By Eric G. Kramer
A case that has spanned more than 13 years recently received an appellate ruling from the Supreme Court of Hawaii. The former operator of the Aloha and Oahu college football postseason bowl games, Aloha Sports, Inc. (Aloha Sports), initially filed a lawsuit against the National Collegiate Athletic Association (NCAA) in October 2005, claiming that the NCAA unfairly interfered with the sale of its business to Pro Sports and Entertainment, Inc. for over $2 million in February 2003. On Nov. 20, 2018, the Supreme Court of Hawaii remanded the case back to the circuit court for proceedings upon overturning the rulings of the lower courts that sided with the NCAA.
Aloha Sports is a former operator of NCAA-sponsored college football bowl games from 1982 through 2002. Its first bowl game was the Aloha Bowl, which began in 1982 in Honolulu, HI. In 1998, Aloha Sports also established the Oahu Bowl, and operated it in conjunction with the Aloha Bowl through the 2000 college football season. Due to an inability to attract top college football teams and generate enough revenue from the event, both bowl games were renamed and relocated beginning with the 2001 season. The Aloha Bowl was subsequently renamed the San Francisco Bowl and the Oahu Bowl was renamed the Seattle Bowl. However, Aloha Sports was unable to proceed with the San Francisco Bowl in 2001 due to bowl certification issues with the NCAA. Aloha Sports did proceed with the newly named Seattle Bowl for the 2001 and 2002 football seasons.
Following the 2002 Seattle Bowl, in the midst of financial and management issues, Aloha Sports entertained the notion of selling its business. In February 2003, Pro Sports & Entertainment, Inc. (Pro Sports) signed a letter of intent to purchase Aloha Sports for approximately $2 million. However, the sale was contingent on the NCAA recertifying the Seattle Bowl for the 2003 season.
Annually, the NCAA enlists their Football Certification Subcommittee to certify each postseason bowl game based upon meeting a set of criteria to ensure the bowl is meeting the needs of its membership. The subcommittee consists of individuals from member institutions along with NCAA staff to serve as liaisons. Some of the criteria for bowl recertification include minimum ticket sales, member institution payout of at least $750,000, financial audits, a letter of credit, and compliance with applicable processes and procedures.
In April 2003, the NCAA Football Certification Subcommittee reviewed applications for bowl recertifications for the 2003 season. Concerns were raised by the subcommittee regarding the management of the Seattle Bowl, which were outlined in an internal memo at the NCAA. The memo also included a note regarding the contingent sale of Aloha Sports to Pro Sports. The subcommittee subsequently notified Aloha Sports that the Seattle Bowl had been decertified. As a result of the Seattle Bowl not being recertified by the NCAA, the contingent sale of Aloha Sports to Pro Sports was nullified. Following the subcommittee’s decision, an NCAA staff liaison offered an opportunity for Pro Sports to independently submit a bid for recertification for the Seattle Bowl in 2004.
Aloha Sports responded to these actions by the NCAA with a complaint filed in October 2005. The complaint alleged four separate causes of action. Those actions included unfair method of competition (UMOC) violations under HRS § 480-2 (1993 & Supp. 2002), tortious interference with prospective economic advantage, and two claims of breach of contract. Through legal wrangling for the better part of six years, some of those initial claims were dismissed, but the tortious interference and violations of UMOC remained. However, at the start of the trial in September 2011, Aloha Sports believed its best opportunity to carry a successful verdict was to pursue only the tortious interference claim. They did not feel that they had the case to pursue the other claims, including the alleged UMOC violations. Following trial deliberations, the jury returned with a favorable verdict for the NCAA, citing Aloha Sports did not prove tortious interference beyond a preponderance of the evidence. No other elements of fact were disclosed in the jury’s decision. Subsequent to the jury’s decision, the court dismissed all previous claims filed by Aloha Sports, including the HRS § 480-2 claims that were not pursued by Aloha Sports in the trial.
