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Wednesday, June 14, 2006
 
The Legality of Oral Promises by NBA GMs to Potential NBA Draft Picks

Jeff Clark of Celtics Blog e-mails me an interesting topic to consider: oral promises made by NBA general managers to potential draft picks. In these promises, a GM promises a draft-eligible player that if he is still on the board when the team selects, the team will draft him. Here are Jeff's thoughts:
What kind of agreement is in place here? Is it considered a oral contract? What are the ramifications of backing out? I believe the Celtics asked Orien Greene if they could back out of their promise last year when they saw that Amir Johnson was still on the board.
Clearly, oral promises are of great value to the players who receive the promises. Perhaps foremost, a promise indicates a "worst-case scenario" (i.e., at worst, the team making the promise will pick him). Moreover, for some underclassmen, a promise can help them decide whether they should remain eligible for the draft or return to school. The same is true of international players who already earn high salaries playing in Europe: remaining eligible in the draft only makes sense if they are going to be a high enough pick (and thus command a high enough salary). Others will use promises to help determine which teams to workout for--if you have a promise from, say, the Seattle Supersonics, who pick 10th in this month's draft (June 28), then you will probably spend your time meeting with teams picking 1-9, rather than those picking after 10.

Promises also supply important benefits to teams. For instance, they may convince the player receiving the promise to remain in the draft (if that is an issue). Or they may discourage the player from meeting/working out with other teams, thus raising the probability that the player is still on the board when the promising team selects.

And promises have clearly been influential. For example, in the 2003 NBA Draft, Celtics GM Danny Ainge promised high school senior Kendrick Perkins that the team would select him in the first round; without that promise, it is thought that Perkins would have matriculated to the University of Memphis to play for John Calipari. And Ainge kept his promise (by way of a trade with the Memphis Grizzlies). In that same draft, at least two other high school seniors received first round promises--Travis Outlaw (Portland) and Ndudi Ebi (Minnesota)--and those promises were also kept. Interestingly, one of the top high school players in the 2004 NBA Draft who did not receive a first round promise was LaMarcus Aldridge, who, without the promise, removed his name from consideration and matriculated to the University of Texas. Fast-forward two years, and Aldridge is expected to be one of the top three picks in this month's drafts. Brandon Roy--who is also projected to be a top pick--has a similar story from the 2002 NBA Draft. Promises were so influential in the 2005 NBA Draft that Sports Illustrated Ian Thomsen's recap of it was entitled "Behind the Curtain: Promises, Surprising Picks Quietly Shaped '05 Draft." In this draft, it is thought that international player Tiago Splitter won't stay in the draft unless he obtains a promise from a team picking in the lottery (apparently, the buyout in his European contract is too costly to take mid to late 1st round money).

But what happens when a promise isn't kept? And has that ever happened?

First off, I'm unaware of an instance where an oral promise to a potential draft pick was broken, although in a recent interview with the Portland Oregonian, Portland Trail Blazers President Steve Patterson said, "There can be promises that just don't work out to be so guaranteed." I'm not sure whether Patterson is alluding to broken promises in the past or the potential for broken promises (he was discussing Tyrus Thomas), but other than his statement, everything I've read suggests that teams do, in fact, fulfill their draft promises. However, if you know otherwise, please contact me--I would appreciate it. **UPDATE**: A couple of people commenting on True Hoop say that both Rashard Lewis and Vladimir Radmanovic were the victims of broken promises--and their agents were irate--check out the post.

Hypothetically, let's say that a team in the 2006 NBA Draft doesn't live up to its word. And let's try this hypo: Celtics GM Danny Ainge promises point guard Marcus Williams that if he is still on the board at #7 (when the Celtics pick), Ainge will take him. But on draft night, something strange happens: power forward LaMarcus Aldridge--who, as I note above, is projected by most draft experts to be a top three pick--is still on the board at #7. And Ainge decides to take Aldridge instead.

Can Marcus Williams successfully sue Danny Ainge and the Celtics for breach of contract or detrimental reliance? The answer is probably "no" but not without some decent arguments by Williams. Here's why:

Although many oral contracts are enforceable, the Statute of Frauds (adopted in some form by all 50 states) requires that there be a written contract for any contract that entails more than one year of performance. Here, Williams would have to sign a rookie first round contract, which would entail at least three years of performance, and possibly five depending on the exercising of team and player options. On the other hand, perhaps Williams could argue that oral contract between he and the Celtics only concerned the draft itself, and not the subsequent player contract he would sign. Under that interpretation, the Statute of Frauds would not apply.

