Sports Law Blog

All things legal relating
to the sports world...

Tuesday, May 14, 2013

Sports Illustrated: The 15 Most Influential Sports Agents

For Sports Illustrated, I write and discuss who I consider to be the 15 Most Influential Sports Agents.

Here's my entry for Scott Boras, #2:

2. Scott Boras

Boras Corporation President
60 years old

You know you've made it when teams' personnel decisions are shaped by whether players have you as their agent. And you know you've really made it when a league changes its draft rules because they don't know how to beat you in a free market. "He's a Boras client" is a phrase uttered by baseball executives with irritation, fear and admiration. It means the player is likely to test the market whenever he can become a free agent and will probably go to the highest bidder. It also means the player's advocate will make a sales pitch like no other. Scott Boras negotiated Alex Rodriguez's 10-year, $252 million deal with the Rangers, Barry Zito's 7-year, $126 million deal with the Giants and literally dozens of other free-agent contracts that seemed over-priced then and now. He also arranged for top draft picks -- including J.D. Drew and Jason Varitek -- to play in independent baseball leagues as a way of obtaining negotiation leverage. Baseball has instituted new rules capping how much teams can spend on drafted players, rules which Boras derided as "mockery" but were in fact a tribute to him.

To read the rest of the list, click here.

-- Posted by Michael McCann @ 5/14/2013 08:46:00 PM -- Comments (0) -- Post a Comment

Saturday, May 11, 2013

"Pros or Cons" Thoughts For The Modern "Sports Attorney" - Part IV

Sports Law Blog is publishing a 5-part series on the practice of sports law. The series is co-authored by Peter Jarvis, a legal ethics and professional responsibility attorney with Hinshaw & Culbertson, LLP in Portland, Oregon and Jason Davis, a California attorney currently residing in Seattle, Washington. These posts will appear on Saturdays. First post can be read at this link, the second at this link and the third at this link. Here is the fourth:

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"Pros or Cons" Thoughts For The Modern "Sports Attorney"

( jason.a.davis.esq@gmail.com, @JasonDavisEsq1 & pjarvis@hinshawlaw.com)

(ARTICLE #4)

The Lateral Pass (Association and Networking)

The quarterback throws, the running back runs, and the kicker kicks. Each member of a team serves a distinct and valuable purpose. Although a sports attorney may at times need or be tempted to wear a number of different hats, it is important to remember which hats are the most important, which are necessary, and which are problematic.

In our continuing hypothetical, Mega Star's requests of Attorney Al include the organization of Mega's motivational speaking business and the filing of Articles of Incorporation for Mega's motivational speaking business in Delaware and legal advice in connection with Mega's purchase of a vacation home in Florida.

As a first question, one might consider whether Al already has the legal competence to handle these Delaware and Florida matters. If not, then he will either have to take the time to learn enough law to make himself competent or, alternatively, to associate with someone who already has the requisite degree of competence.

It does seem highly unlikely, however that Delaware would view Al's formation of a Delaware corporation as the unauthorized practice of Delaware law. If Delaware law did so, the state could not play the preeminent role that it plays in corporate formation on a national level. Whether Al's involvement in a single real estate transaction for a non-Florida resident would provide him with sufficient Florida contact to subject him to the Florida RPCs would have to be addressed under Florida RPC 4-8.5, though it seems to us that that should not be enough. It should be clear, however, that Al's likelihood of being subject to the Florida RPCs will be materially greater if he regularly helps clients buy Florida real property.

In our next and final installment in this series, we will look at a further real reason why Al may want to "share the glory."

-- Posted by Michael McCann @ 5/11/2013 10:00:00 AM -- Comments (0) -- Post a Comment

Thursday, May 09, 2013

Ending home-game blackouts?

Introducing legislation is easy, enacting it is hard. So an all likelihood this is not going anywhere. John McCain today introduced the Television Consumer Freedom Act of 2013, which primarily would allow cable companies to offer channels a la carte, rather than exclusively in packages.

But buried in § 5 of the bill is a provision that would eliminate blackout regulations for games played in stadiums that were financed, in whole or in part, by federal, state, or local government. This would repeal a portion of the Sports Broadcasting Act of 1961, passed at the urging of NFL Commissioner Pete Rozelle, which allows teams to blackout home games in local markets. McCain described the practice of preventing taxpayers from watching games played in arenas that their tax dollars had paid for as "unconscionable." Many of my ideas on fan speech depend on legal consequences and limitations attaching to public financing of sports venues, so I am glad to see the bill relying on the same idea.

Of course, most legislation is introduced for show and there is no apparent groundswell of public or legislative support for this, so I do not expect the bill to go anywhere. And it has more than a little whiff of McCain trying to play populist maverick against the broadcast/cable industries (recall that McCain criticized radio stations for the boycott of the Dixie Chicks in 2003). Still, it is an interesting proposal to watch.