Aloha Sports responded to the jury’s decision by filing an appeal with the Intermediate Court of Appeals (ICA). The ICA granted the appeal on the grounds that there was indeed a factual basis of the UMOC claim filed by Aloha Sports. Specifically, the ICA identified evidence that the NCAA was aware of the pending sale of Aloha Sports to Pro Sports and the contingency of recertification attached to the sale. In addition, the evidence that the NCAA encouraged Pro Sports to separately file an independent bid for the Seattle Bowl the following year suggested unfair methods of competition on behalf of the NCAA. As a result, the ICA vacated the order of the dismissal of the UMOC claim and final judgment entered by the circuit court in January 2012, and the case was remanded back to the circuit court.
The subsequent circuit court proceedings included a summary judgment motion filed by the NCAA, grounded in the idea that Aloha Sports did not provide factual evidence to show an anti-competitive impact in the bowl game industry due to the NCAA’s action in this case. In addition, the motion claimed that Aloha Sports did not prove it was injured as a result of the actions of the NCAA. Rather, the NCAA had legitimate business reasons to decertify the Seattle Bowl for the 2003 season. As such the unfinished sale between Aloha Sports and Pro Sports was simply a byproduct of the failure of the Seattle Bowl to produce a timely letter of credit to the NCAA and its inability to pay teams and vendors.
The NCAA also claimed that Aloha Sports could not proceed because of collateral estoppel, which is used to prevent re-litigation of a previously decided issue of fact or matter of law. The NCAA pointed to Aloha Sports using the same allegations for the current UMOC claim as they did with the previously litigated tortious interference case. The NCAA also cited judicial estoppel when Aloha Sports voluntarily chose to not pursue the UMOC claim in the initial trial in September 2011. The NCAA argued that Aloha Sports had its opportunity to proceed with the UMOC claim, and that it should not be able to now pursue an option that is not compatible with its earlier position that was accepted by the court.
In June 2015, the circuit court agreed to grant the NCAA summary judgment on the basis of Aloha Sports failure to demonstrate a disagreement of material facts in the case. There was no evidence presented to show that Aloha Sports was injured as a result of the NCAA’s conduct, nor was the NCAA acting in a way to be construed as anticompetitive in the bowl game market. The court also agreed with the NCAA on its claims of judicial estoppel and collateral estoppel. In support of the court’s judicial estoppel position, it declared that Aloha Sports had implicitly surrendered its UMOC claim during the September 2011 trial when it did not pursue it because of the more challenging elements it presented. In addition, the collateral estoppel position taken by the court cited the jury’s decision that Aloha Sports had already not proven tortious interference beyond a preponderance of the evidence. Should Aloha Sports be allowed to go forward with the UMOC claim, it would be based upon the same alleged conduct already decided upon in a previous trial.
In October 2017, the ICA reaffirmed the lower court’s decision of granting summary judgment to the NCAA. The primary reason cited by the ICA included a failure by Aloha Sports to demonstrate that the NCAA had acted in an anticompetitive manner. In order to show that the NCAA acted in such a way, Aloha Sports would have needed to specify the relevant market, produce evidence that the NCAA’s actions had an anticompetitive impact on the market, and demonstrate how Aloha Sports is in competition with the NCAA.
Following the ICA’s decision, Aloha Sports proceeded to file a writ of certiorari with the Supreme Court of Hawaii in January 2018. In support of its decision, the Supreme Court of Hawaii identified three areas it evaluated in response to the both the ICA and circuit court’s rulings.
Evidence Necessary to Withstand Summary Judgment on UMOC Claim
Based upon HRS § 480-13, a plaintiff must prove three elements: A HRS Chapter 480 violation; an injury to plaintiff’s business as a result of the defendant’s conduct that negatively affects competition; and proof of damages.
