Sports Law Blog
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Tuesday, June 30, 2009
 
Should NCAA Adopt Rooney Rule?

On our blog, dre cummings and Roger Groves have written extensively about the Rooney Rule, an internal NFL rule which requires that NFL teams interview minority candidates for head coaching positions and which (as Cumberland law prof Marcia McCormick wrote about on Workplace Prof Blog earlier this month), now also requires that teams interview minority candidates for senior football operations positions. Thought it's difficult to show "causation" there has been a marked increase in the number of African-American head coaches since the league adopted the Rooney Rule. For some terrific background on the history and goals of the Rooney Rule, check out Temple law prof Jeremi Duru's article in the Virginia Sports and Entertainment Law Journal and dre cummings' article in the Thurgood Marshall Law Review.

Interestingly, the NCAA has not adopted the Rooney Rule. Over on NCAA Double-A Zone blog, Marta Lawrence has a good piece on the NCAA's position. Here's an excerpt:

* * *

While the Rooney Rule has worked to help diversify the NFL coaching ranks, NCAA President Myles Brand and Vice President of Diversity and Inclusion Charlotte Westerhaus maintain a similar rule for college athletics won't work.

"The 'Rooney Rule' is an interviewing rule," writes Westerhaus in a recent blog post. "More candidates than ever before were interviewed last fall without an interview mandate similar to the 'Rooney Rule' and without the possibility of sanctions for noncompliance. What was the end result? Only four African Americans were hired as head football coaches of color in Division I FBS. This simply is not good enough.

"The NCAA is not opposed to equal opportunity within the interview process. But what is needed now is an end to side-stepping the crux of the hiring dilemma. Interviewing is not hiring. What is needed is more hires of head football coaches of color, not mandated interviews and the continued perpetuation of false hope."

* * *
To read the rest, click here. To read a law review article advocating that the NCAA adopt the Rooney Rule, see Michael Nicholas' article in the Virginia Sports and Entertainment Law Journal.

Monday, June 29, 2009
 
More on American Needle

As Mike noted below, the Supreme Court granted cert today in American Needle v. NFL and will review the Seventh Circuit’s holding that the NFL and its teams act as single entity when promoting NFL football through licensing teams’ intellectual property. We have been tracking and discussing this case since the district court ruled for the NFL back in October 2007 (and then debating it in the Tulane Mardi Gras Moot Court Competition), and I wanted to emphasize one point as we continue to follow this case through the Supreme Court: The NFL—and other professional sports leagues in the U.S.—have a tremendous amount to gain from the Supreme Court’s decision, but not much to lose.

First, let’s start with a little background. The Seventh Circuit’s opinion is an outlier. Until American Needle, every appellate court (and virtually every court) to address the issue held that professional sports leagues are not single entities and are thus subject to scrutiny under Section 1 of the Sherman Act. The Seventh Circuit went against the grain, stating in American Needle that the single entity status of sports leagues “should be addressed…one facet of a league at a time,” and concluding that the NFL acts as a single entity when collectively licensing NFL teams’ intellectual property.

Both American Needle and the NFL then filed petitions for cert with the U.S. Supreme Court. American Needle’s argument is simple—the Supreme Court should hear the case and reverse it because the Seventh Circuit’s holding conflicts with over 50 years of case law in other circuits. The NFL’s argument is more complex. Because it won the case before the Seventh Circuit, the NFL is seeking an expansion, not a reversal, of the decision. The NFL is thus arguing that professional sports leagues are single entities for all purposes, and thus should be completely exempt from Section 1 scrutiny. In the alternative, the NFL claims that professional sports leagues should be deemed single entities with respect to all of their “core venture functions.” Of course, the NFL will then claim that virtually every decision they make constitutes a “core venture function.”

I will address the merits of the underlying arguments over the next few months, but let’s get back to my original point. An expansion of the Seventh Circuit’s holding would be a huge win for professional sports leagues. Depending on the scope of the Supreme Court’s decision, leagues could be free to make decisions regarding the location and ownership of teams, contraction of franchises, television restrictions, intellectual property licensing, etc., without fear of attack under Section 1 of the Sherman Act. Taken to its most unlikely extreme, the Supreme Court could extend the single entity protection to cover all decisions made by a league, including salary caps, player drafts, free agency rules, and other player restraints.

Despite what some are saying, however, a reversal of the Seventh Circuit’s decision would not be a catastrophic loss for the NFL. Over at profootballtalk.com, Mike Florio claims that
the stakes are high. If the Supreme Court rules that the league and its teams do not constitute a single entity for antitrust purposes, then all exclusive marketing arrangements likely would be scuttled. For example, EA would likely lose exclusive rights to the team names and logos for the Madden video game — and the league would lose the extra money that comes from exclusivity.

I think Mike does great work over there, but his observation on this one is a bit misleading (but, Marc Edelman has a great comment in that post). The issue before the Supreme Court is not whether the NFL’s exclusive licensing arrangement is legal under the antitrust laws. The issue is whether the licensing arrangement should even be subject to scrutiny under the antitrust laws. If the NFL wins, they escape Section 1 scrutiny. If the NFL loses, their arrangement will then be analyzed under the rule of reason, where a court will weigh the procompetitive benefits of the agreement versus its anticompetitive effects.

There is no reason to believe that the Supreme Court’s rejection of the single entity argument makes it any more (or less) likely that American Needle would prevail in the underlying antitrust case (or that a suit against the exclusive deal with EA would be successful). Rather, it only subjects the NFL to the same antitrust scrutiny they have been subjected to for the last 50 years. American Needle could win the underlying case, but only if it could prove that the anticompetitive effects of the NFL’s exclusive apparel licensing deal outweighed its procompetitive benefits.

