Court Opinion

ID: 176125
Source: CourtListenerOpinion
Date Created: 2010-09-29 13:43:36+00
Date Added: 2024-06-11T12:50:30.626914
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                              Pursuant to Sixth Circuit Rule 206
                                      File Name: 10a0316p.06

                UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT
                                    _________________

                                               X
                         Plaintiff-Appellant, -
 WARRIOR SPORTS, INCORPORATED,
                                                -
                                                -
                                                -
                                                    No. 09-1395

                                                ,
                                                 >
                                    Plaintiff, -
 ATHLETE’S CONNECTION,

                                                -
                                                -
                                                -
          v.
                                                -
                                                -
                                                -
 NATIONAL COLLEGIATE ATHLETIC

                        Defendant-Appellee. -
 ASSOCIATION,
                                                -
                                               N
                 Appeal from the United States District Court
                for the Eastern District of Michigan at Detroit.
              No. 08-14812—Marianne O. Battani, District Judge.
                                    Argued: April 28, 2010
                            Decided and Filed: August 20, 2010*
       Before: BATCHELDER, Chief Judge; MOORE and COOK, Circuit Judges.

                                      _________________

                                           COUNSEL
ARGUED: John J. Bursch, WARNER NORCROSS & JUDD LLP, Grand Rapids,
Michigan, for Appellant. Robert J. Wierenga, MILLER, CANFIELD, PADDOCK AND
STONE, P.L.C., Ann Arbor, Michigan, for Appellee. ON BRIEF: John J. Bursch,
Charles N. Ash, Aaron D. Lindstrom, WARNER NORCROSS & JUDD LLP, Grand
Rapids, Michigan, William R. Jansen, Michael G. Brady, WARNER NORCROSS &
JUDD LLP, Southfield, Michigan, for Appellant. Robert J. Wierenga, Gregory L.
Curtner, David R. Grand, Kimberly K. Kefalas, MILLER CANFIELD, PADDOCK
AND STONE, P.L.C., Ann Arbor, Michigan, for Appellee.

        *
        This decision was originally issued as an “unpublished decision” filed on August 20, 2010. On
September 24, 2010, the court designated the opinion as one recommended for full-text publication.

                                                 1
No. 09-1395          Warrior Sports v. Nat’l Collegiate Athletic Ass’n            Page 2

                                   _________________

                                        OPINION
                                   _________________

          COOK, Circuit Judge. Warrior Sports filed suit claiming that, by changing the
rule that governs the size of lacrosse stick heads approved for use in NCAA-sanctioned
play, the NCAA violated the Sherman Act and tortiously interfered with Warrior’s
business. After denying Warrior’s preliminary injunction request, the district court
granted judgment on the pleadings in favor of the NCAA. Warrior appeals, and we
affirm.

                                             I.

          Defendant-Appellee the National Collegiate Athletic Association (NCAA) sets
the rules that govern intercollegiate athletic competitions involving its member schools,
including the play and equipment rules for men’s lacrosse matches. Other league
governing bodies, including the National Federation of High School Sports, adopt and
follow the rules set by the NCAA, giving those rules particularly strong influence on the
market for lacrosse equipment. Plaintiff-Appellant Warrior Sports, Inc. manufactures
and distributes lacrosse sticks.

          Prior to 2006, the rule governing the allowable dimensions of lacrosse stick
heads (Playing Rule 1-17) remained unchanged for thirty years, setting the width of the
head at a minimum of 6.5” at its widest point and 10” from top to bottom. Traditional
heads were triangular in shape, but because the rule did not specify a minimum width
for the base (or “channel”) of the head, manufacturers began producing heads with a
more pinched shape. According to the NCAA, the pinched design made it more difficult
for a player to dislodge the ball from an opponent’s stick during play, which prompted
players to use increasing amounts of force when attempting to do so, leading to more
injuries. To address this and other issues, in 2006, the NCAA initiated its rule-changing
process. The NCAA Lacrosse Rules Committee met with equipment manufacturers
(Warrior among them) to address potential rule changes, including the addition of a
No. 09-1395        Warrior Sports v. Nat’l Collegiate Athletic Ass’n               Page 3

minimum width requirement for the channel, aimed at resolving the dislodgement
problem. On September 7, 2006, the Rules Committee announced proposed changes to
Rule 1-17 instituting minimum width requirements for the channel of the stick head.
The 2006 Rule Change (intended to go into effect on January 1, 2009) would have
rendered the vast majority of all men’s stick heads, including 14 of the 15 models
marketed by Warrior, illegal for NCAA play. Warrior responded by filing a lawsuit in
the Eastern District of Michigan challenging the 2006 Rule Change, but dismissed the
action after the NCAA agreed to reconsider the proposed change.

