Free Letter - District Court of Delaware - Delaware

Case 1 :07-cv-00178-GIVIS Document 1 14 Filed 02/15/2008 Page 1 of 3
ASHBY 6. GEDDES
ATTORNEYS AND COUNSELLORS AT LAW TELEPHONE
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WILMINGTON, DELAWARE usage
February 15, 2008
The Honorable Gregory M. Sleet BY HAND DELIVERY
United States District Court AND ELECTRONIC FILING
844 King Street
Wilmington, DE 19801
Re: Deutscher Tennis Bund, et al. v. ATP Tour, Inc., et al., C.A. No. 07-178-GMS
Dear Chief Judge Sleet:
Defendants submit this reply in response to Plaintiffs’ February 8 letter and in further
support of Defendants’ request to move for sunmiary judgment dismissing Plaintiffs’ claims.
Plaintiffs’ letter underscores that this case is an ideal candidate for summary judgment.
While Plaintiffs’ lawyers and proffered experts offer shifting theories of "competition," "relevant
markets," and the supposed "cartel," the actual record evidence does not support their broad-
brush theories — and more oiten than not contradicts them. For example, Plaintiffs’ submissions
portray Plaintiffs as wanting to "compete" with the ATP Tour, but Plaintiffs’ witnesses testified
to the opposite — that Plaintiffs want to be a part of ATP’s tiered structure, as they are now. And
whereas the pleadings purport to obj ect to ATP’s restructuring and rules as unlawful ‘
"agreements," Plaintiffs’ witnesses testified that their real beef is that they want ge agreement
— "consensus" — within the ATP membership, not less, and that they want structured calendars,
ranking points, player commitments, etc. This chasm between the lawyers’ theories and the
actual evidence cries out for summary judgment to avoid a lengthy and unnecessary trial.
Antitrust Claims: Plaintiffs do not actually dispute any of the facts (outlined in our
2/8/08 ltr. at 2) showing that ATP’s restructuring will expand output, increase player
compensation, and increase costs to the supposed "cartel" members — the exact opposite of what
a "cartel" controlling players and toumaments would do. Indeed, Plaintiffs admit that ATP’s
plan will substantially increase player compensation. Pltfs. ltr. at I(l). Plaintiffs’ legal argument
only shows this is an issue for summary judgment. Likewise, any testimony concerning
"competition" among ATP toumaments spoke only to "competition" within the ATP Tour
structure — i.e. intrabrand competition. These undisputed facts and others (and Plaintiffs’ actual
testimony), compel dismissal of Plaintiffs’ claims, including under a Rule of Reason analysis.]
I Plaintiffs’ wrongly imply that the Rule of Reason precludes summary judgment. Where, as
here, the material facts are undisputed, courts dismiss such claims on summary judgment,
including challenges to intraleague rules and structures. See, e.g., Orson v. Miramax, 79 F.3d
1358, 1370 (3d Cir. 1996) (summary judgment dismissing antitrust claims); Toscana v. PGA,
201 F. Supp.2d 1106 (E.D. Cal. 2002) (summary judgment dismissing antitrust challenge to tour
media rights, scheduling, and player eligibility rules); see also T oscano, 258 F.3d 978 (9th Cir.

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Again, as reflected in Copperweld, Dagher, and a host of` other cases, "the primary concern of
antitrust law" is "interbrand," not "intrabrand," competition. Continental, 433 U.S. at 52 n. 19.
Plaintiffs also do not refute Defendants’ showing that summary judgment is proper
because Plaintiffs’ "re1evant market" definition is arbitrary and circular. Plaintiffs’ definition of
"top-tier" tournaments based on player participation rates ignores that participation in a "top tier"
toumament is itself largely dictated by "player comrnitrnent" rules that Plaintiffs now attack, but
that previously ensured that the Hamburg toumament had top players. Plaintiffs’ claim that
Hamburg is a "top—tier" toumament is based on historical player participation rates that resulted
from "player commitment" rules, not unfettered "competition" among ATP Tournaments. This
is but one example of why summary judgment is appropriate and will avoid trial of Plaintiffs’
hopelessly confused and contradictory theories.
Plaintiffs themselves — as opposed to their lawyers and experts — embrace player
commitment rules as a benefit to "top-tier" tournaments and the Tour. While Plaintiffs’
submissions here purport to assail such rules, the record evidence is that Plaintiffs (a) urged ATP
to adopt a mandatory, "8 of 8" cornrnitment for top-tier toumaments (DX 26 at 2, demanding
"mandatory player commitment for ALL of the events") and (b) want a "top-tier" position for
Hamburg with the benefit of "the player commitment that is being proposed for the 1000 events
starting in 2009" and being “the only event during its toumament week" (GvW at 386:8-387:8).
As we explained in our first letter, Plaintiffs’ pre—1awsuit support for and insistence on a
"tiered" structure, player commitments, pooling, etc., as well as Plaintiffs’ current desire to be
part of the ATP Tour structure (not compete with it) and insistence on more (not less) intrabrand
structures precludes any claim of "antit1ust injury," let alone recovery of treble damages. See,
e. g. Sullivan, 34 F.3d at 1107 (cited by Plaintiffs) (plaintiffs "equal involvement" in disputed
policies was "complete defense"). Also, Plaintiffs must prove an injury of the "type the antitrust
laws were intended to prevent and that flows from that which makes the defendants’ acts
unlawful." Brunswick, 429 U.S. at 489. Because Plaintiffs seek the protection of individual
"competitors," and not "competition” — meaning interbrand competition — there is no antitrust
injury and, thus, dismissal is required. Tunis Bros., 952 F.2d at 728 (3d Cir. 1992) (cited by
Plaintiffs) (dismissing antitrust claims; no injury arising from harm to interbrand competition).2
Finally, with respect to ATP’s status as an integrated entity (whether as a "sing1e entity,"
"joint ventr.u·e," or otherwise sufficiently integrated organization), Plaintiffs cite (a) outdated,
inapposite cases that pre—date the Supreme Court’s seminal decision in Copperweld (1984), not
to mention its more recent extension of Copperweld in Dagher (2006),3 (b) cases that expressly
_ 2001) (affirming summary judgment dismissing antitrust claims); Rothery Storage v. Atlas Van
Lines, 792 F.2d 210 (D.C. Cir. 1986) (affirming summary judgment dismissing claims).
2 Plaintiffs reference possible testimony from "non-deposed officers of plaintiffs." Pltfs. ltr. at
n. 4. Defendants deposed the officers identified in Plaintiffs’ initial disclosures. Testimony from
undisclosed officers is precluded under at least FRCP 26 and the Coordinated Scheduling Order.
3 Los Angeles Mem. Coliseum, 726 F.2d 1381 (9th Cir. 1984); N Am. Soccer, 670 F .2d 1249
(2d Cir. 1982); but see id., 459 U.S. 1074, 1077-78 (Relmquist, J. dissent from denial of cert.)
("NFL owners are joint ventures who produce a product, professional football, which competes
with other sports and other forms of entertaimnent in the entertaimnent market. Although

