NHL Motions to Dismiss Junior Hockey Antitrust Lawsuit

Blasting an antitrust lawsuit accusing the NHL of depriving junior hockey players of their market value as “implausible” and “factually unsupported,” the NHL last Friday motioned a Southern District of New York judge to dismiss a case that could upend the player development industry.

In February, two former major junior hockey players (Tanner Gould and Isaiah DiLaura) along with labor organizations that represent current and prospective North American major junior hockey players sued the NHL and Canadian Hockey League (which is comprised of three leagues: the OHL, QMJHL and WHL) for allegedly conspiring to limit what players can earn. Through an agreement with the CHL, the NHL is portrayed as supporting a system that protects leagues’ profits at the expense of young players’ earnings. The major junior leagues, for example, enjoy exclusive territorial rights to recruit and sign players, thus reducing how those leagues compete in the labor market.

In multiple ways, the NHL’s motion to dismiss tries to persuade U.S. District Judge Margaret Garnett that the lawsuit is deficient. 

For starters, the NHL asserts the plaintiffs are “patently incorrect” about key facts. While the complaint alleges the NHL makes “annual payments” contingent on junior leagues maintaining allegedly anticompetitive rules, the NHL says it “does not require the CHL to maintain any of the specific rules at issue in this case.” The NHL instead financially supports player development, such as through contributing to players’ tuition, education, concussion protocols and mental health training.

The NHL also objects to the plaintiffs claiming the NHL-CHL agreement obligates the NHL to pay major junior clubs for 18- or 19-year-old players drafted and signed to NHL contracts. The league says the NHL only pays if a drafted and signed player is actually retained by an NHL team on its roster. 

The labor relationship between the NHL and players is also invoked as a defense. The NHL-CHL agreement is incorporated in the NHL-NHLPA collective bargaining agreement, which states the NHLPA is the exclusive bargaining representative “of all present and future players in the NHL.” The NHL underscores the non-statutory labor exemption, which reflects a series of U.S. Supreme Court rulings that hold when management and labor collectively bargain pay, wages and other employment conditions, those conditions are exempt from antitrust scrutiny. 

As the NHL sees it, the exemption applies to the rules at issue in this case. That is true even though junior hockey players aren’t NHLPA members. The NHL relies on case precedent to argue the exemption nonetheless applies “to the claims of prospective players who have not been drafted and may never be drafted.” 

The league references NHLPA v. Plymouth Whalers, a case from 2005 involving a challenge to OHL eligibility rules limiting the number of “over-age” or 20-year-old hockey players. Since the underlying legal challenge in Plymouth Whalers stemmed from when NCAA players who were drafted by NHL teams could become free agents, the non-statutory labor exemption applied. The NHL argues that because the current plaintiffs are challenging annual payments related to the development of junior hockey players, some of whom are future NHL players, and are challenging other aspects of prospective NHL employment, the exemption ought to apply here as well. 

The league, represented by the law firm Paul, Weiss, also insists that much of the plaintiffs’ case concerns matters unrelated to the NHL or its CHL dealings. For instance, while exclusive geographic areas for CHL leagues to recruit players are challenged, the NHL says nothing in its CHL agreement is germane to that topic. Likewise, while the plaintiffs contend the CHL’s draft is anticompetitive, the NHL maintains “no term of the NHL-CHL Agreement relates to the CHL Defendants’ draft processes.”

In addition, the NHL references a defense that the CHL emphasizes in its own motion to dismiss. The Foreign Trade Antitrust Improvements Act (FTAIA) limits the reach of U.S. antitrust law to protect American citizens and American exporters. The NHL and CHL maintain FTAIA bars the plaintiffs’ claims, since “none of the allegedly anticompetitive effects of the NHL’s conduct in the United States” would have caused the plaintiffs’ injuries, “which were suffered in Canada.”

To that point, the NHL stresses that DiLaura “only played for Canadian teams” during the relevant period. As to Gould, the NHL says he played “at most” one season in the U.S., and the complaint “contains no factual allegations showing how the NHL’s conduct caused DiLaura any alleged injury in the United States.”

The plaintiffs will have a chance to rebut these arguments in forthcoming memorandums to Garnett.