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Sports Law Scoreboard

An Inside Look Into The Legal and Business Side of Sports

Are Consumers Entitled to Sue Over the Fight of the Century?

Posted in Sports Business and the Law

Well, the two of them squared off and Manny P lost. Turns out that he had an injury before the fight and fans who paid to see it (or lawyers) are suing claiming various consumer fraud violations. I have a public policy problem with this one. Sports figures are injured all the time and managers either play them or not. Does a Dodger fan have the right to sue because Puig is not in the lineup? How about if he is and does not play as well as the fan thinks he should. I predict that the court will throw these out, finding that the decision has to lie with the fighter’s manager, not a plaintiff’s lawyer.

“Fight Of The Century” A Feast For Class Action Litigators

Posted in Uncategorized

It was billed as the “Fight of the Century” – the match between world champion Manny Pacquiao and undefeated world champion Floyd Mayweather, Jr.  When every dime is accounted for, revenue from last Saturday’s fight at the MGM Grand in Las Vegas is expected to top $400 million. Unsurprisingly, that is a record.  Honest fans paid approximately $100 for pay-per-view access, and the fighters will ultimately split a purse worth more than $300 million.  In the end, Mayweather won by unanimous decision and, by every metric, the fight was a massive success for the athletes, their promoters, and the Vegas machine.  It was also a big letdown for fans who had waited for an epic match-up that arguably should have happened five years ago.

Reports subsequently revealed that Pacquiao injured his shoulder in the months leading up to the fight.  On Wednesday May 6, he underwent arthroscopic surgery in Los Angeles to repair a torn rotator cuff in his right shoulder.  Despite the preexisting nature of the injury, Pacquiao denied any “injury to [his] shoulders, elbows, or hands that needed evaluation or examination” on his pre-fight questionnaire submitted to the Nevada State Athletic Commission.  Pacquiao’s camp denied making any misrepresentation, stating that Pacquiao and his adviser, Michael Koncz, inadvertently “checked the wrong box” on the questionnaire.

Following the injury disclosure, boxing fans teamed up with a few entrepreneurially-minded class action litigators to flood the federal courts with lawsuits alleging fraud and conspiracy by the fighters, their promoters, the television networks, and television providers. See, e.g., here and here.

Of local interest, on Monday, two Philadelphia residents joined the fray with a class action matter filed in the United States District Court for the Eastern District of Pennsylvania.  Plaintiffs, Allan Gordon and Seth Lamb named Showtime and HBO, Mayweather Promotions, LLC, Pacquiao and his promoter, Top Rank, Inc., Top Rank’s CEO and President, Bob Arum and Todd Duboef, respectively, and Michael Koncz, alleging that the defendants conspired to conceal Pacquiao’s injury.  Protesting what they call a “sham fight,” Plaintiffs complain that Pacquiao injured his shoulder so severely that he could not train for a period of two weeks.  Plaintiffs suit is summarized in Paragraph 13:

Defendants each engaged in blatantly self-interested and wrongful conduct which violated the contractual expectations and rights of pay-per-view purchasers who fully anticipated and contracted for access to view and observe an honest and fair boxing match played in compliance with all laws, regulations, and [Nevada Athletic Commission] rules.

Gordon and Smith each paid $99.99 to watch the match – Gordon from his secondary home in Hallandale Beach, Florida, and Smith from his home in Philadelphia.  They assert statutory claims under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (the “UTPCPL”) and the Florida Deceptive and Unfair Trade Practices Act, both of which provide for remedies in addition to actual damages. In the case of the UTPCPL, for instance, a consumer can recover three times the amount of his or her actual damages and an award of attorneys’ fees for a proven violation of any provision of the UTPCPL.  In addition to their statutory claims, Plaintiffs assert common law claims for tortious interference with a contractual relationship, fraud, breach of contract, unjust enrichment, and civil conspiracy.

Plaintiffs ask the Court to certify the matter as a class action and to designate Plaintiffs as representatives of a class that Plaintiffs anticipate will exceed “hundreds of thousands” of pay-per-view subscribers.  In reality, the class of potential plaintiffs could exceed five million.

