Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: CHL dismissed from hockey players’ union lawsuit alleging developmental league restrictions, (Dec 2, 2024)

By Justin Marcus Smith, J.D.

The court said it could not find any substantial connection to the State of New York or the Southern District there.

New York’s long arm statute did not confer jurisdiction over Canadian Hockey League (CHL) defendants in the World Association of Icehockey Players Unions’ (WAIPU) lawsuit challenging putative restrictions on junior player leagues, held the federal district court in Manhattan. The long arm statute did not apply because, among other reasons, the named plaintiffs were not from New York, they did not play hockey in New York, and their claims did not “arise from” the Canadian Hockey League (CHL) defendants’ transaction of business in New York. The same was true for the World Association of Icehockey Players Unions North America Division (WAIPU) plaintiffs because they did not even attempt to identify a member satisfying those requirements. In addition, the court did not have personal jurisdiction under the Clayton Act because the plaintiffs did not satisfy the Act’s venue prong where they did not show that the CHL defendants transacted any business in the Southern District of New York. The court dismissed the CHL defendants and set a conference to discuss the National Hockey League’s (NHL) motion to dismiss, as the remaining defendant (World Association Of Icehockey Players Unions North America Division v. National Hockey League, No. 1:24-cv-01066-MMG (S.D.N.Y. Nov. 26, 2024)).

Background. The World Association of Icehockey Players Unions North America Division and World Association of Icehockey Players Unions USA Corporation (collectively, WAIPU), on behalf of their members, and two individual plaintiffs, filed an antitrust class action complaint against an alleged cartel consisting of the National Hockey League (NHL), the Canadian Hockey League (CHL), the Western Hockey League (WHL), each of the WHL member clubs, the Ontario Major Junior Hockey League (OHL), each of the OHL-member clubs, the Québec Maritimes Junior Hockey League (QMJHL), and each of the QMJHL member clubs—for violations of the Sherman Antitrust Act. Specifically, the plaintiffs alleged that the NHL was a co-conspirator that joined and facilitated the alleged CHL defendants’ conspiracy through a written agreement (NHL-CHL agreement) for the NHL to provide funding to the Major Junior Leagues contingent on those defendants cleaving to rules and policies that the plaintiffs said comprised the anticompetitive agreements.

The complaint raised three causes of action: violation of § 1 of the Sherman Act, declaratory relief under 28 U.S.C. § 2201, and equitable and ancillary relief under 28 U.S.C. § 2202. WAIPU sought treble damages plus costs and attorney’s fees; disgorgement of unlawful profits; and declaratory and permanent injunctive relief. After jurisdictional discovery, the CHL defendants moved for dismissal challenging the court’s jurisdiction under Fed. R. Civ. P. 12(b)(2). The court granted dismissal for lack of personal jurisdiction.

Arguments raised. The CHL defendants said they were not subject to personal jurisdiction in the district because, among other things, they primarily operate in Canada; no Major Junior League games occur in New York; no Major Junior League players are trained in New York; the Major Junior League defendants do not have physical locations in New York and do not sell tickets to hockey events there; their broadcasting is focused on Canadian audiences; and, any contact with New York was incidental and insufficient to perfect jurisdiction under any plaintiff theory.

The plaintiffs countered that the CHL defendants had a sufficient connection to New York or the district through recruiting and scouting; availability of internet-based merchandise to New York customers; and, their connections and relationships with the New York City -based NHL.

No jurisdiction. The court concluded the lack of evidence that the claims and injuries of the plaintiffs had any connection to CHL defendants’ contacts with the forum, even assuming those contacts to be otherwise sufficient, was “fatal” to the plaintiffs’ jurisdictional arguments.

First, the court did not find any statutory basis for personal jurisdiction under New York’s Long Arm Statute, C.P.L.R. § 302(a), or under the Clayton Act, 15 U.S.C. § 22, so there was no need to consider whether the exercise of personal jurisdiction would comport with constitutional due process.

