Antitrust Law Daily Wrap Up, ANTITRUST—C.D. Cal.: Consumer denied remand of DirecTV, NFL exclusive dealing suit, (Mar 29, 2016)

By Linda O’Brien, J.D., LL.M.

A consumer was not entitled to remand of his claims that satellite television service provider DirecTV had a monopoly over the broadcast of out-of-market football games under its exclusive agreement with the National Football League, allowing it to charge consumers supra-competitive prices for its NFL Sunday Ticket programming, the federal district court in Los Angeles has ruled (In re National Football League’s Sunday Ticket Antitrust Litigation, March 28, 2016, O’Connell, B.).

DirecTV provides direct broadcast satellite television service throughout the United States and distributes an exclusive “out-of-market” sports content programming package known as “NFL Sunday Ticket.” DirecTV has an exclusive agreement with the National Football League (NFL) to offer subscribers access to Sunday afternoon games that were not otherwise available in their market on national broadcast networks.

In October 2015, consumer Robert Lippincott filed a class action complaint in state court against DirecTV and the NFL, alleging violations of California’s Consumers Legal Remedies Act (CLRA) and Unfair Competition Law (UCL). Lippincott claimed that DirecTV’s monopoly over the broadcast of out-of-market Sunday afternoon football games allowed the defendants to charge consumers supra-competitive prices for its NFL Sunday Ticket programming. The defendants removed the case to the federal court. Before the court was Lippincott’s motion for remand.

The court determined that it could exert federal subject matter jurisdiction over the complaint. The plaintiff’s argument that there was no basis for federal subject matter jurisdiction because his complaint alleged exclusively state law causes of action was rejected. The court noted that the U.S. Supreme Court clarified the standard for finding a “substantial federal question” in Gunn v. Minton, 133 S.Ct. 1059 (2013). It held that federal jurisdiction over a state law claim is proper if a federal issue is (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.

In this case, the plaintiff contended that his claims were premised on an unconscionability theory. According to the court, the plaintiff’s claims would fail as a matter of law without allegations regarding the defendants’ alleged monopolistic conduct. His claims depend on the defendants’ actual or incipient violation of a federal antitrust law. Pleading unconscionability requires more than merely alleging that the price of a product was unfairly high. The defendants denied the plaintiff’s allegations that DirecTV was a monopoly that abused its monopoly position to charge supra-competitive prices. Thus, the case involves a “dispute or controversy respecting the . . . effect of [federal] law.”

Furthermore, the plaintiff’s claims arose under the Sherman Act and the federal interest embodied in the Sherman Act was well recognized and substantial, the court found.

Finally, the federal antitrust issue was capable of resolution in federal court without disrupting the federal-state balance approved by Congress. According to the court, the artful pleading doctrine—determining whether removal jurisdiction exists by reference to a plaintiff’s well pleaded complaint—is invoked only in exceptional circumstances. Here, the plaintiff acknowledged that the federal courts have exclusive jurisdiction over all cases arising under Section 2 of the Sherman Act. Although federal courts do not have jurisdiction over all cases alleging any type of monopolistic conduct, the plaintiff’s complaint artfully pleaded conduct that was exclusively within the jurisdiction of the federal court, namely a violation of Section 2 of the Sherman Act, the court concluded.

The case is No. 2:15-ml-02668-BRO-JEM.

Attorneys: Arun S. Subramanian (Susman Godfrey LLP) for 8812 Tavern Corp. Lee Albert (Glancy Prongay & Murray LLP) for Ninth Inning Inc. James W. Anderson (Heins Mills & Olson, PLC) and Brian C. Gudmundson (Zimmerman Reed, PLLP) for Our Ventures Inc. Melissa D. Ingalls (Kirkland & Ellis LLP) for DirecTV, LLC, DirecTV Sports Networks, LLC, and DirecTV Holdings LLC.

Companies: 8812 Tavern Corp.; Ninth Inning Inc.; Our Ventures Inc.; DirecTV, LLC; DirecTV Sports Networks, LLC; DirecTV Holdings LLC

Cases: Antitrust CaliforniaNews