-- Posted by Howard Wasserman @ 5/09/2013 10:34:00 PM -- Comments (0) -- Post a Comment

O'Bannon Case Update: Discovery

The O'Bannon v NCAA case crawls along. Presently the courts are trying to determine the scope of discovery leading up to the trial itself. There was a hearing yesterday (May 8th) in San Francisco before U.S. Magistrate Judge Nathanael Cousins, in part, to determine from whom the plaintiffs would be allowed to take depositions. This is an important step in the process as the case heads progresses towards the June 20th hearing before U.S. District Judge Claudia Wilkins on class certification.

In terms of depositions, Judge Cousins decided that:

The plaintiffs MAY depose:

1. Big Ten commissioner Jim Delany
2. Horizon League commissioner Jon LeCrone
3. Frenso State president John Welty

At this time, the plaintiffs MAY NOT depose:

1. Texas athletic director DeLoss Dodds
2. Missouri Valley commissioner Doug Elgin
3. Big 12 commissioner Bob Bowlsby
4. NCAA managing director of research Todd Petr.

For a detailed report on yesterday's proceedings, and comments from both sides, you can read the excellent piece by Steve Berkowitz of USA Today here.

Additionally, Jon Solomon of the Birmingham News write about the fact that a former EA Sports employee admitted in his deposition that the programmers absolutely tried to replicate college players.......conflicting an initial defense offered by the NCAA. In his story, which can be read here, Solomon says:

"Jeremy Strauser, who worked at EA from 1995 until 2011, testified last December that computer-game avatars were linked to specific player identifying numbers and biographical information, such as team depth charts, was used to make the game realistic. "We generally tried to make the players perform as their real life counterparts, short of their name and likeness," Strauser testified."

Stay tuned.....

-- Posted by Warren K. Zola @ 5/09/2013 12:00:00 PM -- Comments (0) -- Post a Comment

Sports, video, and procedural rules

This story captures why people like me like using sports to illustrate legal ideas.

1) The umpires went to video review of a disputed non-Home Run call. And despite everyone (including the opposing team's announcers) believing the ball was a home run, the umps upheld the call. Why? Because video review still involves judgments and inferences, depending on the angle and what each individual sees. Contra Justice Scalia, the video does not necessarily speak for itself; someone has to figure out what the video is saying and that is going to vary on the viewer. Video just gives sports fans another thing to argue and complain about with respect to umpires.

2) The manager for the losing team was thrown out after this happened. Baseball has specific rules on what and how you can argue with umpires. One rule is that if a manager requests video review, he cannot argue over the results of that review (much as he cannot argue balls and strikes). Nor can he protest the review decision to the league, which is a non-reviewable judgment call. So you can make a motion, but not a motion for reconsideration. And you cannot appeal.

-- Posted by Howard Wasserman @ 5/09/2013 10:32:00 AM -- Comments (0) -- Post a Comment

Legal Analysis of Vijay Singh v. PGA Tour

I have an article for Golf.com on Vijay Singh's lawsuit against the PGA Tour over his would-be suspension for using deer antler spray (which he admitted to in a Sports Illustrated story by David Epstein and George Dohrmann).

Here's an excerpt of my article:

He also takes sharp aim at what he portrays as a disingenuous right to appeal the suspension. According to the lawsuit, the PGA Tour told Singh in February that if he appealed the 90-day suspension, the suspension would not begin until after an appeal was heard in May and was found unsuccessful. Pending the appeal, Singh could continue to play on the PGA Tour. Singh, however, claims the PGA Tour told him that any money he earned during the pending period would have to be put in escrow and subject to forfeiture if he lost the appeal.

In other words, if Singh appealed and lost, he would have lost more than 90 days’ worth of money: he would have forfeited any money he earned while pending appeal, plus money he could have earned over the 90-day suspension.

In Singh’s view, the message was clear: he would be punished for appealing. Singh insists no other golfer has been subjected to this arrangement and that it constituted bad faith.

To read the rest, click here.

-- Posted by Michael McCann @ 5/09/2013 09:05:00 AM -- Comments (0) -- Post a Comment

Tuesday, May 07, 2013

Flood v. Kuhn Reenactment

Readers in the Washington, D.C. area may be interested in attending an upcoming event organized by the Supreme Court Historical Society where the oral argument from the 1972 Supreme Court case of Flood v. Kuhn -- affirming baseball's historic exemption from antitrust law -- will be reenacted. The event is scheduled to be held at the Supreme Court on Wednesday May 22nd, with Justice Sonia Sotomayor presiding. More information for the event, which costs $75 to attend, is available here.

