Antitrust Law Daily Wrap Up, ANTITRUST—Haw. App. Ct: Unfair competition claim against NCAA barred in state court after earlier dismissal of Sherman Act claim, (Nov 1, 2013)

By Edward L. Puzzo, J.D.

Res judicata barred a party from bringing a claim of unfair competition under state law in state court after its substantially identical claim under the Sherman Act brought in federal court had been voluntarily dismissed with prejudice, a Hawaii appellate court has ruled (Aloha Sports v. NCAA, October 30, 2013, Foley, D.).

Aloha Sports was a sponsoring agency of certain National Collegiate Athletic Association (NCAA) post-season football bowl games. After the NCAA withdrew certification of bowl games sponsored by Aloha, Aloha brought claims against the NCAA in federal and state courts.

In the federal complaint claiming Sherman Antitrust Act violations by the NCAA, Aloha had complained of the anti-competitive effects of a combination or conspiracy among the NCAA’s member colleges to require sponsoring agencies to pay a minimum payout of gross game revenues. Aloha later agreed to a voluntarily dismissal of those claims with prejudice.

Aloha then brought a similar claim of unfair competition under state law against the NCAA in Hawaii court. The state circuit court dismissed this claim on res judicata grounds, ruling that the matter had been previously litigated in the federal court when Aloha had accused the NCAA of Sherman Antitrust Act violations. Aloha appealed this dismissal.

Res judicata. All claims arising from an injury must be raised in a single action or they will be barred by res judicata, the court explained, even if some claims arose under state law and some arose under federal law. The Sherman Act claim and the state claim both arose from the same nucleus of operative facts, the appellate court stated. The applicable federal law and state law on the subject were effectively identical, the court noted.

The second required element for res judicata is that the prior judgment was final judgment on the merits. Under both federal and Hawaii law, a voluntary dismissal with prejudice constitutes a final judgment on the merits.

The third required element for res judicata, that the parties be identical, was also clearly met. Thus, ruled the court, since the lower court action raised identical claims previously adjudicated on the merits between the same parties, the circuit court did not err by finding Aloha’s unfair competition claims against NCAA barred by res judicata.

Lack of factual basis. Aloha had also alleged that the NCAA engaged in unfair competition by refusing to permit a transfer of ownership of its bowl games without good cause. The lower court dismissed this claim, stating that this aspect of the complaint lacked a factual basis.

In an unfair competition claim, notice pleading required Aloha to plead facts that

show the NCAA engaged in an unfair act or practice, the appellate court stated. When read as a whole, including the “interference with prospective economic advantage” and “unfair competition” portions of the complaint. Aloha’s complaint provided a factual basis for its claim that de-certification was an unfair method of competition. Therefore, ruled the appellate court, the circuit court erred in dismissing Aloha’s claim for lack of a factual basis.

The case is Civil Action No. CAAP-12-0000512.

Attorneys: Frederick W. Rohlfing III (Case Lombardi & Pettit) for Aloha Sports Inc. William C. McCorriston (McCorriston Miller Mukai MacKinnon) for National Collegiate Athletic Assn.

Companies: Aloha Sports Inc. National Collegiate Athletic Assn.

Cases: Antitrust HawaiiNews