Week 1 Notes8/26/15

A. Origin and Evolution of Commissioner Power

1. Sports and the Law

A. The Original Need: Preserving the Integrity of the Game

The unique office of sports commish raises two important questions: 1) Why
owners, who control sports a private, for-profit business, should vest power in a
powerful single individual. 2) Whether it is in the best interests of a sport to have
such power reside in a single person selected by one constituency, the team owners,
rather than selected by and accountable to players and fans as well. On the other
hand, given that pro sports are big business, why should the person who runs the
business be selected by workers or the customers?

Black Sox Scandal in 1919

Rose v. Giamatti (1989)

Pete Rose betting scandal

Commish was acting under authority of the Major League Agreement (now
renamed Constitution)
Art. I, 2Functions of the Commish
o To investigate, either upon complaint or upon his own initiative, any
act, transaction or practice charged, alleged or suspected to be not in
the best interests of the national game of Baseball, with authority to
summon persons and to order the production of documents and, in
cases of refusal to appear or produce, to impose such penalties as are
hereinafter provided;
o To determine, after investigation, what preventive, remedial or
punitive action is appropriate in the premises, and to take such action
against Major Leagues, Major League Clubs, or individuals, as the case
may be.
Dowd report
o 225 pages; Rose bet on Reds to win
Commish was enjoined because he prejudged the facts of the case, and thus
had denied Rose his right to a proceeding conducted with due regard for all
principles of natural justice and fair play, as Commishs own disciplinary
rules require.
o First time any sports commish had been enjoined
Case was removed to federal district court on the basis of diversity
jurisdiction

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 Rose agreed on August 23 to settle the baseball case on terms that Rose
would withdraw his suit, accept the Commish jurisdiction and penalty, but
neither admit nor deny betting on baseball.
o As penalty, commish declared Rose permanently ineligible from all
baseball association (Rose could apply for reinstatement after a year)
Commish Giamatti dies and is succeeded by Fay Vincent
A few months later, Rose went to jail for income tax fraud
Later admitted in a book that he bet on his team to win

i. Holding
1. Yes - Major League Baseball is a unique organization with
extraordinary power invested in the Commissioner.
2. Baseball constitution states that the functions of the
commissioner include
a. Protect the best interests of the game
b. To take preventative, remedial, or punitive action as
appropriate in each case

ii. Analysis
1. Giamatti wanted to remove the case to federal court via
diversity because rose was so well-liked locally
a. The reds werent a party, so the parties were
completely diverse (Rose OH, Giamatti NY)
b. If reds were a party, diversity would be lost
2. Case was settled
a. Rose was banned for life from the mlb
i. Has happened before shoeless joe was
banned for life because of the black sox
scandal
b. Giamatti passed away and Rose has not been
reinstated
3. Never got a ruling on whether the punishment was
reasonable

--Central fundamental issue: To what extent should public law, speaking through
judges, venture to overturn decisions made by private leagues, usually speaking
through their commissioners?

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B. The Legal Scope of the Commissioners Authority Over Conduct
Detrimental to the General Welfare of the Game

a. Governing documents typically give the Commissioner EXTREMELY

BROAD, typically unreviewable power to act within the best interests of
the sport by taking both preventative and remedial measures
a. Finley: Power is intended to be broad, Commissioners power has
been explicitly restricted when it was meant to be
b. Turner: Court will not second guess whether something is in the
best interests of the game and will not second guess enumerated
rules and punishments):
iii. Discipline players (typically player v. league because player violates
league rules)
iv. Approve or disapprove player contracts (typically team v. league
because team as breached league rules)
v. Resolve disputes between clubs
b. Why do teams and players agree to these rules?
a. Must cooperate in order to create their entertainment product
b. Get uniform and independent decision maker
c. Improves player relations by having the league discipline rather than
the team

--Page 9 poses interesting questions to consider when reading the cases

American League Baseball Club of New York (Yankees) v. Johnson (1919)

AL President Ban Johnson suspended newly acquired pitcher Carl Mays for
deserting his club and breaking contract. Yanks sued.
Johnson asserts 20 of the league constitution, which states that President
has power to impose fines or penalties upon managers and players who, in
his opinion, has been guilty of conduct detrimental to the general welfare of
the game.
Yankees follow up with 24, which states that the club itself has the right to
regulate its own affairs, but not in conflict with any provision of the National
Agreement or this constitution
Yankees win, thus safeguarding the vested property rights of the individual
club-owners against the continual encroachments on club rights by the
president
Judge Wagner: Under these rules it is the right and duty of the president to
regulate the actual playing of the game on the field and to enforce the rules
instituted for the governing of the game.
Permanent injunction against Mays suspension

II. Yankees v. Johnson - (1919) (p. 8)

a. Background
i. This case occurred near the end of the national commission era in
major league governance, during which AL president Byron Johnson

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 was acknowledged to be the strongest figure in the game. No central
commissioner for both leagues
b. Facts
i. Mays walked off the field during a Red Sox game
ii. the Sox sold Mays to the Yankees, and the league wanted to punish
him even though the conduct occurred while he was on the red sox
1. President of the AL suspended Mays
iii. Yankees sued Johnson (president of the AL) to stop the punishment
so they wouldnt lose Mays for the playoffs
c. Holding
i. Johnson argued that section 20 of the AL constitution granted the
authority for the suspension
1. The presidentshall have the power to impose fines or
penalties, in the way of suspension or otherwise, upon any
manager or player who, in his opinion, has been guilty of
conduct detrimental to the general welfare of the game
ii. Yankees and court agreed that section 24 of the AL constitution
trumped: Teams may discipline their own players
1. each clubshall have the right to regulate its own affairs, to
establish its own rules, and to discipline, punishits
manager, players, or other employees, and these powers
shall not be limited to cases of dishonest play or open
insubordination
iii. AL president could only punish in the performance of his duties,
which mainly regard the actual playing of the game on the field and
enforcing the rules for the governing of the game
d. The court granted a permanent injunction against mays suspension
e. Problems
i. The Yankees wouldnt care about discipline the team at interest
wasnt there
ii. Other leagues have the commissioner hand out punishment because
team wouldnt want to punish its own players and lose them
f. This case occurred the same year as the Black Sox Scandal and led the
owners to call for a single, more powerful commissioner

Milwaukee Amer. Assn v. Landis (1931)

Commish interfered with frequent assignment of player and declared him a

free agent
Violated the Major-Minor League agreement
Suit dismissed
Major League Agreement provided commish with jurisdiction to hear and
determine finally any disputes between leagues and clubs or to which a
player might be a party
Conduct detrimental to baseball
To take such other steps as he might deem necessary and proper in the
interest and morale of the players and the honor of the game

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 The commissioner is given almost unlimited discretion in the determination
of whether or not a certain state of facts creates a situation detrimental to the
national game of baseball.
Decision of arbiter may not be:
o Exercised in an illegal manner
o Fraudulently, arbitrarily, without legal basis for the same
o Without evidence to justify action

Charles O. Finley v. Bowie Kuhn (1978)

Based on the evisceration of the reserve clause (keeping players to one

team for their whole careers) and leading to the institution of free agency
Finley (owner of the As and Reggie Jackson) wanted to prepare for this by
creating a farm system
As tried to trade expiring contracts, but the commish blocked it, stating that
it was inconsistent with the best interests of baseball, the integrity of the
game, and the maintenance of public confidence in it.
Issue: Whether the commish of baseball is vested by contract with the
authority to disapprove player assignments which he finds to be not in the
bests interests of baseball.
An amendment to the Major League agreement had the effect of precluding
the commish from finding an act that complied with the Major League Rules
to be detrimental to the best interests of baseball
o This amendment was later removed
Commish has the authority to determine whether any act, transaction or
practice is not in the best interests of baseball, and upon such
determination, to take whatever preventive or remedial action he deems
appropriate, whether or not the act, transaction or practice complies with the
Major League Rules or involves moral turpitude.
The waiver of recourse clause contained in the Major League Agreement is
valid and binding on the parties and the courts.
Suit dismissed
When professional baseball intended to place limitations upon the
Commissioners powers, it knew how to do so. In fact, it did so during the 20-
year period from 1944 to 1964.
Court: Commish acted in good faith, after investigation, in a manner which
he determined to be in the best interests of baseball

Atlanta National League Baseball Club & Ted Turner v. Kuhn (1977)

Dealt with the commishs authority to discipline owners and employees of

the member teams, and thus raised many issues similar to those posed later
in the Rose case
In July 1976, new CBA was negotiated to include free agency
Kuhn suspended Turner one year for tampering with initial free agency

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 In Art. VII, 2, of the Major League Agreement the clubs explicitly agreed to
be bound by the discipline imposed by the commish and obviously intended
to give him a certain amount of leeway to choose the appropriate sanction.
However, commish not deemed to have the authority to take away a future
draft pick. It is not specifically enumerated under 3.
Clubs agreed to be bound by discipline imposed by Commish.

Chicago National League Ball Club v. Fay Vincent (1992)

With expansion Rockies and Marlins coming in, divisions were to be

realigned. Cubs objected and exercised their right under the NL Constitution
to veto their transfer to another division and therefore blocked the overall
proposal.
The commishs general authority under Art. I was limited by the specific
language in Art. VII that no member club may be transferred to a different
division without its consent.
This case ultimately led to Vincents resignation due to additional unpopular
decisions
No member club may be transferred to a different division without its
consent.
Court: Commish may not unilaterally amend the NL constitution

--Additions to the Major League Agreement (page 27-29): First, the owners added a
clause to Art. I, 2(a), which specified that the future commissioner would be the
chair of the Player Relations Committee. This makes the commish more a
participant and partisan for the owners in CBA process, making him less neutral.
Other shit was also clarified and can be found on the pages mentioned.

In re Los Angeles Dodgers LLC (2011)

Precluded a judicial decision concerning whether the scope of the commishs

best interest powers includes intervention to protect a clubs long-term
economic prospects from what the commish believes to be improvident
business decisions by the current owner.
Frank McCourt tried to alleviate financial trouble by entering into a new
television contract. Under Art. VIII, 4(f) of the MLB Constitution, it had to
be approved by the commish. Selig rejected it.
Dodgers ultimately sold at auction

Takeaways

Commish has broad powers, but not unbridled authority, to determine best
interests of game
Need for commissioners with strong powers originated from 1919 Black Sox
Scandal

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 Modern commish power has been eroded by judicial opinions
However, courts generally defer to arbitrators award unless arbitrary,
illegal, capricious, biased

2. Handouts

Judge Dotys Order Vacating Arbitration Award in Adrian Peterson Matter

o Article 46 of CBA
Authorizes commish to impose discipline on NFL players for
conduct detrimental to the integrity of, or public confidence
in, the game.
Also allows player appeal to a hearing officer appointed by
commish.
After hearing, player can be fined, suspended, or terminated.
Domestic violence policy changed after Ray Rice (used to be
max 2 games); Now first time offenders face 6 games.
o AP charged with felony reckless or negligent injury of a child on
9/11/14 as a result of an incident in May 2014
o New Policy taken against AP. NFLPA immediately appeals.
o Issues:
Whether commish impermissibly applied the New Policy to AP
Whether AP was deprived of a fair disciplinary process
Whether the imposition of a psychiatric counseling component
is permissible under the CBA
Whether the Exempt List can be used as a form of discipline
under the CBA
o Goodells arbitrator Henderson used to work for NFL, refused to
recuse himself on the basis of partiality. Ruled in favor of Goodell
without a lot of explanation.
o 12/15/14NFLPA filed a petition to vacate the arbitration award
under Section 301 of the Labor Management Relations Act, 29 U.S.C.
185 (LMRA) and Section 10 of the Federal Arbitration Act, 9 U.S.C.
10 (FAA).
o Vacatur warranted
Henderson simply disregarded the law of the shop and in doing
so failed to meet his duty under the CBA.
Henderson strayed beyond the issues submitted by the NFLPA
and in doing so exceeded his authority.

Commissioner Goodells Final Decision on Article 46 Appeal of Tom Brady

o Deflate Gate
o Wells Report was product of independent investigation
o Article 46, Section 1(a)

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 Discipline for conduct by a player that is detrimental to the
integrity of, or public confidence in, the game of professional
football.
CBA recognizes Commish has authority to decide what
constitutes conduct detrimental, to determine whether a
player has engaged in conduct detrimental, and to determine
and impose appropriate discipline if he finds that a player has
engaged in conduct detrimental.
o Goodell is also hearing officer. HO gives appropriate deference to the
findings and disciplinary decision under review
o Preponderance of evidence (more probable than not)
o ISSUES
Was the decreased air pressure in the footballs the result of
tampering or of natural environmental factors?
Scientific evidence shows tampering
Goodell also considered conduct and the cell phone,
amongst other things in the Wells Report, into his
decision
What role, if any, did Tom Brady have in the scheme to tamper
with the footballs?
Pats personnel would not do anything to footballs
without Bradys permission. This is undisputed.
Brady never spoke to the accused equipment managers
prior to this event (at least as often)
Suspicious conversations were had
Did Brady refuse to cooperate with the investigation?
Refused to make available electronic communication
Destroyed phone day of Wells interview for
investigation
o DISCIPLINE
Compared to Bounty gate with the Saints (page 14)
Discipline is based on steroid-use. First time offenders get 4
games.

Summary of Commissioner Authority to Discipline Players

o Two key documents set forth the rules of each pro league
The primary document governing the relationship between the
players and the teams is the CBA
Defines and limits the power of the commish to take
disciplinary action against players
Constitution and by-laws
Set forth the commishs broad powers to protect the
integrity and best interest of their sports league.
Commish can discipline players for conduct detrimental
to the league

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o MLB
Article II of the Major League Constitution details the commish
powers
Section 2(b) states the commish has the authority to
investigate any act, transaction or practice charged, alleged
or suspected to be not in the best interest of the national game
of Baseball.
Section 3 provides that when a players conduct or actions, are
not in the best interest of baseball, the commish has the
ability to take several actions, including temporary or
permanent ineligibility of that player.
Article XII of the MLB CBA details the power of the commish to
discipline a player whose conduct the commish deems
detrimental
Grievance procedure under Art. XI of the CBA outlines
commish power with regard to fines and suspensions for
conduct on the field.
Art. XI section C details the procedures for suspensions
involving conduct on the playing field.
The arbitration panel used in baseball for any appeal made
by a player shall either be an impartial arbitrator, or a
tripartite panel so empowered and composed of the impartial
arbitrator, or a tripartite panel so empowered and composed
of the impartial arbitrator and two party arbitrators, one
appointed by the Players Association, the other appointed by
the League.
However, at any point during the current CBA term,
either the league or the players association may
terminate the appointment of the impartial arbitrator,
or the selected arbitrators. And if the parties cannot
agree on an arbitrator, they must request a list from the
American Arbitration Association.
o NHL
Commish powers derive from Constitution under Article 6.
Article 6.1 charges the commish with protecting the
integrity of the game of professional hockey and
preserving public confidence in the League.
Article 6.1(j), entitled Disciplinary Powers gives
commish full and complete power to discipline any
person associated with the league for conduct that the
commish deems detrimental to the League or game of
hockey.
Article 6.1(j)(3) states that commishs determination is
final and not subject to any review.

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 Any player can be suspended for more than six games for
detrimental conduct according to NHL CBA.
But players can appeal to an Impartial Arbitrator. Thus,
the commishs decision is not final, contradictory to the
language in the NHL Constitution which states the
commishs decision is final.
o NBA
Art. XXXI of the NBA CBA details grievance and arbitration
procedures with respect to disputes involving discipline of
players.
Section 9 details any player discipline by the commish,
and separates the discipline by the commish, and
separates the discipline into two categories: suspension
of 12 games or less and suspension for more than 12
games.
o For a suspension of under 12 games, for which
the commish has suspended a player for in-game
conduct or concerning the preservation of the
integrity of, or the maintenance of public
confidence in, the game of basketball, the
suspension shall not give rise to the Grievance,
shall not be a subject to a hearing before the
Grievance Arbitrator, and shall not be
determined by arbitration.
o Player may appeal and ruling will be final
Section 9(a)(5) states that the Player Association can
seek a review of the financial impact of the Commish
decision, which would be reviewed by the Player
Discipline Arbitrator.
o The CBA states that the Arbitrator may only
agree with, or lower the financial penalty, and
this determination will be the full and final
deposition of the dispute.
Similar to NHL, section 9(a)(5)(c) of the CBA states that
the Player Discipline Arbitrator shall make no public
comment regarding the matter.
Section 9(b) of the CBA discusses player suspensions
for more than 12 games.
o Art. XXXI section 2-7 of the CBA details this
procedure
o Section 9(d) provides the commish with
substantial power to legislate preservation of the
integrity of the game.
NBA Commish has full authority to discipline and review any
player suspended for 12 games and under, and has substantial,

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 but not complete powers, to discipline for a suspension of
more than 12 games.
o NFL
Primary source of power comes from CBA
Article VIII of Constitution details commish power to resolve
disputes and to take action against a person connected with
the league, when the person engages in conduct detrimental to
the league.
Language in Constitution is ambiguous. CBA tries to clarify,
but that is also ambiguous.
The NFL Commish possesses the authority to discipline a
player for conduct detrimental to the League under the NFL
constitution, the NFL CBA, and a standard form NFL player
contract
Goodell has broadest powers of any of the four leagues

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Week 2 Notes9/2/15

1. Commissioners Role in Player Discipline

A. Introduction

--Seven instrumental and managerial foci of American sports:

1. Charactercharacter development; loyalty; altruism
2. Disciplinesocial control and/or self-control
3. Competitionfortitude; preparation for life; opportunity for
advancement
4. Physical fitness
5. Mental fitnessmental alertness; educational achievement
6. Religiosityfaith and devotion to teams
7. Nationalism (though one might more benignly see sports as providing
social bonding for sub-national groups as well

B. Gambling

Molinas v. NBA

Regularly bet on the Fort Wayne Pistons in the mid-1950s

As soon as Commissioner Podoloff learned of this practice, he suspended
Molinas indefinitely for violating both Section 79 of the leagues constitution
and Clause 15 of his contract
o Both prohibiting any such gambling
Molinas filed antitrust suit against NBA
Judge Irving Kaufman rejected the claim and didnt care if he was betting on
his own team to win
During litigation, Molinas caught as the ringleader in a point-shaving scheme
in college basketball, thus making Judge Kaufmans decision even wiser.
His practice, whether he bet or not, would tip-off the bookmakers and affect
the market of the league.

General Notes

Sports betting remains illegal outside of Nevada

The Wire Act of 1961 criminalizes the use of wire communications to place
bets on sporting events, to transmit information to facilitate the placing of
bets, or to send or receive funds resulting from bets.
In 1992, Congress enacted the Professional and Amateur Sports Protection
Act (PAPSA) to halt the spread of legalized sports gambling.
o Exception for states that already had sports wagering schemes in
place between 1976 and 1990, leaving Nevada as the only state with
broad range sports gambling.

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C. Drug Use

Wilson

Willie Wilson, along with other players on the Kansas City Royals, were
convicted in 1983 for possession of cocaine and sentenced to three months in
jail
In 1984, Commissioner Kuhn suspended the players for the entire 1984
season, pursuant to the following rule in all clubhouses:
o Anyone involved in the illegal possession or use of drugs or illegal
trafficking with drugs of any sort will be subject to discipline. In
serious cases, the discipline may include suspension or dismissal and
termination of contract guarantees.
Arrested and convicted for cocaine possession, sentenced to 3 months in jail
Suspended 1 year
Clubhouse rule issued by Commissioner applies
Rule passed pursuant to Major League Rule 21(f), which was binding on
players under uniform player conduct also applies

The Mitchell Report

Released in December 2007

Claimed that 88 current MLB players, including future HOF pitcher Roger
Clemens, had used various forms of illegal performance-enhancing drugs,
including steroids and human growth hormone (HGH).
Mitchell explained that steroid use poses a serious threat to the integrity of
the game.
o Has risks to the game, personal health risks, and wrongfully
encourages younger players to use it and placing themselves at the
risk for serious harm

3. Performance-Enhancing Drugs

Major League Baseball Players Association and Office of the Commissioner of Baseball
(Alex Rodriguez)

On August 5, 2013, Selig issued A-Rod a notice imposing a substantial

suspension, and the MLBPA grieved on his behalf
MLB contends that A-Rod committed multiple violations of the Joint Drug
Agreement and that he obstructed MLBs investigation and such obstruction
violated the Basic Agreement.
A-Rod contends MLB failed to meet its burden of proving the alleged
misconduct by clear and convincing evidence. He also contends that all
evidence presented by the MLB is tainted by investigatory misconduct and
coercion of witnesses, including Bosch

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 OPINION OF THE PANEL CHAIRMAN
o The Basic Agreement and JDA contain a grievance procedure which
allows a Player who chooses to contest the validity of a suspension to
have the matter decided by a neutral arbitrator.
o JDA VIOLATIONS
A-Rod had banned PES under Section 2.B.
Bosch presented excerpts from notebooks that were stolen. A-
Rod says unreliable since original copies are not available.
BBMs also exchanged describing the drug usage
As advanced as MLBs program has become, no drug-testing
program will catch every Player. In this case, the blood testing
required to detect hGH or IGF-1 had not yet been implemented
in the JDA and therefore was not administered during the
2010, 2011, and 2012 seasons (the seasons A-Rod passed).
A positive drug test is not required to establish a violation of
the JDA for use or possession of a PES.
o OBSTRUCTION
MLB charges A-Rod with violating Article XII(B) of the BA by
attempting to cover-up his JDA violations through a course of
conduct since January 2013 intended to obstruct and frustrate
MLBs investigation of Biogenesis and Bosch.
A-Rod accused by MLB of destroying BlackBerry to prevent
MLB from learning of its contents (a la Brady)
Deliberate efforts to obstruct an MLB investigation under the
JDA, or to cover-up misconduct by a Player who is subject to
such an investigation, if established, may subject a Player to
additional disciplinary sanctions under Article XII(B) of the
Basic Agreement.
o PENALTY
Suspension for the entire 2014 season and postseason
o CONCLUSION
A-Rod was going to bring suit to federal district court in order
to obtain an injunction to play in 2014.

