American Needle, Incorporated v. National Football League ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 07-4006
A MERICAN N EEDLE INC.,
Plaintiff-Appellant,
v.
N ATIONAL F OOTBALL L EAGUE et al.,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 04 C 7806—James B. Moran, Judge.
____________
A RGUED JUNE 3, 2008—D ECIDED A UGUST 18, 2008
____________
Before K ANNE, SYKES, and T INDER, Circuit Judges.
K ANNE, Circuit Judge. American Needle Inc. sued the
National Football League (NFL), its member football
teams, and NFL Properties LLC (to whom we will collec-
tively refer as “the NFL defendants”), along with Reebok
International Ltd. (“Reebok”), alleging that the teams’
exclusive licensing agreement with Reebok violated the
Sherman Antitrust Act. See 15 U.S.C. §§ 1-2. The district
court granted summary judgment to the NFL defendants.
We affirm.
2 No. 07-4006
I. H ISTORY
As the most successful and popular professional sports
league in America today, the NFL needs little introduc-
tion. Indeed, the NFL has inspired countless hours of
heated and in-depth discussion about the league’s 88 years
of professional-football history, including its great
players, championship teams, and memorable games. But
the only discussion the NFL inspires here involves
aspects of the league that are not as well known: the
league’s corporate structure, and the nature of its relation-
ships with its member teams and the entities charged with
licensing those teams’ intellectual property.
For those who do not know, the NFL is an unincorpo-
rated association of (now) 32 separately owned and
operated football teams that collectively produce an
annual series (or “season”) of over 250 interrelated foot-
ball games. Each season culminates in a championship
game—a game better known as the Super Bowl. As such,
the product that the teams produce jointly—NFL foot-
ball—requires extensive coordination and integration
between the teams. After all, NFL football is produced
only when two teams play a football game. Thus, although
each team is a separate corporate entity or partnership
unto itself, no team can produce a game—the product of
NFL football—by itself, much less a full season of games or
the Super Bowl. Likewise, the teams’ individual success is
necessarily linked to the success of the league as a whole;
to put it another way, it makes little difference if a team
wins the Super Bowl if no one cares about the Super Bowl.
Realizing that the success of the NFL as a whole was
in their best interests, in the early 1960’s the individual
No. 07-4006 3
teams sought to collectively promote the NFL Brand—that
is, the intellectual property of the NFL and its member
teams—to compete against other forms of entertainment.
With this promotional effort in mind, in 1963 the NFL
teams formed NFL Properties: a separate corporate
entity charged with (1) developing, licensing, and market-
ing the intellectual property the teams owned, such as their
logos, trademarks, and other indicia; and (2) “conduct[ing]
and engag[ing] in advertising campaigns and promotional
ventures on behalf of the NFL and [its] member [teams].”
Among other things, the NFL teams authorized NFL
Properties to grant licenses to vendors so the vendors
could use the teams’ intellectual property to manufacture
and sell various kinds of consumer products that bear
the teams’ logos and trademarks—products such as
team jerseys, shirts, flags, and, as pertinent here, head-
wear, like baseball caps and stocking hats.
For a while after its establishment, NFL Properties
granted headwear licenses to a number of different ven-
dors simultaneously; one of those vendors was American
Needle, which held an NFL headwear license for over
20 years. But then in 2000, the NFL teams authorized
NFL Properties to solicit bids from the vendors for an
exclusive headwear license. Reebok won the bidding war,
and in 2001 the NFL teams allowed NFL Properties to
grant an exclusive license to Reebok for ten years. NFL
Properties thus did not renew American Needle’s
headwear license, or the licenses of the other headwear
vendors.
American Needle responded to the loss of its headwear
license by filing an antitrust action against the NFL, NFL
4 No. 07-4006
Properties, the individual NFL teams, and Reebok. As
relevant here, American Needle claimed that the exclusive
headwear licensing agreement between NFL Properties
and Reebok violated § 1 of the Sherman Antitrust Act,
which outlaws any “contract, combination . . . or conspir-
acy, in restraint of trade.” 15 U.S.C. § 1. As American
Needle saw it, because each of the individual teams
separately owned their team logos and trademarks, their
collective agreement to authorize NFL Properties to award
the exclusive headwear license to Reebok was, in fact, a
conspiracy to restrict other vendors’ ability to obtain
licenses for the teams’ intellectual property. American
Needle also contended that, by authorizing NFL Properties
to award the license to Reebok, the NFL teams monopo-
lized the NFL team licensing and product wholesale
markets in violation of § 2 of the Sherman Antitrust Act.
