Sports Law Spring 2001 Notes

Professor Miller

I. Contract Formation

A. Offer & Acceptance

· team submits the K to player and thus makes an offer to the player. Player then accepts by signing (team offeror; player offeree)

· player signs the K and returns it to the team, thus player makes the offer to perform personal services

· Only terms that are usually at issue are length of K and salary

· General terms in the K are standard and written by league and players association in collective bargaining

· Only a fully executed standardized NFL contract can bind an NFL team and free agent

· Offer sheet signed by both sides is not enough

· Franchise player tag can be applied to one player per NFL team per year

· Gives team the right of first refusal

· If franchise player is signed by another team the 1^st team gets two 1^st round draft picks spread out over next two years as compensation

· All NFL player K’s are available to all other NFL teams via a database

1. LA Rams v. Cannon (1960) p.1-2

· At this time there was competition btwn 2 leagues; does not exist today

· Cannon signed 3 Ks with Rams prior to playing in Sugar Bowl and took 2 checks (never cashed)

· Making commissioner signature a condition precedent to contract made no sense when this case occurred because commissioner was aligned with owners and gave owners power to void a K that they didn’t like.

· Comm’r signature requirement now part of the CBA.

· Cannon and Rozelle were not bargaining from equal positions

· Ct said there was an offer, but no acceptance

2. Sample v. Jets

- Sample signed three one-year contracts with Jets

- Each contained an injury clause that stated that Sample would get paid for remainder of season if he got injured

- Sample contended that the three K’s were actually one K and that he should be paid for all three years even though he had career ending injury in year one.

- Court ruled that each K was separate and injury clause did not carry over from one K to the other.

- NFL contracts are always a series of one-year K’s

o Gap is bridged by large signing bonuses in NFL.

Role of the Commissioner

· Assent of comm’r required on all K’s today

· Part of CBA

· Before CBA assent was required but courts were more likely to disregard this because comm’r was agent of owners

· Comm’r has very broad powers

· Baseball comm’r is most powerful of all

· He has limitations though

· Can’t act in an arbitrary and capricious manner

· Bound by by-laws

· NFL K’s

· $ is not guaranteed

· Series of one year K’s from owners POV

· Team can release player at any time

· Renegotiation is more feasible because team has power to release player at any time

· More equitable to allow player to renegotiate

· Signing Bonuses

· Language of K is helpful in determining whether the bonus is just for signing or if its for performance

· If player gets hurt before he can perform whole K, he keeps the money

1. Detroit v. Robinson (1960) p. 1-5

· Facts similar to Cannon

· Comm’r approval was condition precedent and Robinson informed Detroit that he wanted out before commsnr approved the K

2. Milwaukee American Assn v. Landis (1931) p. 1-7

· P wants to enjoin Commsnr from disapproving K btwn P & St. Louis involving Bennett

· Bennett is being passed around btwn 3 clubs all owned/controlled by the same person

· only a 2yr option period w/o waivers was allowed

· must give other major league teams waivers before you can release, thus enhancing the player chance of remaining in the majors

· Ct. said St. Louis must release Bennett & make him a free agent

3. Finley v. Kuhn (1978) p. 1-13

-Why doesn’t league want teams to buy players?

· perception problem

· no real return on the money & fans lose interest

-Why bring in the courts?

· constitutional due process

· interferes w/ private practice when rules are contrary to public policy (high standard)

· Cts. can ensure that they are properly following their own rules (arbitrary & capricious in application of the rules)

4. Catfish Hunter v. Charlie Finley

- Finley’s failure to perform under the K was determined to be material and court allowed Hunter to get out of the K.

- In determining whether a failure to render or to offer performance is material, the following circumstances are relevant:

o The extent to which the injured party will be deprived of the benefit which he reasonably expected;

o The extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;

o The extent to which the party failing to perform or to offer to perform will suffer forfeiture;

o The likelihood that the party failing to perform or to offer to perform will cure his failure, taking into account all the circumstances including any reasonable assurances;

o The extent to which the behavior of the breaching party comports with standards of good faith and fair dealing.

- Other grounds for voiding a contract are fraud, duress, undue influence, nonsuitable or breach of fiduciary duty, impractibility or frustration.

- Line of where material breach starts depends on conduct of the defendant

- Court was free to declare the K void because of the material breach of Finley.

5. Atlanta Baseball Club v. Kuhn

· Commissioner imposed a penalty that was not specifically listed in the bylaws of baseball

· Comm’r is limited by any written agreements

o Such as the CBA

· Comm’r has to follow rules and bylaws that he is employed under

· Even though he had broad powers he couldn’t make up a punishment that was not listed

B. Interpretation of Sports Contracts

· 3 approaches

1. Plain meaning

2. Williston standard – No extrinsic evidence allowed

3. Corbin Rule – Extrinsic evidence allowed to prove intent

1. Sample v. Gotham Football Club ( 1973) p. 1-29

· Issue – is it 3-one yr Ks or one 3-yr K

· P argues: lack of sophistication in k negotiations

Lack of counsel

Unequal bargaining positions

· Ct held Ks were plain and unambiguous eventhough it may not accord with the subjective intent of the parties

· they were 3 separate Ks, so Sample cannot collect salary under 1970 K because he was injured during the 1969 season

2. Tollefson v. Green Bay Packers (1950) p. 1-30

· there was a standard form K with a handwritten clause stating “minimum 3600 for season”

· The hand written clause contradicted the plain language here, so the court relies on the hand written portion because it shows the intent of the parties.

· Anything that appears to be negotiated or thought about will be given effect.

C. Power of Termination in Professional Sports Contracts

· Team possess broad power to unilaterally terminate players

· because Ks are for a fixed period, the team is required to provide ground for termination (just cause)

1. Tillman v. New Orleans Saints (1972) p. 1-43

· P suffered a knee injury and team Dr. said he was fit to play

· K allowed for an independent Dr. to evaluate, that Dr. lost credibility and player lost

· there was also a notice issue – K provided that team must give written notice of waiver and team failed to do so. However, Ct. player had actual knowledge, so the written notice did not matter

· Where notice is a condition to a party’s duty to perform, exact compliance will not be required unless it was so essential to the operation of the agreement that a party can justly be held to have perfected his rights when the procedure followed varied from that called for by the K.