Williams v. NFL

Kevin and Pat Williams (Vikings) along with Charles Grant, Deuce McAllister,
and Will Smith (Saints) test positive for bumetanide, which violated the drug
policy. They were suspended four games.
The players filed suit in Minnesota state court. NFL removed decision to
federal court. They raised a violation of Minnesotas Drug and Alcohol
Testing in the Workplace Act (DATWA), Minnesotas Consumable Products
Act (CPA) and a variety of common law tort claims.
District court granted injunction to play while suit was ongoing. Trial court
denied MSJ

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 The NFL asserts DATWA claim is preempted because:
o The claim turns on analysis of the Policy in order to determine
whether it meets or exceeds DATWAs requirements;
o The claim requires interpretation of the Policy in order to determine
whether the NFL qualifies as an employer under DATWA such that the
statutes protections extend to the Players; and
o Uniform interpretation of the CBA/Policy is necessary to preserve the
integrity of the NFLs business as a national organization.
Section 301 preemption doctrine applies to suits for violation of contracts
between an employer and a labor organization, or, in other words, suits for
breaches of CBAs.
SCOTUS has held that federal law exclusively governs suits for breach of a
CBA, and that the pre-emptive force of section 301 extends beyond state-law
contract actions.
The NFL argues that an employee has no DATWA claim if he or she is a party
to a CBA that is at least as protective of the employee as DATWA. Court
disagrees.
Second, the NFL contends that, because DATWA provides employees with a
cause of action against their employers, interpretation of the CBA/Policy is
required in order to determine if the NFL qualifies as an employer under
DATWA.
o Section 301 preempts a state law claim if its resolutiondepends
upon the meaning of a collective-bargaining agreement.
o Section 301 does not preempt every employment dispute, and it does
not preempt all other disputes concerning CBA provisions.
The NFLs national uniformity argument fails
Court declines to vacate the awards.
Stuff about Section 301 is a major focus of this case

Criminal Activity

Ray Lewis
o Avoided being convicted of the stabbing to death of two men outside
of an Atlanta nightclub
o He agreed to plead guilty to the misdemeanor crime of obstructing
law enforcement and accepted probation
Michael Vick
o Dog fighting
o Vick pled guilty to federal criminal charges and served 22 months in
prison
o Goodell immediately suspended Vick and the Falcons were able to
recover $19.97 million of his signing bonus in arbitration
Plaxico Burress
o Shot himself in the leg
o Giants suspended him for the rest of the season

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 o Faced charges of two counts of weapons possession and one count of
reckless endangerment, which could require a 3.515 year prison
sentence.
o Reached plea agreement and pled guilty to the lesser charge,
attempted possession of a dangerous weapon.
o He was sentenced to two years in prison.
Ben Roethlisberger
o Rape claims
o Goodell suspended Big Ben for the first six games of the 2010 season
and refused to allow him to participate in any offseason activities until
he underwent comprehensive behavioral evaluation by
professionals.
Gilbert Arenas and Javaris Crittenton
o Charged with felony gun possession after having unlicensed firearms
in locker room
o Arenas suspended indefinitely, especially after making gun gestures
with his hands
o Arenas entered into a guilty plea agreement with the prosecution
o Sentenced to two years probation and 30 days in a halfway house,
avoiding any jail time

Treatment of Racial Minorities

Not until fall 1945 was Jackie Robinson able to sign and break the color
barrier (he was brought up in 1947)
In 1996, blacks made up 17% of MLB players (Hispanics another 20%), 67%
of NFL players, and 80% of NBA players
o MLB share dropped to 8.2% on 2014 Opening Day
Al Campanis, LA Dodgers VP
o When asked why there were so few black managers and general
managers, he replied: I dont think its prejudice. I truly believe that
blacks may not have some of the necessities to be, lets say, a field
manager or perhaps a general manager.
o He was immediately fired
Marge Schott, managing partner and largest shareholder of the Cincinnati
Reds
o Regularly used racial epithets describing black and Jewish players,
associates, and rivals.
o Fined $25,000 and suspended one year for various racial comments
John Rocker, Atlanta Braves relief pitcher
o Labeled an unidentified black teammate as a fat monkey during a SI
interview
He also said many other racial things
o Selig suspended Rocker for spring training and the first 28 days of the
2000 regular season

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 Arbitrator reduced penalty
Donald Sterling, former Clippers owner
o Asked mistress not to associate with blacks
o Sterling hit with lifetime ban and fined maximum $2.5 million

Treatment of Religious and Political Minorities

Mahmoud Abdul-Rauf
o Formerly known as Chris Jackson
o Refused to stand respectfully during the playing of the National
Anthem for the 1995-96 season
o Nuggets at first sent him to tunnel, but he eventually sat on bench to
draw attention
o Stern suspended Abdul-Rauf (at a cost of nearly $30,000 a game) until
he was prepared to comply with this league rule
o Many legal commentators said that the leagues action constituted
discrimination on the basis of religion, in violation of Title VII of the
Civil Rights Act.

2. Handouts

Steven Smith and Adam Brezine, Top Ten Issues in Sponsorship and
Licensing Agreement That are Likely to Lead to Disputes and Litigation
(2011)
1. Definition of Products or Services Category/Licensed
Goods/Services
a. Greatly impacts contracts between licensors and licensees
b. Conflict between U.S. Tennis Association and Olympus
i. Olympus long time sponsor of the U.S. Open
ii. Gave Olympus exclusive rights to certain things and also
promised to refrain from granting rights to Competing
Companies
iii. For 2010 U.S. Open, USTA also sold sponsorship rights
to Panasonic.
iv. Olympus was pissed, opted out, and sought proper
payment. They eventually settled.
2. Definition of a Competitor
a. Corresponds to the scope of exclusivity in an agreement, as a
property/licensor is, under most circumstances, prohibited
from entering into an agreement with a competitor of the
sponsor/licensee.
3. Scope of Exclusivity
a. Companies may find themselves sharing rights when they
think their right is exclusive.
b. Example of multiple rights of sponsorship is NASCAR

17
 c. Exclusivity is usually the starting point for an antitrust
challenge to a licensing or sponsorship agreement, since by its
very nature the agreement purports to lock certain
competitors out of valuable rights.
4. Renewal Rights/Right of First Negotiation/Right of First Refusal
a. Renewalsthe ability of one or both of the parties to renew
the agreement for a period of time with relatively few items to
be renegotiated.
b. Rights of First NegotiationROFN provisions typically involve
a requirement that the sports property/licensor negotiate in
good faith with the sponsor/licensee about renewing or
extending the agreement before the property/licensor can
offering the same sponsorship or licensing rights on the open
market.
c. Right of First RefusalROFR usually gives the
sponsor/licensee the right to match the terms of any deal that
the sports property/licensor is able to negotiate with a
competitor of the sponsor/licensee.
i. Considered the most restrictive because they often will
chill the marketplace for the propertys/licensors
benefits.
5. Default/Breach
6. Audit Rights
a. Robust audit rights including the right to shift fees and costs
to the party being audited if the audit uncovers underpayments
or other problems can serve as an effective deterrent to any
fraud or other problems and can be critical to discovering
whether violations may have occurred.
7. Assignment
a. The sports properties want to maintain control over the
parties with whom they do business, and a broad assignment
provision could force them into a strategic partnership with a
party they do not like.
8. Professional League Governing Rules and Regulations
a. Sponsorship deals need to be compliant with governing rules
and regulations.
9. Dominant Sponsor
10. The Business Realities

Victor Luckerson, Sponsors Cut Ties to Clippers Following Owners Alleged

Racist Remarks (April 28, 2014)
o Companies suspending or ending their relationship with the Clippers
because it directly conflicts with their companys views and values.
MF thought: Similar to leagues taking action for leagues best
interests

18
 Darren Rovell, MillerCoors Sues Patriots, Claiming Team Reneged on Beer
Deal (September 28, 2011)
o After agreeing with Coors, Patriots deemed deal not valid and offered
it to Anheuser-Busch
o Suits asks for the exclusive agreement to be deemed valid and
enforceable and that the brewer be awarded additional damages to
compensate them for costs and good will

19
Week 3 Notes9/9/15

1. Contract Law Application to Players Market

CHAPTER 4Constructing a Players Market from Contract and Collective

Bargaining

A. Evolving Standards for Contract Enforcement

In 1879, National League created a reserve system because players would

revolve from one club to another.
When the American League started up, they convinced players from the NL
to come to the AL.
Among the first was Napolean Lajoie and the Phillies brought suit against
him

Philadelphia Ball Club v. Lajoie

Was under contract to play for the Philadelphia Ball Club when he entered
into another contract with another team.
Philadelphia sought to restrain him during the period covered by the
contract. The court below refused an injunction.
When, owing to special features, the contract involves peculiar convenience
or advantage, or where the loss would be a matter of uncertainty, then the
breach may be deemed to cause irreparable injury.
The services of the defendant are of such a unique character, and display
such a special knowledge, skill, and ability, as renders them of peculiar value
to the plaintiff, and so difficult of substitution that their loss will produce
irreparable injury, in the legal significance of that term, to the plaintiff.
The plaintiff has so far performed its part of the contract in entire good faith,
in every detail, and it would therefore be inequitable to permit the defendant
to withdraw from the agreement at this late day.
Injunction granted
Appropriate test for granting an injunction, service cannot be easily obtained
from others.
Party seeking injunction also has to show irreparable harm
Court focuses on two issues:
o Uniqueness
Unique and elite talent
Cannot reasonably replace Lajoie
o Mutuality
Lajoie bound to perpetually renewable obligations
Can be cut at any time with 10 days notice

20
Central NY Basketball, Inc. v. Barnett

Ohio court, that once refused to enforce a negative injunction against Lejoie
in 1902, granted a negative injunction to the Syracuse Nationals of the NBA
barring Barnett from playing for another basketball team.
Professional players in the major baseball, football, and basketball leagues
have unusual talents and skills or they would not be so employed. Such
players, the defendant Barnett included, are not easily replaced.
Court focuses on issues of uniqueness and irreparable harm

New York Football Giants, Inc. v. Los Angeles Chargers Football Club, Inc. (Flowers)

Flowers signed contract with Giants while he was still in college. He asked
Giants to keep contract a secret and not submit it until after bowl game.
He was later offered more money to play with Chargers. He informed Giants
he was withdrawing from his contract with them and sent back his un-cashed
bonus checks
Giants seeking an injunction to nullify Flowers contract with the Chargers.
Clean Hands doctrine
o He who comes into equity must come with clean hands.
o Suit should have been dismissed based on deceitful Giants contract
No secret contract permitted; he is allowed to go play for the Chargers

Cincinnati Bengals v. Bergey

Bergey under contract with Bengals. With a team option remaining, Bergey
signed a big contract with a new WFL team (Virginia Ambassadors). Bengals
offer Bergey an even bigger contract in retaliation but their efforts were
unsuccessful.
Bengals sued Bergey, the Ambassadors, and the WFL on the grounds that
Bergeys future service agreement with the WFL team undermined and
interfered with the Bengals rights under its existing contract with Bergey.
Key question: Is it consistent with a players contractual obligations to his
present team to sign a contract to play for another team in the future?
Comparison to Rick Barry and Billy Cunningham regarding the NBA and ABA
o Barry, while under contract with Warriors, signed contract ABAs
Oakland Oaks. He was enjoined from joining them for the first season.
o However, when Oaks were purchased by Washington Capitols, Barry
signed a 5 year deal with the Warriors in order to stay in the Bay Area.
When the Capitols sought injunctive relief against the
Warriors, Barrys argument was that it was tainted from the
outset because of his original contract with the Warriors
Court rejected that argument
o There was no actionable wrong in an athlete signing a new contract
during the period of his existing contract, as long as performance and

21
 consideration under the new contract were to begin after the
expiration of the existing agreement, and there was no
encouragement to terminate the latter contract early.
o Cunningham court refused to nullify contract to play for the Carolina
Cougars in the 1971-72 season, even though the contract had been
signed in 1969 while Cunningham was still under contract with the
76ers.
Ultimately, judge decided that basketball precedents do not relate to the
world of football.
Barry and Cunningham support the proposition that it is not illegal for either
the player or the sports organization, at the time when the player is under a
valid contract to one team, to negotiate and enter into a contract with a
different, competing, team and league, under the terms of which the player
agrees to render his services at the expiration of his current contract.
Harm to Public Interest
o The policy such as that behind the antitrust laws to encourage to the
fullest extent practicable free and open competition in the
marketplace. Restraints on competition are not favored.
o The only public interest that can properly be taken into account is the
policy of the law to encourage free competition in the marketplace.
o Hence, the denial of an injunction is not a case of the Courts turning
its back on the fans and the owners of the plaintiffs franchise, as the
plaintiff improperly suggested in the final argument that it might be.
Harm to WFL and Plaintiff
o No evidence of irreparable injury
o With the rise of the WFL, the NFL can no longer rely upon the absence
of a competitor for protection of its claims to the future services of
players, for which the established teams have neither bargained nor
paid consideration.
o It is only when the NFL chooses to join the competition for the later
services of its players that it will incur these higher costs.
Injunction denied

Boston Celtics v. Brian Shaw

Shaw drafted by Celtics, signs one-year deal. Next year, signs two-year deal
with Italian club, with opt out option in 2nd year. In January 1990, he tries to
get out and signs a new five-year deal with the Celtics.
The arbitrator ruled that Shaw had to deliver the registered termination
letter to the Italian club and a federal district judge issued an order of
enforcement.
The Arbitrators Decision
o Shaw looks to Article I, 2,which says Any amendment to a Uniform
Player Contract [of the type Shaw and the Celtics used], other than
those permitted by this CBA, shall be null and void.

22
 Shaw says the promise to cancel his Italian contract was an
amendment that does not concern compensation, specialized,
compensation schedules, or compensation protection.
o Shaws argument deemed unlawful
The argument concerns the proper interpretation of a contract
negotiated pursuant to a CBA.
Federal labor law gives arbitrators, not judges, the power to
interpret such contracts.
SCOTUS notes that a labor arbitration award is valid so
long as it draws its essence from the labor contract.
An award draws its essence from the contract so long
as the arbitrator is even construing or applying the
contract and acting within the scope of his authority.
One can find plausible arguments favoring the arbitrators
construction.
Shaws recession promise defines the beginning of the
compensation relationship.
It also plausibly determines whether Shaws
compensation will begin at $1.1 million (and continue
for three years) or whether it will begin at $1.2 million
(and continue for only two years).
More importantly, and also quite plausibly, Shaws
overall compensation might have been much different
had he declined to promise to play for the Celtics in
1990-91, thereby forcing the Celtics, perhaps, to obtain
the services of a replacement for that year.
o In sum, Court finds the arbitration award lawful
The District Court Proceedings
o Given the very small likelihood that Shaw would ultimately prevail on
the merits, and the comparative harms at stake, the district court
could properly decide that the overall balance favored the Celtics,
not Shaw.
o The district court easily and properly concludes that the Celtics hands
were not unclean
There was nothing unfair about the Celtics convincing Shaw to
exercise his contractual right in their favor.
o Balance of Harms
Overall balance favors Celtics, not Shaw
o Public Interest
Public interest favors court action that effectuates the parties
intent to resolve their disputes informally through arbitration
o Unclean Hands
Homesick, depressed, no agent representation
Injunction upheld

23
B. RESERVE SYSTEM

In 1879, the eight club owners of baseballs National League formulated the
personnel system that would accomplish two goals (1. Certain continuity in
the athletes that perform for a team so that the public develops an allegiance
both to those players and the clubs for which they perform, and 2. The
compensation paid to those players must be kept under control)the
reserve system
The reserve system created a restricted market in which the players could
sell their services.
Each player has to sign a uniform contract to play with that one team. They
all include one-year options to retain the player for all the same terms.

American League Baseball Club of Chicago v. Chase

Chase played 1B for White Sox. Signed a contract and then attempted to
terminate three months later to sign with a new club in a new league.
According to Sections 1 and 2 of Article VI, the title of the club to the player is
made absolute (page 183).
Section 2 of Article VI recognizes the property of the club in the player as
existing under two conditions: First, under a contract; and, second, under
reserve without a contract.
The court will not assist in enforcing an agreement which is a part of a
general plan having for its object the maintenance of a monopoly,
interference with the personal liberty of a citizen, and the control of his free
right to labor wherever and for whom he pleases, and will not extend its aid
to further the purposes and practices of an unlawful combination, by
restraining the defendant from working for any one but the plaintiff
Injunction vacated
o Unclean hands; not going to help a monopoly get bigger and stronger

2. Introduction to Antitrust Law Principles

CHAPTER 5Basic Principles of Antitrust Law Applied to the Special Nature of the
Sports Industry

A. Introduction

Many take the rules of the game as they are set forth and, perhaps daunted
by the complexity of antitrust doctrine, engage in willful blindness about
the interplay between antitrust and sports, leaving it to special counsel to
assist on antitrust issues where necessary.
Board of Regents requires a consideration of:

24
 o How league rules will affect the price, output, and quality of sports
entertainment services and whether the rule is responsive to
consumer preferences;
o What are the real reasons that rules are adopted, and which of these
reasons are legitimate; and
o Whether there are alternative means of achieving the leagues goals.

B. General Background to Antitrust Law

Sherman Act of 1890

o 1: Prohibits every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce among the
several States, or with foreign nations.
Primary section
Aimed at agreements
If no agreement, no Section 1 claim
3 Key Components
Contract, combination or conspiracy
In restraint of trade
Affects trade and commerce among the several states
Key question: Did the agreement unreasonably restrain
competition
o 2: Prohibits monopolization
Clayton Act of 1914
o 4: Permits anyone damaged in their business or property to sue
antitrust violators for treble damages and attorneys fees.
o 6: Relates to labor
The Purposes of Antitrust Laws
o Obviously for preventing a monopoly
o Monopsony power: Antitrust commentators are more divided on
whether the wealth transfer effect of lower prices for goods and
services ought to be considered symmetrically with monopoly power.
o What if the prices are too low?
The Applicable Antitrust Standard: Per se or Rule of reason
o Per se violations = inherently unreasonable
o Per se: it was sufficient to show that the defendants had engaged in
practices such as price fixing, market allocation, or group boycotts to
condemn the agreement without any further analysis.
Broadcast Music Inc. v. Columbia Broadcasting System, Inc.
SCOTUS narrowed the per se approach to price fixing by
rejecting a claim that an organization that held
nonexclusive copyright licenses for the musical
compositions of hundreds of composers engaged in the
sort of price fixing that automatically violated antitrust

25
 law by selling the right to play all of its licensed music to
commercial broadcasters at a set price.
Northwest Whole Stationers, Inc. v. Pacific Stationery & Printing
Co.
Limited group boycott illegality by holding that a
wholesale purchasing cooperative formed by a group of
small stationery retailers was not guilty of a per se
antitrust violation when it expelled one of its members
for operating a wholesale stationery supply business in
competition with the cooperative.
In the sports law context, restrictive labor practices
harming players, rather than rival clubs or leagues,
would not be labeled as per se illegal boycott groups
o Rule of Reason: Requires judges and juries to balance only an
agreements effects on economic competition.
Competitive effects of a challenged agreement
To prove a claim under ROR, a plaintiff must prove that:
There was an agreement
The agreement or the conduct pursuant to the
agreement FUCK I MISSED IT
FUCKKKKK
This suggests that sports leagues or sports governing bodies
cannot justify restrictive commercial practices on non-
economic grounds, although occasionally courts will suggest
that some non-economic grounds may be relevant if the
objectives are salutary and not motivated by the defendants
economic self-interest.
3 categories of antitrust exemption issues specific to the business of sports:
o The baseball exemption
o The statutory and non-statutory labor exemptions
o The exemptions created by the Sports Broadcasting Acts of 1961 and
1965.

C. Applying the Rule of Reason to Sports League Restraints

Rozelle Rule that limited the ability of NFL clubs to compete for player
services by requiring a club signing a player previously employed by another
NFL club to provide substantial compensation that would be determined by
the commissioner.
This was an unreasonable restraint of trade in violation of 1
o It had a significant anticompetitive effect.
o The court considered whether the restraint imposed is justified by
legitimate business purposes
o The court examined whether the restraint is no more restrictive than
necessary.