See id. § 2.
One year after American Needle brought its suit, the
NFL defendants filed a motion for summary judgment
on the company’s § 1 claim. The NFL defendants argued
that, under the United States Supreme Court’s decision
in Copperweld Corp. v. Independence Tube Corp., 467 U.S.
752 (1984), and its progeny, they were immune from
liability under § 1. In Copperweld, the Supreme Court
concluded that a parent corporation and its wholly owned
subsidiary are a single entity for antitrust purposes. Id. at
771. The Court based its conclusion on its determination
that the parent-subsidiary relationship did not yield the
anti-competitive risks that the Sherman Antitrust Act
was enacted to combat. Id. at 769, 771. Specifically, the
Court stated that agreements between companies are
No. 07-4006 5
generally subject to § 1 review because they deprive the
market of the independent sources of economic power
that competition requires. Id. at 769. But because the
parent-subsidiary relationship is always “guided or
determined not by two separate corporate consciousnesses,
but one,” the relationship does not deprive the market
of any independent sources of economic power. Id. at 771.
Federal courts in later cases extended the single-entity
concept beyond the context of a parent-subsidiary rela-
tionship, stating that affiliated companies or individuals
could also be considered a single entity in certain circum-
stances. See, e.g., Jack Russell Terrier Network v. Am. Kennel
Club, Inc., 407 F.3d 1027, 1035 (9th Cir. 2005); Eleven Line,
Inc. v. N. Tex. State Soccer Ass’n, 213 F.3d 198, 205 (5th Cir.
2000); Chi. Prof’l Sports Ltd. v. Nat’l Basketball Ass’n (“Bulls
II”), 95 F.3d 593, 597-600 (7th Cir. 1996); City of Mt. Pleasant
v. Associated Elec. Coop., Inc., 838 F.2d 268, 271, 276-77 (8th
Cir. 1988). Relying on this gradual extension of Copperweld,
the NFL defendants asserted that they functioned as a
single entity when collectively promoting NFL football
by licensing the NFL teams’ intellectual property, and
were thus immune from liability under § 1.
American Needle did not immediately oppose the NFL
defendants’ summary-judgment motion. Instead, the
company moved for a continuance under Fed. R. Civ. P.
56(f) on the ground that it was “unable to present admissi-
ble evidence” to dispute the NFL defendants’ single-entity
defense. That evidence, American Needle stated, “was in
the possession of the defendants.” The company therefore
asked the district court for the opportunity to take dis-
6 No. 07-4006
covery regarding the NFL defendants’ single-entity defense
and “a number of issues generally,” and included a list
of 51 discovery requests.
The NFL defendants, in turn, objected to American
Needle’s discovery requests on the ground that, as a
whole, they were not limited to the single-entity issue. The
NFL defendants, did, however, offer to produce a wide
range of documents they considered to be related to their
single-entity defense. The district court reserved judg-
ment on the NFL defendants’ objection, and urged Ameri-
can Needle to narrow its discovery requests. In response,
American Needle made additional discovery requests
that were even more extensive in scope and number than
its original requests. The NFL defendants again objected,
and the district court ruled that, until the NFL defendants’
summary-judgment motion was resolved, discovery
would be limited to the single-entity issue. The court then
ordered the NFL defendants to produce all documents
pertinent to their single-entity defense.
Discovery ensued. The NFL defendants abided by the
district court’s order and disclosed a voluminous amount
of documents related to their single-entity defense. But
when discovery concluded, American Needle filed a
second Rule 56(f) motion. As it had done earlier, American
Needle stated that it was “unable to present admissible
evidence” to dispute the NFL defendants’ single-entity
defense because that evidence was “in the possession of
the defendants.” American Needle then listed 49 discovery
requests it sought to have the NFL defendants complete;
most of those requests were copied verbatim from the
No. 07-4006 7
requests American Needle made earlier. The district court
took American Needle’s second Rule 56(f) motion under
advisement, and ordered the company to respond to the
merits of the NFL defendants’ summary-judgment motion.