Thus, while a win for the NFL in the Supreme Court would have significant implications, a loss merely gets us back to the way we were before the Seventh Circuit’s outlier in American Needle.

 
U.S. Suprme Court Grants Cert in American Needle v. NFL

Earlier this morning, the Supreme Court released its order list, which included notice that it has granted cert in American Needle v. NFL. The Seventh Circuit held earlier this year that the NFL can enjoy single entity status -- and thus immunity from Section 1 of the Sherman Antitrust Act -- for limited purposes (namely, apparel sales). Until American Needle, leagues with franchises that are separately owned had traditionally been viewed as joint ventures, and thus subject to Section 1. Although U.S. Solicitor General Elena Kagan recommended that the Court not grant cert, it has done so anyway. It should make for a very important and interesting case.

For other Sports Law Blog coverage on American Needle, click here. For other news from the Supreme Court today, check out the outstanding Supreme Court of the United States Blog.

Friday, June 26, 2009
 
Catching Up with Links

* Brandon Jennings, a 19-year-old who earned over a million dollars playing basketball in Italy last season, was drafted 10th overall by the Milwaukee Bucks in last night's NBA draft, ahead of a number of high-profile college players. Significance? Some believed that Jennings risked hurting his draft status by playing abroad and away from the TV coverage that players receive at top college programs. I never found that concern particularly persuasive, since NBA teams regularly scout Europe and other parts of the globe, and I presume teams are most interested in drafting the best available player or the player best fitting team needs--rather than the most well-known player (and fans' recognition of drafted players didn't help the Cavs after drafting Trajan Langdon at #11 in 1999 or the Bobcats after drafting Adam Morrison at #3 in 2006 or the Nets after drafting Ed O'Bannon at #9 in 1995 etc.). For more on Jennings, see Jeff Goodman's "Jennings' Experiment Pays Off."

* Steve Wieberg and Marlen Garcia have an interesting piece connecting the "one and done" phenomenon of college basketball (where a player attends college for one year in order to satisfy the NBA's eligibility restriction) and corruption at several marquee college programs.

* Contained within the seemingly ubiquitous coverage of Michael Jackson's death, Chad Finn of the Boston Globe has a good feature on a chain of events that began in 1985 with the Sullivan Family, which owned the Patriots, financing Jackson's "Victory" tour and ended with Bob Kraft buying the Patriots (which in turn lead to Bill Parcells, Bill Belichick, and three super bowls).

* Jeff Levine has a good piece on the Biz of Hockey on the Coyotes/NHL recent litigation.

Wednesday, June 24, 2009
 
The New Anti-Tobacco Legislation, Sports Events and Commercial Speech

The Family Smoking Prevention and Tobacco Control Act signed by President Obama's earlier this week contains provisions that should be of more than passing interest to those involving sports sponsorship. As has been widely reported, the legislation (found in 111 P.L. 31, 123 Stat. 1776) asserts Food and Drug Administration jurisdiction over tobacco products and will finally give that agency the power to regulate tobacco products. Additionally, and significantly for those in the sports industries, the legislation prohibits tobacco-related sponsorships of sports and entertainment events.

This legislation serves as a crowning achievement of the efforts by anti-smoking advocates to stop individuals, notably teenagers, from starting the habit. These advocates can feel justly proud of their accomplishment. A great deal of this legislation makes sense, especially giving the Food and Drug Administration jurisdiction over tobacco and the increase in warnings to be found on such products. However, as someone who lauds the goals of a smoke-free America, some of the advertising restrictions may be constitutionally suspect and will likely be challenged.

The law codifies previous bans on outdoor advertising within 1,000 feet of schools and playgrounds and certain print advertising to black-and-white text. In a limitation directly involving sports, the legislation prohibits manufacturers, distributors, or retailers from distributing or causing to be distributed any free samples of smokeless tobacco "to a sports team or entertainment group;" or "at any football, basketball, baseball, soccer, or hockey event or any other sporting or entertainment event determined by the Secretary [of Health and Human Services] to be covered by this subparagraph."(sec. 102a)

In its introduction, the legislation notes that "[t]hrough advertisements during and sponsorship of sporting events, tobacco has become strongly associated with sports and has become portrayed as an integral part of sports and the healthy lifestyle associated with rigorous sporting activity."

While tobacco company sponsorship has gradually decreased for major sporting events, a ban on sponsorships could jeopardize the viability of smaller events in jeopardy. Such a limitation, along with the billboard advertising restrictions -- could also affect the commercial speech rights and may be unconstitutional.

I come to this conclusion with great reluctance, because in the past, I advocated a ban on tobacco advertising (see SUNY v. Fox -- The Dawn of a New Age of Commercial Speech Regulation of Tobacco and Alcohol, 9 Cardozo Arts & Entertainment Law Journal 61 (1990). But since then, commercial speech protection has increased because the Supreme Court has applied the prevailing standard with greater scrutiny. That standard, known as the Central Hudson test is a complex variant of the “intermediate” scrutiny test found in time, place and manner restriction cases and requires that the government’s interest in regulating the commercial speech must be “substantial;” the regulation “directly advances the governmental interest asserted;” and the regulation “is not more extensive than is necessary to serve that interest.” In recent years, the courts have questioned governmental regulation of commercial speech involving liquor regulations and billboards, applying the last two prongs of the test was heightened scrutiny. In a case closely on point, the court, in 2001, concluded in Lorillard v. Reilly that a Massachusetts regulation banning "outdoor" advertising for tobacco products as the law failed the fourth part of the Central Hudson test. Some members of the court expressed interest in scrapping Central Hudson in favor of a strict scrutiny test. I wonder if the sponsorship ban in this legislation would be able to survive the "intermediate scrutiny-plus" standard of Central Hudson as applied by the courts over the last decade.

