The 5th U.S. Circuit Court of Appeals has affirmed the dismissal of an antitrust claim, which alleged that the National Collegiate Athletic Association (NCAA) and the National Federation of State High School Associations (NFHS) imposed a regulation that restrains trade in the market for non-wood baseball bats in violation of the Sherman Act and other state laws.
The panel of judges agreed with the district court that plaintiff Marucci Sports failed to sufficiently allege that the associations conspired to restrain trade.
By way of background, in 2011, the NCAA and NFHS implemented the Bat-Ball Coefficient of Restitution Standard (BBCOR Standard) as a way to regulate the performance of non-wood baseball bats used in high school and collegiate baseball games. The BBCOR Standard is a measurement of how “hot” a bat is, or in other words, how fast a ball comes off the bat on contact. The higher the score, the “hotter” the bat. According to the NCAA, the purpose of the BBCOR Standard is to ensure that aluminum and composite bats perform like wood bats in an effort to enhance player safety and reduce technology-driven homeruns and other big hits.
Washington State University (WSU) conducts all BBCOR certification testing. The testing procedure involves firing a baseball at a subject bat and measuring, inter alia, the ball’s speed as it leaves the bat. The measurements are used to generate a BBCOR value. Bats with a BBCOR value of 0.500 or less are certified for use in NCAA and NFHS-governed baseball games. The BBCOR protocol includes an audit provision that allows for periodic testing of previously certified bat models. A bat model may be decertified if three different bats of the same length and weight combination have failed compliance testing. The BBCOR protocol allows bat manufacturers to observe compliance testing and to appeal a finding that a certain bat is non-compliant. Between 2010 and 2011, Marucci had several aluminum bat models certified as compliant with the BBCOR Standard. In early 2012, four of Marucci’s bats failed compliance testing because their BBCOR value exceeded 0.500. In April 2012, WSU retested Marucci’s decertified bats and they failed again. Marucci appealed WSU’s findings to the NCAA Baseball Rules Committee and the decision to decertify the bats was affirmed.
On April 18, 2012, Marucci filed suit against the NCAA, NFHS, and WSU. The defendants moved to dismiss, leading to a district judge’s adverse ruling against Marucci, who appealed.
In considering the appeal, the 5th Circuit reviewed what it takes to establish a violation of § 1 of the Sherman Act: “Marucci must demonstrate that: ‘(1) [the NCAA and NFHS] engaged in a conspiracy, (2) the conspiracy had the effect of restraining trade, and (3) trade was restrained in the relevant market.’ Apani Sw., Inc. v. Coca-Cola Enters., Inc., 300 F.3d 620, 627 (5th Cir. 2002).”
The panel added that to satisfy the conspiracy element of a Sherman Act claim, Marucci must show “that the defendants engaged in concerted action, defined as having ‘a conscious commitment to a common scheme designed to achieve an unlawful objective.”’ Golden Bridge Tech., Inc. v. Motorola, Inc., 547 F.3d 266, 271 (5th Cir. 2008) (quoting Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764, 104 S. Ct. 1464, 79 L. Ed. 2d 775 (1984)).
The panel added that “once a plaintiff establishes that a conspiracy occurred, whether it violates § 1 is determined by the application of either the per se rule or the rule of reason.” Id.
The latter applies here.
“Under a rule of reason analysis, the factfinder considers all of the circumstances to determine whether a restrictive practice imposes an unreasonable restraint on competition. Maricopa Cnty. Med. Soc’y, 457 U.S. at 343. The court’s considerations should include the restrictive practice’s ‘history, nature, and effect’ and ‘whether the businesses involved have market power.’ Leegin I, 551 U.S. at 885-86. Market power has been defined as ‘the ability to raise prices above those that would be charged in a competitive market.’ Nat’l Collegiate Athletic Ass’n v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 109 n.38, 104 S. Ct. 2948, 82 L. Ed. 2d 70 (1984). The rule of reason analysis also requires that the plaintiff show that the defendants’ activities injured competition. PSKS, Inc. v. Leegin Creative Leather Prods., 615 F.3d 412, 417 (5th Cir. 2010) (“Leegin II”). The rule of reason is designed to help courts differentiate between ‘restraints with anticompetitive effect that are harmful to the consumer and restraints stimulating competition that are in the consumer’s best interest.’ Leegin I, 551 U.S. at 886. Regardless of which rule applies, the court’s inquiry should ultimately focus upon ‘form[ing] a judgment about the competitive significance of the restraint.’” Bd. of Regents, 468 U.S. at 103.