But even then, Ainge could argue that the alleged agreement lacked "consideration," which requires that each party give something up for formation to a contract. Ainge could say that Williams didn't give up anything when he received a promise from him--Williams was going to participate in the draft no matter what (in contrast, with the Kendrick Perkins example described above, Perkins could argue that his consideration was in remaining eligible for the draft). But Williams could argue, perhaps, that he decided to not work out for certain teams after receiving Ainge's promise--and to the extent that hurt his draft position, he did give something up: his stock with certain teams. Such an argument would be consistent with a detrimental reliance (promissory estoppel) claim, which does not require consideration, but modern courts are usually reluctant to recognize it.

Yet even if Williams could argue that there was a valid oral contract, keep in mind that oral contracts are extremely difficult to prove. Did Ainge really promise Williams, with 100% certainty, that he would take him, or was it more of a "if you're still on the board when we pick, I think you might enjoy playing with Paul Pierce" type of statement? Contract law typically considers that kind of nebulous promise to be an illusory promise, which is not enforceable. And were there any witnesses? Would it simply be Williams' word versus Ainge's word? Or Williams' agent's word versus Ainge's word?

Alternatively, what happens if Williams is still on the board at #7 and Danny Ainge is about to select him when, suddenly, former teammate and Minnesota Timberwolves GM Kevin McHale calls Ainge up and says, "Danny, hold on a second! Look, we'll trade you Kevin Garnett for that pick, plus Al Jefferson, Gerald Green, and Dan Dickau." And Ainge decides to make the trade. And with the 7th pick, McHale selects center Patrick O'Bryant. Marcus Williams then free falls, until the Philadelphia 76ers select him at #13. Would Williams have a claim against the Celtics in that instance? Here, I think the answer is almost certainly "no," since an oral promise to draft a player is likely conditional on the player being there at that pick and that the team actually makes that pick--but you can see the interesting legal complexities of oral promises in the context of the NBA Draft.

This analysis shouldn't be limited to the "legal," however. Consider the possible reputational harm a GM might endure if he breaks a promise. He would lose credibility and possibly generate negative attention for his employer. He could also suffer a backlash from certain agents, which could affect his capacity to sign free agent players in the future. Those types of consequences may be far more powerful than any legal issues.

Also see: True Hoop's Henry Abbott discussing this post (6/14/2006).
Also see (2): Celtics Blog's Jeff Clark discussing this post (6/14/2006).
Also see (3): Contracts Prof Blog's Carol Chomsky discussing this post (6/14/2006).
Also see (4): Oral Promises & Professional Sports: The Carlos Boozer Saga (7/13/2004).





18 Comments:

A prudent course of action for a player receiving such a promise might be for the player or his agent to shoot off a confirming email that the player is not working out for other teams, etc. in reliance on the promise. This could put the team in a bit of a bind, and force them to send back a response that . . . well, it's not really an enforecable promise.

Anonymous Anonymous -- 6/14/2006 12:50 PM  


Anonymous: Actually, that is a really good idea! However, it would take a judge who did not understand how professional sports works (usage of trade, prior course of dealing) to enforce that confirmation memorandum [I know its not UCC]. Oh, wait, maybe a judge like S.S. in the district court's analysis in the Clarett case? ~Anonymous #2

Anonymous Anonymous -- 6/14/2006 1:06 PM  


Michael,

Just wanted to point out that it also works the other way around(and maybe more often). Agents make verbal promises to teams that their clients will sign for $X, and then breaks the promise after the player is drafted by that team. Bottom line is that detrimental reliance also entails "reasonable" reliance, and, legally, it's not reasonable for either side to rely on verbal promises made before the draft.

Blogger Rick Karcher -- 6/14/2006 2:15 PM  


Thank you all for commenting.

Anonymous 1:

I agree--the player needs to get a promise in writing or in an electronic correspondence. Not only would a paper trail provide a recorded communication, but it would clarify the promise.

Anonymous 2,

I agree that a judge who actually understands the nature of the NBA Draft would be helpful in assessing NBA Draft law. And now that you mention it, it would be interesting to evaluate what percentage of judges actually follow pro sports drafts (or sports in general).