       The NCAA solicited additional input from all concerned manufacturers,
including Warrior, about how to improve the new specifications. To address the
dislodgement issue, Warrior suggested incorporating a “flare” design—a design on
which it held a patent, though it failed to disclose that fact to the NCAA at the time. In
September 2007, the Rules Committee adopted a new rule (the 2007 Rule Change)
intended to go into effect January 1, 2010. Much like the 2006 Rule Change, the 2007
Rule Change would have rendered the majority of stick heads on the market illegal,
including all 15 of those marketed by Warrior. Significantly, the measurements
incorporated into the 2007 Rule Change promoted a flared head design and closely
tracked the design patented (but at the time not being marketed) by Warrior. When the
NCAA learned of Warrior’s patent after adopting the change, it sent Warrior a letter
asking whether and under what terms the company would be willing to license its
intellectual property rights to other lacrosse equipment manufacturers. Viewing this
correspondence as a veiled threat by the NCAA to change the rules again if Warrior
refused to negotiate licenses with its competitors, Warrior responded that it perceived
the NCAA’s letter as inappropriate and would not consider licensing its rights in the
abstract because it did so only on a case-by-case basis.

       The NCAA adopted a third rule change in February 2008 (the 2008 Rule Change)
and scheduled its effective date for January 1, 2010. Like the 2007 Rule Change, the
2008 Rule Change rendered Warrior’s entire existing line of stick heads illegal. The
specifications adopted in the 2008 Rule Change differed only slightly from those in the
No. 09-1395            Warrior Sports v. Nat’l Collegiate Athletic Ass’n                          Page 4

2007 Rule Change—broadening the range of permissible widths. This modification
allows stick heads using either straight or flared walls to satisfy the rule, and any head
that would have satisfied the 2007 Rule Change necessarily also passes muster under the
2008 Rule Change. Notably, the 2008 Rule Change permits the use of any stick head
designed in conformity with Warrior’s patent.

         Warrior responded to the 2008 Rule Change by filing suit against the NCAA in
the Western District of Michigan accusing the NCAA of violating the Sherman Act and
tortiously interfering with its business relationships.1 Warrior moved for a preliminary
injunction and asked the district court to consider the motion on an expedited basis.
Concerned that Warrior was forum shopping,2 the NCAA immediately opposed
Warrior’s request for expedited consideration of its injunction request and moved to
transfer venue to the Eastern District. The court sided with the NCAA, refusing to
expedite the injunction request and transferring the case to the Eastern District of
Michigan. The NCAA promptly filed an answer and moved for judgment on the
pleadings under Rule 12(c). By memorandum opinion dated January 30, 2009, the
district court denied Warrior’s preliminary injunction motion, Warrior Sports, Inc. v.
Nat’l Collegiate Athletic Ass’n, No. 08-14812, 2009 WL 230562 (E.D. Mich. Jan. 30,
2009), and later, in a separate opinion, granted judgment on the pleadings in the NCAA’s
favor, Warrior Sports, Inc. v. Nat’l Collegiate Athletic Ass’n (Warrior II), No. 08-14812,
2009 WL 646633 (E.D. Mich. Mar. 11, 2009). Warrior appeals.

                                                   II.

         We review the district court’s grant of a motion for judgment on the pleadings
de novo using the same standard as for a motion to dismiss under Rule 12(b)(6). EEOC
v. J.H. Routh Packing Co., 246 F.3d 850, 851 (6th Cir. 2001). “For purposes of a motion

         1
         Warrior’s complaint also asserted a promissory estoppel claim on which the district court granted
judgment in the NCAA’s favor. Warrior does not appeal that portion of the court’s ruling.
         2
          Although the district court never reached the merits of the first lawsuit before Warrior
voluntarily dismissed it, the NCAA successfully moved, over Warrior’s objection, to stay discovery in that
action pending resolution of the NCAA’s Rule 12(b)(6) motion—suggesting a motive for Warrior’s choice
of the Western District for its second filing.
No. 09-1395        Warrior Sports v. Nat’l Collegiate Athletic Ass’n             Page 5

for judgment on the pleadings, all well-pleaded material allegations of the pleadings of
the opposing party must be taken as true, and the motion may be granted only if the
moving party is nevertheless clearly entitled to judgment.” JPMorgan Chase Bank, N.A.
v. Winget, 510 F.3d 577, 581 (6th Cir. 2007) (internal citation and quotation marks
omitted).

                                           A.

