District Court Judge in the Central District of California Grants Judgment as a Matter of law in In re: NFL “Sunday Ticket” Antitrust Litigation

By David Lerch

On August 1, 2024, District Court Judge Philip S. Gutierrez in the Central District of California granted Defendants’ motion for judgment as a matter of law pursuant to Fed. R. Civ. P. 59 against the Plaintiffs (two classes of DirecTV NFL Sunday Ticket subscribers) following a jury trial verdict that awarded the two classes over $4.7 billion in damages.? The Court concluded that expert testimony from two expert witnesses was unreliable and as a result no reasonable jury could have found class-wide injury or damages.?

Background

On March 23, 2022, Plaintiffs filed a Second Consolidated Amended Complaint (CAC) for damages and declaratory and injunctive relief pursuant to Sections 1 and 2 of the Sherman Act (ECF 441).? The CAC alleged that NFL teams made the NFL Sunday Ticket out-of-market sports package that carries all NFL Sunday afternoon games produced by Fox and CBS (except those broadcasts on local CBS and Fox affiliates) the only way to view games other than the limited selection of games broadcast through sponsored telecasts in any given geographic area (CAC ? 8). The Sunday Ticket package bundles all other games into one package, sold jointly by the NFL to DirecTV and then by DirecTV to commercial and residential subscribers (CAC ?? 7, 8).

This exclusive deal, along with other contractual arrangements between the NFL, its member teams, and DirecTV, as well as Fox, ESPN, CBS, and NBC (collectively, the “Networks”), result in the blackout or unavailability of out-of-market games, except through the bundled NFL/DirecTV Sunday Ticket (CAC ? 8).? Plaintiffs alleged that these arrangements result in substantial injury to competition, including through eliminating distribution of out-of-market games through competing Multichannel Video Programing Distributor (“MVPD”) platforms, such as the Dish Network, Comcast Corporation (“Comcast”), and Spectrum Cable (formerly Time Warner Cable); reducing game offerings and package mixes; and imposing supracompetitive pricing for consumers (CAC ? 10).? Plaintiffs alleged that but for the NFL teams’ agreements in which DirecTV and others have joined, teams would compete against each other in the market for NFL football programming, which would induce more competitive pricing and content (CAC ? 11).?

Plaintiffs further alleged the agreements challenged in the complaint drastically curb output, reduce choice, increase price, unreasonably restrain trade in violation of Section One of the Sherman Act (15 U.S.C. § 1), and allow the NFL to unlawfully monopolize the market for live video presentation of professional football games in violation of Section Two of the Sherman Act (15 U.S.C. § 2).? Accordingly, Plaintiffs, on behalf of themselves and others similarly situated, sought injunctive relief putting an end to the anticompetitive scheme and damages to compensate the Classes for the supracompetitive overcharges they paid (CAC ? 20).

The case proceeded to a jury trial and the jury reached a verdict on June 27, 2024 (ECF 1464).? The jury awarded $96,928,272,90 to the commercial class and $4,610,331,671.74 to the residential class (ECF 1481).? On July 3, 2024, the NFL Defendants filed a motion for judgment as a matter of law (ECF 1490).

Admissibility of the Expert Evidence

The Court concluded that two of the NFL Defendants’ experts were unreliable and therefore their testimony was not admissible and should have been excluded pursuant to Federal Rule of Evidence 702 (Order at 3-11, citing Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 149 (1999)).?

The Court noted that one of the experts, Dr. Rascher, used college football as his model of what would happen in the absence of the competitive restraints at issue in the case (“college football but-for world”) (Order at 5).? Rascher opined that if the NFL Teams stopped “colluding and selling” their out-of-market games through the NFL, but sold them either independently or in divisions, the result would be like college football as the games would “become available, just like on Saturday, on over-the-air channels and . . . basic sport cable channels” and customers would not “pay anything extra above what they were already paying for their TV package” (Order at 5).? In support, Dr. Rauscher “looked to see if it was feasible . . . to do what was happening in college football in[] the NFL” by preparing schedules showing games “that actually existed with the NFL schedule” on alternative channels where they could have been shown, stating “[a]nd you can see that CBS and FOX could be showing a couple of games at 10:00 a.m.; ABC, NBC, ESPN, ESPN2, and so forth” and “[s]o all the games are available” (Order at 5).

The Court stated that while it had previously denied Defendants’ Daubert motion and motions in limine as to Dr. Rascher’s opinions, Dr. Rascher’s trial testimony revealed his college football but-for world was not the product of sound economic methodology (Order at 6). In particular, the Court stated that Dr. Rascher needed to explain how these out-of-market telecasts would have been available for free to cable and satellite customers in the but-for world, but did not do so, and instead hypothesized there could have been numerous but-for worlds, asserting that regardless of the but-for world’s structure, consumers would not have paid for an additional subscription (Order at 6).? Dr. Rascher supported his decision to provide multiple variations of a but-for world with the assumption that Defendants and their broadcast partners are sophisticated entities, and they figured it out in college sports, so they would certainly figure it out at the NFL. The Court concluded that while FRE 702 certainly does not require a but-for world to perfectly reflect what the real world would have been, it requires more than just saying market participants would have figured it out, and because Dr. Rascher’s testimony relied on a college football model that was developed based on speculation and ipse dixit opinion, the Court excluded Dr. Rascher’s testimony under FRE 702 (Order at 6).

