ANTITRUST &! TRADE REGULATION REPORT

A BNA s ANTITRUST &! TRADE REGULATION REPORT Reproduced with permission from Antitrust & Trade Regulation Report, 101 ATRR 46, 07/08/2011. Copyright 2011 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com EXEMPTIONS Brady v. NFL Intentional Grounding of an Implied Antitrust Exemption BY THOMAS M. WILSON, III AND GREGORY M. GARRETT Introduction A group of professional and prospective football players recently filed Brady v. NFL, an antitrust class action. The suit was filed in the hope of preventing the NFL from imposing a lockout of its players. Because the players profess to have voided the nonstatutory labor exemption by disclaiming the union role of their players association, they allege that the lockout violates the Sherman Act. This article suggests that, notwithstanding the Supreme Court s decision in Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134 (1968), the common-law doctrine of in pari delicto should bar the plaintiffs action. Although labor law and the question whether the National Labor Relations Board has primary jurisdiction will likely play a prominent role in the Brady litigation, this article assumes, solely for antitrust-law analysis purposes, that there are no controlling labor-law questions. Further, the article assumes that the nonstatutory exemption was operable for the entire period alleged by the plaintiffs. The Brady litigation is unresolved as of the date of this article s publication. A. Factual Background On March 11, 2011, nine current professional football players and one prospective professional football player filed Brady v. NFL, an antitrust class action against the National Football League ( NFL ) and its 32 member teams. The action for injunctive relief, damages, and a declaratory judgment alleges violations and threatened COPYRIGHT 2011 BY THE BUREAU OF NATIONAL AFFAIRS, INC. ISSN 0003-6021

2 1 This article will not address the state-law claims presented in Brady. 2 By its invocation of the All Writs Act, the district court also terminated a host of similar actions then pending against the NFL when it approved the SSA. See White v. NFL, 41 F.3d 402, 409 (8th Cir. 1994). 3 A lockout is, in effect, an employer s strike; i.e., a refusal to employ rather than a refusal to work. violations of 1 of the Sherman Act, as well as causes of action under state tort and contract laws. 1 That action, filed in the United States District Court for the District of Minnesota, was closely followed by and consolidated with Eller v. NFL, also a Sherman Act 1 class action filed against the NFL in the same court, this time by four former NFL players and one prospective NFL player. The Eller plaintiffs seek only injunctive and declaratory relief. This litigation is hardly the first labor dispute between the NFL and its players to be presented to an antitrust tribunal. In 1993, for example, another such suit that also originated in the District of Minnesota White v. NFL was resolved by a Stipulation and Settlement Agreement (the SSA ), a consent judgment/classaction settlement that plays a prominent role in the present Brady litigation. 2 Following the district court s 1993 approval of the SSA, its subsequent approval of amendments to it, and the Eighth Circuit s affirmance after appeal by objectors, the White parties executed a new collective-bargaining agreement ( CBA ) that mirrors the terms of the amended SSA. Since its entry, the SSA has had numerous amendments approved by the district court, which, as is typical in consent-decree practice, retained jurisdiction to construe and enforce it. The CBA involved in the White litigation is the same CBA at the core of the Brady litigation. As is true of the Brady litigation, the White litigation followed a disclaimer by the NFL Players Association (the NFLPA ) of its role as the union and collectivebargaining representative for the players. The purpose of the disclaimer was formally to terminate the collective-bargaining process and thereby arguably to disarm the so-called nonstatutory labor exemption to the antitrust laws with which, the parties agreed, they had theretofore been cloaked. One provision in the SSA allowed the players to seek to reestablish the NFLPA s union status. Another provision promised that if, after expiration of the CBA, the NFLPA once again decided to disclaim its collective-bargaining status, then the NFL would waive its right to attempt to retain its nonstatutory labor exemption by asserting the union s disclaimer to be sham. The CBA executed in 1993 was scheduled to expire at the end of the 2012 professional-football season specifically, on February 28, 2013. On May 20, 2008, however, the NFL announced that it would exercise its right to opt out of the final two years of the CBA. Accordingly, the new termination date for the truncated CBA became March 11, 2011. Starting in 2008, the NFL began to employ the threat of a lockout of the players to take place at the end of the shortened CBA term. 3 The 2008-2011 negotiations for a new CBA were not successful. On March 11, 2011, pursuant to a vote by the players, the NFLPA once again disclaimed to the NFL any intent further to represent the players in collective bargaining and voluntarily changed its status from that of a union to that of a professional association. On the same date, the Brady plaintiffs filed their antitrust class action. Notably, the NFLPA also amended its bylaws to prohibit it or its members from engaging in collective bargaining with the NFL, the NFL s member clubs or their agents. Complaint 58. 