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Tuesday, March 27, 2012
The NFL's Next Legal Challenge Comes From Within

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

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

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

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

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

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


I sure am fascinated by this.

It seems to me that "no salary cap in 2010" in the prior CBA created a contractual right to spend whatever a team wanted in that year. Even if that meant paying every player on the roster a billion in that year, and a dollar in all subsequent years, leaving that team way under the future caps and free to spend at will when the new CBA was agreed.

Warning teams not to do that would seem to be entirely ineffectual when they have in their hands a contract -- the prior CBA -- that says they can do that.

I'm guessing, without knowing, that the league charter reserves to it the right to make changes to rules in the name of competitive balance. And I'm guessing, without knowing, that the league is trying to use this provision to defend this act, since they can't come out and say that any rules were broken.

But at the same time, I'm guessing, without knowing, that there must also be some provision in the league charter that prohibits the league from penalizing franchises to bring them down to the level of their competitors in the absence of some rules violation. In the interest of competitive balance, the league can't just give extra cap room, draft choices, and downs to the Bengals and subtract them from the Patriots just because the Pats have been more successful, right?

I'm wondering if there's some catchall language in the new CBA that binds teams to a generic acceptance of commissioner "adjustments" for competitive balance purposes. But I would think that if any such language is vague enough to have failed to set off the radar of Dallas and Washington lawyers, it's also vague enough that it wouldn't be held to trump the basic antidiscrimination principles that I'm assuming override everything.

And I'd assume that those principles are the protections for the Cowboys and Redskins even if the new CBA provides that all parties waive any rights they claimed under the expired CBA.

And it would seem to me that if the two penalized teams didn't agree to this in advance in some kind of "oops, didn't realize that" clause, they'd not only have a breach of the presumed antidiscrimination principles, they'd also have an argument that the agreement by the other owners to force them to spend less is a combination in restraint of trade. The league only has an antitrust exemption to the extent that violations are made okay by agreement through collective bargaining with the harmed parties, right? Well, maybe the NFLPA couldn't sue because they've agreed to this, but it sure seems that if these two teams haven't agreed, the exemption doesn't stop them from claiming that this is an antitrust violation that harms them.

I can't see how this isn't a huge legal blunder and/or risk by one side or the other, and I'm sure hoping that this will get some close coverage as it plays out.

Anonymous Anonymous -- 3/27/2012 3:33 PM  

A clause in the NFL Constitution and Bylaws allows the Commissioner to take away draft picks and/or fine a team whenever he deems a competitive aspect of the game has been violated "at any time". Clause in conjunction with that allows Commissioner to refer the matter to the NFL Management Committee to impose any such other recommendations it deems appropriate. A final clause allows the Commissioner to disapprove of contracts within 10 days after such contracts are filed with the Commissioner.

Redskins and Cowboys will argue that by not disapproving the contracts within 10 days means the NFL accepted them, and they cannot now retroactively go back and punish them. NFL will argue that "at any time" language means they can go back and punish. The problem I see with NFL's argument is that the clause that the Commissioner can disapprove of contracts is directly on point in this situation.

Further, why are only the Redskins and Cowboys punished when other teams gained the same competitive advantage by (1) front-loading contracts (Julius Peppers, Kyle Vanden Bosch) and (2) going under the salary floor (8 teams did so in 2010). The teams that went under the floor also had the most cap room in 2012 and were able to sign the best players (Vincent Jackson, Carl Nicks for the Bucs, Mario Williams for the Bills, Laurent Robinson for the Jags). Those teams sacrificed 2010 to save money and rid themselves of bad contracts to gain cap space in future years, like 2012.

The only logical explanation for why the NFL did this is that the Redskins and Cowboys grossly outspent every other team in 2010, and that made certain NFL owners look bad in the CBA negotiations for wanting to lower player salaries.

Anonymous Thomas Grove -- 4/20/2012 9:08 AM  

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