Constitutional challenges to portions of this law are likely and the sports industry should pay attention.

Tuesday, June 23, 2009
 
Does The New Women's Professional Soccer League Have A Business Model For Success?

In the late 1990s, sports consulting firms such as Game Plan LLC advised their clients to adopt centrally-planned league structures. Just ten years later, however, these structures have become relatively obsolete. Not only has the WNBA converted to a more traditional structure, but also the centrally-planned XFL, MISL and WUSA have gone entirely out of business.

On March 29, 2009, the WUSA's founders launched a new women's soccer league--Women's Professional Soccer. Not surprisingly, this new league has adopted a more traditional approach.

In a recent law review article, former professional soccer player Elizabeth Masterson and I argue that the new women's professional soccer league is more likely to succeed than its predecessor, the WUSA, because of the virtues intrinsic in the traditional league structure.

In addition to touting the business advantages of traditional sports leagues, Elizabeth and I explain three reasons why we believe the once alleged antitrust advantages of the centrally-planned league are no longer relevant today:
  • First, the 2002 First Circuit case Fraser v. Major League Soccer held that the single-entity defense to antitrust law is unlikely to apply to any centrally-planned sports league that allocates a share of specific team revenues to individual investor-operators.
  • Second, Fraser v. Major League Soccer also held that the labor practices of a professional sports league, irrespective of its structure, cannot violate antitrust law so long as the league competes in a worldwide market for player labor and thus lacks market power.
  • Finally, the more recent Seventh Circuit case American Needle v. National Football League extends the potential insulation from antitrust liability to certain business activities of even traditionally structured sports leagues. (Of course, some of us at Sports Law Blog, including myself, believe the American Needle opinion was poorly decided.)
For those interested in learning more about why the recent movement back to traditionally structured sports leagues makes sense, check out Elizabeth Masterson and my full article: Could the New Women's Professional Soccer League Survive in America? How Adopting a Traditional Legal Structure May Save More than Just a Game.

Monday, June 22, 2009
 
Donald Fehr Stepping Down

The Street & Smith Sports Business Journal posted a link to an article by ESPN stating that Donald Fehr will be stepping down as Executive Director of the MLBPA "no later than the end of March." Pending board approval, his replacement will be current General Counsel Michael Weiner.

 
Professor Scott Rosner on the 1992 Cable Act and Sports Broadcasting

Professor Scott Rosner, the associate director of the Wharton Sports Business Initiative at the University of Pennsylvania, has an engaging op-ed in the San Diego Union-Tribune on sports broadcasting. The op-ed is excerpted below.

* * *

There are four main ways to receive home video service in the United States: traditional over-the-air broadcast, cable, satellite and now over lines from new competitors such as AT&T and Verizon, who have invested billions in infrastructure and marketing. This kind of competition is good because it means lower prices, more innovation and better customer service. It translates into lower bills for consumers as well as an increasing number of HD and non-HD channels, better DVR technology and bundled service. Consumers win as a result of this highly competitive marketplace.

That is, unless you are a sports fan living in San Diego or Philadelphia. The 1992 Cable Act has program access requirements that promote competition and diversity in video programming. The law prevents cable companies from acting in an unfair or anti-competitive manner when selling the huge amount of cable channels and programming that they own.

So why isn't what is happening in San Diego and Philadelphia illegal? In fact, it would be except for a technicality. At the moment the Federal Communications Commission is reviewing the rule that allows this to occur – the “terrestrial loophole” in the federal Cable Act. By their own admission, cable companies are taking advantage of this outdated exception to program-access laws. The loophole makes the law applicable only to satellite-delivered programming and not to programs delivered via a terrestrial signal. It's a technicality that serves no rational purpose.

* * *
To read the rest, click here.

Wednesday, June 17, 2009
 
Legal Fallout of New York Times story on Sammy Sosa

I have a column up on SI.com on the legal fallout of news that Sammy Sosa was--according to the New York Times--one of the 104 names on the list of steroids users. Here's an excerpt.

* * *

Regardless of the Ninth Circuit's forthcoming decision (or of an unlikely review by the U.S. Supreme Court), a number of people are aware of the remaining 102 names. Any of those persons has the capacity to leak the names, which they might be tempted to do for a variety of reasons. They may, for instance, dislike one or more of the named players and want to settle a score. Or perhaps their intentions are more sinister: they could threaten to disclose a name or names unless compensated in a blackmail scheme.

Officials at the MLBPA and MLB are most likely aware of the names, as are various federal officials, including the agents who seized the computers, as well as judges, clerks, prosecutors and their assistants. Certain player agents and attorneys may also be aware of the list. In short, a lot of people have probably seen the list.

Granted, all of these persons "in the know" are bound by professional duties of confidentially, violations for which can trigger civil consequences. A baseball agent, for instance, could risk fine, suspension, or even decertification by the MLBPA, which certifies agents who have clients on 40-man rosters. The union itself is dissuaded from disclosing the names. Under federal labor laws, the MLBPA and its officials owe duties of trust and competence to each of its players. Should the MLBPA disclose the 104 players' names, the named players would be entitled to sue the MLBPA for breach of duties; they could also file a grievance with the National Labor Relations Board. Players' damages could be shown through reputational harm and potential loss of endorsement deals.

* * *

. . . Sosa is viewed favorably for his charisma and charm. He has also been praised for his community service and generosity, particularly for his charitable work after Hurricane George decimated parts of the Dominican Republic in 1998. Never underestimate the power of reputation to influence whether one is selected for prosecution.