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declined to decide whether the defendant was a "single entity,"4 and (c) cases that relied on an
overly restrictive reading of Copperweld and other precedent.5 Bulls II and the other cases cited
by Defendants are in line with the Supreme Court’s functional focus on intrabrand versus
interbrand competition, as shown in its recent decision in Dagher. In any event, the actual
record facts of ATP’s integrated structure and the interdependence of its toumaments are
undisputed. The Court, therefore, will determine how the law applies to those facts.
Fiduciary Duty: Plaintiffs claim that the "action challenged here" is ATP’s restructuring.
Plaintiffs’ claims are thus derivative: they camrot prevail absent "injury to the corporation" — i.e.
that the plan is bad for ATP’s membership as a whole, not just these particular Plaintiffs. Tooley,
845 A.2d at 1036 (Del. 2004). In any event, the restructuring is protected by the business
judgment rule. With respect to Plaintiffs’ claim that Mr. Pasarell’s vote was "interested," the
testimony does not establish that he will materially benefit from the restructuring. See Pltf ltr. at
5, n. 6 ("interest" requires personal, material benefit to director). The toumarnent in which Mr.
Pasarell indirectly holds only a 24% interest, Indian Wells, already had an agreement to be in the
ATP’s highest tier. That agreement pre-dates the current Board, was approved by then-
disinterested directors, and was executed before the three year statute of limitations that govems
here. Plaintiffs’ argument also proves too much. Any change in ATP’s rules and structures
"affects" tournaments, including Indian Wells. It cannot be that Mr. Pasarell, who is on the
Board as a tournament representative, is disqualified from voting on all such core matters.
Tortious Interference and Conversion: Plaintiffs do not identify any business relationship lost
due to ATP’s restructuring. The testimony Plaintiffs cite confirms sponsors are renewing or in
negotiations; no sponsor has terminated an agreement. On the supposed "conversion" of ATP
Membership "rights," Plaintiffs do not dispute that the principal document embodying any
intangible "rights" — the ATP Bylaws — does not grant classification or calendar slots in
perpetuity. Plaintiffs ignore their recent written contracts acknowledging that ATP has "sole
discretion" to reclassify and schedule the Hamburg toumament. There is no "conversion" of
intangible rights that have rg been reduced to a written instrument. Carlton Inv., 1995 WL
694397, at *16 (Del. Ch. 1995) (cited by Plaintiffs) (dismissing conversion claims).
Respectfully submitted,
/s/ Philip Trainer, Jr. (#2 788)
Philip Trainer, Jr. (#2788)
cc: Clerk of Court (by e-filing/hand); Mr. Flinn (by e-filing/hand); Mr. MacGill (by e-mail)
individual NFL teams compete with one another on the playing field, they rarely compete in the
market place .... If the teams were entirely independent, there could be no consistency of
staffing, rules, equipment, or training. All of these are at least arguably necessary to permit the
league to create an appealing product in the entertainment market.").
4 Fraser, 284 F.3d at 59 (not reaching Copperweld; defense verdict under rule of reason); St.
Louis Conv. & Visitors, 154 F.3d at 864 n. 9 (not reaching single entity; defense judgment for
lack of antitrust injury: "The Sherman Act does not require competitive bidding: it prohibits
unreasonable restraints on competition."); but see Mt. Pleasant v. Assoc. Elec. Coop., 838 F.2d
268 (8th Cir. 1988) (treating electrical cooperative as a single firm).
5 McNeil, 790 F. Supp. 871, 880 (D. Minn. 1992); Sullivan, 34 F.3d 1091, 1099 (lst Cir. 1994).