Opinion ID: 195406
Heading Depth: 1
Heading Rank: 3

Heading: Application to Claims Brought on Behalf of SMC

Text: 16 Sullivan argues that the district court was correct when, evaluating the relevant factors as they applied to claims brought on behalf of SMC, it found that plaintiff had alleged, and presented evidence of, a causal connection between the alleged antitrust violation and the harm to the plaintiff, and an improper motive on the part of defendants; and when it found no significant risk of duplicate recoveries or danger of complex apportionment in this case. He maintains, however, that the court erred in its determination that the absence of the remaining Associated General Contractors factors required the court to deny standing. He contends that he has satisfied the remaining factors, and that the court should have granted him standing to press his antitrust suit, both individually and on behalf of SMC. 17 We agree that the district court correctly found that Sullivan's complaint met three of the Associated General Contractors factors. Sullivan alleged, and presented evidence, of a causal connection between the application of the NFL Rule and SMC's inability to refinance the stadium because the sale of Patriots' stock to the public was prohibited. Sullivan also alleged an improper motive on the part of defendants in that they sought to restrain and monopolize interstate commerce in professional football and took the actions they did in furtherance of that goal. In addition, Sullivan indicated that defendants intended to block the refinancing of the stadium by their actions, or, at the very least, that such a harm was a foreseeable consequence of the application of the Rule to the Patriots. 7 Nor does there appear to be a significant risk of duplicate recovery or danger of complex apportionment in this case, as the injuries of which Sullivan complains are sufficiently distinct from those alleged by William Sullivan, the only other plausible litigant in this case. 8
18 We are not persuaded, however, by Sullivan's argument that he satisfies the remaining Associated General Contractors' factors. The existence of antitrust injury is a central factor in the standing calculus. 9 In this case, its absence, together with the indirectness of the injury to Sullivan, and the speculative nature of the claimed damages, outweighs the remaining factors. We therefore conclude that plaintiff lacks standing to pursue the claims brought on behalf of SMC. 19
20 Sullivan contends that he has suffered antitrust injury, that is, the type of injury that the antitrust laws were designed to prevent. He relies principally on McCready, 457 U.S. at 465, 102 S.Ct. at 2540, and Los Angeles Coliseum, 791 F.2d at 1356, to support this claim. 21 The Supreme Court first articulated the concept of antitrust injury in Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977). In Brunswick, several small bowling centers brought suit, challenging the acquisition of several of their competitors by the much larger Brunswick Corporation as an anticompetitive merger under Section 7 of the Clayton Act, 15 U.S.C. Sec. 18, and seeking treble damages under Section 4 for profits they would have made had the acquired centers gone out of business. Id. at 480-81, 97 S.Ct. at 693. 22 Although plaintiffs had alleged that Brunswick had engaged in predatory practices designed to lessen competition in the markets it had entered, they could prove only that Brunswick's acquisitions had deprived them of profits they would have made had the acquired firms closed. Id. at 488, 490 & nn. 15, 16, 97 S.Ct. at 697, 698 & nn. 15, 16. The Court noted that, in essence, plaintiffs were not complaining that Brunswick's actions had reduced competition, but preserved it, thereby depriving plaintiffs of the benefits of increased concentration. Id. at 488, 97 S.Ct. at 697. Rejecting the lower court's holding that any loss causally linked to the mere presence of the violator in the market was compensable, id. at 486-87, 97 S.Ct. at 696, the Court found that plaintiffs' injury was not of  'the type the [antitrust laws] were intended to forestall,'  429 U.S. at 487-88, 97 S.Ct. at 696-97 (citation omitted). The Court held that to recover treble damages under Section 4, a plaintiff must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. Id. at 489, 97 S.Ct. at 697 (emphasis in original). 