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Whether, after a collective bargaining agreement expires, management may claim the non-statutory labor exemption from the antitrust laws for a labor market restraint for as long as the collective bargaining relationship exists.

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IN THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

No. 94-7709

NATIONAL BASKETBALL ASSOCIATION, ET AL.,
Plaintiffs-Appellees,
v.
CHARLES L. WILLIAMS, ET AL.,
Defendants-Appellants.

ON APPEAL FROM AN ORDER OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

TABLE OF CONTENTS

STATEMENT OF ISSUE PRESENTED
STATEMENT OF THE CASE
ARGUMENT
CONCLUSION

TABLE OF AUTHORITIES

Cases:
Anderson v. Shipowners Ass'n, 272 U.S. 359 (l926)
Connell Construction Co. v. Plumbers & Steamfitters
Local Union No. 100, 42l U.S. 6l6, 62l-622 (l975
Gardella v. Chandler, l72 F.2d 402 (2d Cir. l949
Laborers Health and Welfare Trust Fund for
Northern California v. Advanced Lightweight
Concrete Co., 484 U.S 539 (1988)
Powell v. National Football League,
930 F.2d l293 (8th Cir. l989), cert. denied,
498 U.S. l040 (l99l)
Radovich v. NFL, 352 U.S. 445 (l957)

Statutes and Rules: Fed. R. Civ. P. 65(a)(2)


Miscellaneous: Brief for the United States as Amicus Curiae,
Powell v. National Football League,
S. Ct. No. 89-l42l (l990)

STATEMENT OF ISSUE PRESENTED

Whether, after a collective bargaining agreement expires, management may claim the non-statutory labor exemption from the antitrust laws for a labor market restraint for as long as the collective bargaining relationship exists.1

STATEMENT OF THE CASE

1. The National Basketball Association and its member teams ("NBA") on June l7, l994, sued several of their players and their union ("Players") seeking a declaratory judgment that various of their practices do not violate the federal antitrust laws. The defendants counterclaimed alleging that the practices do violate the antitrust laws and sought preliminary injunctive relief. The district court (Hon. Kevin Duffy) consolidated the matters for trial pursuant to Rule 65(a)(2), Fed. R. Civ. P., and on July l8, l994, it entered judgment for the NBA. The Players immedately appealed and on July l9, l994 filed a motion to expedite the appeal. The Court on July 2l, l994 granted that motion.

2. In l988 the NBA and the players signed a collective bargaining agreement to last until the conclusion of the l993- l994 season. It provided for a draft of eligible college players, the right of first refusal for existing teams when its restricted free agent players sought to sign with another team, and a cap on overall player salaries. Earlier this year the parties started bargaining toward a new agreement, but when the existing agreement expired on June 23, l994, they had not been able to agree on these issues. The players claimed that if management continued the practices it would violate the antitrust laws. Further efforts to negotiate, according to the district court, were unsuccessful. Both parties turned to the court for relief.

The district court after a consolidated preliminary injunction hearing/merits trial ruled for the NBA. Following the Eighth Circuit's decision in Powell v. National Football League, 930 F.2d l293 (8th Cir. l989), cert. denied, 498 U.S. l040 (l99l), it held that the NBA's nonstatutory labor exemption continues "as long as a collective bargaining relationship exists." Slip op. at 24. Alternatively, the court held on the antitrust merits that the challenged agreements do not violate the antitrust laws. Id. at 25-28.

ARGUMENT

1. The United States believes that the Powell standard adopted by the district court substantially overstates the scope of the nonstatutory labor exemption from the federal antitrust laws. The reasons for our position are expressed at length in a brief we filed in the Supreme Court in support of the petitioners in that case. Brief for the United States as Amicus Curiae, Powell v. National Football League, S. Ct. No. 89-l42l (l990). Since that brief is before the Court, we will summarize here.2

Employer-imposed restraints affecting only labor markets are not beyond the scope of the antitrust laws. Gardella v. Chandler, l72 F.2d 402, 408 (2d Cir. l949)(L. Hand, J.); id. at 4l3 (Frank, J.); Radovich v. NFL, 352 U.S. 445 (l957); Anderson v. Shipowners Ass'n, 272 U.S. 359 (l926). Rather, such immunity as these restraints enjoy is inferred due to the need to reconcile the antitrust laws with the important congressional policy favoring collecting bargaining expressed in the National Labor Relations Act. Connell Construction Co. v. Plumbers & Steamfitters Local Union No. 100, 42l U.S. 6l6, 62l-622 (l975). The broad thrust of that Act, however, is to expand the protection afforded employees. And nothing in the NLRA shows any congressional intent broadly to deprive unionized workers of the antitrust laws' protection from employer-imposed restraints on competition in the labor market. Thus, the immunity should last no longer than clearly necessary to the successful functioning of the statutory labor scheme.