26
3. Handouts

Topic ATom Brady Cell Phone

o BYOD: Bring Your Own Device
o Nearly three-quarters of all companies now allow workers to connect
with personal devices, or plan to soon.
o In civil or criminal case, you must produce data on employees
personal computers and gadgets if the employer has good reason to
believe there might be relevant work data on them
o Courts are probably unlikely to order discovery of information on
personal devices absent any showing that the personal devices were
used for work purposes (or were in some other way relevant to the
litigation).
o Actual or perceived spoliation may make a court more likely to order
broader preservation or production of electronic data.
Additionally, litigants likely will not be able to use these
concepts as both a sword and a shieldby arguing, for
example, that it owns the work data on employees personal
devices but lacks possession, custody, or control over that
data for the purposes of discovery.
Topic BJPP Medical Record
o HIPAA does not apply to the media
Topic CCardinals Investigated for Hacking into Astros Database
o Cardinals employees hacked into Astros database and retrieved
classified information
Topic DFan Data Privacy Risks
o Teams continue to expand their collection of fan data, making them
vulnerable to hackers looking to access a trove of person information.
o This creates a bigger incentive for teams to beef up data security

27
Week 4 Notes9/16/15

1. Baseballs Exemption from the Antitrust Laws

--Section 1 of Sherman Antitrust Act makes illegal any contract, combination, or

conspiracy in restraint of trade. Section 2 prohibits the effort by any person(s) to
monopolize or attempt or conspire to monopolize trade.
--Three key components of Section 1: There must be a contract, combination, or
conspiracy; the combination must have produced a restraint of trade; and the
restraint must affect trade and commerce among the several states.
--Baseball Trilogy = Federal Baseball, Toolson, and Flood

Flood v. Kuhn

Curt Flood, all-star CF for the Cardinals

Rejected trade to Phillies, despite the pay raise. He declared himself a free
agent and filed suit to establish these rights under federal and state antitrust
law.
After lower courts rejected the claim, SCOTUS took it on
THE GAME
o Big history of baseball
THE LEGAL BACKGROUND
o Federal Baseball Club v. National League
Traveling from state to state to play baseball games does not
violate any interstate commerce.
Baseball not the subject of commerce
Court holds that baseball is not interstate commerce
o 1952 Report of the Subcommittee on Study of Monopoly Power
Baseball needs a reserve clause. There is no feasible substitute
to protect the integrity of the game or to guarantee a
comparatively even competitive struggle.
o Toolson v. NYY
Federal Baseball held that the business of providing public
baseball games for profit between clubs of professional
baseball players was not within the scope of the federal
antitrust laws.
Court may want to overturn Federal Baseball and allow
legislation to apply to antitrust issues in baseball, but
ultimately do not.
Four reasons for the Courts affirmance
Congressional awareness for three decades of the
Courts ruling in Federal Baseball, coupled with
congressional inaction.

28
 The fact that baseball was left alone to develop for that
period upon the understanding that the reserve system
was not subject to existing federal antitrust laws.
A reluctance to overrule Federal Baseball with
consequent effect.
A professed desire that any needed remedy be provided
by legislation rather than by court decree.
o United States v. International Boxing Club
Antitrust law does not apply, cites Federal Baseball and Toolson
Dissent follows Shubert, wherein the Court refused to extend
professional baseballs antitrust immunity to a nationwide
theatre company. Also that boxing is not trade or commerce.
o Radovich v. NFL
Civil Clayton Act case testing the application of antitrust law in
professional football.
Court reversed affirmation of dismissal based on Toolson and
Federal Baseball
The orderly way to eliminate error or discrimination is by
legislation and not by court decision.
Football subject to antitrust laws
o Haywood v. NBA
Ruled that basketball is not exempt from antitrust laws
Reserve system keeps Flood liable to his contract
List of 7 reasons why they do not overrule Federal Baseball
o Baseball is a business engaged in interstate commerce
o Baseballs reserve system enjoys an antitrust exemption this is an
anomaly and aberration
o Baseballs antitrust exemption is fully entitled to the benefit of stare
decisis given its existence for 50 years
As said in Federal Baseball and Toolson, the remedy, if any is indicated, is for
congressional, and not judicial, action.
Dissent
o Call the reserve system virtual slavery

C. The Scope of Baseballs Exemption from the Antitrust Laws

Piazza and Tirendi v. MLB

The fight over the baseball Giants staying in San Fran or moving to Tampa
Bay
Scope of the exemption
o Plaintiffs argue that the exemption is confined to certain circumstance
not present in this case. Baseball argues that the exemption applies to
the business of baseball generally, not to one particular facet of the
game.

29
 o Undercuts precedential value of Federal Baseball
o Flood court made clear that exemption was limited to the reserve
clause.
Held that the antitrust exemption created by Federal Baseball is limited to
baseballs reserve system, and because the parties agree that the reserve
system is not at issue in this case, I reject Baseballs argument that it is
exempt from antitrust liability in this case.
Case eventually reached settlement
Rule stare decisis:
o Reasoning of decision: legal standard or test
o Specific result: application of legal standard or test to the particular
facts of the case
Flood court invalidated rule of Fed. Baseball and Toolson that the business of
baseball is not interstate commerce and thus not within antitrust laws

MLB v. Butterworth

Regarding elimination of two MLB teams before the start of the 2002 season
It was rumored to have been either the Rays or Marlins
Butterworth issued Civil Investigative Demands (CIDs) on MLB seeking
numerous answers to rogs and all documents that might bear on the
contraction issue to determine if baseball was violating federal or state
antitrust law.
MLB immediately filed suit in federal court in Tally to enjoin these CIDs on
the ground that baseball cannot violate the antitrust laws with respect to
franchise matters because of Federal Baseball.
The district judge rejected Piazzas analysis and recognized that the broadly
defined business of baseball is immune from antitrust challenge and that
therefore the attorney general should be barred from pursuing his CIDs
against MLB.
On appeal, the 11th Circuit then went on to conclude that because contracting
teams from MLB were exempt from both federal and state antitrust law, the
Attorney Generals desired investigation could not possibly lead to a
discovery of unlawful conduct and thus his CIDs had to be quashed lest he be
allowed to engage in a baseless fishing expedition.

Curt Flood Act of 1998

Amended Clayton Act to declare that the antitrust laws apply to the conduct,
acts, practices, or agreements (conduct) of persons in the business
Act does not apply to:
o Anything involving the draft
o Anything relating to re-location, owner transfer, expansion, etc.
o Anything relating to sports broadcasting
o Anything relating to persons who are not players (ex: umpires)

30
2. Antitrust Analysis of Players Market Restraints

C. Antitrust Analysis of Specific Player Market Restraints

1. Rookie Draft

Smith v. Pro Football, Inc.

Facts
James Yazoo Smith (plaintiff) was drafted by the Washington Redskins
(defendant) in the 1968 pro football draft for a total salary of $50,000. During the
1968 season, Smith suffered a career-ending neck injury. Two years later, Smith
filed suit against Pro Football, Inc., which operates the Redskins, and the National
Football League (NFL) (defendant) alleging NFLs draft violated antitrust laws.
Specifically, Smith argued that, but for the draft, he would have secured a more
lucrative contract that would have better protected him financially in the event he
could no longer play due to injury. The district court held for Smith and the NFL
appealed.

Purpose of Draft: Promote competitive balance

Evenly matched teams make for closer games, tighter playoff races, better
player morale
Maximizes fan interest, broadcast revenues, overall health of the sport

Issue
Will a player draft violate the Sherman Act under the rule of reason if it is
demonstrated to have positive, economically pro-competitive benefits that offset its
anti-competitive effects, or if it is demonstrated to accomplish legitimate business
purposes and to have a net anticompetitive effect that is insubstantial.

Rule of Law
A player draft will not violate the Sherman Act under the rule of reason if it is
demonstrated to have positive, economically pro-competitive benefits that offset its
anti-competitive effects, or if it is demonstrated to accomplish legitimate business
purposes and have a net anticompetitive effect that is insubstantial.

Holding and Reasoning (Wilkey, J.)

No. The NFL drafts purpose is to disperse talented football players equally among
all NFL teams, with some preference to the weaker clubs. Under the NFLs no-
tampering rule, no team is allowed to negotiate prior to the draft with any eligible
player nor sign any player selected by another team in the draft. Consequently, the
right to negotiate with any given player is exclusively held by one team. If a player
could not contract with his selected team, he could not play football at all.

31
Smith first claims that the NFL draft is a group boycott. A group boycott is typically
restricted to attempts by competitors to exclude horizontal competitors. However,
NFL teams are not direct business competitors. Each team seeks to have the best
talent and may compete on the field, but collectively, no NFL club can survive
without joint action from every other team. Additionally, the NFL teams are not
combined to exclude competitors. The draft may be designed to insulate the NFL
from competition, but it is to improve the entertainment product by enhancing
equality among the many teams.

Next, Smith argues that the NFL draft is a direct restraint of trade in violation of
antitrust laws. Under the rule of reason, a restraint must be evaluated to determine
whether it has significant anti-competitive purposes or effects. A restraint will be
deemed unreasonable if it has the net effect of substantially impeding competition.
The NFL concedes that the draft restricts competition among the various teams for
services of players.

The draft that has been challenged here is undeniably anti-competitive both in its
purpose and in its effect.

The district court held that the drafts effect was significantly anti-competitive. The
draft forces each player to deal with only one team, robbing him of any real
bargaining power. Conversely, the NFL claims that the draft serves to promote a
competitive balance and equality among its teams. However, the NFLs intent to
create competition on the field does not explain the anti-competitive effect of
keeping others out of the pro football marketplace.

Because the drafts anti-competitive and pre-competitive effects are not

comparable, it is not possible to balance them using a traditional rule of reason
analysis. The NFL claims that opening up competition for a players services would
not be in the best interests of the public, the NFL, or the players. A similar argument
was made in National Society of Professional Engineers v. United States, 435 U.S. 679
(1978). There, the U.S. Supreme Court held that the professional societys ban on
competitive bidding violated the Sherman Act and that the purpose of an antitrust
analysis is focused on the significance of the restraintnot whether a policy is in
the public interest.

Clearly, the NFL draft as it existed in 1968 was an unreasonable restraint of trade
and is significantly anti-competitive in purpose and effect. Further, there are less
anti-competitive alternatives available as noted by the district court, including the
option of having more than one team draft a particular player. Regardless, under the
Courts Professional Engineers decision, a player draft can survive scrutiny under the
rule of reason only if it is demonstrated to have positive, economically pre-
competitive benefits that offset its anti-competitive effects, or at the very least, if it is
demonstrated to accomplish legitimate business purposes and to have a net
anticompetitive effect that is insubstantial.

32
Dissent (MacKinnon, J.)
Economic competition between NFL teams should not be the sole determinant of
their pro- or anti-competitive behavior. The ultimate success of the teams depends
on economic cooperation rather than economic competition. Between 1935 and
1968, the growth of football was largely due to the competitive balance that the NFL
achieved during those years to create a league sport with positive results for the
public, teams, and players. The majority wrongly concludes that the draft strips a
players bargaining power. Instead, the draft has assisted in the growth of the league
as a whole and increased starting player salaries. Such favorable effects net out the
adverse effects it has in limiting the players right to negotiate with other teams.

2. Veteran Free Agency

Mackey v. National Football League (Part 1)

Facts
John Mackey (plaintiff) and numerous other professional football players brought
suit against the National Football League (NFL) for antitrust violations related to the
leagues Rozelle Rule (the Rule) and seeking injunctive relief preventing its
enforcement. The district court granted Mackeys request for an injunction and held
that the Rule was a per se violation of 1 of the Sherman Act. The NFL appealed.

Rozelle Rule
Free to sign with another team after playing out one option year at 10%
salary decrease
Required a club signing a player to provide his prior team with fair and
equitable compensation (players, draft choices, or both)
If teams could not agree on compensation, Commissioner would decide
final and un-appealable.

Per se analysis does not apply because the circumstances are unique.

Rule of Reason
3-prong test
o Does agreement have significant anti-competitive effect?
o Is restraint justified by legitimate pro-competitive ???
o ???

Issue
Does the NFLs Rozelle Rule violate 1 of the Sherman Act?

33
Rule of Law
The NFLs Rozelle Rule violates 1 of the Sherman Act and is significantly more
restrictive than necessary to serve any legitimate purpose.

Holding and Reasoning (Lay, J.)

Yes. The Rozelle Rule, codified in the NFL Constitution, allows a professional
football player to become a free agent after he completes his contractual obligation
with a specific club, so long as he plays out the extra option year for a 10 percent
salary decrease. However, if a player signs with a new team, that team owes
compensation in the form of players and/or future draft picks to the former team.
If the two teams are unable to reach an agreement regarding the free agent
compensation, the Commissioner can decide, and his decision is final.

Mackey argues that the Rule violates 1 of the Sherman Act. The district court
agreed that the Rule is a per se violation of the Act as well as a violation under the
rule of reason standard. The rule of reason analysis attempts to determine whether
the restraint imposed is justified by legitimate business purposes and is no more
restrictive than necessary. The district court correctly found that the Rule (1)
significantly deters clubs from negotiating with and signing free agents, (2) acts as a
substantial deterrent to players playing out their options and becoming free agents,
(3) significantly decreases players bargaining power in contract negotiations, (4)
that the players are prevented from selling their services in a free and open market,
and (5) the Rule significantly prohibits players from moving from club to club in
interstate commerce. Further, testimony from expert economists noted that
elimination of the Rule would result in significant increase in players salaries.

The NFL claims that, absent the Rule, star players would flock to the most desirable
clubsresulting in a loss of competitive balance across all teams. The loss would
result in lower revenue due to decreased spectator interest.

Second, the NFL claims that the Rule is necessary to protect teams investment in
scouting expenses and player development costs.

Finally, the NFL argues that elimination of the Rule would lead to increased player
movement across teams and will result in decreased team cohesion.

Each of the NFLs arguments is unavailing. It is true that the NFL has a unique
interest in maintaining competitive balance among its teams. However, the issue is
whether the Rule is essential to keeping that competitive balance. The district court
held that it is not. The Rule operates as an outright restriction on every NFL players
ability to sell his services in an open market. Additionally, the Rule is unlimited in
duration and has no procedural safeguards. The Rule, as enforced, unreasonably
restrains trade in violation of 1 of the Sherman Act. The judgment of the district
court is affirmed.

34
McNeil v. NFL

Eight players challenged NFLs Plan B restrictions on each teams 37

protected players.
o Under Plan B, designed as a less restrictive alternative to the Rozelle
Rule found illegal in Mackey, each team was entitled each year to
protect 37 players on its reserve list.
o Protected players, whether or not their contract had expired, were
permitted to move to other NFL teams only if their current team chose
not to match new offers received, and the move was then subject to
the new team paying compensation to the players current team.
Jury found that Plan B violated the Rule of Reason
o Plan B harmed players by diminishing competition among NFL clubs
for their services,
o That nonetheless the system contributed significantly to competitive
balance among NFL teams, but
o That the system was unreasonable because it was more restrictive
than necessary for that purpose.
NFL did not meet burden to show that no less restrictive alternatives were
available
Case eventually settled

4. Handouts

35
Week 5 Notes9/21/15

1. Labor Exemption From Antitrust

D. Labor Exemption From Antitrust

History and Background

o In Loewe v. Lawlor, SCOTUS made it clear that the Sherman Act did
apply to unions and their activities
o As a result, 1914 Clayton Act was legislated
20: In disputes between employers and employees about
terms and conditions of employment, collective action
undertaken by employees through strikes, picketing, and
boycotts, should not be considered or held to be violations of
any law of the United States.
o In Duplex, SCOTUS held that the Clayton Act protected unions and
their members from antitrust liability and federal court injunctions
only when the union members were pursuing the normal and
legitimate objects of a union, not when they engage in an actual
combination or conspiracy in restraint of trade.
o Norris-LaGuardia Act of 1932
Regardless of whether a labor dispute went beyond the normal
bounds of conflict, federal courts could not enjoin strikes,
pickets, and other forms of employee self-help.
Controversial case, but was sufficient to give economic
pressure by unions a blanket immunity from antitrust liability.
o Wagner Act 1935
Can negotiate into unions
o SCOTUS has not, however, granted CBAs the same blanket antitrust
exemption that it has extended to bargaining tactics like strikes and
lockouts.
SCOTUS struggled to formulate a legal test to be applied when
the antitrust legality of a collective agreement is challenged.
The non-statutory labor exemption is a judicially created addition to the
statutory exemption
o Protects collective bargaining process, even when a CBA results in
certain restraints on competition as between the parties to the CBA.
o We dont want courts determining what is reasonable, we want the
parties to negotiate it.
Labor law is greater than antitrust law
o Labor trumps antitrust
Jewel Tea
o Multi-employer bargaining group
o NSLE protects terms contained in a CBA

36
 Judicial Options for the Non-statutory Labor Exemption
o Option 1: There should be no non-statutory exemption from antitrust
at allunions and employers should have no right to do through their
agreement what would otherwise be illegal by statute.
o Option 2: There should be exemption only for provisions that have
been inserted in the agreement at the behest of the union for the
benefit of the employeesthe historic purpose of the labor exemption
is to help workers, not employers.
o Option 3: The exemption should protect all, but only, the terms within
an existing collective agreementthe essential condition for relief
from antitrust must be actual consent to the practice by the
employees through their union.
o Option 4: The exemption should protect all employment practices
that exist in an employee unit represented by a unionsince the
employees now have the right under labor law to force the employer
to negotiate about the practice, they should not also enjoy the right to
litigate about the practice under antitrust law.
o Option 5: There should be no antitrust liability at all for restraints in
employmentas 6 of the Clayton Act stated, the labor of a human
being is not a commodity or article of commerce for purposes of
antitrust law.

Initial Development of the Doctrine in the Lower Courts

o Mackey rejects Option 5
Restraints on competition within the market for players
services fall within the ambit of the Sherman Act.
o In holding that an agreement resulting from bona fide arms-length
bargaining fell within the objection, the court of appeals thus rejected
Option 1.
o Court rejected argument that Rozelle Rule concerned a non-
mandatory, illegal subject of bargaining because the restraint, on the
merits, violated the Sherman Act.
Court ultimately found the exemption inapplicable
o The McCourt majority rejects Option 2
o After Mackey, the NFLPA had agreed to severe restrictions on players
o Mackey
Rozelle Rule had been incorporated as part of the 1970 CBA,
but that CBA had expired
NFL argued that NSLE not only protects terms in the existing
agreement that the union agreed to, but also protects terms
after they expire and union no longer agrees to.
NSLE (non-statutory labor exemption) applies to both parties
Three prong test for NSLE to apply
Restraint affects only the CBA parties

37
 Agreement concerns a mandatory subject of collective
bargaining
Agreement is product of bona fide arms length
bargaining
Court finds that NSLE does not apply because it fails the third
prong
o Powell
Players strike, then continue to work without CBA, file
antitrust litigation against NFL
Players argue that free agency rules no longer apply since the
agreements were not longer the product of bona fide
negotiation (Mackey prong 3)
District Court concludes that NSLE expires because impasse
had been reached on free agency issue
8th Circuit disagrees: holds that NSLE protects terms contained
in the CBA not only after the CBA expires, but indefinitely
beyond a bargaining impasse as well.

The Supreme Court Speaks

o Brown dealt with the NFLs establishment in 1989 of six-player
developmental squads for each team at a league-mandated salary
level of $1,000 a week.
o NFLPA applauded the creation of theses squads, but insisted that
developmental players salaries be individually negotiated in the same
manner as regular players salaries.
o District court concluded that the labor exemption expired
immediately upon expiration of the agreement.
o On appeal, a divided panel reversed. Appellate court held that the
non-statutory labor exemption protected a league from all antitrust
suits brought by or on behalf of their players union with respect to
conduct engaged in during the collective bargaining process, as long
as the bargaining relationship with the union exists.
o SCOTUS grants cert.

Brown v. Pro Football, Inc.

Issue: Whether club owners who had bargained to an impasse with the
players union about a wage issue, and had then agreed among themselves
(but not with the union) to implement the terms of their own last best
bargaining offer should have their agreement shielded by federal labor laws
from antitrust attack.
o Does the exemption apply to an agreement among several employers
bargaining together to implement after impasse the terms of their last
best good-faith wage offer?
NFL unilaterally establishes practice squad rule with $1,000 weekly salary

38
 o League initiative was not the subject of collective bargaining
o NFLPA objected to salary cap and filed antitrust suit; NFL argues that
NSLE applies
Such conduct, as practiced in this case, is unobjectionable as a matter of labor
law and policy. On that assumption, we conclude that the exemption applies.
Board and court decisions suggest that the joint implementation of proposed
terms after impasse is a familiar practice in the context of multiemployer
bargaining.
Labor law often limits employers to four options at impasse: 1) maintain the
status quo, 2) implement their last offer, 3) lock out their workers (and either
shut down or hire temporary replacements), or 4) negotiate separate interim
agreements with the union.
District Court holds that NSLE expired immediately upon expiration of CBA
D.C. Circuit reverses, holding that NSLE protects a league from all antitrust
suits brought by players union with respect to conduct engaged in during
the CBA process, as long as the collective bargaining relationship with the
union exists.
SCOTUS speaks
o Employers may unilaterally implement changes in pre-existing
condition if new terms are reasonably comprehended within the
employers pre-impasse proposals (typically the last rejected
proposal)
Dilemma: What are employers to do once an impasse is reached?
o If all impose terms similar to last joint offer, they invite antitrust
action premised upon identical behavior
o If any employer imposes terms that significantly differ from last joint
offer, they invite an unfair labor practice charge

Facts
The National Football League (NFL) (defendant), including member team
Washington Redskins (defendant), operated by Pro Football, Inc., implemented six-
player development squads with capped salaries. The squads had not previously
been part of the collective bargaining process between the teams, the players, and
the National Football League Players Association (NFLPA) (plaintiff), which
represented players interests. Although the NFLPA was not directly opposed to the
squads of development players, it requested that the salaries for each of the squad
players be individually negotiated, like had been done with other NFL players. The
NFL and the NFLPA could not reach an agreement and subsequently implemented
its last good-faith wage offer of $1,000 per week salary for the development players.
Washington Redskins player, Brown (plaintiff) brought suit alleging violations of
federal antitrust laws. The district court jury found for the plaintiffs and defendants
appealed. The court of appeals reversed and the U.S. Supreme Court granted
certiorari to review.

