6.2 The Rozelle Rule is invalid under the Rule of Reason standard. 6.2.1 The Rozelle Rule is unreasonably broad in its application. The testimony indicated that defendants are concerned with the effects of unrestricted movement between clubs of the best players in the NFL. Little or no concern was expressed with respect to the average or below average player playing out the option and going to another club without any compensation being given or awarded. However, the Rozelle Rule is not limited to superstars or even the better players. It covers, includes and affects every player, no matter how marginal his status or ability. 6.2.2 The rule is further unreasonable in that there are no procedural safeguards whatsoever with respect to its employment. There is no hearing or opportunity to be heard. The free agent player may not even be aware that other clubs are interested in him and are negotiating with the club to which he was formerly under contract. There is no safeguard against the club to which the player was formerly under contract being unreasonable or refusing to even state any compensation demand. A club can and often does effectively discourage interest by other clubs in a free agent player simply by telling them that they are interested in signing the player and that they intend to do so. 6.2.3 The Rozelle Rule is unreasonable in that it is unlimited in duration. It is a perpetual restriction on a player, following him throughout his career. He is at no time truly free to negotiate for his services with any NFL club. 6.2.4 The Rule is unreasonable when viewed in conjunction with the other anticompetitive practices of defendants: the Draft; the Standard Player Contract; the Option; the Tampering Rule. 6.3 The justifications as to reasonableness presented by defendants fail to demonstrate that the Rule is reasonable. 6.3.1 Protection of investment.-Defendants claim that one of the purposes of the Rozelle Rule is to protect the member clubs' investment in established players: e.g., scouting expenses and player development costs. The Court finds that the expense incurred in selection, training and development of professional football players is not unlike that of other businesses which incur hiring and training costs. There is no right to compensation for this type of investment. 6.3.2 Player continuity.-Evidence was presented by defendants that player continuity was important to the success of a football team. Testimony was presented that time was required for players to effectively work together as a team. 6.3.2.1 The elimination of the Rozelle Rule would, however, affect all teams equally. 6.3.2.2 The quality of play in the NFL will not decrease with the elimination of the Rozelle Rule and consequent freedom of employment. Even assuming the quality of play would decrease, that fact does not justify the Rule's anticompetitive nature. 6.3.2.3 The player continuity argument implicity acknowledges that the Rozelle Rule restricts player movement and that there would be additional movement if it was eliminated. 6.3.2.4 One of the purposes of the Rozelle Rule is to restrict player movement. 6.3.3. Competitive balance.-The Court finds that the existence of the Rozelle Rule and the other restrictive devices on players have not had any material effect on competitive balance in the National Football League. Assuming that they have fostered competitive balance, other legal means are available to pursue this goal (e.g., the Competition Committee, multiple year contracts and special incentives). 6.3.4 Disruption of and irreparable damage to the NFL.-Elimination of the Rozelle Rule would have no significant immediate disruptive effect on professional football. 6.3.4.1 All players are now under contract to a club, some under long, multiple year contracts. 6.3.4.2 Relatively few players at a given time are playing in the option year. 6.3.4.3 Elimination of the Rozelle Rule will not spell the end of the National Football League or even cause a decrease in the number of franchises in the National Football League. 6.3.4.4 Changes in location of franchises or reorganization of existing franchises may occur. 6.3.4.5 If the effects of this decision prove to be too damaging to professional football, assuming justification existed, Congress could possibly grant special treatment to the National Football League based upon its claimed unique status. 7. Defendants' claimed labor exemption 7.1 There is no labor exemption from the antitrust laws available to defendants. 7.2 The exemption extends only to labor or union activities, and not to the activities of employers. 7.3 Assuming the labor exemption can extend derivatively or otherwise to management, it cannot be so extended under the facts in this case. 7.4 The product in professional football for antitrust analysis consists of the players. The Rozelle Rule operates as a direct restriction on competition in this product market. 7.5 The Rozelle Rule is not, and has not been considered by the union to be, in the players' best interests. 7.6 The Rozelle Rule is a nonmandatory, illegal subject of bargaining. 