Furthermore, the panel noted that in Board of Regents, the Supreme Court explained that “it is reasonable to assume that most of the regulatory controls of the NCAA are justifiable means of fostering competition among amateur athletic teams and therefore procompetitive . . . .” Id. at 117.
“The Court distinguished between the restraints at issue in that case —limitations on football telecasts—and ‘rules defining the conditions of the contest, the eligibility of participants, or the manner in which members of a joint enterprise shall share the responsibilities and the benefits of the total venture.’ Id. The latter are presumptively procompetitive and are not generally deemed unlawful restraints on trade. See id.”
The panel noted that its first task was to decide whether the complaint sufficiently alleges that the NCAA and NFHS engaged in concerted action—that is, a “conscious commitment to a common scheme designed to achieve an unlawful objective.” Monsanto Co., 465 U.S. at 764. “Whether the NCAA and NFHS worked in concert with other parties to establish and enforce the BBCOR Standard is uncontroversial. That much is clear. The pivotal question is whether the concerted action was a result of an agreement between the NCAA, NFHS, and others to unreasonably restrain trade?”
Here, the plaintiff’s argument failed.
The panel wrote that the complaint does not “allege any specific facts demonstrating an intention on the part of the NCAA, NFHS, WSU, the incumbent manufacturers, or any other party to engage in a conspiracy.”
Further, Marucci’s allegations “do not make it plausible that the NCAA and NFHS adopted a conscious commitment to a common scheme designed to achieve an unlawful objective. In other words, (the complaint) does not set forth facts that demonstrate a ‘meeting of the minds’ between the NCAA, NFHS, and other alleged conspirators. See Twombly, 550 U.S. at 557. Much like the plaintiff in Twombly, Marucci failed to present any ‘independent allegation of actual agreement’ among the alleged conspirators. See id. at 564. Instead, (the complaint) presents various conclusory allegations that support one of many inferential possibilities. The Supreme Court instructs that such a complaint falls short of the requirements of Rule 8(a)(2). See id. at 557. Accordingly, we conclude that Marucci failed to sufficiently allege a conspiracy under § 1 of the Sherman Act.”
There were many other shortcomings associated with the complaint, which the court detailed with specificity.
Marucci Sports, L.L.C. v. National Collegiate Athletic Association; The National Federation of State High School Associations; 5th Cir.; No. 13-30568; 5/6/14
Attorneys of Record: (for plaintiff-appellant) Kevin Oliver Ainsworth, David Paul Borghardt, William Lee Schuette Jr., Jones Walker LLP, Baton Rouge, LA; Mark Aaron Cunningham, Jones Walker LLP, New Orleans, LA; Jay K. Reisinger, Farrell & Reisinger, Pittsburgh, PA. (for defendant National Collegiate Athletic Association) Philip D. Bartz, Nicholas S. Sloey, Bryan Cave, L.L.P., Washington, DC; Rebecca A. Nelson, Bryan Cave, L.L.P., Saint Louis, MO. (for defendant National Federation of State High School Associations) Gregory M. Bentz, Polsinelli.com, Kansas City, MO; Shelton Dennis Blunt, Kelly Kromer Boudreaux, Michael D. Hunt, Harry Alston Johnson III, Phelps Dunbar, L.L.P., Baton Rouge, LA.
