PARTEE v. SAN DIEGO CHARGERS FOOTBALL COMPANY

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Court of Appeal, Fourth District, Division 1, California.

Dennis PARTEE, Plaintiff and Respondent, v. SAN DIEGO CHARGERS FOOTBALL COMPANY, etc., Defendant and Appellant.

Civ. 22549.

Decided: February 04, 1982

Goebel & Monaghan, Brian D. Monaghan, San Diego, and James E. Rubnitz, Monte Sereno, for plaintiff and respondent. Wyman, Bautzer, Rothman, Kuchel & Silbert, Terry Christensen, Andrew M. White and Michael E. Viebrock, Los Angeles, for defendant and appellant.

San Diego Chargers Football Company, a California limited partnership appeals a judgment following a nonjury trial in which Dennis Partee was awarded damages, attorney fees and costs for the Chargers' breach of contract and violation of the California Antitrust Law (Bus. & Prof.Code § 16700 et seq., “The Cartwright Act”).   The Chargers do not contest the breach of contract award.   They do contest, however, the court's jurisdiction and decision regarding the antitrust award.

Partee, a California resident, played professional football under contract to the Chargers from 1968 to 1976.   Partee was a notable performer playing the positions of punter and place-kicker.

The Chargers are a professional football team and a member of the National Football League (NFL).   In 1975, the last full year Partee played for the Chargers, the NFL had 26 teams located in 16 states and the District of Columbia.   NFL games are regularly broadcast coast to coast over network television and professional football has gained nationwide appeal and international significance.   For practical reasons, professional sports must operate within a league structure.   In professional football, this structure is characterized by a basic division into two conferences each having divisions composed of certain teams within the conference, and by play according to an ordered schedule between teams within the various divisions and the two conferences.   To promote athletic competition and provide a means of keeping the teams on a par with each other for competitive interest and the business success for the member teams, the NFL has certain operating rules, many of which are embodied in the NFL constitution and by-laws.   Partee's antitrust action concerns five of these operating rules as they existed in 1974:  the draft, option clause, Rozelle rule, tampering rule and one-man rule.1  Based on the evidence and the doctrine of collateral estoppel, the court found all but the option clause to violate California antitrust laws.

Since 1968, all NFL players have been represented by the NFL Players Association (NFLPA).   In 1970, the NFLPA and NFL management entered a second collective bargaining agreement covering the 1970 to 1973 seasons.   No new agreement was reached until March 1977, but this agreement was made retroactive to the expiration date of the prior agreement.   This new agreement, which is effective into 1982, contains each of the rules or practices challenged by Partee.2

In 1974, the World Football League (WFL) came into existence and began a “bidding war” with the NFL to supply its need for football players.   WFL teams negotiated with former and current NFL players, and Partee was offered $50,000 to play for the Philadelphia WFL team for a season.   Partee employed Mr. Attanasio as a bargaining agent to negotiate a new contract with the Chargers, and Attanasio informed the Chargers of Partee's $50,000 offer.   Eventually, Partee and the Chargers entered a three-year contract.   The Chargers agreed to pay Partee $38,500 in 1974, $44,000 in 1975, and $49,500 in 1976 (for a total of $132,000) subject to the normal terms and policies of the NFL.

In 1976, Partee sued and recovered for breach of contract in that the Chargers failed to pay Partee's 1976 salary.   Also, Partee sought and was awarded treble damages, attorney fees ($30,000), plus costs for the Chargers' violation of California antitrust laws.   Damages were calculated as $11,500 per year (the difference between the WFL offer and Partee's 1974 salary from the Chargers) for 1974 through 1976, for a total of $34,500.   This amount was trebled for a total damages award of $103,500 for violating the antitrust laws.

The issues raised in this appeal are complex and resolution is important to professional sports generally.   Complicating the applicability of antitrust laws to professional sports is the confusion created by the special exemption from federal antitrust laws afforded professional baseball but apparently denied other professional league sports.   As other cases have noted, this area of the law cries out for legislative resolution (see Flood v. Kuhn (1972) 407 U.S. 258, 285 [92 S.Ct. 2099, 2113, 32 L.Ed.2d 728] ).  But in the absence of legislative guidance, this court will, as it must, apply the relevant law as logically as possible.   The high quality of the parties' briefs aids our task.