Given the number of actions and potential class members, it is likely that present and future actions arising from the fight will be consolidated by the United States Judicial Panel on Multidistrict Litigation for the purposes of reducing expense and the toll on judicial resources.  The MDL is a panel consisting of six federal judges from across the country (including Third Circuit Court of Appeals Judge and former First Lady of Pennsylvania, Marjorie Rendell), which serves to (1) determine whether civil actions pending in different federal districts involve one or more common questions of fact such that the actions should be transferred to one federal district for coordinated or consolidated pretrial proceedings; and (2) select the judge or judges and court assigned to conduct such proceedings.

In the interim, the chairman of the NSAC, Francisco Aguilar, has already promised an investigation by the state attorney general’s office, implying that Pacquiao might be facing perjury charges.

Daily Fantasy Sports Websites Face Legal Hurdles Relating to Advertising Promotions

Posted in Sports Business and the Law

The rapid rise of fantasy sports in the last 15 years is well documented. In 2013 alone, an approximately 30 million Americans spent an estimated $11 billion on fantasy football. In the past year, the hottest trend in fantasy sports has been the growth of daily fantasy sports websites, such as FanDuel and DraftKings. These websites allow customers to draft unique teams each day in whichever sports they choose, then compete in tournaments against up to thousands of individuals at stakes of their choosing.

The two aforementioned companies have enjoyed immense early successes – as of last month, DraftKings and FanDuel were allegedly working on funding deals with various investors that would result in company valuations of over $1 billion each. Many American professional sports leagues and individual teams have entered into contracts with the companies, as reflected here. However, recent lawsuits against both companies concerning truth in advertising laws have created issues that could take years to resolve.

Last week, a group of plaintiffs filed a class action federal lawsuit against DraftKings in Illinois. The plaintiffs consist of a group of customers who deposited money to DraftKings after learning of the company’s promise to provide a 100% match of their deposits. While DraftKings advertises this promotion across many platforms, in reality it does not provide a 100% match of customers’ deposits at the time of deposit.

According to the DraftKings website itself, “Deposit bonuses release in increments of $1 for every 100 Frequent Player Points (FPPs) that you earn by playing in paid contests. All deposit bonuses expire four months after they are created.” As alleged in the plaintiffs’ Complaint, “a consumer who had deposited $600 would have to spend at least $15,000 on contests, and do so within four months, to obtain what was promised as a “100% First-Time Deposit Bonus” or ‘DOUBLE YOUR CASH’ bonus of $600; that would be $14,400 more than his or her initial payment.” The plaintiffs also allege that DraftKings Terms of Use are “a maze of fine print that consists of nearly 6,000 words in single-spaced tiny print.”

Two additional truth in advertising class action lawsuits against DraftKings are pending in federal courts. FanDuel, which also promotes a match deposit bonus yet requires customers to “unlock” the bonus by entering paid contests over time, has recently faced three class action truth in advertising lawsuits, but each of those cases has resolved through a voluntary dismissal (presumably via settlement).

It is difficult to evaluate at this stage whether the companies will significantly suffer from these lawsuits, though the recent valuation estimates after some of these lawsuits were filed indicate that they will continue to prosper. In fact, the companies may even have already determined that the increased business from their deposit bonus match promotions is greater than the cost of defending and settling the lawsuits. Regardless, it will be interesting to see how courts across the country adjudicate the actions that are still pending.

The Kris Bryant Problem and How to Fix It

Posted in Labor & Employment, Sports Business and the Law

On March 30th, the Chicago Cubs assigned wunderkind slugger Kris Bryant to its minor league affiliate in Iowa, rather than bringing him north from spring training for MLB’s opening day.    Bryant – the consensus number one prospect in professional baseball – completely annihilated Cactus League pitching this spring, with a league-leading 9 homers in 40 at-bats and a slash line of .425/.477/1.175.    Bryant’s assignment to Iowa was met with strong reaction from the Major League Baseball Players Association which issued the following statements via Twitter:

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The implication from the players association and others is that the Cubs had an ulterior motive for sending Bryant to the minor leagues, i.e. due to a longstanding wrinkle in the collective bargaining agreement, delaying Bryant’s promotion to the major leagues for the Cubs’ first 8 games of the season  – indeed, the Cubs called up Bryant to the majors on April 17th (and he has continued crushing the ball to the tune of a .409/.552/.591 slash line) – allows the Cubs to keep Bryant’s contractual rights for an additional season.  Instead of being able to declare free agency after the 2020 season, Bryant will become free-agent eligible no sooner than after the 2021 season.  Essentially, by delaying Bryant’s promotion, the Cubs traded eight games of Bryant in 2015 for an entire season of Bryant in 2021.

Both the Cubs and certain pundits have defended Bryant’s non-promotion as justifiable for the purpose of Bryant’s development, such as to improve his defensive skills.  However, it is unclear precisely what defensive skills (or other parts of his game) Bryant was made to “work on” between opening day and April 17.

Bryant is not the first young prospect to be held in the minors by his club for the alleged purpose of delaying the player’s service time.  Teams have been accused of doing this in order to either delay a player’s free agency or arbitration eligibility, and occasionally players have filed grievances against their clubs that have done so.  While transcripts of these grievances are not made public, one can assume that players have accused MLB clubs – who are given a great deal of deference for promotion/demotion decisions in both the CBA and standard player contracts – of violating the implied covenant of good faith and fair dealing in the standard player contract.   But while allegations of “service-time games” against clubs are not novel, it is difficult to recall a minor league player who was held back after so convincingly dominating every level of minor league competition and then statistically outperforming – arguably – every other participant in major league spring training.

I will not speculate here on the likelihood of success if the MLBPA or Bryant’s agent (Scott Boras) files a grievance on behalf of Bryant.  Other authors have so speculated.  The question I pose is whether there is a viable alternative system for determining free agency that can prevent conflicts like this from reoccurring, without causing unintended negative consequences.

Regardless of whether one sympathizes with the Cubs (and MLB) or Bryant (and the MLBPA) on this issue, it is easy to find fault with the current linkage between service time and free agency.  Regardless of whether you believe the Cubs in this instance, this linkage clearly provides clubs with iniquitous incentives.  Clubs are incentivized to potentially hold back even the most “ready” of their best young players – something not seen in the other major professional U.S. team sports.  And thus, aspiring major league players, MLB fans, and potentially the clubs (e.g. if they lose games they could have won with the rookie player) suffer.

So I’d like to propose a solution for MLB and the MLBPA to kick around before the next round of negotiations: end (or substantially limit) the linkage between service time and free agency.  Right now, players are eligible for free agency after amassing 6 years of service time.  This is the case regardless of whether they are 25 or 35 or 45 years old.  Why not instead allow all players – regardless of service time – to file for free agency upon reaching a certain age?

This plan is inherently neither management-friendly nor union-friendly.  Who is favored under such a rule would depend on the “free agent age” that the sides negotiate.  For example, it would likely be quite league-friendly to say that all players become eligible for free agency at age 35, and it would likely be quite player-friendly for the CBA to provide that all players become eligible for free agency at 25.  Somewhere in the middle, however, there is a “fair” age for free agency that both sides can live with.  [n.b. however, there may be some not-so-obvious advantages for MLB clubs if the “free agent age” were not too high, particularly for clubs who have the financial wherewithal to frequently dip into the free agent market.  While some MLB clubs would be primarily concerned with losing team control over players at too young an age, others would prefer if most of the available high-end free agents were not on the “wrong side of 30.”         The thinking here is that if the entire supply of free agents consists of players in their decline years, teams would artificially drive up the market by signing “bad contracts” to older players, expecting them to repeat their peak years]

Clearly, details would need to be hashed out.  For example, this system would probably have to be phased in over time (e.g. becoming effective as to all players who sign their first-year player contract in or after 2015).  Moreover, either side might object on the grounds that this would flood the market with free agents.  Perhaps, if an excess of free agents were a concern, there could be some nominal service time quota to prevent “late bloomers” who have one great season from immediately hitting free agency before their clubs lose contractual control.