39
Issue
Is an employers conduct which takes place during and/or immediately after a
collective-bargaining negotiation and which involved matters that the employer and
employee were required to collectively negotiate shielded from antitrust sanctions
under an implicit, non-statutory exemption?

Rule of Law
An employers conduct which takes place during and/or immediately after a
collective-bargaining negotiation and which involved matters that the employer and
employee were required to collectively negotiate is shielded from antitrust
sanctions under an implicit, non-statutory exemption.

Holding and Reasoning (Breyer, J.)

Yes. Practically, it is difficult to force groups of employers, like NFL teams, and
players to bargain together but, at the same time, forbid them to make competition-
limiting agreements necessary to make a process work or that are agreeable to all
parties. Consequently, there is an implicit exemption which recognizes that some
restraints on competition imposed through the bargaining process are shielded
from antitrust scrutiny. The exemption exists to benefit both employers and
employees. Here, the issue is whether it applies to an agreement among NFL teams
who bargained with the NFLPA to an impasse and subsequently implemented their
last good-faith wage offer.

Both the National Labor Relations Board (NLRB) and the courts have held that, after
impasse, labor law permits single employers unilaterally to implement changes in
preexisting conditions, but only if the terms are reasonably comprehended to be
within the employers previous good faith proposals. There has been no objection
that such should not be extended to multiemployers like the NFL teams. Unlike
labor law, which may accept some anticompetitive agreements in certain industry-
wide scenarios, antitrust law forbids all agreements among competitors that
unreasonably lessen competition among or between them. Imposition of antitrust
liability in this case would threaten to produce instability and uncertainty into the
collective bargaining process, because antitrust law often forbids the kinds of joint
discussions that the collective bargaining process requires in order to function.

Additionally, labor laws give the NLRB, not the courts, the authority to determine
what is desirable collective bargaining policy. Labor laws allow employers, after
impasse, to engage in considerable joint behavior, including joint lockouts and
replacement hiring, implementing their last offer, or maintaining the status quo.
Therefore, the conduct at issue here is shielded from antitrust attack because the
implicit, non-statutory exemption applies. The conduct took place during and
immediately after a collective-bargaining negotiation and involved a matter that the
parties were required to negotiate collectively. The judgment of the court of appeals
is affirmed.

40
Dissent (Stevens, J.)
The unique features of the case here, combined with the basic purpose of the
antitrust laws and national labor policy, leads to the conclusion that the majority
reached an incorrect decision. The jurys verdict in the district court determined
that the agreement among the employers fixed the salaries of certain football
players at a substantially lower level than would be obtained in a free market. From
the outset, the agreement must be deemed unlawful unless it is exempt. Neither the
policies underlying the statutory exemptions nor the implicit, non-statutory
exemption provide a justification for exempting from antitrust analysis collective
action taken by defendants to suppress wages below the level that would be found
in a free market.

He thinks this has gone too far

It would be most ironic to extend an exemption crafted to protect collective
action by employees

--Post-Brown Developments

Clarett v. NFL

Clarett wants eligibility for draft

District court held that the eligibility rules are not immune from antitrust
scrutiny under the non-statutory labor exemption
U.S. Court of appeals disagrees and reverses
Case arises in context of ongoing CBA between NFL and its players,
negotiated between NFL Management Council (NFL member clubs multi-
employer bargaining unit) and the NFLPA.
Eligibility rules for the draft do not appear in the agreement
Eligibility rules are in Constitution and Bylaws
CBA refers to Constitution and Bylaws
Three relevant provisions
o Article III, Section 1 (Scope of the Agreement)
No change in the terms and conditions of this Agreement
without mutual consent NFLPA and Management Council
waive any rights to bargain with one another concerning any
subject covered or not covered in this Agreement for the
duration of this Agreement, including the provisions of the NFL
Constitution and Bylaws.
o Article IV, Section 2 (No Suit)
Neither the NFLPA nor any of its members will sue or
support a suit relating to the presently existing provisions of
the Constitution and Bylaws of the NFL as they are currently
operative and administered.
o Article IX, Section 1 (Non-Injury Grievance)

41
 Any disputeinvolving the interpretation of, application of, or
compliance with, any applicable provision of the NFL
Constitution and Bylaws pertaining to terms and conditions of
employment of NFL players subject to the grievance
procedures afforded under the CBA.
The labor market for NFL players is organized around a collective bargaining
relationship that is provided for and promoted by federal labor law, and that
the NFL clubs, as a multi-employer bargaining unit, can act jointly in setting
the terms and conditions of players employment and the rules of the sport
without risking antitrust liability.
Labor law prohibits Clarett from negotiating directly the terms and
conditions of his employment with any NFL club, and an NFL club would
commit an unfair labor practice were it to bargain with Clarett individually
without the unions consent.
o The terms and conditions of Claretts employment are instead
committed to the collective bargaining table and are reserved to the
NFL and the players unions selected representative to negotiate.
Eligibility rules are mandatory bargaining subjects because they have
tangible effects on the wages and working conditions of current NFL players.
o Also affects job security of players
The fact that the challenged rules govern eligibility for the NFL draft, thereby
excluding some potential employees from consideration, does not render the
NFLs adherence to its eligibility rules as a multi-employer bargaining unit
suspect.
Do eligibility rules constitute a mandatory subject of collective bargaining?
o Clarett says no, and therefore NSLE does not apply
o By reducing competition in the market for entering players, the
eligibility rules also affect the job security of veteran players
o Because of the size of NFL teams is capped, the eligibility rules
diminish a veteran players risk of being replaced by either a drafted
rookie or a player who enters the draft and, though not drafted, is
then hired as a rookie.

Brady v. National Football League

The lockout
Players moved for a preliminary injunction in the district court, urging the
court to enjoin the lockout as an unlawful group boycott that was causing
irreparable harm to the Players.
o District court granted it. League appealed.
o U.S. Court of Appeals concluded that the injunction did not conform to
the provisions of the Norris-LaGuardia Act and vacated the district
courts order.
League filed an unfair labor practice charge with the NLRB in Feb. 2011,
asserting that the union failed to confer in good faith.

42
 Issue: Whether the NLGA forbids or places conditions on the issuance of an
injunction here.
Section 13(c) of the Act states that the term labor dispute includes any
controversy concerning terms or conditions of employment
o This lawsuit is a controversy concerning terms or conditions of
employment.
Definition of labor dispute is in question
The Act also expressly states that a case shall be held to involve or grow out
of a labor dispute when the case involves persons who are engaged in the
same industry, trade, craft, or occupation.
o This is the case here
The present existence of a union is not required for a labor dispute
The employers lockout plays a role as well
o While the Act was designed to protect workingmen, the broader
purpose was to prevent the injunctions of the federal courts from
upsetting the natural interplay of the competing economic forces of
labor and capital.
The preliminary injunction did not conform to the provisions of the NLGA.
Judgment of district court granting the injunction is vacated.
Injunction vacated because it did not conform to provisions of NLGA
Did not express view on applicability of NLSE after the unions disclaimer

2. NBA Age Limit

Age limit is 19
Union wants it to be 18. NBA wants it to be 20.
So much money in the age limit by way of the March Madness tourney
Also has effect on NBA revenues and ownership. It is much different
negotiating a new contract with a player who is 31 as opposed to a player
who is 29.
Studies also show that the age limit and extra year away from the NBA does
little to enhance players skills.
NBAs argument: Need the players to be evaluated one step further at a high
level of competition before teams risk spending high draft picks on a virtually
unproven player.
Unions argument: Entertainers can start whenever they want. Other sports
(besides football) dont have age limits either. Why should they? Also, the
opportunity to make a living in basketball is limited, so why limit it further.

3. Handouts

L.A.s NFL stadium riddle: Three teams, two plans, what to expect next
o Rams have one plan to move to new stadium in LA. Raiders and
Chargers have plan for shared stadium.

43
 o A team needs three-quarters majority of the 32 owners permission to
move.
League would ideally like to avoid that type of vote

How a stadium, surrounding area can boost a teams revenue

o Stadium ownership
Is it city owned or privately owned?
Who holds the brunt of the responsibilities?
o Zoning/local ordinances
Purchaser should be prepared to develop surrounding land
A purchaser should also know if that land is part of an already
planned development.
If a stadium and its surrounding land is subject to a planned
development, it is probable that the planned development was
established to address stadium operations and development.
o Acquisition/possibilities
Understand the type and amount of property being acquired as
part of the franchise acquisition, and determine whether the
acquired land is sufficient for its operations and future
development.
o Surrounding property ownership or control
Determine who owns and/or controls the properties
surrounding the stadium
o Physical condition/capital improvements
Investigate the current physical condition of the stadium
o Public entitlement/financing
Develop an overview of available public entitlement and public
assistance to support the facility and the team
o Communicate with the municipality
Devise a strategy to communicate with the municipality
regarding the purchasers development plans
o Accessibility to public transportation/infrastructure
Understand the public transportation system and
infrastructure system supporting the stadium, the surrounding
area, and any other land the purchaser is looking to acquire
with an eye toward development.

44
Week 6 Notes9/30/15

1. Administration of the Labor Agreement

CHAPTER 3Labor Law and Collective Bargaining in Professional Sports

A. Introduction to National Labor Policy

Congress granted unions (and perhaps management as well) relief from

judicial injunctive interference in labor disputesfirst in Clayton Act of 1914
and then more broadly in the NLGA of 1932.
In the mid-1930s during the Depression, Congress acted to protect collective
bargaining as an affirmative right and would provide a vehicle to improve
employee wages and foster industrial peace.
The Wagner Act of 1935later, as amended by the Taft-Hartley Act of 1948,
and generally referred to as the National Labor Relations Act (Labor Act)
protected the rights of employees to self-organize, to demand that employers
bargain collectively and to engage in concerted activities.
o Pro-employee legislation
o Allows employees to engage in activity together and organize into
unions
The Labor Act established a federal agency that was charged with conducting
secret ballot elections in which employees could vote to form or not to form a
union.
National Labor Relations Board
o NLRB conducts ballot elections in which employees vote whether to
form a union
o NLRB granted authority to investigate labor practices
o NLRB = administrative law judges throughout the country
o Decisions of Board may be appealed to U.S. Circuit Courts of Appeals
NLRA: Passed by Congress based on Commerce Clause powers (power to
regulate interstate commerce)
Question arises: Do professional athletes have the ability to form unions
under the NLRA?
Analysis: Are professional sports leagues interstate commerce and thus
covered by NLRA?
o Federal Baseball and Toolson

B. Application of the Labor Act to Sports

Congress enacted the Labor Act pursuant to its power to regulate interstate
commerce.
Under the Labor Act, a union may establish that a majority of the employees
in an appropriate bargaining unit seeks to be represented for purposes of
collective bargaining by the labor organization.

45
The American League of Professional Baseball Clubs & Assn of National Baseball
League Umpires

The Labor Board first considered whether baseball sufficiently involved

interstate commerce so that the NLRA could apply.
It is noteworthy that these deliberations reveal Congressional concern for
the rights of employees such as players to bargain collectively and engage in
concerted activities.
Additionally, legal scholars have agreed, and neither the parties nor those
participating as amici dispute, that professional sports are in or affect
interstate commerce, and as such are subject to the Boards jurisdiction.
Therefore, we find that pro baseball is an industry in or affecting commerce,
and as such is subject to Board jurisdiction under the Act.
Section 14(c)(1) of the NLRA, as amended, permits the Board to decline
jurisdiction over labor disputes involving any class or category of
employers, where, in the opinion of the Board, the effect of such labor
dispute on commerce is not sufficiently substantial to warrant the exercise of
its jurisdiction
The Employer contends that because of baseballs internal self-regulation, a
labor dispute involving the AL Clubs is not likely to have any substantial
effect on interstate commerce; and that application of the NLRA to this
Employer is contrary to national labor policy because Congress has
sanctioned baseballs internal self-regulation.
The Employer also contends that effective and uniform regulation of
baseballs labor relations problems is not possible through Board processes
because of the sports international aspects.
Court decides that it will best effectuate the mandates of the Act to assert
jurisdiction over this Employer
o Current system seems to be designed solely by owners without a
neutral third party as the final arbiter
o There is no self-regulation to employees outside of the players
themselves (batting practice pitchers, janitors, trainers, etc.)
It is apparent that the Employer, whose operations are so clearly national in
scope, ought not have its labor relations problems subject to diverse state
laws.
It is apparent that MLB, whose operations are so clearly national in scope

--Side note: Should coaches also be included in the Labor Act as supervisors of the
employees.

National & American League Professional Baseball Clubs v. MLBPA

Ultimately granted unlimited free agency for baseball players

Messersmith (LAD) and McNally (Expos) both refused to sign new player
contracts at the end of the 1974 season.

46
 o Instead, they played the 1975 season under the terms of 10(c) of the
Uniform Players Contract, which gave their clubs the right to renew
the old contract on the same terms (except for salary, the amount of
which had recently been subjected to binding arbitration in cases of
dispute).
QP: Whether the contract as renewed by the club contained this option
clause as well
o It either keeps the players on reserve list forever, or they become free
agents
In 1899, in an effort to prevent defection of players to other leagues, the
League placed in the individual players contract a renewal clause, which
was the legal basis for clubs applying to the courts of equity to enjoin players
from jumping to a rival league.
o The current version of the renewal clause was developed in 1947
o If the Club had tendered a contract to the player by February 1st and
the parties had not agreed to new contract terms by March 1st, the
Club had the prerogative under 10(a) (via written notice to the
player within the next ten days) to renew the contract for the period
of one year on the same terms.
o Salary was only exception, to which the club could fix at an amount
not less than 75% of the prior years salary
o ARBITOR REJECTED THIS CLAUSE AS BEING PRESENT IN THE
CONTRACTS OF MESSERSMITH AND MCNALLY
There is nothing in 10(a) which, explicitly, expresses agreement that the
Players Contract can be renewed for any period beyond the first renewal
year.
Finds it difficult to assume that, if the renewed contract is on the same
terms that it also grants the right to additional renewals
Leagues argue that even if the contract has expired, the player may be
reserved
o Court finds that 10(a) falls short of reserving to a Club the right to
renew a contract at the end of the renewal year.
o Accordingly found that Messersmith was not under contract when the
renewal year came to an end
Now to Major League Rules, the leagues claim that there is exclusive
reservation of a players services under Rule 4-A(a) regardless of the
continued existence of any contractual relationship between the Club and the
Player.
o Counsel for the NL asserts that the club may continue the pattern of
career long control over the player and that this pattern of career long
control is not essentially dependent upon the renewal clause (Section
10-A) at all.
o The Players Association, on the other hand, asserts that in the absence
of a nexus or linkage of contract between the Player and the Club,
there can be no exclusive reservation of the right to his future services

47
 Cant just reserve the rights of a player when they are not under contract
Grievance upheld
How labor disputes in sports are resolved:
o CBA provides a system of final and binding arbitration by a neutral
person selected by both sides
o MLB: owners and union select single independent neutral to chair a
3-member panel
o NFL, NBA, NHL: Two sides select a single person who becomes the
sole arbitrator
This case challenges the Reserve System
o MLBPA files grievance claiming that reserve system was not
embodied in the parties CBA
o Before Mackey decision in NFL involving footballs reserve system
(Rozelle Rule)
MLB:
o When a Club renews a Players contract for the renewal year, the
contract in force during that year contains the right of renewal as
one of its terms, entitling the club to renew the contract in successive
years, to perpetuity, perhaps, so long as the Player is alive
Result: Any baseball player could become a free agent by playing out his
option year without signing a new contract
But a new CBA approached and Players negotiated away their rights (or did
they?)
o Year 1-2: Player had to accept clubs unilateral offers or not play
o Year 3-6: ???
o Year 7: Free agency begins for Player

--The legal implication of the final-and-binding Messersmith ruling was that any
baseball player could become a free agent simply by playing out his option year
without signing a new contract.

NFLPA and NFL Management Council (Dutton)

John Dutton, All-Pro DL with the Baltimore Colts

Completed contract in 1978, received no other offers so played option year
with Colts
At the end of the 1979 season, he again received no offers
This was all because the Management Council interpreted the prior clubs
right to elect first refusal or draft pick compensation as applying perpetually
to any free agent, even one coming off an option year contract, not just one
whose previous negotiated contract had just expired.
Dutton sought a ruling from the football arbitrator that these obstacles to
free agency applied only after the expiration of the contract signed by the
player, not after the year of automatic contract renewal via the collective
agreement

48
 Arbitrator rejected argument that Right of First Refusal 17 must not be
interpreted as creating a perpetually renewable option.
o He concluded that he could not infer from the absence of affirmative
or negative language that the parties reached an agreement or
understanding that would serve to confer total free agent status to a
veteran player who had completed a year of service pursuant to a 17
contract
Dutton fails to obtain free agency
Parties did not address this question during 1977 labor negotiations
Players argument: absent express contract language or clear negotiating
history, general wording of CBA provision should not be interpretedFUCK

Kansas City Royals v. MLBPA

Players Association and Owners had entered into two CBAs that dealt with
the arbitrability of issues involving the reserve system.
o The 1968 Basic Agreement established the arbitration procedure for
grievances, designated the Commissioner as arbitrator, and
specifically excluded two types of disputes (neither relating to the
reserve system) from arbitration.
o The 1970 Basic Agreement replaced the Commish as arbitrator with
an independent three judge panel and added two more specific
exclusions from arbitration.
During the negotiation of the 1973 Basic Agreement, the parties agreed to
two modifications of the reserve system: the five and ten rule (a player
with ten years of big league experience, the last five years with the same
team, could veto a trade to any other team), and the arbitration of salary
disputes.
Owners agreed in a letter that notwithstanding Article XV, it is hereby
understood and agreed that the Clubs will not during the term of the
Agreement make any unilateral changes in the Reserve System which would
affect player obligations or benefits.
Court says that it is not the most forceful evidence of a purpose to exclude
the grievances here involved from arbitration
o The 1968 agreement clearly permitted the arbitration of grievances
relating to the reserve system
o Article XV was clearly designed to accomplish the same purposes as
Article XIV. If in accomplishing these purposes the players had clearly
agreed to exclude disputes arising out of the operation of the reserve
system from arbitration, the Messersmith-McNally grievances would
not be arbitrable. For the reasons discussed in this opinion, however,
no such agreement can be found.
o From 1970 to 1973, a number of grievances concerning the reserve
system were submitted to arbitration and Owners raised no
jurisdictional objections.

49
 Club Owners contend that even if the arbitration panel had jurisdiction, the
award must be vacated. They argue that the award exceeded the scope of the
panels authority.
Court says the award must be sustained so long as it draws its essence from
the CBA.
Court cannot agree that the 1973 CBA embodied an understanding by the
parties that the reserve system enabled a club to perpetually control a player.
o The agreement contained no express provision to that effect
o While there is evidence that the reserve system operated in such a
manner in recent years, the record discloses that various Players
Association reps viewed the system as allowing a player to become a
free agent by playing under a renewed contract for one year.
Relief was appropriate. Appeal dismissed.
o Noted that both Owners and the MLBPA agree that some form of a
reserve system is needed if the integrity of the game is to be
preserved and if public confidence in baseball is to be maintained.
Standard of review of arbitration award

2. Discipline Grievances

NFL Players Assn and Philadelphia Eagles (Terrell Owens)

Owens suspended 4 games for antics. After suspension, Eagles said they
would not play him the remaining games that season.
The Players Association immediately filed protest contending the Clubs
actions violate the Maximum Discipline provisions of the NFL CBA and
contending that the discipline is arbitrary and excessive.
Owens took shots at McNabb at Reid, had a terrible attitude, and rubbed his
teammates the wrong way with his public statements
The Four-Game Suspension
o Article VIII of the CBA establishes a Maximum Discipline schedule that
provides:
Conduct Detrimental to ClubMaximum fine of an amount
equal to one weeks salary and/or suspension without pay for
a period not to exceed four (4) weeks.
Extent of Penalty
o Question of whether a suspension of four-weeks meets the dictates of
just cause
o Association notes it as an unusually long penalty.
o To conclude that Owens had not been previously disciplined would be
to trivialize to the point of absurdity the explicit and repeated written
warnings and verbal counseling from Coach Reid, as well as the one-
week banishment from training camp.
o Owens knew that additional suspension could have been avoided if he
made any effort to right his wrong. He chose not to.