       Warrior alleged that the changes to Rule 1-17—including the 2008 Rule Change,
which the NCAA “appears to have” adopted “for improper and anticompetitive reasons
under the influence of one or more of [Warrior’s] competitors”—violated § 1 of the
Sherman Act, which prohibits “[e]very contract, combination . . . , or conspiracy, in
restraint of trade or commerce.” 15 U.S.C. § 1. Because “nearly every contract binding
parties to an agreed course of conduct amounts to some sort of ‘restraint of trade,’ the
Supreme Court has limited the restrictions of section 1 to bar only ‘unreasonable
restraints.’” Care Heating & Cooling, Inc. v. Am. Standard, Inc., 427 F.3d 1008, 1012
(6th Cir. 2005) (quoting Nat’l Hockey League Players’ Ass’n v. Plymouth Whalers
Hockey Club, 325 F.3d 712, 718 (6th Cir. 2003)).

       The district court examined all three of the changes to Rule 1-17. It concluded
that the 2006 and 2007 Rule Changes were noncommercial and therefore immune from
antitrust challenge. Assessing the 2008 Rule Change, the court found that, in light of
Warrior’s accusation that the NCAA enacted it in collusion with Warrior’s competitors,
the 2008 Rule Change served a commercial purpose because Warrior’s “competitors
presumably sought to enact the rule in order to benefit commercially.” Warrior II, 2009
WL 646633, at *4. The court nevertheless rejected Warrior’s antitrust claim, finding
that the 2008 Rule Change did not restrain trade or commerce because, when compared
to the 2007 Rule Change, the 2008 rule expanded the range of stick head designs that
could meet the standards for NCAA-approved play. Id.

       We agree with the district court’s ultimate conclusion, but employ a slightly
different analysis. The NCAA dropped the 2006 and 2007 Rule Changes before they
ever went into effect, and thus they cannot be challenged because they necessarily did
No. 09-1395            Warrior Sports v. Nat’l Collegiate Athletic Ass’n                          Page 6

not cause (nor do they threaten to cause) any injury to Warrior or anyone else. See
Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768, 788–89 (6th Cir. 2002) (“An
antitrust plaintiff bears the burden of showing that the alleged violation was a material
cause of its injury, a substantial factor in the occurrence of damage or that the violation
was the proximate cause of the damage.”). So although the district court chose to
compare the 2008 Rule Change to the 2007 Rule Change to determine whether the 2008
rule restrained trade or commerce, we find that comparison inapt, given that the 2007
rule never took effect. Rather, as the sole rule change ever to take effect, only the 2008
Rule Change matters for purposes of the antitrust analysis.

         Although the district court concluded that Warrior’s allegation of collusion
between the NCAA and Warrior’s competitors transformed the otherwise
noncommercial rule governing athletic competition into a commercial one subject to
antitrust scrutiny, we avoid that question by assuming the rule to be commercial and cut
to the heart of Warrior’s antitrust claim, finding the challenged rule does not harm
competition and, consequently, does not unreasonably restrain trade or commerce.
Warrior’s Sherman Act claim thus fails as a matter of law.

         Two frameworks exist for analyzing Sherman Act claims: the per se rule and the
rule of reason. Care Heating & Cooling, 427 F.3d at 1012. But Warrior’s failure to
challenge the rule as per se unlawful in proceedings below leaves it with only a rule-of-
reason argument.3 To state a claim under the rule-of-reason test, a plaintiff must allege,
inter alia, that the purportedly unlawful contract, combination, or conspiracy “produced
adverse, anticompetitive effects within relevant product and geographic markets.”
Crane & Shovel Sales Corp. v. Bucyrus-Erie Co., 854 F.2d 802, 805 (6th Cir. 1988)
(internal quotation marks and citation omitted); see also Nat’l Hockey League Players
Ass’n, 419 F.3d at 473 (“[A] plaintiff alleging an unreasonable restraint on trade under

         3
          Although Warrior argues in its opening brief that the 2008 Rule Change is per se unlawful, the
NCAA responds that Warrior never raised this argument in the district court. In its opinion, the district
court explicitly noted that Warrior “does not contend that the per se rule applies.” This court “generally
‘cannot consider an issue not passed on below,’” and exercises its “discretion to rule on an issue not
decided below only in ‘exceptional cases.’” St. Mary’s Foundry, Inc. v. Emp’rs Ins. of Wausau, 332 F.3d
989, 995–96 (6th Cir. 2003) (citations omitted). Warrior fails to satisfy the “exceptional case” standard,
so the panel bypasses analysis under the per se rule.
No. 09-1395           Warrior Sports v. Nat’l Collegiate Athletic Ass’n                       Page 7

the rule of reason theory must show significant anti-competitive effects of the challenged
restraint.”).    The Sherman Act exists for “the protection of competition, not
competitors,” Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 338 (1990), and
thus “the foundation of an antitrust claim is the alleged adverse effect on the market.”
Care Heating & Cooling, 427 F.3d at 1014.