23 In Blue Shield of Virginia v. McCready, 457 U.S. 465, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982), the first case explicitly to address antitrust standing, the Court incorporated a focus on antitrust injury into its Section 4 standing inquiry. The plaintiff in McCready was a subscriber of Blue Shield, a health insurance plan that did not provide reimbursement for psychotherapy treatment rendered by psychologists (unless prescribed by and billed through a medical doctor), while providing reimbursement for the same treatment if given by a psychiatrist. McCready was treated by a psychologist, and Blue Shield refused to reimburse her for this treatment. McCready brought suit, alleging that Blue Shield and an association of psychiatrists had engaged in an unlawful conspiracy  'to exclude and boycott clinical psychologists from receiving compensation under'  the Blue Shield plans, and that Blue Shield's failure to reimburse was in furtherance of this conspiracy. McCready, 457 U.S. at 470, 102 S.Ct. at 2543. 24 The defendants argued that McCready had not suffered antitrust injury because her injury did not reflect the anticompetitive effect of the alleged antitrust violation. Id. at 481-82, 102 S.Ct. at 2549-50. McCready had not paid inflated fees for psychotherapy to psychiatrists, the supposed beneficiaries of the conspiracy; nor had she alleged that her psychologists' bills were higher than they would have been had the conspiracy not existed. Id. at 481, 102 S.Ct. at 2549. 25 The Court, however, refused to so limit recovery. While not a competitor of the conspirators, the injury McCready suffered--sanction in the form of the unreimbursed psychologists' services--was inextricably intertwined with the injury the conspirators sought to inflict on the market. Id. at 483-84, 102 S.Ct. at 2550-51. McCready suffered injury by virtue of the role she played in Blue Shield's anticompetitive scheme. Denying reimbursement to patients of psychologists was the very means by which Blue Shield coerced her to choose between becoming an unwilling participant in its illegal campaign to boycott the services of psychologists, or to pay the costs of treatment for the therapist of her choice from her own pocket. The harm to McCready was thus a necessary step in effecting the ends of the alleged illegal conspiracy. Id. at 479, 102 S.Ct. at 2548. The Court therefore found that McCready's injury  'flow[ed] from that which makes defendants' acts unlawful,' within the meaning of Brunswick, falling squarely within the area of congressional concern. Id. at 484, 102 S.Ct. at 2551. 26 Sullivan argues that the logic of McCready supports his standing. In Sullivan's view, the NFL rule at issue affected competition in the market for football stadia by preventing SMC from obtaining refinancing to pay for renovations that would have led the Patriots to extend their lease, and by interfering with the Patriots' capacity to invest money in the maintenance of their stadium, thus undermining SMC's ability to keep the Patriots from breaking their lease with SMC and moving to another location. Further, the injury to SMC was inextricably intertwined with that to the owner of the New England Patriots, since SMC expected to benefit from a joint proposal to conduct a public offering of a minority ownership in the team; and was an integral aspect of the conspiracy against the owner of the Patriots and was likely to result from the implementation of that conspiracy. 27 Like McCready, Sullivan claims, neither the fact that SMC stood in a vertical relationship to the intended victim of the alleged antitrust violation (purchasers of NFL franchises), nor the fact that SMC's injuries might be characterized as indirect deprive SMC of standing. Likewise, Sullivan's failure to show an increase in price or a lessening of supply in the stadia market, and the fact that Sullivan's personal losses might be derivative of those suffered by SMC are not dispositive. Sullivan points out that McCready's losses, for example, were at least in part derivative of those suffered by her employer, who as the direct purchaser of the group health insurance from Blue Shield, presumably did not get the benefit of its bargain with Blue Shield. 28 We disagree that McCready favors Sullivan's right to sue. Sullivan is correct that McCready did stand, in part, for the Court's refusal to limit recovery to those whose injuries result from the anti-competitive effect of the violation, and to extend available recovery at least to some parties who stand in vertical relationship (such as customers) to the direct victim of an antitrust violation. 10 Thus, the fact that SMC was not a competitor in the market for professional football teams, the direct victim of the alleged antitrust violation, but in the related market for football stadia, does not by itself mean that he lacks standing here. See McCready at 472, 102 S.Ct. at 2544 (refusing to engraft artificial constraints on Section 4, stating that  'the statute does not confine its protection to consumers, or to purchasers, or to competitors, or to sellers' ) (internal citation omitted). 