A federal judge from the Northern District of Illinois has dismissed the antitrust claim of a for-profit hockey rink operator and its subsidiary against the Amateur Hockey Association of Illinois (Association), finding that it failed to show the requisite injury upon which relief could be granted.
The plaintiffs in the case were Black Bear Sports Group, Inc. and its subsidiary, Center Ice Arena, LLC. Black Bear operates 10 rinks across the United States. Four of those rinks are in the Chicago suburbs of Glen Ellyn, Woodridge, Lincolnwood, and Crestwood. Black Bear purchased these four rinks between 2016 and 2018 as part of its strategy of acquiring “undermanaged and underperforming” facilities and investing in capital improvements and professional management in order to create successful businesses. Black Bear also manages youth and junior hockey teams. Specifically, it manages teams affiliated with facilities it operates in New Jersey, Ohio, and Maryland. Black Bear’s profit model relies on ice rental income from amateur hockey and figure skating, admission fees for public skating at its facilities, and amateur hockey club participation fees.
The court began by offering “a brief primer on the structure of youth hockey,” noting that “amateur hockey is regulated by USA Hockey, Inc., which in turn sanctions state and regional affiliates. Since 1975 the Amateur Hockey Association of Illinois has been the affiliate regulator of amateur hockey in the state of Illinois.
“The Association organizes amateur hockey by age and skill level. ‘Youth hockey’ includes individuals under the age of 18. Youth players and teams are categorized on three tiers: Tier I teams are made up of the highest-skilled players and travel throughout the United States and Canada to compete with other elite teams; Tier II is intended for competitive but somewhat less skilled players who want to engage in regional competition; and Tier III is made up of beginners and recreational teams. According to the complaint, Tier II teams affiliated with the Association compete in either the Northern Illinois Hockey League or the Central States Developmental Hockey League, with the latter reserved for the most skilled Tier II players,” according to the court.
“All youth hockey teams in Illinois are required to affiliate with the Association. Likewise, all participating teams are required to follow the Association’s by-laws and rules and regulations. Those teams or players who do not comply with the Association’s regulations or who participate in games with teams that are not registered with the Association or another USA Hockey-sanctioned governing body may face discipline, including loss of eligibility to participate in Association-sponsored tournaments, loss of insurance coverage, and revocation of membership.”
The court went on to note that youth hockey “is booming in Illinois. Nationally, participation has increased by nearly nine percent since 2013. The growth rate in Illinois has more than doubled that number, with a more than 18 percent surge in participation during the same period. There are nearly 50 Tier II hockey clubs in what the plaintiffs describe as the ‘Northern Illinois region,’ each of which has between 10 and 30 teams. Each of these youth hockey clubs has a facility designated as its ‘home ice.’
“Black Bear wants the Association to grant it a charter to sponsor a Tier II club that would have its home ice at its Center Ice facility in Glen Ellyn, Illinois. Black Bear’s rinks in Woodridge, Lincolnwood, and Crestwood already host Association-affiliated clubs. But its Center Ice facility is underused. The facility has robust learn-to-skate and learn-to-play hockey programs. It does not, however, have a youth hockey club that calls the facility home.”
Black Bear claimed it “approached” the Association about obtaining approval for a new Tier II club, but was denied because, among other reasons, “there are already enough teams in the relevant market.” Black Bear also claimed the Association told it that it “cannot start a new Tier II club because it is a for-profit enterprise and [Association] rules require sponsors to be charitable organizations.” This, Black Bear argued, amounts “to a predetermination by the Association that it will not grant a charter to Black Bear.”
The court went on to note, importantly, that “Black Bear does not allege that its application has been rejected or even that it has actually applied for a Tier II club charter. Nor does Black Bear allege that the Association or relevant decision makers have told it, in so many words, that such an application would be rejected. Rather, Black Bear points to three ‘requirements’ outlined in a publicly available Association document that it says preclude it from getting a charter,” which “preclude any application it might submit from succeeding, harm competition in the relevant market, and cause it injury.”
Black Bear also alleges it has been injured by another rule recently adopted by the Association. Specifically, Black Bear says that it arranged for the Association-affiliated Tier II club that uses its Lincolnwood rink as its home ice to retain the Center Ice facility in Glen Ellyn as “additional ice,” for which the team would have paid Black Bear rental fees. But Black Bear alleges, “upon learning that the [team] intended to use the Center Ice Facility, [the Association] promulgated a new by-law (1.2.5) that prevents a Tier II team from using ice facilities more than 15 miles from its home rink. … In Black Bear’s view, this rule further demonstrates the Association’s intent to maintain its monopoly power and to injure Black Bear.”
