Black Bear Sports Group, Inc. v. Amateur Hockey Association of ( 2020 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 19-2076 & 19-2450
BLACK BEAR SPORTS GROUP, INC., and CENTER ICE ARENA,
LLC,
Plaintiffs-Appellants,
v.
AMATEUR HOCKEY ASSOCIATION OF ILLINOIS, INC.,
Defendant-Appellee.
____________________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 18 C 8364 — Matthew F. Kennelly, Judge.
____________________
ARGUED DECEMBER 2, 2019 — DECIDED JUNE 22, 2020
____________________
Before BAUER, EASTERBROOK, and SYKES, Circuit Judges.
EASTERBROOK, Circuit Judge. Organized amateur hockey
leagues in the United States come under the purview of USA
Hockey, Inc., which is subject to the Ted Stevens Olympic
and Amateur Sports Act, 36 U.S.C. §§ 220501–43. USA Hock-
ey delegates most of its authority to state and regional affili-
2 Nos. 19-2076 & 19-2450
ates. Since 1975 Amateur Hockey Association of Illinois (the
Association) has governed the sport in that state.
Black Bear Sports Group, which owns skating rinks in Il-
linois, contends in this suit under §2 of the Sherman Anti-
trust Act, 15 U.S.C. §2, that the Association is monopolizing
the sport. But Black Bear does not claim to have paid mo-
nopoly prices. Nor does it seek an order dissolving the Asso-
ciation and allowing free competition. Instead it asked the
district judge to order the Association to admit it as a mem-
ber and permit it to sponsor a club, which would use the
Center Ice Arena in Glen Ellyn as its “home ice”, and to pay
damages for business losses suffered until these things oc-
cur. In other words, Black Bear wants to use the Sherman Act
to compel a cartel to admit a new member and distribute the
monopoly profits differently.
The oddity—indeed impossibility— of this request seems
to have been lost on the litigants, though many decisions
have held that the Sherman Act cannot be used to regulate
cartels’ membership and profit sharing. See, e.g., Four Cor-
ners Nephrology Associates, P.C. v. Mercy Medical Center, 582
F.3d 1216, 1225–26 (10th Cir. 2009); Daniel v. American Board
of Emergency Medicine, 428 F.3d 408, 440 (2d Cir. 2005)
(“[P]laintiffs cannot themselves state an antitrust injury
when their purpose is to join the cartel rather than disband
it.”). At least one district judge in a suit similar to this has
grasped the point. See Reapers Hockey Association, Inc. v. Ama-
teur Hockey Association Illinois, Inc., 412 F. Supp. 3d 941, 956
(N.D. Ill. 2019) (“And lost cartel profits are insufficient be-
cause ‘a producer’s loss is no concern of the antitrust laws,
which protect consumers from suppliers rather than suppli-
Nos. 19-2076 & 19-2450 3
ers from each other.’”) (citing Stamatakis Industries, Inc. v.
King, 965 F.2d 469, 471 (7th Cir. 1992)).
Instead of summarily tossing the suit for lack of antitrust
injury, see Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429
U.S. 477 (1977), the district judge dismissed the complaint
for lack of Article III standing. Black Bear lacks standing, the
judge wrote, because it has not exhausted private remedies
by asking the Association for admission and being turned
down. 2019 U.S. Dist. LEXIS 78770 (N.D. Ill. May 9, 2019).
Black Bear wants to sponsor a Tier II team at the Center
Ice Arena rink. It complains that the Association makes this
impossible by limiting sponsorship to nonprofit entities. The
district judge thought that the absence of a formal applica-
tion to the Association made the claim too speculative. Yet
the Association’s rules say that a sponsor’s nonprofit status
is essential. Article 19 states that “[e]xcept as set out in the
[Association] By-Laws, Rules and Regulations, each Affiliate
shall have a corporate structure and at all times maintain a
tax exempt status under Section 501(c)(3) of the Internal
Revenue Code”. The Association has not pointed to anything
in its bylaws that would make an exception for Black Bear.
The Constitution does not require a potential litigant to bup
its head against a wall as a condition of standing. Black Bear
does not fear a potential future injury; it contends that it
suffers an ongoing injury—it wants to sponsor a team but
can’t. That sets up a justiciable controversy. Asking the As-
sociation for a dispensation might be a means to mitigate
damages, but mitigation is not a necessary component of jus-
ticiability.
The Constitution of the United States does not establish a
general exhaustion-of-private-remedies obligation. No more
4 Nos. 19-2076 & 19-2450
does the Sherman Act. The statute’s text does not require or
hint at exhaustion of nonjudicial remedies. The district court
did not cite, and we could not find, any decision by the Su-
preme Court or any court of appeals creating such a re-
quirement.
In other branches of the law, the Justices have held that
exhaustion is mandatory only if required by statute. See, e.g.,
Patsy v. Board of Regents, 457 U.S. 496 (1982) (exhaustion not
required in litigation under 42 U.S.C. §1983). Cf. Jones v.
Bock, 549 U.S. 199 (2007) (when exhaustion is required by
statute, the subject is an affirmative defense rather than a
topic that must be addressed in the complaint as a condition
to litigation). Principles of abstention, along the lines of Rail-
road Commission v. Pullman Co., 312 U.S. 496 (1941), do not
apply to disputes among private litigants. Judges can and
regularly do interpret documents such as the Association’s
rules without first asking one of the litigants to seek extra-
judicial relief. So we conclude that Black Bear’s decision not
to pursue whatever remedies it may have within the Associ-
ation does not foreclose this suit.
There is, however, a genuine jurisdictional problem. It
takes a non-frivolous federal claim to support the arising-
under jurisdiction of 28 U.S.C. §1331. The Sherman Act claim
is frivolous, perhaps beper called perverse, for the reason
given in this opinion’s third paragraph. If Black Bear wanted
the Association dissolved or demoted to an advisory capaci-
ty, and competition among leagues or sponsors made the
norm in amateur hockey, that would be a genuine antitrust
claim, but it does not appear to want anything of the sort.
If Black Bear has a serious grievance, it arises under the
Illinois law of private clubs. The Association is organized as
Nos. 19-2076 & 19-2450 5
a not-for-profit corporation. Members and potential mem-
bers can enforce (or contest) its rules as a maper of state law,
though a private group receives considerable leeway in the
interpretation and application of those rules. See Van Daele v.
Vinci, 51 Ill. 2d 389 (1972); Finn v. Beverly Country Club, 289
Ill. App. 3d 565, 568 (1997). Black Bear also asserts a claim
under state antitrust law. But it invokes the supplemental
jurisdiction of 28 U.S.C. §1367, not the diversity jurisdiction
of 28 U.S.C. §1332. Because the federal claim fails, any state-
law claims belong in state court. See §1367(c)(3).
The judgment of the district court is modified to provide
that the suit is dismissed for lack of a plausible federal claim
and as so modified is affirmed.
Black Bear’s second appeal (No. 19-2450) concerns the
district court’s denial of a motion to supplement the record.
Such a procedural order is not appealable separately from
the merits. It is reviewable, if at all, by a motion under Fed.
R. App. P. 10(e)(2)(C) and Circuit Rule 10(b). Black Bear did
not seek relief in this court under Rule 10, and at all events
the disputed document is irrelevant to the appropriate dis-
position of the merits. Appeal No. 19-2450 is dismissed for
want of appellate jurisdiction.