Second, although a person can commit perjury through a written statement, the government may place significance in the fact that Sosa did not verbally make the potentially-incriminating comments. Sosa, in fact, claimed he did not feel comfortable speaking because of his command of the English language. If Sosa's English was not perfect, then did he fully understand the meaning of the written statement? If not, could he have "knowingly" lied?

* * *

To read the rest, click here.

I was interviewed on the Dan Patrick Show this morning to discuss Sosa, along with legal issues concerning Plaxico Burress, Donte Stallworth, and Michael Vick. To listen to the interview, click here.

 
NHL wins in Coyotes Bankruptcy Litigation

Zach Lowe of The American Lawyer has the details on the NHL's victory. He interviewed me for his story. Here's an excerpt.

* * *

We couldn't wait four our regular sports law column to write about a federal judge's ruling Monday that Canadian businessman Jim Balsillie can't buy the the Phoenix Coyotes out of bankruptcy court and move the team to Canada without permission from the National Hockey League and other league owners.

But first an instant replay: The Coyotes and the team's owners (repped by Squire, Sanders & Dempsey) filed for bankruptcy last month and announced they had struck an agreement to sell the franchise to Balsillie, owner of the company behind the BlackBerry and a Canadian hockey fanatic who has twice tried to bring a seventh hockey franchise to Canada.

The NHL, repped by Skadden, Arps, Slate, Meagher & Flom (one of two go-to firms for the NHL along with Proskauer Rose), objected to the sale, saying the Coyotes never gave the league a heads-up and were violating league rules that required teams to get permission from other owners to relocate.

So, for the first time, a federal judge had to answer the question: Could a sports team use the asset sale procedures of bankruptcy court to sidestep league rules about franchise relocation?

* * *

A ruling in favor of Balsillie would have "opened the door for team owners and prospective buyers to use the bankruptcy process to circumvent league rules," says Michael McCann an associate professor at Vermont Law School and a frequent contributor to the popular Sports Law Blog.

Judge Baum has ordered that an auction be held in September for bidders to make new offers, as long as they agree to keep it in Glendale, according to court records and this write-up in the New York Times. If that auction fails to produce a suitable bidder, the leagues have proposed that the judge order a second auction so owners wishing to relocate the team could bid.

* * *
To read the rest, click here.

Monday, June 15, 2009
 
Will Roger Goodell Let Plaxico Burress Play?

I have a new column on SI.com, here's an excerpt:

* * *

In [Drew] Rosenhaus' defense, Goodell has thus far declined to sanction Burress, who faces criminal charges for the Latin Quarter Club incident that occurred last November. Although the Giants suspended Burress for the last four games of the 2008 season, Goodell has not sanctioned Burress. If Burress wasn't deserving of a punishment while he awaited a trial scheduled for June, why should a mere delay in the trial suddenly make him more deserving?

Plus, Goodell has normally waited for the disposition of players' legal woes before imposing a punishment. He waited for Michael Vick's guilty plea in 2007, for instance, and did the same for Tank Johnson, who pled guilty to misdemeanor weapon charges, also in 2007. Likewise, Goodell declined to sanction Randy Moss in January 2008 after a restraining order was issued against him. Although he is not obligated to adopt a "presumption of innocence" standard when sanctioning players, Goodell has generally done so.

* * *

Goodell is also not bound by his own precedent, meaning he need not follow a particular script or set of rules gleamed from his earlier punishments. He also needn't worry about his decision to punish being reversed or modified on appeal: under the policy, any appeal goes right back to him.

. . . Goodell, son of the late U.S. Senator Charles Goodell (R-NY) and son-in-law of former White House Chief of Staff Sam Skinner, might be attune to the unusually politicized dynamics of Burress' case. New York City Mayor Michael Bloomberg, a leading advocate of the law used to prosecute Burress, has stressed that Burress should be prosecuted "to the fullest extent of the law" for otherwise there could be "a sham, a mockery of the law." Should Goodell allow Burress to sign a multimillion dollar contract with a team, particularly with the nearby New York Jets, it may be viewed disapprovingly by the Mayor.

* * *
To read the rest, click here.

Thursday, June 11, 2009
 
Catching Up with Links

* I was interviewed on Toronto 590 The Fan yesterday to discuss the Phoenix Coyotes bankruptcy saga. Geoff up some great links yesterday on the same topic.

* I had several interviews on Cold Hard Sports to discuss such topics as whether David Ortiz has been slandered by rumors about using steriods and whether the list of 103 players who tested for steriods can be revealed by compulsion.

* Mayor of Wingville discusses a recently-settled gender discrimination claim brought by a man who was not hired by Hooters as a waiter. A few months ago, Marquette law professor Paul Secunda was interviewed by the Mayor about this lawsuit and offered some excellent legal points.

* Interested in becoming an entertainment agent? Check out Entertainment Agent Blog, a creation of Darren Heitner and others from Sports Agent Blog, which we contratulate for being named a top 50 niche blog.

* Professor Christopher Robinette of Widener University School of Law and Torts Prof Blog writes about new developments in the Cowboys' stadium collapse.

* Professor Joel Maxcy of the University of Georgia Department of Kinesiology has started a new blog -- Sports Labor Relations -- and it has some good posts to start.

* Congratulations to Professor Martha Minow on being named the new Dean of Harvard Law School!