In its lawsuit against the Association, Black Bear alleged monopolization under section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2 as well as violations of various state laws. The Association filed a motion to dismiss Black Bear’s complaint, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).
The court wrote that the Association’s motion to dismiss rests principally on its contention that Article III standing is lacking. To demonstrate standing, a plaintiff must show that he or she (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547, 194 L. Ed. 2d 635 (2016)
The Association disputes whether Black Bear has suffered an injury in fact. In such cases, a plaintiff “must show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized and ‘actual or imminent, not conjectural or hypothetical.'” Id. at 1548 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992).
Black Bear alleged two types of injury. “First, it alleges that it has effectively been denied a Tier II club charter by the Association due to the Association’s purported requirement that clubs be non-profit organizations,” wrote the court, which referred to this as the “alleged exclusion injury. Second, Black Bear alleges that it has been injured by the Association’s adoption of the additional ice rule in early 2018.”
The court ultimately concluded that the plaintiffs’ first argument is too speculative. “The bottom line is that, on the present allegations, Black Bear cannot proceed with this lawsuit without having actually applied for a Tier II club charter,” wrote the court.
Next, the court turned to Black Bear’s second argument that “it has lost rental fees it otherwise would have garnered from renting its Center Ice facility in Glen Ellyn as additional ice for a team that has its home ice at Black Bear’s Lincolnwood facility. It alleges that this loss was caused by the Association’s adoption in early 2018 of a rule that, in Black Bear’s characterization, ‘prevents a Tier II team from using ice facilities more than fifteen miles from its home rink.’ Black Bear alleges that the adoption of this rule ‘demonstrates [the Association]’s intent to main its monopoly power and to injure Black Bear.’
“Again, however, the Court is not obliged to take Black Bear’s interpretation of the Association by-law at face value. Rosenblum v. Travelbyus.com Ltd., 299 F.3d 657, 661 (7th Cir. 2002). And in fact Black Bear’s characterization of the additional ice rule is significantly incomplete. Contrary to Black Bear’s allegation, the rule does not categorically ‘prevent’ Tier II teams from using additional ice at facilities more than 15 miles from their home rink. Rather, it states that rinks within 15 miles may be used without any prior approval but ‘[r]inks outside the designated area must be approved by the relevant Association committee.’
“As with the exclusion injury discussed above, Black Bear has alleged neither that it applied for approval of its additional ice arrangement nor that such an application was rejected. Nor does it allege that the Association or any relevant decisionmaker has even so much as suggested that such an application would be rejected or would be a waste of time. Even assuming that Black Bear’s allegations regarding this injury provide more than the sort of ‘labels and conclusions’ regularly deemed insufficient to survive a motion to dismiss for failure to state a claim, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007), the additional ice allegation runs afoul of the injury-in-fact requirement for many of same reasons as the exclusion injury, Otrompke v. Hill, 592 F. App’x 495, 498 (7th Cir. 2014). That is, taking Black Bear’s allegations as true, it has not ‘clearly allege[d] facts demonstrating’ that it suffered an injury in fact from the Association’s adoption of the additional ice rule. Spokeo, 136 S. Ct. at 1547.”
Black Bear Sports Grp. Inc. and Center Ice Arena, LLC v. Amateur Hockey Ass’n of Ill.; N.D. Ill.; 2019 U.S. Dist. LEXIS 78770, Case No. 18 C 8364; 5/9/19
Attorneys of Record: (for plaintiffs) Paula K. Jacobi, LEAD ATTORNEY, Paul T. Olszowka Barnes & Thornburg LLP, Chicago, IL. (for defendant) James H. Mutchnik, LEAD ATTORNEY, Kirkland & Ellis LLP, Chicago, IL; Donna Peel, Erin Marie Reynolds, Kirkland & Ellis Llp, Chicago, IL; Jonathan J Faria, PRO HAC VICE, Kirkland & Ellis LLP, Los Angeles, CA.
The original complaint can be viewed here: https://jnswire.s3.amazonaws.com/jns-media/d7/f9/1069360/BlackBear_v_AmateurHockey.pdf