2. Houson Oilers v. Floyd

· Floyd was injured then cleared by team Dr. the released a day later

· K stated that he had 72 hours to get opinion by his own Dr.

· Since team didn’t give him this, they breached and Floyd won

· When a party wins at trial the appellate court must look at the facts in the light most favorable to that party on appeal.

3. Schultz v. LA Rams

· Even though K provided that player must furnish written notice of injury to team, it wasn’t critical to K and since the team acted on the oral notice, team waived their right to written notice.

4. Alabama Football Inc. v. Greenwood (1978) p. 1-51

· player signed K to play w/ P

· player saw affirmative evidence of a participatory breach on the part of P not to be able to field a team – player then signed K to play for the Steelers

· Player allowed to keep the signing bonus w/o playing (unjust enrichment) Ct. said use of players name for promotional purposes was adequate consideration for the bonus

· Alabama Football got value from the use of Greenwood’s name

· Bonus money was for the act of signing the K only

· player relieved from future performance under K w/ P

· Case has no precedential value today because there is no competing league and signing bonuses are not meant to lure players away from competing leagues.

5. Alabama Football Inc. v. Stabler (1975) p.1-55

· team was unable to complete its end of the bargain so player sued

· Player allowed to keep $70K of $100K bonus money already received; the fact that player was unable to negotiate w/ other teams while under K was sufficient consideration for the bonus money

· Court cancelled the other $30K for convenience and equity sake

· result oriented opinion; should have been all or nothing

· Miller calls this “rough justice.”

D. Remedies for Breach of Contract

· goal is to place the injured party in the same position that he would have been had the K been fully performed.

· Usual remedy is money damages; for the teams it’s specific performance

· However, the general rule is personal service Ks are not specifically enforceable, so teams seek specific enforcement of negative covenants not to play for another club

1. Philadelphia Ball Club v. Lajoie ( 1902) p. 1-60

· Player has K w/ one team, but jumps to play for another team

· Options:

· ask for specific performance, but end up w/ a bitter player

· enjoin player for playing for the other team (end up w/ specific performance in a sense)(called negative enforcement of the K)

· Reach settlement where 1^st club is paid the difference between what they were going to pay for Lajoie and what it cost to get a replacement equally as skilled as Lajoie

· Court rules that Lajoie was a special type of very skilled player who was irreplaceable, therefore they negatively enforced the K and enjoined him from playing for rival league.

· Player cannot wait out the length of the K and then come back and play for other team

· Money damages not often awarded

· Player can’t usually pay the settlement

· Very difficult to arrive at damages

· Speculative

2. Central NY Basketball v. Barnett ( 1961) p. 1-61

· Team sought injunction and it was granted

· Team argued that the player had exceptional and unique skills

· Different for Lajoie because Lajoie was a hall of famer and Barnett was only in the top 20% of players

· Economic argument against injunctions is that player is willing to play some where else and assume the risk

· judges more inclined to grant an injunction in sports v. a production job (semi-conductors)

· Standard is whether player is trying to better his situation in evaluating whether player will be enjoined from playing for 2^nd team.

3. Hennigan v. Chargers (1970)

· Player had K from 64-66, terminated w/o pay in 67 for injuries

Facts: signed w/ Oilers, injured knee in 65 &66, 3/67 K assigned to Chargers, 4/67 Charges take option to renew, 7/67 failed physical exam and was released

-lower ct found for Hennigan on summary judgment

-reversed on appeal & summary judgment granted for D

Players arguments:

· Should still get pd under the injury clause

· No-cut clause applied

Charger’s arguments:

· the renewal was a new K, injury clause was a condition precedent to performance under that K, and injuries occurred prior to renewal K therefore team doesn’t have to pay

-ct. said renewal and extension are different and that this renewal was a new K and Hennigan gets nothing

4. Boston Celtics v. Shaw (1990) p. 1-66

· Shaw under K w/ Italian team for 2yrs, but has a way out of 2^nd year (condition subsequent)

· signs K w/ Celtics & agrees to rescind 2^nd yr of Italian K (1/90)

· 6/90 Shaw decides to stay in Italy

· case went to arbitration and arbitrator found for Celtics

4 Part test for granting preliminary injunctions

1) P must show likely success on the merits (prejudges the case)

2) P must show Irreparable injury if injunction is not granted (harm part of the test)

3) Will the interest of the other party be substantially impaired by issuance of the injunction? (threshold issue)(Does balance of harm favor B or )?)

4) How will the public interest be affected? (allows judges a wide range of discretion)

II. Torts

A. Participant’s Liability for Intentional Torts

· Battery – intentional physical contact w/ another

· Assault – apprehension of imminent contact

1. Griggas v. Clauson (1955) p. 2-3

· D pushed P & then punched him in the face.

· P fell, hit his head and was knocked unconscious

· P sued & won $2000

Discussion:

o not reasonable behavior for a basketball game

o Fighting is outside the scope of basketball game

o only an assault is he knew the punch was coming

o Why wouldn’t you want an ejection or foul admitted into evidence?

o Doesn’t have much probative value

o Jury has better position to make call than the umpire did who had to make the call on the spot.

o To keep it out argue that it is so prejudicial and has such low probative value it should be kept out.

2. Manning v. Grimsley (1981) p. 2-4

· P-spectator D-pitcher

· fans were heckling D while he was warming up in the bull pen

· D looked directly at hecklers several times & eventually threw the ball in the direction of the hecklers thinking the ball would be stopped by the safety net

· there was a hole in the net and P was hit by the ball

· P sued for battery & negligence

· directed verdict for battery remanded to show intent

· If )’s action is intended, they are liable for all results intended, unintended, foreseeable, unforeseeable, or otherwise.

· Rationale is that this behavior is to be deterred

· MD required actual malice in order to recover under intentional tort theory

· Grimsley was liable because he meant to throw the ball and then became liable for anything after the throwing of the ball.

