Friday, June 25, 2010

Deutscher Tennis Bund vs. ATP World Tour

The first post-American Needle sports-related case was released by the U.S. Court of Appeals for the Third Circuit today. The case is Deutscher Tennis Bund, et al vs. ATP World Tour, et al, No. 08-4123. As of 6:oo PM PDT, the Third Circuit had yet to make the decision available on its website, but I will update this post as soon as it is available. In the interim, I have a copy that I can email to anyone as an attachment upon request. UPDATE - With a hat tip to Nathaniel Grow, the decision can now be found here.

Sports Illustrated's Jon Wertheim and I are collaborating on a law review article about the case (working draft will be posted on SSRN soon) and have been following its developments for the past several years. The case won't receive much attention vis-a-vis the Supreme Court's recent American Needle decision, but is important for a number of reasons. Most notably, it represents the most exhaustive discussion of the authority of an individual sport league to make rules, set schedules, determine player eligibility, etc.

The impetus for the case was the ATP's 2007 move to re-work its tournament calendar. Plaintiff's tournament was demoted as part of the schedule change. Rather than accept its new status as a lower tier tournament, Deutscher Tennis Bund filed suit alleging that the ATP and several individually-named members of the board of directors violated Section 1 and 2 of the Sherman Antitrust Act (allegations also included breach of fiduciary duty claims against the board members). After extensive discovery, the case went to trial in Delaware. At trial, both parties used expert witnesses. The District Court judge ruled for the ATP as a matter of law in connection with some of the plaintiff's claims. A jury verdict was returned for the ATP on the remaining claims.

Some observations and links about the 45 page Third Circuit decision are below:

1. Oral argument was revealing. Audio is available here (scroll down to #08-4123). Rob MacGill of Barnes & Thornburg argued on behalf of plaintiff. Brad Ruskin of Proskauer Rose represented the ATP during oral arguments. One of the three judges (I can't tell which one on audio) asked Brad Ruskin if the yet-to-be decided American Needle decision would be controlling. Listen to his insightful reply.

2. The ATP's succinct press release is here.

3. Judge Scirica wrote for a unanimous three-judge panel in favor of the ATP. He opened by making an important distinction that is probably only known by fairly hard-core tennis fans - the ATP does not control the four Grand Slam tournaments (Australian Open, Roland Garros, Wimbledon, and the US Open). Such tournaments (as well as the Davis Cup and minor league "Futures" tournaments) are under the International Tennis Federation's (ITF) jurisdiction. In contrast, the ATP oversees all remaining elite-level professional men's tournaments. Examples include the big US tournaments every year in Indian Wells, Key Biscayne, and Cincy as well as smaller US-based tournaments such as Atlanta, San Jose, and Washington, DC.

4. Judge Scirica's opinion followed a fairly standard analytical framework. Seminal cases such as Standard Oil, Continental TV, Dagher, and Nat'l Soc. Prof. Eng. were all cited. This part of the opinion reminded me of American Needle.

5. Today's opinion, in contrast to American Needle, cited many more sports-related cases (many in footnotes). The most treatment was devoted to the Seventh Circuit's Chicago Bulls decision and Justice Stevens's SCOTUS NCAA vs. University of Oklahoma opinion from 1984. Of course, American Needle was also cited a number of times. With that said, Deutscher Tennis Bund vs. ATP World Tour was by no means a simple exercise of applying American Needle to the facts of the case.

6. Citing NCAA vs. Univ. of Oklahoma, Judge Scirica stated: "the per se rule does not apply for a tennis tour, like other sports leagues, where 'horizontal restraints on competition are essential if the product is to be available at all.'"

7. Judge Scirica dismissed the possibility of "quick look" treatment too. In sum, upon defendant's showing of procompetitive benefits stemming from the challenged conduct, the "quick look" possibility is "extinguished."

8. The most pointed analysis of American Needle was on pages 28 (for a discussion of the single entity issue) and 29 (reiterating that "substance, not form" controls the antitrust inquiry). There was nothing that extended, distinguished, or refuted American Needle.

9. At the end of Footnote 15, the judge concluded: "the District Court correctly instructed the jury to evaluate the alleged restraints under the full rule of reason." The jury did this, and found in favor of the ATP. On appeal, the Third Circuit found the plaintiff's failure to prove a relevant market for professional tennis player services fatal. Antitrust plaintiffs challenging aspects of sport industry governance would be well-served to read this footnote.

10. In addition to suing the ATP, the plaintiffs also sued a number of directors on the ATP's board. Judge Scirica concluded the decision with a lengthy discussion of the business judgment rule and found that defendant board members did not breach their fiduciary duty to plaintiffs.

Today's tennis case differs markedly from American Needle. The former resulted in a jury verdict that was validated on appeal. The latter is now on remand, with an upcoming trial on the merits if the parties don't settle. Tennis also differs from football. I was surprised the Deutscher Tennis Bund decision didn't spend more time highlighting the differences. In our upcoming article, Jon and I spend a substantial amount of time making the argument that such differences are important...and in some cases should be dispositive.

I will post more moving forward. With the case being released on a Friday during Wimbledon (see Howard Wasserman's post below about the longest match in the history of professional tennis), most mainstream news outlets probably won't write about the case until next week. When such articles do appear, I will link to them in an update.

UPDATE - Randall Chase of the Associated Press wrote a piece for USA Today that includes some quotes from the attorneys involved.