4 The Brady and Eller plaintiffs moved for a preliminary injunction prohibiting the lockout. On April 25, 2011, in an 89-page opinion, the district court granted the Brady plaintiffs injunction request, while denying the Eller plaintiffs identical motion as moot. According to the district court, an injunction was warranted because the NFL had failed to show that the nonstatutory exemption 1) applies to protect an employer s imposition of a lockout; or 2) continues to apply after the employees have renounced the protection of a union. Two days later, the district court denied the NFL s motion for a stay of the injunction pending appeal. The NFL then noted an appeal to the Eighth Circuit Court of Appeals, requested expedited hearing of the appeal, and moved for a stay of the injunction pending appeal. On April 29, 2011, over one dissent, an Eighth Circuit panel granted an administrative stay of the preliminary injunction and, four days later, granted the NFL s motion for expedited appeal. And on May 16, 2011, again over one dissent, the appellate court formally granted the NFL s motion for a stay pending appeal. In so doing, the Eighth Circuit expressed serious doubts that the district court had jurisdiction to enjoin the League s lockout, and accordingly conclude[d] that the League ha[d] made a strong showing of a likelihood of success on the merits. Order at 11. Oral argument on the merits of the injunction was held on June 3, 2011. The arguments regarding the propriety of the preliminary injunction primarily circle around two questions: (1) whether either the Norris-Laguardia Act or the nonstatutory exemption precludes a court from enjoining nonviolent conduct in a labor dispute, and (2) whether the nonstatutory exemption applies absent the presence of a union at the collective-bargaining table. As interesting as those issues may be, the scope of this article is limited to examining whether the claims are, or should be, barred by the common-law doctrine of in pari delicto. For Sherman Act violations, the Brady plaintiffs allegations fall into two categories. What will be referred to herein as Category One consists solely of practices that have been (1) ongoing at least since 1993; (2) expressly agreed to by the parties in their CBA; and (3) expressly approved by the court in the SSA specifically, the entering player pool complained of in Count II; and the salary cap, franchise player, and transitional player provisions alleged in Count III. By contrast, Category Two is limited to one practice one not agreed to by the plaintiffs in the CBA or approved by the court in the SSA, and that first began on the date of suit specifically, the lockout alleged in Count I to be a horizontal group boycott and a per se violation of 1 of 4 That seems notable because, absent the antitrust exemption simultaneously disclaimed by the players, their amendments to the bylaws could be viewed as an unlawful agreement among competitors not to compete i.e., a horizontal group boycott violative of 1 of the Sherman Act and a candidate for a counterclaim. 7-8-11 COPYRIGHT 2011 BY THE BUREAU OF NATIONAL AFFAIRS, INC. ATRR ISSN 0003-6021

3 the Sherman Act. 5 The two categories have one common characteristic: according to the plaintiffs, all the conduct alleged in Counts I, II, and III (the antitrust counts) to violate the Sherman Act was wholly lawful until rendered unlawful by the NFLPA s voluntary and unilateral disclaimer of union status. B. In Pari Delicto The maxim in pari delicto potior est condition defendentis, 6 or in pari delicto for short, first entered the Supreme Court s jurisprudence in Randall v. Howard, 67 U.S. 585 (1863). In Randall, the Court characterized the plaintiff s allegations succinctly: the parties to this bill, in order to counteract a claim set up by other parties for a portion of the mortgage[d] lands, combined together, through the aid of the Court, to shorten the time of sale and to cover up the real ownership of the property. Id. at 588. When the defendants made efforts to sell the property, the plaintiffs sought an injunction prohibiting the sale. But the Court held that [i]t is against the policy of the law to enable either party, in controversies between themselves, to enforce an agreement in fraud of the law, or which was made to injure another. Id. at 588-89. Accordingly, the dismissal of the plaintiff s complaint was affirmed. After enactment of the Sherman Act, the Supreme Court had occasion to consider whether the in pari delicto doctrine applied in Harriman v. Northern Securities Co., 197 U.S. 244 (1905). The opinion in Harriman was preceded by the opinion in Northern Securities Co. v. United States, 193 U.S. 197 (1904), in which the shareholders of competing railroads had transferred their stock to a single holding company. The Court held that the creation of the holding company in this manner violated the antitrust laws and affirmed an injunction prohibiting the holding company from directing the affairs of the competitors. In response, the holding company sought to distribute to its shareholders the stock of the competitors. Some of the stockholders objected to the planned distributions, wanting instead the return of the stock they had transferred to the holding company. The stockholders sought an injunction against the holding company, which was initially granted by the trial court, but subsequently reversed by the Third Circuit. Northern Sec. Co. v. Harriman, 134 F. 331 (3d Cir. 1905). The Supreme Court found that the stockholders were not entitled to relief, holding that equity would not aid the plaintiffs, who had participated in the antitrust violation creating the holding company, even where the contract of sale was illegal. The Court found no special considerations of equity, justice or public policy, which would justify the courts in relaxing the rigor of the rule which bars recovery. Harriman, 197 U.S. at 296. In Eastman Kodak Co. of New York v. Southern Photo Materials Co., 273 U.S. 359 (1927), the doctrine of in pari delicto was first discussed in the context of a private treble-damage action. The customer, Southern Photo, brought suit against the supplier, Kodak, asserting that Kodak refused to sell materials to it in violation of 