Long Arm analysis. Analyzing the New York Long Arm Statute, the court found first that the plaintiffs did not contend that that the CHL defendants’ contacts made them “at home” in New York so as to confer general jurisdiction. Jurisdictional discovery showed no CHL, Major Junior League, or Major Junior Club activity in New York.

To the extent the plaintiffs therefore relied on specific jurisdiction, even if asserted injuries in New York were sufficient through drafting of players from New York, such injuries, if any, did not pertain to the named plaintiffs. Scouting, advertising, streaming, or marketing merchandise online, even if they amounted to “transacting business” in New York, likewise did not appear to affect the plaintiffs in New York. The mere possibility that players from New York may have been affected was insufficient to show injury in New York under the “first effect” test. Nothing alleged here occurred in New York.

The court acknowledged the question of whether New York players were barred from competing for roster spots in the NHL or QMJHL presented a thornier problem. The plaintiffs adequately alleged that players in New York were unable to qualify for clubs outside the OHL. This might not have been too speculative, but there was no named plaintiff to plausibly establish that they were from or played on hockey teams in New York, and likewise, the WAIPU plaintiffs did not identify any particular members. The court said it had to assess specific personal jurisdiction based only on the claims of named plaintiffs. One named plaintiff was a citizen of Canada who only played outside New York. Another was an American citizen who also only played outside New York. Neither asserted any injury in New York.

The court found the plaintiffs did not make a sufficient showing as to scouting activities in New York, but even if such activities were sufficient for “transacting business,” the plaintiffs’ claims did not arise from such conduct. The nature of the scouting and recruiting was most like that in a Second Circuit case that found recruitment was not a business transaction within the meaning of C.P.L.R. § 302(a)(1) because it did not invoke the benefits or protections of New York law. The leagues in question here engaged in even fewer deliberate contacts with New York. The alleged activity was insubstantial, for example, observing players or gathering information about them.

Even if the activity was “transacting business,” none of the named plaintiffs’ claims arose from those transactions. Again, neither named plaintiff was from New York or played hockey there, and the WAIPU plaintiffs did not identify any members from New York or who played there.

With respect to marketing of merchandise, advertising, and streaming online within the U.S., the plaintiffs failed to draw any “substantial relationship” or “articulable nexus” between those transactions and the plaintiffs’ claims of violations of antitrust law. Tangential or attenuated connections would not suffice for jurisdiction.

Clayton Act analysis. Turning to the Clayton Act, the court found the plaintiffs did not argue that the CHL defendants resided or were found within the district. Instead, they relied on transaction of business there. Again, transaction of business had to be of “substantial” and continuous character. The plaintiffs did not explain how the market allocation agreement amounted to transacting business in the district. For example, they did not allege substantial or regular payments form the district or maintaining any clubs or facilities there. Geographic allocation alone did not represent the carrying on of business of any substantial character under the Clayton Act.

The plaintiffs also did not tie any enforcement of market allocation across Canada, the U.S., and the district, if any, such as by imposition of penalties, to any actual conduct. The plaintiffs merely pointed to putative rules and mechanisms for enforcement.

Again, recruiting efforts, if any, were insubstantial or else pleaded in conclusory fashion. No evidence showed activity in the district. Allegations about scouts assigned to New York did not show any transaction of business in the district greater than a few isolated and peripheral contacts.

Last, allegations pertinent to the President of the CHL were conclusory and insufficient to show personal jurisdiction. They did not show any travel to New York. Rather, they showed the NHL deputy commissioner traveled to Canada.

Conference set. The court ordered counsel for plaintiffs and for the remaining defendant, the NHL, to appear for a conference on Wednesday, December 11, 2024, at 10:00 a.m., regarding the status of the plaintiffs' claims against the NHL. The court directed counsel to be prepared to discuss the treatment of the NHL's pending motion to dismiss.

The Case is No. 1:24-cv-01066-MMG.

Judge: Garnett, M.

Attorneys: Gregory Scott Asciolla (DiCello Levitt LLC) for World Association of Ice hockey Players Unions North America Division. Andrew Garry Gordon (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for National Hockey League.

Companies: World Association of Ice hockey Players Unions North America Division; National Hockey League

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