sale of Patriots stock and that Sullivan therefore could not prove causation. The NFL's position was supported by evidence introduced at trial. Sullivan proffered evidence that the option was not a bar to sale because the option could be bought out and because it could not be legally enforced. The issue of whether Murray could have, or would have, blocked a public offering by the Patriots was ultimately disputed. The option agreement and Murray's deposition testimony were received into evidence. The district court, however, refused to admit Murray's statement that he would indeed have stopped any public stock sale of the Patriots from going forward -44- if he had been told about it. The court found the testimony to be too speculative to be admissible. While the court's decision to exclude Murray's speculative testimony is well within the court's wide latitude of discretion in making such evidentiary rulings, United States v. Abel, 469 U.S. 45, 54 (1984); Doty v. Sewall, 908 F.2d 1053, 1058 (1st Cir. 1990), we note that Sullivan's entire case as to the causation of injury was equally speculative. Whether Sullivan's proposed stock sale could have proceeded and would have been successful in the absence of the NFL's public ownership policy was a matter of considerable conjecture. Fairness would seem to militate towards allowing the NFL to present its own version of the probable course of future events to counter Sullivans' theorizing. In any event, the court's subsequent refusal to give the NFL's proffered jury instruction on the law of options, specifically the legal consequences of options under Massachusetts law, erroneously removed another crucial issue from the jury's purview. The Murray option was a key defense for the NFL, because if Sullivan did not have a legal right to sell Patriots stock to the public, he did not suffer any harm from the NFL's ownership policy and the NFL would have been entitled to judgment in its favor. Again, the NFL could make this argument to the jury, but the jury would still lack crucial information concerning the legal underpinnings of a crucial defense for the NFL. Sullivan argues that the NFL's proposed instruction -45- would have singled out one factual issue related to causation for the jury's special attention, something that would have unfairly prejudiced Sullivan. Sullivan adds that allowing the instruction would have generated countering instructions on other legal facets of option law that were relevant to Sullivan's position on the option issue and ultimately would have confused the jury. These arguments notwithstanding, we feel that, as long as suitable instructions are provided covering the basic legal points relevant to each party's arguments, the jury would not be unduly confused. Furthermore, the risk of prejudice from the instruction -- due to the added attention afforded one of the NFL's defenses -- is not sufficient to justify effectively depriving the NFL of a crucial defense. Ultimately, it was for the jury to decide whether the Murray option constituted an insurmountable obstacle to Sullivan's case on causation, and the district court's refusal to instruct on the law of options virtually removed this issue from consideration by the jury. D. Balancing Procompetitive and Anticompetitive Effects in the Relevant Market As we noted above, the rule of reason analysis requires a weighing of the injury and the benefits to competition attributable to a practice that allegedly violates the antitrust laws. Monahan's Marine, 866 F.2d at 526. The district court instructed the jury on its verdict form to balance the injury to competition in the relevant market with the benefits to competition in that same relevant market. The NFL protested, claiming that all procompetitive effects of its policy, even -46- those in a market different from that in which the alleged restraint operated, should be considered. The NFL's case was premised on the claim that its policy against public ownership was an important part of the effective functioning of the league as a joint venture. Although it was not readily apparent that this beneficial effect applied to the market for ownership interests in NFL teams, the relevant market found by the jury, the NFL argued that its justification should necessarily be weighed by the jury under the rule of reason analysis. Sullivan responded, and the district court agreed, that a jury cannot be asked to compare what are essentially apples and oranges, and that it is impossible to conduct a balancing of alleged anticompetitive and procompetitive effects of a challenged practice in every definable market. The issue of defining the proper scope of a rule of reason analysis is a deceptive body of water, containing unforeseen currents and turbulence lying just below the surface of an otherwise calm and peaceful ocean. The waters are muddied by the Supreme Court's decision in NCAA -- one of the more extensive examples of the Court performing a rule of reason analysis -- where the Court considered the value of certain procompetitive effects that existed outside of the relevant market in which the restraint operated. NCAA, 468 U.S. at 115-20 (considering the NCAA's interest in protecting live attendance at untelevised games and the NCAA's legitimate and important interest in maintaining competitive balance between amateur -47- athletic teams as a justification for a restraint that operated in a completely different market, the market for the telecasting of collegiate football games).9 Other courts have demonstrated similar confusion. See, e.g., L.A. Coliseum, 726 F.2d at 1381, 1392, 1397, 1399 (stating that the relevant market provides the basis on which to balance competitive harms and benefits of the restraint at issue but then considering a wide variety of alleged benefits, and then directing the finder of fact to balance the gain to interbrand competition against the loss of intrabrand competition, where the two types of competition operated in different markets). To our knowledge, no authority has squarely addressed this issue. On the one hand, several courts have expressed concern over the use of wide ranging interests to justify an otherwise anticompetitive practice, and others have found particular justifications to be incomparable and not in correlation with the alleged restraint of trade. Smith v. Pro Football, Inc., 593 F.2d 1173, 1186 (D.C. Cir. 1978); Brown v. Pro Football, Inc., 812 F. Supp. 237, 238 (D.D.C. 1992); Chicago Pro. Sports Ltd. Partnership v. National Basketball Ass'n, 754 F. 9 The Supreme Court did not expressly consider the issue presented here. Therefore, it is impossible to tell whether the Court was consciously applying the rule of reason to include a broad area of procompetitive benefits in a variety of markets, or whether the Court was simply not being very careful and inadvertently extended the rule of reason past its proper scope. There is certainly no language, as Sullivan suggests, indicating that the Court was considering the alleged benefit of competitive balance only to the extent that it had procompetitive effects in the market for televised football games. -48- Supp. 1336, 1358 (N.D.Ill. 1991). We agree that the ultimate question under the rule of reason is whether a challenged practice promotes or suppresses competition. Thus, it seems improper to validate a practice that is decidedly in restraint of trade simply because the practice produces some unrelated benefits to competition in another market. On the other hand, several courts, including this Circuit, have found it appropriate in some cases to balance the anticompetitive effects on competition in one market with certain procompetitive benefits in other markets. See, e.g., NCAA, 468 U.S. at 115-20; Grappone, Inc. v. Subaru of New England, Inc., 858 F.2d 792, 799 (1st Cir. 1988); M & H Tire Co. v. Hoosier Racing Tire Corp., 733 F.2d 973, 986 (1st Cir. 1984); L.A. Coliseum, 726 F.2d at 1381, 1392, 1397, 1399. Moreover, the district court's argument that it would be impossible to compare the procompetitive effects of the NFL's policy in the interbrand market of competition between the NFL and other forms of entertainment, with the anticompetitive effects of the intrabrand market of competition between NFL teams for the sale of their ownership interests, is arguably refuted by the Supreme Court's holding in Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977). Continental T.V. explicitly recognized that positive effects on interbrand competition can justify anticompetitive effects on intrabrand competition. Id. at 51-59. Although Continental T.V. can reasonably be interpreted as referring only to interbrand and intrabrand components of the same relevant -49- market, Hornsby Oil Co., Inc. v. Champion Spark Plug Co., 714 F.2d 1384, 1394 (5th Cir. 1983), there is also some indication that interbrand and intrabrand competition necessarily refer to distinct, yet related, markets. Continental T.V., 433 U.S. at 52 n.19 (The degree of intrabrand competition is wholly independent of the level of interbrand competition.). Arguably, the market put forward by the NFL -- that is the market for NFL football in competition with other forms of entertainment -- is closely related to the relevant market found by the jury such that the procompetitive benefits in one can be compared to the anticompetitive harms in the other. Clearly this question can only be answered upon a much more in-depth inquiry that we need not, nor find it appropriate to, embark upon at this time. Finally, we note that although balancing harms and benefits in different markets may be unwieldy and confusing, such is the case with a number of balancing tests that a court or jury is expected to apply all the time. Indeed, Justice Brandeis' famous formulation of the rule of reason seems to contemplate the balancing of a wide variety of factors and considerations, many of which are not necessarily comparable or correlative: The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint and its effect, actual or probable. The history of the restraint, -50- the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts. Board of Trade of the City of Chicago v. United States, 246 U.S. 231, 238 (1918). Although the issue of the proper scope of the rule of reason analysis is more appropriately resolved