Thomas Shields v. World Aquatics

• Court: Court of Appeals for the Ninth Circuit
• Decided: September 17, 2024
• Docket: 23-15092
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS SEP 17 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

THOMAS A. SHIELDS; KATINKA No. 23-15092 HOSSZÚ, on behalf of themselves and all others similarly situated, D.C. No. 3:18-cv-07393-JSC

Plaintiffs-Appellants, MEMORANDUM* v.

WORLD AQUATICS,

Defendant-Appellee.

INTERNATIONAL SWIMMING LEAGUE, No. 23-15156 LTD., D.C. No. 3:18-cv-07394-JSC Plaintiff-Appellant,

v.

Appeal from the United States District Court for the Northern District of California Jacqueline Scott Corley, District Judge, Presiding

Argued and Submitted February 16, 2024 San Francisco, California

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Before: MILLER, BADE, and VANDYKE, Circuit Judges.

Plaintiffs-Appellants, a group of professional swimmers and the

International Swimming League (ISL), appeal the district court’s grant of summary

judgment to Defendant-Appellee Fédération Internationale de Natation (FINA) on

their claims under section 1 of the Sherman Act. (Since the district court’s

decision, FINA has changed its legal name to World Aquatics.) The swimmer

plaintiffs also appeal the district court’s denial of class certification. We have

jurisdiction under 28 U.S.C. § 1291, and we reverse.

“We review a grant of summary judgment de novo and evaluate the evidence

most favorably to the nonmoving party to determine whether any genuine issues of

material fact remain and whether the district court correctly applied the relevant

substantive law.” Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1432 (9th

Cir. 1995). “We review a district court’s denial of a motion to modify a scheduling

order for abuse of discretion.” DRK Photo v. McGraw-Hill Glob. Educ. Holdings,

LLC, 870 F.3d 978, 982 (9th Cir. 2017). We review a district court’s denial of class

certification and “any particular underlying Rule 23 determination involving a

discretionary determination” for abuse of discretion. Yokoyama v. Midland Nat’l

Life Ins. Co., 594 F.3d 1087, 1091 (9th Cir. 2010).

Section 1 of the Sherman Act prohibits contracts, combinations, or

conspiracies that unreasonably restrain trade. Tanaka v. University of S. Cal., 252

2 F.3d 1059, 1062 (9th Cir. 2001); see 15 U.S.C. § 1. Restraints can be unreasonable

in one of three ways. “A small group of restraints are unreasonable per se because

they always or almost always tend to restrict competition and decrease output.”

Ohio v. American Express Co. (Amex), 585 U.S. 529, 540 (2018) (internal

quotation and citation omitted). Most restraints are subject to the rule of reason,

under which we “conduct a fact-specific assessment of ‘market power and market

structure . . . to assess the [restraint]’s actual effect’ on competition.” Id. at 541

(alterations in original) (quoting Copperweld Corp. v. Independence Tube Corp.,

467 U.S. 752, 768 (1984)). When restraints are “‘not unambiguously in the per se

category,’” but “‘require no more than cursory examination to establish that their

principal or only effect is anticompetitive,’” California ex rel. Harris v. Safeway,

Inc., 651 F.3d 1118, 1134 (9th Cir. 2011) (quoting 11 Phillip E. Areeda & Herbert

Hovenkamp, Antitrust Law ¶ 1911a (2d ed. 2005)), we apply a “quick look,” or

truncated, rule of reason approach.

1. Plaintiffs have created a triable issue as to whether FINA’s General Rule

4 constituted a per se unlawful group boycott by preventing member federations

and swimmers from doing business with ISL without risking draconian sanctions.

We apply the per se approach to an alleged boycott when “competitors enter into a

horizontal agreement” with “no purpose other than disadvantaging the target,”

Honey Bum, LLC v. Fashion Nova, Inc., 63 F.4th 813, 820 (9th Cir. 2023), or when

3 some or all of the following conditions are met: “(1) the defendant’s restriction

‘cut[s] off access to a supply, facility, or market necessary to enable the boycotted

firm to compete’; (2) the defendant ‘possesse[s] a dominant position in the relevant

market’; and (3) the defendant’s restriction is ‘not justified by plausible arguments

that [it is] intended to enhance overall efficiency and make markets more

competitive.’” Id. at 821 (alterations in original) (quoting Northwest Wholesale

Stationers, Inc. v. Pacific Stationery & Printing Co., 472 U.S. 284, 294 (1985)).

