Sports Law Blog gets attention

Marc's post on the Gregg Williams suspension got some pub from reporter Stefan Fatsis on this week's Hang Up and Listen podcast on Slate. Fatsis seems to be a regular reader of the blog; he interviewed me for an NPR speech on fan speech a few years ago.

New Sports Illustrated column: What Hurdles Remain for Dodgers Sale?

I have a new column for SI on a group that includes Magic Johnson wining the bidding process for the Dodgers and what issues remain.  They include factors that will be considered by a bankruptcy judge on April 13 and how debt financing plays a role in Major League Baseball's evaluation of the winning bid. 

Hope you have a chance to check out the column.

Odds

Tassos Kaburakis and I recently had the chance to collaborate on a research project looking at gambling in the EU. Our findings were just published in the new issue of Business Law International. The abstract is below. Our follow-up piece focuses on the US exclusively and is slated for publication later this year. Among other things, our US-specific article looks at PASPA on the statute's 20th anniversary.

Using law and policy as a sustainable competitive advantage source is a recent research stream. This paper illustrates how legal and policy research contributes to firms’ strategy in the regulated gambling industry, defined by legislation and jurisprudence. The gambling sector has been a microcosm of European integration and harmonisation challenges, as well as promising opportunities. Research on European Court of Justice case law in the period 1990-2010 and on recent policy developments yields significant findings for firms wishing to compete in the gambling industry, in which entry barriers have traditionally been high due to restrictive regulation. Following the latest European Court of Justice decisions in September 2010 and the ensuing policy impact across Europe, gambling operators are prudent to invest in litigation, lobbying, continuous legal and policy monitoring, and establishment of regional gambling sites in jurisdictions they would have been preempted from pursuing heretofore.

Football Agents: Back on Campus

After almost five years, the NFLPA decided to rescind the “Junior Rule” yesterday. This rule, enacted and enforced by the NFLPA, specified that agents were not allowed to contact a college player until after their junior year—specifically, either after their last regular season or conference championship game or December 1st, whichever came later. Since the NFL’s CBA requires that three regular seasons have completed before a player may be drafted, the intent was to reduce unnecessary contact between draft ineligible student-athletes and agents.

In theory, this rule made sense; in practice it became an unbridled disaster for the industry. The competition to sign student-athletes is fierce and this rule became a wedge between agents who completely ignored it and those who tried to follow the law. Unfortunately for the NFLPA and their agents, since contact with a student-athlete is not prohibited by the NCAA, by and large student-athletes and institutions neither cared about nor enforced this rule.

The result was that agents were forced to decide between abiding by this rule or losing potential clients to their competitors who largely ignored this prohibition. Furthermore, even if agents themselves decided to follow the law, they skirted its intent by hiring runners or representatives to recruit for them. Since the NFLPA has no jurisdiction over anyone not certified by the union, the industry saw an explosion of runners who descended on college campuses across the country.

Yesterday, the NFLPA, by a vote of the player representatives, rescinded the “Junior Rule.” What this means is that schools across the country must be even more prepared to educate their student-athletes. The good news is that the game has changed from enforcement to education. The bad news, how many schools take educating student-athletes in this transition process seriously?

The NFL's Next Legal Challenge Comes From Within

The NFL continues to push the boundaries of antitrust and labor law. The latest incident has to do with an ongoing debate between two teams--the Dallas Cowboys and the Washington Redskins--and the league itself. Charges of collusion abound. Here is a summary of the events that triggered this conflict.

1. March 8, 2006: With CBA expiring, Commissioner Paul Tagliabue asks the owners to extend the agreement through the 2012 season. Every owner except Mike Brown of Cincinnati and Ralph Wilson of Buffalo votes to do so. However, a stipulation is put in the CBA extension is that owners can opt out in ’08 and cut the CBA’s length by two years. A provision is put in the CBA that means if the owners opt out, the last year of the agreement (2010) will not include a salary cap.
2. An uncapped year was intended to act as a “poison pill” for both the NFL and NFLPA. The NFLPA was in favor of an uncapped year because they anticipated teams would spend over this artificial ceiling if there are no restrictions. The NFL was in favor of this provision because there were clear limits on free agency that the NFLPA opposed.
3. May 20, 2008: The NFL owners vote unanimously to opt out of their collective bargaining agreement. Without action, CBA will expire March 3, 2011.
4. March 5, 2010: The 2010 league year begins with no salary cap, again, a provision originally meant to motivate sides to extend CBA.
5. 2010 NFL Season: played, but no salary cap.
6. During this season, two teams go over what would have been the artificial salary cap—the Washington Redskins & the Dallas Cowboys. This is done partly by front-loading salaries from long contracts into 2010 season.
7. Important note: All contracts were approved by NFL Management Committee.
8. Winter/Spring 2011: NFL Lockout
9. July, 2011: Owners ratify new CBA.
10. NFL, via the NFL Management Council, comes down on Redskins & Cowboys by punishing them for going over cap in 2010. Both teams were penalized for overloading contracts in the 2010 uncapped season despite league warnings to restrict doing so. Washington has been given a $36 million reduction over two years, while Dallas loses $10 million. Each must take at least half the reduction this year.
11. Why is the league upset over this overspending? Teams had been warned by the league not to structure contracts in such a way, because it could negatively affect competitive balance in 2011 and beyond, when a new collective bargaining agreement was expected to kick in. By dumping large financial guarantees into the uncapped year, Washington and Dallas not only were able to retain or sign potential impact players, the league contends, but also have greater salary-cap flexibility under the new CBA.
12. Finding by NFL that this action "created an unacceptable risk to future competitive balance".
13. No dispute from the NFLPA since they agreed to allow the NFL to take this cap space from the Cowboys and from the Redskins and redistribute the money to other teams. Why? NFL offered to help pump up the 2012 team-by-team salary cap in exchange for the union’s agreement. Also NFLPA Exec Dir DeMaurice Smith up for reelection.
14. Redskins and Cowboys contest this decision for two main reasons: one, the Management Council approved the contracts; and two, how could they be at fault when there was nothing in writing that prohibited them from structuring contracts as they did? Also, the NLFPA could file charges that the owners colluded to try to suppress wages.
15. The NFL Management Council is Co-Chaired by New York Giants owner John Mara, whose team happens to compete in the NFL East against the Redskins and Cowboys.
16. Statements made by each party include:

a. The Redskins statement:
“The Washington Redskins have received no written documentation from the NFL concerning adjustments to the team salary cap in 2012 as reported in various media outlets. Every contract entered into by the club during the applicable periods complied with the 2010 and 2011 collective bargaining agreements and, in fact, were approved by the NFL commissioner's office. We look forward to free agency, the draft and the coming football season.”

The Cowboys statement:
“The Dallas Cowboys were in compliance with all league salary cap rules during the uncapped year. We look forward to the start of the free agency period, where our commitment to improving our team remains unchanged.”

The NFL statement:
"The Management Council Executive Committee determined that the contract practices of a small number of clubs during the 2010 league year created an unacceptable risk to future competitive balance, particularly in light of the relatively modest salary cap growth projected for the new agreement's early years. To remedy these effects and preserve competitive balance throughout the league, the parties to the CBA agreed to adjustments to team salary for the 2012 and 2013 seasons. These agreed-upon adjustments were structured in a manner that will not affect the salary cap or player spending on a league-wide basis."

17. As indicated in CBA, teams suing NFL go to arbitration, which in this case is Special Master Prof. Stephen Burbank at Wharton.

"Tar Heel Tear Down": UNC Sanctions and Implications for the U

The long anticipated sanctions handed down to the University of North Carolina on March 12^th were yet another blow to a major college program in what has been a decade replete with NCAA sanctions. In the Football Bowl Subdivision (FBS) alone, thirty-seven programs have been sanctioned to some degree over the past ten years. Of those thirty-seven programs, four were banned from postseason play, eighteen were stripped of scholarships, fourteen faced recruiting restrictions, and all were given probation. Accompanying these sanctions, six show-cause orders have been issued, preventing the inculpated coach from working at the college level without NCAA approval.

The UNC case follows the well-documented sanctions delivered to the University of Southern California (USC) in 2010 and the Ohio State University (OSU) in 2011. USC was stripped of its 2004 National Championship, forced to vacate its 2005 season, and given a two-year postseason ban. OSU was saddled with probation, a one-year postseason ban, and a reduction in football scholarships. In both the USC and OSU cases, part of the violations stemmed from coaches who had knowledge of violations and either fostered continued non-compliance, or did not take proper preventative measures. As UNC recently learned, staff transgressions prompt stiff punishment.

As described by the NCAA’s Public Infractions Report, UNC’s violations stemmed from three separate circumstances: (1) a former tutor committing academic fraud with student-athletes and providing impermissible benefits to student-athletes; (2) the provision of impermissible benefits to student-athletes by various individuals, including sports agents and their associates; and (3) unethical conduct by a former assistant coach. The report links at least eleven former student-athletes to a variety of improprieties occurring while members of the UNC football team. John Blake, the implicated Assistant Coach, had a working relationship with now deceased sports agent Gary Wichard, and reportedly steered players toward his agency.

For these indiscretions, UNC was given a one-year postseason ban, prohibiting the team from playing in the 2012 ACC championship game and any subsequent bowl game. The program was also placed on probation for three years, and stripped of five scholarships for each of the next three years. Blake was issued a three-year show cause order. The University had already placed its football program on a two-year probation, cut three scholarships per year for three years, and vacated wins from the 2008 and 2009 seasons, but the NCAA viewed these self-imposed sanctions as insufficient and issued the dreaded postseason ban.

