By Sonny Hoang
On October 24, 2012, Patrick Dang filed a complaint in the United States District Court of Northern California alleging several antitrust violations under California’s Antitrust Law, the Cartwright Act.
Dang is alleging that the NFL Properties’ exclusive blanket licensing deals, covering every NFL team’s trademarks, logos, and emblems, with Reebok and, subsequently, Nike are unlawful restraints of trade. He alleges that the monopoly priced exclusive licenses increased the prices of apparel bearing NFL trademarks, logos, and emblems that he bought. He also alleges that the exclusive blanket licenses foreclosed a substantial part of the market of apparel manufacturers who used to compete for individual team licenses before 2000. Patrick DANG, on Behalf of Himself and All Others Similarly Situated, Plaintiff, v. SAN FRANCISCO FORTY NINERS, LTD.; The Oakland Raiders, L.P.; Chargers Football Company, LLC; New Orleans Louisiana Saints, LLC; Football Northwest LLC; The Detroit Lions, Inc.; Houston NFL Holdings, L.P.; Minnesota Vikings Football Club, LLC Ltd; Jacksonville Jaguars, Ltd; Tennessee Football, L.P.; Pittsburgh Steelers Sports, Inc.; Buffalo Bills, Inc.; Indianapolis Colts, Inc.; Pdb, 2012 WL 5249408 (N.D.Cal.)
Dang’s Case Mirrors American Needle
Dang has initiated a class action covering anyone who has bought NFL apparel anywhere in the country since 2000. If this sounds familiar, it should. Dang’s case mirrors American Needle v. National Football League in which the manufacturer, American Needle, is alleging federal antitrust violations against the NFL over its exclusive licensing agreements with Reebok, and now, Nike. American Needle won the first round of this case in which the Court ruled that, even though NFL Properties is a single corporation, the NFL teams will not be considered a single entity even if they submit all of their intellectual property rights to a single corporation. The Court’s ruling merely removed one of the NFL’s defenses. The case has since been remanded for discovery and further motion practice.
The California Cartwright Act Is Inapplicable Due to Its Substantial Effects on Interstate Commerce
However, Dang’s first two counts against the NFL, NFL Properties, and the NFL teams are distinguishable in a very decisive way. He is alleging nationwide horizontal agreements and vertical agreements in restraint of trade in violation of California’s Cartwright Act, the state’s antitrust law. Dang, Pdb 2012 WL 5249408 (N.D.Cal.) Unfortunately for Dang, his lawyer may have failed to research the prior application of California’s Cartwright Act. If he had done a quick search of the Cartwright Act’s application to professional sports leagues, he would have found the act inapplicable to the NFL (Partee v. San Diego Chargers, 1983 34 Cal.3d 378 (1983); state antitrust law’s inapplicability to basketball (Robertson v. National Basketball Association (S.D.N.Y.1975) 389 F.Supp. 867, 881; HMC Management v. New Orleans Basketball Club (La.App.1979) 375 So.2d 700, 706–707); the Cartwright Act’s inapplicability to baseball. (Flood v. Kuhn, 407 U.S. 258 (1972)).
Should Dang Just Stick with His §1 Sherman Act and §26 Clayton Act Claims?
There has been no case supporting a finding of state antitrust laws applicability to professional sports. This is probably due to the fact that state antitrust laws are designed to protect the public from the local effects of local antitrust violations in intrastate commerce. Courts have focused on the negative Commerce Clause implications when striking down state antitrust law complaints because professional sporting leagues are primarily involved in interstate commerce across state borders. Additionally, the Court has concluded that there is an unreasonable burden on interstate commerce “where the nature of an enterprise is such that differing state regulation, although not conflicting, requires the enterprise to comply with the strictest standard of several states in order to continue an interstate business extending over many states, the extraterritorial effect which the application of a particular state law would exact constitutes, absent a strong state interest, an impermissible burden on interstate commerce.” Flood v. Kuhn, 443 F.2d 264 at 267 (2d Cir. 1971), affirmed 407 U.S. 258 (1972). This unreasonable burden stems from the fact that any team in a national sporting league would have to conform with the strictest antitrust laws of any state, thereby granting unreasonable extraterritorial powers to that state. This unreasonable burden on interstate commerce far outweighs any state interest in regulating this issue, and there is a federal law already covering this issue, which Dang can and has alleged in Count IV of his complaint.
If Dang focuses on his federal causes of action, he may be able to simply piggy-back American Needle without his lawyer spending a substantial amount of time or money on the case. His lawyer may also want to consider dropping the Cartwright Act claims for another reason — the risk of court sanctions for bringing a frivolous claim.
