By Ryan M. Rodenberg and Russ K. Childers
One month and one day.
That was the length of time it took for a published opinion in another sports antitrust case to be rendered following the U.S. Supreme Court’s decision in American Needle v. National Football League, et al. While the legacy and import of a Supreme Court case is not fully known for years following the decision, a first glimpse was provided by the U.S. Court of Appeals for the Third Circuit in Deutscher Tennis Bund v. ATP World Tour, et al.
The underlying lawsuit has its origins in the Association of Tennis Professionals’ (ATP’s) move to revise its annual tournament calendar. Plaintiff Deutscher Tennis Bund, a clay court tournament in Germany, was demoted as part of the calendar augmentations. Prior to the change, the German tournament was held strategically a couple of weeks prior to the French Open, one of the four Grand Slams and the only major event on clay. After the calendar was tweaked, the Hamburg tournament was scheduled between Wimbledon (on grass courts) and the U.S. Open (on hard courts). Tournament organizers viewed the revised tournament schedule unfavorably and filed suit in Delaware federal court alleging that: (i) the changes amounted to an antitrust violation under both sections of the Sherman Antitrust Act and (ii) certain individual members of the ATP board of directors breached fiduciary duties in approving the change. At the time of its filing, the case was described in the Sports Business Journal and elsewhere as the most direct challenge to the authority of an individual sport governing body to make rules, set schedules, and partake in other administrative functions.
At the District Court level, the judge ruled in favor of the ATP as a matter of law on several of the plaintiff’s claims. The other claims were submitted to the jury, which returned a verdict for the ATP. The plaintiffs appealed to the Third Circuit and oral arguments took place in late 2009. Judge Scirica wrote for a unanimous court on June 25, 2010 and affirmed the District Court. Judge Scirica’s opinion cited all of the familiar antitrust cases such as Standard Oil, Continental TV, Dagher, and Nat’l Soc. Prof. Eng. Sports antitrust cases that were discussed included the Seventh Circuit’s Chicago Bulls decision and the Supreme Court’s 1984 NCAA vs. University of Oklahoma opinion. American Needle was also cited a number of times, but Deutscher Tennis Bund v. ATP World Tour probably could have been decided in much the same way without reference to American Needle. In other words, American Needle was not dispositive. In fact, during oral argument, the ATP’s attorney insightfully opined that American Needle, regardless of how the Supreme Court decided it, was not controlling.
The Third Circuit opinion reaffirmed the right of the ATP as a sports league to set its own schedule, but made clear that such right is not absolute. The ATP and other similarly situated sport governing bodies were not granted a blanket antitrust exemption as a single entity or otherwise. Judge Scirica also highlighted the deficiencies of the plaintiff’s case. Most notably, the judge explained how Deutscher Tennis Bund’s failure to prove a relevant player market for antitrust purposes was largely fatal to their case. Another plaintiff may have a different/stronger case and the present decision would not foreclose such a case from being filed in the future.
The implications of Deutscher Tennis Bund v. ATP World Tour are interesting. For the ATP, the case helps confirm the governing body’s position that it has the power, through a board of directors duly elected by its members, to make rules and set tournament schedules. For the plaintiff, the case is an obvious setback. By stripping the Hamburg-based tournament of its top tier status, the tournament’s player field will almost certainly be weaker moving forward. In 2007, the tournament hosted nine of the top ten ranked players in the world. In 2008, eight of the top nine ranked players participated. In contrast, in 2009, the first year the tournament was held following the re-classification, only one top ten player competed. Given the depleted player field likely moving forward, it would be difficult to argue that sponsors, fans, or the media would find the tournament as attractive as it had been in the past.
Another potential consequence of this decision is that the German tournament will likely have difficulty garnering the financial support it has enjoyed in the past. With the long-term status of the tournament somewhat in flux, tournament sponsors might be inclined to put their sponsorship money elsewhere. With a lower profile tournament in Hamburg, and fewer familiar names entered, there is also less likelihood of people going to the venue or turning on the television or computer to watch. As a result, German fans may be less likely to be excited about and involved in tennis. The implications of such diminished engagement are not limited to lower revenues for the tournament, but also fewer rackets, strings, shoes, and tennis clothes sold, as well as lower income from club dues and court reservation fees throughout the country.
While the immediate impact of any legal decision is on the parties directly involved, the legacy of important cases is often manifested in realms not immediately evident. For example, Daniel Walsh of the Advertising Specialty Institute recently opined that the American Needle case may have a profound effect on the apparel industry and its licensing activities moving forward. Whether the decreased visibility of what used to be Germany’s top flight tournament has a detrimental impact on player development in the country, for example, remains to be seen. On the flip side, perhaps the Third Circuit decision in favor of the ATP will help facilitate a better, more streamlined tournament schedule that helps promote and grow the sport on a global basis. Given the lack of substantive overlap between the two cases, it is likely that both will be cited as non-intertwined precedent moving forward.
© Ryan M. Rodenberg and Russ K. Childers 2010.
