Sports Law Notes: Exam Preperation Outline Part 2

Labor Law & Professional Sports

1. NLRA
   1. Amrcn League of Prof. Baseball Clubs & Assn of Ntnl Baseball League Umpires (1969) p.4-3
      • Baseball is interstate commerce & is subject to NLRB jurisdiction (thus overruling the Supreme Ct. in a sense Flood)
      • board can decline jurisdiction if the dispute doesn’t have a major impact on commerce
      • board exerted jurisdiction here
      • baseball’s internal regulation is not sufficient to prevent labor disputes, the 3rd party in arbitration isn’t neutral
      • labor disputes will be national in scope
      • umpires are not supervisors

   Dissent:

   • Congress’s silence on the issue of covering baseball in NLRA should be taken to mean that jurisdiction should not be asserted
   • No showing that jurisdiction is needed
2. Section 8(a)(3) – Discrimination on the Basis of Union Activity or Membership
   1. NLRB v. Transportation Management Corp (1983) p.4-9
      • bus driver fired for attempting to organize a union; reason given for firing was he left his keys in the bus and took unauthorized breaks (pretextual reasons)
      • Court applied the Wright line Analysis:
        • General Counsel (of NLRB, who brings suit) carries the burden of persuading the Board that an anti-union animus contributed to the employer’s decision to fire an employee
        • burden does not shift, but the employer, could avoid the finding of a violation by demonstrating by a preponderance of the evidence that the worker would have been fired even if he had not been involved with the Union. (affirmative defense)
      • Ct held that the evidence was not sufficient to show that P would have been discharged despite his efforts to organize a union.

      Test for determining is discrimination is based on union activity:

      • Wright Line analysis à places burden on employer to prove discharge would have occurred had the forbidden motive not been present
        • preponderance of the evidence standard (>50%)
      • some states have not adopted this rule because the Act directs that the Board’s atty. has the burden of proving violations

      *Why is who has the burden important?

      1. What if the evidence for either side cancels each other out?
      2. In civil actions P has burden of proof (preponderance) once burden is met it shifts to D

      *Balance:

      1. Don’t want someone to get fired for Union activities?
      2. Don’t want an employee or employer to do what ever they want (Carte blanc) and not get fired.
   2. Nordstrom v. NLRB (4-13)
      • Wright Line created a causation test in all cases alleging employee being fired based on union activities that turn on employer motivation.
        • First, we shall require that the General Counsel make a prima facie showing sufficient to support the inference that protected conduct was a motivating factor in the employer’s decision. Once this is established, the burden will shift to the employer to demonstrate that the same action would have taken place even in the absence of the protected conduct.
          • To establish an unfair labor practice the General Counsel need show by a preponderance of the evidence only that a discharge is in any way motivated by a desire to frustrate union activity.
      • The elements of protected activity on the part of the discharged employee, employer knowledge of the protected activity, and employer animus toward the Union, taken together, are sufficient to establish a prima facie case of unlawful discharge.
3. Duty to Bargain
   Appropriate Bargaining Unit
   1. NASL v. NLRB (1980) p.4-48
      Issue 1: Was there a Joint employer relationship? Yes
      • existence of a joint employer relationship depends on the control which one employer exercises, or potentially exercises over the labor relations policy of the other.
      • Held the league exercises a significant degree of control over essential aspects of the clubs’ labor relations.
      • Miller says could argue not a joint enterprise bcse teams compete against each other

      Issue 2: Is a league-wide bargaining unit appropriate?

      • standard for determining appropriate bargaining unit is arbitrary & capricious
        • Doesn’t have to be the best bargaining unit only an appropriate one
      • Held that with an integrated group with common labor problems & a high degree of centralized control over labor relations a league-wide unit is reasonable

   The Principle of Exclusivity and the Duty to Bargain

   1. Morio v. NASL (1980) p.4-51
      • secret elections held to create union
      • NASL refused to bargain w/union & admitted it
      • Held: the parts of the agreement made after the establishment of the union void
        • Void – Doesn’t exist
        • Voidable – leaves an option open to void
      • Powerful remedy because it gave the players a choice
      • Ct. also granted a temporary injunction. Why? To prevent the possibility of exacerbated harm

      NOTE: Sports are unique because CBA & individual Ks co-exist.

