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CHICAGO PROFESSIONAL SPORTS L.P. v. NBA

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION


November 6, 1992

CHICAGO PROFESSIONAL SPORTS LIMITED PARTNERSHIP and WGN CONTINENTAL BROADCASTING COMPANY, Plaintiffs,
v.
NATIONAL BASKETBALL ASSOCIATION, Defendants.

Will

The opinion of the court was delivered by: HUBERT L. WILL

Judge Hubert L. Will

MEMORANDUM OPINION

 I. FACTUAL BACKGROUND

 For an extensive discussion of the factual background in this case, see Chicago Pro. Sports v. National Basketball Ass'n, 754 F. Supp. 1336, 1338-49 (N.D. Ill. 1991), aff'd, 961 F.2d 667 (7th Cir. 1992), cert. denied, U.S. , 61 U.S.L.W. 3171 (Nov. 2, 1992).

 II. NBA MOTION FOR PARTIAL SUMMARY JUDGMENT

 Defendant National Basketball Association (the "NBA") has moved this court for an order granting it partial summary judgment dismissing (1) plaintiff Chicago Professional Sports Limited Partnership's (the "Bulls'") antitrust challenge to the NBA Superstation Same Night Rule, pursuant to which superstation broadcasts of NBA games are not permitted on the same night as telecasts of NBA games over Turner Network Television ("TNT"); and (2) plaintiff WGN's claim for damages allegedly stemming from the NBA 25-Game Rule, which limits to 25 the number of games a team may broadcast over a superstation. The NBA also requests summary judgment on WGN's claim for damages arising out of the Superstation Same Night Rule, in the event that this court denies its motion for summary judgment based on the Sports Broadcasting Act (the "SBA"), 15 U.S.C. ยงยง 1291-95 (1992).

 The NBA advances two major arguments to support its motion for summary judgment. First, it argues that it is entitled to partial summary judgment since the Superstation Same Night Rule is exempt from antitrust scrutiny under the SBA due to the rule's inclusion in the NBA's contract with TNT, and because TNT constitutes "sponsored telecasting" within the meaning of the SBA. Second, the defendant argues that it is entitled to partial summary judgment dismissing WGN's claim for damages resulting from the 25-Game Rule since the Bulls never sought to license more than 25 games to WGN during the past two seasons and because the WGN-Bulls contract limitation of 25 games was based upon the Bulls' own economic and business considerations. Summary judgment is appropriate where the court is satisfied "that the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). For the reasons delineated below, the NBA's summary judgment motion is denied.

 A. NBA Motion for Partial Summary Judgment Under SBA Dismissing Bulls' Antitrust challenge to the Superstation Same Night Rule Is Denied

 The NBA suggests that the Superstation Same Night Rule is exempt from antitrust scrutiny by virtue of the antitrust exception created by the SBA. *fn1" Specifically, the NBA claims that its Superstation Same Night Rule is exempt under the SBA from antitrust scrutiny by virtue of the rule's inclusion in the NBA's contract with TNT. According to the NBA, this position is supported (and perhaps even required) by the Seventh Circuit's construction of the SBA in Chicago Pro. Sports Ltd. Partnership v. National Basketball Ass'n, 961 F.2d 667 (7th Cir. 1992). The NBA argues that the Seventh Circuit's review of this court's opinion broadly interprets the SBA to conclude that a professional sports league is entitled to prohibit the broadcast of games not otherwise transferred to a national television distributor so long as the contract by which the professional sports league transfers part of its national broadcast rights limits the broadcasting of other contests. See id. at 670 ("No line between transfers made and transfers forbidden could be stable . . . . We therefore disagree with the district court to the extent it thought the [SBA] applies only when the league arranges for (or permits) telecasting of every contest."). Because the NBA's contract with TNT expressly provides that NBA games may not be broadcast over a superstation when a TNT game is on the air, the NBA reasons that the Superstation Same Night Rule fits squarely within the Seventh Circuit's reasoning as to when a "transfer forbidden" is exempt from antitrust scrutiny under the SBA. *fn2"

 No such conclusion necessarily flows from the Seventh Circuit opinion. Instead, the Seventh Circuit in extended dictum merely hypothesized and declined to rule on various ways in which the NBA might "rearrange its affairs" in an attempt to qualify for the exemption. *fn3" The hypothetical musings of the Seventh Circuit with regard to how the SBA might apply to a different situation are not controlling in this case.