Regardless, even if the parties to collective bargaining hate my idea, I am hopeful that the interested parties will immediately begin brainstorming for creative alternatives to the current, system for determining free agency eligibility. While on the macro-level, the game is flourishing financially and player salaries are at an all-time high, I would argue that has happened in spite of – not because of – the current system of free agency. Now that we are well into a 20+ year period of relative baseball labor peace, there is no need to maintain vestiges of former CBAs that needlessly put clubs at odds with their players and fans, as I believe this system does.

Fan Sues NFL For $25 Million Alleging Theft Of Idea For Original NFL Network Series

Posted in Intellectual Property, Sports Business and the Law

A Los Angeles resident has sued the National Football League, NFL Commissioner, Roger Goodell, and eight NFL employees in the United States District Court for the Central District of California alleging theft of intellectual property. Representing himself pro se, Plaintiff, Rickey B. Reed, claims that he developed the concept for an original production profiling the lives of aspiring young athletes who dream of playing in the NFL; an idea he claims is remarkably similar to a show aired on the NFL Network in late 2014.

Reed attaches a batch of emails addressed to numerous NFL employees dating back to August 2013 in which Reed describes his concept for an original show titled “NFL: The Next Generation”:

In any given year 100,000 guys may play high school football, 10,0000 guys may play at the colligate level, but after that the numbers take a dip that is steeper than a bungee jump down the side of Mount Everest when the selection committee only invites 332 players to participate in the 2013 NFL scouting combine. These figures translate into a great number of broken hearts and enough man tears to float a cruise ship from California to Czechoslovakia.

*          *          *

This is the football version of (American Idol) seated in the heart of an unofficial NFL combine that will give these rejected and neglected, hungry and thirsty young men a nationally televised platform to prove the experts wrong, and to show those who said that they can’t, that they can.

In his email pitch, Reed outlined the procedure for evaluating the athletes using NFL combine metrics. Reed envisioned that the show would feature a mixture of segments, including human interest stories and personal profiles. Further, the show would highlight the contestants’ physical attributes to appeal to… um… a wider audience:

People are interested in interesting people so our contestants will be personalized before our viewers. Of course we expect our contestants to be tough, but when they are sexy as well, we will exploit that quality to lock in female viewers, who are for the most part born with a dedicated spirit.

Five days later, Reed received a letter from the NFL’s legal department indicating that the NFL has a policy prohibiting unsolicited proposals. The letter further stated that the NFL had no interest in his production, and that all materials submitted would be returned to him unread.

Reed alleges that, in January 2015, he took his show idea to a local gym to discuss it with “a guy [he] knows who is a former NFL player.” After reviewing the concept, the unidentified player informed Reed that he had seen a similar show on the NFL Network, referring to a six-part original series produced by the NFL Network titled “Undrafted,” which the NFL Network describes as follows:

Every year, thousands of college football players leave school with dreams of achieving a career in the NFL. Of those, 256 players are selected in the NFL Draft. The remaining – the undrafted – are forced to overcome another obstacle to pursue their dream.

Reed alleges that the NFL took the concept without compensation, constituting a “great injustice that can only be effectively dealt with by imposing jail time and steep punitive damages.” Reed asserts causes of action for breach of implied-in-fact contract, breach of confidence,” and a statutory claim under California’s Business & Professions Code.

Reed seeks combined total damages of $25 million, representing “1.25% of the $2 billion in revenue gain by [the NFL] related to media income in 2014, and approximately 0.28% of the [NFL’s] total earnings for the same year which was $9 billion.” (Reed does not source his statistics – in fact, league revenue in 2014 was likely closer to $11 billion, with a significantly higher portion coming from broadcast rights/media.)

Reed further requests that the District Court enter an order restraining the NFL from using, broadcasting, advertising, selling, or distributing all content related to Reed’s alleged concept.  In his final prayer, Reed asks for relief that may or may not be within the District Court’s inherent equitable powers:

[O]rder any and all other favorable relief that should be granted to [Reed], as [Reed] has been victimized by the evil and deceptive method of robbery that has been practiced by industry giants for decades, as they have lusted after, lied, coveted and stolen from artist [sic], writers, inventors and creators of the fruit of their God given talent, oppressing the artist and denying him and his family the benefits that are a direct result of the use of his talents, and using the benefits of the artists to fill their own bank accounts, live in houses that the artist should be living in, driving cars that the artist should be driving, and stealing credit for successful products that rightfully belong to the artists. . . .

