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Supreme Court Grants Cert in American Needle

Yesterday, was the last day of the Supreme Court's term, and Justice David Souter's career on the Court before he rides off into the New Hampshire hills, and the Court handed down a number of orders including a notice that it had decided to grant cert in American Needle v. the NFL. The Seventh Circuit had ruled that the NFL can have single entity status, and enjoy immunity from antitrust claims, for a limited purpose, (here, apparel licensing). Until American Needle, the prevailing law of the land was that the NFL acted as a joint venture or partnership of individual clubs, thus subject to Section I of the Sherman Antitrust Act.

The decision in American Needle could have far reaching consequences for not only the NFL but for all major leagues. Both the NFL and American Needle asked for a review of the Seventh Circuit's ruling. American Needle for the most obvious reason that the Circuit Court ruled against it and would like the Supreme Court to find that there is no single entity for any purpose. The NFL has asked the Supreme Court to broaden the Seventh Circuit's ruling to find that the league operates as a single entity for all purposes.

The NFL has little to lose before the Supreme Court. Should the Court hold against the league, life as the NFL knows it will return to the reality as it existed before the case began. American Needle will still have to prove a violation of the Section I of the Sherman Act, and the court will analyze the exclusive licensing agreement that is at the core of the dispute under the rule of reason. Do the pro-competitve benefits of the exclusive licensing agreement outweigh its anti-competitive effects?

However, the benefits to the NFL and the other professional sports leagues of a victory at the Supreme Court, and the adoption by the Court of the position urged by the NFL that the league operates as a single entity for all purposes, is hard to overstate. Not only will the leagues be freed from litigation over exclusive licensing agreements, but the leagues will gain unquestioned control over franchise relocations and ownership transfers. For a look at how important that may be to a league, one need only visit the bankruptcy court in Phoenix and peruse the Coyotes file on the fight between Jim Basillie and the NHL. The NFL had its own problems some time ago with the on again, off again Oakland, Los Angeles, Oakland Raiders and the league's favorite litigation partner Al Davis.

Full post as published by Sports Biz on June 30, 2009 (boomark / email).