2 of the Sherman Act. Kodak asserted that the damages awarded were improper because they were based 5 The lockout is the only conduct alleged by the Eller plaintiffs to violate the Sherman Act. 6 In equal fault, the stronger is the situation of the defendant. on profits earned by Southern Photo while it participated in Kodak s unlawful monopolization efforts. The Court held the following to be a correct statement of the law: If, during the preceding period in which the plaintiff had been a customer of the defendant, it had not merely bought goods from the defendant because of a business necessity, but, with knowledge of the defendant s purpose to monopolize, had knowingly and willfully helped to build up the monopoly, it was in pari delicto, and hence could not recover any damages whatever on account of the defendant s refusal to continue to sell it goods; and, further, that even if the plaintiff had not been a party to the monopoly, it could not recover damages on the basis of profits which it had earned while a customer of the defendant to the extent that they had been increased by the monopoly and exceeded those in a normal business, but that they must be reduced to the basis of normal profits. Id. at 377 (emphasis added). The leading decision on the doctrine of in pari delicto in the antitrust context came in Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134 (1968). In Perma Life, the manufacturer (International Parts) made mufflers and car exhaust system parts. International Parts created a wholly owned subsidiary (Midas) to establish a chain of dealers. Midas then entered into agreements with the dealers, granting them the right to use the Midas trademark, provided that the dealers purchased all of their mufflers and other exhaust system parts from Midas, carried the entire line of Midas products, and generally refrained from dealing with Midas s competitors. Midas also fixed the retail prices that the dealers charged for mufflers, restricted the locations at which the dealers could sell the mufflers, and granted each an exclusive territory. Several dealers filed an antitrust action, claiming that the terms of the agreement violated the antitrust laws. The lower courts held that the dealers claims were barred by in pari delicto. The Supreme Court reversed. The lead opinion was authored by Justice Black and joined by four other Justices. The Court s ruling was clearly stated: We therefore hold that the doctrine of in pari delicto, with its complex scope, contents, and effects, is not to be recognized as a defense to an antitrust action. Perma Life, 392 U.S. at 140. The Court reasoned that there was no language in the antitrust statutes indicating congressional intent that the doctrine of in pari delicto apply as a defense to treble-damage actions under the antitrust laws. Further, because the antitrust laws serve an important public purpose, courts must be wary of importing common law barriers to relief in such settings. The Court also stated that private enforcement of the antitrust laws through trebledamage actions was an important mechanism for deterring antitrust violations, and a fastidious regard for the moral worth of the parties would only result in seriously undermining the usefulness of the private action as a bulwark of antitrust enforcement. Id. at 139. Even though the plaintiff s conduct may be no less morally reprehensible than [that of] the defendant,... the law encourages his suit to further the overriding public policy in favor of competition. Id. Nonetheless, if there were a beneficial byproduct to the plaintiff from the anticompetitive scheme, such a benefit could be taken into account in the computation of damages. Id. at 140. ANTITRUST & TRADE REGULATION REPORT ISSN 0003-6021 BNA 7-8-11

4 The defendants also characterized the dealers as actively supporting the entire restrictive program as such, participating in its formulation and encouraging its continuation. Perma Life, 392 U.S. at 140. The Court stated that the facts presented did not support that characterization. Therefore, the Court declined to address whether such truly complete involvement and participation in a monopolistic scheme could ever be a basis, wholly apart from the idea of in pari delicto, for barring a plaintiff s cause of action. Id. Justice White joined the opinion of the Court, but also wrote a separate concurring opinion. In his view, the historic doctrine of in pari delicto is not a useful concept for sorting out those situations in which the plaintiff might be barred because of his own conduct from those in which he may have been a party to an illegal venture but is still entitled to damages from other participants. Perma Life, 392 U.S. at 143 (White, J., concurring). But, rather than excusing entirely the culpability of an antitrust plaintiff, Justice White would examine whether allowing recovery, notwithstanding the plaintiff s own antitrust violation, would further the deterrent effect of private antitrust enforcement. Thus, when a party with superior bargaining power coerces another into an antitrust violation, the less powerful party should be permitted to recover damages. Id. at 145. If, however, the more powerful party were to suffer an injury after imposing a term in violation of the antitrust laws, that party would be barred from recovery. Similarly, in a price fixing scheme between two competitors, where the price fix results in lost business to one of the conspirators, it should not be allowed to bring an action against its coconspirator, unless the coconspirator was the more responsible for the illegal scheme. Id. at 146. In fact, allowing such a claim under the antitrust laws might promote the very conduct price fixing that the antitrust laws are designed to deter. Were the conspiracy successful, the conspirator would reap supracompetitive profits, and were it to fail, then the conspirator would have a