29 The circuits are split, however, over the question of whether a plaintiff must be either a consumer or competitor in the market harmed by the antitrust violation at issue in order to establish antitrust injury. Some courts have held that a plaintiff may establish antitrust injury by proof that he was a consumer or competitor in the relevant market, or by showing that his injury was inextricably intertwined with the injury to competition, in that the plaintiff was  'manipulated or utilized by [d]efendant as a fulcrum, conduit or market force to injure competitors or participants in the relevant product and geographic market.'  Province v. Cleveland Press Pub. Co., 787 F.2d 1047, 1052 (6th Cir.1986) (quoting Southaven, 715 F.2d at 1086); see Ostrofe v. H.S. Crocker Co., Inc., 740 F.2d 739, 745-46 (9th Cir.1984) (though neither a consumer nor competitor in the relevant market, fact that injury to plaintiff was a necessary means to achieve the conspirators' illegal end sufficient to establish antitrust injury); Ashmore v. Northeast Petroleum Division of Cargill, 843 F.Supp. 759, 769-70 (same); Donahue v. Pendleton Woolen Mills, 633 F.Supp. 1423, 1435-39 (S.D.N.Y.1986) (following Ostrofe ). 11 30 Other courts have interpreted Supreme Court caselaw and the antitrust laws more narrowly, holding that a plaintiff must be a market participant in order to establish antitrust injury. See Bichan v. Chemetron Corp., 681 F.2d 514, 519 (7th Cir.1982) (Section 4 protects only parties injured as customers or competitors in a defined market, or in a discrete area of the economy); see also Winther v. DEC International, Inc., 625 F.Supp. 100, 102-03 (D.Colo.1985). We need not resolve this conflict, because even under a broad reading of McCready, SMC cannot support its claim of antitrust injury. 31 Read broadly, McCready extends antitrust standing to parties who can establish that their injury was a necessary step and the means employed by the conspirators to achieve their illegal ends, regardless of the parties' direct market participation. See McCready, 457 U.S. at 479, 484 n. 21, 102 S.Ct. at 2548, 2551 n. 21; Ostrofe, 740 F.2d at 745-46; Ashmore, 843 F.Supp. at 768-70 & nn. 16, 18. Unlike McCready and her co-plaintiffs, neither Sullivan nor SMC were necessary instruments to effectuate the alleged conspiracy. Denying stadium refinancing was not a necessary step in restraining competition in the market for professional football franchises, nor the very means by which the defendants sought to do so. Indeed, according to plaintiff's own complaint, the purpose of the NFL policy was to exclude competitive entry into the business of professional football by ... television companies, motion picture producers, investment bankers, owners of other professional sports teams, home entertainment companies, and entertainment companies generally. The policy is not alleged to have a similar anticompetitive effect on stadia. Moreover, the instruments of the alleged conspiracy were the NFL and member club owners, not Sullivan or SMC. 32 Nor does the Ninth Circuit's holding in Los Angeles Coliseum bolster Sullivan's claim that he suffered antitrust injury. In that case, the Los Angeles Coliseum and the Oakland Raiders attempted to negotiate a deal to relocate the Raiders to Los Angeles to play in the Coliseum (the Rams' old home field), following the Rams' move to Anaheim. In its effort to block this move, the NFL invoked a league rule requiring three-fourths of the member teams to approve a team's relocation into another team's league territory. The Coliseum and the Raiders brought suit, claiming that this was an unlawful restraint of trade, in violation of Section 1 of the Sherman Act, 15 U.S.C. Sec. 1. A jury found that the NFL rule violated the antitrust laws, and awarded damages to both the Coliseum and the Raiders. 33 In holding that the Coliseum had standing to bring this antitrust action, the court found that the Coliseum had suffered antitrust injury, because the NFL had restrained competition ... among football stadia by restraining the Raiders['] attempt to move and operate in Los Angeles. 791 F.2d at 1364 (emphasis in original). Had the Raiders been permitted to move to Los Angeles, the Coliseum would have been able to bid effectively to have them as a tenant. The rule restraining such a move, the court held, was precisely of the type that the antitrust laws were designed to prevent. Id. 34 The rule at issue here posed no similar restraint on SMC's capacity to compete for a pro football team's tenancy. In fact, in 1987, the year of the attempted sale, SMC and the Patriots had a lease that ran until the year 2002, regardless of the team's ownership.