B. Defenses to Intentional Torts

· Self Defense

· Consent

1. McAdams v. Windham p. 2-8

· P estate sued D for assault and battery

· the two were engaged in a friendly sparring match like matches they had had before

· D hit P over the heart and P died

· Ct found the act was not unlawful and there was consent to enter the sparring match -- D not liable

C. Negligence & Recklessness

· Damages more limited in negligence actions than in intentional torts

· Only liable for foreseeable consequences as result of negligence

· Insurance covers negligence of insured

· How to plead a tort case

· Plead both negligence and intentional tort

· Intentional tort

· Punitive damages can be obtained

· Negligence

· Insurance will cover negligence

· Insurance co. has deep pockets

· Conduct in or out of bounds of the sport?

· At what point does certain conduct cross the line?

· Hall of fame player in the sport would be a good expert witness.

· Heightened standard of care for contact sports

· Depends on jurisdiction

· If no statutory or common law on the heightened standard:

· Reasonable man standard applies

· No recklessness à no $$$

· Decided by jury

· Argue on appeal that there should be a higher standard if you are defendant and you lose

1. Bourque v. Duplechin (1976) p. 2-11

· player ran out of the base path & broke another player’s jaw

· could sue claiming this was not a reasonable way to break up a double play

· the nature of the game itself is something to consider

· Ct. did not say there was negligence, but there is enough for a reasonable fact finder (jury) may find negligence

Dissent – the act was intentional not negligent

Insurance issue: Should policy have covered the loss? Ins. Company claims they shouldn’t have to pay because the act was intentional. Ct. says they do have to pay.

2. Picou v. The Hartford Ins. Co. (1990) p. 2-14

· D’s insured injured P’s ankle during the course of a church softball game and P sued for negligence or breach of a duty

· Ct. said no; there was an assumption of risk here

· A participant sport athlete has a duty not to engage in wanton, willful, or reckless conduct that injures another player or spectator.

· Using a simple negligence standard would discourage participation in sports, a thing that is encouraged by society.

Discussion:

-assumption of risk is pretty much disfavored in most jurisdictions today

-one has a duty to act reasonable & prudent under the circumstances

3. Nabozny v. Barnhill (1975) p. 2-17

· Contributory negligence is a question of fact for the jury to decide

· Soccer case where kid kicked goalie in the head while goalie was in possession of the ball.

· A player is liable in tort if his conduct is such that it is either deliberate, willful or with a reckless disregard for the safety of other player so as to cause injury to the other players – Question of fact for the jury.

4. Oswald v. Township High School District #214 (1980) p. 2-19

· P was kicked and injured while playing basketball in a required gym class

· P claims that participants should have known the rules

· Ct. said a player is not liable if the conduct is not willful or wanton.

· Places different standards on contact and non-contact sports

· ) won on a motion to dismiss for failure to state a claim upon which relief can be granted

· Even if all the facts were true, there is no cause of action

5. Savino v. Robertson (1995)p. 2-22

· P & D were teammates on a hockey team

· P was hit in the eye by a puck during warm-ups

· P argues that D failed to exercise ordinary care

· Ct says that a participant in a contact sport may recover for injury only where the other’s conduct is willful, wanton or in reckless disregard

· Ct held P was required to plead & prove wilful or wanton conduct, not mere negligence

· Warm-ups are same as game as far as the heightened standard of care goes

· Contributory negligence:

· Absolute bar to recovery in Maryland

· Different types of contributory negligence statutes

· Comparative negligence

· If B is 20% at fault and ) is 80% at fault, B can only recover for up to 80% of damages

· Modified comparative negligence

· ) has to be at least 50% at fault in order for B to recover

Rules to Evaluate Appropriate Conduct:

1) were parties engaged in a “game”

2) was the game being played in the appropriate area

3) does the game have rules or customs

4) was bodily contact involved in the game

5) whether P’s injury was derived form bodily contact permitted by the rules

6. Zurla v. Hydel (1997)p. 2-26

· P, D and another went to FL to golf

· D thought P had cleared the green and took his shot

· ball didn’t slice like it usually did & hit P in the head

· P sued for negligence

· D claimed there should be the higher standard of willful & wanton misconduct

· Court states that golf is simply not the type of game in which the participants are inherently, inevitably, and customarily struck by the ball.

· Court rules that a golfer injured by a golf ball need only allege and prove traditional negligence in order to recover damages, rather than willful and wanton conduct.

· An argument that the player was so bad that he had a duty to stay off the course will probably fail.

Waivers and Sports Activities

· Health clubs can waive their liability for negligence because there are other clubs that the consumer can go to if they don’t like the waiver.

· White water rafting waivers don’t usually stick because you normally have to drive a long way to get there and can’t just turn around and do it at your house if you don’t like the waiver.

1. Franzek v. Calspan Corp. (1980)

· P was injured during an experimental rafting trip; 3 others killed

· P signed a release waiving all claims caused by D negligence

· Release was good for Niagra Gorge & Butterfield (Niagra’s President)

· A waiver will be good if clear & unequivocal & the word negligence is present

· waiver was not good against Calspan, therefore, Calspan can/could seek contributions from Niagra if found liable

Issue: Can a person waive suit for negligence if they screw up?

1) could say yes bcse it is a freely negotiated K

2) bad idea bcse standard of care will decrease when released of liability

3) hard to say no when already on location & ready to take the trip

4) very narrowly construed

2. Spencer v. Killington (1997) p. 2-32

· P collided w/ post during ski race

· P signed a release statement before racing

· Ct. held waiver void; against public policy

1) Race was open to general public

2) Amateur levels invited

3) Ski area had expertise to control hazards & guard against negligence

4) Resort can get insurance & pass costs on to customers

Notes: Same analysis as Fransek, but raft case has better facts for P than here.

Skier could see the course & assess the danger.

Recklessness

1. Hackbart v. Cincinnati Bengals (1977) p. 2-36

Facts: Acting out of anger & frustration, but w/o intent to injure, Clark stepped forward & struck a blow w/ his right forearm to the back of the kneeling B’s head w/ sufficient force to cause both players to fall forward to the ground.

· 2 theories for suit

1) Reckless misconduct

2) Negligence

· the character of the NFL negates any notion that conduct can be circumscribed by reasonableness

· Defenses: consent and assumption of risk

· Ct. held B assumed the risk: B should expect these outburst; players are selected for the NFL based on aggressive behavior; not trained to be concerned about the safety of other players

· Court stated that violence was part of football

2. Hackbart v. Cincinnati Bengals (1978) p. 2-39

· ) action was clearly against the rules

· Question is what could be reasonably expected to happen when you hit someone in the back of the head with your elbow?