 
Hustlin' Chagaev

An Attempt to Unravel the Confusion Surrounding the Cancellation of the Rematch Between WBA Heavyweight “Champion in Recess” Ruslan Chagaev and “Champion” Nikolay Valuev

On May 30, 2009, Ruslan Chagaev, 25-0-1 (17 KOs), the former Uzbekistani amateur sensation and undefeated World Boxing Association (the “WBA”) heavyweight champion was scheduled for a rematch with boxing’s own “Eighth Wonder of the World,” the seven foot, 300 plus pounds Nikolay Valuev, 50-1 (34 KOs), in Helsinki, Finland. Their first bout ended with Chagaev winning the WBA world heavyweight championship by shutting down the physically imposing Valuev with smart boxing. Had their second bout taken place as scheduled, Chagaev would have had the opportunity to repeat his accomplishment in the first world heavyweight title fight ever held in Finland. However, the Finland Professional Boxing Federation declined to sanction the fight after the weigh-in, after the blood tests submitted by Chagaev purportedly tested positive for hepatitis B. It was the third time that Chagaev had cancelled a rematch with Valuev.

In the aftermath of the cancellation, the WBA Medical Committee held a hearing on the hepatitis B test and its implications. In the balance was whether Valuev should now be regarded as the one and only WBA world heavyweight champion and whether Valuev should then be compelled to defend against the top available challenger, John (The Quiet Man) Ruiz. Valuev won the “vacant” WBA world heavyweight championship with a split decision win over Ruiz on August 30, 2008. The title apparently became vacant after Chagaev was adjudged a “champion in recess” following an Achilles tendon injury after his first defense of the title on January 19, 2008 and before the first scheduled date for his rematch with Valuev. However, both Chagaev and Valuev have successfully defended the WBA title since that time, with Valuev winning a decision over Evander Holyfield on December 20, 2008 and Chagaev winning a six-round technical decision over Carl Davis Drumond on February 7, 2009.

If the above synopsis seems confusing, little additional clarification can be provided from a WBA ruling on February 2, 2009 which stated, in part, that “[i]f Chagaev should incur another injury or impediment that would prevent him from defending against the Champion [Valuev], he will vacate whatever title he may hold and will be correspondingly lowered in his ranking.” To put the ruling another way, whatever title Chagaev may have had as of February 2, 2009, he had to defend it against “champion” Valuev without any further injury or medical problems or he would lose whatever title that he had and would be lowered in the WBA rankings...

To view the full article, please go to: http://www.8countnews.com/news/138/ARTICLE/1656/2009-06-11.html

Paul Stuart Haberman, Esq. is an attorney at the New York law firm of Heidell, Pittoni, Murphy & Bach, LLP. He is also a New York State licensed boxing manager and the Chairman of the Sports Law Committee of the New York County Lawyers Association. ©

Wednesday, June 10, 2009
 
Franchise Relocation Fees, Antitrust, in Phoenix Bankruptcy Court

We've given little attention so far to the bankruptcy of the Phoenix Coyotes, pending in federal bankruptcy court in Phoenix. The ongoing dispute over control of the team raises some important longstanding issues relating to franchise relocation and antitrust law. In the hope that the parties will settle before he's forced to issue a decision, Judge Baum has "dropped the hammer" on lawyers from all sides. I've been quoted in several stories over the past month in the National Post (Toronto) on the case:

Judge Stuck Between a Rock, Hard Place: Coyotes Bankruptcy; Would Prefer if NHL, Balsillie worked Out a Deal

Money matters in bankruptcy court

NHL aware of legal ‘morass’: U.S. Antitrust Laws; Court filing notes ambiguous rules for sports leagues

“Confusion” over league powers could weaken NHL Coyote’s case



 
Law Professors at the Baseball Hall of Fame


Last week, the Baseball Hall of Fame in Cooperstown, NY, hosted its annual "Cooperstown Symposium on Baseball and American Culture". The event featured ten law professors. Congratulations to Patricia Bryan (North Carolina), John Eastman (Chapman), our guest blogger Ed Edmonds (Notre Dame), Kathy Heller (Chapman), Hugh Hewitt (Chapman), Mitchell Nathanson (Villanova), Keith Rowley (UNLV), Alexander Sanders (Charleston), Brad Snyder (Wisconsin), John Tehranian (Chapman), who participated in the event.


Coverage can be found here, here, and here.

Tuesday, June 09, 2009
 
MLB's First Year Player Draft This Evening - A Thought About Free Agent Compensation

The first three rounds of baseball’s First Year Player Draft will take place this evening. The first round of the draft will be shown live on MLB Network. There will be five selections in the first round that constitute compensation for Type A free agents that were signed during the off-season. The list is as follows: Number 17 - Diamondbacks from Dodgers for Orlando Hudson; number 24 - Angels from Mets for Francisco Rodriguez; number 25 - Angels from Yankees for Mark Teixeira; number 27 - Mariners from Phillies for Raul Ibanez; and number 32 - Rockies from Angels for Brian Fuentes.

There will be 16 selections taken in the supplemental round between rounds 1 and 2 linked to free agent compensation. The list of these choices are as follows:

33 - Mariners - signing of Raul Ibanez by the Phillies; 34 - Rockies - signing of Brian Fuentas by the Angels; 35 - Diamondbacks - signing of Orlando Hudson by the Dodgers; 36 - Dodgers - signing of Derek Lowe by the Braves; 37 - Blue Jays - signing of A.J. Burnett by the Yankees; 38 - White Sox - signing of Orlando Cabrera by the Athletics; 39 - Brewers - signing of C.C. Sabathia by the Yankees; 40 - Angels - signing of Mark Teixeira by the Yankees; 41 - Diamondbacks - signing of Juan Cruz by the Royals; 42 - Angels - signing of Francisco Rodriguez by the Mets; 43 - Reds - signing of Jeremy Affeldt by the Giants (beginning of the Type B free agent compensation); 44 - Rangers - signing of Milton Bradley by the Cubs; 45 - Diamondbacks - signing of Brandon Lyon by the Tigers; 46 - Twins - signing of Dennys Reyes by the Cardinals; 47 - Brewers - signing of Brian Shouse by the Rays; 48 - Angels - signing of Jon Garland by the Diamondbacks.

