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12/20/77 Norman F. Hecht, Harry v. Pro-Football

December 20, 1977

CORPORATION, ET AL

v.

PRO-FOOTBALL, INC., A CORPORATION, ET AL. 1977.CDC.278 DATE DECIDED: DECEMBER 20, 1977



UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

NORMAN F. HECHT, HARRY KAGAN and MARC A. MILLER, joint

venturers, APPELLANTS, Washington Federals, Inc., a

Appeal from the United States District Court for the District of Columbia (D.C. Civil 2815-66).

APPELLATE PANEL:

McGowan, Circuit Judge, Harrison L. Winter,* Circuit Judge for the Fourth Circuit and Wilkey, Circuit Judge. Opinion for the Court filed by Circuit Judge Wilkey.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WILKEY

This is a private antitrust action. Plaintiffs Hecht, Kagan, and Miller (hereafter collectively "Hecht") are a group of promoters who in 1965 sought unsuccessfully to obtain an American Football League franchise for Washington, D.C. Defendants are Pro-Football, Inc., operator of the Washington Redskins (the Redskins), and the District of Columbia Armory Board, an unincorporated instrumentality of the District of Columbia which operates and maintains Robert F. Kennedy Stadium under contract with the Interior Department. *fn1 The Armory Board leases RFK Stadium to the Redskins. Hecht attacks a restrictive covenant in that lease. *fn2

Hecht contends that RFK Stadium is the only stadium in the Washington metropolitan area suitable for the exhibition of professional football games; that the restrictive covenant prevented him from obtaining the use of the stadium; and that his inability to obtain the use of the stadium prevented him from submitting an acceptable franchise application to the AFL owners, and thus from competing with the Redskins in the Washington professional football market. Hecht's complaint alleges that the restrictive covenant constitutes a contract in restraint of trade, in violation of Sherman Act §§ 1 and 3; *fn3 and that the Redskins, in obtaining the covenant and refusing to waive it, have monopolized professional football in Washington, D.C., in violation of Sherman Act § 2. *fn4 The case was tried to a jury, *fn5 which rendered a verdict for defendants. Hecht appeals numerous instructions and evidentiary rulings. We reverse and remand for a new trial. I. FACTS

Formed in 1959-60 with eight franchised teams, the AFL by 1965 was seriously considering expansion. It planned to grant two new franchises, one to a city with an NFL franchise and one to a city with no professional football team. The granting of any new franchise required the affirmative votes of six clubs.

In June 1965 Hecht and his associates organized an original group of investors. This group had no football experience and limited financial strength, but possessed a general familiarity with business affairs. Hecht sent a franchise application form to the AFL, and followed it with a meeting in late June with AFL Commissioner Foss. They discussed details of the application, the need for Hecht to bolster his group's financial position, and the feasibility of gaining access to RFK Stadium in view of the Redskins' lease. In that connection, Hecht and Foss discussed the advisability of soliciting the aid of the Interior Department in obtaining the use of RFK Stadium.

Shortly after this meeting, Hecht persuaded three additional investors to join his promotional group. These were men of considerable means. Hecht also met with Stewart Udall, then Secretary of the Interior. Udall apparently responded favorably to Hecht's proposal, and told Hecht that his staff would investigate the legality of the restrictive covenant in the Redskins' lease.

In July 1965 Hecht submitted a written offer to purchase an AFL franchise, couching the application in a form suggested by Commissioner Foss. During July and August there were numerous interchanges between Hecht and the AFL group, about which there was conflicting evidence. These events need not be detailed. Hecht presented evidence which tended to show that his promotional activities were serious and that at least some members of the AFL expansion committee favored his application; he presented one piece of evidence which suggested that if he got the stadium he would get the franchise. The Redskins presented evidence which tended to show that the AFL owners never seriously considered expansion to Washington and that Hecht's application never had a chance of being approved.

On 7 September 1965 Hecht submitted a written proposal to the Armory Board for shared use of RFK Stadium. The Board told Hecht that it could not negotiate a lease with him owing to the restrictive covenant in the Redskins' lease. The Board also said, however, that it would gladly consider any arrangement acceptable to the Redskins under which Hecht could use the stadium (i.e., a waiver of the restrictive covenant) and by which the Board's financial condition would be improved. *fn6 There was conflicting evidence about the practicality of any plan for sharing the stadium between two professional football teams.

On 4 October 1965 Hecht received a memorandum from the Interior Department expressing its opinion that the restrictive covenant in the Redskins' lease violated the antitrust laws. Hecht distributed copies of this memorandum to the AFL owners and to the Armory Board. Months of intermittent and frustrating meetings followed. The Redskins presented evidence which tended to show that they had reason to doubt the sufficiency of Hecht's financial resources and the integrity with which he pursued the negotiations. During this period, Hecht was whipsawed between the positions of the Redskins and the AFL. The Redskins would not seriously negotiate for Hecht's use of the stadium unless Hecht had an AFL franchise; the AFL would not seriously consider Hecht's application for a franchise unless he had the use of RFK Stadium. In his quandary, Hecht made representations to both sides which were optimistic at best. In August 1966 the Redskins broke off negotiations. In October 1966 Hecht filed his original complaint in this action. II. OVERALL ANALYSIS

At the outset, the Redskins contend that we need not reach Hecht's various assignments of error because the trial conclusively demonstrated that Hecht lacks standing to sue. Section 4 of the Clayton Act confers the right to sue for treble damages on "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws . . . ." *fn7 This section establishes a two-fold standing requirement: the plaintiff must show both an injury-in-fact to his "business or property" and a causal connection between that injury and the defendant's allegedly illegal acts. *fn8 The Redskins contend that Hecht has shown neither.

First, they argue that Hecht's promotional group had a shifting and impermanent structure; that no money had been contributed or even committed by its members; that Hecht had no prospect of ever receiving a franchise; that Hecht failed to negotiate toward a franchise in a serious and businesslike manner; and that Hecht consequently lacked "business or property" for antitrust purposes. As will be pointed out more fully below, *fn9 however, the courts have generally not insisted that a plaintiff actually be engaged in a going business in order to have antitrust standing; it is sufficient if he has manifested an intention to enter the business and has demonstrated his preparedness to do so. *fn10 Our review of the record indicates that the evidence presented a question of fact for the jury on these issues. We cannot hold that Hecht lacked "business or property" as a matter of law.

Second, the Redskins argue that Hecht's inability to submit an acceptable franchise application was due entirely to his own bad faith in negotiating with them for use of RFK Stadium, and that Hecht consequently failed to show a causal connection between his injury and the restrictive covenant in the Redskins' lease. We find this argument sanctimonious and somewhat sophistical. The negotiations, plainly, were frustrating for all concerned. The question, in any event, was peculiarly one for the jury. *fn11 We cannot hold, in defiance of plain evidence and common ...


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