-- Posted by Nathaniel Grow @ 5/07/2013 07:00:00 AM -- Comments (0) -- Post a Comment

Monday, May 06, 2013

The truth about past relationships

NBA player Jason Collins famously came out as gay last week, the first active player in a major U.S. team sport to do so. The reaction was the expected mixed bag. One mini firestorm erupted over comments by media critic Howard Kurtz, who chastised Collins for not owning up to his having been engaged to a woman. Unfortunately for Kurtz, Collins actually mentions his engagement (along with the fact that he dated women) in the eighth paragraph of the Sports Illustrated cover story. Kurtz apologized--initially in a typically half-assed fashion, then more unequivocally--and was grilled about it on CNN, stating "I deserve the criticism, I accept it and I am determined to learn from this episode." He also was terminated from The Daily Beast, although he insists this was in the works for a while and the timing was a coincidence.

Criticisms of Kurtz, and his apology, all focus on the factual error of his criticism. But this suggests that had Kurtz been correct and Collins had not mentioned the engagement, Kurtz's criticism would have been justified. Is that right? hat bothered me about Kurtz's initial story (but that I did not see discussed) was the stupidity of his premise: Collins was not being completely honest or forthcoming in excluding the detail of his engagement from the SI story. When a public-figure comes out, does the story really have to be "complete" and does that completeness necessarily include details about past heterosexual sexual activity? And how deep does this run--what is it, exactly, that Kurtz believes the public is entitled to know? Is it only the engagement about which Collins was obligated to "come clean"? Is it all dating? Is it the number of heterosexual sexual partners? Collins is 34 years old and only recently (within the past several years) came to understand his sexuality. It stands to reason that in the decade-plus between puberty and his coming out, he dated and had relationships, perhaps even long-term and serious relationships, with women. But why is that fact remotely relevant to the story of his coming out? Does it make him less gay? Does it make his story less sympathetic that he behaved as many closeted (or unrealizing) GLBT people do and as people have been forced to do by society, particularly in the world of team sports?

-- Posted by Howard Wasserman @ 5/06/2013 02:35:00 PM -- Comments (0) -- Post a Comment

Additional Thoughts on the Economics of College Athletics

To follow up on Warren's and Rick’s informative posts, I thought I’d add a couple of somewhat countervailing thoughts to the discussion (I haven't had a chance to fully digest the expert reports linked to in Warren's post, so some of these points may be addressed in those filings). I’ll preface this by stating that I completely agree with the critics of the NCAA that the organization is woefully in need of significant reforms, and also agree as a matter of fairness that college athletes deserve a greater share of profits they generate.

Nevertheless, it seems that the debate over whether to pay college players often broadly generalizes the issue across all 340+ Division I schools. In reality, though, the profitability of university athletic departments varies greatly across Division I. While the SEC, ACC, Big 10, Big 12, Pac 10, and former Big East programs all undoubtedly make significant profits when their football and basketball revenues are accurately accounted for, that is not the case for many of the so-called mid-major and low-major Division I schools. For instance, USA Today compiled a chart for all Division I public schools listing the percentage of each athletic department’s funds that came directly from the college or university from 2006-2011:

http://usatoday30.usatoday.com/sports/college/story/2012-05-14/ncaa-college-athletics-finances-database/54955804/1

As the USA Today chart reveals, as much as 70-80% of the athletic budgets for many mid- to low-major schools is diverted from other university funds (in many cases, coming directly from student fees). While this data is a little dated, I do not believe the situation has appreciably changed over the last two years. So I think there is some merit to the argument that paying college athletes would have a significant impact on the continued feasibility of many Division I athletic programs, as that added expense would likely make continued participation at the Division I level impractical, if not impossible, for many lower ranking Division I institutions.

Of course, one could easily imagine a scenario in which only those schools that make a profit in football or basketball would need to pay their players. But that would, for better or worse, undoubtedly result in a very different structure for college athletics than the one we have today. For instance, it would almost certainly entail splitting the so-called BCS conferences off from most of the rest of the mid-major and low-major conferences – effectively creating an additional tier within Division I – as it would be nearly impossible for these lower ranked schools to effectively compete with programs that pay their players. As a result, I fear that at a minimum the NCAA college basketball tournament would lose a lot of its current appeal – at least in the early rounds – without the participation of the Cinderella teams that make the first weekend of the tournament so exciting.

Moreover, I suspect that paying basketball and football players would also result in a number of schools (including many of those belonging to BCS conferences) reducing the number of non-revenue generating sports that they offer. This ripple effect seems to go overlooked at times in these discussions.

None of this is necessarily intended to argue that these considerations should outweigh the fairness issues involved in depriving college football and basketball players a greater share of the revenue they produce. I'm merely contending that paying college athletes would in fact have a profound effect on college athletics in a number of ways that, it seems to me, are not always fully discussed in this on-going debate.