7.6.1 The Rozelle Rule, being a per se violation of the antitrust laws and otherwise violative of the antitrust laws under the Rule of Reason standard, cannot, because of its illegality, constitute a mandatory subject of bargaining as that phrase is used in labor law. 7.6.2 Mandatory bargaining under the National Labor Relations Act does not coincide with legality under the Sherman Act. The National Labor Relations Act governs the methods or procedures for reaching a collective bargaining agreement, not the legality of it. 7.6.3 Simply because the clubs and the union must bargain does not mean that the clubs can ignore other laws. United Mine Workers v. Pennington, 381 U.S. 657, 665 (1965). 7.7 In neither of the two collective bargaining sessions which resulted in collective bargaining agreements was there any trade-off or quid pro quo whereby the union agreed to the Rozelle Rule in return for other benefits. 7.7.1 Individual negotiation of regular season salaries is traditional in professional sports. 7.7.2 In 1968 and again in 1970 neither party in the collective bargaining wanted any change from this traditional practice. 7.7.3 Prior to the commencement of negotiations in 1968 it was agreed that the union would not be required to negotiate regular season salaries. 7.8 The union has never agreed to the Rozelle Rule. 7.9 In the collective bargaining history between the union and the defendants there has been nothing which could be legitimately characterized as "bargaining" between the parties with respect to the Rozelle Rule. 7.9.1 In the 1968 negotiations there was from the outset a solid refusal on the part of the owners to negotiate on the Option Clause, which term at that time was understood to include the Rozelle Rule. 7.9.2 The Option Clause issue was effectively ignored by relegating it to a committee for "study" under the 1968 NFLPA-NFL Collective Bargaining Agreement. (article VIII.) 7.9.3 There was no agreement by the union to the Rozelle Rule in the 1968 Collective Bargaining Agreement. 7.9.4 The union achieved little in the way of substantive benefits in the 1968 Collective Bargaining Agreement. 7.9.4.1 Most of the substantive benefits to the union were in reality continuation of past practices by the defendants. 7.9.5 There was no agreement by the union to the Rozelle Rule in the 1970 Collective Bargaining Agreement. 7.9.6 In 1970 the position of the clubs, expressed numerous times to the union leaders, was that there could be no changes in the "structure of the game or in the Commissioner's form of self government." Defendants took the position throughout the 1970 negotiations that the Commissioner's powers, including the Rozelle Rule, could not be touched and were non-negotiable. Throughout the 1970 bargaining process there was no negotiation during which the union agreed to or accepted the Rozelle Rule. 7.9.6.1 The Scope of Agreement clause in the 1970 Collective Bargaining Agreement does not constitute an acceptance by the union of the Rozelle Rule. 7.9.6.2 There is no reference in the Rozelle Rule in the 1970 NFLPA-NFL Collective Bargaining Agreement. 7.9.6.3 The clubs sought to insert a provision dealing with the Rozelle Rule during the drafting of the 1970 Collective Bargaining Agreement. 7.9.6.4 The clubs through this provision were attempting to protect themselves from litigation attacking the Rozelle Rule. 7.9.6.5. The union rejected this provision. 7.9.7 The 1970 Collective Bargaining Agreement expired by its terms January 31, 1974. Since that time there has been no collective bargaining agreement in effect between the NFLPA and the clubs. 7.9.8 In the 1974 negotiations the union demanded the elimination of the Rozelle Rule, taking the position that in their judgment it was illegal. This latter position was the position of the NFLPA throughout the negotiations in 1974. 7.9.9 There were no negotiations on any major issues in 1974. 7.10 The union, from its inception through the present day, has been too weak vis-a-vis the clubs to obtain elimination of or even a reasonable modification of the Rozelle Rule. 7.10.1 In 1968 the split between the leaders of the AFLPA and the NFLPA contributed to a severely weak bargaining position on the part of the union. 7.10.2 In 1968 the union was a fledgling organization and had its first experience with formal collective bargaining and this further contributed to a weak bargaining position. 7.10.3 Faced with the clubs' refusal to even discuss the issue in 1968, union representatives realistically had no hope of eliminating the Rozelle Rule or even changing it. 7.10.4 In 1968 the American Football League Players Association's signing of a collective bargaining agreement with the clubs undercut the brief strike of the NFLPA and left the NFLPA no alternative but to accede to the clubs' terms. 7.10.5 Factors contributing to the relatively weak position of the union in collective bargaining with the clubs in 1970 were inadequate finances and communication problems, the latter made particularly acute by the large number of players and their geographical dispersion. 7.10.5.1 The union was approximately $200,000 in debt during the 1974 negotiations. That was also the union's financial position at the conclusion of trial. 7.10.5.2 There exists a great disparity in financial strength between the clubs' collective bargaining committee and the union. 