        Warrior’s complaint fails to identify any anticompetitive effects on the market
for lacrosse sticks attributable to the 2008 Rule Change (or, for that matter, to any other
version of Rule 1-17). Rule 1-17, irrespective of the various versions’ specifications,
applies to all manufacturers, including Warrior, in exactly the same way.4 Any
manufacturer wishing to market a lacrosse stick approved for use in NCAA competition
(or in any competition governed by the NCAA standards) must conform the stick to the
dimensions specified in the rule.             To be sure, rule changes impose costs on
manufacturers: they must adapt their processes to make sticks that meet the new rule’s
specs; and their stock of non-conforming sticks becomes obsolete. But Warrior fails to
allege any facts that would support a conclusion that the rule even arguably injures
competition. Indeed, by complaining that the new rule will “neutralize Warrior’s
intellectual property rights and market position . . . opening the door and paving the way
for new entrants,” Warrior concedes that the 2008 Rule Change will increase
competition, not reduce it. Because the new rule applies equally to all manufacturers,
Warrior may compete in the market on the same footing as all other participants. This
includes an ability to sell stick heads produced in conformity with its patent, which the
2008 Rule Change does not bar. Warrior’s failure to allege an injury to competition
dooms its Sherman Act claim as a matter of law.

        4
         We note Warrior’s complaint may inadequately allege the relevant market. See, e.g., Worldwide
Basketball & Sport Tours, Inc. v. NCAA, 388 F.3d 955, 963–64 (6th Cir. 2004).
No. 09-1395         Warrior Sports v. Nat’l Collegiate Athletic Ass’n                Page 8

                                            B.

        Under Michigan law, a claim of tortious interference with business relationship
requires proof of (1) a valid business relationship or expectancy; (2) knowledge of that
relationship or expectancy on the part of the defendant; (3) an intentional interference
by the defendant inducing or causing a breach or termination of that relationship or
expectancy; and (4) resulting damage to the plaintiff. Via The Web Designs, L.L.C. v.
Beauticontrol Cosmetics, Inc., 148 F. App’x 483, 487 (6th Cir. 2005) (citing Baidee v.
Brighton Area Schs., 695 N.W.2d 521, 538 (Mich. Ct. App. 2005)). “The third element
of [this] tort requires the plaintiff to demonstrate that the third party was induced either
to breach the contract or to break off the prospective business relationship by an
intentional act that is either (1) wrongful per se; or (2) lawful, but done with malice and
unjustified in law.” Id. (citing CMI Int’l, Inc. v. Intermet Int’l Corp., 649 N.W.2d 808,
812 (Mich. Ct. App. 2002)).

        The district court rejected Warrior’s tortious interference claim, finding that,
though Warrior alleged collusion regarding the 2008 Rule Change in a way that might
suggest malice, it ultimately failed to demonstrate “that the adoption of the 2008 Rule
Change was done with a malicious and unlawful purpose, because the only effect of the
2008 Rule Change [when compared to the 2007 Rule Change] was to increase the
number of sticks that would be allowed under the NCAA’s rules.” Warrior II, 2009 WL
646633, at *4. We decline to adopt the court’s analysis, but agree with its ultimate
conclusion.

        “To establish that a lawful act was done with malice and without justification,
the plaintiff must demonstrate, with specificity, affirmative acts by the[] defendant that
corroborate the improper motive of the interference.” Erickson’s Flooring & Supply Co.
v. Tembec, Inc., 212 F. App’x 558, 566 (6th Cir. 2007) (quoting Mino v. Clio Sch. Dist.,
661 N.W.2d 586, 597–98 (Mich. Ct. App. 2003)). Taking a comprehensive view of the
allegations in the complaint, Warrior fails to allege specific, affirmative actions by the
NCAA that corroborate its claim of malice. Indeed, its vague assertion that “in deciding
to change the rules, [the NCAA] appears to have acted for improper and anticompetitive
No. 09-1395           Warrior Sports v. Nat’l Collegiate Athletic Ass’n                         Page 9

reasons under the influence of one or more of the competitors of [Warrior],” Compl. ¶ 3,
lacks the specificity required by Michigan law. And nothing about the content or
character of the 2008 Rule Change—which applies equally to all lacrosse stick
manufacturers—inherently suggests that the NCAA intended to cause Warrior harm.5
Accordingly, we affirm the judgment in favor of the NCAA on Warrior’s tortious
interference claim.

                                                 III.

         For these reasons, we affirm the judgment of the district court.

         5
          Nor does Warrior’s repeated insistence that the Rule Changes do not actually make it easier to
dislodge the ball create such an inference. Warrior fails to cite any law suggesting that a sports rule-
making body with a facially plausible concern about a competition issue must supply empirical proof that
a proposed rule change actually remedies the concern before enacting the rule.