Finally, on a different note, I can't help but wonder how college basketball and football players themselves come down on these issues. In my (admittedly limited) experience, many athletes do not necessarily want a significant share of the revenues they generate, but rather would simply like to receive an additional stipend enabling them to live more comfortably on campus, and perhaps receive some financial assistance so that their immediate family and friends -- who can't otherwise afford it -- can travel to see them compete in big games. In fact, my sense is that many athletes don't mind that a significant share of the profits they produce help subsidize the vast array of non-revenue generating sports programs at most D-I schools. I'm not sure if anyone has completed a survey of college athletes' perspectives on these issues, but I think that the data from such an undertaking would be enlightening.

-- Posted by Nathaniel Grow @ 5/06/2013 07:00:00 AM -- Comments (0) -- Post a Comment

Saturday, May 04, 2013

"Pros or Cons" Thoughts For The Modern "Sports Attorney" - Part III

Sports Law Blog is publishing a 5-part series on the practice of sports law. The series is co-authored by Peter Jarvis, a legal ethics and professional responsibility attorney with Hinshaw & Culbertson, LLP in Portland, Oregon and Jason Davis, a California attorney currently residing in Seattle, Washington. These posts will appear on Saturdays. The first one is available at this link and the second at this link. Here is the third one:

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"Pros or Cons" Thoughts For The Modern "Sports Attorney"

( jason.a.davis.esq@gmail.com, @JasonDavisEsq1 & pjarvis@hinshawlaw.com)

(ARTICLE #3)

Know the Rules - "The Immaculate Misconception" (UPL)

One of the most dramatic moments in football is when a wide receiver leaps for a long pass in the end zone. His arms outstretched, while attempting to drag his feet to stay in bounds, he maintains control long enough to complete a touchdown. Similarly, a sports attorney may find him/herself having to stretch to their capacity for the benefit of the client, while staying within the limits of the law (ethical or otherwise).

The determination of what is and isn't the practice of law is not subjectively determined by the attorney, but rather by the jurisdiction to which activity transpires. In our sample scenario, Mega Star asks Attorney Al to negotiate possible contracts with the California and Texas teams. Such negotiations may well require Al (and certainly Mega, if he signs) to travel to those states and could, for that matter, lead to contracts governed in whole or in part by the law of those states.

Suppose, then, that Al negotiates and Mega signs a contract with either the California or Texas team, and suppose further that all reasonable minds would agree that the choice of ethics law rules would require the application of California or Texas law. Does that mean that Al would be guilty of the Unauthorized Practice of Law in either of those states? Not necessarily.

In either jurisdiction, the negotiation of a contract for a third party would likely be considered a part of the practice of law. In other words, the practice of law is not limited to litigation. At risk of some potential oversimplification, it also includes advising others for a fee about their contract rights in negotiations. Almost all states now recognize at least some degree of "temporary" in-state lawyering which does not violate the state's Unauthorized Practice rules. In California, for example, Al might have a solid argument that since his client, Mega, was a New York resident at the time and since he was only occasionally in California for purposes of those negotiations, he should not be subject to the California RPCs. See, e.g, Estate of Condon (1998) 65 Cal. App. 4th 1138, 76 Cal. Rptr. 2d 922. See also, 2013 California Rules of Court, Rule 9.48.

In Texas, the result may be less clear, but one can at least hope that the same result should follow. Cf. Texas RPC 5.05. To the extent that Al has doubts under either state, he certainly could cut his risk by associating a lawyer licensed in the state in question.

-- Posted by Michael McCann @ 5/04/2013 10:00:00 AM -- Comments (0) -- Post a Comment

Friday, May 03, 2013

Comparing the Economic Investment and Incentive of Universities and Professional Teams in the Context of Licensing Broadcast Rights

Furthering the discussion of the topic of Warren's post yesterday, the economics of college athletics calls into question the exclusive right of universities, conferences and the NCAA to sell and license the broadcast rights. This purported exclusive property interest in college sports has never been challenged. The rationale for protection of the right to exploit game broadcast rights is presumably based upon the professional sports broadcast licensing model and the underlying rationale set forth in the Pittsburgh Athletic case, which is that protection provides an economic incentive to make the investment required to produce a performance of interest to the public (which is essentially the underlying rationale for copyright protection) as well as the prevention of unjust enrichment due to the substantial investment required to produce the event.

But college and professional sports are not at all similarly situated in terms of the extent of the investment made or the incentive to make it, which makes recognition of the exclusive property right less compelling. First, the extent of the investment made in college sports is much less because the producers do not compensate the players who make the live event possible. Indeed, in justifying a professional team's property right in Pittsburgh Athletic, the court specifically mentioned the substantial expense of professional team owners in paying the players whose performances are what drive consumer interest and demand and thereby contribute substantially to the monetary value in the broadcast for which networks are willing to pay substantial rights fees. Additionally, professional team owners, unlike the producers of college sports, make a substantial investment in the purchase price for their ownership interest in the club.