claim for treble damages against the coconspirator. Justice White characterized his test principally as one of causation; that is, when the parties truly bear substantially equal responsibility, neither should be permitted to recover. But when one party is more culpable than the other, inquiry should be made into facts as to the relative responsibility for originating, negotiating, and implementing the scheme; evidence as to who might reasonably have been expected to benefit from the provision or conduct making the scheme illegal under 1; proof of whether one party attempted to terminate the arrangement and encountered resistance or counter-measures from the other; facts showing who ultimately profited or suffered from the arrangement. Id. at 146-47. In Justice White s view, the dealers were not shown to be as responsible for the scheme as Midas, nor were they equal partners with [Midas] with respect to the origin and implementation of this scheme for distributing respondents mufflers, or in terms of benefits from the scheme. Id. Justice Fortas concurred in the result, and stated that recovery should not be denied on the basis of the doctrine of in pari delicto. Perma Life, 392 U.S. at 147 (Fortas, J., concurring). In his view, however, recovery should be denied if the fault of the parties is reasonably within the same scale if the delictum is approximately par. Id. In other cases, where the parties are not in equal positions, a private suit for antitrust violations should be allowed. Justice Fortas also would have held that each aspect of the alleged scheme should be examined, and if any part of it was originated or insisted upon by the antitrust plaintiff, the antitrust plaintiff should be barred from recovery for that part. In Justice Fortas s view, the dealers were not coadventurers or partners in the franchise agreement as a whole, and they are not barred by in pari delicto. Id. at 148. But if, on remand, the dealers were found to have insisted on certain provisions, then they would not be permitted to recover damages in connection with those provisions. Id. Justice Marshall also concurred in the result. He disagreed with the lead opinion s finding that the doctrine of in pari delicto has no place in a treble-damage antitrust action. Perma Life, 392 U.S. at 148 (Marshall, J., concurring). Although Justice Marshall would not mechanically apply the doctrine as it had developed at common law, he would deny recovery upon a showing by the defendant that the plaintiff actively participated in the formation and implementation of an illegal scheme, and is substantially equally at fault. Id. at 149. Like Justice Fortas, he would deny recovery to an antitrust plaintiff to the extent that the plaintiff insisted on the term complained of. And if the defendant were to show that the plaintiff actually participated in the formulation of the entire anticompetitive scheme, trading off anticompetitive benefits for anticompetitive restrictions, then the plaintiff would be denied recovery altogether. Id. at 149-50. Justice Marshall s proposed rule rested not on the deterrent effects of treble-damage actions, but rather on the equities between parties and the principle that a wrongdoer should not be permitted to profit from his own wrong. Justice Harlan, joined by Justice Stewart, concurred in part and dissented in part. In Justice Harlan s view, the other members of the Court had used an improper definition of in pari delicto, and that as properly defined, it should be a defense to an antitrust action. Perma Life, 392 U.S. at 153 (Harlan, J., concurring in part, dissenting in part). He stated that when two private defendants engage in price fixing, both of them should be denied relief under the antitrust laws. Id. If, however, a third party were to purchase goods from one of the conspirators, knowing of their illegal conduct, the third party should nonetheless be permitted to recover, because the third party has broken no law; at most, the third party has allowed an offense to be committed against itself. Id. at 154. In the case where the defendant retaliates against a plaintiff s antitrust violation with an independent antitrust violation of the defendant s own, the plaintiff should be permitted to recover, on the theory that the law discourages vigilantism. Id. And in the case where a party with greater economic power coerces a party with lesser power into accepting terms that constitute an antitrust violation, the less powerful party does not bear equal fault and, therefore, should not be precluded from recovery. Id. at 155. Justice Harlan found the record to be unclear on those points, and that the lower courts had misapplied the doctrine of in pari delicto; accordingly, he would have remanded for further inquiry. Id. at 155-56. 7-8-11 COPYRIGHT 2011 BY THE BUREAU OF NATIONAL AFFAIRS, INC. ATRR ISSN 0003-6021

5 Thus, despite the sweeping statement in the lead opinion that in pari delicto does not apply in antitrust suits five Justices (White, Fortas, Marshall, Harlan, and Stewart) opined that when the parties truly are in equal fault for an antitrust violation, the antitrust plaintiff will be denied relief. In a subsequent case arising under the federal securities laws, the Court recognized the five-justice view as the rule of Perma Life, stating: a private action for damages in these circumstances may be barred on the grounds of the plaintiff s own culpability only where (1) as a direct result of his own actions, the plaintiff bears at least substantially equal responsibility for the violations he seeks to redress, and (2) preclusion of suit would not significantly interfere with the effective enforcement of the securities laws and protection of the investing public. Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 310-11 (1985). Notably, the doctrine of in pari delicto has been mentioned only in passing in subsequent Supreme Court antitrust cases. E.g., Am. Soc y of Mechanical Eng rs v. Hydrolevel Corp., 456 U.S. 556, 568 n.6, 569 (1982); Texas Indus., Inc. v. Radcliffe Mats., Inc., 451 U.S. 630, 635 n.7 (1981). The Circuit Courts of Appeals generally have concluded that an antitrust plaintiff may be denied relief if it had sufficient involvement in the violation. Shortly after Perma Life was decided, the Seventh Circuit ruled that the decision holds only that plaintiffs who do not bear equal responsibility for creating and establishing an illegal scheme, or who are required by economic pressure to accept such an agreement, should not be barred from recovery simply because they are participants. Premier Elec. Constr. Co. v. Miller-Davis, Co., 422 F.2d 1132, 1138 (7th Cir. 1970); see Blackburn v. Sweeney, 53 F.3d 825, 829 (7th Cir. 1995) (citing Bateman Eichler, and stating that [t]his Circuit has accepted and endorsed the equal responsibility defense. ). The Fourth Circuit likewise has embraced the view of the five concurring Justices in Perma Life, holding that when parties of substantially equal economic strength mutually participate in the formulation and execution of the scheme and bear equal responsibility for the consequent restraint of trade, each is barred from seeking treble damages from the other. Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3, 15-16 (4th Cir. 1971). In the First Circuit, a plaintiff is precluded from recovery when it has been in complete, voluntary, and substantially equal participation in an allegedly illegal scheme. CVD, Inc. v. Raytheon Co., 769 F.2d 842, 856 (1st Cir. 1985). The Ninth Circuit will permit relief, unless the defendant proves that the plaintiff had complete involvement and that the illegal conspiracy would not have been formed but for its participation. THI-Haw., Inc. v. First Commerce Fin. Corp., 627 F.2d 991, 995 (9th Cir. 1980). In dictum, both the Second and Fifth Circuits have recognized that an antitrust plaintiff may be denied relief when it bears equal culpability with the defendant. Bernstein v. Universal Pictures, Inc., 982 (2d Cir. 1975); Wilson P. Abraham Constr. Corp. v. Texas Indus., Inc., 604 F.2d 897, 902 (5th Cir. 1979), aff d on other grounds, 451 U.S. 630 (1981). But in the most recent Circuit Court opinion on the issue, the Third Circuit expressed doubt whether any plaintiff should be denied relief based on its involvement with an antitrust violation, although it ultimately did not decide the issue. Howard Hess Dental Labs. Inc. v. Dentsply Int l, Inc., 424 F.3d 363, 382-83 (3d Cir. 2005). C. The Appropriate Test The authors submit the following to be the appropriate test for determining when the doctrine of in pari delicto should be held to bar a private plaintiff from pursuing relief under the antitrust laws: (1) as a direct result of its own actions, the plaintiff bears at least substantially equal responsibility for the violations it seeks to redress; and (2) preclusion of suit would not substantially interfere with the effective enforcement of the antitrust laws and protection of the consuming public. This analysis is based on the holding in Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299 (1985). In developing the test in Bateman Eichler, the Supreme Court relied heavily on the concurring decisions in Perma Life. Bateman Eichler, 472 U.S. at 306-111. Moreover, the Court expressly rejected an argument by the defendant that the differences between the federal antitrust statutes and the securities laws required an analysis different from that in Perma Life. Bateman Eichler, 472 U.S. at 309-10. And the Court itself held that its two-pronged test came directly from an analysis of the multiple opinions in Perma Life. Id. at 310 ( We therefore conclude that the views expressed in Perma Life apply with full force to implied causes of action under the federal securities laws. ). 7 D. The First Category of Alleged Violations Category One consists of the players claims that several provisions of the SSA and CBA violate the antitrust laws; specifically, the players challenge the entering player pool, the salary cap, the franchise player, and the transitional player provisions. Under the entering player pool provision, the teams agreed to a maximum amount that can be paid to new players. The salary cap provisions of the most recent SSA and CBA provide that total wages paid to all players may not exceed 57.5% of Total Revenues, as that term is defined in those agreements. The franchise player and transitional player provisions severely restrict a player, whose contract has expired, from obtaining employment with a team other than his immediately preceding employer. Even presuming that these various provisions could be deemed antitrust violations, as contended by the players, and setting aside the obvious argument that the restraints are beyond the scope of the Sherman Act by 7 Some decisions have recognized the application of the Bateman Eichler test to antitrust actions. See, e.g., Gen. Leaseways, Inc. v. Nat l Truck Leasing Ass n, 830 F.2d 716, 721 n.7 (7th Cir. 1987) ( Because the Court in Bateman Eichler expressly relied upon and extended Perma Life based on its perception of similar interests in deterrence through private enforcement, Bateman must be regarded as authoritative in the antitrust case now before us. ); Roma Constr. Co. v. a Russo, 96 F.3d 566, 582 (1st Cir. 1996) ( Recognition of such a defense, patterned on the Clayton Act defense, was extended to securities actions in Bateman Eichler.... ) (Lynch, J., concurring). ANTITRUST & TRADE REGULATION REPORT ISSN 0003-6021 BNA 7-8-11

