Court Opinion

ID: 8926002
Source: CourtListenerOpinion
Date Created: 2022-11-27 06:41:07.403272+00
Date Added: 2024-06-11T17:09:24.190691
License: Public Domain

BEEZER, Circuit Judge,
dissenting.
I respectfully dissent. For the reasons stated below, I believe that the district court employed incorrect legal standards in granting the preliminary injunction.
I
BACKGROUND
A. Facts
The only findings of fact made by the district court were as follows:
The court concludes that plaintiffs have raised serious questions relative to their claim that defendants are in violation of 15 U.S.C. § 1 and that this is the case even though plaintiffs’ own arrangement with CBS is not above suspicion on the same ground. An analysis of these questions will require a full trial and thoughtful consideration of the quite fluid state of the relationship between major college football and television broadcasters in the aftermath of the Supreme Court’s NCAA decision. The court further concludes that the balance of hardships tilts rather sharply in favor of the plaintiffs with respect to the subject of this proceeding, which relates only to the airing of two games, Nebraska v. UCLA (Sept. 22) and Notre Dame v. USC (Nov. 24). By issuance of this order ABC and ESPN are not measurably harmed, other than by some perceived diminution of their ability quickly to dispatch CBS from the market for nationwide college football telecasts. The plaintiff universities, however, are clearly harmed in the absence of such order, both monetarily and with respect to the intangibles discussed at length in argument on the motion. The defendant universities will clearly benefit from the order in much the same fashion. The public interest is likewise served by this order. It is a matter of common knowledge that the Rose Bowl is sold out for the Nebraska — UCLA game, which could well determine the “championship” of college football in 1984. Such is the rich tradition of the USC — Notre Dame rivalry that sportly passions would be aroused if both teams were 0-9 at game time.
(emphasis added).1
B. Standard of Review
The grant of a preliminary injunction may be reversed if the district court abused its discretion or based its decision on an erroneous legal standard or clearly erroneous findings of fact. Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1421 (9th Cir.1984). A preliminary injunction is proper if the plaintiff shows a combination of: (1) “probable success on the merits” and “the possibility of irreparable injury” or (2) “serious questions” raised on the merits and a balance of hardships that tips “sharply” in the plaintiff’s favor. Id. at 1421 (quoting Miss Universe, Inc. v. Flesher, 605 F.2d 1130, 1134 (9th Cir.1979)). Regardless of which end of the continuum the plaintiff’s claim falls on, a showing that the public interest will be served by the injunction is required. American Motorcyclist Association v. Watt, 714 F.2d 962, 967 (9th Cir.1983).
*523The district court based its decision on the second of the two ends of the continuum. The district court found “serious questions” and a balance of hardships that tipped “sharply” in the plaintiffs’ favor. It did not find a mere “possibility of irreparable injury” and a “strong likelihood of success on the merits,” which is the opposite end of the continuum. Sierra Club v. Hathaway, 579 F.2d 1162, 1167 (9th Cir.1978).
In general, the decision to grant a preliminary injunction lies within the discretion of the district court. William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 526 F.2d 86, 88 (9th Cir.1975). In this case, the district court misapplied the applicable legal standards. As a result, it is not necessary to find an abuse of discretion to reverse the granting of the preliminary injunction.2
II
THE BALANCE OF HARDSHIPS
The first step in analyzing the granting of the preliminary injunction is to review the balance of hardships. The district court found that the balance of hardships tips sharply in favor of the plaintiffs. In reaching that conclusion, the district court relied upon an erroneous legal standard.
A. Hardship to the Plaintiffs
The district court found that the plaintiffs would be irreparably injured in the absence of the preliminary injunction. It is well-settled that monetary injuries are not irreparable and may not be considered in determining whether a preliminary injunction is proper.3 Sampson v. Murray, 415 U.S. 61, 90, 94 S.Ct. 937, 952, 39 L.Ed.2d 166 (1974); Los Angeles Memorial Coliseum Commission v. National Football League, 634 F.2d 1197, 1202 (9th Cir.1980); C. Wright & A. Miller, 11 Federal Practice and Procedure § 2948, at 434 (1973). This is especially true in an action under the Sherman Act, since a plaintiff can recover treble damages. It is also well-settled that a preliminary injunction cannot be issued to prevent a mere speculative injury. S.J. Stile Associates Ltd. v. Snyder, 646 F.2d 522, 525 (C.C.P.A.1981) (“A preliminary injunction will not issue simply to prevent a mere possibility of injury, even where pro*524spective injury is great. A presently existing, actual threat must be shown.”); New York v. Nuclear Regulatory Commission, 550 F.2d 745, 755 (2d Cir.1977) (requiring “a showing that the alleged threats of irreparable harm are not remote or speculative but are actual and imminent”); C. Wright & A. Miller, supra, § 2948, at 436-38. On application of these principles, the district court’s findings do not withstand scrutiny.