The Chargers contend the court lacked subject matter jurisdiction to decide whether they violated the Cartwright Act.   The Chargers reason that because professional football is a unique activity of interstate commerce which requires nationally uniform governance, only federal antitrust laws apply.   If courts permit the application of state antitrust regulation to professional football's interstate activities, interstate commerce would be unreasonably burdened.   Therefore, the Chargers contend, it was a violation of the Commerce and Supremacy Clauses of the Constitution when the trial court found the Chargers violated the California antitrust laws.

 It is helpful to first understand what the Chargers do not contend and thus what we need not discuss.   As their reply brief makes abundantly clear, they do not base their jurisdiction argument on traditional preemption doctrine.3  The Chargers do not claim federal antitrust laws, the Sherman and Clayton Acts, “occupy” the field of antitrust regulation.   States have concurrent powers in this area, and California has exercised its concurrent power under the Cartwright Act.   Nor do the Chargers contend the federal and state laws so conflict as to require preemption of the state scheme.   The federal and California antitrust laws, having identical objectives, are harmonious with each other (see Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 315, 70 Cal.Rptr. 849, 444 P.2d 481).

Finally, the Chargers do not claim professional football is exempt from all antitrust regulation.   Rather, the essence of their argument is that federal, not state, law governs.

 State “police power” regulations which unreasonably burden interstate commerce are invalid (see Southern Pacific Co. v. Arizona (1945) 325 U.S. 761, 781–782 [65 S.Ct. 1515, 1526, 89 L.Ed. 1915] ).  The burden is unreasonable if the state's regulation substantially impedes the free flow of commerce from state to state, or it regulates “those phases of the national commerce which, because of the need of national uniformity, demand that their regulation, if any, be prescribed by a single authority.”  (Id. at p. 767 [65 S.Ct. 1515, 1519], citing Cooley v. Board of Wardens, 12 How. 299, 319, 13 L.Ed. 996.)

Though our analysis places emphasis on the quoted portion of the rule of Southern Pacific, supra, we also bear in mind the general rules:

“Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.  [Citation.]  If a legitimate local purpose is found, then the question becomes one of degree.   And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities.   Occasionally the Court has candidly undertaken a balancing approach in resolving these issues [citation], but more frequently it has spoken in terms of ‘direct’ and ‘indirect’ effects and burdens.  [Citation.]”  (Pike v. Bruce Church, Inc. (1970) 397 U.S. 137, 142 [90 S.Ct. 844, 847, 25 L.Ed.2d 174].)

More recently, the proper mode of analysis with respect to the question of whether a burden on interstate commerce is permissible has been described as follows:

“[W]e must inquire (1) whether the challenged statute regulates evenhandedly with only ‘incidental’ effects on interstate commerce, or discriminates against interstate commerce either on its face or in practical effect;  (2) whether the statute serves a legitimate local purpose;  and, if so, (3) whether alternative means could promote this local purpose as well without discriminating against interstate commerce.   The burden to show discrimination rests on the party challenging the validity of the statute, but ‘[w]hen discrimination against commerce ․ is demonstrated, the burden falls on the State to justify it both in terms of the local benefits flowing from the statute and the unavailability of nondiscriminatory alternatives adequate to preserve the local interests at stake.’  [Citation.]”  (Hughes v. Oklahoma (1979) 441 U.S. 322, 336 [99 S.Ct. 1727, 1736] 60 L.Ed.2d 250.)

 Moreover, it is the rule that where the state statute does not discriminate between interstate and intrastate commerce, the controlling question is whether “the incidental burden imposed on interstate commerce by the state is ‘clearly excessive in relation to the putative local benefits' ” (Minnesota v. Clover Leaf Creamery Co. (1981) 449 U.S. 457, 471 [101 S.Ct. 715, 728, 66 L.Ed.2d 659], quoting from Pike v. Bruce Church, Inc., supra, 397 U.S. 137, 142 [90 S.Ct. 844, 847, 25 L.Ed.2d 174] ).

