On October 10, 2008, U.S. District Judge Loretta A. Preska addressed the single-entity defense in a case against the National Hockey League. Madison Square Garden, L.P. v. NHL, Southern District of New York, Case No. 07 CV 8455. The NHL is an unincorporated association of 30 member clubs organized as a joint venture. Madison Square Garden filed an antitrust suit in September 2007 accusing the NHL of preventing off-ice competition between teams by attempting to take control of the Rangers’ website and turn it into a “cookie cutter site.” The league’s hockey clubs voted 25-3 in favor of linking their websites under a common management system in June 2006. Madison Square Garden dissented and was set to face a fine of $100,000 per day until it agreed to connect nyrangers.com to the other teams’ websites.
The NHL filed a motion to dismiss or, in the alternative, for partial summary judgment arguing that it is a single entity. In its motion, the NHL argued that under Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), the NHL should be “found to engage in ‘wholly unilateral’ activity when ‘deciding how to make and sell what only the venture can create [i.e., NHL Hockey]’ and that consequently, it is incapable of ‘conspiring’ under the Sherman Act.” The court noted that the single-entity defense was rejected in cases against the old North American Soccer League, Major League Soccer, and earlier cases against the NFL. However, the court also noted authority to the contrary including cases against the Professional Golfers’ Association, National Basketball Association, and American Needle, Inc. v. NFL (previously discussed). The court punted on the decision stating:
The Court need not – and will not – resolve the question at this juncture. The arguments advanced by the NHL in favor of single entity status require examining facts outside the pleadings. For example, the League argues that, like in Chicago Professional Sports, the NHL “has no existence independent of sports” and that NHL hockey “is one product from a single source.” But even in Chicago Professional Sports, the Seventh Circuit held only that “we conclude that when acting in the broadcast market the NBA is closer to a single firm than to a group of independent firms.” Similarly in Am. Needle, the District Court afforded single entity status to the [NFL] on a motion for summary judgment, only after determining (after discovery) that there were certain “advantages of one-stop exploitation of the intellectual properties of the 32 teams and of those common to the league in a national market.” Am. Needle, Inc. v. New Orleans Louisiana Saints, 496 F. Supp. 2d 941, 944 (N.D. Ill. 2007).
While the court decided that the NHL’s single-entity defense could not be resolved at the pleading stage, it did leave some advice for the parties going forward:
To be sure, [Madison Square Garden] faces a tall order in making its case. This Court has already observed that agreements among parents of a joint venture not to compete in the market in which a joint venture operates have generally been upheld. The reasonableness of the restraint, however, is evaluated under the rule of reason.
Madison Square Garden follows American Needle, Inc. v. NFL in allowing discovery, which further emphasizes the preference of courts to decide the single-entity defense on a case-by-case basis. The wide variations in the organization of sports leagues may lead courts to uphold the single-entity defense in some cases but not others. League organizers should pay close attention to these cases when organizing new leagues or making significant changes in existing leagues. Teams, sports apparel businesses, and other sports-related businesses should also be aware of the implications of these cases on their relationships with professional sports leagues.