In re: National Collegiate Athletic Association Athletic Grant-In-Aid Cap Antitrust Litigation

ORDER REAFFIRMING EXCLUSION OF CERTAIN EXPERT TESTIMONY BY DR. ELZINGA. Signed by Judge Claudia Wilken on 9/3/18. (cwlc1S, COURT STAFF)

Northern District of California, cand-4:2014-md-02541

Current View

Full Text

4 1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 IN RE: NATIONAL COLLEGIATE ATHLETIC ASSOCIATION ATHLETIC 5 GRANT-IN-AID CAP ANTITRUST No. 14-md-02541 CW LITIGATION 6 ________________________________ 7 ORDER REAFFIRMING THIS DOCUMENT RELATES TO: EXCLUSION OF CERTAIN 8 EXPERT TESTIMONY BY ALL ACTIONS DR. ELZINGA 9 10 11 For the Northern District of California ______________________________________ United States District Court 12 13 Following the Court's rulings on cross-motions for summary 14 judgment and the admissibility of Dr. Elzinga's expert opinions 15 regarding a multi-sided market definition, Defendants assert that 16 the Court's summary adjudication of market definition, as well as 17 the ruling on the admissibility of Dr. Elzinga's opinions on that 18 issue, are erroneous because they are predicated on a 19 misunderstanding of Defendants' position at the summary judgment 20 stage, and because of the recent Supreme Court opinion regarding 21 market definition in the context of two-sided transaction 22 platforms, Ohio v. American Express Co., 138 S. Ct. 2274 (2018) 23 (American Express). See Docket No. 862 at 7-10. The parties 24 briefed these issues and argued them at the pretrial conference 25 held on July 19, 2018. 26 The Court revisits its summary judgment adjudication of 27 market definition and related Daubert ruling as to Dr. Elzinga's 28 4 1 proposed multi-sided market definition in light of American 2 Express and reaffirms those decisions. 3 I. MARKET DEFINITION 4 In its Order Granting in Part and Denying in Part Cross- 5 Motions for Summary Judgment, the Court granted Plaintiffs' 6 summary judgment motion on the issue of market definition based on 7 "the absence of any material factual dispute" with respect to that 8 issue. Docket No. 804 at 18. The Court noted that Defendants 9 contend that stare decisis controls the outcome of this case, 10 including the market definition. Id. The Court also noted that, 11 For the Northern District of California at the hearing on the cross-motions for summary judgment, United States District Court 12 Defendants agreed that all relevant rulings in O'Bannon control in 13 this case, including market definition. Id. 14 Defendants now argue that their summary judgment briefs were 15 clear that "the applicable market definition is a disputed issue 16 of fact," and that they never agreed, either in their summary 17 judgment briefs, or at the hearing on the cross-motions for 18 summary judgment, "to application of the same relevant market as 19 in O'Bannon." Docket No. 862 at 8-9. The record, however, does 20 not support these new contentions. 21 Plaintiffs moved for summary judgment on the issue of market 22 definition. They pointed to sufficient facts to satisfy their 23 burden of production under Rule 56 to define the relevant market 24 in this case as comprising national markets for Plaintiffs' labor 25 in the form of athletic services in men's and women's Division I 26 basketball and FBS football, wherein each class member 27 28 2 4 1 participates in his or her sport-specific market.1 Docket No. 2 655-4 at 6-7 (citing Daniel A. Rascher Report of March 21, 2017 3 (Rascher Rep.) at 74, 13-63, 75-100). In these markets, the 4 class-member recruits sell their athletic services to the members 5 of Division I basketball and FBS football in exchange for grants- 6 in-aid and other benefits and compensation permitted by NCAA 7 rules. Id. This market definition is consistent with Plaintiffs' 8 claims against Defendants in this litigation, which are based on 9 the theory that Defendants have monopsony power over the labor 10 markets for Division I basketball and FBS football and exercise 11 that power to cap artificially the compensation to athletes For the Northern District of California United States District Court 12 participating in these markets. 13 In response to Plaintiffs' motion, Defendants did not ask the 14 Court, either in their summary judgment briefs or at the hearing 15 on the parties' cross-motions for summary judgment, to adopt a 16 market definition different from the one that Plaintiffs proposed. 17 18 1 Dr. Rascher's definition of these markets is based on similar economic analyses to those performed in O'Bannon, which 19 were not challenged by the NCAA on appeal in that case. Dr. Rascher's analyses here are predicated on up-to-date data and take 20 into account women's Division I basketball, which was not at issue in O'Bannon. Rascher Rep. at 74-75. Dr. Rascher's economic 21 analyses show that the most talented athletes are concentrated in the respective markets for Division I basketball and FBS football; 22 purported alternatives to Division I basketball and FBS football, such as the National Association of Intercollegiate Athletics 23 (NAIA) or National Christian College Athletic Association (NCCAA), have not proved to be viable substitutes; none of the major 24 professional leagues in class members' sports provide competitive options for most college-aged talent; high barriers to entry 25 preclude any viable alternatives emerging for class members' athletic services; and the geographic scope of the markets is 26 nationwide. Id. at 75-100. Defendants did not move to exclude Dr. Rascher's opinions regarding market definition under Federal 27 Rule of Evidence 702. Defendants did not appeal the Court's market definition in O'Bannon and the Ninth Circuit adopted it. 28 3 4 1 Nor did Defendants point to any facts in their summary judgment 2 briefs to show that a genuine issue of material fact existed with 3 respect to the issue of market definition. 