· If ) could predict some sort of injury, court likely to find ) liable.

· there is a cause of action for recklessness apart from assault & battery

· recklessness – intent to commit the act

· battery – intent to cause harm

· Ct. held the act was clearly outside the scope of the game

· Football is a very violent game, but there are rules to protect the safety of the players.

Antitrust Law

A. The Baseball Anomaly

n Baseball was exempt from Sherman Act because it was deemed to be an exhibition and not interstate commerce

n Only players have standing to bring suit today

n Any restraint adopted by the owners concerning franchise movement is exempt from the antitrust laws today

1. Federal Baseball Club of Baltimore v. Ntnal League of Prof. Baseball Clubs (1922)

p.3-4

· B cause of action was under the Sherman Act

· B lost because baseball is an exhibition (purely state affairs), not a business, therefore, no interstate commerce

· Baseball sells history v. contact, fighting, stars so it gets special treatment

· Continued during WWII

· antitrust laws don’t apply to state exhibitions

· what was interstate commerce in 1922 à conservative construction

· things that were in a vacuum in 1860 appear much different in 1920s

· what else is going on in baseball à Black Sox scandal (fixing of the World Series)

· this argument fails today à too much activity for it not to be interstate commerce

Interposition: states rights trumping federal; not true anymore

2. Flood v. Kuhn (1972) p. 3-7

· Flood challenged the league’s reserve clause allowing him to be traded w/o his consent

· Reserve clause à if team wanted to they could keep you forever

· Baseball argued fundamental fairness

· Baseball stated that they had relied upon Federal Baseball for so long and made decisions based upon it that it would be fundamentally unfair to change it now

· Flood merely stated that Federal Baseball was wrong and should be changed

· This failed because you have to argue that the law as presently constituted is really harming B.

· Congressional inaction on a matter is not probative because Congress has only so much time and there are much more important things to worry about than baseball

· CBA has gotten rid of these types of problems

· Dissent:

· Marshall states that Court is loathe to overturn previous rulings, but they should when actual harm is occurring to someone because of the law.

· Ct. denied Flood’s challenge

B. General Considerations

1. Sherman Act

· prohibits “every K, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or w/ foreign nations”

· Two elements required to establish violation of Sherman Act:

1) the existence of a K, combination or conspiracy, &

2) a resulting unreasonable restraint of trade

· Rule of Reason – balancing test under which the court weighs all of the circumstances and decides whether the pro-competitive benefits outweigh the anti-competitive detriments. Restraint must be narrowly tailored to meet the legitimate purpose and not stray beyond it.

· Per Se Rule – any agreement which because of its pernicious effect on competition and lack of any redeeming virtue is conclusively presumed to be unreasonable & therefore illegal without elaborate inquiry as to the precise harm that was caused or the business excuse for their use.

· Rule has to be narrowly construed

· Never stop with a per se analysis, always go through the rule of reason.

· If it is per se illegal, it will always fail the rule of reason test.

· Threshold test – Market Power??

2. NCAA v. Board of Regents of the Univ. of OK (1984) p. 3-23

· NCAA adopted plan to limit the total number of televised football games and the number of televised games that any one college could appear in.

· CFA negotiated its own deal w/ NBC and NCAA threatened disciplinary action, so OKL sued

· NCAA plan was a violation of the Sherman Act: it constituted illegal per se price fixing and if not per se, its anticompetitive limitation on price and output was not offset by any procompetitive justifications sufficient to save the plan even when the totality of the circumstances was examined

· by restraining the quantity of television rights available for sale, the challenged practices create a limitation on output; such limitations are unreasonable restraints of trade

· this case involves an industry in which horizontal restraints on competition are essential if the product is to be available at all

· Horizontal restraint occurs when competitors agree how they will compete

· Exception to horizontal restraint is when )’s are engaging in a joint activity, like was happening in this case.

· In this case the rule was overly anticompetitive and could have been done in a less restrictive wasy.

C. Player Restraints

1. Mackey v. NFL (1976) p. 3-30,5-21

Issue: Does the Rozelle Rule violate the Sherman Act

Threshold: restraints on competition w/in the market for players’ services fall w/in the ambit of the Sherman Act.

· Dist. Ct. found the Rule to be a group boycott & a concerted refusal to deal (per se)

· Cir ct. says the unique nature of pro football renders it inappropriate to apply per se rules

· Rule is unreasonable; overly broad & unlimited in duration, unaccompanied by procedural safeguards, & employed in conjunction w/other anticompetitive practices such as the draft, Standard Player K, option clause, and the no-tampering rules

· ) cannot hide behind a joint venture, has to be real reason for the restraint to be valid.

2. Smith v. Pro Football (1979) p.3-36

Issue: was draft as it existed in 1968 a violation of the Sherman Act

· Dist. Ct. said draft was a group boycott and was thus per se violation

· Cir ct. held the draft is not properly characterized as a group boycott and should be tested under the rule of reason

· NFL argued that without draft system player salaries would be lower across the board (failed)

· NFL also argued that draft promoted a competitive balance and playing field equity between teams.

· The effect of the 1968 draft was to suppress or even destroy competition in the market for player services; it virtually eliminates economic competition among buyers for the services of sellers

· NFL could still have a draft, just not as it was constituted in 1968.

D. Player Discipline

1. Molinas v. NBA (1961) p.3-43

Issue: Is the mechanism in place/procedure to determine whether the athlete’s rights are compromised?

· P admitted betting on his team & was suspended by NBA

· P sued claiming suspension violated antitrust laws

· B bet on himself, but if he got into the hole he may start betting against himself

· Once there is a public perception that a sport is fixed it is hard to regain trust

· Court said the rule was anticompetitive but it made sense

· Gambling undermines the integrity of the game

· Beneficial effects of suspension outweigh the anticompetitive effects

2. Blalock v. Ladies Prof. Golf Assn (1973) p.3-44

· P suspended for cheating & sued for unreasonable restraint on trade

· P was suspended by a group of fellow players

· LPGA is involved in interstate commerce

· could be considered a conspiracy bcse of the decision to suspend coming from fellow players

· suspension process at issue here, not the conduct of cheating

· Ct. held the suspension was imposed by competitors of P who stand to gain financially from Ps exclusion from the market; this arrangement is per se illegal

E. Location and Ownership of Franchises

1. NASL v. NFL (1982) p.3-49

Issue: can NFL prohibit owners from investing in another professional sport team?