      • disparity between players ability is great & therefore compensation must be different
      • different from mechanics fixing a car
4. The Subject Matter of Collective Bargaining
   • Mandatory – wages, hours or other terms & conditions of employment
   • Not Mandatory – 1) those that concern ER-3^rd party relations that are outside the scope of union concerns; 2) those that deal w/ union-EE relations which are regarded as being outside the scope of legitimate management concern & 3) those matters which center on managerial decisions which lie at the core of entrepreneurial control
   1. NFLPA v. NLRB (1974) p.4-57
      Issue: Did NLRB err in dismissing complaint on the ground that rule was adopted by Commsnr rather than ERs?
      • It was a no fighting rule that imposed a $200 fine
      • Some players were fined as a result of the rule, but players were unaware of the rule
      • Held: Owners unilaterally adopted the rule, did not consult w/union prior to adoption, therefore engaged in unfair labor practice

      Discussion:

      • Ct. doesn’t have a problem w/ commsnr making the rule
      • Ct is concerned that owner came up w/ the rule not the commsnr
      • commsnr’s loyalty is to the owners because they pay his salary
      • if owners make the decision it has to be bargained for because you are taking away wages w/ the fine
      • players entitled to notice & hearing because its covered under CBA & players should have a right to defend himself

V. The Labor Exemption to the Antitrust Laws

1. Overview of the Labor Exemption
   1. Allen Bradley Co v. Local Union #3 (1945) p.5-3
      • manufacturer of electrical equipment wanted to sell in NY city, but market was closed due to union activity
      • a store should be able to negotiate & price shop to get the best deal
      • Econ 101: Elastic goodsà not necessities
        • Inelastic goods à necessities; raising price won’t change volume bcse it’s a necessity (baby formula)
      • if city retailer didn’t buy from union, their businesses would be boycotted
      • argument that it is OK to stifle competition & not considered under the Sherman Act is that it’s labor not a commodity
      • Union says anti-trust to prevent price conspiracies & the union is not concerned about prices, just high paying jobs
        • counter argument: consumer get hurt, outside competitors (Bradley’s emplo
          yees)
      • fair competition is good; Sherman Act is designed to protect fair competition
      • A business monopoly is a business monopoly no matter whether union is involved or not
      • Held: Finding no purpose of Congress to immunize labor unions who aid and abet manufacturers and traders in violating the Sherman Act, the respondent violated the Act. The same labor union activities may or may not be in violation of the Act, dependent upon whether the union acts alone or in combination w/ business groups.
   2. Amalgamated Meat Cutters v. Jewel Tea Company (1965) p.5-9
      • Butcher’s union sets hours for market times (9-6)
      • Union’s not acting w/ the intent to hurt other people
      • consumer is getting burned by not having longer hours
      • Jewel came up/w a better way of handling meat & more convenient, but it was shot down
      • Marketing hours are mandatory and must be bargained for
      • Union-employer agreements are beyond the reach of the Sherman Act
      • Difference between this case and Bradley case is intent
        • If intent of action is primarily anticompetitive à not allowed
        • If anticompetitive effect is ancillary to purpose à lawful activity
          • Butcher’s purpose was to work fewer hours
   3. United Mine Workers of America v. Pennington (1965) p.5-13
      • • UMW sued to recover $55K alleged to be due to a retirement fund
        • P argued conspiracy to get small coal producers out of the market
        • D cross-claimed for antitrust violations
        • D argued wage standards, therefore exempt from Sherman Act
        • Ct said union may make wage agreement w/ multi-employer bargaining unit & may seek to obtain same terms from other employers, but can’t conspire to impose wages on other bargaining units
        • Overproduction is not a good free market argument because you are tampering w/ a system by unnaturally taking away jobs & affecting supply & demand (higher wages; less workers)
        • Unions are inherently designed to eliminate activity (CBAs are exempt from antitrust)
        • Intent of the agreement controls
          • Here it was the intent of the union to harm small companies
          • Harm to small companies was not ancillary

      Dissent: Act doesn’t really cover when union & industry work together. Here supply exceeds demand.

      • Labor should be treated differently because it is not a commodity
      • History shows a consistent congressional purpose to limit severely judicial intervention in collective bargaining under cover of the wide umbrella of the antitrust laws, &, rather to deal w/ what Congress deemed to be specific abuses on the part of labor unions by specific proscriptions in the labor statutes.
2. The Labor Exemption Doctrine in Professional Sports
   1. Mackey v. NFL (Cir Ct 1976) p.5-21
      • • Rozelle rule (player movement) violated Sherman Act; failed prong 3 of the test for labor exemption

      3-prong Test:

      • 1. the labor policy favoring collective bargaining may potentially be given pre-eminence over the antitrust laws where the restraint on trade primarily affects only the parties to the CBA
        2. Federal labor policy is implicated sufficiently to prevail only where the agreement sought to be exempted concerns a mandatory subject of bargaining
        3. The policy favoring collective bargaining is furthered to the degree necessary to override the antitrust laws only where the agreement sought to be exempted is the product of bona fide arm’s length bargaining
      • not a per se violation like the Dist. Ct claimed
      • just because things didn’t change here doesn’t mean they got something elsewhere (dishes v. Laundry)
      • Court assumed that since Rozelle Rule wasn’t part of arm’s length bargaining
        • In fact players could have received concessions in order to allow Rule to continue in existence
   2. McCourt v. CA Sports, Inc. (1978) p.5-23
      • Reserve clause issue w/NHL: Was the agreement the product of bona fide arm’s length bargaining?
      • NHL had an independent arbitrator; look more like a good faith effort over the NFL who uses the commsnr for arbitration
      • Ct. said the reserve system had not been the subject of good faith bargaining& just because you didn’t like the result doesn’t mean there was no collective bargaining (dishes v. laundry)
      • burden of proof was not met to show that it wasn’t part of collective bargaining à hard burden to meet
   3. Reynolds v. NFL (1978) p.5-30
      • Settlement from Mackey
      • P wants this to go further & give them free movement
      • Ct. says there needs to be some line drawn to protect the business; who decides where the line should be drawn? à the whole via the CBA
      • The settlement is fair & reasonable
      • Just because a settlement isn’t the best for everyone doesn’t mean it isn’t a good settlement.
   4. Wood v. NBA (1987) p. 5-31
      • P contends the salary cap, college draft & prohibition of play corporations violate Sherman Act
      • Ct. says this is true on its face, but is was agreed upon through the CBA
      • P contends he isn’t achieving full market value because he is being capped
      • Ct. says this is common in the industry
      • Wood says he wasn’t around when the CBA was signed so he shouldn’t be bound by it.
        • Court says “tough,” that’s the way unions work.

   Key Questionà should CBA be honored or should P be able to backdoor the agreement
   *Professional sports are unique because players bargain for their own wages, whereas normally unions bargain for members wages

VI. Amateur Athletics

1. Amateur Status – The Right to Play
   1. Oldfield v. The Athletic Congress (1985) p. 6-2
      • P was amateur, went pro & wanted to return to amateur to compete in Olympics

      Issue: Was there a private cause of action? No.
      4 Factors for determining if statute contains an implied cause of action:

      1. whether P is a member of a class for whose special benefit the statute was enacted
      2. whether there is an indication of Congress’s intent to create or deny a private remedy
      3. whether a private remedy would be consistent w/ the statute’s underlying purposes
      4. whether the cause of action traditionally is relegated to state law
   2. OK Secondary School Activities Assn v. Midget (1972) p. 6-10
      • Courts shouldn’t interfere with unincorporated associations in their efforts to discipline voluntary members
        • In the absence of fraud, abuse, coercion, bad faith or capricious action courts shouldn’t interfere
      • Students can’t transfer from majority to majority, but can go from majority to minority w/ the goal being to increase racial integration
      • if one can’t go back to majority you are impeding integration because no one will ever go in the first place.
      • argument: no due process because they didn’t get a required hearing
   3. CSU v. NCAA (1975) p.6-13
      • CSU joined NCAA & therefore had to abide by the 1.6 rule
      • Courts will intervene where the action by the association is in violation of its own bylaws and constitution
        • This rule applies to substantive as well as procedural questions
      • The sanction imposed upon CSU of indefinite probation hurt their reputation and thereby affected their ability to recruit athletes
        • This injury gave them grounds to sue

   NCAA arguments:

   1. ct. has no jurisdiction
      • à ct can interfere to make sure NCAA is following their own rules
   2. there is only a mere expectancy to
      go to championship; not a right
      • à ct. dismisses saying this is a significant interest; that goal is significant
2. Amateurism and the Constitution
   • 14^th amendment only applies to state action not private
   1. NCAA v. Tarkanian (1988) p.6-17
      • coach suspended by school for being involved in NCAA violations
      • Coach sued for due process violation & won
      • sued UNLV & NCAA claimed they were a necessary party
      • Lower Ct àsuspension constituted State action prohibited by 14th Amend.; Supreme Court reversed
      • P argues NCAA was a state actor; NCAA is so powerful that UNLV had no other choice
      • Ct said how can they be joint actors if their interests are diametrically opposed
      • NCAA not a state actor because they enjoyed no governmental powers to facilitate their investigation
      • NCAA could not directly discipline any UNLV employee or Tarkanian
      • UNLV operated its athletic program under the color of NCAA regulations, NCAA did not operate under color of state scheme.
      • UNLV could have withdrawn from NCAA if it did not want to follow NCAA’s suggestions
      • Dissent: the nature of the investigations was a violation of Tarkanian’s due process rights
        • NCAA and UNLV acted jointly in suspending Tarkanian
        • UNLV agreed that findings of fact at NCAA hearing would be binding on UNLV