Second, the for-profit/not-for-profit distinction between professional and college sports changes the economic incentives to make the investment, in that professional team owners put their personal funds at risk for the prospect of earning a profit and return on their investment. In college sports there is no expectation of return on investment in an ownership sense. The individuals who support and make monetary investments in a university's athletic program are taxpayers, students, and private donors. However, unlike professional team owners, the investment of these individuals is certainly not based or dependent upon the university's ability to exploit game broadcast rights. Moreover, universities, unlike for-profit professional teams, do not need an economic incentive to produce a game of interest to the public. Indeed, according to the NCAA and its member institutions themselves, athletics is an integral part of the university's educational mission and the purpose of intercollegiate athletics is not to profit but to enhance the educational experience and the student body.

In my view, the economic reality of Division I college football and basketball presents a classic unjust enrichment scenario in which the exponentially increasing rights fees the NCAA, conferences, and universities continue to engorge at the players' expense is increasingly becoming more unjust.

-- Posted by Rick Karcher @ 5/03/2013 08:37:00 AM -- Comments (0) -- Post a Comment

Thursday, May 02, 2013

The Economics of College Athletics

As the O'Bannon v NCAA litigation progresses, ever so slowly, through our legal system, there is one defense that gets tossed around quite a bit--very few football or men's basketball programs actually make money. The argument, ergo, is that schools would be unable to compensate these athletes their fair market value without jeopardizing the existence of their entire athletic departments.

Recently, the NCAA released their latest "Division I Intercollegiate Athletics Programs Report on Revenues & Expenses" which can be accessed here. John Infante on the Bylaw Blog, an expert in NCAA issues, summarizes this report as follows:

23 athletic departments operated in the black last year, same as in 2011. By the NCAA's definition, this means the school's athletic department generated revenue exceeded expenses, and the athletic department needed no allocated revenue (i.e. subsidy) from the school to break even.
While revenues are going up, expenses are rising faster. Expenses in FBS were 10.8% in the last year, while revenues increased only 4.6%.
The median negative net generated revenue (generated revenue minus expenses) was a "loss" of over $12 million while the median positive net generated revenue was a "profit" of $8 million.

Not surprisingly, there is another opinion. Expert witnesses for the plaintiffs in the O'Bannon case submitted a document that describes a far different economic reality within Division I athletics. Dr. Daniel Rascher, a partner at OKSR, LLC, an leading economic consulting firm specializing in applying economic analysis to complex legal issues, submitted this document supporting the plaintiff's claim. While you are welcome to download this entire submission, and if you do pay careful attention to pages 59 through 99, Rascher argues a few main points:

1. The NCAA's financials are intentionally inaccurate:
2. Athletics departments operate within non-profit universities, thus there is less of an incentive (and mechanism) to show a profit;
3. That "athletic deficits" reflect the accounting practices of universities or the flow of revenues back into expenses rather than the inability of revenues to meet costs.....Within athletic departments it can flow into salaries for athletic staff (coaches, athletic directors, support personnel) or into facilities;
4. And finally a market in which all but a dozen or two programs out of 340-plus are losing money does not experience the sort of entry we have seen in Division I sports since the Board of Regents case ended the NCAA's television cartel in 1984.

Bottom line is we all know the quote "Lies, damn lies, and statistics...."

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While we are talking about the never ending legal case of O'Bannon v NCAA, documents were filed in court last week in anticipation of the June 20th class certification hearing. For those of you captivated by the arguments, or writing semester ending analyses of this case, I wanted to provide two important documents for your review.

1. Here is the "Reply Brief of Antitrust Plaintiffs in Support of Motion for Class Certification." This document supports the O'Bannon plaintiff's efforts for class certification. You can download this document here.

2. Please find the "Rebuttal Report of Dr. Robert McCormick in Support of Antitrust Plaintiffs' Motion for Class Certification. You can download this document here.

-- Posted by Warren K. Zola @ 5/02/2013 03:00:00 PM -- Comments (0) -- Post a Comment

Legal Perspectives on Morals Clauses and Endorsement Agreements

Reprinted with permission from The Delaney Report

Endorsement Agreements and the “Morals Clause”

Most endorsement agreements in which a company pays an athlete (or celebrity) to promote its products or services contain a “morals clause.” A morals clause allows a company to terminate, or otherwise take some corrective action against, an endorser who is tarnishing the company’s reputation based on some “immoral” conduct. This type of protection seems reasonable considering what a company invests and its goals in entering into an endorsement agreement. It is not unusual for a company to pay an athlete millions of dollars to be the public face for the company’s products, and then spend millions more to build its advertising and marketing campaign around the athlete so that the athlete’s name and achievements become associated with the company’s products. When the endorser’s talents and achievements are overshadowed by scandal or criminal conduct, the company understandably wants to part ways.