Violation of HRS Chapter 480 — “Competitive conduct is unfair when it offends established public policy and when the practice is immoral, unethical, oppressive unscrupulous or substantially injurious to consumers.” The actions of the NCAA to decertify the 2003 Seattle Bowl while having knowledge of the conditions of the sale between Aloha Sports and Pro Sports could rise to the level of a violation of HRS Chapter 480. Evidence was also cited that the NCAA encouraged Pro Sports to file an independent bid for the Seattle Bowl and may not have followed its own policies by decertifying the Seattle Bowl instead of subjecting it to a one-year probation. These actions could meet the requirements of a violation of HRS Chapter 480. In addition, the Supreme Court of Hawaii deemed that there was sufficient evidence to raise questions as to the material facts in the case, and that granting summary judgment in this case by the lower courts was therefore an error.
Injury and Nature of Competition — Two elements must be proven by the plaintiff in order to satisfy this requirement. One, the plaintiff must show that an injury occurred to the plaintiff’s business. Two, the plaintiff must show how the defendant’s conduct negatively affected competition as a whole. Aloha Sports demonstrated that it suffered an injury with the evidence provided regarding the decertification of the Seattle Bowl in 2003, which allegedly contributed to the failure to sell its business to Pro Sports. Furthermore, Aloha Sports provided evidence that the conduct by the NCAA had an anticompetitive impact on the bowl industry as a whole. As a result of its actions to decertify the Seattle Bowl, possible negative industry outcomes include lower sale prices for bowls due to the uncertainty of recertification decisions by the NCAA and a potential negative impact on financial benefits to institutions, vendors, and consumers who would have otherwise participated in the bowl game. The Supreme Court of Hawaii concluded that Aloha Sports did identify a dispute of material facts that an injury to a plaintiff’s business resulted from the conduct of the defendant.
Proof of Damages — These facts are not in dispute.
Waiver and Judicial Estoppel
Although the ICA did not address waivers or judicial estoppel in its appeal decision, the Supreme Court of Hawaii addressed both elements. In regard to the circuit court’s waiver decision, the Supreme Court of Hawaii disagreed with the notion that Aloha Sports had waived its right to proceed with the UMOC claim. Since the circuit court dismissed Aloha Sports’ UMOC claim three years before the September 2011 pre-trial hearing, Aloha Sports had no right to voluntarily waive a non-existent UMOC claim during that pre-trial hearing. Therefore, the circuit court was incorrect in its judgment that Aloha Sports had implicitly waived its UMOC claim. Consequently, since Aloha Sports could not have waived the UMOC claim, it also could not have assumed an inconsistent position from previous court proceedings, thus judicial estoppel also does not apply in this case.
Collateral estoppel can be used by the courts to prevent relitigating a fact or issue in a prior lawsuit. However, in order for it to be utilized, four requirements must be met. Those four requirements are: The issue previously decided in prior adjudication must be identical to the current action, a final judgment on the merits has been submitted, the issue decided on the prior adjudication was essential to the final judgment, and the party against whom the collateral estoppel is being brought upon was a party in the prior adjudication.
There were no qualms with requirements two and four. However, both requirements one and three failed to be met. While issues in question are quite similar, they are not identical, as required to utilize collateral estoppel. In order to prove intentional or tortious interference, a plaintiff must prove purposeful intent. Conversely, a UMOC claim does not require an intent on behalf of the defendant. In addition, the jury’s decision did not specify a particular issue or fact in which it used to render its verdict. Without these details, it is difficult to make an assumption that Aloha Sports would be relitigating the same factual issues with the UMOC claim. Therefore, the Supreme Court of Hawaii disagrees with the circuit court that collateral estoppel should be used in this case.
In November 2018, the Supreme Court of Hawaii concluded that grounds for summary judgment were unfounded based upon the evidence provided by Aloha Sports on the first two elements of an UMOC claim. The evidence raised questions as to the material facts of the case. Without agreement to the material facts, a court cannot proceed with summary judgment. Furthermore, the ruling from the circuit court on the matters of waiver, judicial estoppel, and collateral estoppel were also unfounded based upon aforementioned reasoning provided.
The case has been remanded to the circuit court for future proceedings.
Eric G. Kramer is an Associate Director of Athletics for Compliance and Sport Administration at Missouri Western State University and a PhD student at Troy University specializing in research related to sport law and risk management in sport and recreation.