      State Action: Case typically involves the state delegating power to a 3^rd party

   2. Louisiana High School Athletic Assn v.St. Augustine High School (1968) p.6-26
      • St. Augustine wants to join Athletic Assn
      • they are a public, minority school & the Assn is a private organization so they feel they can discriminate
      • Ct. said not private org. because 85% of members are public schools; funded by public funds, therefore state actor
      • Private organization that ran public school athletics was a state actor
   3. Brand v. Sheldon Community School (1987) p. 6-28
      • There is a property interest in a college athletic scholarship, but not in a mere expectancy
      • issue is whether P is entitled to participate or has a mere expectancy to participate
      • P is a wrestling student declared ineligible to participate due to sexual activity
      • cts have generally held there is no entitlement to participate in school sports
      • all rules were followed & P received all process due him
      • Substantive due process rights are violated only if Board’s decision was arbitrary and capricious.
      • ct said board’s decision was not arbitrary & no right to privacy was violated
      • Brand argued that he received a more harsh sentence than previous violators
        • Court said it would not go back and look at previous cases and deconstruct them and look at their facts to decide this argument
      • the Due Process Clause does not require courtroom standards of evidence to be used in administrative hearings
3. The Great Gender Debate
   1. Cohen v. Brown University (1996) p. 6-41
      • Brown demoted men’s programs to gain equity between men’s and women’s programs to comply with Title IX
      • Title IX requires some type of equity between men’s and women’s programs
      • Was permissible for Brown to cut programs in order to meet with Title IX requirements
      • Compliance with Title IX may be achieved in a number of ways:
        • Eliminate athletic program altogether
        • Elevate or create requisite number of women’s programs
        • Demote or eliminate requisite number of men’s programs
        • Combination of these remedies
      • Court states that it gives universities as much freedom as possible in conducting their operations consonant with constitutional and statutory limits.

Sports Agents

• Agents can get paid as the player gets paid
• If player doesn’t get paid, agent doesn’t get paid
• Agents get commission on signing bonuses, as they are considered salary

1. Zinn v. Parish (7-2)
   • Agent negotiated a three-year deal for player. After he did that player released him and refused to pay him his commission for the three years.
     • Court ruled for agent and he got his commission
   • Standard to prove negligence by agent is what would reasonable agent have done in similar situation.
     • Hard standard to prove negligence under
     • Agent makes so many decisions it’s hard to 2^nd guess them
   • Fraud and intentional misrepresentation are easier to show
2. Brown v. Woolf (7-5)
   • Agent talked player into signing with a new team for a lot of money, but team failed.
     • Player didn’t get his money but agent got full commission from team.
   • Player sued for constructive trust on money that agent got
   • General rule is that in cases of constructive fraud punitive damages are available.
     • Constructive fraud is characterized as acts or a course of conduct from which an unconscionable advantage is or may be derived or a breach or confidence coupled with an unjust enrichment which shocks the conscience, or a breach of duty, including mistake, duress or undue influence, which the law declares fraudulent because of a tendency to deceive, injure the public interest or violate the public or private trust.
     • Another formulization is where the dominant party in a fiduciary relationship makes a false statement which the other party relies on to their detriment.
       • Dominant party doesn’t need to know it is false.
     • Not so in MD à no punitives allowed
     • Have to show actual malice for punitive damage award in MD
3. Detroit Lions & Billy Simms v. Argovitz (7-7)
   • Argovitz was Sims’ agent and was negotiating K with Lions
     • Argovitz started really high and then was negotiating down, almost to an agreement
     • Argovitz then suggested that Sims should speak to the Houston Gamblers
       • Argovitz owned a large stake in Gamblers, but did not disclose that
   • Lions made an offer to Sims, which was relayed by Argovitz, which was lower than he thought it should be and upset him
   • Sims signed with Houston and told Argovitz not to call Lions back.
   • The relationship between a principal and an agent is fiduciary in nature, and as such imposes a duty of loyalty, good faith, and fair and honest dealing by the agent
   • Because of egregious breach of Argovitz’s fiduciary duty, the proper remedy was recission of the contract.
4. Walters v. Fullwood (7-11)
   • Parties to a K can specify which law is going to apply to the K
     • K in MD can be governed by DE law
   • Intentional interference with K
     • Plaintiff must allege:
       • The existence of a valid K between plaintiff and another contracting party;
       • Defendant’s knowledge of that K;
       • Defendant’s intentional procurement of a breach of that contract by the other party; and
       • Damages
     • Such a claim requires that the defendant’s sole motive was to inflict injury and that the defendant employed unlawful
   • There can be no interference with a K at will
     • Services and fees are already paid
   • Agent offering and player signing K before player’s graduation was not illegal in this case but it was against public policy so the court wouldn’t enforce the K.
     • In some states it is illegal for this to occur
   • Agent bears the brunt of the K being declared void as he was more experienced and was richer.