 We think it is sufficiently plain not to require further discussion that the Cartwright Act of this state is nondiscriminating and applies both to interstate and intrastate commerce.   It is equally clear professional football operates in interstate commerce.   In light of this and the general principles cited above, this court must balance the burden on the interstate aspects of professional football and any need for nationally uniform antitrust regulation against California's interest in preventing unfair trade practices within its borders.   We bear in mind throughout these discussions federal antitrust laws are applicable (Radovich v. National Football League (1957) 352 U.S. 445, 452 [77 S.Ct. 390, 394, 1 L.Ed.2d 456] ), and federal decisions under the Sherman Act apply to any antitrust law enforced under the Cartwright Act (Corwin v. Los Angeles Newspaper Service Bureau, Inc. (1971) 4 Cal.3d 842, 852, 94 Cal.Rptr. 785, 484 P.2d 953).

The “burden on interstate commerce” analysis was first applied to professional sports in the baseball context.  (Flood v. Kuhn (S.D.N.Y.1970) 316 F.Supp. 271, affd. (2d Cir. 1971) 443 F.2d 264, affd. 407 U.S. 258 [92 S.Ct. 2099, 32 L.Ed.2d 728] (1972).)   Considering baseball's reserve system 4 in Flood v. Kuhn, supra, the trial court found state antitrust laws inapplicable on alternative grounds:  preemption and unreasonable burden on interstate commerce.

Treating the applicability of state antitrust laws to professional baseball as a question of first impression, the second circuit affirmed.  (Flood v. Kuhn, supra, 443 F.2d 264, 267–268.)   Citing Southern Pacific Co. v. Arizona (1945) 325 U.S. 761, 774–775 [65 S.Ct. 1515, 1522–1523, 89 L.Ed. 1915], the United States Court of Appeals said:

“[W]here the nature of an enterprise is such that differing state regulation, although not conflicting, requires the enterprise to comply with the strictest standard of several states in order to continue an interstate business extending over many states, the extra-territorial effect which the application of a particular state law would exact constitutes, absent a strong state interest, an impermissible burden on interstate commerce.”  (Id., at p. 267.)

Analyzing the nature of the competition in professional baseball as well as the effect of and need for state antitrust regulation of that competition, the Court of Appeals in Flood went on to say and conclude:

“Professional baseball clubs, although existing as separate legal entities, are organized into so-called leagues for competitive play and are dependent on the league playing schedule to further the ends of their sports competition.   Therefore, it is the league structure at which any state antitrust regulation must be aimed if organized professional baseball is not to be severely fragmented.   On the one hand, it is apparent that each league extends over many states, and that, if state regulation were permissible, the internal structure of the leagues would require compliance with the strictest state antitrust standard.   The consequent extra-territorial effect of necessary compliance would be considerably more far-reaching than that in Southern Pacific Co. v. Arizona, supra.   On the other hand, we do not find that a state's interest in antitrust regulation, [fn. omitted] when compared with its interest in health and safety regulation, is of particular urgency.   Hence, as the burden on interstate commerce outweighs the states' interests in regulating baseball's reserve system, the Commerce Clause precludes the application here of state antitrust law.”  (443 F.2d at pp. 267–268;  italics added.)

Quoting the above underscored portion of the Court of Appeals opinion, the United States Supreme Court said this statement adequately disposed of the state law claims (Flood v. Kuhn, supra, 407 U.S. 258, 284–285 [92 S.Ct. 2099, 2113, 32 L.Ed.2d 728] ).  The high court affirmed the judgment of the Court of Appeals in Flood.   It also approved the view expressed by the District Court that application of state antitrust law is precluded because it would conflict with federal policy and “because national ‘uniformity [is required] in any regulation of baseball and its reserve system’ ” (407 U.S. at p. 284 [92 S.Ct. at p. 2113] ).

Other cases, both state and federal, have raised the issue of the applicability of state antitrust regulation to professional league sports.   In State of Wisconsin v. Milwaukee Braves, Inc. (1966), 31 Wis.2d 699, 144 N.W.2d 1, Wisconsin sought to enjoin the baseball franchise's planned move from Milwaukee to Atlanta and claimed certain aspects of professional baseball violated its antitrust laws.   As in Flood v. Kuhn, supra, 443 F.2d 264, the Wisconsin court held state law inapplicable on preemption and burden on interstate commerce grounds.5

In Robertson v. National Basketball Association (S.D.N.Y.1975) 389 F.Supp. 867, the court held state antitrust regulation inapplicable to professional basketball because of its interstate nature (389 F.Supp. at p. 880).   Noting professional basketball is subject to federal antitrust law (see Haywood v. National Basketball Association, 401 U.S. 1204, 1205 [91 S.Ct. 672, 673, 28 L.Ed.2d 206] ), and following Flood v. Kuhn, supra, 443 F.2d 264, 268, the court found state antitrust regulation is precluded by the interstate nature of professional basketball which is in the “same business” as baseball, involving “ ‘substantial volumes of interstate trade and commerce’ ” (389 F.Supp. at p. 881).