Viewing the evidence in the light most favorable to the plaintiffs, a rational

trier of fact could conclude that General Rule 4 had no purpose other than to

disadvantage FINA’s competitors. FINA admitted that General Rule 4 “has also

been applied in the context of third parties that seek to . . . replace FINA as the

international governing body,” and FINA executives discussed plans to thwart

future ISL events by punishing member federations for engaging with unaffiliated

organizations.

The district court reasoned that General Rule 4 “does not (and did not in

2018) prevent swimmers from participating in unauthorized events; it prevented

and continues to prevent member federations from affiliating with ISL and other

non-sanctioned entities.” That is one interpretation of the evidence, but a jury

could conclude otherwise and find that General Rule 4 cut off ISL’s access to top-

tier professional swimmers, an input necessary for ISL to compete. Before it was

4 amended in 2019, General Rule 4 required member federations to “suspend[]” any

“individual or group” that participated in an unsanctioned event “for a minimum

period of one year, up to a maximum period of two years.” The rule prohibited

member federations from engaging with non-affiliated bodies and, more generally,

the “exchange of competitors” with such bodies. While FINA never imposed

sanctions on any athletes for participating in non-FINA events, plaintiffs point to

ample evidence that FINA, national federations, and swimmers understood the rule

to expose swimmers to suspensions—including from competing at the Olympics

and World Championships—if they participated in events hosted by unaffiliated

entities like ISL.

2. Plaintiffs have also created a triable dispute under the quick look standard,

which requires showing that General Rule 4 imposed a “naked restraint on price

and output.” National Collegiate Athletic Ass’n v. Board of Regents of Univ. of

Okla., 468 U.S. 85, 110 (1984). A rational trier of fact could conclude that General

Rule 4 reduced output in the market for swimming competitions by suppressing the

number of competitions in 2018, and that it lowered prices in the market for

swimmers’ services by reducing the total pool of prize money and appearance fees.

The district court erred in concluding that a rule of reason analysis was

necessary because courts lack experience with “the rules of a governing

body for international and Olympic sports.” It is well established that “the

5 likelihood that horizontal price and output restrictions are anticompetitive is

generally sufficient to justify application of the per se rule without inquiry into the

special characteristics of a particular industry.” Board of Regents, 468 U.S. at 100

n.21; accord In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186,

1191 (9th Cir. 2015).

Similarly, FINA argues that as with joint venture sports leagues, the rule of

reason applies because FINA is “an athletic governance association” and General

Rule 4 is a necessary “governance rule.” It is true that sports leagues and joint

venture restrictions are unique antitrust contexts that are generally analyzed under

the rule of reason. See Honey Bum, 63 F.4th at 822 n.4; National Collegiate

Athletic Ass’n v. Alston, 594 U.S. 69, 88–91 (2021). As the district court

recognized, however, FINA and its member federations are not a joint venture

sports league, but an association of independent national federations. And the fact

“[t]hat some restraints are necessary to create or maintain a league sport does not

mean all ‘aspects of elaborate interleague cooperation are.’” Alston, 594 U.S. at 90

(quoting American Needle, Inc. v. National Football League, 560 U.S. 183, 199

n.7 (2010)). A rational trier of fact could conclude that FINA can organize

swimming competitions and maintain its calendar of events without restricting

participation in non-affiliated events.

3. The district court did not abuse its discretion in denying plaintiffs’ request

6 to extend their merits expert report deadline. Once a district court enters a

scheduling order setting a deadline for completing discovery, modifications are

allowed only upon a showing of “good cause.” Fed. R. Civ. P. 16(b)(4). “The

central inquiry under Fed. R. Civ. P. 16(b)(4) is whether the requesting party was

diligent in seeking the amendment.” DRK Photo, 870 F.3d at 989. The district

court was within its discretion to reject plaintiffs’ post hoc argument that confusion

arising from unrelated stipulations prevented them from meeting their deadline.

The court reasonably determined that there was “no inference to be drawn from”

plaintiffs’ failure to meet their deadline “other than that [it] was an intentional

decision.”