The key terms in a morals clause are the behavior triggering the morals clause and the company’s options when the clause is triggered. Typically, the athlete seeks to have the morals clause narrowly drawn so that only certain actions trigger the clause, such as a conviction of a felony. A company paying for the endorsement prefers a broadly worded morals clause giving it the right to terminate or sanction the athlete for a variety of transgressions. For example, there are many kinds of behavior that fall short of a criminal conviction that could tarnish a company’s image, such as public fights, arrests for drunk driving, drug use, criminal accusations (even if the charges are later dropped), and domestic scandals. A company may also want to be able to take action if the endorser criticizes its product or management.

A morals clause will likely spell out what action the company can take if the endorser’s behavior triggers the morals clause. Depending on the bargaining power of the athlete, the morals clause may allow the company to terminate the agreement, levy fines, recoup payments, pull the athlete’s products from stores, such as happened with Michael Vick, or not use the athlete’s image or likeness in advertisements.

Morals Clauses in the News

In the last few years, there have been many examples of athletes whose endorsement deals were terminated due to criminal, offensive or unseemly conduct from, Kobe Bryant to Tiger Woods to most recently Lance Armstrong and Oscar Pistorius. Even before he admitted to doping to win his seven Tour de France titles, Armstrong lost endorsement deals with Nike, Trek and Oakley following the U.S. AntiDoping Agency’s (USADA) decision to strip him of his titles. Although his confession does not constitute a conviction of a crime, it seems likely that there was some language in the morals clauses of his endorsement contracts that allowed these companies to terminate the agreements. Similarly with Pistorius, sponsors are distancing themselves from him or terminating their relationship with him because he has been charged with murder, even though he has not been convicted.

Sometimes a morals clause is triggered by behavior that would be considered “disreputable.” Pittsburgh Steelers running back Rashard Mendenhall entered into an agreement with Hanesbrands, Inc., in which he agreed to advertise and promote Champion brand products. The morals clause provided that “[i]f Mendenhall commits or is arrested for any crime or becomes involved in any situation or occurrence tending to bring Mendenhall into public disrepute, contempt, scandal, or ridicule, or tending to shock, insult or offend the majority of the consurning public or any protected class or gyoup,” then Hanesbrands will have the right to immediately terminate the agreement. Hanesbrands did in fact invoke the morals clause and terminated its agreement with Mendenhall immediately after the killing of Osama Bin Laden, he expressed unpopular opinions concerning Bin Laden, women and religion via his Twitter account. Mendenhall filed suit against Hanesbrands, claiming that the decision to terminate the endorsement agyeement was unreasonable, contrary to the course of dealing between the parties, and violated the covenant of good faith and fair dealing. The court hearing the case denied Hanesbrands’ motion to dismiss, suggesting that Hanesbrands’ decision to terminate the agreement might violate the covenant of good faith and fair dealing if it were arbitrary, irrational or unreasonable. Another contested issue was whether the public’s response to Mendenhall’s tweets rose to the level of “shocking, insulting or offending a majority of the consumer public or any protected class or group,” as required by the morals clause. The case was recently settled and the settlement terms have not been disclosed.

When To Invoke the Morals Clause

Even if a company can legally invoke the morals clause in an endorsement contract, it must still face the question whether doing so is a wise business decision. Is the conduct of the athlete of such a potentially damaging nature to the company that a continued relationship would be detrimental, and if so, what are the consequences to the company for terminating the agreement? In the case of an athlete endorsement agreement, for example, the company will typically consider several issues before terminating the agreement such as (1) the severity of the endorser’s transgression and the company’s audience, (2) the company’s investment in the ad campaign, including production costs for commercials, purchases of onair, online and print media space, and event sponsorship fees, (3) whether other commercials or individuals are available to fill the void created by terminating the endorser, and (4) the likelihood of litigation brought by the athlete.

Certain behavior by an endorser may be so reprehensible that a company should not hesitate to invoke the morals clause, but other types of behavior may be less damaging to the company. And a company should consider the demographics of its audience: for example, a younger audience may be more forgiving towards certain behavior than an older audience. Michael Phelps’ involvement with marijuana did not result in the termination of his Subway endorsement deal but Michael Vick’s involvement with illegal dog fighting resulted in his loss of his Nike endorsement.

Conclusion

With prominent athletes and celebrities seemingly so often embroiled in scandals, companies that sponsor them need to carefully consider morals clauses in their endorsement agreements. By focusing on the language and remedies permitted in a morals clauses, companies will be able to better protect themselves when a scandal hits.

-- Posted by Brian Socolow @ 5/02/2013 06:00:00 AM -- Comments (0) -- Post a Comment

Wednesday, May 01, 2013

Junior Seau, Head Trauma, and the NFLs Concussion Problem

Junior Seau (photo courtesy of Dave Sizer/Creative Common)

Junior Seau's suicide last year traumatized a family, a community, and a nation. Recently emerging evidence indicates that Seau suffered from severe brain damage in the years that preceded his death. Researchers found late stage chronic traumatic encephalopathy (CTE) when his brain tissue was analyzed in 2012. In fact, in dozens of cases where former National Football League (NFL) players (and their families) have consented to brain tissue analysis following death, an alarming percentage have been found to have been suffering from CTE before they passed away. Momentum continues to grow for the NFL and tackle football organizations throughout the United States to begin to minimize the incredible amount of head trauma that most football players subject themselves to.

