APPENDIX Subsequent to the hearing, Hon. John F. Seiberling submitted the following documents for inclusion in the record. [Telegram] NEW YORK, N. Y., October 14, 1975. Congressman JOHN F. SEIBERLING, The National Basketball Players Association strongly applauds your sponsorship of legislation in connection with professional athletes. The NBA players are actively involved in an anti-trust action and at this very moment protesting most of the issues involved in your hearing. LAWRENCE FLEISHER, General Counsel. U.S. DISTRICT COURT, DISTRICT OF MINNESOTA, FOURTH DIVISION Findings of Fact, Conclusions of Law and Order for Judgment, No. 4-72-Civil 277 JOHN MACKEY, ET AL., PLAINTIFFS v. NATIONAL FOOTBALL LEAGUE, AN UNINCORPORATED ASSOCIATION, ET AL., DEFENDANTS INTRODUCTION Trial commenced before the Court without a jury on February 3, 1975, and terminated on July 19, 1975, after 55 days of trial. Sixty-three witnesses presented oral testimony in the Court Room and the testimony of four of these witnesses was also presented by deposition transcript. Five additional witnesses testified solely through deposition transcript. The Court's attention was directed to in excess of 400 exhibits. The trial transcript extends to over 11,000 pages. Post-trial briefs were received by October 1, 1975. The plaintiffs are present or former professional football players in the National Football League (hereinafter "NFL"). The Count I plaintiffs seek only injunctive relief. They are Kermit Alexander, Kenneth Bowman, William Curry, Thomas Keating, John Mackey and Alan Page. The Count II plaintiffs seek monetary damages. They are Ocie Austin, Marlin Briscoe, Richard F. Gordon, John Henderson, Clint Jones, Gene Washington, Charles West, John Williams and Nate Wright. The NFL is an unincorporated association or league of professional football clubs. Its membership presently consists of 26 professional football clubs, each operating a team within the United States. The NFL schedules and organizes the pattern of games played between the teams of its member clubs. The league provides officials for the supervision of the playing of such games and has formulated rules for the playing of such games. The NFL performs various other functions related to the operation of a professional sports league. Defendant Alvin Ray "Pete" Rozelle is an employee of the NFL, is its chief executive officer and its commissioner. His powers and duties are set forth in the NFL Constitution and By-Laws. Defendant clubs own and operate professional football teams and each club is a member club of the NFL. The business of professional football as conducted by them involves a variety of activities, including the playing of football games, transporting players and other team personnel, employing players and other personnel, purchasing and transporting equipment, and arranging telecasts and (81) broadcasts of professional football games through contracts with television and radio networks or stations. Defendants have admitted for purposes of this proceeding that each of them transacts business in the District of Minnesota. On October 11, 1972, plaintiffs filed their Amended Complaint, which added Richard F. Gordon and Ocie Austin as parties plaintiff. On January 10, 1974, plaintiffs filed their Second Amended Complaint, which deleted the class action allegations contained in the original and amended complaints. The Court's pretrial understanding of the issues to be tried was as follows: (1) Plaintiffs claim that Section 12.1 (H) of the NFL Constitution and By-Laws (hereinafter referred to as the "Rozelle Rule") constitutes a per se violation of the antitrust laws. Plaintiffs claim that if the Rozelle Rule does not constitute a per se violation of the antitrust laws, it violates the Rule of Reason standard. Plaintiffs further claim that they are entitled to damages and injunctive relief. (2) Defendants claim that the per se standard is not applicable, that the Rule of Reason standard is the test to be applied, and that under that test there is no violation of the antitrust laws. Defendants further claim that their conduct is immune from the antitrust attack under their "labor exemption” defense. Defendants further claim that this action is not properly in this court. but rather is within the exclusive jurisdiction of the National Labor Relations Board. Pursuant to pretrial Order on December 6, 1974, trial was held on the issues of liability of defendants under the antitrust laws. Pending determination of the issues of antitrust liability, trial as to the damage issues was deferred. At the close of plaintiffs' case defendants' motion to dismiss was denied. Extensive evidence as to the reasonableness of the Rozelle Rule under the Rule of Reason standard was received during the course of the trial. The trial afforded the Court a comprehensive view of the workings of the National Football League and of the collective bargaining history and of the nature and effects of the Rozelle Rule. The Court was aided by financial exhibits produced by defendants, expert testimony by economists, and testimony by owners, players, coaches, general managers, and others. The Court's Findings of Fact and Conclusions of Law are set forth in 10 numbered topics hereafter. In reaching these Findings the Court has weighed the evidence relating to the restrictive and anticompetitive nature of the Rozelle Rule against the evidence presented by defendants to show among other things: (1) That the Rozelle Rule is reasonable. (2) That the NFL member clubs are not horizontal business competitors of one another. (3) That professional football is a form of entertainment dependent on competitive balance. (4) That the Rozelle Rule is necessary to maintain such competitive balance. (5) That the Rozelle Rule and other player rules have served player and club interests. (6) That the Rozelle Rule is absolutely necessary to the existence of professional football and the structure of the game. The Findings which follow therefore constitute the Court's decision in compliance with Rule 52 of the Rules of Civil Procedure. 