4. Absent expert testimony, plaintiffs have not created a triable dispute

regarding market definition. By omitting it from their opening brief, plaintiffs have

forfeited any challenge to the district court’s determination that they failed to

define their proposed “market for the organization and promotion of top-tier

international swimming competitions.” See Orr v. Plumb, 884 F.3d 923, 932 (9th

Cir. 2018) (“[A]rguments . . . omitted from the opening brief are deemed

forfeited.”). As to plaintiffs’ proposed labor market for top-tier swimmers,

undisputed facts render unreasonable their evidence substantiating the buyer side

of this market. See Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509

U.S. 209, 242 (1993). For example, top-tier professional swimmers, including the

7 swimmer plaintiffs, frequently compete in a wide variety of non-affiliated events.

5. Even without a viable market definition, however, Plaintiffs have raised a

triable dispute under the rule of reason through direct evidence of anticompetitive

effects. “A plaintiff is not required to define a particular market for . . . a rule of

reason claim based on evidence of the actual anticompetitive impact of the

challenged practice,” PLS.com, LLC v. National Ass’n of Realtors, 32 F.4th 824,

838 (9th Cir. 2022), “‘such as reduced output, increased prices, or decreased

quality in the relevant market,’” id. at 832 (quoting Amex, 585 U.S. at 542).

Drawing all reasonable inferences in plaintiffs’ favor, a rational trier of fact could

conclude that by threatening to sanction swimmers, General Rule 4 prevented ISL

from holding events in 2018 and thereby reduced output and wages.

6. The district court abused its discretion in refusing to certify the swimmer

plaintiffs’ proposed damages classes of swimmers who signed contracts to

participate in ISL competitions in 2018 or participated in ISL events in 2019.

Under Rule 23(a)(4), plaintiffs must demonstrate that “the representative parties

will fairly and adequately protect the interests of the class.” Fed R. Civ. P.

23(a)(4). “‘Only conflicts that are fundamental to the suit and that go to the heart

of the litigation prevent a plaintiff from meeting the Rule 23(a)(4) adequacy

requirement.’” In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 942 (9th

Cir. 2015) (quoting 1 William B. Rubenstein et al., Newberg on Class Actions

8 § 3.58 (5th ed. 2011)). Rule 23(b)(3) permits certification when “questions of law

or fact common to class members predominate over any questions affecting only

individual members, and . . . a class action is superior to other available methods

for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3).

The district court abused its discretion in determining that representation

was inadequate because swimmers “compete for shares of a fixed pot,” meaning

“any damages formula will necessarily disfavor some swimmers.” Any such

conflict would not be fundamental because each plaintiff shares the same liability

and damages theory: that General Rule 4 precluded opportunities to compete in

ISL events and collect prize money. See Blackie v. Barrack, 524 F.2d 891, 909–10

(9th Cir. 1975). Plaintiffs proposed to apportion more money to swimmers with

stronger past performance; “[m]ere speculation as to conflicts that may develop”

from that methodology is not an appropriate reason to deny certification. Social

Servs. Union, Loc. 535, Serv. Emps. Int’l Union, AFL-CIO v. Santa Clara County,

609 F.2d 944, 948 (9th Cir. 1979).

Any arguments about adequacy of representation arising from the funding of

this litigation by ISL’s founder, Konstantin Grigorishin, have been forfeited by

FINA because it did not address that issue in its answering brief. See Jensen v.

EXC, Inc., 82 F.4th 835, 847 (9th Cir. 2023).

The district court also abused its discretion in holding that a class action was

9 not superior to individual actions because issues related to the allocation of

damages—as well as the high total damages at stake—give each absent class

member a strong interest in individually prosecuting an action. A class action is

superior to other methods of litigation when it “will reduce litigation costs and

promote greater efficiency” or when “no realistic alternative exists.” Valentino v.

Carter-Wallace, Inc., 97 F.3d 1227, 1234–35 (9th Cir. 1996). By failing to address

superiority on appeal, FINA has forfeited any argument that a class action was not

superior to other methods of litigation. See Jensen, 82 F.4th at 847. Even so,

plaintiffs’ damages model projected that most swimmers lost less than $10,000 in

2018 and 2019 due to cancelled ISL events, making the cost of individually

prosecuting an antitrust action prohibitive. See Leyva v. Medline Indus. Inc., 716

F.3d 510, 515 (9th Cir. 2013).

REVERSED and REMANDED.