· NFL had policy preventing cross-ownership

· Dist. Ct said the ban had an anticompetitive intent & would likely have an anticompetitive effect on the NASL, but said NFL was a single economic entity, so the Sherman Act doesn’t apply

· Some validity to ban

· Sports teams in same market compete for fan and TV money

· Assured owners would focus attention on NFL only

· Is there a submarket? Yes. Not the same capital investors as the general business world. Market is small and specialized

· need sports knowledge

· high risk investment

NFL argument’s:

1) NFL is a single economic entity (fails)

2) Inherent conflict of interest

· Held: the policy substantially restrains competition & violates the rule of reason

· RofR: Restraints are bad but will be allowed for clearly delineated purposes & will only effect the positive “thing” at issue

Rule of Reason

· Focus of the inquiry is whether the restraint imposed is justified by legitimate business purposes & is no more restrictive than necessary.

· R of R isn’t even reached until P proves 3 elements:

1) An agreement among 2 or more persons or distinct business entities

2) Which is intended to harm or unreasonably restrain competition, &

3) Which actually causes injury to competition

2. LA Coliseum Commission v. NFL (1984) p.3-54

· P viewed NFL Home Territory Rule as an unlawful restraint of trade

· Rule required all 28 owners to approve a move into another teams territory

· NFL changed rule to require ¾ approval

· NFL is not a single entity

· Have to analyze the question, “Is it a pro competitive thing at the end of the day?”

· Analyze the facts and circumstances of case

· Ancillary restraints doctrine

· Some agreements which restrain trade may be valid if they are subordinate and collateral to another legitimate transaction and necessary to make that transaction effective.

· Ancillary restraint must be tested under the rule of reason

· A factor in determining the reasonableness of an ancillary restraint is the possibility of less restrictive alternatives which could serve the same purpose

· To withstand anti-trust scrutiny, restrictions on team movement should be more closely tailored to serve the needs inherent to producing an NFL product

· Holding: NFL liable to LA Coliseum & the Raiders; NFL enjoined from preventing the Raiders from relocation in LA

· LA Coliseum v. NFL (II)

· Court ordered Raiders’ damage award to be offset by the difference in value between the expansion value the Raiders got by moving to LA and the value of the expansion opportunity that Raiders gave NFL by leaving Oakland.

· NBA v. SDC Basketball

· Raiders I does not say that all rules governing the movement of franchises are illegal

· Have to apply a very fact intensive analysis, including the economics of the case, to a rule that restricts movements of franchises.

· A professional sports league’s club relocation rule must at least be closely tailored and incorporate objective standards and criteria such as population, economic projections, playing facilities, regional balance, and television revenues.

· Very unlikely that a grant of summary judgment in a franchise movement case will be upheld because it is a very fact intensive inquiry and the trial judge must find that one party adduced no facts upon which a reasonable jury could have found for that party.

Labor Law & Professional Sports

A. NLRA

1.Amrcn League of Prof. Baseball Clubs & Assn of Ntnl Baseball League Umpires (1969) p.4-3

· Baseball is interstate commerce & is subject to NLRB jurisdiction (thus overruling the Supreme Ct. in a sense Flood)

· board can decline jurisdiction if the dispute doesn’t have a major impact on commerce

· board exerted jurisdiction here

· baseball’s internal regulation is not sufficient to prevent labor disputes, the 3^rd party in arbitration isn’t neutral

· labor disputes will be national in scope

· umpires are not supervisors

Dissent:

· Congress’s silence on the issue of covering baseball in NLRA should be taken to mean that jurisdiction should not be asserted

· No showing that jurisdiction is needed

B. Section 8(a)(3) - Discrimination on the Basis of Union Activity or Membership

1. NLRB v. Transportation Management Corp (1983) p.4-9

· bus driver fired for attempting to organize a union; reason given for firing was he left his keys in the bus and took unauthorized breaks (pretextual reasons)

· Court applied the Wright line Analysis:

· General Counsel (of NLRB, who brings suit) carries the burden of persuading the Board that an anti-union animus contributed to the employer’s decision to fire an employee

· burden does not shift, but the employer, could avoid the finding of a violation by demonstrating by a preponderance of the evidence that the worker would have been fired even if he had not been involved with the Union. (affirmative defense)

· Ct held that the evidence was not sufficient to show that P would have been discharged despite his efforts to organize a union.

Test for determining is discrimination is based on union activity:

-Wright Line analysis à places burden on employer to prove discharge would have occurred had the forbidden motive not been present

-preponderance of the evidence standard (>50%)

-some states have not adopted this rule because the Act directs that the Board’s atty. has the burden of proving violations

*Why is who has the burden important?

1) What if the evidence for either side cancels each other out?

2) In civil actions P has burden of proof (preponderance) once burden is met it shifts to D

*Balance:

1) Don’t want someone to get fired for Union activities?

2) Don’t want an employee or employer to do what ever they want (Carte blanc) and not get fired.

2. Nordstrom v. NLRB (4-13)

· Wright Line created a causation test in all cases alleging employee being fired based on union activities that turn on employer motivation.

· First, we shall require that the General Counsel make a prima facie showing sufficient to support the inference that protected conduct was a motivating factor in the employer’s decision. Once this is established, the burden will shift to the employer to demonstrate that the same action would have taken place even in the absence of the protected conduct.

· To establish an unfair labor practice the General Counsel need show by a preponderance of the evidence only that a discharge is in any way motivated by a desire to frustrate union activity.

· The elements of protected activity on the part of the discharged employee, employer knowledge of the protected activity, and employer animus toward the Union, taken together, are sufficient to establish a prima facie case of unlawful discharge.

C. Duty to Bargain

Appropriate Bargaining Unit

1. NASL v. NLRB (1980) p.4-48

Issue 1: Was there a Joint employer relationship? Yes

· existence of a joint employer relationship depends on the control which one employer exercises, or potentially exercises over the labor relations policy of the other.

