San Francisco Seals, Ltd. v. National Hockey League
379 F.Supp. 966 (1974)
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Rule of Law:
Member clubs of a professional sports league may be treated as a single business enterprise rather than economic competitors, and therefore, the league's internal rules restricting franchise relocation do not constitute a conspiracy in restraint of trade under Section 1 of the Sherman Act.
Facts:
- San Francisco Seals, Ltd. was a professional hockey team and a member club of the National Hockey League (NHL).
- The NHL constitution grants each member club exclusive territorial rights in its home city and a 50-mile radius.
- The constitution explicitly states, 'No member shall transfer its club and franchise to a different city or borough' without the consent of three-fourths of the league's members.
- The San Francisco Seals formally applied to the NHL Board of Governors to move its franchise from San Francisco to Vancouver, British Columbia.
- The NHL Board of Governors denied the Seals' request to relocate.
Procedural Posture:
- San Francisco Seals, Ltd. (plaintiff) initiated a private antitrust lawsuit against the National Hockey League and its member clubs (defendants) in the United States District Court.
- The plaintiff's complaint alleged violations of Sections 1 and 2 of the Sherman Act.
- The plaintiff moved for a partial summary judgment.
- The defendants cross-moved for a summary judgment on all issues.
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Issue:
Does a professional sports league's constitutional provision prohibiting a member club from unilaterally transferring its franchise to a different city constitute a violation of Section 1 of the Sherman Act?
Opinions:
Majority - Curtis, District Judge
No, the league's rule does not violate Section 1 of the Sherman Act. The court reasoned that for antitrust purposes, the relevant market is the production of professional hockey games, and within this market, the NHL and its member teams are not economic competitors. Instead, they operate as a single business enterprise or a single unit, collaborating to produce a product (professional hockey) that competes with other professional sports leagues. A Section 1 violation requires a combination or conspiracy between at least two independent business entities. Since the NHL clubs are partners in a joint venture rather than competitors, their internal organizational rules, such as those restricting franchise relocation, are not illegal horizontal restraints of trade but are necessary for the league's existence. The court distinguished this case from United States v. Topco Associates, where the members were actual economic competitors. Additionally, the court found the Seals lacked standing to sue for a Section 2 monopolization violation because the team was not in the 'target area' of the NHL's alleged anti-competitive conduct, which was aimed at rival hockey leagues, not its own members.
Analysis:
This decision establishes the foundational 'single entity' defense for professional sports leagues in antitrust law. By characterizing the league and its teams as a unified enterprise rather than a group of competing businesses, the court insulated the league's internal governance rules from per se antitrust liability under Section 1. This precedent significantly strengthened the power of sports leagues to control member teams' locations, expansions, and operations, forcing future plaintiffs to challenge such rules under the more difficult 'rule of reason' standard. It set the stage for decades of litigation over the unique economic structure of professional sports.