in a case where it is dispositive and more fully briefed, we can draw at least one general conclusion from the caselaw at this point: courts should generally give a measure of latitude to antitrust defendants in their efforts to explain the procompetitive justifications for their policies and practices; however, courts should also maintain some vigilance by excluding justifications that are so unrelated to the challenged practice that they amount to a collateral attempt to salvage a practice that is decidedly in restraint of trade. In any event, we need not enter these dangerous waters to resolve the instant dispute. The NFL wanted the jury to consider its proffered justifications for the public ownership policy -- namely that the policy enhanced the NFL's ability to effectively produce and present a popular entertainment product unimpaired by the conflicting interests that public ownership would cause. These procompetitive justifications should have been considered by the jury, even under Sullivan's theory of the proper scope of the rule of reason analysis. As we point out in note [4] above, and as Sullivan himself points out, to the extent the NFL's policy strengthens and improves the league, resulting -51- in increased competition in the market for ownership interests in NFL clubs through, for example, more valuable teams, the jury may consider the NFL's justifications as relevant factors in its rule of reason analysis. The danger of the proffered instructions on the verdict form is that they may have mislead the jury into thinking that it was precluded from considering the NFL's justifications for its ownership policy. Therefore, the relevant market language on the verdict form should be removed, or else the jury should be informed that evidence of benefits to competition in the relevant market can include evidence of benefits flowing indirectly from the public ownership policy that ultimately have a beneficial impact on competition in the relevant market itself. E. References to Prior Antitrust Cases Against the NFL Despite a pretrial motion in limine and repeated objections by the NFL, the district court allowed the jury to hear numerous references to prior antitrust cases against the NFL. Evidence about prior antitrust violations by the defendant may, in appropriate cases, be admissible to show things like market power, intent to monopolize, motive, or method of conspiracy. United States Football League v. National Football League, 842 F.2d 1335, 1371 (2d Cir. 1988) (hereinafter USFL). Because of the inherently prejudicial nature of such evidence, however, evidence of prior antitrust cases involving the NFL are only admissible if Sullivan can demonstrate that the conduct underlying those prior judgments had a direct, logical -52- relationship to the conduct at issue in the present case. USFL, 842 F.2d at 1371; International Shoe Mach. Corp. v. United Shoe Mach. Corp., 315 F.2d 449, 454 (1st Cir.), cert. denied, 375 U.S. 820 (1963) (plaintiff must show that his claimed injury stemmed directly and proximately from the same type of practice condemned in the prior Government action); see also Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338, 1351 (3d Cir. 1975). In many of the instances where Sullivan or his counsel made references to prior antitrust cases at trial, Sullivan failed to satisfy this burden. Sullivan argues that the prior cases were relevant either to certain testimony regarding the reasonableness of the NFL's ownership policy and voting requirements or to the issue of defining the relevant market. Because none of the cases mentioned at trial concerned the NFL's ownership policy at issue here, evidence of those prior cases is not relevant to the reasonableness of the NFL's policy against public ownership. The general voting requirements are not in dispute, so cases touching solely upon them are also not relevant. Certain limited portions of some prior antitrust decisions are relevant to the issue of defining the relevant market. The testimony and commentary at trial concerning these prior cases, however, was not limited to the relevant market portions of these cases and, on the contrary, focussed primarily on the issue of whether the NFL's public ownership policy was unreasonable. As such, that evidence was prejudicial, without any balancing relevance to justify its -53- admission into evidence. The references to prior NFL cases were made in a number of different contexts during the trial (including during direct examination, cross-examination, and at closing argument), and they contained a variety of different information. These references are not likely to be repeated in precisely the same context upon a new trial. Therefore, instead of identifying which particular pieces of evidence were inadmissible, we think it would be more useful to point out more generally that references to prior NFL cases are not relevant to the issue of the reasonableness of the NFL's public ownership policy and such references should be excluded if they contain information about the unreasonableness of other policies of the NFL which were at issue in the other cases. Reversed and remanded. -54-