 Moreover, in any event, the NBA has taken none of the steps posited by that court to try to obtain protection by "commandeering all of the telecasting rights" of the "27 clubs" and "rearranging its affairs" to change the clubs' "allocation of revenues." First, as we previously found, "nothing in any NBA agreement nor anything else in the constitution or by-laws suggests further agreement by the teams to share their separately owned copyrights and transfer those rights, in whole or in part, to the league." 754 F. Supp. at 1350, 1351 ("games not sold by the league to NBC (or to TNT) remain [the] property of the teams."). The Seventh Circuit agrees. *fn4" Second, the rights to the games licensed by the Bulls to WGN have not been transferred to the league or by the league to any other party. See 754 F. Supp. at 1350. As the seventh Circuit affirmed, "the Sports Broadcasting Act applies only when the league has 'transferred' a right to 'sponsored telecasting.'" 961 F.2d at 671. The SBA, therefore, "does not, by its terms, similarly protect joint agreements 'to prohibit the transfer' of national broadcast rights over and above those licensed to NBC (or possibly TNT, assuming TNT's broadcasts fit within the statutory meaning of 'sponsored broadcasting.')" 754 F. Supp. at 1350 (emphasis added). Third, because each team retains the right to televise on its particular local over-the-air or cable outlet the same games that are televised by TNT, the league's transfer of rights to TNT cannot be characterized as exclusive. *fn5"

 Antitrust exceptions, in the words of the Seventh Circuit, must be read "narrowly, with beady eyes and green eyeshades." 961 F.2d at 672. Accordingly, for the reasons previously discussed, we conclude that the SBA does not exempt the NBA's Superstation Same Night Rule's prohibition of non-transferred superstation telecasts from antitrust scrutiny. There may be facts which preclude the Bulls and WGN from objecting to the Same Night Rule, but summary judgment as a matter of law is inappropriate.

 The NBA's motion must be denied for a second reason: it is not clear that TNT constitutes "sponsored telecasting" within the SBA's meaning. Although the SBA does not expressly define the term "sponsored telecasting", the NBA argues that TNT telecasts are within the plain meaning of the term for several reasons. First, TNT is available to every television household whose cable provider wishes to carry the network. *fn6" Second, TNT telecasts of NBA games contain numerous commercial sponsor spots. Third, since viewers are not charged each time they tune in to TNT, the NBA contends TNT is indistinguishable from other indisputably sponsored commercial telecasting. Fourth, NBA argues that the SBA's legislative history reveals that its focus on "sponsored telecasting" was intended to exclude only closed circuit and subscription television and that TNT is neither closed circuit nor subscription television. *fn7" Finally, the NBA suggests that the recently enacted Cable Television Consumer Protection and Competition Act of 1992 (the "Cable Act"), Pub. L. No. 102-385, supports the characterization of TNT as "sponsored telecasting" within the meaning of the SBA.

 In its status as a cable television programming service, however, it is not clear that TNT constitutes "sponsored telecasting" as that term is used in the SBA. Although it is indeed a hybrid programming service, TNT is perhaps better characterized as subscription television for the following reasons. First, no one receives TNT without paying for it. while it may be true that viewers do not pay each time TNT is selected on remote control, a viewer must pay to receive TNT through the costs of hook-up fees, monthly cable service fees and even additional monthly "premium cable" fees charged by some local cable operators for TNT and other expanded cable programming services. TNT is thus fundamentally different from indisputably "sponsored telecasting" such as the national broadcast networks and local over-the-air stations. Second, TNT derives its revenues predominantly from "subscriptions" as opposed to advertising revenues from paying "sponsors." *fn8" Third, prior and subsequent legislative history demonstrates that "sponsored telecasting" as used in the SBA is limited to free commercial television as opposed to cable. *fn9" In 1988, the Department of Justice opined, after acknowledging that some ambiguity exists with regard to the issue, that the SBA provided no antitrust immunity to the National Football League ("NFL") for its contract with ESPN, a cable operation similar to TNT. *fn10" Moreover, the then NFL Commissioner acknowledged during the 1961 hearings before the House Antitrust Subcommittee that the SBA "covers only the free telecasting of professional sports contests, and does not cover pay TV." Telecasting of Professional Sports Contests: Hearing Before the Antitrust Subcommittee of the House Committee on the Judiciary on H.R. 8757, 87th Cong. 1st Sess. 36 (1961).

