Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: NCAA Pac-12 Conference antitrust suit against Mountain West Conference survives dismissal, (Oct 1, 2025)

By Justin Marcus Smith, J.D.

The case was at too early a stage to definitely rule whether the complaint called for application of the per se rule or the rule of reason.

The National Collegiate Athletic Association Pac-12 Conference (Pac-12) sufficiently pleaded antitrust standing and antitrust causes of action to proceed to discovery in its quest for declaratory judgments against the Mountain West Conference (MWC) in connection with an anti-poaching agreement, held the federal district court in San Jose, California. The Pac-12 claim under California’s Unfair Competition Law survived along with the underlying antitrust causes of action. It was too early to decide whether to apply per se analysis or the rule of reason. The court said it also needed a more complete factual record to decide whether termination fees for alleged Pac-12 poaching of MWC members were unenforceable (Pac-12 Conference v. Mountain West Conference, No. 5:24-cv-06685-SVK (N.D. Cal. Sept. 30, 2025)).

Background. Plaintiff Pac-12 and MWC are both National Collegiate Athletic Association Division I athletic conferences. After Pac-12 lost 10 of its 12 member schools to rival athletic conferences in 2022 and 2023, it entered into a scheduling agreement with MWC to secure a complete football schedule for its two remaining member schools during the 2024-2025 football season. The parties’ scheduling agreement contained a clause requiring Pac-12 to pay MWC a termination fee for any school that might leave MWC to join Pac-12 short of a complete merger of parties.

After five MWC schools defected to Pac-12, MWC demanded Pac-12 pay $43 million in termination fees for the first four MWC teams to announce their departure. Pac-12 responded by filing the instant lawsuit for declaratory judgment challenging the termination fee provision under the Sherman Act and California’s Cartwright Act, the California Unfair Competition Law (UCL), and common law. Pac-12 also asked the court to declare the scheduling agreement invalid for unenforceable “liquidated damages” penalties. At the time of filing, the parties had not consummated the definitive transaction otherwise discussed in the scheduling agreement such that the two conferences would merge entirely.

After all parties consented to jurisdiction of a magistrate judge, MWC moved to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. The court denied dismissal.

Antitrust standing. The court held Pac-12 alleged sufficient non-speculative injury to itself and to competition generally to show antitrust standing at the pleading stage. MWC argued the court should dismiss the Section 1 Sherman Act and Cartwright Act causes of action for lack of antitrust standing and failure to plead plausible antitrust claims. The parties addressed these two causes of action together, and the court did the same.

MWC conceded the existence of an agreement, but it argued Pac-12 did not show antitrust standing because it failed to allege injury to competition generally and only speculated about harm to itself. MWC pointed to another clause of the scheduling agreement that specifically allowed MWC member schools to join Pac-12 at no cost in the event of complete merger of the two conferences. Moreover, MWC argued, the termination fee requirement did not impede Pac-12 recruitment of five MWC schools, nor did anything in the scheduling agreement prevent Pac-12 from recruiting non-MWC schools. And even if the Scheduling Agreement injured competition, Pac-12 would be an equally culpable co-conspirator in any alleged restraint of trade or would have harmed the MWC schools only.

The court found MWC’s arguments did not give the court a basis for disregarding the Pac-12 allegations of antitrust injury. Pac-12 essentially pleaded it was under duress at the time it entered into the scheduling agreement. The court observed that Section 1 of the Sherman Act reaches “every contract” in unreasonable restraint of trade. Pac-12 alleged harm beyond the termination fees in the form of depletion of conference resources to compete for additional schools and reduced options for MWC member school mobility. The court deemed such harms not speculative. MWC already demanded termination fees, and depletion of Pac-12 resources by imposition of termination fees also limited the conference as a destination for other schools, amounting to general competitive harm.

Antitrust claims. The court denied the MWC motion to dismiss the Sherman Act and Cartwright Act causes of action. It was too early to make a definitive ruling on whether the case called for application of the per se rule or the rule of reason. Pac-12 premised its complaint primarily on a per se theory of liability, but it also contained several allegations pertinent to the rule of reason. The complaint did not support the “quick look” theory.

MWC argued the Ninth Circuit and Supreme Court have long applied the rule of reason to sports league agreements, and the termination fee provision of the scheduling agreement was an ancillary restraint not subject to per se treatment. MWC pointed to pro-competitive purpose language in the scheduling agreement preamble. It also said the termination fees were essential to increased output, games that would not have otherwise happened.

Pac-12 variously argued that courts ordinarily apply per se treatment to anti-poaching agreements, like the termination fee provision here, because they are forms of horizontal market allocation; the court could not make the necessary fact determinations at the pleading stage to find an ancillary restraint; calling the restraint ancillary was a defense; the termination fee provision was not subordinate or collateral to the scheduling agreement; and the termination fee provision was not necessary to ostensible procompetitive purposes.

The court perceived both sides were inviting the court to decide the mode of analysis on a motion to dismiss. The court said it was too early to do that. The parties lacked sufficient factual evidence for their contentions. In calling for rule of reason analysis, MWC overlooked that Pac-12 said it acceded to the scheduling agreement under duress and pressure to secure a 2024-2025 football season. Pac-12 alleged sufficient facts about the timing and circumstances to make that plausible. The unique attributes of the termination fees provision of the scheduling agreement did not align with the respective categorical positions of the parties. The court said it would wait for a factual record to make a firm determination, but for now the complaint adequately pleaded a plausible case for application of the per se rule. The court continued that it was neither appropriate nor necessary to dismiss the antitrust claims based on the arguably inadequate pleading of an alternative and primarily defensive rule of reason theory.

UCL. The court denied dismissal of the Pac-12 UCL claim. The court held it survived because it was based on predicate “unlawful” antitrust claims the court had already found plausible. The court held Pac-12 also stated a claim for UCL “unfair” business practices without having to reach whether Pac-12 stated an unfairness theory independent of its antitrust claims.

Invalid contract. The court held that determining whether the termination fees were fair and reasonable, and therefore enforceable, would be premature on a partial factual record. That was especially so here because Pac-12 sufficiently alleged that the contract disproportionately penalized breach. Second, MWC argued the termination fees were not in fact liquidated damages at all because they did not flow from breach, but rather from Pac-12 electing to pursue an alternate performance route by choosing to absorb only some MWC member institutions short of a complete merger.

The court cited cases indicating that a lack of certainty on whether a contract provides for either liquidated damages or an unenforceable penalty might merely call for alternate performance. In that event, the provision would not impose damages and would not be subject to Cal. Civ. C. § 1671 limitations. If the obligor did not have a free rational choice about performance, the provision would be deemed to provide for a penalty. The MWC argument that the termination fees were triggered not by breach but by Pac-12 alternate performance appeared inconsistent with the “liquidated damages” wording. The scheduling agreement did not refer to Pac-12 recruitment of fewer than all MWC members as a breach. The “liquidated damages” description of the poaching penalty facially revealed MWC’s true intent to prevent Pac-12 from accepting offers from MWC schools entirely, notwithstanding the lack of an explicit contractual commitment by Pac-12 to not accept MWC members into Pac-12. Again, the court said it wanted a more complete factual record. The court denied dismissal of the invalid contract cause of action.

The Case is No. 5:24-cv-06685-SVK.

Judge: Keulen, S.

Attorneys: Eric H. MacMichael (Keker, Van Nest & Peters LLP) for Pac-12 Conference. Alexander L. Cheney (Willkie Farr & Gallagher LLP) for Mountain West Conference.

Companies: Pac-12 Conference; Mountain West Conference

Cases: Antitrust StateUnfairTradePractices CaliforniaNews