· Held the league exercises a significant degree of control over essential aspects of the clubs’ labor relations.

· Miller says could argue not a joint enterprise bcse teams compete against each other

Issue 2: Is a league-wide bargaining unit appropriate?

· standard for determining appropriate bargaining unit is arbitrary & capricious

· Doesn’t have to be the best bargaining unit only an appropriate one

· Held that with an integrated group with common labor problems & a high degree of centralized control over labor relations a league-wide unit is reasonable

The Principle of Exclusivity and the Duty to Bargain

1. Morio v. NASL (1980) p.4-51

· secret elections held to create union

· NASL refused to bargain w/union & admitted it

· Held: the parts of the agreement made after the establishment of the union void

· Void - Doesn’t exist

· Voidable - leaves an option open to void

· Powerful remedy because it gave the players a choice

· Ct. also granted a temporary injunction. Why? To prevent the possibility of exacerbated harm

NOTE: Sports are unique because CBA & individual Ks co-exist.

-disparity between players ability is great & therefore compensation must be different

-different from mechanics fixing a car

D. The Subject Matter of Collective Bargaining

· Mandatory - wages, hours or other terms & conditions of employment

· Not Mandatory - 1) those that concern ER-3^rd party relations that are outside the scope of union concerns; 2) those that deal w/ union-EE relations which are regarded as being outside the scope of legitimate management concern & 3) those matters which center on managerial decisions which lie at the core of entrepreneurial control

1. NFLPA v. NLRB (1974) p.4-57

Issue: Did NLRB err in dismissing complaint on the ground that rule was adopted by Commsnr rather than ERs?

· It was a no fighting rule that imposed a $200 fine

· Some players were fined as a result of the rule, but players were unaware of the rule

· Held: Owners unilaterally adopted the rule, did not consult w/union prior to adoption, therefore engaged in unfair labor practice

Discussion:

· Ct. doesn’t have a problem w/ commsnr making the rule

· Ct is concerned that owner came up w/ the rule not the commsnr

· commsnr’s loyalty is to the owners because they pay his salary

· if owners make the decision it has to be bargained for because you are taking away wages w/ the fine

· players entitled to notice & hearing because its covered under CBA & players should have a right to defend himself

V. The Labor Exemption to the Antitrust Laws

A. Overview of the Labor Exemption

1. Allen Bradley Co v. Local Union #3 (1945) p.5-3

· manufacturer of electrical equipment wanted to sell in NY city, but market was closed due to union activity

· a store should be able to negotiate & price shop to get the best deal

· Econ 101: Elastic goodsà not necessities

Inelastic goods à necessities; raising price won’t change volume bcse it’s a necessity (baby formula)

· if city retailer didn’t buy from union, their businesses would be boycotted

· argument that it is OK to stifle competition & not considered under the Sherman Act is that it’s labor not a commodity

· Union says anti-trust to prevent price conspiracies & the union is not concerned about prices, just high paying jobs

· counter argument: consumer get hurt, outside competitors (Bradley’s employees)

· fair competition is good; Sherman Act is designed to protect fair competition

· A business monopoly is a business monopoly no matter whether union is involved or not

· Held: Finding no purpose of Congress to immunize labor unions who aid and abet manufacturers and traders in violating the Sherman Act, the respondent violated the Act. The same labor union activities may or may not be in violation of the Act, dependent upon whether the union acts alone or in combination w/ business groups.

2. Amalgamated Meat Cutters v. Jewel Tea Company (1965) p.5-9

· Butcher’s union sets hours for market times (9-6)

· Union’s not acting w/ the intent to hurt other people

· consumer is getting burned by not having longer hours

· Jewel came up/w a better way of handling meat & more convenient, but it was shot down

· Marketing hours are mandatory and must be bargained for

· Union-employer agreements are beyond the reach of the Sherman Act

· Difference between this case and Bradley case is intent

· If intent of action is primarily anticompetitive à not allowed

· If anticompetitive effect is ancillary to purpose à lawful activity

· Butcher’s purpose was to work fewer hours

3. United Mine Workers of America v. Pennington (1965) p.5-13

· UMW sued to recover $55K alleged to be due to a retirement fund

· P argued conspiracy to get small coal producers out of the market

· D cross-claimed for antitrust violations

· D argued wage standards, therefore exempt from Sherman Act

· Ct said union may make wage agreement w/ multi-employer bargaining unit & may seek to obtain same terms from other employers, but can’t conspire to impose wages on other bargaining units

· Overproduction is not a good free market argument because you are tampering w/ a system by unnaturally taking away jobs & affecting supply & demand (higher wages; less workers)

· Unions are inherently designed to eliminate activity (CBAs are exempt from antitrust)

· Intent of the agreement controls

· Here it was the intent of the union to harm small companies

· Harm to small companies was not ancillary

Dissent: Act doesn’t really cover when union & industry work together. Here supply exceeds demand.

· Labor should be treated differently because it is not a commodity

· History shows a consistent congressional purpose to limit severely judicial intervention in collective bargaining under cover of the wide umbrella of the antitrust laws, &, rather to deal w/ what Congress deemed to be specific abuses on the part of labor unions by specific proscriptions in the labor statutes.

B. The Labor Exemption Doctrine in Professional Sports

1. Mackey v. NFL (Cir Ct 1976) p.5-21

· Rozelle rule (player movement) violated Sherman Act; failed prong 3 of the test for labor exemption

3-prong Test:

1) the labor policy favoring collective bargaining may potentially be given pre-eminence over the antitrust laws where the restraint on trade primarily affects only the parties to the CBA

2) Federal labor policy is implicated sufficiently to prevail only where the agreement sought to be exempted concerns a mandatory subject of bargaining

3) The policy favoring collective bargaining is furthered to the degree necessary to override the antitrust laws only where the agreement sought to be exempted is the product of bona fide arm’s length bargaining

· not a per se violation like the Dist. Ct claimed

· just because things didn’t change here doesn’t mean they got something elsewhere (dishes v. Laundry)

· Court assumed that since Rozelle Rule wasn’t part of arm’s length bargaining

· In fact players could have received concessions in order to allow Rule to continue in existence

2. McCourt v. CA Sports, Inc. (1978) p.5-23

· Reserve clause issue w/NHL: Was the agreement the product of bona fide arm’s length bargaining?