Reed only recently filed the suit and the docket does not contain an affidavit or waiver of service, meaning the NFL likely has not yet received a copy of the Complaint.  The NFL did, however, address the issue in a January 12, 2015 letter responding to numerous emails by Reed complaining of infringement, stating:

The NFL takes intellectual property concerns very seriously. However, a review of [the] matter indicates that there has not been any misappropriation or unauthorized use of [Reed’s] purported intellectual property.

Mayweather-Pacquiao Fight: Why a Promise Is a Promise

Posted in Sports Business and the Law

The fight is on, but the fight over the contract continues. Mr. P announced that Mr. M would not agree to a $5 million penalty if either of them had a dirty drug test after the fight. You flat out cannot do that in a negotiation. Once terms are agreed to, adding terms is a non-starter absent extraordinary circumstances. What might that be? If you add value from your side, MAYBE the other side will agree to modify a contract. So here, for example, would it have been worth some extra money to have obtained the drug test promise? Or the promise of an added return fight? Perhaps joint appearances in Vegas?

The lesson is that if you want something, ask for it, but the ask had better be before the contract is inked.  By the same token, if you hold back on the “ask” until the end of a negotiation, be prepared to walk away from the deal.

 

New Jersey and Sports Leagues Set to Resume Sports Betting Battle in Federal Appellate Court Today

Posted in Sports Business and the Law

Today is a crucial day for New Jersey in its mission to legalize sports betting, as it will argue its position on the issue against attorneys for the four major American professional sports leagues and the NCAA this morning in the Third Circuit Court of Appeals in Philadelphia, Pennsylvania.

Attorney Theodore B. Olson, who represents New Jersey in this action, plans to argue that U.S. District Court Judge Michael Shipp erred in ruling that that New Jersey’s partial repeal of its prohibition against sports wagering violates the federal Professional and Amateur Sports Protection Act of 1992 (“PAPSA”).  New Jersey will likely also assert that the professional sports leagues have “unclean hands” due to their partnerships with fantasy sports websites.

While it is true that some sports leagues have recently embraced pay-fantasy sports websites, the leagues remain steadfast in their quest to thwart New Jersey’s legalization efforts.  They believe that PAPSA clearly prohibits the 46 states not exempted from the act’s application from legalizing sports betting in any fashion.

The Third Circuit has previously ruled in favor of the sports leagues, but the Court’s prior Opinion potentially provided the state with a loophole – it acknowledged that even under PAPSA, states have “much room . . . to make their own policy” and can establish their own parameters of sports betting prohibitions.  New Jersey will assuredly use that language in support of its argument today.

Led by Governor Chris Christie, New Jersey has been undeterred by many unfavorable court decisions in the two-plus years since the sports leagues initially sued to prevent the state from commencing sports betting.  While nearly all casinos and racetracks in New Jersey have seen revenues decrease each of the last few years, the state and its casino/racetrack owners believe that sports betting could reverse their fortunes and bring in millions of dollars yearly.

Whether the Third Circuit will continue to affirm the sports leagues’ position that PAPSA prevents New Jersey from having authority to legalize sports betting remains to be seen. What is certain is that today’s oral argument and the resulting decision is extremely crucial in determining the future of potential sports betting in New Jersey, in addition to many other states that may wish to follow its lead.

Why Juries Like or Dislike Clients

Posted in Sports Business and the Law

Christian Laettner at Yahoo event

Christian Laettner (photo by Steven Buyansky (Flickr: YahooMadness-53) [CC BY 2.0, via Wikimedia Commons)

“30 for 30” on ESPN is always worth a watch. On Sunday, they aired a show on why people hate Christian Laettner.  For those who never saw him, he was a 6-foot 10-inch center who in the ‘90s was the dominant player for the dominant team, Duke University. He was a tough kid with Abercrombie good looks. While he looked like a choir boy, he played like a street kid. The show points out his contradictions. First and foremost, Duke is and was an elite school and the assumption was that he was a rich hid. His dad is a printer and his mom an elementary school teacher. He grew up in Buffalo, not Beverly Hills. He went to a prep school but did janitorial work to defray the cost of tuition.

