NFL Successfully Defends Against Antitrust Claims Brought by City of Oakland

NFL Successfully Defends Against Antitrust Claims Brought by City of Oakland
By Timothy LaComb, of MoginRubin LLP
Featured in Sports Litigation Daily, Volume 17, Issue 13 – July 17, 2020

For the second time, the Raiders relocated from Oakland, California to a warmer city 400 miles away. The Raiders moved from Oakland to Los Angeles in 1982 and, after returning in 1995, moved from Oakland to Las Vegas a few months ago. And, just like the first move, the Raiders’ relocation to Las Vegas spurred antitrust litigation challenging the NFL’s restrictions on team movement and expansion.

However, the two rounds of litigation were initiated by plaintiffs in very different positions, which proved outcome determinative for whether the alleged damages were proximately caused by the NFL’s restrictions. The first suit was brought by the Raiders and its future home, the Los Angeles Coliseum, against the NFL and its member-teams because the bylaws blocked their pending move to Los Angeles, causing lost profits. Both the jury and Ninth Circuit determined the plaintiffs’ damages were proximately caused by the NFL’s relocation restraints.

But the recent litigation was brought by Oakland, the Raiders’ then-current home, against the NFL and its teams because the bylaws facilitated the move to Las Vegas by artificially inflating the value of the Raiders and pricing Oakland out of the market. Oakland’s theory is that but-for the restrictive bylaws, either the Raiders would have stayed or another team would have moved to Oakland. The restrictions, therefore, caused the damages stemming from the loss of an NFL franchise.

Chief Magistrate Judge Joseph C. Spero disagreed, finding the causal connection between the challenged bylaws and alleged injuries too attenuated. However, Judge Spero applied an overly harsh pleading standard that arguably rendered his conclusions on causation incorrect, giving Oakland a colorable argument on appeal.

Pleading Causation for Antitrust Claims

Pleading causation for an antitrust claim is not a difficult proposition, having aptly been labeled an “edentulous” (i.e., toothless) test.[7] To defeat a 12(b)(6) motion, the plaintiff need only allege facts that create a plausible inference that the alleged injuries were proximately caused by the defendant’s antitrust violation. As courts and commentators have recognized, this does not require plaintiffs to reconstruct a hypothetical marketplace absent a defendant’s anticompetitive conduct, as such a standard “would only encourage monopolists to take more and earlier competitive action.”[8] And, to the extent there exists an underlying problem of proof, “the defendant is made to suffer the uncertain consequences of its own undesirable conduct.”[9] This, unfortunately, was not the framework applied by Judge Spero.

Oakland’s Claims are Dismissed for Lack of Causation

On April 30, 2020, Judge Spero granted the NFL’s motion to dismiss with prejudice. He found, among other things, that Oakland failed to adequately show the Defendants’ unlawful conduct proximately caused their injuries.[10]

Judge Spero first analyzed whether the NFL bylaws requiring the Raiders to pay a $350 million relocation fee to the other team owners caused harm to Oakland.[11] He correctly concluded they did not because (1) the relocation fee disincentivized the move given it was a large fee the Raiders paid to its rivals, and (2) although it increased the likelihood the owners would approve the move, this simply removed a potential anticompetitive restraint (owner approval), which increased competition in the stadia market.[12]

Judge Spero then turned to whether the NFL’s rules restricting the number of teams proximately caused Oakland’s alleged injuries. He first objected to Oakland’s failure to address deficiencies identified in his first dismissal order, like whether potential owners would establish new teams if the NFL allowed them to do so or whether such potential owners would have based a team in Las Vegas before the Raiders relocated there.[13]

He next criticized Oakland for not constructing the hypothetical world that would exist absent the restrictions, including “what the playing field would look like if the NFL allowed more than thirty-two teams,” “would another team have already existed in Las Vegas,” “would the Raiders have gone elsewhere if Las Vegas already had a team,” “[i]f the Raiders left, would a different team play in Oakland,” and “what sort of league structure might be permissible if the current number of teams is not.”[14] Based on the absence of these allegations, Judge Spero concluded Oakland did not plead causation.[15]

Oakland Has a Colorable Causation Argument on Appeal

As is often the case, the district court applied an overly harsh pleading standard that failed to analyze whether Oakland’s theory of causation was plausible. Again, Oakland need only plead facts that create a plausible inference that the NFL’s rules restricting the number of teams proximately caused its injuries and should not be penalized for failing to reconstruct the marketplace absent the NFL’s restrictions.

Applying this framework, Oakland appears to have adequately pleaded causation. Oakland alleges the bylaws artificially increase the price of NFL franchises by restricting supply and that, but-for the restriction, Oakland could have kept the Raiders or attracted another team. Oakland supports these allegations with facts that show it remains a desirable location for NFL franchises and it made significant efforts to retain the Raiders. Its alleged injuries (lost investment, income, and tax revenue and devaluation of property) flow from the loss of an NFL franchise. These facts create a plausible inference that the NFL’s bylaws restricting team expansion proximately caused Oakland’s injuries. Assuming Oakland overcomes the additional hurdle of demonstrating at least one of its injuries are recoverable under the antitrust laws, Oakland has a decent shot at succeeding on appeal.

[7] United States v. Microsoft Corp., 346 U.S. App. D.C. 330, 253 F.3d 34, 79 (2001)

[8] Viamedia, Inc. v. Comcast Corp., 951 F.3d 429, 484-85 (7th Cir. 2020) (quoting United States v. Microsoft Corp., 253 F.3d 34, 78-79, 346 U.S. App. D.C. 330 (D.C. Cir. 2001) (en banc)).

[9] Id.

[10] City of Oakland v. Oakland Raiders, No. 18-cv-07444-JCS, 2020 U.S. Dist. LEXIS 76589 (N.D. Cal. Apr. 30, 2020).

[11] Id. at *21-23.

[12] Id.

[13] Id. at *28.

[14] Id. at *28-29.

[15] As a “separate and sufficient” reason for dismissal, Judge Spero held Oakland’s alleged injuries are not “compensable under the Clayton Act.” Id. at 35-39.

This article was original featured in Sports Litigation Alert on July 17, 2020.

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