By Mark Hamblett, From New York Law Journal

A federal judge has rejected class status for damages sought by consumers challenging the exclusivity of regional sports networks airing Major League Baseball and National Hockey League games.

But Southern District Judge Shira Scheindlin certified a class seeking injunctive relief for baseball and hockey fans who say antitrust laws are being violated, leaving them with fewer choices and higher prices.

Scheindlin issued two opinions in Lauman v. National Hockey League, 12-cv-1817, and Lerner v. Officer of the Commissioner of Baseball, 12-cv-3704.

In one, she declined to certify a class on damages and rejected the expert report of Roger Noll, a nationally recognized sports economist, on consumer demand that would have been the basis for a money damages class.

But on injunctive relief, Scheindlin said a class is warranted in a challenge to the “territorial exclusivity” in the agreements between Major League Baseball and the National Hockey League, and regional sports networks that produce their games, and DirecTV and Comcast. Under league agreements, the networks are prohibited from broadcasting their games to fans who live outside of their home territory.

For example, under these agreements, a New York Yankees fan living in Iowa must buy an “out-of-market package” of games for all teams in baseball just to get Yankees games. The Iowa consumer doesn’t have the option of just buying the YES Network.

In a better world, the plaintiffs argued, regional sports networks would offer consumers the chance to shop à la carte and purchase the games of the team they want at a lower price.

The defendants tried to defeat class certification for injunctive relief by asserting that there was conflict among members of the proposed class—that some members would prefer the status quo because they benefit from the anti-competitive behavior.

But the judge said this so-called “winners and losers” argument “fails three times over.”

First, she said, “there is no question that here, a common injury exists in the form of diminished consumer choice.”

“Second, at a policy level, defendants’ argument threatens the integrity of antitrust laws,” Scheindlin said. “If the fact that illegal restraints operate to the economic advantage of certain class members were enough to defeat certification, the efficacy of class-wide antitrust suits—and the deterrence function they serve—would wither.”

Finally, the judge said, the defendants’ argument would subvert the purpose of Rule 23(b)(2). “When the remedy sought is injunctive rather monetary divergent interests within the class militate in favor of certification, because certification gives affected parties a greater voice in the litigation.”

In all of the cases cited by the defendants, Scheindlin said, there were class members who suffered no real injury and thus would have lacked standing to bring a suit on their behalf.

“Here, every class member has suffered an injury, because every class member, as a consumer in the market for baseball or hockey broadcasting, has been deprived of an option—à la carte channels that would have been available absent the territorial restraints,” she said. “On top of this general injury, certain class members have also suffered the additional injury of having to pay too much for the content they wanted.”

The judge said the defendants will have the opportunity at trial to argue that the lack of à la carte channels is outweighed by pro-competitive benefits, specifically well-priced out-of-market packages.

“It is possible, as defendants suggest, that many baseball and hockey fans would prefer for the complained-of restraints to be deemed lawful rather than unlawful,” she said. “Indeed, it is even possible that many such fans would have preferred that the instant lawsuit not be brought.”

The point is, Scheindlin said, the question of whether the current arrangements are legal or illegal is a merits question, not a matter of whether to certify the class.

On the issue of damages, Noll estimated that if territorial restrictions were eliminated, the average monthly price of the MLB.tv package would decrease from $20.05 to $14.50 and the average monthly price of NHL GameCenter Live would decrease from $26.28 to $18.08.

But the defendants attacked the statistical models Noll used and produced an expert of their own, economist Daniel McFadden, who concluded that Noll’s methods were “junk science.”

Scheindlin also was critical of Noll’s conclusions.

“Dr. Noll’s estimates do not rely on sufficient data about consumer tastes and preferences,” she said. “Instead, time and time again, Dr. Noll substitutes actual, readily-obtainable information for mathematical assumptions in determining how hockey and baseball fans will behave” in a world without the restraints.

Edward Diver and Howard Langer of Langer, Grogan & Diver in Philadelphia are lead counsel for the plaintiffs.

Among several attorneys representing the defendants are Beth Wilkinson, partner at Paul, Weiss, Rifkind, Wharton & Garrison, and Bradley Ruskin, partner at Proskauer Rose, for Major League Baseball; Shepard Goldfein, partner at Skadden, Arps, Slate, Meagher & Flom for the NHL; Arthur Burke, partner at Davis Polk & Wardwell for Comcast; Louis Karasik, partner at Alston & Bird in Los Angeles for DirecTV; Jonathan Schiller of Boies Schiller & Flexner for the Yankees; Stephen Neuwirth, partner at Quinn Emanuel Urquhart & Sullivan for The Madison Square Garden Company and the New York Rangers; and John Schmidtlein, partner at Williams & Connolly for the YES Network.

IMAGE: Yankee Stadium Flickr/Matt Boulton

For more on this story go to: http://www.newyorklawjournal.com/id=1202727477483/Partial-Victory-for-Plaintiffs-Challenging-Sports-Leagues#ixzz3bMVWADjP