In their motion for judgment as a matter of law, Defendants also argued that expert testimony from another expert, Dr. Zona, should be excluded for four reasons: (1) Dr. Zona’s models predicted higher prices for Sunday Ticket in the but-for world; (2) his models irrationally predicted that consumers would pay higher prices from an alternative distributor of Sunday Ticket instead of purchasing from DirecTV; (3) his models rested on the unsupportable assumption that there was an alternative possible distributor available—specifically, a streaming service—during 2011 to 2023; and (4) Dr. Zona’s calculation and presentation of an “NFL tax” was untimely and an invalid model (Order at 10).? The Court concluded that the second and third arguments had merit given that Plaintiffs’ responses to them conflict with each other.? (Order at 10).?

The Court concluded that ultimately, and regardless of whether a competitive live streaming service existed, the main flaw with Dr. Zona’s model was that he failed to define an assumption that was necessary for evaluating the rationality and reliability of his models by never deciding what a “direct-to-consumer” product entailed (Order at 11). Without knowing what “direct-to-consumer” meant, it would be impossible to determine if it would have been economically rational for consumers to purchase Sunday Ticket from an alternative distributor at a higher price, and that definition was necessary for determining whether a viable alternative distributor even existed during the class period (Order at 11). Without that information, the Court concluded that it could not determine whether the but-for worlds without exclusivity were modeled reliably.

Judgment as a Matter of Law

Despite finding Dr. Rascher’s and Dr. Zona’s opinions unreliable, the Court did not find at the threshold that it would be unreasonable for a juror to find that there was a conspiracy that unreasonably restrained trade (Order at 12). The Court noted thatthere was evidence in the record—even without the testimony of Dr. Rascher and Dr. Zona—to support a reasonable jury’s finding of an unreasonable restraint of trade at each step of the rule of reason (Order at 12). Given that a reasonable jury could find that there were anticompetitive effects, that Defendants’ procompetitive justifications were pretextual or unrelated to the restraints, and/or that there were less-restrictive alternatives based on the record, the Court concluded that judgment as a matter of law was inappropriate on these grounds (Order at 12).? However, the Court concluded that without Dr. Rascher’s and Dr. Zona’s testimony, it would be impossible for a jury to determine on a class-wide basis that Sunday Ticket subscribers would have indeed paid less in the absence of Defendants’ anticompetitive conduct (Order at 12). Accordingly, the Court concluded that Plaintiffs failed to provide evidence from which a reasonable jury could make a finding of injury and an award of actual damages that would not be erroneous as a matter of law, that would be totally unfounded and/or would be purely speculative.

Jury’s Verdict

The Court concluded that even if it would not have granted judgment as a matter of law, it would have vacated the jury’s damages verdict, remitted Defendants’ award to nominal damages, and conditionally granted a new trial based on the jury’s damages award, which the Court concluded was irrational (Order at 12).? In particular, the Court noted that neither of the jury’s damages awards to the Residential or Commercial Classes were proposed by Plaintiffs or found in the record (Order at 13).? Defendants argued that to arrive at the damages award number, the jury started with: (1) the list price of $294 for Sunday Ticket (offered to residential consumers) in 2018 and 2019 and then subtracted Dr. Zona’s calculation of the average price that consumers actually paid ($102.74 paid by residential Sunday Ticket subscribers) yielding an amount of $191.26.? The jury then multiplied $191.26 by the number of subscriptions to arrive at its damages figure (Order at 13-14).

The Court found that the jury’s damages awards were not based on the “evidence and reasonable inferences” but instead were more akin to “guesswork or speculation” (Order at 15). The Court reasoned that: For the price Plaintiffs actually paid for Sunday Ticket, the jury relied on the residential list price for two years in the class period (Order at 15). For the price that class members would have paid (had there been no agreement to restrict output) the jury used $102.74 (Order at 16). The record shows that this number is the average price that was actually paid by all residential DirecTV subscribers who received Sunday Ticket (Order at 16).?

The Court noted that this was problematic because the average price actually paid cannot be the price that the class members should have paid, and that awarding the actual historical discounts as damages was nonsensical (Order at 16).? The Court stated that this is the “opposite of what the Court instructed and gets the relationship between overcharges and discounts backwards—awarding damages based on the money the residential class members theoretically saved” (Order at 16).

The Court also disagreed with Plaintiffs’ argument that as long as a damages award is “within the range” supported by evidence it “cannot be set aside,” stating that the jury verdict must both “find substantial support in the record and lie within the range sustainable by the proof” (Order at 13), citing Los Angeles Mem’l Coliseum Comm’n, 791 F.2d at 1366.? The Court stated that it cannot be that any award less than the maximum amount sought by Plaintiffs escapes scrutiny and may be untethered to the record (Order at 14).? The Court also rejected the argument that it was speculating about the jury’s deliberations, stating that this was a rare situation where it is clear, without speculation, that the award was based on improperly considered evidence (i.e. the expert testimony) (Order at 14). The Court noted that this was not a case where a jury deviated from an experts’ damages figure for an arbitrary reason, and nor was it a case where the jury split the difference, or arrived at a damages amount within a calculated range, but instead, the jury came up with its own specific damages based on a methodology that the Court can definitively trace (Order at 15).

The Court concluded that the jury did not follow the Court’s instructions and instead relied on inputs not tied to the record to create its own “overcharge,” and so found that the jury’s damages verdict was clearly not supported by the evidence.