Shortly after briefing completed, the district court
issued an order in which it both denied American Needle’s
Rule 56(f) motion, and granted the NFL defendants’
motion for summary judgment on American Needle’s § 1
claim. The district court determined that further discovery
on the single-entity issue was unnecessary because “the
facts that materially [bore] upon the [court’s] decision[ ]
[were] undisputed,” and led “to the conclusion that the
NFL and the teams act as a single entity in licensing their
intellectual property.” The court’s conclusion was based on
its determination that the NFL teams’ collective-licensing
agreement serves “to promote NFL football.” And by
promoting NFL football through collective licensing, the
court continued, the NFL teams “act[ ] as an economic
unit” in such a manner that “they should be deemed to be
a single entity.” The court therefore concluded that Ameri-
can Needle’s § 1 claim failed as a matter of law because,
under Copperweld, single entities cannot restrain trade in
violation of the Sherman Antitrust Act. The court then
sought supplemental briefing on whether its single-entity
finding compelled the dismissal of American Needle’s § 2
monopolization claim.
After the parties submitted their briefs addressing
American Needle’s § 2 monopolization claim, the court
granted summary judgment to the NFL defendants. The
court concluded that its earlier single-entity determina-
8 No. 07-4006
tion doomed American Needle’s § 2 claim because, as a
single entity, the NFL and its member teams could collec-
tively license their intellectual property “to one or many
without running afoul of the antitrust laws.” This appeal
followed.
II. A NALYSIS
American Needle attacks the district court’s judgment by
forwarding two arguments. First, American Needle
contends that the district court incorrectly denied its Rule
56(f) motion before granting summary judgment to the
NFL defendants on its § 1 claim. American Needle further
asserts that the district court was wrong to grant the
NFL defendants’ motions for summary judgment on both
its § 1 and § 2 monopolization claims. We address these
arguments in turn.
A. The district court’s denial of American Needle’s Rule 56(f)
motion
We first address the district court’s denial of American
Needle’s Rule 56(f) motion, a decision that we review for
abuse of discretion. See Hammer v. Ashcroft, 512 F.3d 961,
971 (7th Cir. 2008). According to American Needle, the
district court abused its discretion by allowing it, without
explanation, “to obtain only those documents that the
[NFL] defendants themselves agreed to provide,” and not
the documents that the company sought in its discovery
requests. In American Needle’s view, the district court
No. 07-4006 9
“cannot, without explanation, permit one party to
control the flow of information” in discovery, and “[t]o
do so is not the exercise, but the abdication, of discretion.”
But the premise of American Needle’s argument is
flawed: the district court did not, as American Needle puts
it, “abdicate” its discretion over discovery matters to the
NFL defendants “without explanation.” To the contrary,
the district court’s denial of American Needle’s Rule 56(f)
motion was thoroughly explained.
After American Needle submitted its second set of wide-
ranging discovery requests, the district court ruled that
discovery would be limited to only those documents
pertaining to the NFL defendants’ single-entity defense,
and ordered the defendants to turn over all the docu-
ments related to their defense. And in its order rejecting
American Needle’s second Rule 56(f) motion, the court
clearly explained that further discovery was unnecessary
because “the facts that materially [bore] upon the [court’s]
decision[ ] [were] undisputed,” and led “to the conclu-
sion that the NFL and the teams act as a single entity in
licensing their intellectual property.”
In any event, American Needle fails to show that the
district court was wrong to deny additional discovery. To
succeed on its challenge, American Needle needs to
identify the “specific evidence which [it] might have
obtained from [the NFL defendants] that would create a
genuine issue” as to the defendants’ single-entity defense,
and thus allow American Needle’s § 1 claim to survive
summary judgment. Davis v. G.N. Mortgage Corp., 396
F.3d 869, 885 (7th Cir. 2005); see also United States v. All
10 No. 07-4006
Assets & Equip. of W. Side Bldg. Corp., 58 F.3d 1181, 1190-91
(7th Cir. 1995) (affirming district court’s denial of de-
fendants’ request for additional discovery because
request “lacked specificity concerning what information
[the defendants] hoped to uncover and how it would
refute [the claims brought against them]”). American
Needle identifies no such evidence, however; instead, the
company merely explains that further discovery was
necessary because “the determination of the single
entity question [sic] requires a fact intensive inquiry [sic].”