My article Junior Seau, Head Trauma, and the NFLs Concussion Problem has just posted to SSRN. It will appear soon in the University of Mississippi Sports Law Review. The article is based on my remarks at the NFL Concussion Litigation symposium that was hosted by the Ole Miss Sports Law Society on November 9, 2012. A simulcast of the symposium can be accessed here.

From the article abstract:

"By all accounts, Tiaina 'Junior' Seau was an extraordinary professional athlete. Seau’s career in the National Football League (“NFL”) spanned two decades as he battled furiously as a linebacker for the San Diego Chargers, Miami Dolphins, and the New England Patriots. His performance on the field of play was exceptional; he was selected to the Pro Bowl twelve times and will most certainly be voted into the NFL Hall of Fame when he becomes eligible in 2015. Despite Seau’s unparalleled career, athletic accomplishments, and financial rewards, he committed suicide on May 2, 2012, at the age of 43, just two years after his retirement from professional football. While newspaper accounts in the immediate aftermath of Seau’s suicide recounted an impulsive man who became disconnected, volatile, and erratic following his retirement from the NFL, his family speculated that this erratic behavior and disconnectedness were uncharacteristic of the man that befriended thousands, and was unfailingly committed to representing the Seau name with honor. Upon his suicide, some speculated that repeated concussive head trauma and brain disease led to Seau’s devolving behavioral changes and ultimate suicide.

During Seau’s twenty-year NFL career, he was never diagnosed with a concussion, nor did he miss a game because of concussion-like symptoms. This single fact alone is stunning because following Seau’s suicide, the National Institute of Health (NIH) conducted neutral/blind examinations of his brain tissue and found widespread evidence of “chronic traumatic encephalopathy [(“C.T.E.”)], a degenerative brain disease widely connected to athletes who have absorbed frequent blows to the head.” According to reports, Seau had privately complained that in the final five or six years of his life, he endured a headache that never relented. Indeed, at age forty three, Junior Seau’s brain was found to contain “abnormal, small clusters called neurofibrillary tangles of protein known as tau” which are found “in the brains of those with Alzheimer’s disease and other progressive neurological disorders.” Junior Seau was afflicted with late-stage chronic brain disease when he committed suicide.

Emerging medical evidence confirms that Seau is not alone. Recent studies conducted by teams of researchers led by both Dr. Julian Bailes at West Virginia University and Dr. Ann McKee at Boston University have uncovered jarring evidence that an overwhelming percentage of former NFL players, those who have allowed their brains to be autopsied and studied, are afflicted with C.T.E. The issue of brain disease and traumatic head injury has become so clamorous, that President Barack Obama recently speculated that if he had a son, he would most likely not let that son play tackle football. To that end, the NFL and the sport of American football seem to be quickly approaching a crossroads. A strong probability exists that many of the athletes that have played tackle football, at all levels, but particularly those that played for many years, are at some level of risk of serious brain disease. Questions abound.

This article seeks to answer a few of those questions. Will American football continue its meteoric rise in popularity as a cultural phenomenon in the United States as more is learned about the damage that its athletes are enduring? Did the NFL incur liability by ignoring and actively discounting the seriousness of head trauma to thousands of athletes that played in the league, as alleged by a class of former players currently suing the NFL for damages (including the Seau family)? Will a player of Junior Seau’s magnitude bring the kind of attention to traumatic head injuries in football that will require determined action by pee-wee, middle school, high school, college and professional football organizations to protect its players? Can American football continue in its trajectory of rising popularity or will it eventually decline in relevance and become a relative afterthought, much like boxing or horseracing, because of its insidious dangers."

-- Posted by dré cummings @ 5/01/2013 09:00:00 AM -- Comments (0) -- Post a Comment

Tuesday, April 30, 2013

Boston Business Breakfast on Sports Law this Thursday

I look forward to giving a talk at the Harvard Club in Boston this Thursday at 7:30 am. It is for my alma mater, St. John's Prep, which I'm proud to say is also the alma mater of Notre Dame head football coach Brian Kelly (Class of 1979) and Penn State head football coach Bill O'Brien (Class of 1988).

I'll be discussing breaking issues in sports law, including the Boston Marathon bombings and the impact on stadium security.