Rick,

I see your point, but considering that the NBA Rookie Wage Scale removes almost all of the bargaining out of negotiations between team and first round draft pick, it doesn't appear that an NBA team would suffer any kind of detrimental reliance in regards to salary expectations (at least in regards to first round picks). I am sure that phenomenon has arisen in the MLB and NFL Drafts, however. It is also possible that an NBA team drafts a player who gave assurances that he would report, but later the player refuses to report for non-salary reasons--perhaps the team could have a detrimental reliance argument in that scenario.

As to the "reasonableness" in this circumstance, I wonder how to define it? If almost all NBA Draft promises are kept, that would seem to suggest that "reasonable" means satisfying a promise, and a failure to do so would be unreasonable. At least that is what the player's attorney would argue!

Blogger Michael McCann -- 6/14/2006 2:57 PM  


I apologize if I'm missing an obvious point, but why do teams make promises to players in the first place? Is it merely to convince them that it's worth it for them to stay in the draft?

Anonymous Anonymous -- 6/14/2006 4:19 PM  


Promises are made to 1) see how the player might react; 2) see how the agent might react; 3) to spread the word as truth; 4) to spread the word as merely gossip (with no intent on following through); 5) to start trouble; 6) to stir chaos; 6) to get their name in the news; 7) to bring people up only to shoot them down. Oh wait, in pro sports there is a number 8) because they are honest about their intentions. ~Anonymous #2

Anonymous Anonymous -- 6/14/2006 4:25 PM  


Anonymous 3:

That's a good question, and I should address that more carefully in the post (although the post is pretty long as it is!). Promises benefit the team by helping to convince the player receiving the promise to remain in the draft (if that is an issue) and/or to discourage the player from meeting/working out with other teams. Having said that, I tend to the think that most promises benefit the player far more than the team, but there are still benefits to the team.

Thanks for the question.

Blogger Michael McCann -- 6/14/2006 4:28 PM  


Anonymous 3,

Please also see Anonymous 4's comments right above mine--those are terrific (if a bit pessimistic, but probably true).

Blogger Michael McCann -- 6/14/2006 4:30 PM  


I would say "reasonableness" should be defined by what's expressly permitted or not permitted by the CBA and league draft rules. While pre-draft dealing and verbal promises are commonplace in the industry, the rules prohibit it, and for good reason because otherwise it eliminates the whole purpose and function of a draft.

Blogger Rick Karcher -- 6/14/2006 4:30 PM  


MM, thanks for calling me a pessimist! I was not one until I went to law school, but you are right! Of course, I can sleep at night knowing that "everybody lies" in sports. Isn't that sad? Anyway, thanks for actually reading the postings. This is a great site! ~Anonymous (I've lost track)

Anonymous Anonymous -- 6/14/2006 4:38 PM  


(Anonymous 3 here) - Thanks for the responses to my question. I wonder - would it really disincentivize the player from working out with other teams? Clearly, it would with respect to teams picking after the promising team. But doesn't the player still have an incentive to go as high in the draft as possible - as thus, work out for teams picking earlier? I just note the seeming contradiction of the scenario you mentioned, where the player, with a promise from team 10, gets to focus on teams 1-9 - this would seem to raise his probability of going earlier, not lower it.

Unless, the player promises not to work out for any other teams, as the express consideration for the team's promise. Do you know if this is done?

Anonymous Anonymous -- 6/14/2006 5:50 PM  


MM, can you maybe add this for commentary? It appears Dmitri Young took the Gilbert Arenas professional athlete immunity/above the law defense.
http://www.freep.com/apps/pbcs.dll/article?AID=2006606140441

Anonymous Anonymous -- 6/14/2006 10:52 PM  


Thanks for these additional comments.

Anonymous 4,

Thank you for the kind words about this blog. We appreciate them.

Anonymous 3,

Good question. You're right, from the player's perspective, if he receives a promise from the team picking #10, he has a strong incentive to workout for teams picking 1-9, which would (assuming he works out well) raise the probability of him going higher. But my understanding of promises is that in many cases, teams make the promise on the condition that the player no longer work out for additional teams (or that he work out for fewer teams). So whether the promise raises the probability of him going higher would seem to depend on the nature of the promise (and certainly, if he gives up the possibility of working out for additional teams, that would go to his consideration for purposes of establishing a contract).

Anonymous 5,

Thanks for passing along the story on Dimitri Young and his court no-show. Interesting developments to say the least. I'm actually more struck by his attorney's failure to show up for court. I hope to blog on it in the next day or so.

