Third Circuit Delivers Antitrust Victory to the NFL

Dec 1, 2005

The Third U. S. Circuit Court of Appeals has affirmed a district court’s ruling that a municipal taxpayer lacked standing to sue the National Football League for violating the Sherman Antitrust Act, 15 U.S.C. §§ 1-2, and the Clayton Act, 15 U.S.C. § 15.
Specifically, the appeals court found that Warnock, who was claiming that the NFL illegally coerced his municipality into a building a stadium and obtained favorable lease terms, was neither a “competitor or customer” of the NFL.
Earlier this year, a federal judge from the Western District of Pennsylvania dismissed Warnock’s claim, likening him to “a spectator in the stands who is unable to challenge a disputed call by the referee because he does not hold the head coach’s red challenge flag.”
That court wrote that to show standing the plaintiff would have to show the injury is “fairly traceable to the conduct” of defendants. Allen v. Wright, 468 U.S. 737, 757, 82 L. Ed. 2d 556, 104 S. Ct. 3315 (1984).
“Plaintiff in effect alleges that defendants committed an antitrust violation that caused Allegheny County to spend tax dollars in order to keep the Steelers in Pittsburgh. In this respect, however, plaintiff’s theory is missing a critical link in the chain of causation. Defendants are not the entity that allegedly improperly distributed plaintiff’s tax dollars. Defendants are not a municipal or state body, they do not have any characteristics of such an entity, and they certainly do not have the ability to levy and collect taxes from the citizens of Allegheny County. While the standing doctrine may be an elastic concept, extending the doctrine to fit plaintiff’s theory would stretch standing beyond the breaking point.
“If plaintiff’s theory was accepted by this court, any municipal taxpayer could bring suit against any private entity that receives tax dollars from a local government by arguing that the entity violated federal law. Federal courts could be flooded with a litany of claims by municipal taxpayers seeking to sue private entities as long as the litigant could successfully allege a nexus between a violation of federal law and the entity’s receipt of municipal tax dollars. This outcome, however, would run anathema to the constitutional standing requirement that the injury alleged be ‘fairly traceable’ to the actions of the defendant(s). In such cases, and in the present case where plaintiff’s suit was brought to redress the allegedly improper distribution of local tax dollars to private entities, the missing link is that the litigant, while disputing the judgment of the local government entity, did not sue the local government entity that actually made the tax distribution. As a result, plaintiff cannot satisfy the causation prong because his alleged injury is not ‘fairly traceable’ to the conduct of defendants, but rather ‘results from the independent action of some third party not before the court.’ Allen, 468 U.S. at 757.”
Appeals Courts Adds Its Own Take
The appeals court wrote that courts should consider several factors in an antitrust standing analysis:
(1) the causal connection between the antitrust violation and the harm to the plaintiff and the intent by the defendant to cause that harm, with neither factor alone conferring standing;
(2) whether the plaintiff’s alleged injury is of the type for which the antitrust laws were intended to provide redress;
(3) the directness of the injury, which addressed the concerns that liberal application of standing principles might produce speculative claims;
(4) the existence of more direct victims of the alleged antitrust violations; and
(5) the potential for duplicative recovery or complex apportionment of damages.
2660 Woodley Rd. Joint Venture v. ITT Sheraton Corp., 369 F.3d 732, 740-41 (3d Cir. 2004).
“As we see it, the pivotal question here is the ‘directness’ of the victim — as opposed to the injury. We must ask whether there are “more direct victims” of the NFL’s alleged violations. Id. at 741. It appears to us that Allegheny County and the Sports & Exhibition Authority have been more directly harmed than taxpayers like Warnock. They have allegedly been coerced to offer favorable terms to the Steelers, to the taxpayers’ detriment. Therefore, taxpayers would be only indirect victims. Granted, Warnock alleges that the County and the Authority are engaged in an ‘unholy alliance’ with the NFL. However, if that is the case, the County and the Authority would be the proper defendants, not the NFL. Indeed, the District Court properly cited Areeda & Hovenkamp, Antitrust Law § 335a (2d ed. 2000), for the proposition that allegations of political influence or conspiracy on the part of the government are not sufficient for standing. 356 F. Supp. 2d at 545 n.7.
“Also, one of the essential tenets of antitrust standing is that a plaintiff must generally be a ‘competitor or customer’ of the defendant. This requirement can be fulfilled if the harm to the plaintiff is ‘inextricably intertwined’ with the antitrust conspiracy. See Gulfstream III Assocs., Inc. v. Gulfstream Aerospace Corp., 995 F.2d 425, 429 (3d Cir. 1993). Here, Warnock is clearly not a competitor. Nor is he a customer in the traditional sense. He has not alleged that he is either a prospective professional football team owner, or that he is an actual consumer of the NFL’s products. Unless one concludes that Warnock’s harm is ‘inextricably intertwined’ with the alleged violation, which it is not, Warnock is simply a taxpayer with a general grievance.
Robert C. Warnock v. National Football League et al.; 3d. Cir.; No. 05-1530; 11/9/05
Attorneys of record: (for plaintiff) William James Helzlsouer, Dravosburg, PA.


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