6 virtue of the nonstatutory labor exemption, the players should be denied relief under the antitrust laws under the doctrine of in pari delicto. As stated above, each of these provisions was incorporated into the SSA and CBA in 1993. See White v. NFL, 822 F.Supp. 1389, 1412-14 (D. Minn. 1993) (specifically describing the entering playing pool, salary cap, franchise player, and transition player provisions). In seeking the court s approval of the SSA, the players and their lawyers view[ed] the proposed settlement as a fair, reasonable and adequate method of resolving this litigation. Id. at 1397; see id. at 1426 ( Class counsel and the NFLPA believe that the entire agreement will benefit the overwhelming majority of the players in the NFL, and raise salaries throughout the league. ). They also believe[d] that the proposed settlement advance[d] and protect[ed] the interests of all class members, and provide[d] the framework for labor peace within the NFL after almost six years of strife. Id. at 1397. Not only did the players agree to these provisions, they fought to have the agreement implemented. The players counsel submitted affidavits in support of the proposed settlement agreement, and the reaction of the overwhelming majority of the players to the settlement [was] extremely favorable. White, 822 F.Supp. at 1420-21. After the court approved the SSA, the players and the teams moved to amend it, asking for modifications to the very same provisions at issue in Brady: the franchise player, transition player, entering player pool, and salary cap provisions. White v. NFL, 836 F.Supp. 1458, 1473-75 (D. Minn. 1993). Ninety-six percent of the players supported the amended SSA. Id. at 1483. And when one of the teams (the Philadelphia Eagles) objected to the approval of the amended SSA, the players even sought sanctions against that team. Id. at 1505. Based on the efforts of the players and the teams, the trial court entered final judgment approving the SSA. White v. NFL, 836 F.Supp. 1508 (D. Minn. 1993), aff d, 41 F.3d 402 (8th Cir. 1994), cert. denied, Jones v. NFL, 515 U.S. 1137 (1995). 8 Further, the SSA was the culmination of over five years of hard fought litigation in which NFL players, represented by class counsel, challenged the legality of the NFL player reservation system. White, 822 F.Supp. at 1421. The court expressly found that the SSA was the product of long and difficult negotiations, conducted in good faith and at arm s length by experienced and able attorneys. Id. And in the final analysis, the players no doubt have reaped substantial benefits from the SSA in the form of huge salaries. For the 2009-2010 season, it has been estimated that the average NFL player earned an annual salary of approximately $1.41 million to $2.08 million. 9 8 In the years following the approval of the SSA, the court has heard numerous disputes over its terms. See, e.g., White v. NFL, 899 F.Supp. 410 (D. Minn. 1995); White v. NFL 972 F.Supp. 1230 (D. Minn. 1997); White v. NFL, 92 F.Supp.2d 918 (D. Minn. 2000); White v. NFL, 88 F.Supp.2d 993 (D. Minn. 2000); White v. NFL, 149 F.Supp.2d 858 (D. Minn. 2001); White v. NFL, 2007 U.S. Dist. LEXIS 21536 (D. Minn. 2007); White v. NFL, 533 F.Supp.2d 929 (D. Minn. 2008); White v. NFL, 2008 U.S. Dist. LEXIS 33188 (D. Minn. 2008); White v. NFL, 585 F.3d 1129 (D. Minn. 2009);, 2011 U.S. Dist. LEXIS 20759 (D. Minn. 2011). 9 http://content.usatoday.com/sportsdata/football/nfl/ salaries/team. Under that set of facts, and presuming that the challenged provisions actually are antitrust violations, the players bear at least substantially equal responsibility for the violations they seek to redress. Unlike the situation presented in Perma Life, where there was no evidence that the dealers had any role in the development of the anticompetitive terms, there are reported decisions expressly holding that the players were intimately involved in drafting the provisions about which they complain. Given the protracted litigation leading to the approval of the amended SSA in 1993, there can be little doubt that the players had bargaining power substantially equal to that of the teams. See THI-Haw., Inc. v. First Commerce Fin. Corp., 627 F.2d 991, 996 (9th Cir. 1980) ( this is not a case of a party who has vigorously protested the inclusion of an illegal provision only to be overwhelmed by a party in a superior bargaining position ). And the SSA could never have come into existence without the consent and active participation of the players. In such cases, an antitrust court should deny relief under the doctrine of in pari delicto. The second inquiry is whether denying relief to the players under the antitrust laws would substantially interfere with the effective enforcement of those laws and the protection of the consuming public. Were the players to prevail in this case, clearly there could be more competition among teams for professional football player services. But that outcome could have no procompetitive effect on the consuming public. Indeed, unbridled competition for player services likely would result in an increase in prices to consumers, in that total player salaries would go up, causing an increase in ticket prices, the price of concessions, and other items. Of course, some fans could benefit from that scenario, if the teams that they supported were dramatically to increase their payrolls and acquire the services of the best players, thereby destroying the competitive balance of the league. Such an outcome, however, is not the purpose of the antitrust laws. See Am. Needle, Inc. v. NFL, 130 S.Ct. 2201, 2217 (2010) ( the interest in maintaining a competitive balance among athletic teams is legitimate and important.... ) (citation and internal quotation marks omitted). Moreover, allowing antitrust relief to the players in this case raises the very problem anticipated by Justice White in his concurrence in Perma Life. That is, the players were intimately involved in the development of the alleged restraints of trade. When they became dissatisfied with those restraints, the players filed a claim under the Sherman Act. Allowing the players to recover treble damages in such a case does nothing to deter