The other compensation choices in rounds 2 and 3 for Type A free agents are:

56 (second round) - Dodgers - signing of Derek Lowe by the Braves; 60 - Diamondbacks (second round) - signing of Juan Cruz by the Royals; 61 (second round) - White Sox - signing of Orlando Cabrera by the Athletics; 73 - Brewers (second round) - signing of C.C. Sabathia by the Yankees; 104 (third round) - Blue Jays - signing of A.J. Burnett by the Yankees.

One interesting point to me is the compensation for the three Type A players signed by the New York Yankees. Teixeira was ranked ahead of both Sabathia and Burnett by the Elias Sports Bureau. Because of the rankings, the Blue Jays received picks 37 and 104. The Brewers received picks 39 and 73, and the Angels received picks 25 and 40. The Yankees still have a first round choice, number 29, because they failed to sign Gerrit Cole, their first round selection last year.

With the able assistance of third year Notre Dame Law student Johnny McDermott, Johnny and I have been able to take a look at all of the compensation selections back to 2000. For instance in 2006, the Yankees chose Joba Chambelain with the 41st pick (round 1 - supplemental) as compensation from the Phillies for signing of Tom Gordon. Gordon is now in his 21st major league season. The next pick went to the St. Louis Cardinals from the Giants who signed Matt Morris. The Cardinals selected Chris Perez. Morris is off to a tough start this year with the Pirates. Huston Street, who was sensational with the Athletics in 2005 when Oakland promoted him to the big leagues after only one season in the minors, was selected by the A’s in 2004 as compensation from the Orioles for the signing of Miguel Tejada. For these examples of successful selections, however, one looks at many, many names of players who did not make a contribution to the team that selected them or are still in the minors. This underscores the significant difference of the MLB draft from the NFL and NBA although one can easily find “busts” in the first round there as well.

 
NBA and English Premier League discuss commercial cooperation

The Premier League, the English soccer competition, and the NBA, the American national basketball association, are discussing a commercial cooperation. Both competitions are generally considered to be the most popular sports competitions in het world. Together they want to learn from each other’s strategies and expand to the emerging market of Asia.

According to the Financial Times
, representatives of both competitions have conducted negotiations with respect to this cooperation. David Stern, commissioner of the NBA, admits that the Premier League runs ahead with regard to attracting foreign investors and refers to the Russian, American and Middle East investors in English clubs.

Stern furthermore reveals plans of an expansion of the NBA to Europe and seems strongly convinced that the financial sound NBA-competition will appeal to potential franchise owners outside the United States. From a legal point of view, such expansion raises interesting questions. Marc Edelman, guest contributor on this site, recently published an excellent article on this topic
, in which the differences in operation structure and competition law (and the consequences thereof) are explained. In this article he furthermore focuses on age and education requirements together with the drafts and reserve system.

Considering an expansion of the NBA to Europe, among others, the following issues must be dealt with:
  • Specific regulation on broadcasting rights in the EU: the European Commission has set forth the main principles in relation to broadcasting rights in some recent decisions. The Commission accepted the joint selling of sport media rights by football associations on behalf of football clubs (as opposed to the sale of these rights by the individual clubs themselves), provided that certain conditions were satisfied. These include among others the sale of sport media rights through open and transparent tender procedures, a limitation of the rights' duration and the breaking down of the rights into different packages to allow several competitors to acquire rights.
  • The White Paper on sports: a key document of the European Commission dealing with the strategic orientation of the role of sports in the future EU. This document states several examples of organizational sporting rules that are not likely to offend EU Competition Law, provided that their anti-competitive effects are inherent and proportionate to the legitimate objectives pursued: rules fixing the length of matches or the number of players on the field of play; rules concerning the selection criteria for sporting competitions; rules on 'at home' and 'away from home' matches; rules preventing multiple ownership in club competitions and rules concerning transfer periods.
  • Differences in doping regulation: the WADA code has recently been introduced for all European professional sportsmen. It is being discussed whether the whereabouts imply a breach of the European privacy laws, namely, the right to privacy and family life under the provisions of article 8 of the European Convention on Human Rights of 1950. Legal challenges under Data Protections Laws and the EU Working Time Directive are being considered.

At the moment, professional sports are considered to fall within the scope of the EU Treaty. Discussions on the specific nature of sports, however, are likely to be held in the next months or years. The Commission has agreed, together with the International Olympic Committee and the major international sports bodies, to discuss the specificity of sports on the principle of theme-by-theme discussions. Topics to be addressed include anti-doping, mobility and nationality, volunteering, professional-amateur sport relations and funding. Rumors have spread that the Commission is considering to agree on the very specific nature and to put sports outside of the scope of European regulation. Obviously such specificity would facilitate (the legal problems of) a possible expansion of the NBA.


Sunday, June 07, 2009
 
Alan Milstein on Judge Sonia Sotomayor's Nomination

After Ohio State star running back Maurice Clarett won a sweeping victory before U.S. District Judge Shira Scheindlin of the U.S. District Court for the Southern District of New York in his 2004 case challenging the NFL's age eligiblity rule, the NFL appealed Judge Scheindlin's ruling and a three-judge panel on the U.S. Court of Appeals for the Second Circuit heard the oral arguments. Judge Sonia Sotomayor, whom President Obama has nominated to the Supreme Court, was one of the three judges and she wrote the opinion in favor of the NFL. The opinion excluded Clarett and similarly situated players from the 2004 draft.

Alan Milstein, who has litigated on behalf of a number of star athletes, argued the case for Clarett before Judge Scheindlin and later before the three judge panel (I was on Clarett's legal team and aided Alan).

Alan was interviewed by Larry Neumeister of the Associated Press about his thoughts on Judge Sotomayor's nomination by President Obama.