1. Defendant NFL and its member clubs are subject to the antitrust laws 1.1 The business of professional football is subject to the antitrust laws. Radovich v. National Football League, 352 U.S. 445 (1957). 1.2 Each of the NFL member club defendants and the NFL is engaged in interstate commerce to a substantial degree. 1.3 The defendant member clubs are organized and operated for profit. 1.4 Defendant NFL and its member clubs have complete monopoly over major league professional football in the United States. 2. The history of the Rozelle Rule 2.1 Prior to 1963 there was no right in any club to receive compensation from another club when that club signed a player who had previously been under contract to the first club. 2.2 In 1962, R. C. Owens became a free agent after playing out the option year with the San Francisco 49ers, and was no longer under contract to that or any other club. Owens then signed a contract with the Baltimore Colts. The adoption of the Rozelle Rule followed the signing of Owens. 2.3 The Rozelle Rule was unilaterally adopted by defendant member clubs in 1963 as an amendment to their Constitution and By-Laws, becoming Section 12.1(H) of that document. 2.4 Article 12.1 (H) of the NFL Constitution and By-Laws (hereinafter the "Rozelle Rule") reads as follows: "Any player, whose contract with a League club has expired, shall thereupon become a free agent and shall no longer be considered a member of the team of that club following the expiration date of such contract. Whenever a player, becoming a free agent in such manner, thereafter signs a contract with a different club in the League, then, unless mutually satisfactory arrangements have been concluded between the two league clubs, the Commissioner may name and then award to the former club one or more players, from the Active, Reserve, or Selection List (including future selection choices) of the acquiring club as the Commissioner in his sole discretion deems fair and equitable; any such decision by the Commissioner shall be final and conclusive." 2.5 The Rozelle Rule has continued to the present day as Section 12.1(H) of the NFL Constitution and By-Laws without any change from the form in which it was originally adopted. 2.6 Each of the member clubs, as a condition of its initial entry into the National Football League, agreed to abide by the NFL Constitution and By-Laws. Each of the defendant NFL member clubs has thus agreed to be bound by and to follow the Rozelle Rule. 2.7 Through the conclusion of trial Commissioner Rozelle had exercised his power under the Rozelle Rule of awarding compensation to the club to which a player had previously been under contract four times. Those instances were as follows: 2.7.1 Pat Fischer.-In 1967 Fischer played out the option year with the St. Louis Cardinals. After May 1, 1968, he was signed by the Washington Redskins. Commissioner Rozelle awarded the Cardinals a second round draft choice in the 1969 draft and a third round draft choice in the 1970 draft. 2.7.2 David Parks-Kevin Hardy.-In 1967 Parks played out the option with the San Francisco 49ers and became a free agent on May 1, 1968. He subsequently signed a contract with the New Orleans Saints. There had been no agreement on compensation between the two clubs. Commissioner Rozelle awarded as compensation from the New Orleans Saints to the San Francisco 49ers Hardy, the New Orlean Saints' first round draft choice in the earlier 1968 draft, and the New Orleans Saints' first round draft choice in the upcoming 1969 draft. 2.7.3 Phil Olsen.-In 1971 the New England Patriots neglected to timely exercise their option over Olsen's services for the upcoming 1972 season. Commissioner Rozelle declared Olsen a free agent and no longer a member of the New England Patriots team. Olsen then signed with the Los Angeles Rams. Commissioner Rozelle awarded to the New England Patriots the Los Angeles Rams' first round draft choice in the 1972 draft and stated that additional compensation would be awarded to the Patriots from the Rams at the conclusion of the 1971 season. He also directed the Rams to pay to the Patriots the sum of $35,000 constituting Olsen's initial signing bonus and other expenses. In January 1972, Commissioner Rozelle awarded additional compensation to the New England Patriots: the Rams' third round draft choice which they had previously acquired from the Washington Redskins. 2.7.4 Dick Gordon.