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 In so doing, he engaged in conduct that was manifestly
detrimental to the Club.
The Removal
o Association claims decision to suspend for remainder of season
should be considered inappropriate for two reasons:
It exceeds the maximum discipline set forth in Article VIII for
Conduct Detrimental, and
It is disproportionate in relation to the offense.
o The Eagles argue that no term in the CBA limits a clubs right to
determine which Players will appear on the field or be permitted in
the team facility while a team is preparing for its games.
o Careful scrutiny is required in the examination of facts in this case.
o There was ample reason for the Coach to conclude that the problem
was by no means resolved.
Owens was willing to sit rather than attempt to right his
wrong
o Even at the arbitration hearing, Owens attitude had not changed
o Coachs decision to move forward without Owens was proper
considering the entirety of the circumstances.

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Week 7 Notes10/14/15

1. Collective Bargaining in Professional Sports

CHAPTER 3Labor Law and Collective Bargaining in Professional Sports

A. Introduction to National Labor Policy

Congress granted unions (and perhaps management as well) relief from

judicial injunctive interference in labor disputesfirst in Clayton Act of 1914
and then more broadly in the NLGA of 1932.
In the mid-1930s during the Depression, Congress acted to protect collective
bargaining as an affirmative right and would provide a vehicle to improve
employee wages and foster industrial peace.
The Wagner Act of 1935later, as amended by the Taft-Hartley Act of 1948,
and generally referred to as the National Labor Relations Act (Labor Act)
protected the rights of employees to self-organize, to demand that employers
bargain collectively and to engage in concerted activities.
o Pro-employee legislation
o Allows employees to engage in activity together and organize into
unions
The Labor Act established a federal agency that was charged with conducting
secret ballot elections in which employees could vote to form or not to form a
union.
National Labor Relations Board
o NLRB conducts ballot elections in which employees vote whether to
form a union
o NLRB granted authority to investigate labor practices
o NLRB = administrative law judges throughout the country
o Decisions of Board may be appealed to U.S. Circuit Courts of Appeals
NLRA: Passed by Congress based on Commerce Clause powers (power to
regulate interstate commerce)
Question arises: Do professional athletes have the ability to form unions
under the NLRA?
Analysis: Are professional sports leagues interstate commerce and thus
covered by NLRA?
o Federal Baseball and Toolson

B. Application of the Labor Act to Sports

Congress enacted the Labor Act pursuant to its power to regulate interstate
commerce.
Under the Labor Act, a union may establish that a majority of the employees
in an appropriate bargaining unit seeks to be represented for purposes of
collective bargaining by the labor organization.

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C. Unions Exclusive Bargaining Authority

If a majority of the employees choose to be represented for purposes of

collective bargaining by a union, the union becomes the exclusive
representative of all the employees in the unit for purposes of collective
bargaining
CBA prevails over any individually negotiated employment conditions
The very purpose of providing by statute for the collective agreement is to
supersede the terms of separate agreements of employees with terms which
reflect the strength and bargaining power and serve the welfare of the
group.
Section 9(a) of NLRA
o Union is entitled to eliminate all individual bargaining, even
bargaining to secure better terms than the collectively negotiated
minimum
o In most unionized industries, individual bargaining does not exist
o In sports, however, CBA sets out guaranteed benefits and minimum
salary scale and permits each players to negotiate extra renumeration

Morio v. North American Soccer League

NLRB is the bargaining agent for the NASLPA

League sought (unsuccessfully) to challenge the Boards league-wide unit
determination in court.
While appeal was pending, the League refused to bargain collectively with
the union.
o A lot of changes were made
The Players Association filed unfair labor practice charges with the NLRB,
alleging that this NASL conduct violated the unions exclusive bargaining
authority under the NLRA; the Labor Board issued a complaint against the
League and sought an injunction against such negotiation of new individual
contracts.
The duty to bargain carries with it the obligation on the part of the employer
not to undercut the Union by entering into individual contracts with the
employees.
These unilateral changes appear to modify all existing individual contracts
entered into before 9/1/78, in derogation of the Unions right to act as the
exclusive bargaining agent of the union
Judge first rejected NASL owners claim that they could legally refuse to
negotiate at all with the players union for the three years they had spent
challenging its certification election.
Respondents most vigorous opposition:
o Application for an order requiring Respondents to render voidable, at
the option of the Union, all individual player contracts, whether
entered into before or after the Unions certification on 9/1/78.

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 o Respondents claim that such power in the hands of the Union, a non-
party to this action, would result in chaos in the industry and subject
Respondents to severe economic loss and hardship since these
individual contracts are the only real property of Respondents.
The Board seeks an order requiring Respondents to maintain the present
terms and conditions in effect until Respondents negotiate with the Union
The court finds that Petitioner is entitled to the temporary injunctive relief
which it seeks with respect to all of the individual contracts.
o The individual contracts are in violation of the duty of the
Respondents to bargain with the exclusive bargaining representative
of the players.
In National Licorice Co. v. NLRB, the Supreme Court held that the Board has
the authority, even in the absence of the employees as parties to the
proceeding, to order an employer not to enforce individual contracts with its
employees which were found to have been in violation of the NLRA.
Injunction granted.
o NLRB has the authority to order an employer not to enforce individual
contracts

--Side Note: Alex Rodriguez for Manny Ramirez trade broken up because the CBA
prevented clubs and players from negotiating salary reductions; rather, it barred
any salary reduction in a guaranteed contract unless the union was satisfied that the
terms actually or potentially provide additional benefits to the player.

D. Appropriate Bargaining Unit in the Sports Context

Absent voluntary recognition by the employer, a union that can demonstrate

substantial allegiance (a 30% showing of interest) among the employees
may petition the NLRB to conduct a secret ballot election.
o If the union wins a majority of the votes cast, the Board must define
the scope of the relevant employee constituencythat is, whether the
union seeks to represent a unit appropriate for purposes of collective
bargaining under 9(b) of the Labor Act.
In the sports context, the appropriate unit is comprised of only the leagues
players and of all the leagues players.
Test applied: Whether the employees within a proposed grouping share a
sufficient community of interest to become the recognized bargaining
unit.
o You dont need THE bargaining unit, just A bargaining unit.

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North American Soccer League v. NLRB???

Labor Board accepted the position of the Player Association a single league-
wide unit was an appropriate bargaining unit in an employment relationship
in which the League and individual clubs were joint employers of the
players.
However, they also agreed to leave the two Canadian teams out of it.
The League and its member clubs appealed the Boards certification of a
single unit encompassing all of the players on American teams.
Joint Employers
o The Leagues control over the clubs labor relations begins with
restrictions on the means by which players are acquired.
o The League also exercises considerable control over the contractual
relationships between the clubs and their players.
The club must seek the permission of the commissioner before
signing a contract which alters any terms of the standard
contract.
o The record in this case supports the Boards factual finding of a joint
employer relationship among the League and its constituent clubs.
o Even assuming the League and the clubs are joint employers, the
petitioners contend that requires a finding of a separate joint
employer relationship between the League and each of its clubs, and
does not permit all the clubs to be lumped together with the League as
joint employers.
o There is a joint employer relationship among the League and its
member clubs
Appropriate Unit
o The Board is not required to choose the most appropriate bargaining
unit, only to select a unit appropriate under the circumstances.
o The Board found they form, through the League, an integrated group
with common labor problems and a high degree of centralized control
over labor relations.
In these circumstances the Boards designation of a league-
wide bargaining unit as appropriate is reasonable, not
arbitrary or capricious.
The facts successfully refute any notion that because the teams compete on
the field and in hiring, only team units are appropriate for collective
bargaining purposes.
o Once a player is hired, his working conditions are significantly
controlled by the League.
o Collective bargaining at that source of control would be the only way
to effectively change by agreement many critical conditions of
employment.
Court: The Board is not required to choose the most appropriate bargaining
unit, only to select a unit appropriate under the circumstances. The

55
 determination will not be set aside unless the Boards discretion has been
exercised in an arbitrary or capricious manner.
Exceedingly narrow standard of review
Order enforced

--Side Note: The result of the NASL decision was to require all the soccer teams to
bargain as a single unit with the players association.
The general principle of labor law is that multiemployer bargaining is a
purely consensual undertaking, one that must initially be agreed to by the
union and each of the employers participating.
All parties are in it together; no one party can unilaterally back out if the
negotiations did not go as they had hoped.

E. Union Activity and Employer Retaliation

One tangible result of NLRA coverage is that employees gain federal

administrative protection against employer retaliation for supporting the
employees union and its actions.
In professional sports, however, players had already organized their
associations and secured CBAs even before they could be sure of that the
Labor Board would assert jurisdictional coverage.
Section 8 of NLRA:
o Unfair labor practice for employer to interfere with, restrain, or
coerce employees engaged in FUCK TOO SLOW
Employers may not retaliate against employees for supporting the union or
its activities
o Applies to initial union organization
Employers must be careful when taking actions against employees or they
can face an unfair labor practice charge
o Employers true motivation vs. Employees record of performance
In sports, very difficult distinguishing whether an action against an employee
is based on a punitive anti-union motive or due to players relative skill.

Seattle Seahawks v. NFLPA & Sam McCullum

Starting WR for the Seahawks from 1976-81

Union player representative
Coach had beef with McCullum during bargaining year. Team traded for a
WR and cut McCullum.
An unfair labor practice charge was then filed by McCullum and the NFLPA
Evidence shows the Seahawks have been trying to trade for Carr (new WR)
for months on favorable terms.
However, the judge found that both of these team decisions were influenced
by the Seahawksand especially Pateras (head coach)anti-union
sentiments directed at McCullum.

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 But For test to determine if employee was fired but for his involvement in
the labor bargains
Judge found that antiunion considerations were a motivating factor in the
decision that produced McCullums release
McCullum said some words against team doctors and such, but it was ok
because it was part of their working conditions (page 120 paragraph 2)
Respondent argues that judges finding was inconsistent because Seahawks
had turned down an offer from Carr earlier.
o We do not see that conduct as inconsistent with the judges
motivation finding for the reasons essentially given by the judge.
The Respondent simply has not shown that the acquisition of Carr would
have occurred even in the absence of the animus of the Respondents
managementmore notably, but not solely, the animus of Pateraagainst
McCullum as an outspoken representative of union sentiment on the team.
Charges upheld

F. Duty to Bargain in Good Faith

Once employees decide to form a union, both the employer and the union
come under a statutory duty to bargain collectively with each other.
The principal focus of the duty is procedural, rather than substantive
As long as a party does not engage in surface bargainingthat is, go through
the motions with no real intent to arrive at a settlementthe party is
perfectly free to engage in hard bargainingto remain unyielding in its
negotiating position, whatever the arguments made by the other side.
Behavior in the bargaining process: Two most important doctrines are 1) an
obligation of the employer (and, on occasion, the union) to supply all the
relevant information that is needed by the bargaining representative for the
proper performance of its duties and 2) the obligation to refrain from
unilateral changes in employment conditions, whether to the employees
benefit or detriment, at least until impasse has been reached in bargaining.
An essential component of each doctrine is whether the issue in dispute falls
within the phrase terms and conditions of employment such that the
employer must provide information and refrain from unilateral action about
it.
In First National Maintenance Corp. v. NLRB, the court held that the key
management decisions about the scope and direction of the enterprise
were not mandatory subjects of bargaining, regardless of their direct impact
on employee lives.
The fact that bargaining about a particular topic is not mandatory does not
imply that such bargaining is illegal. Indeed, purely voluntary negotiation
about such permissive topics takes place regularly in different bargaining
relationships.
Section 8 of NLRA:

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 o Requires parties to meet at reasonable times and confer in good faith
with respect to wages, hours, and other terms of employment
What does the duty of good faith entail?
o Obligation of employer to supply all relevant information that is
needed by the bargaining representative for the proper performance
on its duties
o Obligation to refrain from unilateral changes in employment
conditions until impasse has been reach in bargaining.

Silverman v. Major League Baseball Player Relations Committee

The baseball strike of 1994-95?

League argues that bargaining is permissive. However, it is mandatory.
The Board had substantial reasonable cause to conclude, and a substantial
likelihood of success ultimately in establishing, that the unilateral changes
made by the Owners to the free agency system before impasse violated the
rule against changes to mandatory subjects of bargaining.
The Board has clearly met its injunctive remedy standard in demonstrating
that the owners committed an unfair labor practice by their unilateral
abrogation of Article XX(F) and the free agency system.
Salary arbitration for reserve players is also a mandatory part of the
collective bargaining process between the Players and the Owners.
o Interest arbitration
Concerns disputes over terms of new or renewal contracts
o Rights arbitration
For disputes over the interpretation or application of a
contract
o Because interest arbitration clauses involve a mechanism for
resolving disputes which may arise as to the terms of future
contracts, as opposed to existing terms and conditions of
employment, they are a non-mandatory topic of bargaining.
The interest arbitration clauses can survive the expiration of CBAs where the
clauses are so intertwined with and inseparable from the mandatory terms
and conditions for the contract currently being negotiated as to take on the
characteristics of the mandatory subjects themselves.
The unilateral changes made by the Owners to the free agency system before
impasse violated the rule against changes to mandatory subjects of
bargaining.
Next issue: Whether an interim injunction was warranted for this violation
of the Labor Act.
o Interest: Publics interest in more productive and peaceful collective
bargaining in baseball.
o Issuing the injunction before Opening Day is important to ensure that
the symbolic value of that day is not tainted by an unfair labor

58
 practice and the NLRBs inability to take effective steps against its
perpetuation.
o In professional baseball, whether to leave a team, where to go and
why are of deep concern to the affected players and the loss of those
choices in the terms and conditions of employment cannot be
adequately recompensed by money.
o Free agency and salary arbitration are inextricably intertwined,
such that illegal alteration of one such feature in the baseball players
market would inevitably changed the product of the other.
o Even though it is easier later to reconstruct the actual process of
salary arbitration and more precisely determine a lost wage from that
process, monetary damages are insufficient to recompense for the
harm caused in eliminating the salary arbitration process as a choice
in the integrated reserve/free agency systems.
o Thus, a poisoning of the free agency bargaining process will also affect
the wage negotiations of reserve and salary arbitration players.
Conversely, the loss of salary arbitration in the reserve system skews
the choice of free agency rights.
Injunction granted

G. Economic Conflict in Sports Labor Relations

At some point the law draws a boundary line between legitimate weapons of
self-defense and impermissible forms of retaliation against the exercise of
statutory rights.

NFL Management Council and NFLPA

Players went on strike, but when they came back, they werent allowed to
play because they didnt return and sign in time
NFLPA files unfair labor charges with the Labor Board on the ground that
this NFL policy discriminated against those players who had exercised their
statutory right to strike, and thus deprived strikers of one-sixteenth of their
annual salaries for the sixteen-game season.
The Wednesday deadline rule clearly constitutes discriminatory conduct
which adversely affects employee rights (based on the principles outline on
page 136)
Adversely affects the right to strike
The Wednesday deadline was only applicable to striking players
In addition to other things, the Court finds that any administrative burden
associated with maintaining two separate squads for the games on October
18-19 is not a legitimate and substantial justification for the Wednesday
deadline.
Standard

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 o Even if the employer introduces evidence that conduct was
motivated by business considerations, some conduct is so
prejudicial to union interests and so devoid of significant economic
justification that the employers FUCK
o If the impact on employee rights of the discriminatory conduct is
comparatively slight, an antiunion motivation must be proved.
Complaint upheld.

--Canadian laws bar the use of replacement players

H. Decertification as a Union Strategy in Sports Labor Relations

Decertification = when a Players Association disclaims interest in being the

bargaining representative of the players
Surface bargaininga tactic designed to avoid reaching an agreement
before the collective bargaining agreement expired so that it could disclaim
its representative status and allow its members to pursue antitrust litigation
and injunctive relief against the League to try to block the NFLs expected
lockout.
NFLPA decertified in 2011 lockout
League and clubs locked out players in order to apply economic pressure
The day after the start of the lockout, Brady and ten others (9 current
players, 1 prospective player) filed a class-action lawsuit in Minnesotas
Federal District Court against the NFL and its clubs.
o The complaint alleged that the NFLs lockout violated the Sherman
Antitrust Act, constituting an unlawful group boycott; furthermore,
the complaint alleged that the NFLs salary cap and free agency
restrictions were anticompetitive.

I. Union and the Individual Player

The deference given to private arbitration in the administration of the labor

agreement accentuates the dominance of the union over individual players in
the day-to-day life of the bargaining relationship.
o Thus, a player in a contract dispute with his own club cannot go off to
court where he and his attorney might feel more comfortable.
A breach of the statutory duty of fair representation occurs only when a
unions conduct toward a member of the collective bargaining unit is
arbitrary, discriminatory, or in bad faith.

Peterson v. Kennedy and NFLPA

James Peterson of TB Bucs signed one-year deals in each of the 1976, 1977,
and 1978 seasons.

60
 He also had a special clause in his contract that entitled him to his salary for
the 1977 and 1978 seasons if he were unable to play because of a football-
related injury in a previous year.
Got hurt early in the 1976 season, missed the rest of the year. Next year
came back and was cut after the first week of training camp.
Petersons agent filed a grievance under the injury grievance procedure in
the NFL-NFLPA collective agreement in order to recover the salary due for
the 1977 1978 seasons.
The parties disputed whether the NFLPA had been informed at the outset of
the special injury protection clause in Petersons contract.
The arbitrator ruled against Petersons claim under the injury grievance
procedure, on the ground that this particular procedure was used only to
collect salary payments owed for the year during which the injury occurred.
Then, Peterson sued the NFLPA for breach of the labor law duty of fair
representation
o The principal ground was that the unions conduct amounted to no
more than negligence, and negligence could not constitute unfair
representation under the NLRA.
o Peterson appeals this ruling.
After looking at all evidence in light most favorable to Peterson, court
concludes that the union did not breach its duty of fair representation
The duty of fair representation is a judicially established rule imposed on
labor organizations because of their status as the exclusive bargaining
representative for all of the employees in a given bargaining unit.
o It is the policy of the NLRA to allow a single labor organization to
represent collectively the interests of all employees within a unit,
thereby depriving individuals in the unit of the ability to bargain
individually or to select a minority union as their representative.
A union breaches its duty of fair representation only when its conduct
toward a member of the collective bargaining unit is arbitrary,
discriminatory, or in bad faith.
Mere negligent conduct on the part of a union does not constitute a breach of
the unions duty of fair representation.
It is for the union, not the courts, to decide whether and in what manner a
particular grievance should be pursued.
Standard
o Because a union balances many collective and individual interests in
deciding whether and to what extent it will pursue a particular
grievance, courts should accord substantial deference to a unions
decisions regarding such matters.
Appeal denied

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2. Handouts

MLB-MLBPA Basic Agreement

Grievance shall not mean a complaint which involves action taken with
respect to a Player or Players by the Commish involving the preservation of
the integrity of the game of baseball.
Grievance shall not mean a complaint or dispute which involves the
interpretation or application of, or compliance with the provisions of the first
sentence of paragraph 3(c) of the Uniform Players Contract.
Arbitrator selected by both parties in a selection process. At any time during
the term of this Agreement either the Association or the Labor Relations
Department (LRD) may terminate the appointment of the impartial
arbitrator by serving written notice upon him and the other Party, so long as
it doesnt affect his ability to render awards.
Honestly, may not be on exam so just see highlighted portions

Book Excerpt (Walker and Howe cases)

C. Challenges to the Best Interests of the Sport

1. Misconduct on the Field, Court, or Ice

Roberto Alomar spit in umpires face after arguing balls and strikes.
Suspended 5 games. People were in uproar about it being too short. He
appealed. Was eligible for the playoffs and the suspension didnt begin until
the next season.

Larry Walker v. MLB Player Relations Committee (Montreal Expos)

Walker charged mound after being hit by a pitch. Was fined $500 and
suspended for four games
The Expos then told Walker that the team would not pay him the $88,000 for
those four games.
The Players Association filed a grievance that this Expos action was not just a
refusal to pay Walker for failure to render services, but team discipline that
could not be added to League action.
Key Reason: For many years, baseball owners had uniformly paid players
their salaries for time lost due to league suspensions for on-the-field (not off-
the-field) misconduct.
The Expos were bound by this owner practice and its contractual
consequences

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--Side notes: Under the NBAs CBA, Commissioner disciplinary action is reviewable
by a neutral arbitrator.

3. Drug Use

Drug and alcohol use dates back centuries

Major League Baseball Players Association and the Commissioner of Major League
Baseball (Howe)

Steve Howe was a relief pitcher for the Dodgers & Yankees
Howe was caught in the off-season buying cocaine from an undercover
Montana police officer. After being placed on probation, Howe was banned
from baseball for life by Fay Vincent.
With support of the George Steinbrenner, Howe sought help from the union
(MLBPA) to try to salvage his career
In the Wilson decision of 1984, the arbitrator accepted Commissioner Kuhns
premise that player use of drugs was a matter of legitimate concern
regarding the best interests of baseball
o Could lead to body deterioration, player involvement with criminals,
and possibly even player control by gangs/criminals that would affect
the way they play.
Seventh reported incident during 12-year baseball career
**START OF THE CASE**
The MLBPA has neither formally agreed to the Drug Policy and Prevention
Program nor brought an arbitration challenge against it.
Howe was suspended and rehabilitated numerous times
Howe entered an Alford plea of guilty to his Montana arrest charge without
explicitly conceding the underlying facts.
The Standard of Review
o While the Commissioner has a reasonable range of discretion in
such matters, the penalty he imposes in a particular case must be
reasonably commensurate with the offense and appropriate given
all the circumstances
o Offenders must be viewed with a careful eye to the specific nature of
the offense, and penalties must be carefully fashioned with an eye
toward responsive, consistent and fair discipline
o There must, in other words, be careful scrutiny of the individual
circumstances and the particular facts relevant to each case.
o The burden of the Commissioner to justify his action transcends that
of the ordinary employer inasmuch as he can effectively prevent a
players employment by anyone at any level of his chosen profession.
Discussion and Analysis
o Howe had ADHD and this was a factor in his drug use. This disorder
during the time was never diagnosed or treated.

