Wood v. National Basketball Ass'n
809 F.2d 954 (1987)
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Rule of Law:
Provisions within a collective bargaining agreement that are mandatory subjects of bargaining under federal labor law, such as salary caps and player drafts, are shielded from challenge under the Sherman Antitrust Act by the non-statutory labor exemption.
Facts:
- The National Basketball Association (NBA) and the National Basketball Players Association (NBPA) negotiated a collective bargaining agreement (CBA) memorialized in a 1983 Memorandum of Understanding.
- The NBA sought controls on player salaries, claiming that rising costs threatened some teams with bankruptcy.
- The resulting CBA established a 'salary cap' setting a maximum and minimum for aggregate team salaries, continued the existing college draft system, and prohibited the use of player corporations.
- As part of the agreement, the players were collectively guaranteed 53 percent of the NBA's gross revenues in salaries and benefits.
- O. Leon Wood, a top college player, was selected by the Philadelphia 76ers in the first round of the 1984 NBA draft.
- At the time of the draft, the 76ers' team payroll exceeded the maximum allowed under the salary cap.
- Consequently, the 76ers tendered Wood a one-year contract for $75,000, the maximum allowable for a team over the cap, though they indicated an intent to negotiate a larger contract after adjusting their roster.
Procedural Posture:
- O. Leon Wood filed an antitrust action against the National Basketball Association (NBA) in the U.S. District Court for the Southern District of New York.
- Wood sought a preliminary injunction to restrain enforcement of the salary cap, college draft, and other provisions of the collective bargaining agreement.
- The district court denied Wood's motion for a preliminary injunction.
- After the parties submitted evidence for a final decision on the merits, the district court granted judgment in favor of the defendants (the NBA).
- Wood, as the appellant, appealed the district court's final judgment to the U.S. Court of Appeals for the Second Circuit.
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Issue:
Do provisions in a collective bargaining agreement between a professional sports league and its players' union, such as a salary cap, college draft, and prohibition on player corporations, violate Section 1 of the Sherman Antitrust Act?
Opinions:
Majority - Winter, Circuit Judge
No. The challenged provisions of the collective bargaining agreement do not violate Section 1 of the Sherman Act because they are protected by the non-statutory labor exemption. The court reasoned that federal labor policy, as expressed in the National Labor Relations Act, prioritizes collective bargaining through an exclusive representative over individual negotiations. Wood's claim—that he is illegally prevented from achieving his full free-market value—is fundamentally at odds with this policy, which allows employees to subordinate individual interests to the collective good. The court noted that many standard features of industrial CBAs, such as seniority systems and hiring halls, have similar anticompetitive effects on individuals but are lawful. To apply antitrust law here would subvert national labor policy, unravel the entire bargained-for agreement, and potentially collapse labor relations not just in sports but in other industries. All challenged provisions, including the salary cap, draft, and player corporation ban, are mandatory subjects of bargaining as they are intimately related to 'wages, hours, and other terms and conditions of employment.'
Analysis:
This decision firmly establishes that the non-statutory labor exemption provides a powerful shield for collectively bargained provisions in professional sports, even those that appear to be classic restraints of trade like drafts and salary caps. It prioritizes federal labor policy and the stability of collective bargaining over the antitrust principle of promoting competition in the labor market. The ruling significantly limits the ability of individual players to use antitrust law to challenge employment terms agreed to by their union, shifting their recourse to the internal union process or a potential breach of the duty of fair representation claim. The case reinforces that once employees opt for collective representation, the terms of the resulting agreement—so long as they concern mandatory subjects of bargaining—are largely insulated from antitrust attack.