· NHL had an independent arbitrator; look more like a good faith effort over the NFL who uses the commsnr for arbitration

· Ct. said the reserve system had not been the subject of good faith bargaining& just because you didn’t like the result doesn’t mean there was no collective bargaining (dishes v. laundry)

· burden of proof was not met to show that it wasn’t part of collective bargaining à hard burden to meet

3. Reynolds v. NFL (1978) p.5-30

· Settlement from Mackey

· P wants this to go further & give them free movement

· Ct. says there needs to be some line drawn to protect the business; who decides where the line should be drawn? à the whole via the CBA

· The settlement is fair & reasonable

· Just because a settlement isn’t the best for everyone doesn’t mean it isn’t a good settlement.

4. Wood v. NBA (1987) p. 5-31

· P contends the salary cap, college draft & prohibition of play corporations violate Sherman Act

· Ct. says this is true on its face, but is was agreed upon through the CBA

· P contends he isn’t achieving full market value because he is being capped

· Ct. says this is common in the industry

· Wood says he wasn’t around when the CBA was signed so he shouldn’t be bound by it.

· Court says “tough,” that’s the way unions work.

Key Questionà should CBA be honored or should P be able to backdoor the agreement

*Professional sports are unique because players bargain for their own wages, whereas normally unions bargain for members wages

VI. Amateur Athletics

A. Amateur Status – The Right to Play

1. Oldfield v. The Athletic Congress (1985) p. 6-2

· P was amateur, went pro & wanted to return to amateur to compete in Olympics

Issue: Was there a private cause of action? No.

4 Factors for determining if statute contains an implied cause of action:

1) whether P is a member of a class for whose special benefit the statute was enacted

2) whether there is an indication of Congress’s intent to create or deny a private remedy

3) whether a private remedy would be consistent w/ the statute’s underlying purposes

4) whether the cause of action traditionally is relegated to state law

2. OK Secondary School Activities Assn v. Midget (1972) p. 6-10

· Courts shouldn’t interfere with unincorporated associations in their efforts to discipline voluntary members

· In the absence of fraud, abuse, coercion, bad faith or capricious action courts shouldn’t interfere

· Students can’t transfer from majority to majority, but can go from majority to minority w/ the goal being to increase racial integration

· if one can’t go back to majority you are impeding integration because no one will ever go in the first place.

· argument: no due process because they didn’t get a required hearing

3. CSU v. NCAA (1975) p.6-13

· CSU joined NCAA & therefore had to abide by the 1.6 rule

· Courts will intervene where the action by the association is in violation of its own bylaws and constitution

· This rule applies to substantive as well as procedural questions

· The sanction imposed upon CSU of indefinite probation hurt their reputation and thereby affected their ability to recruit athletes

· This injury gave them grounds to sue

NCAA arguments:

1) ct. has no jurisdiction

à ct can interfere to make sure NCAA is following their own rules

2) there is only a mere expectancy to go to championship; not a right

à ct. dismisses saying this is a significant interest; that goal is significant

B. Amateurism and the Constitution

· 14^th amendment only applies to state action not private

1. NCAA v. Tarkanian (1988) p.6-17

· coach suspended by school for being involved in NCAA violations

· Coach sued for due process violation & won

· sued UNLV & NCAA claimed they were a necessary party

· Lower Ct àsuspension constituted State action prohibited by 14^th Amend.; Supreme Court reversed

· P argues NCAA was a state actor; NCAA is so powerful that UNLV had no other choice

· Ct said how can they be joint actors if their interests are diametrically opposed

· NCAA not a state actor because they enjoyed no governmental powers to facilitate their investigation

· NCAA could not directly discipline any UNLV employee or Tarkanian

· UNLV operated its athletic program under the color of NCAA regulations, NCAA did not operate under color of state scheme.

· UNLV could have withdrawn from NCAA if it did not want to follow NCAA’s suggestions

· Dissent: the nature of the investigations was a violation of Tarkanian’s due process rights

· NCAA and UNLV acted jointly in suspending Tarkanian

· UNLV agreed that findings of fact at NCAA hearing would be binding on UNLV

State Action: Case typically involves the state delegating power to a 3^rd party

2. Louisiana High School Athletic Assn v.St. Augustine High School (1968) p.6-26

· St. Augustine wants to join Athletic Assn

· they are a public, minority school & the Assn is a private organization so they feel they can discriminate

· Ct. said not private org. because 85% of members are public schools; funded by public funds, therefore state actor

· Private organization that ran public school athletics was a state actor

3. Brand v. Sheldon Community School (1987) p. 6-28

· There is a property interest in a college athletic scholarship, but not in a mere expectancy

· issue is whether P is entitled to participate or has a mere expectancy to participate

· P is a wrestling student declared ineligible to participate due to sexual activity

· cts have generally held there is no entitlement to participate in school sports

· all rules were followed & P received all process due him

· Substantive due process rights are violated only if Board’s decision was arbitrary and capricious.

· ct said board’s decision was not arbitrary & no right to privacy was violated

· Brand argued that he received a more harsh sentence than previous violators

· Court said it would not go back and look at previous cases and deconstruct them and look at their facts to decide this argument

· the Due Process Clause does not require courtroom standards of evidence to be used in administrative hearings

C. The Great Gender Debate

1. Cohen v. Brown University (1996) p. 6-41

· Brown demoted men’s programs to gain equity between men’s and women’s programs to comply with Title IX

· Title IX requires some type of equity between men’s and women’s programs

· Was permissible for Brown to cut programs in order to meet with Title IX requirements

· Compliance with Title IX may be achieved in a number of ways:

· Eliminate athletic program altogether

· Elevate or create requisite number of women’s programs

· Demote or eliminate requisite number of men’s programs

· Combination of these remedies

· Court states that it gives universities as much freedom as possible in conducting their operations consonant with constitutional and statutory limits.

Sports Agents

· Agents can get paid as the player gets paid

· If player doesn’t get paid, agent doesn’t get paid

· Agents get commission on signing bonuses, as they are considered salary

1. Zinn v. Parish (7-2)

· Agent negotiated a three-year deal for player. After he did that player released him and refused to pay him his commission for the three years.