However, American Needle’s point is irrelevant. Just
because the resolution of the single-entity issue is “fact
intensive” does not speak to whether additional discovery
was necessary to uncover specific evidence; after all, the
large number of documents American Needle obtained
from the NFL defendants could have provided such a
complete answer to the “fact-intensive” question as to
render further discovery unnecessary. We thus cannot
say that the district court abused its discretion by
denying American Needle’s Rule 56(f) motion. See Davis,
396 F.3d at 885; All Assets & Equip., 58 F.3d at 1190-91.
B. The district court’s grant of summary judgment to the
NFL defendants
American Needle next challenges the district court’s
grant of summary judgment to the NFL defendants. We
review the district court’s grant of summary judgment
de novo, taking the facts in the light most favorable to
American Needle, the non-moving party. See Foskett v.
No. 07-4006 11
Great Wolf Resorts, Inc., 518 F.3d 518, 522 (7th Cir. 2008).
And in so viewing the record, we will examine whether
there is a genuine issue of material fact that precludes
judgment as a matter of law. See Fed. R. Civ. P. 56(c);
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Cady v.
Sheahan, 467 F.3d 1057, 1060-61 (7th Cir. 2006).
American Needle first contends that the district court
erred by granting the NFL defendants’ summary judg-
ment on its § 1 claim. Specifically, American Needle
argues that the district court incorrectly concluded that
the NFL teams constitute a single entity under Copperweld
when collectively licensing their intellectual property.
American Needle’s argument leads us into murky wa-
ters. We have yet to render a definitive opinion as to
whether the teams of a professional sports league can be
considered a single entity in light of Copperweld. The
characteristics that sports leagues generally exhibit make
the determination difficult; in some contexts, a league
seems more aptly described as a single entity immune
from antitrust scrutiny, while in others a league appears
to be a joint venture between independently owned
teams that is subject to review under § 1. See Brown v. Pro-
Football, Inc., 518 U.S. 231, 248-49 (1996) (“[T]he clubs that
make up a professional sports league are not com-
pletely independent economic competitors . . . . In the
present context, however, that circumstance makes the
league more like a single bargaining employer . . . .”); Bulls
II, 95 F.3d at 597-99 (“To say that the league is ‘more like
a single bargaining employer’ than a multi-employer unit
is not to say that it necessarily is one, for every purpose.”);
see also Super Sulky, Inc. v. U.S. Trotting Ass’n, 174 F.3d 733,
12 No. 07-4006
741 (6th Cir. 1999) (“[T]he notion of concerted action
liability in the field of professional sports is at best con-
fusing.”). For instance, from the perspective of fans, a
professional sports league can be seen as “a single source”
of entertainment that produces “one product,” even
though the league’s member teams are distinguishable.
Bulls II, 95 F.3d at 599. Yet at the same time, individuals
seeking employment with any of the league’s teams
would view the league as a collection of loosely affiliated
companies that all have the independent authority to hire
and fire employees. See Brown, 518 U.S. at 249 (noting that
professional football players “often negotiate their pay
individually with their employers,” NFL teams); Bulls II,
95 F.3d at 599 (“[F]rom the perspective of college basket-
ball players who seek to sell their skills, the teams [in
the National Basketball League (NBA)] are distinct . . . .”).
That being said, we have nevertheless embraced the
possibility that a professional sports league could be
considered a single entity under Copperweld. Bulls II, 95
F.3d at 598. But see Fraser v. Major League Soccer, L.L.C., 284
F.3d 47, 55-56 (1st Cir. 2002) (citing Sullivan v. Nat’l Football
League, 34 F.3d 1091, 1099 (1st Cir. 1994), to note that
Bulls II has not yet been adopted by United States Court
of Appeals for the First Circuit). But because of the many
and conflicting characteristics that professional sports
leagues generally exhibit, we have expressed skepticism
that Copperweld could provide the definitive single-entity
determination for all sports leagues alike. See id. at 599-600.