The district court found that the plaintiffs would be harmed “both monetarily and with respect to the intangibles discussed at length in argument on the motion.” The district court did not find, and there is no reason to believe, that the monetary harm is not compensable by damages. To the extent that the district court relied on monetary damages, it applied an erroneous legal standard.
The plaintiffs assert three “intangible” harms.4 First, they argue that the denial of the preliminary injunction would substantially reduce the value of their television contract with CBS. To the extent that the contract loses value, however, the plaintiffs can seek monetary damages. Moreover, any reduction in value would be caused solely by the existence of the ABC-CFA contract. If the plaintiffs prevail at trial, the value of the contract would be fully restored because the ABC-CFA contract would be void. Thus, harm to the CBS contract is not “irreparable” for purposes of a preliminary injunction.
Second, the plaintiffs argue that the denial of the preliminary injunction would impair their recruiting efforts. This argument is extremely speculative. The record reveals that USC is hardly suffering from a lack of television exposure. The game against Notre Dame would be the third consecutive USC game televised nationally on CBS.5 Any harm suffered by the plaintiffs as a result of lack.of exposure would be de minimis.6
Third, the plaintiffs argue that the denial of the preliminary injunction would deprive them of a valuable opportunity to showcase their teams. As noted above, the harm would be de minimis.7 Moreover, the plaintiffs’ conduct is highly relevant in *525evaluating this claim:8 the value of the right to showcase the teams cannot be very significant if the plaintiffs were willing to sign a contract with an exclusivity clause.9
B. Hardship to the Defendants
In addition to misapplying the legal standards governing the plaintiffs’ claims of irreparable injury, the district court completely ignored the defendants’ claims of hardship. The district court found that “ABC and ESPN are not measurably harmed, other than by some perceived diminution of their ability quickly to dispatch CBS from the market for nationwide college football telecasts.” The preliminary injunction assures CBS the broadcast rights to the USC-Notre Dame game and forecloses competitive bidding by the networks for broadcast rights to the most popular 1984 crossover game. The district court did not address ABC’s contention that the preliminary injunction hampers its efforts to develop product identification and to sell its exclusive package to advertisers.10
The district court also stated that “[t]he defendant universities will clearly benefit from the order.” The district court evidently did not give any weight to the fact that Notre Dame is contesting a preliminary injunction from which it will “clearly benefit.” Nor did it even acknowledge the argument advanced by Notre Dame and the CFA that the preliminary injunction will endanger the relations among the CFA member universities and the viability of the national television package that they are attempting to develop. Cf. FTC v. Warner Communications Inc., 742 F.2d 1156, at 1165 (9th Cir.1984) (per curiam) (in an action for a preliminary injunction under the Federal Trade Commission Act, noting that equities similar to those alleged by ABC and Notre Dame are “entitled to serious consideration”). A full and fair consideration of the parties’ claims required the district court to address these hardships specifically in its findings.
C. The Balance of Hardships
The plaintiffs have failed to establish a substantial- injury that is both irreparable and nonspeculative. The district court’s conclusion to the contrary is due to a misapplication of the law. The district court’s conclusion that the balance between the hardship to the plaintiffs and the hardship to the defendants, which it ignored, tips “sharply” in favor of the plaintiffs is erroneous. The granting of the preliminary injunction was based on an incorrect legal standard.
Ill
SERIOUS QUESTIONS AND LIKELIHOOD OF SUCCESS
The second step in evaluating the granting of the preliminary injunction is to determine whether the plaintiffs demonstrated an adequate likelihood of ultimate success on the merits. The district court found that the plaintiffs have raised “serious questions,” which is the lower end of the continuum in the standard for granting a preliminary injunction. This finding would have been sufficient if the balance of hardship tipped “sharply” in favor of the plaintiffs. Since the balance of hardships favors the plaintiffs only to a minute degree, if at all, the “serious questions” standard is inappropriate. However, the injunction can *526be sustained if the record reflects that the plaintiffs have established a “strong likelihood of success on the merits.”
A. Per Se Rule vs. Rule of Reason
The starting point for an analysis under section 1 of the Sherman Act is the determination of the appropriate test for legality. The plaintiffs argue that the exclusivity provision is a naked restraint that is illegal per se. The defendants argue that the Rule of Reason is appropriate. The district court evidently chose the latter course.