-Gordon played out the option with the Chicago Bears during the 1971 season and became a free agent May 1, 1972. A number of clubs thereafter expressed interest in obtaining Gordon's services. However, no club was able to work out a compensation agreement with the Chicago Bears. Because of this fact, no club would sign Gordon due to the unknown compensation that would be awarded should it do so. The situation was at an impasse well into the 1972 regular season. Finally, Commissioner Rozelle announced in advance of any signing what the compensation to the Chicago Bears would be: a first round draft choice for the draft following the 1973 football season. Immediately thereafter the Los Angeles Rams signed Gordon to a contract. 3. Other claimed anticompetitive practices of the defendants 3.1 A better understanding of the Rozelle Rule requires analysis of other anticompetitive rules and practices of the defendants. These rules, part of the reserve system of the NFL, impose severe hardships on a player prior to his ever becoming a free agent and act to discourage and deter players from playing out the option and achieving that status. 3.2 The draft.-The player selection process of the defendants, commonly referred to as the Draft, occurs annually in January or February. 3.2.1 Virtually all players desiring to enter into professional football, and deemed qualified, are divided up by defendants among the defendant clubs. Each such player is required to negotiate and deal with only that one defendant club to whom he has been assigned. The draft deprives players of the opportunity to negotiate with clubs other than the one club that drafted them. 3.2.2 If the player does not desire to deal with the defendant club which selected him or if he is unwilling to accept the terms offered by it, he is effectively boycotted or blacklisted. 3.3 Standard player contract.—If a player is drafted and agrees to the terms of the defendant club to which he is thereby assigned, the rules of the NFL dictate that he sign a Standard Player Contract. 3.3.1 No club is allowed to employ a player who will not sign this form of contract. (Section 15.6 of the NFL Constitution and By-Laws.) 3.3.2 While minor modifications or departures from the Standard Player Contract are permitted by defendants, no modifications or departures are permitted that would open up a player's services to free competition between the clubs. The Standard Player's Contract in all cases binds each player to a member club for a period of at least two years. The two year period is comprised of the stated period of duration of the contract-one year, and a second year mandated by a provision granting the club a unilateral right to extend the contract for that period. 3.4 Option clause. This provision in the Standard Players Contract allows the club to unilaterally extend the player's contract for an additional year, and is referred to as the Option Clause. 3.4.1 The Option Clause acts to discourage players from playing out the option and becoming free agents. 3.4.2 It binds the player to an additional year during which he must perform for the club. 3.4.3 Further, under the Option Clause a club can, and in virtually all cases does, reduce the player's salary to 90% of the contract amount for the previous year. 3.4.4 In most instances the player would prefer to sign a new contract with his club at the new salary offered him than play an additional year at a 10% reduction in salary. 3.4.5 During this option year the player who has not signed a new contract faces possible informal discipline by disapproving coaches and owners. He also risks injury and a poor performance during the option year, facts which would substantially limit his opportunities to go elsewhere if and when he attained free agent status. 3.5 Tampering.-Competition for players' services is further frustrated by the so-called tampering rule. During the time a player is under contract with one club, including the option year, all defendant clubs are prohibited from negotiating with him or making offers to him. This prohibition runs to May 1, despite the fact that the club's regular season ends in the previous December. Such negotiations or offers are called tampering, which, under Section 9.2 of the NFL Constitution and By-Laws, subjects the offending club to fines, penalties and liability to expulsion from the League. 3.5.1 The player has thus an unnecessarily small amount of time in which to bargain with other clubs if and when he finally achieves free agent status. That time period is, for all practical purposes, less than three months in length: from May 1 to the beginning of the summer camps of the clubs. 4. The reserve system of the NFL 4.1 At the end of the option year, which ends on May 1, a player theoretically gains his freedom and may bargain with any club. Such freedom appears to be illusory. 4.2 A club which desires a player who has played out the option and has become a "free agent" cannot sign that player without an agreement in advance as to what compensation it will pay to the club to which the player was formerly under contract, unless it is willing to risk an unknown compensation award by Commissioner Rozelle. 4.3 The fact that unknown compensation would be awarded has acted as an effective deterrent to clubs signing free agents without reaching a prior agreement on compensation with that player's former club. 4.3.1 The extreme reluctance of clubs to sign such a player without a prior agreement on compensation is clearly evidenced by the few isolated instances in which it has occurred since the adoption of the Rozelle Rule in 1963. |