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Lawsuit against NFL over deal with Reebok will continue

By Kenneth Lowe | Apr 15, 2014

CHICAGO (Legal Newsline) - A long-running lawsuit over allegations the National Football League violated antitrust laws by awarding an exclusive licensing agreement to Reebok will continue after a federal judge in Chicago earlier this month denied motions for summary judgment from both sides.

Delivered by U.S. District Judge Sharon Johnson Coleman, the ruling struck down requests seeking summary judgment from the plaintiff, apparel manufacturer American Needle, and the defendants, a group that includes the NFL, NFL Properties, 30 of the league's 32 teams and Reebok International Ltd.

Coleman's nine-page memorandum and opinion, dated April 4, marks the latest decision in the legal battle that began a decade ago and has already been before the U.S. Supreme Court for review of prior motion dispositions, specifically on the issue of whether the NFL's teams could be considered a single entity for purposes of the Sherman Antitrust Act.

The nation's high court in 2010 unanimously said "no" on the single-entity question, a ruling that went in favor of American Needle's case, reversed the Seventh Circuit Court of Appeals and remanded the matter back to Chicago's federal court.

American Needle was one of several companies that held rights to produce headwear with NFL and team logos on them until its licenses with NFL Properties - the entity that licenses the intellectual property of the NFL and its teams -were not renewed in 2001.

Following the decision to reduce the number of outside companies with whom it contracted with to produce such apparel, NFL Properties executed an exclusive, 10-year licensing deal with Reebok in 2001, leading American Needle to sue the league and other defendants in 2004.

In its April 2013 motion for summary judgment, American Needle claimed the exclusive deal restrained trade in the market in violation of the Sherman Antitrust Act and that the court could use a "quick look" analysis to determine a violation had occurred, rather than a "full rule of reason" review.

The company argued that following the agreement between NFL Properties and Reebok, prices of licensed hats increased while output decreased and never returned to the pre-deal levels, an anti-competitive result it asserts is exactly what the federal antitrust law aims to prevent.

The defendants, however, called American Needle's premise one that "defies common sense," asserting in their own motion for summary judgment that despite the exclusive license, they have to compete in a market much more broad than the plaintiff alleges.

While American Needle defined the market as the wholesale market for NFL trademarked hats, the defendants claimed their headwear competes in a marketplace where consumers are just as likely to buy gear plastered with the logos of college sports teams or even Disney characters.

Coleman rejected both sides' requests for summary judgment in her ruling.

In denying American Needle's motion for summary judgment, Coleman pointed to the defendants' claim that "the exclusive license arrangement encouraged additional licensee commitment and had numerous pro-competitive effects, including improvements in product design, quality, distribution, and coordination of styles with other apparel items."

The defendants' "contentions are sufficiently supported by evidence and expert opinion to be facially plausible," Coleman wrote, adding that "[t]he plausibility of the claims of pro-competitive effect precludes abbreviated review of American Needle's claim."

In denying the defendants' motion for summary judgment, Coleman explained she was not persuaded by their argument that American Needle's proposed market is improper because it focused on wholesale transactions as opposed to the consumer retail market.

"American Needle has offered evidence that despite the asserted wholesale price increases and output reductions that followed the exclusive Reebok license agreement, total revenue paid by consumers for NFL hats rose," Coleman wrote. "The court views this evidence as sufficient indication of anticompetitive effect on consumers to fall within the purview of the Sherman Act."

Coleman also rejected the causation argument the defendants raised in their summary judgment motion alleging that American Needle failed to show a link between the exclusive licensing agreement and damage suffered.

Electronic court documents show that the parties have been given an April 16 deadline to file a joint statement indicating if they would like the magistrate judge assigned to the case to schedule a settlement conference. Coleman also set a status hearing for April 21.

American Needle is represented by Buffalo Grove lawyer Jeffrey M. Carey and the defendants are represented by several attorneys, with records listing Timothy B. Hardwick of Latham & Watkins in Chicago as the lead attorney for Reebok and Gregg Levy of Covington & Burling in Washington D.C. as the lead attorney for the NFL.

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