7.10.6 Illustrative of the lack of bargaining power of the union and the strength of the clubs was the reduction by the clubs in 1975 in the squad size from 47 active players to 43. This reduction was unilaterally imposed by the clubs without any bargaining or consultation with the union. 7.10.7 It has been impossible to date for the union to wage an effective strike in support of their bargaining demands. 7.10.7.1 A strike has never been economically feasible for the union. 7.10.7.2 An effective strike has never been possible for the union partly as a result of the substantial adverse public pressure that would be engendered by the taking of such action. 7.11 The present litigation should not have impeded or frustrated the collective bargaining efforts of the parties. Any such impeding or frustrating effect has been the result of the defendant clubs' insistence on an agreement by the union to the present Rozelle Rule or to a provision substantially similar in effect. 7.12 The Rozelle Rule has never been the subject of serious, intensive, armslength collective bargaining. 7.13 The Rozelle Rule was unilaterally imposed by the NFL and member club defendants upon the players in 1963 and has been imposed on the players from 1963 through the present date. 7.14 The NFLPA has made every effort to eliminate the Rozelle Rule, but in that endeavor has been totally unsuccessful. 7.15 From 1963 up until 1968 the defendants operated independent of collective bargaining constraints. 7.16 Defendants are not insulated from antitrust liability simply because of the emergence of collective bargaining with the union in 1968 and the union's inability to date to achieve the elimination of the Rozelle Rule through the collective bargaining process. 8. Jurisdiction of the National Labor Relations Board 8.1 The National Labor Relations Board does not have exclusive jurisdiction over the subject matter of this lawsuit. 8.2 The National Labor Relations Board does not have primary jurisdiction over issues necessary to the Court's determination. 8.2.1 The doctrine of exclusive primary National Labor Relations Board jurisdiction has never been applied by the Supreme Court to avoid a determination on the merits of an antitrust claim. 9. Damages 9.1 The Court finds that each of the plaintiffs has been injured in his business or property. 9.2 Evidence as to the specific damages suffered by each of the nine Count II plaintiffs within the limitation period will be heard in that stage of the trial relating to the damage issues. 10. Order for judgment 10.1 The Clerk shall enter judgment on these Findings and Conclusions as follows: 10.2 Section 12.1 (H) of the NFL Constitution and By-Laws, commonly referred to as the Rozelle Rule, is hereby declared to be in violation of the antitrust laws. 10.3 Defendants, and each of them, their respective officers, agents, servants, employees, and all persons in active concert or participation with them, or any of them who receives actual notice of this judgment by personal service or otherwise, be, and they hereby are, permanently restrained and enjoined, pending further order, from continuing, attempting to continue, or otherwise enforcing the Rozelle Rule against plaintiffs. 10.4 For the plaintiffs and against defendants on Counts I and II of plaintiffs' Second Amended Complaint. 10.5 Costs and attorneys' fees will be determined later. 10.6 Judgment will be stayed pending appeal or until further Order of this Court. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE Submitted: June 17, 1976; filed: October 18, 1976. Before GIBSON, Chief Judge, LAY and WEBSTER, Circuit Judges. LAY, Circuit Judge. This is an appeal by the National Football League (NFL), twenty-six of its member clubs, and its Commissioner, Alvin Ray "Pete" Rozelle, from a district court judgment holding the "Rozelle Rule" 1 to be violative of § 1 of the Sherman Act, and enjoining its enforcement. This action was initiated by a group of present and former NFL players,2 appellees herein, pursuant to §§ 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, and § 1 of the Sherman Act, 15 U.S.C. § 1. Their complaint alleged that the defendants' enforcement of the Rozelle Role constituted an illegal combination and conspiracy in restraint of trade denying professional football players the right to freely contract for their services. Plaintiffs sought injunctive relief and treble damages. 1 The Rozelle Rule essentially provides that when a player's contractual obligation to a team expires and he signs with a different club, the signing club must provide compensation to the player's former team. If the two clubs are unable to conclude mutually satisfactory arrangements, the Commissioner may award compensation in the form of one or more players and/or draft choices as he deems fair and equitable. 