Antitrust Law Daily Wrap Up, ANTITRUST—C.D. Cal.: NFL wins judgment as a matter of law in Sunday Ticket litigation, (Aug 2, 2024)

By Peter Reap, J.D., LL.M.

The jury’s nearly $4.8 billion award was overturned, the court attempting to recover fumbles by both the plaintiffs’ experts and the jury’s damages calculations.

The federal district court in Los Angeles has granted the National Football League’s (NFL’s) motion for judgment as a matter of law (JMOL) after a jury in late June found that the league violated antitrust laws in distributing its premium telecast subscription service for out-of-market Sunday afternoon games—"Sunday Ticket"—at inflated prices and only on a satellite provider, awarding the two classes of consumer plaintiffs nearly $4.8 billion in damages from the NFL. The jury’s awards of $96,928,272.90 to the Commercial Class and $4,610,331,671.74 to the Residential Class, were vacated. The court explained that it overturned the jury’s findings because the only evidence showing that the plaintiffs were injured and damaged—the reports of two expert witnesses offered by the plaintiffs—were not produced using sound methodologies and therefore inadmissible. In a press release, the league hailed the major victory (In re: NFL “Sunday Ticket” Antitrust Litigation, No. 2:15-ml-02668-PSG-SK (C.D. Cal. August 1, 2024)).

Background. The class action was brought by viewers who purchased a DirecTV package to watch so-called out-of-market games—games that cannot be seen locally on free, over-the-air television. The challenged arrangement between the NFL and DirecTV essentially requires fans to purchase a bundled package of all NFL Sunday games in order to ensure access to games between teams outside of their local markets. Fans cannot purchase games individually. The plaintiffs claimed violations of Sections 1 and 2 of the Sherman Act, insofar as, absent the alleged anticompetitive agreements, the out of market telecasts solely available to “Sunday Ticket” subscribers would be available by other means, resulting in more NFL telecast games accessible to more viewers at lower prices.

The claims in the long-running litigation were dismissed in 2017 by the district court, but in August 2019, the Ninth Circuit overturned dismissal of the suit. The appellate court concluded that, at this preliminary stage, the plaintiffs alleged an injury to competition and antitrust standing. The NFL petitioned for review by the U.S. Supreme Court, but was denied certiorari.

Back before the district court, the NFL moved for summary judgment. In January 2024, the district court denied the NFL’s motion for summary judgment. The court held that there were disputes of material fact as to whether an agreement exists that pools member teams’ telecast rights, whether the member teams are capable of concerted action, and whether the NFL and its member teams function as a single entity when producing telecasts.

In arguing for summary judgment, the NFL challenged the Sherman Act claims on the ground that producing telecasts requires cooperation between the NFL and its member teams and therefore cooperation cannot create a horizontal agreement that restrains trade. The court concluded that the plaintiffs provided enough evidence to show its possible for the member clubs to act individually to produce telecasts and a trier of fact could find that the alleged horizontal pooling of telecast rights is considered a concerted action under Section 1 of the Sherman Act. The court concluded that the plaintiffs provided enough evidence to show it is possible for member teams to act individually and produce telecasts. The court denied summary judgment of the Section 1 claim.

The court also concluded that there was a triable issue of fact as to whether the NFL and its member teams must function as a single entity to produce telecasts. Because there was a dispute of fact as to whether the conduct amounted to monopolization in violation of Section 2 of the Sherman Act, the court denied summary judgment of the Section 2 claims.

After 13 days of trial in the district court, the jury was given instructions and handed the case on June 26. On June 27, 2024, the verdict was handed down. Both parties filed motions for JMOL after the close of evidence, and the court denied the plaintiffs’ motion and took the NFL’s motion under submission. The NFL filed detailed arguments asking for a JMOL following the verdict, asserting that “the jury’s irrational damages award confirms that Plaintiffs failed to offer viable proof of anticompetitive effects, impact, or damages.”