Interestingly, what is absent from this Infractions Report, is punishment for UNC directly tied to a failure to monitor social media, which was a charge in the Notice of Allegations. It is clear that at least one violation (receipt of impermissible benefits by Marvin Austin) would have been discovered by even a cursory review of his Twitter account. The Infractions Committee, however, declined to impose a blanket duty on institutions to monitor social media. Instead, the Committee held that a duty to monitor social media may arise if an institution has a reasonable suspicion of rules violations by an individual student-athlete. The Committee concluded its comments relative to social media monitoring by punting to schools and conferences: “[i]f the membership desires that the duty to monitor social networking sites extend further than we state here, the matter is best dealt with through NCAA legislation.” For a more detailed discussion of monitoring social media, see my recent law review article published by the University of Mississippi School of Law: “ ‘Student-Athlete.O’ Regulation of Student-Athletes’ Social Media Use: a Guide to Avoiding NCAA Sanctions and Related Litigation.”

The sanctions that were leveled against UNC are generally consistent with those imposed upon USC, OSU and others, and may provide a glimpse into future punitive action by the NCAA. The investigation that bears monitoring in the coming months is the well-documented allegations against the University of Miami. In the shocking account detailed in a Yahoo! Sports August report, Nevin Shapiro, a former University booster, claims that from 2002 to 2010 he provided impressible benefits to seventy-two players including: prostitutes, jewelry, travel, and even funds for an abortion after a player allegedly impregnated a stripper. According to the report, at least seven Miami staff members knew about the benefits being conferred, and some even steered athletes toward Shapiro.

If these allegations prove true, penalties against Miami will assuredly exceed those levied against UNC because if these precedential cases prove anything, it’s that complicit knowledge amongst coaching staff members is reprehensible in the eyes of the Association. Misdeeds by authority figures entrusted with the care of student-athletes implicate an institution far more than the exploits of teenagers and rogue outsiders. If even a fraction of the egregious acts alleged in the Miami case are substantiated, a multiple-year post season ban is likely, and numerous coaches may find themselves strapped with a show-cause penalty. Presently, much attention is paid to providing proper compliance education to student-athletes, but in light of these cases, institutions may need to start devoting more resources for compliance education of coaches and support staff, and not just the athletes working under their tutelage.

Hat tip to law clerks Brian Konkel and Gabriela Schultz for their work on this piece.

The Gregg Williams' NFL Suspension: Logical Yet Perhaps Illegal

Most NFL fans were appalled to learn about former New Orleans Saints defensive coordinator Gregg Williams' bounty system that paid his players for injuring opponents. In light of growing concern about retired NFL players' health, Commissioner Roger Goodell swiftly suspended Williams indefinitely from the league.

Thus far, Goodell's suspension of Williams has received overall positive press. However, even if fans are happy to see Williams go, their feelings beg an entirely different question: did Roger Goodell have the legal authority as a governing figure on behalf of the 32 teams to ban Williams from practicing his profession as a pro football coach?

If challenged under Section 1 of the Sherman Act, Goodell's attempt to indefinitely suspend Williams serves as an interesting test case to the modern view of antitrust law's Rule of Reason. As the NFL will most likely note, back in 1961 the U.S. District Court for the District of New York ruled in the case Molinas v. Nat'l Basketball League that a league commissioner may indefinitely suspend a player on moral grounds. However, since the Molinas case was decided (which, of course, only came from a single district court), courts' interpretation of antitrust law's Rule of Reason has changed significantly.

Most notably, in the 1978 U.S. Supreme Court case National Society of Professional Engineers v. United States, the high court explained that antitrust law's Rule of Reason should not turn "on a court's intuitive judgment of whether a particular practice seems sensible and equitable, but rather on economic analysis." In other words, unlike in past decisions such as Molinas, public policy grounds no longer serve a clear place in a proper antitrust analysis.

In light of the Supreme Court's holding in both Professional Engineers and its progeny, I have repeatedly argued that indefinite commissioner suspensions in professional sports leagues are generally no different from illegal group boycotts. This argument is especially powerful where the suspended party is an NFL coach because NFL coaches are not unionized and thus their suspensions lie outside of antitrust law's non-statutory labor exemption.

Interestingly, a rarely discussed footnote in Professional Engineers (footnote 22) leaves open a small gray area if the main purpose for a restraint of trade is to protect a collective entity from "product liability." Given the bona fide liability concerns that would flow to NFL teams by allowing continued employment of a coach that has encouraged physical harm to players, Goodell's suspension may fall firmly within the spirit of this Footnote 22 caveat.

Nevertheless, footnote 22 of Professional Engineers is vague, and its successful application has been rare. In addition, footnote 22 relates specifically to product markets and not to labor markets, where upholding such a restraint would entirely prevent one from practicing his chosen avocation.

In this vein, courts have been frequent to uphold the general position that no matter how laudable one's intentions, separate businesses are forbidden from coming together to form an extra-governmental entity that provides rules for the regulation and restraint of interstate commerce. According to most courts, the power to regulate such trade is a power reserved for the government and not trade associations, even where a trade association's leader has honorable intentions.