Here is an excerpt from Neumeister's story:
Alan Milstein, who represented former Ohio State running back Maurice Clarett in his effort to enter the National Football League draft as a 19-year-old, remembered "very tough, very tough" questioning by Sotomayer. The appeals court overturned a lower-court judge who was going to let Clarett be drafted.

"It was obvious to me that she and the other panel members had made up their minds about this issue without looking at the briefs or even hearing the arguments," Milstein said. "I don't think she wanted to hear anything I had to say."

Milstein described the appeals court's decision as a heartbreaking denial of opportunity for his client to escape the poor, gang-infested community where he grew up. Still, Milstein said he believes Sotomayor "will make a great justice."

For the rest, click here. For other sports law opinions by Judge Sotomayer, see Geoff's recent post. And for a bit of sports law history, if you would like to read Alan's emergency application to the U.S. Supreme Court for lift of the Second Circuit's stay in the NFL's favor, click here.

Saturday, June 06, 2009
 
Tony La Russa Reaches Settlement over Fake Twitter Account Lawsuit

Jimmy Golen of the Associated Press interviews several people, including Harvard Law prof Wendy Seltzer and me, over St. Louis Cardinals' Manager Tony La Russa's recent lawsuit against Twitter and subsequent settlement over a guy creating a fake Twitter account, purporting to be La Russa. An excerpt of the story is below.

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Tony La Russa's lawsuit against Twitter was a lot like kicking dirt on the umpire: He got a lot of attention, and he made his point, but he wasn't likely to win the argument.

"His chances are probably slim" if the case went to court, said Michael McCann, a Vermont Law School professor and contributor to the Sports Law Blog. "There were strong indications that this is parody. And given the content of the tweets, I don't think that anybody would think it was actually Tony La Russa that was doing this."

Only four people had signed up to follow the "TonyLaRussa" Twitter account when the real St. Louis Cardinals manager, a lawyer and two-time World Series champion, decided he couldn't ignore the offensive messages going out under his name. He sued the social networking site and the unidentified impostors who made light of drunken driving and the death of two Cardinals pitchers.

The potential court showdown between the manager who pioneered the three-out save and the social networking site that limits users to 140 characters was averted on Friday when the site agreed to pay his legal fees and make a donation to his Animal Rescue Foundation.

* * *

Wendy Seltzer, a fellow at Harvard's Berkman Center for Internet and Society, said the Communications Decency Act protects internet service providers from most liability in these cases. La Russa might have had a better case against the pranksters who posted the material, she said. . . . "If only four people saw that before he managed to make his complaint, it's highly unlikely his reputation was damaged in any relevant community," Seltzer said.

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For the rest of the story, click here. For related coverage of La Russa, see Geoff's interesting post about managers and coaches with law degress.

Thursday, June 04, 2009
 
When should Congress be involved with sports?

Mike's post about Congressman Cohen's letter to David Stern urging repeal of the NBA's age limit raises an interesting question. Past efforts by members of Congress on the issue of steroids (hearings, letters to the Union and the Commissioner's Office, etc.) have been derided as political grandstanding and a waste of time and met with a jeering "don't they have better things to worry about than baseball?". Same with criticisms of, and hearings about, the BCS (led, if I recall, by Utah Senator Orrin Hatch).

So some questions: Why the seemingly (for the moment) different reaction to Cohen's letter? Would we see similar criticism of Cohen pushes for hearings on the age limit or some legislation to change the NBA's rules? And if not, why not?

 
Does the NBA Age Limit Violate Age Discrimination Laws?

New York labor and employment attorney Louis Pechman of Berke-Weiss & Pechman has a very interesting analysis on the possibility of the NBA's age limit violating age discrimination laws. Here is an excerpt from his piece:
Surprisingly lost in the discussion about whether age limits are appropriate for the NBA draft is the fact that many state laws prohibit employment discrimination against individuals who are eighteen or over. As playing in the NBA is employment -- albeit a dream job -- eighteen year olds are deprived of their potential employment and are thus victims of age discrimination. In New York, for example, the New York State Human Rights Law prohibits employers from refusing to hire or employ an “individual eighteen years of age or older… because of such individual’s age.” The NBA, and its players’ union, are subject to compliance with all New York employment laws, as well as other state laws which prohibit discrimination based on age.
For the rest, click here. For a post from earlier today on U.S. Congressman Steve Cohen's request that the age limit be lowered back to its old 18 year old mark, click here.

 
Congressman Steve Cohen Takes Aim at NBA Age Limit

U.S. Congressman Steve Cohen (D-Tennessee) has written to NBA commissioner David Stern and NBPA executive director Billy Hunter asking them to eliminate the NBA's age limit, which requires that a player be 19 years old plus one year removed from high school in order to be eligible for the NBA Draft (the rule was negotiated in 2005; previously, players could join the NBA right after finishing high school). The NBA and NBPA will be negotiating a new CBA in the near future and the age limit will likely be a source of tension between the two bargaining units. There are several stories on Congressman Cohen's request. Gary Parrish of CBS Sportsline has one of them and it's excerpted below.

* * *
U.S. Rep Steve Cohen (D-Tenn.) wrote a letter Wednesday to NBA commissioner David Stern and NBA Players Association executive director Billy Hunter that asks them to eliminate the league’s 19-year-old age minimum for U.S. players to enter the draft.

CBSSports.com obtained a copy of the letter from Cohen's office.

"I am writing to express my deep concern over the policy of the National Basketball Association (NBA) to bar athletes from playing in the league on the basis of their age," Cohen's letter to Stern begins. "The '19 plus 1' policy, which requires American players to be at least 19 years of age and one year removed from their high school graduating class, is unfair restriction on the rights of these young men to pursue their intended career. I also believe that it has played an important role in several recent scandals involving college students who were prevented from entering the NBA upon high school graduation. I ask that this policy be repealed when the NBA completes its new collective bargaining agreement with the NBA Player's Association."

