McCann: Legal Lessons from NBA/NFL Lockouts

Michael McCann, Legal Analyst and SI.com Columnist for Sports Illustrated

While the NFL and NBA lockouts were resolved before either league suffered permanent injury, the work stoppages still caused economic harm (including harm to third-party apparel makers, concessionaires and others), led to millions of dollars of legal fees and reflect poorly upon the leadership of league and union officials.

Both lockouts were also completely avoidable.  The leagues and players’ associations literally had years to avert them, and yet the lockouts still happened.

Why?  Why would smart businesspersons opt to endure the negative publicity and fan disdain of lockouts?  Why would they place their faith in expensive lawyers, unpredictable courts and powerless mediators when their conflicts could only be resolved by themselves?  It isn’t as if lockouts have to happen — Major League Baseball and the MLBPA agreed on a new CBA in November 2011 without even the hint of a work stoppage.

For leagues with teams that spend millions of dollars each year on analytics in hopes of unearthing competitive advantages, the millions spent by the NFL and NBA on lockout expenses seem strikingly inefficient.  To be sure, the key issues at stake, most notably relative percentages of revenues allocated to players and owners, were at times intractable.  But the agreements ultimately reached were reachable long before the lockouts.

Part of the explanation for the “better” behavior of teams than their leagues and players’ associations may rest in operational objectives.  While leagues and players’ associations are motivated primarily by business and legal considerations, teams are motivated most by competitive considerations.  To be sure, leagues “compete” with other leagues, and more generally with other entertainment providers, for fans’ interest and dollars.  And players’ associations compete with other players’ associations for most effectively representing their membership.  But teams compete with each other every day and are better candidates to utilize analytics and other optimizing approaches.

Still, pro sports leagues and players associations should learn from the two lockouts.  This is most true of the NHL and NHLPA, as their CBA is set to expire on September 15, 2012.

There are three key legal lessons from the NFL and NBA lockouts:

1. Antitrust litigation and NLRB charges take too long for players to wage effective legal battles: 

Both the NFLPA and NBPA thought that by decertifying (or, similarly, disclaiming interest) and filing antitrust lawsuits, owners would be threatened by the prospect of paying treble damages, likely in the billions of dollars.  This strategy had a fundamental flaw: antitrust litigation, especially complex antitrust litigation involving novel issues — such as those posed by Tom Brady et al. v. NFL and Carmelo Anthony et al. v. NBA — takes years.  Owners, or at least their lawyers, knew that.  They knew the lockouts would be settled long before there could be an imminent possibility of losing a trial and paying billions of dollars in damages.

The same dynamic was true of the players’ unfair labor practices charges with the National Labor Relations Board.  Both NFL and NBA players hoped to persuade the NLRB that the leagues made unreasonable demands in order to engineer prolonged lockouts.  The NLRB, however, never acted on the charges, and gave little indication as to when they would.

The legal process was therefore too slow for the players to effectively use the law as a weapon against the leagues.

2. Federal labor law protects the rights of owners to conduct lockouts

With the prospect of obtaining money damages too far into the future, a better strategy for the players was in seeking injunctive relief — namely, an order from a judge enjoining a lockout until a full trial could be heard.  NFL players temporarily obtained this relief from U.S. District Judge Susan Nelson.

But, as NFL owners expected, the U.S. Court of Appeals for the Eighth Circuit quickly reinstated the NFL’s lockout.  This expectation was based on the Norris-LaGuardia Act, a federal labor law that prevents federal courts from issuing injunctions while labor and management are at impasse.  While interpretation of the Act in the context of professional league lockouts remains a source of controversy and while other federal appellate courts might have favored the players’ interpretation, the courts involved with the players’ litigation clearly spoke in favor of the owners.

One caveat: if the NHL locks out its players later this year and if the NHLPA decertifies — which means that each player becomes independent and can file litigation in a court nearby where he plays — expect the players to file antitrust litigation in a federal court in California or Arizona.  Both states have NHL teams, meaning the league has sufficient nexus to each state to defend itself in court.  More importantly, both states are governed by the U.S. Court of Appeals for the Ninth Circuit, which is regarded as more pro-labor than other federal circuits and which may embrace a view of the Norris-LaGuardia Act favorable to players.  It is also possible NHL players could file litigation in Canada, which features stronger labor laws.

The NHL, for its part, would probably seek to move any litigation to New York, where league headquarters are based and where case law from the U.S. Court of Appeals for the Second Circuit is favorable to its interests.  The league might instead seek to defend itself in Minnesota or Illinois, both of which are states governed by the U.S. Court of Appeals for the Eighth Circuit, which ruled in favor of the NFL.

3. Federal mediation didn’t work – Deadlines did

George Cohen, director of the Federal Mediation and Conciliation Service, attempted to bridge the divisions of both leagues and players’ associations, but was unable.  Mediation can work – two sides agree to allow a completely independent and neutral person to direct the negotiations.  But mediation isn’t binding and, by bringing a new person into the discussion, can further complicate the situation.

In the case of the two lockouts, the owners and players at the bargaining table were only able to reach deals when faced with a dire possibility: for the NFL and their players, the prospect of losing regular season games; for the NBA and their players, the prospect of losing the 2011-12 season.  No lawyers, courts or mediators were needed to tell them that.

Michael McCann is a Legal Analyst and SI.com Columnist for Sports Illustrated.  He is also NBA TV’s On-Air Legal Analyst and a tenured professor and Director of the Sports Law Institute director at Vermont Law School.  He also teaches a sports law and analytics reading group at Yale Law School.  It is the first sports law and analytics course to be offered at a law school.  Follow McCann on Twitter at https://twitter.com/mccannsportslaw

 

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