Salary Cap

• Cap and cash figures are very different
• Cap number i
  s a percentage of Defined Gross Revenues (DGR)
  • DGR includes
    1. TV revenues (Bulk)
    2. Radio revenues
    3. Gate receipts
• DGR is divided by # of teams then multiplied by the percentage the NFL comes up with (currently 68%) and that is the cap figure
• $1M/day fine for each day a team is over the cap

Example below is for a four year deal with $8M signing bonus

Year	Salary for Year	Cash	Cap
2001	$500,000	$8.5M	$2.5M
2002	$1M	$1M	$3M
2003	$1M	$1M	$3M
2004	$2M	$2M	$4M

• In the event that a player is released before the end of K:
  • If released prior to June 1^st:
    • Team takes the charge for the remaining signing bonus left on K on the salary cap number for that year
  • If released after June 1^st
    • Team has option to spread the remaining money left on signing bonus out over two years, or take it all in current year
• If player is traded the trading team is still responsible for the signing bonus on their cap
• Most NFL teams would rather take the cap hit in one year instead of spreading it out
• Incentives:
  • Two types: Likely to be earned and Unlikely to be earned
    • Likely to be earned is where a running back is promised $100K if he rushes for 1000 yards and he rushed for that or more last season
      • Likely to be earned are charged to the salary cap when negotiated
        • If player doesn’t earn it the team gets a credit the next year
    • Unlikely to be earned is where a running back is promised $100K if he rushes for 1000 yards and last year he rushed for 999 yds. or less.
      • Charged to the cap when he earns it

A

Amateur Athletics, 21

Antitrust Law, 11

Appropriate Conduct, 9

Assault, 6

assumption of risk, 8

B

Battery, 6

business monopoly, 19

bylaws, 3

C

Comparative negligence, 9

competing leagues, 5

Congressional inaction, 12

Contract Formation, 1

Contributory negligence, 8

D

Discrimination on the Basis of Union Activity or Membership, 16

draft, 14

Duty to Bargain, 17

E

enjoin, 5

F

Federal Baseball, 11

fiduciary, 25

foreseeable, 7

foul, 7

Franchise player, 1

fundamental fairness, 12

G

golf, 9

H

hand written clause, 4

Heightened standard, 8

How to plead a tort case, 8

I

implied cause of action, 22

Incentives, 26

Insurance, 8

Intent of the agreement, 20

Intentional interference with contract, 25

Intentional Torts, 6

Interpretation of Sports Contracts, 3

J

Jewel Tea, 19

L

Labor Exemption to the Antitrust Laws, 19

Labor Law & Professional Sports, 16

Location and Ownership of Franchises, 14

M

material breach, 3

Modified comparative negligence, 9

Money damages, 5

N

Negligence & Recklessness, 7

NLRA, 16

O

Offer & Acceptance, 1

P

Per Se Rule, 12

personal service, 5

Player Discipline, 14

Player Restraints, 13

Power of Termination in Professional Sports Contracts, 4

preliminary injunctions, 6

R

Recklessness, 10

Remedies for Breach of Contract, 5

renewal, 6

reserve clause, 12

Role of the Commissioner, 1

Rule of Reason, 12

S

Salary Cap, 25

Sherman Act, 12

signing bonus, 4

Signing Bonuses, 2

simple negligence, 8

specific performance, 5

Sports Agents, 24

stifle competition, 19

T

The Labor Exemption Doctrine in Professional Sports, 20

The Subject Matter of Collective Bargaining, 18

Title IX, 24

Torts, 6

U

umpires, 16

unincorporated associations, 22

V

voiding a contract, 3

W

Waivers, 10

Warm-ups, 9

Wright line Analysis, 16