By Robert E. Freeman, Jonathan Mollod, Melissa Felcher, of Proskauer
In the most recent face-off between ice rink operator Black Bear Sports Group, Inc. (“Black Bear”) and affiliate regulator Amateur Hockey Association of Illinois (“AHA” or “the Association”), AHA won the drop and secured the puck. Black Bear had alleged an antitrust injury based on its argument that multiple AHA requirements precluded it from obtaining a charter that would have allowed it to sponsor a Tier II amateur hockey club at its ice facility in Glen Ellyn, Illinois. Slapping away the shot, Judge Easterbrook of the Seventh Circuit called the claim one of “impossibility” and affirmed the dismissal of Black Bear’s antitrust suit, albeit on different grounds than the lower court, for “lack of a plausible federal claim.” (Black Bear Sports Group Inc. v. Amateur Hockey Association of Illinois Inc., No. 19-2076 (7th Cir. June 22, 2020)).
Amateur hockey is regulated by USA Hockey, Inc., which in turn sanctions state and regional affiliates. Within the state of Illinois, AHA has been the affiliate regulator of amateur hockey in the state since 1975. AHA promulgates different rules and regulations for its hockey teams based on age, skill and competitive level. Youth hockey teams (i.e., under the age of 18) range from Tier I to Tier III, with Tier I being the most competitive and Tier III being more recreational. According to Black Bear, nearly all organized amateur hockey teams, including nearly every high school hockey team, is a member of AHA. It also claims that youth hockey teams in Illinois are required to affiliate with AHA (or another sanctioned governing body), and follow its bylaws and regulations. Those teams that violate such regulations may be deemed ineligible for AHA-sponsored tournaments or face other discipline.
As noted by the district court, another facet to ensure that youth hockey remains a competitive and viable sport is giving each youth hockey team a rink to play in, known as a “home ice.” That’s how rink owners, like Black Bear, find their way into the arena. As a for-profit operator of multiple ice rinks, Black Bear believed that, while its Glen Ellyn rink had been hosting educational programs, it was underused and could host a youth hockey team in the area (as Black Bear apparently provided rinks for, but had not sponsored, other youth teams in the state). However, in order to sponsor a Tier II team at its rink, Black Bear needed an AHA charter. Yet, before even sending an application, Black Bear believed that it was already playing shorthanded. According to Black Bear, AHA officials informed it that there were already enough teams in the relevant market and further, that under AHA’s allegedly anti-competitive rules, it would likely not be approved to sponsor a Tier II club at its Glen Ellyn rink.
In December 2018, Black Bear dropped the gloves and filed suit against the AHA, alleging violations of federal and state antitrust law, as well as related state-law tort claims, based on its allegation that the AHA unlawfully excluded it from youth hockey. In its complaint, Black Bear contended that three specific AHA requirements were enacted to exclude its entry into the Tier II youth hockey market and prohibit it from receiving a charter.
First, Black Bear alleged that AHA had a rule limiting sponsorship to nonprofit entities, thereby removing Black Bear from eligibility. Second, Black Bear pointed to AHA’s alleged requirement that applicants seeking a charter must identify any other youth hockey teams that could be affected by granting the application. Lastly, Black Bear claimed that AHA instituted a rule that prevented “any Tier II team from using ice facilities more than fifteen miles from its home rink.” This rule allegedly created a problem as it supposedly forechecked Black Bear’s plan to rent out the Glen Ellyn rink as “additional ice” to an existing Tier II team because the rink was 24 miles away and exceeded the limit. In all, Black Bear claimed that AHA maintained a monopoly, harmed competition in the youth hockey market and unlawfully prevented its entry into the Illinois youth hockey market. It asserted claims for monetary damages for harm to its business and for injunctive relief to compel AHA to allow Black Bear to sponsor a Tier II team.
In the Northern District of Illinois, Black Bear argued that these rules restricted the market and demonstrated AHA’s “intent to maintain its monopoly power and to injure Black Bear.” The district court disagreed. In May 2019, the court held that, although AHA did in fact promulgate these rules, there was “significant doubt” as to whether or not these rules would actually bar Black Bear from obtaining a charter. In denying the antitrust and related claims for lack of Article III standing, the lower court focused on the fact that Black Bear never officially submitted a charter application. Specifically, the court explained that “the bottom line [was] that, on the present allegations, Black Bear [could not] proceed with this lawsuit without having actually applied for a Tier II club charter.” In examining the AHA regulations, the court found, despite Black Bear’s contention that AHA officials preemptively denied its opportunity, that the AHA provisions were not necessarily a blanket prohibition against Black Bear’s charter request as the regulations contained, among other things, exceptions to certain requirements and gave the AHA broad discretion to consider applications. Thus, the court found Black Bear’s claims “too conjectural” to support the injury-in-fact requirement for standing, sending Black Bear’s complaint to the penalty box.
The matter went up on appeal to the Seventh Circuit. In June 2020, Judge Easterbrook, in a terse five-page opinion, quickly swatted Black Bear’s claims and affirmed dismissal, albeit under different reasoning. In rejecting the lower court’s reasoning, the appeals court looked to the text of the Sherman Act and explained that an “exhaustion of nonjudicial remedies” is not required under the statute before a litigant may commerce a suit. Additionally, the court took issue with the lower court’s interpretation of AHA’s provisions, explaining that the rules requiring a non-profit sponsor seemed “essential” and that AHA had not “pointed to anything in its bylaws that would make an exception for Black Bear.”
Nevertheless, the Seventh Circuit ultimately agreed that Black Bear’s claims were offside. Specifically, the court explained that Black Bear’s complaint appeared to be an attempt to use the Sherman Act to “compel a cartel to admit a new member and distribute the monopoly profits differently,” a request that the court coined as both an “oddity” and “impossibility.” In viewing Black Bear’s claim as an effort to join the monopoly rather than dissolve it, the appeals court held that the complaint did not state a viable federal antitrust claim under the Sherman Act and should therefore be dismissed. The court also declined to take up state antitrust claims on jurisdictional grounds.
Thus, Black Bear remains stuck behind its own blue line in its quest for a Tier II club, and it is uncertain whether the sports group will have another shot at the net if it decides to apply for an AHA charter. It is also unclear what AHA’s defensive alignment will look like should it receive an application from Black Bear. Interestingly, this is not the first antitrust suit that AHA has faced over its administration of youth hockey in Illinois. Regardless, let’s hope that the next face-off won’t occur inside of the courtroom, but rather on the ice.