The types of conduct that are treated as illegal per se are those in which “surrounding circumstances make the likelihood of anticompetitive conduct so great as to render unjustified further examination of the challenged conduct.” NCAA v. Board of Regents, — U.S. -, 104 S.Ct. 2948, 2962, 82 L.Ed.2d 70 (1984). The district court did not determine that the exclusivity provisions met that description. On the contrary, the district court found that the resolution of the claims would require “thoughtful consideration of the quite fluid state of the relationship between major college football and television broadcasts.” The plaintiffs, however, argue forcefully that the exclusivity is illegal per se as a “naked restraint.” See United States v. Sealy, Inc., 388 U.S. 350, 354-58, 87 S.Ct. 1847, 1851-53, 18 L.Ed.2d 1238 (1967); Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 210-14, 79 S.Ct. 705, 708-10, 3 L.Ed.2d 741 (1959). The plaintiffs’ argument misconceives the nature of “naked” restraints. The exclusivity provision has a purpose other than restraining competition: it allows ABC and the CFA to develop a national college football television package. Cf. White Motor Co. v. United States, 372 U.S. 253, 263, 83 S.Ct. 696, 702, 9 L.Ed.2d 738 (1963) (holding that “naked restraints of trade with no purpose except stifling of competition” are illegal per se). As a result, Sealy and Klor’s are not controlling.
It is possible to view this arrangement as either horizontal or vertical. Cf. Sealy, 388 U.S. at 352, 87 S.Ct. at 1849 (noting that it is necessary to look at substance, rather than form, to determine whether an arrangement is horizontal or vertical). As a horizontal arrangement, the ABC contract is quite similar to the joint selling arrangement reviewed under the Rule of Reason in Broadcast Music, Inc. v. Columbia Broadcasting System, 441 U.S. 1, 99 S.Ct. 1551, 60 L.Ed.2d 1 (1979). The Supreme Court recognized in BMI that the effect of such an arrangement may be to “make” a market, thus stimulating competition. Id. at 19-23, 99 S.Ct. at 1562-1564; see NCAA, 104 S.Ct. at 2960-62. This is precisely the position advanced by ABC and the CFA.
As a vertical arrangement, the ABC contract closely resembles the territorial restrictions reviewed under the Rule of Reason in Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977). In Continental T.V., the Supreme Court recognized that vertical nonprice restrictions could stimulate inter-brand competition and held that a per se rule was therefore inappropriate. Id. at 51-59, 97 S.Ct. at 2558-2562.11 This is precisely the position. advanced by the defendants. See Baxter, Separation of Powers, Prosecutorial Discretion, and the “Common Law” Nature of Antitrust Law, 60 Texas L.Rev. 661, 697 (1982) (noting that “a firm’s choice of distributional arrangements, such as granting franchises or grouping goods and services for sale, may simply reflect the firm's judgment about the efficient and effective way to structure its marketing efforts”). The plaintiffs argue that the exclusivity provision is contrary to interbrand competition because crossover games are eliminated. This argument totally misses the point. The “brands” are the competing network television packages, not the teams. Because the exclusivity provision could enhance the marketing of the CFA football *527package, the Rule of Reason is appropriate.12
B. Application
It is not necessary to apply the Rule of Reason to the facts of this case, given the procedural setting. It is sufficient to note that close issues are presented which must be resolved at trial. While the district court’s finding that “serious questions” are raised by this case is correct, the plaintiff has not shown a sufficiently strong likelihood of success to overcome the virtual absence of irreparable injury.13
IV
THE PUBLIC INTEREST
Even when the evidence supports a finding that the balance of hardships is tipped in favor of the plaintiff, the granting of a preliminary injunction requires a showing that the public interest is served by the injunction. American Motorcyclist Association, 714 F.2d at 967. See generally Shreve, Federal Injunctions and the Public Interest, 51 Geo.Wash.L.Rev. 382 (1983). The district court found that televising the games served the public interest. While that is undoubtedly true, it is irrelevant. Just as the granting of the preliminary injunction did not guarantee the broadcast of the game, the denial of the preliminary injunction would not have barred the broadcast of the game. Both ABC and CBS claim contractual rights with regard to the broadcast of the USC-Notre Dame game.14 With the preliminary injunction, CBS will have the right to televise the game with Notre Dame’s consent. Without the preliminary injunction, CBS would be required to negotiate with ABC and the GFA for the right to televise the game.15 Thus, the most significant effect of the preliminary injunction is to determine the relative rights of a party and a nonparty.16 The public interest is not served by such a determination.
The public interest is served by the preliminary injunction only to the extent that it removes an impediment to the broadcast of the game. To the extent that the district court found a greater public interest, it misapplied the legal standards. This error standing alone, however, does not require reversal.
*528y
CONCLUSION
In the absence of a balance of hardships tipped sharply in favor of the plaintiffs or a strong likelihood of success, the district court could not properly grant the preliminary injunction. The record reveals that both elements are at the lower end of the continuum: the plaintiff has raised “serious questions” and, arguably, has shown a possibility of irreparable harm. The district court applied incorrect standards in finding that the balance of hardships tipped sharply in favor of the plaintiffs. I would reverse the order of the district court and remand for further proceedings.