This skepticism, in turn, has led us to opine that the
question of whether a professional sports league is a
single entity should be addressed not only “one league
No. 07-4006 13
at a time,” but also “one facet of a league at a time.” Id. at
600. Thus, in reviewing the district court’s decision, we
will limit our review to (1) the actions of the NFL, its
members teams, and NFL Properties; and (2) the actions of
the NFL and its member teams as they pertain to
the teams’ agreement to license their intellectual
property collectively via NFL Properties.
With this compartmentalization of Copperweld in mind,
we turn to American Needle’s challenge to the district
court’s single-entity determination. According to Ameri-
can Needle, the district court applied the wrong legal
standard when concluding that the NFL teams were a
single entity. As American Needle sees it, the district
court concluded “that the NFL [t]eams are a single entity
because they ‘act’ as a single entity in licensing their
intellectual property.” American Needle asserts that this
approach undercuts the Supreme Court’s central teaching
in Copperweld: that the Sherman Antitrust Act was de-
signed to combat the deprivation of independent
sources of economic power in the marketplace. See 467
U.S. at 469-71.
Therefore, American Needle continues, instead of asking
whether the NFL teams merely “ ‘act’ ” as a single entity,
the district court should have inquired into whether the
NFL teams’ agreement to license their intellectual property
collectively deprived the market of sources of economic
power that control the intellectual property. That question,
the company contends, can be answered by looking to
whether the teams could compete against one another
when licensing and marketing their intellectual property.
14 No. 07-4006
If so, American Needle posits, then it is the individual
teams who actually control their intellectual property,
meaning that they cannot be considered a single entity
for the purposes of licensing their intellectual property.
We agree with American Needle that the Supreme Court
in Copperweld was concerned about the anti-competitive
effects that collective action might introduce into the
market. See id.; Bulls II, 95 F.3d at 598; see also Spectrum
Sports v. McQuillan, 506 U.S. 447, 458-59 (1993) (discussing
Copperweld in context of § 2 claim); Goldwasser v. Ameritech
Corp., 222 F.3d 390, 397 (7th Cir. 2000) (same). We
further agree that when making a single-entity deter-
mination, courts must examine whether the conduct in
question deprives the marketplace of the independent
sources of economic control that competition assumes. See
Copperweld, 467 U.S. at 469-71; Bulls II, 95 F.3d at 598;
Ball Mem’l Hosp., Inc. v. Mut. Hosp. Ins., Inc., 784 F.2d
1325, 1337 (7th Cir. 1986).
But we are not convinced that the NFL’s single-entity
status in the present context turns entirely on whether
the league’s member teams can compete with one
another when licensing and marketing their intellectual
property. American Needle’s proposed approach is one
step removed from saying that the NFL teams can be a
single entity only if the teams have “a complete unity of
interest”—a legal proposition that we have rejected as
“silly.” Bulls II, 95 F.3d at 598. As we have explained,
“Copperweld does not hold that only conflict-free enter-
prises may be treated as single entities”; “[e]ven a single
firm contains many competing interests.” Id. at 598 (dis-
No. 07-4006 15
cussing Robert G. Eccles, Transfer Pricing as a Problem of
Agency, in Principals and Agents: The Structure of Business
151 (1985)). Thus, though the several NFL teams could
have competing interests regarding the use of their in-
tellectual property that could conceivably rise to the
level of potential intra-league competition, those inter-
ests do not necessarily keep the teams from functioning
as a single entity. Id. at 597-98. We therefore cannot fault
the district court for not considering whether the NFL
teams could compete against one another when licensing
and marketing their intellectual property.