Cohen expanded on his thoughts in an afternoon interview with CBSSports.com. He said that though he represents a district that includes Memphis, the timing of his letter is unrelated to recent news that the University of Memphis men's basketball program has been charged with major violations by the NCAA. Rather, the timing is connected to Thursday's start of the NBA Finals, and Cohen said he has long planned to send his letter this week because he expected two stars who never attended college to be participating on the sports' biggest stage.

"We've been looking at the issue since April, to be honest," Cohen said by phone. "We were expecting a Kobe-LeBron Finals, but we got a Kobe-Dwight Finals, which is just as fine because we've got two players who went straight from high school to the NBA (in the Finals), and it didn't seem to hurt them at all in their development as players."

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For the rest, click here. For empirical research on high school players and the NBA Draft, see my law review article Illegal Defense: The Irrational Economics of Banning High School Players from the NBA Draft and my study NBA Players That Get in Trouble with the Law: Do Age and Education Level Matter? and my research on points/boards/assists as featured in ESPN The Magazine. Also be sure to see Alan Milstein's comments from a New York Law School sports law symposium two months ago about a legal challenge to the NBA's age limit, and posts on Sonny Vaccaro's remarks about the topic.

Monday, June 01, 2009
 
David Price, Francisco Liriano, and the Saga of the Super Twos

On Saturday evening, the middle game of a three-game series between the Minnesota Twins and the Tampa Bay Rays, Francisco Liriano and David Price, were the starting pitchers for their respective teams. Price picked up his first regular season win in the game after throwing 108 pitches in five and two-thirds innings, while Liriano dropped to 2-7 and his ERA increased to 6.60 in the 5-2 victory for the Rays. Early in the season, a number of reporters and bloggers were surprised that David Price, the 2007 number one draft choice from Vanderbilt, was being sent down to Durham for more minor league work. Jayson Stark of ESPN was one who offered some observations in “Believe it or not, Price headed to minors.” Although his spring performance included a 1.08 ERA, Stark reviewed Tampa Bay’s reasoning and argued that the move was not done for financial reasons because the terms of Price’s initial six-year deal protected the Rays. However, when looking closer at the terms of Price’s $8,500,000 contract, it appears that he has the right to void the annual salary in the original deal and file for arbitration in any year where he reaches arbitration-eligibility.

There are three basic groups of players in major league baseball. Those who are not eligible for arbitration, the arbitration-eligible group, and those who are eligible to be free agents. All of these categories are established by service time. Article XXI of the Basic Agreement covers credited major league service. One year of credited service equals 172 days. Under the CBA, the first group eligible for salary arbitration is the Super Twos group.

The language in the second paragraph of Article VI, F.(1) Eligibility establishes the criteria:

“a Player with at least two but less than three years of Major League service shall be eligible for salary arbitration if: (a) he has accumulated at least 86 days of service during the immediately preceding season; and (b) he ranks in the top 17% (rounded to the nearest whole number) in total service in the class of Players who have at least two but less than three years of Major League service, however accumulated, but with at least 86 days of service accumulated during the immediately preceding season.”

By spending the early part of the 2009 season in the minors, Price will not complete this season with more than one year of credited service even when adding his limited time on the Tampa Bay roster last season. Even if he is on the roster for all of the 2010 season, he will still be under two years of credited service. Either the Rays sign him to a new deal before his eligibility for arbitration as they did with Evan Longoria in April 2008 or they can maintain the original deal beyond next season depending upon his service time and those of the class each year beginning in 2011.

As to Liriano, the Minnesota Twins did not recall him from Rochester until August 1, 2008. Liriano started 19 games for Rochester last year with a 10-2 record and a 3.28 ERA in 118 innings. He also had a solid strikeout-to-walk ratio. Low walk totals are a hallmark of the Twins pitching philosophy. It appeared that he could have been recalled earlier last season, and some reporters and bloggers addressed this at the time.

Liriano’s salary for 2009 is $430,000, a modest amount above the league minimum in part because his service time at the beginning of this season was not quite enough to land in the group of Super Twos. Although Liriano is off to a rocky start with the Twins this season, the cost of his services is low.

There were four starting pitchers in the Super Twos group this year. Brian Bannister of the Kansas City Royals made $421,000 last year, but after exchanging numbers he signed for the midpoint figure of $1,737,500 this season. Ricky Nolasco of the Florida Marlins received $390,000 for 2008. As a Super Two, he negotiated a salary of $2,400,000 for the 2009 season. Bannister started the season at AAA Omaha, and Nolasco was recently optioned to the New Orleans Zephyrs. The star of the starting pitching class of 2009 Super Twos is Cole Hamels of the World Champion Philadelphia Phillies. Hamels was able to improve his 2008 salary of $500,000 to $4,350,000 for 2009 on the basis of his 84 starts during his three years with the Phillies. Because he spent part of the 2006 in the minors, he was not credited with three years of service at the end of last season. The fourth starting pitcher in the Super Twos class was Shawn Hill of the Nationals. Hill was one of the three players to proceed to a hearing this past year. After defeating the Nationals, Hill was released by the Nationals. He found a spot on the San Diego Padres roster for $500,000 (the Nationals’ offer) plus his settlement with the Nationals, but after pitching in three games he was placed back on his familiar spot on the disabled list on April 26.

The point of the post is the importance of service days and initial eligibility in the Super Twos category. Either by design or financial fortune, the Twins were able to keep Liriano from becoming a Super Two in the 2009 class.