2 The suit was initiated by 36 players as a class action; however, the class action allegations were later withdrawn. At the commencement of trial, there remained 16 of the original plaintiffs. Six of them, Kermit Alexander, Kenneth Bowman, William Curry, Thomas Keating, John Mackey, and Alan Page, sought only injunctive relief under Count I of the complaint. The remaining 10, Ocie Austin, Marlin Briscoe, Daniel Conners, Richard F. Gordon, John Henderson, Clint Jones, Gene Washington, Charles West, John Williams, and Nate Wright, sought both injunctive relief and damages under Count II. Conners later withdrew his claim. The district court, the Honorable Earl R. Larson presiding, conducted a plenary trial which consumed 55 days and produced a transcript in excess of 11,000 pages. At the conclusion of trial, the court entered extensive findings of fact and conclusions of law. The court granted the injunctive relief sought by the players and entered judgment in their favor on the issue of liability. This appeal followed. The district court held that the defendants' enforcement of the Rozelle Ruleconstituted a concerted refusal to deal and a group boycott, and was therefore a per se violation of the Sherman Act. Alternatively, finding that the evidence offered in support of the clubs' contention that the Rozelle Rule is necessary to the successful operation of the NFL insufficient to justify the restrictive effects of the Rule, the court concluded that the Rozelle Rule was invalid under the Rule of Reason standard. Finally, the court rejected the clubs' argument that. the Rozelle Rule was immune from attack under the Sherman Act because it had been the subject of a collective bargaining agreement between the clubowners and the National Football League Players Association (NFLPA). The defendants raise two basic issues on this appeal: (1) whether the so-called labor exemption to the antitrust laws immunizes the NFL's enforcement of the Rozelle Rule from antitrust liability; and (2) if not, whether the Rozelle Rule and the manner in which it has been enforced violate the antitrust laws. Ancillary to these contentions, appellants attack a number of the district court's findings of fact and raise several subsidiary issues. HISTORY We first turn to a brief examination of the pertinent history and operating principles of the National Football League. The NFL, which began operating in 1920, is an unincorporated association comprised of member clubs which own and operate professional football teams. It presently enjoys a monopoly over major league professional football in the United States. The League performs various administrative functions, including organizing and scheduling games, and promulgating rules. A constitution and bylaws govern its activities and those of its members. Pete Rozelle, Commissioner of the NFL since 1960, is an employee of the League and its chief executive officer. His powers and duties are defined by the NFL Constitution and Bylaws. Throughout most of its history, the NFL's operations have been unilaterally controlled by the club owners. In 1968, however, the NLRB recognized the NFLPA as a labor organization, within the meaning of 29 U.S.C. § 152(5), and as the exclusive bargaining representative of all NFL players, within the meaning of 29 U.S.C. § 159(a). Since that time, the NFLPA and the clubs have engaged in collective bargaining over various terms and conditions of employment. Two formal agreements have resulted. The first, concluded in 1968, was in effect from July 15, 1968 to February 1, 1970. The second, entered into on June 17, 1971, was made retroactive to February 1, 1970, and expired on January 30, 1974. Since 1974, the parties have been negotiating; however, they have not concluded a new agreement. For a number of years, the NFL has operated under a reserve system whereby every player who signs a contract with an NFL club is bound to play for that club, and no other, for the term of the contract plus one additional year at the option of the club. The cornerstones of this system are § 15.1 of the NFL Constitution and Bylaws, which requires that all club-player contracts be as prescribed in the Standard Player Contract adopted by the League, and the option clause embodied in the Standard Player Contract.5 Once a player signs a Standard Player Contract, he is bound to his team for at least two years. He may, however, become a free agent at the end of the option year by playing that season under a renewed contract rather than signing a new one. A player "playing out his option" is subject to a 10% salary cut during the option year. 3 The district court's opinion is reported at 407 F. Supp. 1000 (D. Minn. 1975). 4 Trial on the issue of damages was deferred pending the disposition of this appeal. 5 Paragraph 10 of the Standard Player Contract contains the following option clause: "The Club may, by sending notice in writing to the Player, on or before the first day of May following the football season referred to in ¶ 1 hereof, renew this contract for a further term of one (1) year on the same terms as are provided by this contract, except that (1) the Club may fix the rate of compensation to be paid by the Club to the Player during said further term, which rate of compensation shall not be less than ninety percent (90 percent) of the sum set forth in 3 hereof and shall be payable in installments during the football season in such further term as provided in ¶ 3; and (2) after such renewal this contract shall not include a further option to the Club to renew the contract. the phrase "rate of compensation" as above used shall not include bonus payments or payments of any nature whatsoever and shall be limited to the precise sum set forth in ¶ 3 hereof." |