. Fed.R.Civ.P. 52(a) and 65(d) require specific findings when a preliminary injunction is granted. The district court made only the limited findings quoted above. As a result, we do not have the benefit of the complete and detailed reasoning of the district court.

. The defendants urge us to consider the fact that the plaintiffs’ contract with CBS contains an exclusivity provision analogous to the provision at issue in this case. In pari delicto is rarely, if ever, a defense to an antitrust action. See 2 P. Areeda & D. Turner, Antitrust Law If 348 (1978). It does not follow, however, that the plaintiffs’ actions are irrelevant to the granting of a preliminary injunction. The Second Circuit has stated:
It is true that the in pari delicto doctrine is not a defense on the merits, ... but the [plaintiff's practices] certainly can be taken into account in determining the equities as a prelude to ruling on a preliminary injunction, at least where a clear showing of "public interest” has not been made out.
Columbia Pictures Industries, Inc. v. American Broadcasting Cos., 501 F.2d 894, 899 (2d Cir.1974). The Second Circuit’s approach is quite logical: a court should consider the actions of the plaintiff in evaluating claims of hardship. Although the plaintiffs argue that the exclusivity provision in the CBS contract is different from the exclusivity provision in the ABC contract, the district court found that it is "not above suspicion.” This fact is useful in evaluating the merits of the plaintiffs’ claim of hardship.
The plaintiffs seek to distinguish Columbia Pictures on the ground that a “clear showing of ‘public interest’ ” has been made in this case. It should be noted that the Second Circuit did not limit its consideration of a party’s conduct to cases in which the public interest is not clear. Moreover, this argument misconceives the logic of the Second Circuit’s approach. The plaintiffs’ conduct is a factor to be considered, not a bar to equitable relief. Although it is conceivable that the public interest in granting a preliminary injunction could be so strong that it would be prudent to ignore the plaintiffs conduct, this case does not present such a situation. As noted below, the public interest only marginally favors the granting of a preliminary injunction in this case.

. This rule is subject to an exception for cases in which monetary damages either cannot be measured, see, e.g., Texas v. Seatrain International, S.A., 518 F.2d 175, 179 (5th Cir.1975), or are otherwise inadequate, see, e.g., Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197, 1205 (2d Cir.1970) (threat to business’ existence). See generally Note, Granting Preliminary Injunctions Against Dealership Terminations in Antitrust Actions, 67 Va.L.Rev. 1395, 1398-1401 (1981).

. The plaintiffs also make the following argument:
If ABC and the CFA succeed in blocking CBS' coverage of the USC-Notre Dame game, as well as other crossover games, CBS may determine that it is unable to continue to televise college football after this season. As a practical matter, the Pac-10/Big Ten will have to join the CFA in order to have their games shown on national network television and ABC will have forced a competitor out of the market for network televising of intercollegiate football games.
Although that argument is imaginative, it is too speculative for purposes of the injunction application. Moreover, if the plaintiffs are correct, they can obtain money damages. The preliminary injunction cannot be upheld on the basis of this argument.