Even if you are not an alum, but are interested in sports law, I hope you consider attending ($25/person):

Boston Business Breakfast

Michael McCann ’94 • Sports Law

Thursday, May 2 at 7:30 am
Downtown Harvard Club, 1 Federal Street
$25 per person

Lance Armstrong was recently interviewed by Michael McCann '94 for Armstrong's first interview since his conversation with Oprah Winfrey. Join us for a unique opportunity to hear McCann speak at the Downtown Harvard Club on Thursday, May 2 at 7:30 am. A leading expert in sports law, McCann is a tenured professor at the University of New Hampshire School of Law, where he is founder and director of the Sports and Entertainment Law Institute. He is also Sports Illustrated's legal analyst, and serves as an on-air expert on sports law matters for CNN and NBA TV. McCann is expected to discuss his interview with Armstrong and how Armstrong can defend lawsuits, various legal issues involving the NCAA and student-athletes, and select business and legal issues impacting the NBA, NFL, MLB and NHL. He will also discuss his coverage of the Boston Marathon bombings for Sports Illustrated and WEEI, and how the bombings will affect sports security.

For more information, click here.

-- Posted by Michael McCann @ 4/30/2013 12:12:00 PM -- Comments (0) -- Post a Comment

Monday, April 29, 2013

NBA player comes out--Now what?

Sports Illustrated has the story of Jason Collins, a Stanford grad, 12-year NBA veteran, and current free agent (he spent the past year with the Celtics and Wizards) coming out publicly (he came out to his family last summer). Submitted without comment, other than to not that while this is not a star player in the prime of his career, it is a big step in that direction.

-- Posted by Howard Wasserman @ 4/29/2013 01:18:00 PM -- Comments (0) -- Post a Comment

Saturday, April 27, 2013

"Pros or Cons" Thoughts For The Modern "Sports Attorney" - Part II

Sports Law Blog is publishing a 5-part series on the practice of sports law. The series is co-authored by Peter Jarvis, a legal ethics and professional responsibility attorney with Hinshaw & Culbertson, LLP in Portland, Oregon and Jason Davis, a California attorney currently residing in Seattle, Washington. These posts will appear on Saturdays. The first one is available at this link. Here is the second one:

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"Pros or Cons" Thoughts For The Modern "Sports Attorney"

( jason.a.davis.esq@gmail.com, @JasonDavisEsq1 & pjarvis@hinshawlaw.com)

(ARTICLE #2)

Home Field Advantage? (Choice of Ethics Law)

As a general proposition, an attorney who is licensed and practices only in one state will be governed by the Rules of Professional Conduct, or RPCs, of that state. When, however, an attorney is licensed in more than one state or the attorney's practice crosses state lines, the picture gets more complex. Of course, an attorney receives and maintains the ability to practice law by virtue of the licensing authority of the jurisdiction(s) in which the attorney is licensed. When the rules of the various jurisdictions are the same, this does not matter. But what if they are different? Which set(s) of ethical rules govern which of the attorney's actions?

In our first segment, we introduced Attorney Al, who is licensed in both New Jersey and New York. Which state's Rules govern Al's representation of his client Mega Star? Fortunately, RPC 8.5 of these two states are substantially similar to each other and to the equivalent ABA Model Rule. New Jersey's RPC 8.5, which is identical to ABA Model Rule 8.5, state in pertinent part:

Rule 8.5 Disciplinary Authority; Choice Of Law

(a) Disciplinary Authority. A lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction, regardless of where the lawyer's conduct occurs. (...) A lawyer may be subject to the disciplinary authority of both this jurisdiction and another jurisdiction for the same conduct. (Emphasis added)

(b)(2) for [conduct not involving litigation], the rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur. (Emphasis added)

New York's Rule 8.5 varies at (2)(ii) in that if the lawyer is licensed to practice in New York “and another jurisdiction, the rules to be applied shall be the rules of the admitting jurisdiction in which the lawyer principally practices; provided, however, that if particular conduct clearly has its predominant effect in another jurisdiction in which the lawyer is licensed to practice, the rules of that jurisdiction shall be applied to that conduct.” (Emphasis added)

Depending at least in part upon Al's geographic location at the time of this work, one could theoretically pick New York, New Jersey, California or Texas as the location where most of Al's conduct in aid of the representation occurred. And looking at the location of "predominant effect" may not provide a clear answer. Is it New York, because that is where Mega now lives? In California or Texas if he signs with either of those teams? As will be noted, at least the New Jersey rule provides, as a safe harbor, that Al need only conform his conduct to the rules of a state which he reasonably believes is the state of predominant effect.

But if, say, the predominant effect is in a state in which Al is not licensed, will he be subject to discipline or prosecution for the Unauthorized Practice of Law? This topic to be continued . . .

-- Posted by Michael McCann @ 4/27/2013 10:00:00 AM -- Comments (1) -- Post a Comment

2. Scott Boras

Boras Corporation President 60 years old

Boston Business Breakfast

Michael McCann ’94 • Sports Law

Boras Corporation President
60 years old