violations of the antitrust laws; instead, it actually encourages other would-be violators. Upon seeing that an active coconspirator in a restraint of trade may recover treble damages for the violation that it helped to create, others could be encouraged to engage in similar anticompetitive conduct, knowing that if they become dissatisfied with the illegal agreement, treble damages may be obtained from the coconspirators. In other words, denying judicial relief to an admitted wrongdoer is an effective means of deterring illegality. Bateman Eichler, 472 U.S. at 306. Indeed, assuming that the conduct alleged in Category One violates the Sherman Act, then allowing relief to the players would do little more than effect a wealth transfer among active coconspirators. The policy underlying the antitrust laws the promotion of competition among business competi- 7-8-11 COPYRIGHT 2011 BY THE BUREAU OF NATIONAL AFFAIRS, INC. ATRR ISSN 0003-6021

7 tors thus would not be furthered by allowing the players to recover from the teams. Finally, and quite apart from the plaintiffs uncoerced agreement to the Category One conduct, Counts II and III cannot be maintained because the conduct complained about was adjudged by the court as lawful under the rule of reason and expressly included in its consent judgment that enrolled the SSA. It is black-letter law that a consent judgment may not be altered or modified at the request of one of the parties to it without a showing of changed circumstances. And the voluntary rejection of the nonstatutory exemption by the party seeking to overrule a consent judgment does not qualify as a changed circumstance. 10 Because of the limited scope of this article, we assume that the parties precomplaint conduct complied with applicable labor law and accept the plaintiffs representation that the nonstatutory exemption was in effect until the complaint was filed. 11 Part of the NFLPA s need for immediate disclaimer was avoidance of the alternative an impasse that, under Brown v. Pro Football, Inc., 578 U.S. 231 (1996), would clearly authorize the NFL unilaterally to impose the conditions of its last, best offer to the union. E. The Second Category of Alleged Violations Category Two of the antitrust violations alleged in the complaint consists of a single practice the lockout. Count I alleges that the lockout is a horizontal group boycott violative of 1 of the Sherman Act. Unlike each of the practices of Category One, the Category Two lockout is not (1) an ongoing practice that began before the filing of the Brady complaint; (2) a practice expressly agreed to by the plaintiffs as part of the CBA; or (3) a practice given rule of reason judicial approval by the district court or the Eighth Circuit as part of the SSA. Indeed, the only common thread connecting those practices contained in Category One with the lockout is that all were lawful under the Sherman Act until rendered unlawful by the NFLPA s intentional disclaiming of its role as the plaintiffs union representative. No legal or factual analysis is required to determine the precomplaint antitrust lawfulness of the Category One practices, because the plaintiffs allege that their calculated voiding of the nonstatutory exemption is what rendered them unlawful. Similarly, the plaintiffs repeatedly allege that the lockout is unlawful because, upon the NFLPA s disclaimer, the nonstatutory exemption immediately ceased to exist. 10 In other words, the plaintiffs allege that all the Category One practices were lawful until March 11, 2011 the date on which (1) the CBA expired; (2) the Category Two lockout began; (3) the nonstatutory exemption was jettisoned; and (4) the class-action complaint was filed. 11 Ironically, all the Category One anticompetitive practices are effectively subsumed within the Category Two lockout. Specifically, the lockout is alleged to be a horizontal group boycott a concerted refusal of the NFL and its member teams to deal with the plaintiffs in the ways enumerated in the CBA. As shown in the above discussion of the Category One practices, each is specifically authorized by the CBA. The irony, then, is that the allegations of Count I necessarily include a concerted refusal by the defendants to deal with the plaintiffs in the ways they complain about in Counts II and III i.e., Count I alleges that the defendants have conspired not to deal with the plaintiffs in ways that the plaintiffs allege injure them. In other words, Count I alleges antitrust injury at the hands of the defendants by their concerted refusal to engage in, among other things, the very conduct alleged by the plaintiffs in Counts II and III also to be causing them antitrust injury. As developed earlier, the defense of in pari delicto, loosely translated, means that the plaintiffs and defendants are of equal fault. If, however, what is meant by fault is that which makes the conduct sued upon unlawful, then there can be no equal fault here. That is because, as already developed, the alleged illegality of all the conduct was caused solely by the disclaimer of the NFLPA, as called for by an affirmative vote of the plaintiffs. In the typical in pari delicto setting, the plaintiff claims that it withdrew from a relationship because it was unlawful. In Brady, however, the plaintiffs claim that the relationship was unlawful because they withdrew. And if being of equal fault is sufficient at common law to bar a plaintiff s recovery, then being of sole fault should surely be sufficient. Broadly stated, there is nothing in the rationale of Perma Life that argues against denying recovery or injunctive relief to the plaintiffs for the lockout alleged in Brady, and there is much that argues for it. The nonstatutory exemption is a judicial policy specifically established for the purpose of promoting collective bargaining by protecting its practitioners from antitrust liability. 