Los Angeles Memorial Coliseum Commission v. National Football League
726 F.2d 1381 (1984)
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Rule of Law:
A professional sports league's rule that restricts a member team's ability to relocate its franchise is subject to the rule of reason under Section 1 of the Sherman Act and constitutes an unreasonable restraint of trade if it is not narrowly tailored to achieve legitimate procompetitive objectives.
Facts:
- In 1978, the Los Angeles Rams professional football team decided to move from the Los Angeles Memorial Coliseum to a stadium in Anaheim, California, leaving the L.A. Coliseum without a major tenant.
- The L.A. Coliseum's efforts to attract another NFL team were constrained by NFL Rule 4.3, which required a three-quarters vote from all member clubs for a franchise to relocate into another team's designated 'home territory.'
- Al Davis, the managing general partner of the Oakland Raiders, became dissatisfied with the team's stadium in Oakland after its lease expired and began negotiations to move the team to the L.A. Coliseum.
- On March 1, 1980, Davis and the L.A. Coliseum signed a memorandum of agreement outlining the terms for the Raiders' relocation to Los Angeles.
- Davis announced his intention to move the Raiders at an NFL meeting on March 3, 1980.
- On March 10, 1980, the NFL member clubs voted 22-0 against the proposed move, with five teams abstaining, thereby blocking the Raiders' relocation under Rule 4.3.
- In a separate matter, the City of Oakland initiated an eminent domain action against the Raiders in an attempt to prevent the team from leaving.
Procedural Posture:
- The Los Angeles Memorial Coliseum Commission sued the National Football League (NFL) in U.S. District Court for the Central District of California, alleging Rule 4.3 violated Section 1 of the Sherman Act.
- The district court initially dismissed the suit as not ripe for review.
- After the Raiders and the Coliseum signed an agreement, the Coliseum reactivated its lawsuit and the district court granted a preliminary injunction against the NFL.
- On appeal, the U.S. Court of Appeals for the Ninth Circuit reversed the preliminary injunction.
- After the NFL owners voted to block the move, the Coliseum renewed its lawsuit in district court.
- The Oakland Raiders filed a cross-claim against the NFL, aligning as a party plaintiff with the Coliseum.
- The first trial in 1981 ended in a hung jury, and the court declared a mistrial.
- Before the second trial, the district court granted a directed verdict for the plaintiffs on the 'single entity' issue, ruling as a matter of law that the NFL was not a single entity.
- The liability portion of the second, bifurcated trial concluded with a jury verdict in favor of the Coliseum and the Raiders.
- The district court entered a final judgment on liability and issued a permanent injunction preventing the NFL from interfering with the Raiders' move to Los Angeles.
- The NFL and various member clubs appealed the judgment and injunction to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
Does the National Football League's Rule 4.3, which requires three-quarters approval from member teams for a franchise to relocate into another team's home territory, constitute an unreasonable restraint of trade in violation of Section 1 of the Sherman Act?
Opinions:
Majority - J. Blaine Anderson
Yes, the National Football League's Rule 4.3 constitutes an unreasonable restraint of trade in violation of Section 1 of the Sherman Act. The court rejected the NFL's defense that it operates as a 'single entity' incapable of conspiring under antitrust law, finding instead that the 28 member clubs are separate and independent business entities that compete with one another. Applying the rule of reason, the court determined that Rule 4.3 creates a territorial allocation that harms competition by insulating teams from rivals, foreclosing competition among stadiums for tenants, and ultimately allowing teams to charge monopoly prices to consumers. While the NFL asserted procompetitive justifications such as franchise stability and fan loyalty, the rule was not narrowly tailored to achieve these goals. The court noted that less restrictive alternatives, such as objective guidelines for relocation, could serve the league's legitimate interests without so severely restraining trade, and that the rule's subjective voting process allowed owners to block moves for purely anticompetitive reasons or personal animosity.
Concurring-in-part-and-dissenting-in-part - Spencer Williams
No, the National Football League's Rule 4.3 does not violate Section 1 of the Sherman Act because the NFL should be treated as a single entity for purposes of franchise relocation, making it legally incapable of conspiring with itself. The dissent argues that the majority focused excessively on the formal corporate separation of the teams while ignoring their profound economic interdependence. The teams cannot produce their joint product—professional football—without extensive cooperation and coordination through the league structure. Therefore, intra-league rules governing the location of franchises are analogous to internal decisions made by a single corporation about where to place its branches, which are not subject to Section 1 scrutiny. The appropriate legal tool to address the NFL's market power is Section 2 of the Sherman Act (monopolization), not Section 1, which should be reserved for restraints on 'upstream' markets where teams do compete, such as for players and coaches.
Analysis:
This landmark decision established that professional sports leagues are not immune from Section 1 of the Sherman Act under a 'single entity' theory. By applying the rule of reason to a league's internal governance rules on franchise relocation, the court affirmed that such rules must be justified by legitimate, procompetitive purposes and be narrowly tailored, rather than serving as a tool for incumbent teams to stifle competition. This ruling significantly empowered individual franchises seeking to relocate, shifted the balance of power between leagues and their member clubs, and forced sports leagues to adopt more objective and transparent criteria for major business decisions to withstand antitrust scrutiny. The case continues to influence legal analysis of joint ventures and sports league governance.