· Court ruled for agent and he got his commission

· Standard to prove negligence by agent is what would reasonable agent have done in similar situation.

· Hard standard to prove negligence under

· Agent makes so many decisions it’s hard to 2^nd guess them

· Fraud and intentional misrepresentation are easier to show

2. Brown v. Woolf (7-5)

· Agent talked player into signing with a new team for a lot of money, but team failed.

· Player didn’t get his money but agent got full commission from team.

· Player sued for constructive trust on money that agent got

· General rule is that in cases of constructive fraud punitive damages are available.

· Constructive fraud is characterized as acts or a course of conduct from which an unconscionable advantage is or may be derived or a breach or confidence coupled with an unjust enrichment which shocks the conscience, or a breach of duty, including mistake, duress or undue influence, which the law declares fraudulent because of a tendency to deceive, injure the public interest or violate the public or private trust.

· Another formulization is where the dominant party in a fiduciary relationship makes a false statement which the other party relies on to their detriment.

· Dominant party doesn’t need to know it is false.

· Not so in MD à no punitives allowed

· Have to show actual malice for punitive damage award in MD

3. Detroit Lions & Billy Simms v. Argovitz (7-7)

· Argovitz was Sims’ agent and was negotiating K with Lions

· Argovitz started really high and then was negotiating down, almost to an agreement

· Argovitz then suggested that Sims should speak to the Houston Gamblers

· Argovitz owned a large stake in Gamblers, but did not disclose that

· Lions made an offer to Sims, which was relayed by Argovitz, which was lower than he thought it should be and upset him

· Sims signed with Houston and told Argovitz not to call Lions back.

· The relationship between a principal and an agent is fiduciary in nature, and as such imposes a duty of loyalty, good faith, and fair and honest dealing by the agent

· Because of egregious breach of Argovitz’s fiduciary duty, the proper remedy was recission of the contract.

4. Walters v. Fullwood (7-11)

· Parties to a K can specify which law is going to apply to the K

· K in MD can be governed by DE law

· Intentional interference with K

· Plaintiff must allege:

· The existence of a valid K between plaintiff and another contracting party;

· Defendant’s knowledge of that K;

· Defendant’s intentional procurement of a breach of that contract by the other party; and

· Damages

· Such a claim requires that the defendant’s sole motive was to inflict injury and that the defendant employed unlawful

· There can be no interference with a K at will

· Services and fees are already paid

· Agent offering and player signing K before player’s graduation was not illegal in this case but it was against public policy so the court wouldn’t enforce the K.

· In some states it is illegal for this to occur

· Agent bears the brunt of the K being declared void as he was more experienced and was richer.

Salary Cap

· Cap and cash figures are very different

· Cap number is a percentage of Defined Gross Revenues (DGR)

· DGR includes

1. TV revenues (Bulk)

2. Radio revenues

3. Gate receipts

· DGR is divided by # of teams then multiplied by the percentage the NFL comes up with (currently 68%) and that is the cap figure

· $1M/day fine for each day a team is over the cap

Example below is for a four year deal with $8M signing bonus

Year	Salary for Year	Cash	Cap
2001	$500,000	$8.5M	$2.5M
2002	$1M	$1M	$3M
2003	$1M	$1M	$3M
2004	$2M	$2M	$4M

· In the event that a player is released before the end of K:

· If released prior to June 1^st:

· Team takes the charge for the remaining signing bonus left on K on the salary cap number for that year

· If released after June 1^st

· Team has option to spread the remaining money left on signing bonus out over two years, or take it all in current year

· If player is traded the trading team is still responsible for the signing bonus on their cap

· Most NFL teams would rather take the cap hit in one year instead of spreading it out

· Incentives:

· Two types: Likely to be earned and Unlikely to be earned

· Likely to be earned is where a running back is promised $100K if he rushes for 1000 yards and he rushed for that or more last season

· Likely to be earned are charged to the salary cap when negotiated

· If player doesn’t earn it the team gets a credit the next year

· Unlikely to be earned is where a running back is promised $100K if he rushes for 1000 yards and last year he rushed for 999 yds. or less.

· Charged to the cap when he earns it

Amateur Athletics, 21

Antitrust Law, 11

Appropriate Conduct, 9

Assault, 6

assumption of risk, 8

Battery, 6

business monopoly, 19

bylaws, 3

Comparative negligence, 9

competing leagues, 5

Congressional inaction, 12

Contract Formation, 1

Contributory negligence, 8

Discrimination on the Basis of Union Activity or Membership, 16

draft, 14

Duty to Bargain, 17

enjoin, 5

Federal Baseball, 11

fiduciary, 25

foreseeable, 7

foul, 7

Franchise player, 1

fundamental fairness, 12

golf, 9

hand written clause, 4

Heightened standard, 8

How to plead a tort case, 8

implied cause of action, 22

Incentives, 26

Insurance, 8

Intent of the agreement, 20

Intentional interference with contract, 25

Intentional Torts, 6

Interpretation of Sports Contracts, 3

Jewel Tea, 19

Labor Exemption to the Antitrust Laws, 19

Labor Law & Professional Sports, 16

Location and Ownership of Franchises, 14

material breach, 3

Modified comparative negligence, 9

Money damages, 5

Negligence & Recklessness, 7

NLRA, 16

Offer & Acceptance, 1

Per Se Rule, 12

personal service, 5

Player Discipline, 14

Player Restraints, 13

Power of Termination in Professional Sports Contracts, 4

preliminary injunctions, 6

Recklessness, 10

Remedies for Breach of Contract, 5

renewal, 6

reserve clause, 12

Role of the Commissioner, 1

Rule of Reason, 12

Salary Cap, 25

Sherman Act, 12

signing bonus, 4

Signing Bonuses, 2

simple negligence, 8

specific performance, 5

Sports Agents, 24

stifle competition, 19

The Labor Exemption Doctrine in Professional Sports, 20

The Subject Matter of Collective Bargaining, 18

Title IX, 24

Torts, 6

umpires, 16

unincorporated associations, 22

voiding a contract, 3

Waivers, 10

Warm-ups, 9

Wright line Analysis, 16

Back to Sports Law

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