And with that said, American Needle’s assertion that
the NFL teams have deprived the market of independent
sources of economic power unravels. Certainly the NFL
teams can function only as one source of economic power
when collectively producing NFL football. Asserting that
a single football team could produce a football game is
less of a legal argument then it is a Zen riddle: Who wins
when a football team plays itself? See Nat’l Collegiate
Athletic Ass’n v. Bd. of Regents, 468 U.S. 85, 101 (1984)
(“ ‘[Some] activities can only be carried out jointly. Perhaps
the leading example is league sports. When a league of
professional lacrosse teams is formed, it would be point-
less to declare their cooperation illegal on the ground that
there are no other professional lacrosse teams.’ ” (quoting
Robert Bork, The Antitrust Paradox 278 (1978))); Bulls II, 95
F.3d at 599 (“[T]he NBA has no existence independent of
sports. It makes professional basketball; only it can make
‘NBA Basketball’ games . . . .”). It thus follows that only
one source of economic power controls the promotion of
16 No. 07-4006
NFL football; it makes little sense to assert that each
individual team has the authority, if not the responsibility,
to promote the jointly produced NFL football. Indeed, the
NFL defendants introduced uncontradicted evidence
that the NFL teams share a vital economic interest in
collectively promoting NFL football. After all, the league
competes with other forms of entertainment for an audi-
ence of finite (if extremely large) size, and the loss of
audience members to alternative forms of entertainment
necessarily impacts the individual teams’ success. See Bulls
II, 95 F.3d at 597; see also Brown, 518 U.S. at 248 (“[T]he
[teams] that make up a professional sports league are not
completely independent economic competitors, as they
depend upon a degree of cooperation for economic sur-
vival.”); Nat’l Football League v. N. Am. Soccer League, 459
U.S. 1074, 1077 (1982) (Rehnquist, J., dissenting) (“The
NFL . . . competes with other sports and other forms of
entertainment in the entertainment market. Although
individual NFL teams compete with one another on the
playing field, they rarely compete in the market place.”).
But most importantly, the record amply establishes that
since 1963, the NFL teams have acted as one source of
economic power—under the auspices of NFL Proper-
ties—to license their intellectual property collectively
and to promote NFL football. Tellingly, American Needle
does not dispute that the NFL teams collectively license
their intellectual property to promote NFL football; in
fact, when opposing the NFL defendants’ motion for
summary judgment, American Needle relied on NFL
Properties’s Articles of Incorporation, which state that the
teams formed NFL Properties “[t]o conduct and engage
No. 07-4006 17
in advertising campaigns and promotional ventures on
behalf of the [NFL] and the member [teams].” And our
review of the record reveals no evidence that requires us
to question the purpose of the teams’ licensing agreement.
Simply put, nothing in § 1 prohibits the NFL teams
from cooperating so the league can compete against
other entertainment providers. Indeed, antitrust law
encourages cooperation inside a business organiza-
tion—such as, in this case, a professional sports league—to
foster competition between that organization and its
competitors. See Bulls II, 95 F.3d at 599. Viewed in this
light, the NFL teams are best described as a single
source of economic power when promoting NFL football
through licensing the teams’ intellectual property, and we
thus cannot say that the district court was wrong to so
conclude.
Moving on, the failure of American Needle’s § 1 claim
necessarily dooms its § 2 monopolization claim. As a single
entity for the purpose of licensing, the NFL teams are free
under § 2 to license their intellectual property on an
exclusive basis, see Cook Inc. v. Boston Scientific Corp., 333
F.3d 737, 740 (7th Cir. 2003), even if the teams opt to reduce
the number of companies to whom they grant licenses,
see Bulls II, 95 F.3d at 598 (“To say that participants in an
organization may cooperate is to say that they may control
what they make and how they sell it: the producers of Star
Trek may decide to release two episodes a week and
grant exclusive licenses to show them, even though this
reduces the number of times episodes appear on TV in a
given market . . . .”); Gregory J. Werden, Antitrust Analysis
18 No. 07-4006
of Joint Ventures: An Overview, 66 Antitrust L.J. 701, 730-31
(1998) (“An antitrust claim based solely on a single firm’s
denial of a license to a trademark would readily be dis-
missed . . . .”). As such, American Needle has no colorable
claim that the NFL teams and NFL Properties created a
monopoly by awarding Reebok the exclusive headwear
licensing contract. See Cook Inc., 333 F.3d at 740 (discussing
competitive effects of exclusive-licensing agreements);
Bulls II, 95 F.3d at 598. The district court was therefore
correct to grant summary judgment to the NFL defendants
on American Needle’s § 2 monopolization claim.
III. C ONCLUSION
We A FFIRM the district court’s judgment.
8-18-08