. The recruiting efforts of UCLA are not at issue in light of the broadcast of the UCLA-Nebraska game. The Big Ten and the Pac-10 cannot assert a conference-wide harm to recruiting unless they can show that the USC-Notre Dame game has a unique effect on the Conferences’ ability to recruit athletes. Such a showing has not been made. Thus, only USC’s recruiting efforts are at issue.
Schedule A to the CBS-Big-10/Pac-10 letter agreement reveals that CBS plans to televise the USC-Washington game on November 10 and the USC-UCLA game on November 17. It has been reported that USC will appear in eight televised games this year. Newman, Greed and Glut?, Seattle Times, October 6, 1984, at Dl, col. 6.

. The plaintiffs also argue that televising the football game would raise the USC football team’s national ranking and would improve its chances of appearing in a post-season bowl game. This argument is utterly speculative. Additionally, the plaintiffs note that televising football games makes it possible to operate large coeducational athletic programs. Any such injury caused by the exclusivity provision is monetary.

. The Big-10 Conference can claim no harm under this theory because USC is not a Big-10 team. The Pac-10 Conference can claim no harm under this theory because it has no interest in insuring television exposure for USC, rather than another Pac-10 team. The Pac-10 could have insured television coverage for its teams by scheduling an alternative game on the date in question. USC can claim only minimal harm under this theory because, as discussed above, USC receives massive television coverage.

. See supra note 2.

. In addition to the exclusivity provision, the letter agreement provided that no Big-10 or Pac10 team would appear on national television more than four times during the 1984 season. An analogous provision is contained in article 13 of the Big Ten/Pacific-10 Conference Football Television Plan.

. ABC and the CFA claim that the development of a strong national package is necessary in light of the availability of regional and local broadcasts. They note that games of peculiar local or regional interest, such as Brigham Young-Utah in Utah or California-Stanford in Berkeley will attract a much larger market share in those areas than a game of general national interest, such as USC-Notre Dame. Accordingly, they assert that an exclusive national package is necessary to produce maximum advertising revenues.

. Vertical price restraints are still illegal per se. Monsanto Co. v. Spray-Rite Service Corp., — U.S. -, 104 S.Ct. 1464, 1469 & n. 7, 79 L.Ed.2d 775 (1984). See generally Liebeler, The Distinction Between Price and Nonprice Distribution Restrictions, 31 UCLA L.Rev. 384 (1983).

. The plaintiffs also resort to arguing by labels, calling the exclusivity provisions a "group boycott" and a "cartel arrangement." It is now well-established that those terms lack inherent meaning. See R. Bork, The Antitrust Paradox 330-44 (1978). It is the effect of the arrangement, rather than its form, that is relevant. See generally, Bauer, Per Se Illegality of Concerted Refusals to Deal: A Rule Ripe for Reexamination, 79 Colum.L.Rev. 685 (1979).

. The plaintiffs frequently allude to ABC's alleged plan to drive CBS out of the college television market. Such a motivation does not by itself violate the Sherman Act. Regardless of ABC’s intent, the plaintiffs must show that the exclusivity provision had an anticompetitive effect. NCAA, 104 S.Ct. at 2962 & n. 26; see Easterbrook, Is There a Ratchet in Antitrust Law?, 60 Texas L.Rev. 705, 708 (1982) (“Apparently-exclusionary conduct is of legitimate concern only if it works to drive out equally or more efficient rivals.’’). Although the plaintiffs could bring an action for attempted monopolization, they have not done so. In any event, such an action would fail for lack of a "dangerous probability of success.” See 2 E. Kintner, Federal Antitrust Law § 13.4 (1980). It is inconceivable that ABC could monopolize the market in light of the presence of CBS, NBC, and the various cable networks.

. The plaintiffs claim that they are entitled to arrange for the broadcast of the game without the consent of Notre Dame, the CFA, or ABC because it will be played on USC’s home field. Regardless of the merits of that claim, the CBS contract purports to give CBS the exclusive right to televise the game in question.

. Of course, it is also possible that the game would be broadcast on local stations or by syndication. Both contracts permit such broadcasts notwithstanding their exclusivity provisions. Such broadcasts would alleviate any injury to the public interest.
The plaintiffs argue that ABC would refuse to negotiate. If that is the case, however, the plaintiffs’ case under sections 1 and 2 of the Sherman Act might be strengthened considerably.

. Although the defendants have not yet filed a responsive pleading, it may ultimately be necessary to join CBS as a plaintiff in this case. See Fed.R.Civ.P. 19. As is obvious from this discussion, CBS’s rights may be adversely affected by the outcome of this litigation.