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o Commissioners medical adviser cautioned against Howes return
unless he was tested every other day. Baseball did not heed this clear
warning.
o To give Howe yet another chance of returning to the game without
implementing those conditions was not, in the courts judgment, a fair
shot at success.
o Here, there was little consideration of the medical records
o When considering the expulsion of a player, this failure to examine all
the circumstances, irrespective of the cause, is not consistent with the
Commissioners responsibility.
o Suspension was long enough and has sent the message. Court thinks
Howe should have a second chance to succeed.

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Week 8 Notes10/21/15

1. Franchise Ownership, Admission and Relocation

CHAPTER 7BUSINESS STRATEGY AND ANTITRUST SCRUTINY OF INTERNAL

LEAGUE REGULATION OF INTER-CLUB COMPETITION

--Player salary and franchise value have risen over the decades as a result of
changing times and increases in ticket sales, stadium revenues, television, etc.)
Recognition of these financial trends is important for two reasons:
o First, although a more favorable legal environment has enabled
players to secure a larger share of the games revenuesplayer
salaries have gone up somewhat more than franchise pricesthe
lions share of salary increases is attributable to increases in the
games revenues that also enlarge ownership profits (or for some
teams reduce ownership losses).
British economist Alfred Marshalls first law of labor
economics: the employers demand for labor is derived from
the consumers demand for the goods and services produced
by that labor.
o The second reason why we must be conscious of the explosion in team
values is because the law has left its imprint on that economic trend as
well.

A. Franchise Ownership Rules

The law is well established that it is competition, and not individual

competitors, that is protected by the antitrust laws
The major source of antitrust litigation about specific sports ownership rules
in the United States concerns the NFLs policy that restricts the ability of its
owners also to control clubs in other leagues.
An NFL franchise cannot be publicly traded corporations (GB Packers
grandfathered exception)
o The mechanism for enforcement of this NFL rule has been the
requirement that three-quarters of the clubs must approve any
change in ownership of a team.
o The MLB, NBA, and NHL have no similar restrictions

NASL v. NFL

NASL challenged the NFLs cross-ownership ban

The existence of such a submarket and the importance of the function of
existing team owners as sources of capital in that market are implicitly
recognized by the defendants proven intent in adopting the cross-ownership
ban.

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 o If they believed, as NFL now argues, that all sources of capital were
fungible substitutes for investment in NASL sports teams and that the
ban would not significantly foreclose the supply of sports capital, they
would hardly have gone to the trouble of adopting it.
Unless the ban has precompetitive effects outweighing its clear restraint on
competition, therefore, it is prohibited by 1 of the Sherman Act.
NFL argues that the anti-competitive effects of the ban would be outweighed
by various pro-competitive effects.
o First it contends that the ban assures it of the undivided loyalty of its
team owners in competing effectively against the NASL in the sale of
tickets and broadcasting rights, and that cross-ownership might lead
NFL cross-owners to soften their demands in favor of their NASL team
interests.
But the enormous financial success of the NFL despite long-existing cross-
ownership by some members of NASL teams demonstrates that there is no
market necessity or threat of disloyalty by cross-owners which would justify
the ban.
NFL has failed to come forward with proof that any legitimate purposes
could not be achieved through restrictive means as was required
No evidence of leaking confidential NFL information to NASL competitors,
nor is there any evidence showing that NFL could not be protected against
unauthorized disclosure by less restrictive means.
Reversed, among many other reasons (last paragraph page 453)

--Side note: Exception carved out in 1996 for MLS in regards to owners trying to
own teams in their city from other leagues, or in a city that did not have any NFL
team in its market.
Thus, NFL owners are now only precluded from owning teams in a
competing league if those other teams are in cities where somebody elses
NFL team is located.
The exceptions were created to resolve two specific controversies:
o Wayne Huizenga purchasing the Dolphins while owning the Panthers
and Marlins
The first exception allowed Wayne to keep all Miami-based
teams as long as they remained in Miami
o Paul Allens purchase of the Seattle Seahawks while already owning
the Portland Trailblazers
The second exception allowing NFL owners also to own
another leagues team in a market where no NFL team is
located (e.g., Portland), allowed Allen to buy the Seahawks

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Sullivan v. NFL

Patriots owner Billy Sullivan sought to alleviate his familys financial distress
by putting up 49% of the team in a public stock offering
Sullivan sold it in 1988 to Kiam for $84 million, who then sold it in 1992 to
Orthwein for $110 million
Sullivan sued NFL under the Sherman Act, claiming that absent NFLs policy
against public ownership he would have to been able to retain controlling
interest in the rapidly-appreciating football asset, instead of having to sell it
at a depressed price to private buyers.
o At trial, the jury awarded Sullivan $38 million in damages, which the
trial judge remitted to $17 million. NFL appeals
Lack of Antitrust Injury
o Under antitrust laws rule of reason, the NFLs policy is in restraint
of trade if anticompetitive effects of the policy outweigh the policys
legitimate business justifications.
o The jury determined that the NFLs policy had an actual harmful
effect on competition in this market
o The NFL argues on appeal that Sullivan has not established the
existence of any injury to competition, and thus has not established a
restraint of trade that can be attributed to the NFLs ownership policy.
League asserts 1) that NFL clubs do not compete with each
other for the sale of ownership interests in their teams so there
exists no competition to be injured in the first place; and 2)
Sullivan did not present sufficient evidence of injury to
competition from which a reasonable jury could conclude that
the NFLs policy restrains trade.
This notion is ultimately rejection
o NFL does not challenge the jurys initial finding of the relevant market
No Competition Subject to Injury as Matter of Law
o The question of whether competition exists between NFL teams for
sale of their ownership interests, such that the NFLs ownership policy
injures this competition, is ultimately a question of fact.
NFL thinks teams do not compete. Court declines to make this
finding.
o The NFLs public ownership policy allegedly does not merely prevent
the replacement of one club owner with anotheran action having
little evident effect on competitionit compromises the entire
process by which competition for club ownership occurs.
Insufficient Evidence of Harm to Competition
o The NFL contends that Sullivan did not present sufficient evidence
concerning: 1) the existence of competition between NFL clubs for the
sale of ownership interests, and 2) a decrease in output, an increase in
prices, a detrimental effect on efficiency or other incidents of harm to

67
 competition in the relevant market, from which a reasonable jury
could conclude that the NFLs policy injured competition.
o Court disagrees that evidence is too thin to support a jury verdict in
Sullivans favor.
o The statements of the two NFL owners (Rooney and Wilson) imply
that greater access to capital for all teams will put increased pressure
on some teams to compete with others for that capital.
o Noted that evidence of actual, present competition is not necessary as
long as the evidence shows that the potential for competition exits.
o By restricting output in one form of ownership, the NFL is thereby
reducing the output of ownership interest overall.
In other words, the NFL is literally restricting the output of a
producta share in an NFL team.
Ancillary Benefits
o The NFL next argues that even if its public ownership policy injures
competition in a relevant market, it should be upheld as ancillary to
the legitimate joint activity that is NFL football and thus not
violative of the Sherman Act.
o Not sufficient to establish that the policy does not unreasonably
restrain trade in violation of 1 of the Sherman Act.
o One basic tenet of the rule of reason is that a given restriction is not
reasonable, that is, its benefits cannot outweigh its harm to
competition, if a reasonable, less restrictive alternative to the NFLs
ownership policy that would yield the same benefits as the current
policy.
The record contains evidence of a clearly less restrictive
alternative to the NFLs ownership policy that would yield the
same benefits as the current policy.
Causation of Injury in Fact
o Public trading could have increased value, thus economic injury
Trial errors lead to reversal page 464
o The district court instructed the jury on its verdict form to balance the
injury to competition in the relevant market with the benefits to
competition in that same relevant market.
o District court agrees that a jury cannot be asked to compare what are
essentially apples and oranges, and that it is impossible to conduct a
balancing of alleged anticompetitive and pro-competitive effects of a
challenged practice in every definable market.
o On the one hand, several courts have expressed concern over the use
of wide ranging interests to justify an otherwise anti-competitive
practice, and others have found particular justifications to be
incomparable and not in correlation with the alleged restraint of
trade.

68
 We agree that the ultimate question under the rule of reason is
whether a challenged practice promotes or suppresses
competition.
Thus, it seems improper to validate a practice that is decidedly
in restraint of trade simply because the practice produces
some unrelated benefits to competition in another market.
o On the other hand, several courts, including this Circuit, have found it
appropriate in some cases to balance the anticompetitive effects on
competition in one market with certain pro-competitive benefits in
other markets.
o Moreover, the district courts argument that it would be impossible to
compare the pro-competitive effects of the NFLs policy in the
interbrand market of competition between the NFL and other forms
of entertainment, with the anticompetitive effects of the intrabrand
market of competition between NFL teams for the sale of their
ownership interests, is arguably refuted by SCOTUS.
o Courts should generally give a measure of latitude to antitrust
defendants in their efforts to explain the precompetitive justifications
for their policies and practices; however, courts should also maintain
some vigilance by excluding justifications that are so unrelated to the
challenged practice that they amount to a collateral attempt to salvage
a practice that is decidedly in restraint of trade.
o The relevant market language on the verdict form should be removed,
or else the jury should be informed that evidence of benefits to
competition in the relevant market can include evidence of benefits
flowing indirectly from the public ownership policy that ultimately
have a beneficial impact on competition in the relevant market itself.

B. Admission and Relocation of Sports Franchises

Existing club owners make many determinations

Teams controlled by capitalist owners are not likely to relocate unless the
move is in the teams financial interest, but the effect of relocation on the
league as a whole can be less clear.
The internal rules and practices of each league require consent of a super-
majority of clubs owners to create a new franchise, and even to accept the
new owner of an existing franchise.
An attempt at relocation is also supposed to gain league-wide consent.

Los Angeles Memorial Coliseum Commn v. NFL (Raiders I)

Raiders trying to move from Oakland to Los Angeles

Al Davis signed a memorandum of agreement to move the team to L.A., but
it was voted against

69
 An injunction was entered barring the league from blocking the Raiders
relocation, and the NFL immediately appealed.
We must examine Rule 4.3 to determine whether it reasonably serves the
legitimate collective concerns of the owners or instead permits them to reap
excess profits at the expense of the consuming public.
Relevant Market
o The Raiders claimed that the relevant market consisted just of NFL
football (the product) in greater Los Angeles (the geographic area).
The L.A. Coliseum claimed that its market consisted of
stadiums offering facilities to NFL teams across the United
States.
o The NFLs position was that the relevant product markets consisted of
all entertainment and stadium uses across the entire country.
o Davis testified that teams compete for fans in nearby cities
o The stadia is affected by an NFL teams arrival
o Is the NFL a single entity or partnership which creates a product that
competes with other entertainment products for the consumer dollar?
Or 28 individual entities which compete with one another both on and
off the field for support of the consumers?
o There was ample evidence for the jury to determine whether Rule 4.3
harmed competition among the 28 teams to such an extent that any
benefits to the League as a whole were outweighed.
The History and Purpose of Rule 4.3
o League members saw exclusive territories as a means to aid stability,
ensuring the owner who was attempting to establish an NFL team in a
particular city that another would not move into the same area,
potentially ruining them both.
Rule 4.3 was designed to protect this notion
o The NFL argues that Rule 4.3 serves a variety of legitimate League
needs, including ensuring franchise stability.
o Anticompetitive purpose alone is not enough to condemn Rule 4.3.
The rule must actually harm competition, and that harm must be
evaluated in light of the precompetitive benefits the rule might foster.
Ancillary Restraints and the Reasonableness of Rule 4.3
o The NFLs primary argument is that it is entitled to judgment
notwithstanding the verdict because under the facts and the law, Rule
4.3 is reasonable under the doctrine of ancillary restraints.
o Rule 4.3 aids the League, the NFL claims, in determining its overall
geographical scope, regional balance and coverage of major and minor
markets
o Because there was substantial evidence of less restrictive alternatives
accomplishing the same means, we find that the jury could have
reasonably concluded that the NFL should have designed its ancillary
restraint in a manner that served its needs but did not so foreclose
competition.

70
 o The NFL made no showing that the transfer of the Raiders to L.A.
would have any harmful effect on the League.
o Affirmative defense to Section I claim
o Some agreements which restrain competition may be valid if they are
subordinate and collateral to another legitimate transaction and
necessary to make that transaction effective.
o Merely removes from per se restraint still must be analyzed under
rule of reason
o However, increases probability that restraint will be found reasonable
Pro-Competitive Benefits
o Territorial allocations are inherent in an agreement among joint
venturers to produce a product
o Encourages participation in venture
o Adds stability and security for participants in venture
Ensure the owner attempting to establish an NFL team in a
particular city that another team would not move into the area
o This stability ensures no one team has an undue advantage on the
field
o Fosters fan loyalty, promotes traditional rivalries between teams,
contributing to higher attendance and TV viewing
o Protect local government investment and expenditures
Less Restrictive Alternative
o Rule 4.3 protects owners investment, but does not incorporate any
standards or durational limits into the voting requirement or consider
factors such as fan loyalty and team rivalries
o Rule 4.3 requires only 7 no votes to prevent approval for the sole
reason of preventing another team from entering a market, regardless
of whether the market could actually sustain two teams
Let the market itself deter unwise moves
o Local governments can protect their investments through negotiation
of leases
Substantial evidence existed for the jury to find the restraint imposed by Rule
4.3 was not reasonably necessary to the production and sale of the NFL
product. Therefore, the NFL is not entitled to judgment notwithstanding the
verdict.
Affirmed

--Side notes: The Raiders I decision concerned only the NFLs antitrust liability for
rejecting the Raiders proposed move to L.A.
Raiders II is based on profits lost during the delay in their move
o The court of appeals endorsed the basic premise to the NFLs
argument that the NFL as a whole owned the right to expand into the
Los Angeles area, a valuable right foreclosed by the Raiders
relocation.

71
 Raiders II was significant not just in sharply reducing the size of the NFLs
damage liability to the Raiders, but also in offering somewhat greater
support for league constraints upon unilateral team movements.
o Held Rule 4.3 invalid only as it was applied to the Raiders proposed
move to Los Angeles

NBA v. San Diego Clippers Basketball Club

Clippers argue that either the NBA three-quarters rule is void as a matter of
law under Raiders I, or that the NBA has not adduced genuine issues of fact to
allow the rule to stand.
The NBA asserts a number of genuine issues of fact:
o The purpose of the restraint as demonstrated by the NBAs use of a
variety of criteria in evaluating franchise movement.
o The market created by professional basketball, which the NBA alleges
is substantially different from that of professional football.
o The actual effect the NBAs limitations on movements might have on
trade.
The issue here is whether the mere requirement that a team seek NBA
Board of Governor approval before it seizes a new franchise location violates
the Sherman Act.
The NBA here did not attempt to forbid the move.
Given the Raiders I rejection of per se analysis for franchise movement rules
of sports leagues, and the existence of genuine issues of fact regarding the
reasonableness of the restraint, the judgment against the NBA must be
reversed.
Summary judgment reversed

League Controls over Entry/Contraction

Mid-South Grizzlies v. NFL

WFL owners and team want to join the NFL as a new franchise
QP: Whether the NFLs rejection of the Grizzlies application constituted a
violation of the basic Sherman Act.
Congress could not have been unaware that necessary effect of the television
revenue sharing scheme which it approved for the NFL would be that all
members of that league would be strengthened in their ability to bid for the
best available playing and coaching personnel, to the potential disadvantage
of new entrants.
The exclusion of the Grizzlies was patently pro-competitive
o It left the Memphis area, with a large stadium and a significant
metropolitan area population, available as a site for another leagues
franchise, and it left the Grizzlies organization as a potential
competitor in such a league

72
 We need not, in order to affirm the summary judgment, accept entirely the
NFLs position that there is no intra-league competition.
The Grizzlies were obliged, when faced with the NFL denial of the existence
of competition among NFL members and a potential franchisee at Memphis,
to show some more than minimal level of potential competition, in the
product markets in which league members might compete.
o They made no such showing
Grizzlies urge that because the NFL is a practical monopoly it had an
obligation to admit members on fair, reasonable, and equal terms, absent
some pro-competitive justification for their exclusion.
o This argument suffers from same defect as the others
o The seential facilities doctrine is predicated on the assumption that
admission of the excluded applicant would result in additional
competition, in an economic rather than athletic sense.
o The Grizzlies have simply failed to show how competition in any
arguably relevant market would be improved if they were given a
share of the NFLs monopoly power.
Since on the record before us the Grizzlies have shown no actual or potential
injury to competition resulting from the rejection of their application for an
NFL franchise, they cannot succeed on their 1 Sherman Act claim.
Affirmed.

4. Handouts

--PAPSA and New Jersey (17 page article)

The latest issues in daily fantasy sports, particularly with FanDuel and
DraftKings
PASPA is often described as a federal ban on sports betting but is more
technically a ban on states' ability to license, sponsor or authorize sports
betting. This slight distinction is significant because advocates for states
rights contend that PASPA, by taking away states autonomy on sports
betting, violates the U.S. Constitution.
In contrast, the Unlawful Internet Gambling and Enforcement Act of 2006
(UIGEA) exempts fantasy sports games from the federal ban on sports
betting. At the time of UIGEAs passage, Congress and President George W.
Bush reasoned that exempting fantasy sports from the ban made sense
because of clear distinctions between fantasy sports and sports betting.
Fantasy sports involve skill rather than chance, and skill-based games
generally fall outside gambling prohibitions. Of course, those who are skilled
at sports betting would argue that their success has much more to do with
skill than chance, but federal law nonetheless treats sports betting and
fantasy sports as separate creatures. This distinction still exists in spite of
more recent forms of fantasy sportsespecially daily fantasy sportsthat
seem to resemble sports betting more than the types of fantasy sports games
that were popular in 2006.

73
Week 9 Notes10/28/15

1. Television Contracts

C. Television Contracts

The background source is a legal regime that gives clubs an exclusive

intellectual property right in their teams broadcasts and names
Another crucial legal factor is the ability of teams to come together to sell a
single package of broadcasting and marketing rights to the highest bidder.
A key policy issue is whether such legal arrangements actually are in the best
interests of fans of the sport and consumers of products advertised during
broadcasts and emblazoned with team logos.
Territorial issues with broadcasting
The earliest league television policy sought to limit the breadth of broadcasts
of games played by any one team. This brought the first antitrust challenge.
To allow television revenue sharing (in the NFL in particular) Congress
enacted the Sports Broadcasting Act (SBA) of 1961, the first ever antitrust
exemption fashioned for sports by the legislativeas opposed to the
judicialbranch of our national government.

United States v. NFL (1953)

The Leagues by-laws contained a blanket prohibition against teams

broadcasting their games into the home territories of other teams. The
Justice Department charged that this league policy constituted an agreement
in restraint of trade in violation of 1 of the Sherman Antitrust Act.
Is the provision which prevents the telecasting of outside games into
the home territories of other teams on days when the other teams are
playing at home illegal?
o This provision constitutes a contract in restraint of trade
o When a football team agrees to restrict the projection of its games in
the home areas of other teams, it thereby cuts itself off from this part
of its potential market.
o QP: Whether the particular restraints imposed by Article X are
reasonable or unreasonable.
o Pro teams should not compete against each other financially. Under
these circumstances, it is both wise and essential that rules be passed
to help the weaker clubs in their competition with the stronger ones
and to keep the League in fairly even balance.
o One option to keep the balance is to reasonably restrict the
projection of games by radio or television into the home territories of
other teams.
Prevents the weaker teams from televising into the home
territories of the stronger teams as much as it prevents the

74
 stronger teams from telecasting into the home territories of
the weaker ones.
The weaker teams lose practically nothing by this television
restriction. But they benefit greatly from it in that the
restriction adds to their home game attendance by preventing
potential spectators from staying at home to watch on
television exciting outside head-on games between strong
teams.
o The greatest part of the defendant clubs income is derived from the
sale of tickets to games. Protecting home game attendance is essential
o The objective of the clubs agreeing to a television blackout of the
home territory (except for the remote possibility of a home game
telecast) during the day a home game is played is not to restrain
competition among the individual clubs in the sale of television rights
or competition among television stations and networks and
advertisers and advertising agencies in the purchase of such rights.
o The first type of restriction imposed by Article X is a reasonable one
and a legal restraint of trade.
Is the restriction on telecasting outside games in home territories when
the home teams are playing away games and telecasting them in their
home territories illegal?
o The home game attendance test is applied here
o The home team playing an away game has no affect on home gate
receipts
o The record is this case contains no factual justification for Article Xs
suppression of competing telecasts of League games when the away
game is being televised in its home territory.
o Defendants conjecture that without such restriction gate attendance
would decline a week or two later at the home game has little
probative value.
o Article Xs restriction on this type of competition is an unreasonable
and illegal restraint of trade.