We think that as a matter of logic that point is impasse in the bargaining, for that is the point at which the labor laws let management bring to bear important new legal and economic leverage--such as unilaterally imposing new terms consistent with a good faith pre-impasse bargaining position. See generally Laborers Health and Welfare Trust Fund for Northern California v. Advanced Lightweight Concrete Co., 484 U.S 539, 543 n.5 (1988). But, because impasse is not always readily identifiable, see id. at 552, and because the labor laws counsel caution in declaring an impasse, we believe that appropriate deference to the policies of the labor laws would counsel recognizing the immunity for a reasonable period beyond impasse to allow the employer to ascertain, upon advice of counsel, that impasse has occurred and to adjust its business operations so as to avoid antitrust liability.

How long after impasse the nonstatutory labor exemption should last is not a question susceptible of simple, bright-line treatment in all cases. A variety of factors might be taken into account in determining whether employers were reasonably on notice that impasse had occurred and whether they had had reasonable opportunity to react. In some circumstances, however, it will be clear that that point has been reached. For example, if the employer avails himself of rights that accrue only upon impasse, such as the right unilaterally to impose new terms of employment, there can be little doubt that he understands that the negotiations have reached impasse.

Extending the immunity beyond that point to the end of the collective bargaining relationship, as Powell and the district court opinion do, forces the union to give up the collective bargaining relationship-- i.e., be decertified as collective bargaining agent--in order to claim antitrust rights. While this result seemed not to trouble the district court (Op. at 25), we are convinced that such a rule disserves both labor and antitrust interests and that Congress in enacting a worker protection statute never intended it.

2. Because the district court based its holding as to immunity solely on its conclusion that the nonstatutory labor exemption continues so long as there is a collective bargaining relationship, that holding constitutes legal error and the judgment should not be affirmed on that ground. It is not possible to determine from the district court's findings whether the NBA's conduct to date is immune under a proper interpretation of the exemption. The Players take the position that impasse has been reached, but the NBA disagrees. The district court made no finding on the point because, under the legal standard it adopted, impasse has no significance. It also lacked any reason to consider whether, if impasse has occurred, the NBA has had a reasonable opportunity to ascertain that fact and to make adjustments.

Moreover, it is not clear whether the district court's order declaring "continued implementation" of the disputed terms not to violate the antitrust laws as long as it is implemented as part of a continuing collective bargaining relationship (Op. 24-25) authorizes unilateral changes in those terms after impasse. The NBA's complaint appears broadly to claim the nonstatutory labor exemption for fulfilling obligations or exercising rights under the federal labor laws, within a collective bargaining relationship.3 The district court apparently agreed, emphasizing that labor law governs all disputes arising between parties in a collective bargaining relationship. See Op. 13, 18, 24, 25. Nothing in the court's opinion suggests that any event short of decertification of the union would terminate the exemption. Thus, the district court's decision may immunize conduct that would clearly fall outside the exemption as we understand it.

CONCLUSION

Because the district court based its holding as to immunity solely on its conclusion that the nonstatutory labor exemption continues so long as there is a collective bargaining relationship, that holding constitutes legal error and the judgment should not be affirmed on the ground that the nonstatutory labor exemption immunizes the NBA's conduct from antitrust scrutiny.

Respectfully submitted.

ANNE K. BINGAMAN
Assistant Attorney General
DIANE P. WOOD
Deputy Assistant Attorney General
CATHERINE G. O'SULLIVAN
ROBERT B. NICHOLSON
Attorneys

Department of Justice
Washington, D.C. 20530
(202) 5l4-2489

AUGUST 1994

Footnotes

1 The United States does not address the district court's alternative ruling that as a matter of substantive antitrust law the challenged practices are not unlawful.

2 The Players have submitted copies to the Court, and thus we will not burden the Court with yet more copies.

3 The NBA's complaint expressly states that it has the "right under the federal labor laws" not only to continue in effect the terms of the expired contract but also "to make unilateral changes consistent with its pre-impasse proposals." Complaint 100. It further alleged that the risk of antitrust liability was preventing it from "fulfill[ing] its obligations or exercis[ing] its rights under the labor laws" after expiration of the contract. Complaint 101. And it asserts its entitlement to a declaration that it would not violate the antitrust laws by continuing in effect the disputed provisions past the expiration of the contract "because such action is governed solely by the labor laws and is exempt from antitrust liability under the nonstatutory labor exemption to the antitrust laws." Complaint 105.

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