Hairston v. Pacific 10 Conference

Opinion by Judge HALL; Separate Concurrence by Judge TROTT. CYNTHIA HOLCOMB HALL, Circuit Judge: Plaintiffs-appellants Russell Hairston, Frank Garcia, Jovan McCoy and Kyle Roberts appeal the district court’s order granting summary judgment in favor of defendant-appellee, the Paeific-10 Conference (“Pac-10”). The district court had jurisdiction over this matter pursuant to 15 U.S.C. §§ 15 and 26, and 28 U.S.C. § 1367. We have jurisdiction over this timely appeal pursuant to 28 U.S.C. § 1291. We affirm. I. Appellants are former and current University of Washington (“UW”) football players. Appellee, the Pacific-10 Conference (“Pac-10”), is an unincorporated association of ten universities situated in California, Arizona, Oregon and Washington,1 formed for the purpose of “establishing an athletic program to be participated in by the members.” On November 5, 1992, the Seattle Times reported that UWs star quarterback, Billy Joe Hobert, had received three loans total-ling $50,000 from an Idaho businessman. After investigating the allegations, UW officials suspended Hobert and declared him permanently ineligible to play amateur football. One month later, the Los Angeles Times published a series of articles alleging that UWs football program had violated several NCAA rules. At this time, UW, in conjunction with Pac-10 officials, began investigating these alleged irregularities. After conducting an eight-month investigation into the allegations of recruiting improprieties, the Pac-10 placed the UW football team on probation for recruiting violations. The levied sanctions included: (1) a two-year bowl ban covering the 1993 and 1994 seasons; (2) a one-year television revenue ban; (3) a limit of 15 football scholarships each for the 1994-95 and the 1995-96 academic years; (4) a reduction in the number of permissible football recruiting visits from 70 to 35 in 1993-94 and to 40 in 1994-95; and (5) a two-year probationary period. The imposition of penalties on the UW Huskies devastated both the players and their fans. In an effort to have the sanctions rescinded, appellants filed a complaint against the Pac-10. In their complaint, appellants alleged antitrust violations under Section One of the Sherman Act, 15 U.S.C. § 1, and breach of contract. They argued that the penalties were “grossly disproportionate to the University’s violations” and evidence of a conspiracy engineered by UWs Pac-10 competitors to sideline UWs football program and thereby improve their own records and odds of winning a post-season bowl game berth. Besides injunctive relief2 appellants also sought damages, which would include the cost of air fare, lodging, meals and expenses related to a trip to play in a post-season bowl game. The Pac-10 responded by filing a motion to dismiss all claims. In its motion, the Pac-10 contended that the players lacked constitutional and antitrust standing. The Pac-10’s motion was granted in part as to certain plaintiffs not included in this appeal, but denied as to the issue of the players’ standing. Hairston v. Pacific-10 Conference, 893 F.Supp. 1485 (W.D.Wash.1994) (“Hairston I”). The district court found that because [1318] the players had demonstrated direct antitrust injury, they could pursue their antitrust claims. Id. at 1491-92. However, the court dismissed the players’ breach of contract claim because it found that the players were not intended third-party beneficiaries of the contract between and among Pac-10 member schools. Id. at 1494. The Pac-10 then filed a motion for summary judgment alleging that appellants had faded to present any evidence of anticompeti-tive conspiracy among Pac-10 members or between the Pac-10 and the NCAA. The court agreed and granted the Pac-10’s motion. Hairston v. Pacific-10 Conference, 893 F.Supp. 1495, 1496 (W.D.Wash.1995) (“Hairston II”). This appeal then followed.3 II. A district court opinion granting summary judgment is reviewed de novo. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995), cert. denied, — U.S. —, 116 S.Ct. 1261, 134 L.Ed.2d 209 (1996). III. On appeal, the Pac-10 contends that the motion for summary judgment should be affirmed because appellants lack antitrust standing under Section 4 of the Clayton Act, 15 U.S.C. § 4. Although we are not persuaded by the reasoning in the district court’s opinion, Hairston I, 893 F.Supp. at 1490-92, we need not decide whether appellants have met the requirements for antitrust standing, because they have failed to establish any violation of the antitrust laws. As Professors Areeda and Hoven-kamp have observed: When a court concludes that no violation has occurred, it has no occasion to consider [antitrust] standing.... An increasing number of courts, unfortunately, deny standing when they really mean that no’ violation has occurred. In particular, the antitrust injury element of standing demands that the plaintiffs alleged injury result from the threat to competition that underlies the alleged violation. A court seeing no threat to competition in a rule-of-reason case may then deny that the plaintiff has suffered antitrust injury and dismiss the suit for lack of standing. Such a ruling would be erroneous, for the absence of any threat to competition means that no violation has occurred and that even suit by the government — which enjoys automatic standing — must be dismissed. 