Arguments In American Needle V. NFL Focus Mainly On Licensing

By Daniel Kaplan, Staff Writer, SportsBusiness Journal

Despite the hype surrounding a potentially precedent-setting antitrust case, the oral arguments before the U.S. Supreme Court this morning between the NFL and cap manufacturer American Needle largely focused on the narrow question of whether the league's exclusive licensing contract with Reebok should be subject to antitrust law. Not once did the issue of players arise, despite tremendous coverage around whether a broad ruling in favor of the league would give it more leeway on labor issues. Perhaps the furthest afar was a question from Justice Antonin Scalia, who asked NFL outside counsel Gregg Levy whether if the league could pool apparel rights, could it set franchise prices. Levy said yes, and the justice exclaimed, "Wow." This interchange was recounted by NFLPA outside counsel Jeffrey Kessler on the steps of the Supreme Court after the hearing. The NFLPA filed an amicus curiae brief on behalf of American Needle, arguing the case could extend into labor relations. Kessler used the exchange to underscore his contention that the league is seeking sweeping powers.

WHAT NEEDS TO BE PROTECTED: The justices addressed matters pertaining to which league functions should be protected from antitrust review, a continuing thorn in the side of sports leagues and bodies. "You are seeking to get from the courts what you can't get from Congress," Justice Sonia Sotomayor told Levy. But American Needle's outside counsel, Glen Nager, was also aggressively questioned. Justice Samuel Alito asked him when could the league's 32 teams work together. Even rules changes, which both sides have said are the proper function of the league, could be challenged, Alito said, if say, for example, the league voted to go from 16 to 14 games, but some teams disagreed. The NFL's core contention is that the license signed with Reebok in '00 and which bumped American Needle from team contracts is protected from antitrust scrutiny because the NFL is a joint venture for the purposes of playing and promoting games. But some of the justices asked if selling caps was really about promoting the game. Sotomayor in particular frequently came back to this point, asking Levy how long the NFL has sold collective apparel rights (since '63), and saying later, "Is it so evident that T-shirts promote the game?" Levy said that selling intellectual property like caps and T-shirts was intrinsic to the game because the logos meant nothing unless a team was playing.

Kessler Says Labor Became Issue When Stewart Discussed Things NFL Couldn't Do

POST-HEARING THOUGHTS: After the hearing, Kessler argued that labor had been introduced into the equation when U.S. Deputy Solicitor General Malcolm Stewart talked about things the NFL could not do, like setting pay rates for secretaries across the league. American Needle's counsel, Nager, talking as he walked away from the court, disagreed, saying the secretaries question was only a hypothetical point. He did say that just because labor was not raised did not mean the justices would not consider it. Levy after the hearing told assembled reporters on the frigid courthouse steps that the case was about licensing only and not about the players' union. Asked by a reporter about that subject, Levy, referring to a recent editorial in the Washington Post by Saints QB Drew Brees on the case's possible affect on labor, said, "You have been spending too much time reading the papers and Drew Brees."

NOT 100% WITH EITHER SIDE: Daniel Glazer, who runs the sports practice at Patterson Belknap Webb & Tyler and who was in the courtroom, said he thought the justices seemed uncomfortable giving either the NFL blanket immunity from antitrust laws or completely agreeing with American Needle's position. In the end, he said, the U.S. Solicitor General's brief, which described a framework in which there would be some instances that the league could be deemed a single entity exempt from antitrust scrutiny and others where it is not, seems the most logical outcome. For his part, Levy said not to read too much into the questioning in terms of how the justices would vote, but he said that Justice Stephen Breyer, who seemed particularly enthusiastic in his questioning of Levy, probably was a lost vote.