Blogger Michael McCann -- 6/14/2006 11:45 PM  


First, as was alluded to in the post, drafting a player and signing a contract with a player are two different events. A promise to draft #7 is not a promise of a contract for more than one year. I don't think the Statute of Frauds would apply. The SOF certainly would apply if the promise was "We will draft you #7 and sign a standard rookie contract with you."

I also think there could be an argument for consideration in certain circumstances. If Ainge was involved in the player's decision not to work out for other clubs, this might be consideration for Ainge's promise. Maybe he would have worked out for another club and moved up to the 6th pick or higher. Ainge doesn't want that to happen, so he suggests that the player avoid the hassle.

As for the promissory estoppel argument, I think Rick is right about the reasonableness of the reliance, although reasonableness is not technically an element of a promissory estoppel claim. It comes into play in the "if injustice can be avoided only enforcement of the promise" element, however. The problem with reasonableness is that it is malleable, and what is reasonable for a seasoned veteran or club executive and reasonable for a likely immature draftee leaves a lot of wiggle room.

More troubling for the PE cause of action is that the promisor (Ainge) must have reasonably expected his promise to induce action or forbearance on the part of the promisee. The McHale trade example perfectly illustrates that the club would not have reasonably expected the potential draftee to rely on the promise in a way that would result in enforcement.

And of course, the draftee would have to actually rely. Reasonableness aside, I doubt this would happen. The player would be poorly advised by his agent if he stopped working out for other teams or bought a house in Boston.

Somewhere in the analysis we would also hear about industry customs. An unrepresented draftee might be able to avoid application of industry customs for lack of knowledge, but a draftee with an agent could not.

(Incidentally, I do not agree with the Michael's statement that modern courts are reluctant to recognize promissory estoppel. The doctrine has never been easy to prove because the law has a way of clinging to its formalities, but promissory estoppel is recognized in the vast majority of jurisdictions.)

Blogger Jeff McFarland -- 6/15/2006 11:12 AM  


In the NBA draft, with so much speculation and money involved, teams and players like to give themselves more clear options to look at. The problem with most promises is that the draft never goes in the right order to where the guy you promised is either still there or a better guy has dropped so it would be hard to pass on him just to keep your word. Players may not care about a particular promise other than just to know where they might land in the draft. If a guy is going to be picked between 8 and 13 regardless, he doesn't care if Seattle promised him because he is going to be drafted anyway. In rare cases, players drop way down after a promise is not kept and if he falls into the second round it can be a risky situation for the player.

The thing to remember, before you feel bad for the players, is that plenty of players change teams via free agency or demanding trades. We complain about players not having loyalty in sports either. The thing to remember is that this is a business, not a sport.

Anonymous Sports Overload -- 6/15/2006 11:55 AM  


Thanks for these comments. Just a quick note:

Jeff,

In terms of promissory estoppel, there have been a number of recent law review articles detailing courts' reluctance to recognize it.

For example, see Phuong N. Pham, The Waning of Promissory Estoppel, 79 CORNELL L. REV. 1263 (1994). In it, Pham writes about courts' "extreme reluctance to grant recovery under promissory estoppel." This comment goes to my post's remark that "modern courts are usually reluctant to recognize promissory estoppel."

Blogger Michael McCann -- 6/15/2006 10:20 PM  


Michael, it probably is just semantics, and I was probably painting with too fine a brush. I think the courts recognize the doctrine -- indeed, state legislatures have actually codified Section 90 in some instances.

The cited law review article indicates that success under PE is not as prevalent as some of the literature indicates. The article also posits that many of the same principles underlying PE (namely reliance) have crept into breach of contract, such that it is inappropriate to really think of breach of contract and reliance as distinct causes of action. It would be interesting to see if things have changed since 1994.

As I said, and as I think you were postulating (IOW, we agree), it remains difficult to prove because courts still adhere to formalities. Thus, a PE claim is not nearly as likely to be successful as a breach of contract claim, although the cited article indicates that reliance would likely be a factor in the court's decision.

In my view, PE is worthy of an appearance in the pleadings if there is also a breach of contract assertion -- as an alternative theory of recovery. Given the low likelihood of success, it would probably not be cost-efficient to bring a claim of PE on its own...particularly in the scenario(s) you mention in your post.

Blogger Jeff McFarland -- 6/16/2006 11:42 AM  


There have been broken promises, but teams are hesitant to do so because of possible ramifications from the draftees' agent who may represent other high-profile clients.

Anonymous Anonymous -- 6/16/2006 10:52 PM  


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