The 6th U.S. Circuit Court of Appeals has affirmed a district court’s dismissal of an antitrust lawsuit brought by the NHL Players Association and others, which had claimed that a rule change affecting who could play in the Ontario Hockey League prevented some players from achieving free agency in the NHL and thus violated antitrust laws.
Interestingly, the appeals court drew a parallel with Clarett v. Nat’l Football League, 369 F.3d 124 (2d Cir. 2004), writing that “any anti-competitive effect of a properly bargained collective bargaining agreement is excluded from antitrust scrutiny by a non-statutory antitrust exemption.”
At issue was an eligibility rule of the Ontario Hockey League, which, along with the European leagues and American colleges and high schools, feeds players to the NHL. Rule 7.4 holds that no overage player can be signed by an OHL team unless he was previously on a Canadian Hockey Association or USA Hockey player’s registration the previous season. “The National College Athletic Association does not permit players holding either type of registration to play at a NCAA school. These two rules – the OHL rule requiring overage players to have a been on a CHA or USA Hockey registration, and the NCAA rule barring players with either of those registrations – combine to prevent OHL teams from signing any 20-year-old NCAA players.” This is because such a player would not have been permitted by the NCAA to have obtained the registration required by the OHL of 20-year-old players.
Rule 7.4 is commonly referred to as the Van Ryn Rule. Mike Van Ryn was a University of Michigan hockey player when he was drafted by the New Jersey Devils in June of 1998. “Pursuant to the CBA between the NHL and the NHLPA, the Devils thus obtained the rights to Van Ryn for one year, at which point, if the Devils failed to sign Van Ryn, he would become an unrestricted free agent. Under the terms of the CBA, those rights would only be extended past one year if Van Ryn remained in NCAA competition, or went to play for a non-affiliated hockey league.
Van Ryn remained at Michigan for another year, extending the Devils’ rights to him for one year. He then signed with the Sarnia Sting, an OHL club. The OHL is affiliated with the NHL, and therefore, the Devils’ rights to Van Ryn were not extended by Van Ryn’s signing with the Sting. “Van Ryn thus became an unrestricted free agent in June 2000, and signed a three-year contract with the NHL’s St. Louis Blues. Had Van Ryn not played in an affiliated league for the year, during which the Devils had exclusive rights to him, his only path to free agency would have been to sit out for the season.”
The Devils, with the support of the NHL, sought to declare Van Ryn a “defected player” ineligible for free agency. But an arbitrator rejected this effort. Within two months of the arbitration decision and Van Ryn’s signing with the Blues, the OHL adopted the “Van Ryn Rule.”
The NHLPA and the individual plaintiffs in the instant case, Anthony Aquino and Edward Caron, claim the adoption of the rule is an attempt to prevent other NCAA players from achieving free agency via the route traveled by Van Ryn.
The defendants disputed that motive, noting that a rule similar to the Van Ryn Rule, which prevented overage players from playing in the OHL if they had not played there as 19-year-olds, was in effect from 1992 to 1998.
The defendants further argued that former NCAA players, who will not turn 20 before December 31 of any season, may play in the OHL. However, pursuant to Section 8.4 of the CBA, players generally must be at least 19 years old to be selected in the NHL Entry Draft. Thus, few NCAA players who have been drafted by an NHL team will be able to sign with an OHL team and follow the path taken by Mike Van Ryn to unrestricted free agency.
The defendants ultimately moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6}. That motion was granted, spawning the present appeal.
The panel quickly determined that it would use the rule of reason approach in deciding the case, noting that “courts consistently have analyzed challenged conduct under the rule of reason when dealing with an industry in which some horizontal restraints are necessary for the availability of a product, such as sports leagues.” Law v. NCAA, 134 F.3d at 1019, (10th Cir. 1998).
The plaintiffs, held the panel, met the threshold requirement of an antitrust violation by showing that the challenged agreement was entered into by multiple parties.
Second, the panel concluded that the plaintiffs satisfied the burden by showing that there was a relevant market in the instant case, which “meets the requirement of reasonable interchangeability of employees with Defendants’ employees, as there is significant substitution between the market for player services in the NHL and that for sixteen-to twenty-year-old players in other North American leagues, including the OHL.
Indeed, as the NHLPA alleges in its complaint, the NHL and OHL share players and have detailed rules providing for the loan and recall of players between the OHL and NHL.
“Although we conclude that the district court erred in determining that Plaintiffs had failed to identify a relevant market, we decline to reverse the district court’s dismissal of Count I of the complaint because Plaintiffs have failed to sufficiently identify anti-competitive effects of the Van Ryn Rule.
“Plaintiffs essentially allege two types of anti-competitive effects of the Van Ryn Rule: an effect on competition among OHL teams, and an effect on player salaries in the relevant market because some players who might otherwise have achieved free agency in the NHL are unable to do as a result of the Van Ryn Rule. For the reasons that follow, both of these arguments fail:
• “Harm to athletic competition is not a cognizable anti-competitive effect under the Sherman Act and
• “Any harm caused by some players’ inability to achieve free agency in the NHL is caused by the NHL’s Collective Bargaining Agreement, and not the Van Ryn Rule.”
The panel noted that the defendants correctly argued that the alleged effects of the Van Ryn Rule are caused not by the Rule, but by the CBA.
“We agree with Defendants that any anti-competitive effect caused by a restriction on the means by which players may achieve free agency in the NHL must be ascribed to the CBA and not the Van Ryn Rule, and that Plaintiffs have consequently failed to state a claim upon which relief can be granted.
“The reason Anthony Aquino and Edward Caron (assuming they possessed the requisite talent) were unable to achieve free agency in the NHL is not that the Van Ryn Rule prohibited them from playing in the OHL; it is that the CBA governing eligibility for NHL free agency says that they are not eligible for free agency. We would draw this conclusion under even the most lenient proximate cause standard. Ultimately, we draw this conclusion because common sense requires it. Only indefensibly circuitous logic would blame the rules governing who can play in the OHL, and not the rules governing who can become an NHL free agent, for preventing players from achieving free agency in the NHL.”
National Hockey League Players Association, et al. v. Plymouth Whalers Hockey Club, et al.; 6th Cir.; No. 04-1173; 8/15/05
Attorneys of record — argued: (for appellants) Michael P. Conway of Grippo & Elden LLC in Chicago, Illinois. (for appellees) Stephen F. Wasinger of Wasinger, Kickham & Hanley in Royal Oak, Michigan.
Attorneys of record – on brief: (for appellants) John E. Bucheit and John R. McCambridge of Grippo & Elden LLC in Chicago, Illinois. (for appellees) Stephen F. Wasinger and Gregory D. Hanley of Wasinger, Kickham & Hanley in Royal Oak, Michigan.