Grant of JMOL. The court determined that the testimonies of the two experts offered by the plaintiffs—Dr. Rascher and Dr. Zona—were based on flawed methodologies and required to be excluded. Because there was no other support for the class-wide injury and damages elements of the plaintiffs’ § 1 and § 2 claims, judgment as a matter of law for the NFL was ordered by the court.

The first of the plaintiffs’ experts, Dr. Rascher, used college football as his model of what would happen in the absence of the competitive restraints at issue in the case (college football but-for world). Rascher opined that if the NFL Teams stopped selling their out-of-market games through the NFL, but sold them either independently or in divisions, the result would be like college football as the games would “become available, just like on Saturday, on over-the-air channels and... basic sport cable channels” and customers would not “pay anything extra above what they were already paying for their TV package.”

Even though the court had previously denied the NFL’s Daubert motion and motion in limine on Rascher’s opinions, Rascher’s trial testimony revealed his college football but-for world was not the product of sound economic methodology. At trial, Rascher needed to explain how these out-of-market telecasts would have been available for free to cable and satellite customers in the but-for world, the court said, but he did not do so. Instead, he hypothesized there could have been numerous but-for worlds and that, regardless of the but-for world’s structure, consumers would not have paid for an additional subscription. He supported his decision to provide multiple variations of a but-for world with the assumption that the NFL and their broadcast partners “are sophisticated entities... and they figured it out in college sports, [so] they would certainly figure it out at the NFL.”

While Federal Rule of Evidence 702 does not require a but-for world to perfectly reflect what the real world would have been, the court reasoned, “it requires more than just saying market participants would have figured it out.” Rascher’s s failure to produce a coherent model was especially a problem for the court because it noted significant differences between the reality that is college football today and the outcome in his college football but-for world. Thus, the court excluded his testimony.

As for the plaintiffs’ second expert, Dr. Zona, the court excluded his testimony as well. Two of the NFL’s arguments for exclusion had particular merit: Zona’s models irrationally predicted that consumers would pay higher prices from an alternative distributor of Sunday Ticket instead of purchasing from DirecTV; and his models rested on the unsupportable assumption that there was an alternative possible distributor available—specifically, a streaming service—during 2011 to 2023. However, the main flaw with Zona’s testimony was that it failed to define an assumption that was necessary for evaluating the rationality and reliability of his models by never deciding what a “direct-to-consumer” product entailed, according to the court.

Even if the court had not found that JMOL was necessary because of the exclusion of Rascher’s and Zona’s testimonies, the court stated that it would have vacated the jury’s damages verdict, remitted the NFL’ award to nominal damages, and conditionally granted a new trial based on the jury’s irrational damages award. The court observed that this was that rare case in which the jury appeared to base its award, not on proper consideration of the evidence, but on its own methodology detached from expert opinions or calculations. In fact, the court was able to definitely trace the jury’s methodology through reverse engineering the damages awards. The jury did not follow the court's instructions and instead the damages awards were akin to guesswork or speculation.

NFL comments. The NFL thanked the court in a statement released following the decision: "We are grateful for today's ruling in the Sunday Ticket class action lawsuit. We believe that the NFL's media distribution model provides our fans with an array of options to follow the game they love, including local broadcasts of every single game on free over-the-air television."

The Case is No. 2:15-ml-02668-PSG-SK.

Judge: Gutierrez, P.

Attorneys: James W. Anderson (Heins Mills and Olson PLC) for SD Billy Frogs Inc. d/b/a Billy Frogs. Amanda K. Bonn (Susman Godfrey LLP) for Ninth Inning Inc. d/b/a The Mucky Duck. Daniel M. Petrocelli (O'Melveny And Myers LLP) for DirecTV LLC and DirecTV Holdings LLC.

Companies: SD Billy Frogs Inc. d/b/a Billy Frogs; Ninth Inning Inc. d/b/a The Mucky Duck; DirecTV LLC; DirecTV Holdings LLC

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