4 Instead, Defendants' position during summary judgment 5 proceedings was that O'Bannon controls all relevant issues in this 6 litigation, including market definition. See Docket No. 789, Hr'g 7 Tr. at 7-9 (responding in the affirmative when asked by the Court 8 whether the rulings in O'Bannon "with respect to the agreement, 9 the market, and the anti-competitive effect would apply equally" 10 to the women's basketball class, which includes persons who were 11 not involved in O'Bannon). At the hearing on the cross-motions For the Northern District of California United States District Court 12 for summary judgment, the Court asked the parties whether expert 13 testimony, including Dr. Elzinga's on his multi-sided market 14 theory, was relevant to the determination of the summary judgment 15 motions. Defendants responded only that Dr. Elzinga's opinions 16 "are relevant if, for example, you allow re-litigation on the 17 issue of pro-competitive justifications." Id. at 74. Defendants 18 added that "Dr. Elzinga does not redefine the market from the way 19 it was defined in O'Bannon in the sense that O'Bannon defined it 20 to include Division I colleges and universities." Id. at 75 21 (emphasis added). 22 To the extent that Defendants mentioned Dr. Elzinga's 23 testimony in their summary judgment briefs, they did so in 24 connection with other issues, and did not cite it as a basis to 25 preclude summary adjudication on market definition. Specifically, 26 Defendants mentioned Dr. Elzinga's opinions (1) to support their 27 argument that Defendants did not abandon certain of their 28 procompetitive justifications, Docket No. 704, Opp'n to MSJ at 52; 4 4 1 and (2) to argue that the portions of Dr. Elzinga's opinions that 2 were based on a multi-sided market theory should not be excluded, 3 in part because they are "consistent with several holdings of 4 O'Bannon regarding the college education market and the 5 procompetitive effects of the challenged restraints within that 6 market" and because they provide a "framework for explaining the 7 features" of the market recognized in O'Bannon. Docket No. 748, 8 Defs.' Reply at 37 (emphasis added). 9 The foregoing establishes that Defendants did not point to 10 facts to show the existence of a disputed issue of fact as to 11 market definition. See Keenan v. Allan, 91 F.3d 1275, 1279 (9th For the Northern District of California United States District Court 12 Cir. 1996) (holding that the non-moving party must "identify with 13 reasonable particularity the evidence that precludes summary 14 judgment" and that it is not the duty of the district court "to 15 scour the record in search of a genuine issue of triable fact"). 16 Accordingly, the Court's summary adjudication on the issue of 17 market definition in Plaintiffs' favor was appropriate. 18 II. DR. ELZINGA'S OPINIONS REGARDING A MULTI-SIDED MARKET 19 In a separate order following its rulings on summary 20 judgment, the Court granted Plaintiffs' motion to exclude the 21 expert opinions of Dr. Elzinga regarding the definition of the 22 relevant antitrust market in this litigation as a multi-sided 23 market. The Court excluded such opinions as irrelevant because 24 they addressed market definition, an issue that was no longer a 25 part of this case in light of the Court's summary adjudication of 26 that issue. Docket No. 815 at 5. 27 28 5 4 1 After the Court excluded Dr. Elzinga's opinions regarding a 2 multi-sided market definition, the Supreme Court issued its 3 decision in American Express, which addresses market definition in 4 the context of two-sided transaction platforms. Defendants argue 5 that "the American Express decision validates key aspects of Dr. 6 Elzinga's opinions that this Court excluded and squarely calls 7 into question whether the Court erred in declining to even 8 consider at trial Dr. Elzinga's arguments on the relevant market 9 and anticompetitive effects." Docket No. 862 at 7-10. Defendants 10 add that "even if the Court were correct in its view that 11 Defendants previously waived reliance on a multi-sided market For the Northern District of California United States District Court 12 analysis, the Supreme Court's clarification of the law in American 13 Express makes it appropriate for Defendants to advance that theory 14 at trial." Id. at 9. At the pretrial conference held on July 19, 15 2018, the Court invited both sides to argue the relevance, or lack 16 thereof, of American Express to the Court's prior rulings. 17 After considering the parties' submissions and argument, the 18 Court concludes that American Express has no effect on its rulings 19 on market definition or the exclusion of Dr. Elzinga's opinions on 20 the issue. 21 In American Express, the question before the Supreme Court 22 was whether the plaintiffs in that case carried their initial 23 burden to prove that American Express' anti-steering provisions in 24 its contracts with merchants, which prevented merchants from 25 encouraging cardholders to use non-American Express credit cards 26 at the point of sale and which resulted in higher merchant fees, 27 have anticompetitive effects under Section 1 of the Sherman Act. 28 138 S. Ct. at 2283. 6 4 1 The Supreme Court explained that a credit-card company brings 2 two types of market participants together in what is called a two- 3 sided transaction platform, which offers different services to two 4 different groups "who both depend on the platform to intermediate 5 between them." Id. at 2280. Each credit-card company operates a 6 network that "provides separate but interrelated services to both 7 cardholders and merchants," consisting of credit on the cardholder 8 side, and a means to receive a fast and guaranteed payment on the 9 merchant side. Id. Two-sided transaction platforms "facilitate a 10 single, simultaneous transaction between participants," such that 11 when a credit-card network sells one transaction's worth of card- For the Northern District of California United States District Court 12 acceptance services to a merchant, it also "must" sell one 13 transaction's worth of credit-payment services to a cardholder. 14 Id. at 2286. Because of this directly proportional and 15 simultaneous consumption on both sides, two-sided transaction 16 platforms are "better understood as suppl[ying] only one product