1. Collective Selling of Pooled Rights and the SBA of 1961

Section 1 of the SBA states that: The antitrust lawsshall not apply to any
joint agreement by or among persons engaging in or conducting the
organized professional team sports of football, baseball, basketball, or
hockey, by which any league of clubssells or otherwise transfers all or any
part of the right of such leagues member clubs in the sponsored telecasting
of the games of football, baseball, basketball, or hockey as the case may be,
engaged in or conducted by such clubs
In 1971 the FCC first adopted the Sports Blackout Rules which prohibits
cable and satellite providers from carrying a sports event if the game is
blacked out on local broadcast television stations.

75
 o In the case of NFL games, a blackout occurs when a team does not sell
a certain percentage of its tickets within 72 hours prior to the game.
o In an order dated 9/30/14 the FCC eliminated sports blackout rules

2. League Restrictions on the Sale of Television Rights by Individual Clubs

The more fundamental question is how judges should treat current league
television policies that are not protected by SBA
Only in the NFL have the teams elected to have all of their regular season
games (and even some their pre-season games) sold by the league through
pooled-rights contracts.
In all other professional sports leagues, a small minority of games are
televised pursuant to nationwide pooled-rights contracts, while the vast
majority of games are televised pursuant to contracts negotiated, and the
revenues retained (subject to revenue sharing rules) by individual member
clubs.

Chicago Professional Sports Ltd. & WGN v. NBA (1992)

NBA seeks to limit local superstation games

Rule of Reason analysis applicable
Anticompetitive Purpose/Effect
o Reduces output (total number of televised games)
o Shortens the list of stations to which clubs may sell their rights to
retain games
o Thereby reduces competition among teams for sale of TV broadcast
rights
Pro-competitive Purpose/Effect
o Rules keeping popular games off superstations help weaker teams
attract the support of their local audiences
o Teams in smaller markets depend more on live gate revenues to
finance operations to compete with Bulls, Lakers, Knicks on the court
o Rivalry makes for a more attractive product which then attracts a
larger audience
o Rule prevents clubs from misappropriating a property right that
belongs to the NBA (to exploit its symbols and success)
o Rule prevents free-riding
The SBA applies only when the league has transferred a right to sponsored
telecasting.
As the league of clubs has not transferred to the networks either the right
to show, or the right to black out, any additional games, the SBA does not
protect its 20-game rule.
The SBA is special interest legislation, a single-industry exception to a law
designed for the protection of the public.

76
 In NCAA, the NCAA tried to persuade the Supreme Court that the plaintiffs
should be required to establish power in a viewership market. The Court
replied: We must reject this argument for two reasons, one legal, one factual.
As a matter of law, the absence of proof of market power does not justify a
naked restriction on price or output This naked restraint on price and
output requires some competitive justification even in the absence of a
detailed market analysis.
o Meaning, any agreement to reduce output measured by the number of
televised games requires some justification.
The leagues first justification is that the telecasting rule prevents the clubs
from misappropriating a property right that belongs to the NBA: the right
to exploit its symbols and success.
o Rejected
o It mischaracterizes the NBAs articles and bylaws, which leave with
the teams the intellectual property in their games.
o It also has nothing to do with antitrust law.
A court applying the Rule of Reason asks whether a practice produces net
benefits for consumers; it is no answer to say that a loss is reasonably
small.
Second justification was that it is a restraint on free riders
o According to the NBA, three forms of free-riding characterize the
Bulls telecasting:
First, the contracts with NBC and TNT require these networks
to advertise NBA basketball on other shows; the Bulls and
WGN receive the benefit of this promotion without paying the
cost.
Second, the NBA has revenue-sharing devices and a draft to
prop up the weaker teams. The Bulls took advantage of these
while they were weak (and through the draft obtained their
current stars) but, according to the league, are siphoning
viewers (and thus revenues) to their own telecasts, thus
diminishing the pot available for distribution to todays weaker
teams.
Third, the Bulls and WGN are taking a free ride on benefits of
the cooperative efforts during the 1980s to build up
professional basketball as a rival to baseball and football
efforts that bore fruit just as the Bulls produced a
championship team, and which the Bulls would undermine.
o Free-riding is the diversion of value from a business rivals efforts
without payment.
o However, the NBA may (and does) charge members for value
delivered.
o Avoidance of free-riding does not justify the NBAs 20-game limit.

77
 It is enough to say that if the league may levy a tax on superstation
broadcasts, then there is no free-riding. And if the league may not levy a tax,
then a direct limit with the same effect as a tax is unjustifiable.
o Either way the NBA comes up short, and under NCAA the failure of its
justifications eliminates the need for the district judge to define a
market.
Affirmed

--Side notes
NBA creates new provision that prevents teams from airing their game on a
superstation the same night another NBA game is being aired on TNT.
o Rejected
o The rights to the games licensed by the Bulls to WGN have not been
transferred to the league or by the league to any other party.
o Moreover, because each team retains the right to televise on its
particular over-the-air or cable outlet the same games that are
televised by TNT, the leagues transfer of rights to TNT cannot be
characterized as exclusive.
SBA doesnt apply
o It only applies when the league has transferred a right to sponsored
telecasting.
o TNT did not appear to be sponsored telecasting
People have to pay for TNT
TNT derives its revenues predominantly from subscriptions
as opposed to advertising revenues from paying sponsors
Sponsored telecasting as used in the SBA is limited to free
commercial as opposed to cable

Chicago Professional Sports Ltd. Partnership & WGN v. NBA (Bulls II) (1996)

Bulls want to broadcast 41 games on WGN compared to 30. The NBA argues
that antitrust laws allow it to fix a lower number (15 or 20) and to collect the
tax it proposed.
Unless a contract reduces output in some market, to the detriment of
consumers, there is not antitrust problem.
Judge deems market power irrelevant
Straight Rule of Reason case, which means starting with an inquiry into
market power and, if there is power, proceeding to an evaluation of
competitive effects.
Vacated and remanded
Aftermath
o Parties settle
o Bulls broadcast 35 games on WGN
o League gets revenue share

78
2. Group, Licensing of Merchandise and Intellectual Property

D. Group Licensing of Merchandise and Related Intellectual Property Rights

This section focuses on the legal and policy issues concerning the ability of
teams to come together to sell a single package of marketing rights to the
highest bidder.
Leagues have largely centralized trademark licensing for merchandising
purposes
Each team assigns its name and logo to a league-run entity
o League entity has right to grant an exclusive license for some product
categories (automobile, computer)
o Teams and league may grant non-exclusive FUCK
Players retain intellectual property rights to their name, image and likeness
Third parties seeking endorsement from five or fewer players deal directly
with individual players (or more likely, their agents)

Topps Chewing Gum v. MLBPA

Topps signs players in the minors before they make it big

Per se Analysis
o Group boycotts traditionally treated as per se violations
o The classic boycott is a concerted attempt by a group of competitors
at one level to protect themselves from competition from non-group
members seeking to compete.
o Enhanced competition?
At the time, there was little competition because it was too
expensive for competitors to duplicate its business model of
soliciting players when they enter the minor leagues
Group licensing enhances competition among Topps and its
trading card industry competitors for players publicity rights
Anticompetitive vs. Pro-competitive purpose/effect?
In this case, Topps does not and could not contend that the parties to the
alleged boycott, the MLBPA and the major league baseball players, are in any
sense competitors with each other.
Topps certainly does not compete with major league baseball players for the
players rights. Topps merely purchases the rights from the players.
Topps contends that it competes with the MLBPA for the players publicity
rights, and that the MLBPA has instigated the boycott in order to exclude
Topps from the market except on those terms the MLBPA dictates.
The MLBPA has argued that the arrangement of a group boycott will enhance
the competition for players publicity rights for use on a group basis.
Court concludes that per se treatment is inappropriate

79
 The first issue in any rule of reason analysis is to define the relevant market
in which the competitive impact of the defendants actions are to be
examined.
o The parties here have devoted little attention to this question, and to
the extent they have addressed it, they disagree.
The MLBPA appears to claim that the relevant market is that of publicity
rights for all athletes and performers, whereas Topps contends that it is the
market for the publicity rights of major league baseball players for use on a
group basis.
Rule of reason analysis looks to the effects on the defendants acts on the
relevant market
o MLBPA claims that its acts are pro-competitive, while Topps asserts
that it is being improperly foreclosed from competing for players
publicity rights.
Summary judgment denied

MLB Properties, Inc. v. Salvino, Inc.

Bean-filled toy bears

Had rights to names and numbers, but didnt have rights to team logos
Anticompetitive Purpose/Effect
o Court rejects Salvinos claim that agreement is an output restriction
Evidence shows that the number of licenses and licensees has
multiplied since MLBP became exclusive licensing agent FUCK
Pro-competitive benefits:
o One-stop shopping that saves transaction costs
o Prevents free-rider problem
o Promotes competitive balance among teams
o Quality control and enforcement
Court buys competitive balance argument
Salvinos approach direct licensing by teams would negatively impact
competitive balance (more popular teams would grant more licenses and
receive more income than less popular teams)

4. Handouts

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Week 10 Notes11/4/15

1. Single Entity Doctrine

D. The Nature of a Sports League: Are League Rules the Product of a Single
Entity or an Agreement Among Competing Club Owners

Three different types of non-government challengers may surface against

league practices.
o One group consists of third parties attempting to deal with the
existing league, such as players, fans, stadiums, aspiring club owners,
and television networks.
o The second group includes team owners who may oppose a rule or
policy of their league.
o The third type of challenger is a new league trying to develop and
maintain itself as a viable competitor to the established league.
Question at hand is whether a sports league consists of a collection of distinct
and economically competitive clubs who have come together to cooperate in
some aspects of otherwise autonomous business OR is a sports league
treated as a single integrated entity, analogous to a national law firm with
partners based in several cities, which is thus incapable of conspiracy in
restraint of trade when it establishes its internal operating rules and
structure
The basic premises to the single entity defense were:
o That the athletic product offered by each league in the broader sports
and entertainment market was jointly created by the league members
who were inherently incapable of producing anything of value
independently of their league; and
o That while each team competed athletically on the field in order to
produce an attractive league product, they cooperated economically
as partners within a joint venture through which they jointly created
and owned the business assets of the league.
The product of the NFL requires that Rule of Reason be applied cautiously
and that depending on the concerted activity in question, the Rule of Reason
may not require a detailed analysis; it can sometimes be applied in the
twinkling of an eye.
Copperweld
Single Entity Defense
o Basis premises to leagues single entity defense:
Athletic product offered by each league is jointly created by
league members who are incapable of producing anything of
value independently of the league.

81
NASL v. NFL

Issue over long-standing rule against ownership in competing leagues. NFL

threatened to make it from an understanding to a formal policy.
In terms of antitrust policy, this league restriction would have had its major
impact (if any) on competition between the NFL and other professional
sports leagues.
However, NASL challenged it under 1 of the Sherman Act.
Appellate court reversed the trial courts embrace of the single entity
defense
o NFL consists of members who each operate individually in terms of
gate receipts, expenses, revenues, etc.
o NFL teams are separate economic entities engaged in a joint venture.
o The characterization of the NFL as a single economic entity does not
exempt from the Sherman Act an agreement between its members to
restrain competition.
The cross-ownership rule, then, is a valid covenant by joint venturers who
produce a single product not to compete with one another.
Although individual NFL teams compete with one another on the playing
field, they rarely compete in the marketplace.
Rehnquist has issue, dissents to SCOTUS denial of writ of cert.
o The league members rarely compete in the marketplace
o The league competes as a unit against other forms of entertainment
o The cross-ownership rule is a covenant by joint venturers who
produce a single product not to compete with one another.
o TEST: A covenant not to compete is valid if it is merely ancillary to
the main purpose of a lawful contract, and necessary to protect the
covenantee in the enjoyment of the legitimate fruits of the contract, or
to protect him from the dangers of an unjust use of those fruits by the
other party.
The cross-ownership rule seems to meet this test
Second paragraph page 287
o The Court has noted that the Rule of Reason does not prohibit a seller
ofa business from contracting not to compete with the buyer in a
reasonable geographic area for a reasonable time after he has
terminated his relationship with the business.
It is difficult for Rehnquist to understand why the cross-
ownership rule is not valid under this standard.

--Differing League Structures

MLS was originally created as a single entity

No individual owners; all owned as one by limited liability company
The net profits eventually earned by MLS would be paid out as dividends to
the investor-shareholders.

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 Initial design not practical
New design keeps teams owned by entire MLS. Investor-operators for
most teams, such as Robert Kraft, receive separate special class of stock and
get almost full operating control over the teams in their areas.
o The revenues that come from these local sources are split 50-50
between the individual investor-operator and the league, while all
revenues generated from national television and merchandising deals
go to MLS.

Fraser v. MLS

The appellate court rejected the claim by holding that the plaintiffs had failed
to establish the first prong of the Rule of Reason, a showing of anti-
competitive effect, because of other reasonable substitute employers for
players services.
Chief Judge Boudin: If ordinary investors decided to set up a company that
would own and manage all of the teams in a league, then company labor
rules would be considered a decision of a single entity and not an agreement
among separate parties subject to 1.
o In many ways, MLS does resemble an ordinary company: it owns
substantial assets critical to the performance of the league; a
substantial portion of generated revenues belongs to it and is to be
shared conventionally with both operator/investors and passive
investors.
YET the court held that the formal integration of operations into a single
business entity was not conclusive.
o First, there is a diversity of entrepreneurial interests that goes well
beyond the ordinary company.
o Second, in this case the analogy to a single entity is weakened, and the
resemblance to a collaborative venture strengthened, by the fact that
the operator/investors are not mere servants of MLS; effectively, they
control it, having the majority of votes on the managing board.
The problem is especially serious where, as here, the
stockholders are themselves potential competitors with MLS
and with each other.
Here, MLS has two roles: one as an entrepreneur with its own
assets and revenues; the other (arguably) as a nominally
vertical device for producing horizontal coordination, i.e.,
limiting competition among operator/investors.
o From an antitrust standpoint, the prospect of horizontal coordination
among the operator/investors through a common entity is a distinct
concern.
Bottom paragraph page 293
Background: Revised Structure
o MLS unable to attract investors

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 o Significantly altered structure in 1996 to create special class of stock
sold FUCK DIDNT GET IT
Background: Player Restraints?
o Team decides which players it would like
o League (as employer) negotiates contract with player
o League (as employer) pays player
Lawsuit:
o MLS players allege that centralized method of setting salaries of all
MLS players violated antitrust law
o District Court dismissed Section 1 claim on single entity grounds
Ultimately, plaintiffs failed to prevail even if the Rule of Reason is applied.

--Single entity in the context of the NFL and franchise relocation

Los Angeles Memorial Coliseum Commn v. NFL (Raiders I)

A divided court of appeals rejected the single entity argument

The NFL argued that it was a single entity and thus the agreement among
club owners not to allow the Raiders to relocate was not reviewable under
1 of the Sherman Act.
Indent of majority opinion page 296
9th Circuit majority (Anti Single Entity)
o Although the business interests of League members will often
coincide with those of the NFL as an entity in itself, that commonality
of interest exists in every cartel.

--Single entity in the context of the NBA and broadcast rights sales

Chicago Professional Sports Ltd. Partnership & WGN v. NBA (Bulls II)

Antitrust law permits, indeed encourages, cooperation inside a business

organization the better to facilitate competition between that organization
and other producers.
Conflicts are endemic in any multi-stage firm, but they do not imply that
these large firms must justify all of their acts under the Rule of Reason.
Copperweld does not hold that only conflict-free enterprises may be treated
as single entities. Instead it asks why the antitrust laws distinguish between
unilateral and concerted action, and then assigns a parent-subsidiary group
to the unilateral side in light of those functions.
7th Circuit Majority (Pro Single Entity)
o The point is that antitrust law permits, indeed encourages,
cooperation inside a business organization the better to
facilitateFUCK
This court held that the district court had used the incorrect substantive
antitrust test under the Rule of Reason and remanded.

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 o When considering if a sports league is a single entity, the main
question is whether the actions of the league have any potential to
lessen economic competition among the separately owned teams.
o Whether member clubs of a sports league have legitimate economic
interest of their own, independent of the league and each other.
A joint venture warrants scrutiny for at least two reasons:
o The venture could possess market power with respect to the jointly
produced product (essentially act like a single firm with monopoly
power); or
o The fact that the venturers remain competitors in other arenas might
either distort the way the joint product is managed or allow the
venturers to use the joint product as a smokescreen behind which to
cut deals to reduce competition in the other arenas.
The antitrust issue is really whether, as a result of some cooperative venture,
economic interests which remain independent coordinate their decisions.
o Joint ventures are subject to antitrust scrutiny precisely because
separate economic interests are joined in decision-making, with the
potential for distorted results.

--The Supreme Court Speaks

American Needle, Inc. v. National Football League

Facts
Prior to 1963, the various teams within the National Football League (NFL)
(defendant) made their own arrangements for licensing and marketing
trademarked merchandise items such as caps and jerseys featuring the teams logo
and mark.

In 1963, the teams formed the National Football League Properties (NFLP) to
coordinate the development and licensing of the teams merchandise. Between 1963
and 2000, the NFLP granted nonexclusive licenses to a number of vendors, including
American Needle, Inc. (plaintiff), to manufacture and sell apparel featuring team
logos. In December 2000, however, the NFLP granted a 10-year exclusive license to
Reebok to manufacture and sell trademarked gear for all 32 teams. American
Needles license was not renewed.

American Needle filed suit against the NFL alleging violations of 1 and 2 of the
Sherman Act. Specifically, American Needle claimed that the NFL and the NFLP
conspired to restrict the distribution of the teams intellectual property rights.

The district court granted the NFLs motion for summary judgment. The Court of
Appeals for the Seventh Circuit affirmed. The U.S. Supreme Court granted certiorari
to review.

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Issue
Regardless of the legal structure of an entity or a set of entities, can any contract,
combination, or conspiracy useful to the entity violate 1 of the Sherman Act if the
agreement deprives the marketplace of independent decision-making?

Rule of Law
Regardless of the legal structure of an entity or a set of entities, any contract,
combination, or conspiracy useful to the entity may violate 1 of the Sherman Act if
the agreement deprives the marketplace of independent decision-making.

Holding and Reasoning (Stevens, J.)

Yes. The sole issue is whether the NFL and the NFLP are a single entity or are
capable of engaging in a contract, combinationor conspiracy, as defined by 1 of
the Sherman Act.

Section 1 applies only to concerted action that restrains trade. Section 2, however,
covers both concerted action and independent action, but only if the action creates a
monopoly. Concerted action under 1 does not turn on whether the parties are
involved in legally distinct entities. Rather, the question is how the parties involved
operate together.

There have been instances when a single entity controlled by a group of competitors
engaged in concerted activity violated 1. At the same time, there is not necessarily
concerted activity simply because more than one entity is involved. Thus, the
inquiry is whether the agreement, the contract, combinationor conspiracy, is
created through separate decision makers with the result depriving the marketplace
of independent centers of decision making.

Often, decision makers in a true single entity have a unity of interest and are less
likely to be engaged in concerted activity. Here, the NFL teams are independently
owned and managed with unique economic interests and goals. The teams compete
with each other, not only on the field, but also to attract fans, for ticket sales, and for
contracts with coaching talent as well as sales of trademarked merchandise. When
each NFL team markets its intellectual property, it seeks to further its own
individual interests. Consequently, a decision made by all of the teams to grant an
exclusive license to one vendor stifles competition.

The fact that the NFL created the NFLP to collectively market teams merchandise
does not mean that the structure escapes 1 liability. Illegal restraints furthered
under such a structure for a period of time also does not immunize the NFLPs
conduct from 1 scrutiny. Moreover, the fact that there could be no NFL football
without the cooperation among the many teams is not relevant to whether that
cooperation is concerted or independent action.

Here, the NFLPs agreement to be the sole agent in charge of licensing the teams
logos is the only thing preventing each separate team from managing its own

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licensing of trademarks. Agreements made within such an entity as the NFLP
constitutes concerted action covered by 1 because the parties to the agreement act
on interests separate from those of the firm itself. The independent teams operating
through the NFLP are not like the components of a single entity that act to maximize
the firms profits. The teams remain separately controlled and each teams decisions
not only effects its own profits, but the profits of the NFLP. Thus, NFLP is an
instrumentality of the teams.

When restraints on competition are needed to allow the product to be available, the
restraint may not be a per se violation of 1. Instead, the more lenient Rule of
Reason analysis should be used to determine whether the conduct is invalid by the
court below. The judgment of the court of appeals is reversed and the case is
remanded for further proceedings.

2. Monopoly

E. The Problem of Monopoly in Professional Sports

--Antitrust Law and Monopoly Power

The principal source of law in this area is 2 of the Sherman Act, which
prohibits firms from monopolizing (or attempting to monopolize) trade and
commerce, supplemented by 7 of the Clayton Act which forbids mergers
that may tend substantially to lessen competition or tend to create a
monopoly.
A monopolization charge consists of two elements: 1) the possession of
monopoly market power, and 2) the use of unacceptable means to acquire,
entrench or maintain that market power.
An attempt to monopolize claim requires a showing that the defendant has
a dangerous probability of acquiring monopoly market power and has acted
with the specific intent to achieve monopoly status.
In both types of 2 claims, there are essentially two elements:
o The first requires substantial market power of some degree; and
o The second, improper conduct that creates, entrenches, or enlarges
that market power.
A firm has a measure of monopoly power only if it has the ability to lower the
quantity or quality of its product and in turn to raise prices significantly
above marginal production costs without experiencing a decrease in profits.
Courts have adopted a surrogate test for monopoly power: Does the firm
have a large majority of the total production (or sales) in the relevant
market, which is defined by both a product type and a geographical area
within which the products in question are viable alternatives for most buyers
(or sellers)e.g., television rights to football games in the northeastern
United States, tickets to sporting events in southern California, or
professional football players in the United States.