2 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 360f, at 202-03 (rev. ed.1995) (footnotes omitted); accord Levine v. Central Florida Medical Affiliates, Inc., 72 F.3d 1538, 1545 (11th Cir.1996) (declining to reach the issue of standing because appellant had failed to demonstrate existence of antitrust violation); see Sicor Ltd. v. Cetus Corp., 51 F.3d 848, 855 n. 10 (9th Cir.) cert. denied, — U.S. —, 116 S.Ct. 170, 133 L.Ed.2d 111 (1995) (choosing not. to reach standing issue because appellant had not made out claim of antitrust injury); see also McCormack v. Nat’l Collegiate Athletic Assoc., 845 F.2d 1338, 1343 (5th Cir.1988) (punting on standing issue and reaching merits of antitrust claim). The Sherman Act requires, at a minimum, that appellants prove that the Pac-10’s actions had an anticompetitive effect. It is on this showing that appellants’ claim fails, and accordingly we decide this case on the merits. IV. Section 1 of the Sherman Act prohibits “[e]very contract, combination ... or conspiracy, in restraint of trade or commerce among the several Statesf.] ...” 15 U.S.C. § 1. In order to establish a claim under Section 1, the players must demonstrate: “(1) that there was a contract, combination, or conspiracy; (2) that the agreement unreasonably restrained trade under either a per se rule of illegality or a rule of reason analysis; and (3) that the restraint affected interstate commerce.” Bhan v. NME Hospitals, Inc., 929 F.2d 1404, 1410 (9th Cir.), cert. [1319] denied, 502 U.S. 994, 112 S.Ct. 617, 116 L.Ed.2d 639 (1991) (citation omitted). The first and third elements of this test are not at issue. The Pac-10 members’ agreement to sanction UW fulfills the “contract, combination, or conspiracy” prong. See NCAA v. Board of Regents of Univ. of Okla., 468 U.S. 85, 99, 104 S.Ct. 2948, 2959, 82 L.Ed.2d 70 (1984) (“NCAA member institutions have created a horizontal restraint-an agreement among competitors on the way in which they will compete against each other.”). The parties do not dispute that the agreement affects interstate commerce. Thus, the only issue is whether the sanctions constituted an unreasonable restraint of trade. We analyze this question using the rule of reason analysis. Id. at 103, 104 S.Ct. at 2961. Under the rule of reason, the fact-finder examines the restraint at issue and determines whether the restraint’s harm to competition outweighs the restraint’s pro-competitive effects. Bhan, 929 F.2d at 1413. The plaintiff bears the initial burden of showing that the restraint produces significant anticompetitive effects within the relevant product and geographic markets. If the plaintiff meets this burden, the defendant must come forward with evidence of the restraint’s procompetitive effects. The plaintiff must then show that “any legitimate objectives can be achieved in a substantially less restrictive manner.” Id. Here, the plaintiffs met their initial burden by showing that the Pac-10 members banned UW from participating in bowl games for two years. The Pac-10 replied with evidence showing that there are significant procom-petitive effects of punishing football programs that violate the Pac-10’s amateurism rules.4 The burden then returned to the athletes to show that the Pac-10’s procom-petitive objectives could be achieved in a substantially less restrictive manner. The players’ burden of proof at the summary judgment stage of the proceedings was not high; all they had to do was present more than a “mere scintilla of evidence to support [their] case.” City of Vernon v. Southern Cal. Edison Co., 955 F.2d 1361, 1369 (9th Cir.), cert. denied, 506 U.S. 908, 113 S.Ct. 305, 121 L.Ed.2d 228 (1992). This they failed to do. The athletes claim that the Pac-10’s penalties were grossly disproportionate to UW’s violations. However, they do not offer even the thinnest reed of support for this proposition. They point to the testimony of Robert Aronson, a law professor at the University of Washington, who analyzed the sanctions imposed against the UW compared to sanctions imposed against similar institutions. Aron-son, however, testified that the penalties were within the range of appropriate penalties. The players also claim that the NCAA’s report on the Pac-10’s sanctions concludes that the penalties were disproportionate. It does not. The report actually states that the Pac-10’s penalties were too lenient, not that they were too. harsh. In short, the athletes have presented no evidence that would allow a jury to find in their favor. Hence summary judgment was proper. Y. Appellants also argue that the district court erred in dismissing their breach of contract claim. A dismissal for failure to state a claim pursuant to Rule 12(b)(6) is reviewed de novo. Stone v. Travelers Corp., 58 F.3d 434, 436-37 (9th Cir.1995). [1320] In their complaint, the players alleged that the Pac-10’s Constitution, Bylaws and Articles created a contract