 Statutes must be construed according to the plain meaning of their terms at the time the legislation is passed. United States v. Wise, 370 U.S. 405, 411, 8 L. Ed. 2d 590, 82 S. Ct. 1354 (1962). Additionally, as previously indicated, antitrust exemptions must be construed narrowly. "Sponsored telecasting" is not expressly defined by either the SBA or by any subsequent case law. In its report on the proposed legislation, the House Judiciary Committee noted only that "the bill does not apply to closed circuit or subscription television." H.R. 9096, 87th Cong., 1st Sess. at 5 (1961). While the plain meaning of the term "subscription television" in 1961 might arguably have referred only to a pay-per-view service, it seems equally likely that the term "sponsored telecasting" would not have included such hybrid services as TNT and ESPN. "Sponsored telecasting" in 1961 referred to "free" television -- the national network and local over-the-air broadcasting provided at no direct cost to viewers. The NBA's attempt to construe TNT as such "sponsored telecasting" simply because it contains commercial advertisements and is not offered on a pay-per-view basis is unconvincing. Since antitrust exemptions must be characterized narrowly, we conclude that TNT, like ESPN, falls outside the statutory meaning of "sponsored telecasting." The recently enacted Cable Act does not alter this conclusion. *fn11"

 B. NBA Motion for Partial Summary Judgment Dismissing WGN's Claim for Damages Is Denied

 Plaintiff WGN claims that the 25-Game Rule prevented it from broadcasting more than 25 Bulls games during both the 1989-90 and 1990-91 NBA seasons. NBA contends that there is no genuine factual dispute that, independent of any alleged antitrust violation, 25 was the maximum number of games that the Bulls were prepared to license to WGN for these seasons and, thus, the 25-Game Rule is not the cause of any alleged damages suffered by WGN. Instead, the NBA suggests that the WGN-Bulls contractual limitation to 25 games was based solely upon the Bulls' own economic and business considerations.

 WGN argues that in 1989, when the Bulls and WGN contracted for the televising of Bulls games for the 1989-90 and 1990-91 seasons, the Bulls were prevented by the NBA rules from offering WGN any more than 25 games per season. *fn12" Pursuant to the by-laws, each team's television contracts must comply with the terms of the NBA's own present or future television contracts and, in addition, are subject to the NBA Commissioner's approval. 754 F. Supp. at 1342. Had it not been for the 25-Game Rule, the Bulls presumably could have contracted for up to 41 games. WGN claims that the 25-Game Rule was the only reason that the Bulls did not offer more games for broadcast in the 1989-90 and 1990-91 seasons.

 The evidence reveals that the Bulls in earlier years had contracted with WFLD for up to 40 games. The sworn testimony of the parties suggests that, but for the 25-Game Rule, the Bulls and WGN might have contracted for more than 25 games. *fn13" In response to the WGN and Bulls claims that they would have contracted for more than 25 games, the NBA correctly points out that the economic success of the Bulls on WGN during the last three seasons may not be probative of the Bulls' intent at the time that it executed the WGN agreement. Although it is not entirely clear the extent to which the Bulls and WGN may be benefitting from the advantage of hindsight in estimating the number of games which might have been contracted for absent the 25-Game Rule, WGN raises sufficient questions of material fact to require denial of the summary judgment motion on this issue.

 The NBA also seeks summary judgment on WGN's claim for damages arising out of the Superstation Same Night Rule, in the event that this court denies the NBA's motion for summary judgment based on the SBA. WGN claims that it complied with the Superstation Same Night Rule only because the Bulls were required to do so by the rules and regulations of the NBA. According to WGN, the restriction precluded it from telecasting two distinct groups of games. First, WGN could not telecast any Bulls games that TNT decided to broadcast. Second, WGN was prevented from showing any Bulls games that were played on the same nights as TNT broadcasts of other NBA games, even when TNT was not showing a Bulls game. Whether or not the Bulls would have licensed WGN to televise Bulls' games on nights when TNT was carrying NBA games is, as yet, an unresolved question of fact. Accordingly, it is possible that WGN may have suffered injury resulting from the Superstation Same Night Rule. WGN has raised sufficient questions of material fact to preclude summary judgment on this issue as well. Accordingly, the NBA's motion is denied.

 III. CONCLUSION

 For the aforementioned reasons, the NBA's motion for partial summary judgment is denied.

 Hubert L. Will

 United States District Judge

 DATED: November 6, 1992


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