A recent Louisiana case held, consistently with Robertson and Flood, that state antitrust laws cannot be applied to the interstate aspects of the National Basketball Association and its member team, the New Orleans Jazz (HMC Management v. New Orleans Basketball Club (La.App.1979) 375 So.2d 700, 706–707, emphasizing preemption).

A somewhat similar state case regarding professional football is Matuszak v. Houston Oilers, Inc. (Tex.Civ.App.1974) 515 S.W.2d 725.   Matuszak claimed his contract with the Oilers violated the Texas antitrust laws and was therefore unenforceable (id. at p. 728).   Applying Flood v. Kuhn, supra, 443 F.2d 264, at page 268, the court rejected this claim stating it was considering a question of preemption.   From its reliance on the passage in Flood v. Kuhn, speaking to the problem of compliance with the strictest state antitrust standard if state regulation were permitted and the lack of particular urgency in the states' interest in antitrust regulation, however, it is apparent the court in Matuszak treated an undue burden on interstate commerce as a species of preemption (id. at pp. 728, 729).   The Texas court concluded antitrust regulation over professional football is a “question for the Federal Courts.”  (Id. at p. 729.)

The authorities we have reviewed reveal the courts throughout the United States have consistently and without exception denied the states the right to enforcement of antitrust regulation of professional baseball, basketball and football.   The burden on interstate commerce from such state regulation derives primarily from the need for national uniformity of regulation and the relatively lesser need for involvement by the state authorities.   We have not found a single state which has applied its antitrust laws to professional sports engaged in nationwide league competition.   The need for California to have a position consistent with the other states involved with professional sports is significant.

Professional football, like professional basketball, is a nationwide business structured essentially the same as baseball (see Robertson v. National Basketball Association, supra, 389 F.Supp. 867, 881).   Professional football's teams are dependent upon the league playing schedule for competitive play, just as in baseball, and any state antitrust regulation must necessarily affect the league structure, again just as in baseball.   Fragmentation of that league structure extending across state lines would adversely affect the success of these competitive business enterprises (see Flood v. Kuhn, supra, 443 F.2d 264, 267–268).   The analysis and holding of Flood v. Kuhn is persuasive and controlling on the issue of the applicability of state antitrust law to the interstate aspects of professional football.   There is no distinguishing the Flood facts and holding on the question of the burden on interstate commerce which state antitrust law application would impose.   As in Flood, we find important the basic interstate commerce characteristics of professional football, particularly as they apply to those aspects of the player-team-league relationships which Partee challenges;  the necessity of a nationwide league structure for the benefit of both NFL member teams and the players in terms of competition;  the need for a nationally uniform set of rules governing the league structure;  and the potential for conflicting state antitrust decisions which would compel all member teams to comply with the laws of the most strict state.

 We recognize California's legitimate interest in regulating unfair trade practices within its borders but believe this interest is outweighed by the above factors in the present case.   Adapting the test set forth in Minnesota v. Clover Leaf Creamery Co., supra, 449 U.S. 457 [101 S.Ct. 715, 728, 66 L.Ed.2d 659], we hold the incidental burden imposed on the interstate commerce aspects of professional football by application of California's Cartwright Act is clearly excessive in relation to the putative benefits to the state.   The imposition of any restriction on California teams must necessarily affect their foreign counterparts.   For example, is Partee, as a member of the Chargers team, to be free to engage in contract talks with the other team representatives while the players residing in Wisconsin, New York and Texas are precluded from engaging in such negotiations?   Must teams from other states compensate California teams when hiring out-of-state free agents while at the same time California teams are free to obtain their players without compensation?   The league would be virtually destroyed by such diversity of application of individualized state rules.   The federal courts constitute the proper forum to resolve the propriety of the interstate activities of professional football.6

 We conclude, by reason of the Commerce Clause of the United States Constitution, the state court lacks jurisdiction to apply the Cartwright Act to professional football operating in interstate commerce.   Our resolution of the jurisdiction issue in favor of the Chargers obviates the need for discussion of the other issues raised on appeal.