12 Against the general Congressional policy of promoting competition, there is the specific Congressional policy of promoting labor peace by restraining competition to the extent necessary to facilitate collective bargaining. On the one hand, the authors strongly doubt that precluding recovery on a dispute that can be classified as antitrust only because of the plaintiff s intentional destruction of an antitrust exemption would serve as any deterrent to private enforcement of the antitrust laws. On the other hand, the authors have no doubt that allowing recovery on such a dispute would act as a strong deterrent to good-faith collective bargaining by multiemployer groups. Collective bargaining under conditions where the nonstatutory exemption may be used by the union as a bargaining chip instantly capable of converting a labor lockout into an antitrust conspiracy does not promote good faith. And antitrust is too important to permit its tribunals to descend into the role of pawns in the process of negotiating, amending, and enforcing collective bargaining agreements. 13 12 The purpose of the nonstatutory exemption is not, however, just to protect employees and their employers from treble damage liability; its purpose equally is to prevent antitrust tribunals from answering a host of important practical questions about how collective bargaining... is to proceed the very result that the implicit labor exemption seeks to avoid. Brown, 578 U.S. at 240-41. 13 As Justice Goldberg observed in his concurring opinion in United Mine Workers of America v. Jewel Tea Co., Inc., 381 U.S. 676, 716 (1965), it is clear that Congress intended to foreclose judges and juries from roaming at large in the area of collective bargaining, under cover of the antitrust laws.... And as Justice Breyer opined in Brown, supra., 578 U.S. at 242, one of the labor law objectives was to take from antitrust courts the authority to determine, through application of the antitrust laws, what is socially or economically desirable collectivebargaining policy. ANTITRUST & TRADE REGULATION REPORT ISSN 0003-6021 BNA 7-8-11

8 All this is not to suggest that a multiemployer labor dispute cannot mature over time into an antitrust violation. It is irrational to presume, however, that the maturation process can be completed in one day, as is alleged in Brady, and that the disclaimer of union status renders all collective-bargaining that preceded it unlawful ab initio. Similarly, it is not suggested that the limited application of Perma Life envisioned here should be applied only to labor disputes of the type presented in Brady. Rather, it should be available wherever a plaintiff has intentionally curtailed an antitrust exemption in order to base an antitrust complaint on the newly nonexempt conduct. Invoking or creating a new variety of in pari delicto is, of course, not the only means of protecting antitrust tribunals from collective-bargaining encroachment. For example, it might be possible to invoke the familiar doctrine that a person will not be allowed to recover for his own wrong, as Justice Marshall wrote in his concurring opinion in Perma Life. But the wrong here is not something that has caused injury to the plaintiffs, and they have nothing to recover; if any injury is sustained, it will solely befall the defendants. Similarly, the doctrine of unclean hands does not seem to fit. Notwithstanding that the applicability of unclean hands to antitrust claims received much the same treatment in Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211 (1951), that in pari delicto received in Perma Life, the defense of unclean hands typically requires some wrongful conduct by the plaintiff outside the facts of the case in which it is raised. And the wrongful conduct of the Brady plaintiffs is not even of a type that is actionable. Indeed, it is better described as manipulative. In any event, expanding the doctrine of in pari delicto to accommodate the lockout claim does not seem to be that much of a stretch and does no violence to Perma Life. First, there is no conceivable way that the overriding public policy in favor of competition, Perma Life, 392 U.S. at 139, could be furthered by allowing the Brady plaintiffs to recover. Where the allegedly illegal scheme in Perma Life was thrust on the plaintiffs by the defendant, here the defendants conduct was unlawful, if at all, solely by reason of a voluntary act of the plaintiffs one to which the defendants in no way contributed and that they were incapable of preventing. In sum, no benefit to antitrust law would be achieved by allowing one of its exemptions to be manipulated as a ploy by those for whose benefit it was created. Because public policy strongly favors keeping labor disputes out of antitrust tribunals, the doctrine of in pari delicto should be expanded, if necessary, to preclude recovery for the lockout claim in Brady. CONCLUSION The public-policy reasons that underly the Supreme Court s decision in Perma Life strongly suggest that the Brady action should be barred. The preexisting conduct about which the plaintiffs complain not only falls within the classic understanding of in pari delicto and the five-justice rule distilled from Perma Life, but is separately barred by the doctrine that a consent judgment may not be modified absent changed circumstances. And because the lockout is unlawful, if at all, only because so rendered by the plaintiffs disclaimer of union status, it should qualify for a sui generis application of in pari delicto where, as here, the plaintiff is solely responsible for any illegality of the conduct. In sum, all the antitrust claims in the Brady complaint should be barred on the grounds of in pari delicto. 7-8-11 COPYRIGHT 2011 BY THE BUREAU OF NATIONAL AFFAIRS, INC. ATRR ISSN 0003-6021

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10 7-8-11 COPYRIGHT 2011 BY THE BUREAU OF NATIONAL AFFAIRS, INC. ATRR ISSN 0003-6021