We face these issues as lawyers. The megastar who is actually shy. The Gatsby, a self-made man who comes across as royalty. Teaching a jury who your client is represents the art of trying a case. If you cannot peal back the layers and present the real person, perhaps you should be writing wills.

Dean Smith, Tark the Shark and the Power of Mentorship

Posted in Education, Sports Business and the Law, Sports History

I never knew Dean Smith, but his former players worship him. Jerry Tarkanian was a client. He may not have taken Phi Beta Kappas in but he dearly, truly cared about his “boys,” including having tutors for them.

I owe a huge debt to my Dean/Shark, whose name was Norm Peek. Peek was the supervising deputy at the California Attorney General’s Office and one of the finest trial lawyers I have ever met. He taught me how to do everything from trying a case to ethically fighting one. He always would say, “give people an out as you are going to need one yourself one day.”  Notoriously anti-social, he honored me by coming to my wedding. What little contribution I have made to the profession I owe to his care and feeding. All young attorneys should be as lucky. Firms grow and prosper (or not) to the degree that senior lawyers invest in their young charges. A good lesson for us all.

Major League Baseball and its Clubs Defend Wage-and-Hour Class Action Brought by Former Minor Leaguers

Posted in Sports Business and the Law
Source: Pixabay

Source: Pixabay

On October 24, 2014, Aaron Senne and several former minor league baseball players filed a consolidated amended class action complaint against the Office of the Commissioner of Major League Baseball, former Commissioner Bud Selig himself, and the 30 major league clubs.  The amended complaint alleges in its introductory paragraphs that the defendants “openly collude on the working conditions for the development of [their] chief commodity: young baseball players.”

Despite this introduction, and unlike prior and pending cases brought by professional baseball players, the 100-page amended complaint in Senne does not make claims for antitrust violations.  The complaint instead consists of claims under the federal Fair Labor Standards Act, state wage-and-hour laws, state unfair-business-practice laws, and equitable state theories such as quantum meruit.  In short, the players allege that they are paid significantly less than what is fair and/or what is required by laws governing minimum wages and overtime.

The lawsuit is generating publicity not merely because of its subject matter, but also because of the media relations efforts of one of the plaintiff’s lead attorneys, Garret Broshuis, a 33-year old former minor leaguer and recent (2013) law school graduate.  In addition to the sports-related periodicals one would expect to cover this case, Broshuis has recently been featured in the Village Voice, the Daily Beast, and  Mother Jones – publications with decidedly non-jock audiences that are not known for their coverage of either sports or the business thereof.  Broshuis explains in these features that minor leaguers typically earn $1,000 or less per month, and then are expected to purchase their own equipment and pay for their own lodging.  [side note: The New York Mets have generated some recent negative press for requiring their minor leaguers to pay for use of Mets training facilities in the offseason – something which their co-defendants would privately concede is not helpful to MLB’s p.r. efforts in justifying the defendants’ stance in this Senne case].  Defendants and their proponents argue that the minor league experience is not run-of-the-mill employment but is instead designed to be a training ground for the major leagues; in short, minor leaguers are provided with more than what can be measured in their paychecks.

While opinions abound about the plaintiffs’ likelihood of success, it would seem that the federal claim, at least, will turn on the applicability of the exemptions in the Fair Labor Standards Act that are geared toward certain types of seasonal employees.  Plaintiffs are aware of these exemptions but argue that they are inapplicable.

The case is Senne et al v. Office of the Commissioner of Baseball, et al, Case Number 3:2014cv00608, United States District Court for the Northern District of California (San Francisco).  Motions to dismiss and to transfer venue are pending.  To the extent that the case is not cut short by dispositive motions or a settlement, an 8-week trial is set for early 2017.