The judgment awarding damages and attorney fees to Partee based on the violation of Business and Professions Code section 16700 et seq. is reversed.   In all other respects, the judgment is affirmed.

FOOTNOTES

1.   The draft is a selection system whereby the respective NFL teams are awarded the initial rights to negotiate exclusively with football players graduating from college.The option clause is a provision of the NFL Standard Player Contract which grants the team the right to renew a player's contract for one additional year if the team and player cannot agree to a new contract.   After the option year expires, the player becomes a “free agent” and may negotiate and contract with teams of another league or with other NFL teams subject to the Rozelle rule.The Rozelle rule is named after the NFL commissioner, Pete Rozelle.   This rule provides if a free agent contracts with another NFL team, the new team must compensate the player's former team with draft choice(s) or other player contracts.   If the new and former teams cannot agree as to the compensation, the commissioner arbitrates the matter and determines the compensation.The tampering rule prohibits a NFL team from negotiating with a player currently under contract with another NFL team.   Also, if one team has the exclusive right to negotiate with a player, no other team may tamper with that player.The one-man rule refers to the commissioner's authority to compel a player to adhere to terms of an operative collective bargaining agreement between the players and NFL teams.

2.   This second collective bargaining agreement was negotiated concurrently with antitrust suits brought by players against the NFL.   The most significant case, Alexander v. National Football League (D.Minn.1977) 1977–2 Trade Cases (CCH) ¶ 61,730, was a class action.   Alexander incorporates a settlement which substantially modifies the practices and rules Partee challenges.   Thus, most of the problems with unreasonable trade practices are currently obviated by the settlement.   The settlement also contains a covenant not to sue (in antitrust) by the class members.   However, Partee who filed this suit before the specified cutoff date chose not to be a class member.   This agreement terminates in mid-1982.

3.   The two aspects of traditional preemption doctrine both focus on congressional intent.  (1) If Congress clearly manifests an intent to occupy exclusively an area of law (e.g., immigration, postal regulations), states may not regulate.  (2) If no such congressional intent is manifested, states have concurrent power and may regulate.   However, state laws which conflict with federal laws are preempted.  (See, generally, G. Nowak, R. Rotunda, and Joe Young, Constitutional Law 267 (West 1978).)

4.   As considered by the trial court in Flood v. Kuhn, supra, baseball's reserve system had many of the attributes of the NFL rules and practices of which Partee complains.   Baseball's reserve system involved an agreement by all of the teams to be involved in a draft creating exclusive bargaining rights in the club as to the draftee;  a uniform player's contract empowering the signing club unilaterally to renew a player's contract from year to year;  denial of any right in a player, once signed, to negotiate with any other team;  a prescribed number of players per team;  and the unilateral right of a team to assign the contract to another team (see Flood v. Kuhn, supra, 316 F.Supp. 271, 273–275).

5.   “[A]pplication and enforcement of a state antitrust law to decisions of the league ․ would conflict with the national policy in this segment of interstate commerce․  [¶] Other members of the court prefer the view that [professional baseball activities] require uniformity of regulation, and since organized baseball operates widely in interstate commerce, the regulation ․ [if any] must be prescribed by Congress.”   (Milwaukee Braves, Inc., supra, 144 N.W.2d at pp. 17–18.)

6.   The federal courts have in fact supplied professional football players with ample antitrust protection.  (See, e.g., Smith v. Pro Football, Inc. (D.C.Cir.1978) 593 F.2d 1173, 1177, 1183–1187;  Kapp v. National Football League (9th Cir. 1978) 586 F.2d 644, 648–650;  Mackey v. National Football League (8th Cir. 1976) 543 F.2d 606, 616–618, 622;  Alexander v. National Football League (D.Minn.1977) 1977–2 Trade Cases (CCH) ¶ 61,730.)   On termination of the present collective bargaining agreement, any antitrust violations will be subject to review by the federal courts.

COLOGNE, Associate Justice.

GERALD BROWN, P. J., and WORK, J., concur.