between the conference and its members, and that the players were third-party beneficiaries of this contract. The players further contend that the Pac-10 breached this contract when it levied unreasonable sanctions against UW, thereby injuring the players as beneficiaries. Under Washington law, to create a third-party beneficiary contract, the parties must intend that the promisor assume a direct obligation to the intended beneficiary at the time they enter into the contract. Postlewait Constr. Inc. v. Great American Ins., 106 Wash.2d 96, 720 P.2d 805, 806 (1986). “The test of intent is an objective one; the key is not whether the contracting parties had an altruistic motive or desire to benefit the third party, but rather whether performance under the contract would necessarily and directly benefit that party.” Id. 720 P.2d at 806-07. To determine the contracting parties’ intent, the court should construe the contract as a whole, in light of the circumstances under which it was made. Id. at 807. To support their claim, appellants point to the languáge of the Pac-10 Constitution. Under its “Statement of Purpose,” the conference notes that its goal is “to enrich and balance the athletic and educational experiences of student-athletes at its member institutions, [and] to enhance athletic and academic integrity among its members.” By. joining the Pac-10, members are obligated to “administer [an] athletic program in accordance with the Constitution, Bylaws, and other legislation of the Conference,” “conduct [their] intercollegiate athletic program in keeping with the highest recognized standards and in a manner which will enhance the reputation for integrity of the Pacific-10 Conference,” “assure the intercollegiate athletic program is maintained as an integral part of the educational objectives and programs on the campus of each Paeifie-10 Conference member institution,” and “participate in the sports of football and basketball.” The ultimate goal of the conference is realization of certain values including: “[academic and athletic achievement of student-athletes,” “increased educational opportunities for young people,” “quality competitive opportunities for student-athletes,” and “amateurism in intercollegiate athletics.” In dismissing appellants’ contract claim, the district court found that this language largely consisted of “vague, hortatory pronouncements in the contract” and that “[b]y themselves, these pronouncements are not sufficient to support the players’ claims that the Pac-10 intended to assume a direct contractual obligation to every football player on a Pac-10 team.” Hairston‘I, 893 F.Supp. at 1494. We agree. The key here is that appellants have not demonstrated that the parties intended to create direct legal obligations between themselves and the students. Other than the statements from the Pac-10’s Constitution, By-laws and other legislation, appellants have failed to provide any evidence that the parties intended to create a contractual obligation; accordingly, we find their claim without merit. VI. Appellants have fáiled to show that the penalties the Pac-10 imposed constituted an unreasonable restraint of trade. As a result, no antitrust violation occurred. Appellants also have failed to allege a breach-of-contract claim since no language in the contract shows the Pac-10 and its members intended to assume a direct obligation to the students. For these reasons, we AFFIRM. Footnotes [1] The Pac-10 includes: the University of Washington, Washington State University, University of Oregon, Oregon State University, University of California, Berkeley, Stanford University, University of California, Los Angeles, University of Southern California, Arizona State University and the University of Arizona. [2] Because the penally period imposed on UW has ended, the appellants’ claims for injunctive relief are moot. [3] Prior to filing this appeal, the players stipulated to the dismissal of the NCAA as a defendant. Thus, only the Pac-10 remains as a defendant-appellee. [4] As the Supreme Court explained in NCAA, [T]he NCAA seeks to market a particular brand of football-college football. The identification of this "product” with an academic tradition differentiates college football and makes it more popular than professional sports to which it might otherwise be comparable, such as, for example, minor league baseball. In order to preserve the character and quality of the “product,” athletes must not be paid, must be required to attend classes, and the like. And the integrity of the "product” cannot be preserved except by mutual agreement; if an institution adopted such restrictions unilaterally, its effectiveness as a competitor on the playing field might soon be destroyed. Thus, the NCAA plays a vital role in enabling college football to preserve its character, and as a result enables a product to be marketed which might otherwise be unavailable. In performing this role, its actions widen consumer choice-not only the choices available to sports fans but also those available to athletes-and hence can be viewed as procompetitive. NCAA, 468 U.S. at 101-02, 104 S.Ct. at 2960-61.