35 Sullivan argues that SMC suffered direct harm as a result of the NFL's restraints on the stadia market. He maintains that Los Angeles Coliseum supports this claim, and compares SMC's status to that of the Coliseum. 36 In Los Angeles Coliseum, the Coliseum had been engaged in a bidding struggle with a rival stadium for the tenancy of the Oakland Raiders when the NFL's invocation of its restrictive relocation rule foreclosed further negotiations, thus depriving the Coliseum of expected revenue for leasing the facility to the Raiders for their games. 791 F.2d at 1365. The Ninth Circuit concluded that the NFL's illegal territorial restraints directly and foreseeably restrained competition in the stadia market, in which the Coliseum participated, and that the harm it suffered was a direct result of the NFL's illegal territorial restraints. Id. 37 In an attempt to limit the reach of this holding, the court stated that it was confident that [this] ruling will not be misinterpreted as being a broad endorsement of antitrust standing for all parties who might have contracted with the Raiders had they not been restrained in their relocation plans. Football stadia constitute a special market distinguished from those comprised by, say, hotels, laundering establishments, or limousine services, by their indispensable and intimate connection with professional football and football teams. An injury such as that suffered by the Coliseum in the present case cannot be characterized fairly as an indirect 'ripple effect.'  Id. at 1365. 38 Sullivan seems to argue that since SMC, like the Coliseum, is a participant in the market for football stadia, it enjoys similar distinguished status by virtue of its indispensable and intimate connection with professional football and football teams, and should be able likewise to recover. The injury to SMC, and its relation to the rule at issue in this case, are, however, clearly distinguishable. 39 The rule at issue in Los Angeles Coliseum affected where a team could be located. In precluding a team from relocating in a particular area, the rule necessarily restrained competition in the related market for football stadia. Once the NFL invoked its rule to block the Raiders from moving into the Rams' territory, the Coliseum (and, indeed, all other stadia in that location) was barred from competing with other stadia for the Raiders' tenancy. 40 The rule at issue in this case had no similar direct effect on SMC, nor on the market in which it was a participant. Plaintiff claims that the NFL rule restricting public ownership of NFL teams was the but for cause of the loss of his stadium, injuring SMC as follows: the NFL rejected William Sullivan's plan to sell 49% of his stock to an investment bank, which, in turn, would sell the stock to the public; as a result, SMC did not get refinancing; SMC therefore could not pay its debts, nor complete renovations; SMC could not get an extension on its lease (which was contingent on the sale of Patriots' stock), and was forced to file for bankruptcy. We think that any injury suffered by SMC as a result of the NFL rule was indirect, and a consequence of the direct injury inflicted on the Patriots' owner. 41 In addition, the fact that William Sullivan, the party most directly harmed by the alleged violation, has pursued (and indeed, obtained a verdict in) his own antitrust action diminishes another possible rationale for allowing Sullivan to proceed in this case. See Associated General Contractors, 459 U.S. at 542, 103 S.Ct. at 910 (existence of an identifiable class of persons whose self-interest likely to motivate them to vindicate the public interest in antitrust enforcement diminishes the justification for allowing a more remote party to sue). 12
42 The district court found that [g]iven that an extended chain of independent events would have had to have occurred to give credence to the Plaintiff's damages claim on behalf of SMC, the damages claims were at best, highly speculative. 828 F.Supp. at 118. Sullivan claims that damages to SMC are measurable in terms of the enhanced market value of the stadium which would have resulted from the planned renovations, the extension of the lease with the Patriots, and the potential for deals with promoters for other entertainment and sports events. We think that calculating these damages would necessitate wide ranging speculation, Southaven Land Co., 715 F.2d at 1088, about the future value of a refinanced, renovated, debt-free stadium with a new lease. Because the harm to SMC was indirect, and was caused, in part, by independent intervening factors (notably, its prior serious indebtedness, as well as its failure to secure additional sources of commercial financing), we agree with the district court that SMC's damages claims are highly speculative, and are an additional factor weighing against a grant of standing in this case. See Associated General Contractors, 459 U.S. at 542, 103 S.Ct. at 910 (finding that damages were speculative because injury was indirect, and because it may have been produced by independent intervening factors). 43 The Ninth Circuit's holding in Los Angeles Coliseum is not to the contrary. In that case, the estimated damages claimed by the Coliseum included claims for lost profits that would have been earned had luxury stadium boxes been built in the Coliseum and rented for the 1980 football season. 791 F.2d at 1366. The court noted these estimates may have been unfounded due to lack of proof of causation. Id. Nonetheless, the court upheld the damages award, holding that even without considering the elements in question (lost profits from would-have-been luxury boxes), there was sufficient evidence, including attendance and seat price estimates offered by the Raiders, to uphold the total award of damages. Id. 44 Los Angeles Coliseum is distinguishable in several important respects. As the Ninth Circuit found, the Coliseum suffered direct harm as a result of the NFL's antitrust violation: but for the NFL's interference in its negotiations with the Raiders, the Coliseum likely would have secured their tenancy. Id. at 1365. The damages suffered were therefore intimately connected with the antitrust violation. Moreover, losses based on attendance and ticket price estimates were the foreseeable result of these damages, and are precisely the type of damages courts can calculate easily. By contrast, the asserted harm here is indirect, and likely the result, at least in part, of independent intervening factors; nor is the enhanced market value of a refinanced, renovated, debt-free stadium with a new lease easy to calculate. It is the combination of these factors that leads us to conclude that any damages to SMC as a result of the alleged antitrust violation are highly speculative. See Associated General Contractors, 459 U.S. at 542, 103 S.Ct. at 910. 45 Having considered the relevant Associated General Contractors' factors, we conclude that the balance in this case weighs against a grant of standing. We therefore conclude that Sullivan may not pursue an antitrust action on behalf of SMC. 46