Sixth Circuit Affirms Dismissal Of Antitrust Lawsuit Against Football Helmet Manufacturers
09/30/2022On September 9, 2022, the United States Court of Appeals for the Sixth Circuit affirmed a district court’s dismissal of an antitrust lawsuit filed against defendants National Operating Committee on Standards for Athletic Equipment (“NOCSAE”) and a group of football helmet manufacturers including Riddell, Inc., Kranos Corp., and Xenith, LLC. Hobart-Mayfield, Inc. v. Nat’l Operating Comm. on Standards for Athletic Equip., No. 21-1441 (6th Cir. Sept. 9, 2022). The Court ruled that plaintiff Hobart-Mayfield, Inc.’s (Mayfield) complaint alleging antitrust violations in the alleged football helmet market failed to state a claim for plausible relief and was properly dismissed by the trial court upon defendants’ Rule 12(b)(6) motion.
Plaintiff is the maker and seller of an after-market football helmet accessory designed to make football helmets safer. Defendant NOCSAE is a non-profit that sets voluntary safety standards for athletic equipment, and NOCSAE’s football helmet safety standards “have been adopted by virtually all football leagues.” Through a licensing agreement with NOCSAE, defendant helmet manufacturers stamp a trademarked NOCSAE logo and phrase on helmets they produce. Plaintiff claimed that football helmets and accessories failing to meet NOCSAE standards are “almost entirely excluded” from the alleged market and that defendant helmet manufacturers “control nearly the entire football helmet and helmet [accessory] market.” On this basis, plaintiffs amended the complaint in the United States District Court for the Eastern District of Michigan alleged that NOCSAE’s 2018 policy change permitting only helmet manufacturers, not helmet accessory manufacturers, to seek safety certifications of helmets with attached accessories was a violation of Section 1 of the Sherman Act and state antitrust and tort laws. Defendants subsequently moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), and the district court granted the motion.
Reviewing the district court’s order de novo and applying the Iqbal-Twombly standard to plaintiff’s complaint, the Court affirmed the district court’s dismissal of the complaint. Evaluating plaintiff’s claim under the rule of reason, the Court focused its analysis on the agreement prong of Section 1, which requires that the “plaintiff must include in the complaint allegations demonstrating … the defendants [agreed] or conspired among each other.” Plaintiff made two different arguments to support its contention that an agreement among defendants to restrain trade existed, both of which the Court rejected.
First, plaintiff argued that an explicit agreement existed among defendants through a “two-step process” involving the initial licensing agreement between NOCSAE and the helmet manufacturers and then NOCSAE’s subsequent policy change. Plaintiff claimed that NOCSAE’s policy change, by “chang[ing] the manner in which the License Agreements operated,” functioned as a modification of the licensing agreements. The Court concluded, however, that plaintiff failed to adequately plead an explicit agreement on this basis because it did not offer evidence “demonstrating that Defendants assented to [the NOCSAE] press release as a modification of the underlying license agreements.” Distinguishing between the written licensing agreement among defendants and the “unilateral publications by NOCSAE,” the Court found that such a distinction meant plaintiff failed to plead sufficient facts suggesting an explicit agreement to restrain trade among defendants.
Second, the Court also rejected plaintiff’s argument that circumstantial evidence indicated an anticompetitive agreement among defendants as a per se violation of Section 1. The Court found implausible plaintiff’s argument that defendants’ refusal to sell NOCSAE-certified helmets with plaintiff’s accessory constituted a group boycott and per se violation because the context for plaintiff’s alleged group boycott was defendants’ concern about the safety of their product. Citing Supreme Court precedent, the Sixth Circuit concluded this context did not provide a “plausible suggestion of conspiracy” and also appeared designed to “establish and enforce reasonable rules in order to function effectively” in providing safety standards for football helmets. The Sixth Circuit was also unconvinced by the nine “plus factors” put forward by plaintiff to support its contention of a group boycott. These nine factors included: (1) leadership overlap between NOCSAE and defendants; (2) more extensive testing of helmets with accessories; (3) that NOCSAE’s policy change occurred after plaintiff’s development of its product; (4) NOCSAE’s direction to plaintiff to work with defendants and not go to market independently; (5) contact between NOCSAE representatives and potential customers explaining how use of plaintiff’s accessory could void the NOCSAE safety certification; (6) that NOCSAE acted contrary to its economic interest by not certifying helmet/accessory combinations; (7) that defendants exchanged confidential safety information about plaintiff’s product; (8) that the football helmet market is “ripe for collusion”; and (9) that plaintiff’s allegedly safety-enhancing accessory could be used as evidence against defendants in product liability cases. The Court rejected these factors as plus factors because, for each one, plaintiff “ask[ed] the court to make sweeping conclusions about the motives and actions of Defendants” through “conjecture” and speculation.
Finally, the Sixth Circuit affirmed the trial court’s dismissal of plaintiff’s state law claim against defendants for alleged tortious interference with business relationships or expectations. The Court concluded that plaintiff’s alleged business relationships, for which the evidence was merely talks with football teams to purchase plaintiff’s helmet accessory, were “more akin to wishful thinking than a reasonable likelihood of forming a business relationship.” The Court also found that, even assuming plaintiff’s claimed business relationships were likely to be realized, the motive for defendants’ actions was not malicious but merely to “protect their brand credibility and the safety of their products,” a legitimate business interest that could not support plaintiff’s tortious interference claim.