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 When thinking about 2s ban on monopolization, it is important to
remember that the two elements of a violationmonopoly market power
and improper conductare wholly separate.
Du Pont = Major precedent
o The ultimate consideration is whether the defendants control the
price and competition in the market for such part of trade or
commerce as they are charged with monopolizing.
o What is called for is an appraisal of the cross-elasticity of demand in
the trade.
o In considering what is the relevant market for determining the control
of price and competition, no more definite rule can be declared than
that commodities reasonably interchangeable by consumers for the
same purposes make up that part of the trade or commerce,
monopolization of which may be illegal.
In International Boxing Club v. United States, SCOTUS ruled for the first time
that a sport was subject to antitrust law.

--Monopoly power and expansion

American Football League v. National Football League

In identifying the relevant market, the district court recognized that the two
leagues and their member teams competed with each other in several ways,
and that the relevant market with respect to one aspect of their competition
would not necessarily be the relevant market with respect to another.
o Relevant market with respect to their competition is nationwide in
respect for coaches/players, television.
o Competition for spectators only in 31 metropolitan areas.
The appeals court rejected the claim that the market was 17 cities where the
NFL had or was seriously considering franchises.
o The relevant market is nationwide, though the fact that there are a
limited number of desirable sites for team locations bears upon at the
question of Nationals power to monopolize the national market.
Re-affirmed that the NFL does not have the power to monopolize the
relevant market.
o The initial cities (11) in which the NFL had a team also had the
capability of supporting more than one team.
o The other 20 cities were open to the AFL.
o AFLs ability to filed teams and have full schedules suggests that the
NFL did not completely dominate the market.
The AFL also argued that the NFL had occupied the more desirable cities and
that the NFL had unlawfully expanded.
NFL DID NOT HAVE CONTROLLING MONOPOLY POWER
Side Note: The fact that no major professional sports league has ever had to
face serious competition for more than a few years may be the strongest

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 argument that such leagues are natural monopolies.

--Monopolizing conduct and the monopolizing the supply of players

The mere existence of monopoly power in the relevant market is not

sufficient to establish a violation of 2 of the Sherman Act.
A 2 violation also requires the willful acquisition or maintenance of that
power as distinguished from growth or development as a consequence of a
superior product, business acumen, or historic accident.
The true evil aimed at by antitrust law is action by the monopolist that
excludes others from entering or remaining in the market and providing
competitive balance.

Philadelphia World Hockey Club v. Philadelphia Hockey Club

The World Hockey Associations (WHA) primary objective was to secure a

federal court injunction barring the NHL and its clubs from seeking state
court injunctions to prevent more than 60 NHL players who had signed WHA
contracts from moving to the WHA in apparent violation of their NHL
standard player contracts.
o Clause 17: The club is entitled to renew the contract for one year
upon its expiration on the same terms as before, with the exception of
the salary amount, which was set anew each year.
o This Clause in itself makes the player contract perpetually renewable.
Through the totality of many interlocking arrangements, the NHL
perpetuates a conspiracy and combination with the intent to monopolize and
which monopolizes major league professional hockey.
o Major reason to preclude others from ever having immediate access
to the reservoir of players who could become part of another major
professional hockey league which could be a material and viable
competitor to the NHL.
When WHA formed in August 1971, NHL made two major moves:
o First was to authorize further expansion to Atlanta and Long Island
Especially Long Island where the WHA had been negotiating a
franchise lease and it was the only site available for a hockey
franchise in the NY metropolitan area.
o Second was to form a Legal Committee that coordinated vigorous
enforcement of the reserve clause through injunction proceedings
against NHL players seeking to move to the WHA for much higher
salaries.
Perpetually renewable contract option held to be in violation of 2 of the
Sherman Act.
Background: Farm System
o NHL maintains unique farm system
o Almost all professional players came from amateur teams governed

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 by Canadian Amateur Hockey Association (CAHA)
o NHL had agreement with CAHA to fund player development (NHL
contributed $1 million per year)
o NHL made additional payments to CAHA for each player drafted and
again for players who signed NHL contract
o Each minor league team was sponsored by, or had affiliation or player
loan arrangement with an NHL team
MONOPOLY POWER
o The NHL overwhelmingly controls the supply of players who are
capable and available for play in a new league where the level of
internal competitions fairly approaches the levels currently existing in
the NHL.
o The quality of play need not instantly equal that of the NHL, but there
must be a prospect that the product will be nearly equal in a relatively
short period of time.
WILLFULNESS & INTENT
o The mere possession of monopoly power in the relevant market does
not alone constitute a violation of 2 of the Sherman Act. There must
also be the willful acquisition or maintenance of that power as
distinguished from growth or development as a consequence of a
superior product, business acumen, or historic accident.
o The NHL willfully acquired and maintained its monopoly power
through the use of many agreements
o President of NHL: NHLs purpose was to make certain that the NHL
would always be the only major professional hockey league operating
from coast-to-coast in the United States or Canada.
Injunction granted

--Monopolizing stadiums

Hecht v. Pro Football, Inc.

Getting an AFL team in Washington to compete with the Redskins failed

Relevant market was the DC area
Rejected trial judges argument that, to prevail without proof of specific
unfair practices, Hecht had to demonstrate that the Washington metropolitan
area could support two professional football teams.
o The appellate court agreed that, if the defendants had a natural
monopolythat is to say it was the only firm in the market because
the market was not large enough to support two firms, such a
monopoly does not violate the antitrust laws unless it was acquired or
maintained by exclusionary, unfair, or predatory means.
However, it reversed the instruction that Hecht bore the burden of proving
that the Redskins did not have a natural monopoly; rather, it was the
defendants obligation to prove the claim.

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 Finally, the appeals court reversed the trial judges refusal to instruct the jury
to consider a claim that the defendant had breached obligations owed by
monopolists under the essential family doctrine.
o This doctrine states that where facilities cannot practicably be
duplicated by would-be competitors, those in possession of them
must allow them to be shared on fair terms. It is illegal restraint of
trade to foreclose the scarce facility.
Have to share and let us play!
Elements of cause of action:
o Control of essential facility by monopolist
o Defendant unable to practically or reasonably dupolicate the essential
facility
o FUCK
o FUCK
o FUCKKKKK
Hecht could have used other venues in the area

Weinberg v. Chicago Blackhawk Hockey Team

The complaint concerned the Blackhawks refusal to grant the plaintiff media
credentials and stadium access to generate content for his unofficial game
program, The Blue Line, which he sold outside Chicago Stadium in
competition with the Blackhawks own program, Face Off, which was
available inside the stadium.
Known as monopoly leveraging as requiring proof:
o 1) that defendant has monopoly power in one market;
o 2) that defendant used this power to exact a competitive advantage
itself in a second market;
o 3) that the competitive advantage was not won on competitive merits,
but rather stemmed from a coercive use of the monopoly power in the
first market;
o 4) that the defendant acted with the intent to gain the unwarranted
advantage in the second market; and
o 5) the anti-competitive conduct resulted in a lessening of competition
Court also found that the plaintiffs had stated a valid cause of action based on
the essential facilities doctrine.
Monopoly Power
o The Blackhawks unquestionably have monopoly power in NHL
hockey in Chicago.
o Weinberg sufficiently alleged that Blackhawks refused to grant him
media credentials and press access to prevent The Blue Line from
competing with Blackhawks official program Goal.
Anticompetitive effect?
o The Blackhawks have effectively exclude The Blue Line from the
immediateFUCK

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 Appellate court reversed trial courts dismissal
However, summary judgment granted for Blackhawks on the ground that
selling programs outside of one hockey arena did not constitute a
substantial part of trade or commerce and thus the relevant market was too
small to warrant application of the states antitrust law.

--Television Contracts and Other Monopolistic Practices

USFL v. NFL

USFL was unable to secure a network TV deal and folded

o Blames NFL
Court of appeals rejected the USFLs appeal from a judgment awarding it just
$1 in damages after it went out of business following three seasons.
NFL television contract ended in 1986 and at that point, networks were free
to contact with a competing leagues games for all time slots.
Because the NFL was forbidden by its network contracts to televise games on
cable, cable television contracts were open to a competing league, although
such contracts were less lucrative than network contracts.
The jury did not find the NFL guilty of a 2 violation

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Week 11 Notes11/11/15

NCAA v. Board of Regents of the Univ. of Oklahoma & Univ. of Georgia Athletic Assn.

GO BACK AND FIND THREE ANTICOMPETITIVE REASONS

HISTORY OF THE NCAA TELEVISION PLAN

o UPenn started the television trend
o On January 11, 1951, a three-person Television Committee had
concluded that television does have an adverse effect on college
football attendance and unless brought under some control threatens
to seriously harm the nations overall athletic and physical system.
o In 1951 the NCAA adopted a television plan that permitted only one
game per week to be broadcast in each area, and limited each school
to two television appearances per season.
o Studies in each of the next five years indicated that tv had an adverse
effect on attendance.
o Negotiated deals with networks in the 60s, 70s, and 80s.
o Under the new contracts, over a two-year cycle each network had to
carry games showing at least 82 NCAA members, with six being the
maximum number for any one college team (and only four on national
coverage).
The NCAAs rules, as reflected in the network contracts, also
barred any individual member from selling its own teams
broadcast rights.
o However, the College Football Association (CFA) members were
unhappy with these restraints, and they negotiated a different
contract with NBC that gave these big-time college football powers
both more appearances and more money.
The NCAA threatened any team that allowed its game to be
broadcast on NBC with sanctions, not only against their
football program, but against all their sports.
o Thus, the Universities of Oklahoma and Georgia filed suit in an
Oklahoma federal district court, and secured an injunction against any
effort by the NCAA to interfere with CFAs dealings with NBC.
There can be no doubt that the challenged practices of the NCAA constitute a
restraint of trade in the sense that they limit members freedom to
negotiate and enter into their own television contracts.
o In that sense, however, every contract is a restraint of trade
o The Sherman Act was intended to prohibit only unreasonable
restraints of trade.
It is also undeniable that these practices share characteristics of restraints
we have previously held unreasonable.
District court: The policies of the NCAA with respect to television rights are
ultimately controlled by the vote of member institutions.

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 o Horizontal restraintan agreement among competitors on the way in
which they will compete with one another.
A restraint of this type has often been held to be unreasonable
as a matter of law.
Because it places a ceiling on the number of games
member institutions may televise, the horizontal
agreement places an artificial limit on the quantity of
televised football that is available to broadcasters and
consumers.
o Moreover, the District court found that the minimum aggregate price
in fact operates to preclude any price negotiation between
broadcasters and institutions, thereby constituting horizontal price
fixing, perhaps the paradigm of an unreasonable restraint of trade.
What is critical is that this case involves an industry in which horizontal
restraints on competition are essential if the product is to be available at all.
The NCAA plays a vital role in enabling college football to preserve its
character, and as a result enables a product to be marketed which might
otherwise be unavailable.
Per Se?
o No. NCAA member institutions have created a horizontal restraint
Analysis = Rule of Reason
o What is critical is that this case involves an industry in which
horizontal restraints on competition are essential if the product is to
be available at all
o In order to preserve the character and quality of the (college football)
product, athletes must not be paid, must be required to attend class,
and the like.
Under the Sherman Act, the criterion to be used in judging the validity of a
restraint on trade is its impact on competition.
Because it restrains price and output, the NCAAs television plan has a
significant potential for anticompetitive effects.
o Output is lower
o Price is higher
o District court found that if member institutions were free to sell
television rights, many more games would be shown on television,
and that the NCAAs output restriction has the effect of raising the
price the networks pay for television rights.
Individual competitors lose their freedom to compete
o Both price and output are unresponsive to consumer preference
Petitioner (NCAA) argues that its television plan can have no significant
anticompetitive effect since the record indicates that it has no market
powerno ability to alter the interaction of supply and demand in the
market.
o ARGUMENT REJECTED
As a matter of law, the absence of proof of market power does

94
 not justify a naked restriction on price or output.
Thus, the plan is inconsistent with the Sherman Acts
command that price and supply be responsive to
consumer preference. We have never required proof of
market power in such a case.
This naked restraint on price and output requires some
competitive justification even in the absence of a
detailed market analysis.
As a factual matter, it is evident that petitioner does possess
market power.
The District court employed the correct test for
determining whether college football broadcasts
constitute a separate marketwhether there are other
products that are reasonably substitutable for televised
NCAA football games.
Thus, the NCAA television plan on its face constitutes a restraint upon the
operation of a free market, and the findings of the District court establish that
it has operated to raise price and reduce output.
Under the Rule of Reason, these hallmarks of anticompetitive behavior place
upon petitioner a heavy burden of establishing an affirmative defense which
competitively justifies this apparent deviation from the operations of a free
market.
District court finds ZERO pro-competitive efficiencies
The interest in maintaining a competitive balance that is asserted by the
NCAA as a justification for regulating all television of intercollegiate football
is not related to any neutral standard or to any readily identifiable group of
competitors.
The plan simply imposes a restriction on one source of revenue that is more
important to some colleges than to others.
Perhaps the most important reason for rejecting the argument that the
interest in competitive balance is served by the television plan is the District
courts unambiguous and well supported finding that many more games
would be televised in a free market than under the NCAA plan.
o The finding that consumption will materially increase if the controls
are removed is a compelling demonstration that they do not in fact
serve any such legitimate purpose.
Consistent with the Sherman Act, the role of the NCAA must be to preserve a
tradition that might otherwise die; rules that restrict output are hardly
consistent with this role.
Held that the record supports the District courts conclusion that by
curtailing output and blunting the ability of member institutions to respond
to consumer preference, the NCAA has restricted rather than enhanced the
place of intercollegiate athletics in the Nations life.
Affirmed.
DISSENT (pages 916-921)

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2. Pay From College

The NCAAs rules make it clear that pay is the receipt of funds, awards or
benefits not permitted by the governing legislation of the Association for
participation in athletics and that a grant-in-aid administered by an
educational institution is not considered to be pay, provided it does not
exceed the NCAAs financial aid limitations.
A crucial rule, Article 16.02.03, bans extra benefits for student-athletes
i.e., benefits not generally available to the institutions students.
In August 2014, changes in the NCAA governance structure were adopted
that now allow a subgroup of Division I-A schools, those in the five
conferences that earn revenues from football that far exceeds the revenues
earned by other Division I institutions and conferences (the Big Five), to
establish different rules with respect to certain matters.
o Will allow each school to provide, in addition to the previously
allowed grant-in-aid, a cash stipend in an amount that would increase
the total value of a full scholarship to the full cost of attendance.
A recurring issue is how to treat athletes who, while receiving an athletic
scholarship, are also able to draw on external sources of financial support
while at college.
The Tenth Circuit reversed a district court ruling that the rule violated the
Equal Protection Clause on the ground that it lacked a rational connection
with the policy of preserving amateurism.
o The appeals court noted that the case did not involve any right to a
college education, but rather a right to receive what it called a certain
favorable financing arrangement.
In 1992, the NCAA rules were amended to permit Division I student-athletes
to receive a Pell Grant in combination with other institutional financial aid,
provided the overall grant does not exceed the value of a full grant-in-aid
plus $1,700.
o Many member schools had still opposed efforts to amend the rule to
allow students to keep up to $1,700 of their Pell Grants because the
institutions could not afford to lose this source of revenue.
Besides cash payments to athletes, the NCAA strictly forbids any benefits in
kind over and above the carefully delineated grant-in-aid for tuition, frees,
books, and room and board.
Student-athletes also cant have anything that regular students cant have.
o Ex: FSU dining facility open to regular students as well
The January 1997 Convention amended a rule, permitting student-athletes to
work for pay during the school year, although the amount of money that the
student could earn was limited to the difference between scholarship
benefits and the normal cost of attending the college, estimated as normally
around $2,000.

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3. Athletes Market

Why and to what extent restraints on the players are to be treated as

qualitatively different under the law.
Held in McCormack (SMU death penalty case): The NCAA markets college
football as a product distinct from professional football. The eligibility rules
create the product and allow its survival in the face of commercializing
pressures. The goal of the NCAA is to integrate athletics with academics. Its
requirements reasonably further this goal.

Banks v. NCAA

QP: Whether the underlying NCAA policy unreasonably deprives college

players of the opportunity to participate in the draft and receive the advice
and representation of an agent.
Banks entered ND as a top prospect and got hurt in his sophomore year.
Took senior season off while his teammate became a top prospect at his
position.
Banks declares for the draft and signs a contract with an agent and a form
with the NFL basically taking away any remaining eligibility he has with the
NCAA.
Banks went undrafted and returned to ND to finish his degree, but NCAA
wouldnt give him a waiver from its rules to allow him to play.
Banks filed an antitrust suit to be able to have the freedom to learn what his
professional prospects were if he chose to leave college.
o The judge granted the NCAAs motion under Rule 12(b)(6) for
summary dismissal because of Banks failure to state a valid antitrust
claim.
DISMISSAL OF A RULE OF REASON CASE
o Banks failed to allege an anti-competitive effect on an identifiable
market
THE VALIDITY OF THE ANTITRUST CLAIM
o Banks believes the anti-competitive effect to be the no-draft rule
foreclosing players from choosing a major college football team
based on the willingness of the institution to waive or change the no-
draft rule.
Erroneous claim
This is a rule to which the NCAA member institutions
have agreed and adhered to
o Any school that sought to waive or change the
rules would forfeit its ability to participate in
NCAA sanctioned events.
o As the district court held, the complaint has failed to allege an anti-
competitive impact.

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 The failure results from Banks inability to explain how the no-
draft rule restrains trade in the college football labor market.
As SCOTUS in Board of Regents stated: most of the regulatory
controls of the NCAA are a justifiable means of fostering
competition among the amateur athletic teams and therefore
are pro-competitive because they enhance public interest in
intercollegiate athletics.
o In order for the NCAA Rules to be considered a restraint of trade in
violation of 1 of the Sherman Act, Banks must allege that the no-
draft and no-agent rules are terms of employment that diminish
competition in the employment market (i.e., college football).
o The no-draft rule merely serves as an NCAA eligibility requirement
and precludes the existence of a college football labor market for
athletes who are ineligible by NCAA standards.
o Court rejects claim that the NCAA is a purchaser of labor through
athletic scholarships
o Pro-competitive effect = amateurism
DISSENT
o Only relevant market is the nationwide labor market for college
football players
o Colleges are purchasers and players are suppliers
o Thinks they should have opportunity to gauge pro opportunities
before declaring and then potentially being fucked if they go
undrafted.
o Colleges are paying players with scholarships (education, room and
board, etc.) in exchange for athletic performance on a playing field
o The no-draft rule is anticompetitive because it constitutes an
agreement among colleges to eliminate an element of competition in
the college football labor market.
o It may very well be that the no-draft and no-agent rules are essential
to the survival of college football as a distinct and viable product, in
which case Banks would lose.
o Comparative to a farm system

--Jenkins v. NCAA Materials (PDF)

Jeffrey Kessler files against NCAA

o Argues the NCAA has unlawfully capped player compensation at the
value of an athletic scholarship.
o Effectively asks to end amateurism
o Suit simply states that no cap is legal in a free market and asks the
judge to issue an injunction against the NCAA ending the practice.
o It makes no claim on specific revenues, only that athletes should be
treated like other students, who are not subject to educational or
financial compensation caps by agreement among universities.

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 o Kessler is confident he will win in part because of the major revenue
that college sports generates.
NCAA, conferences: Scholarships would be cut if players are paid
o

--ED OBANNON CASE (OBannon v. NCAA)

Summary
o Issue: NCAA rules prohibiting student-athletes from being paid for
the use of their names, images, and likenesses.
o District court held that the NCAAs amateurism rules were an
unlawful restraint of trade in violation 1 of the Sherman Antitrust
Act.
o Analysis: Rule of Reason test
o The panel vacated the district courts judgment and permanent
injunction insofar as they required the NCAA to allow its member
schools to pay student-athletes up to $5,000 per year in deferred
compensation.
Opinion
o QP: Whether the NCAAs rules are subject to the antitrust laws and, if
so, whether they are an unlawful restraint of trade.
o District court decision was largely correct
Although we agree with SCOTUS and sister circuits that many
of the NCAAs amateurism rules are likely to be pro-
competitive, we hold that those rules are not exempt from
antitrust scrutiny; rather, they must be analyzed under RULE
OF REASON.
One correct alternativeallowing NCAA members to give
scholarships up to the full cost of attendance.
The cost of attendance includes the items that make
up a grant-in-aid plus non-required books and
supplies, transportation, and other expenses related to
attendance at the institution.
The difference between a grant-in-aid and the cost of
attendance is a few thousand dollars at most schools.
BUT, district courts other remedy, allowing students to be paid
cash compensation of up to $5,000 per year, was erroneous.
o Limits have been placed since 1948 regarding scholarships and
financial aid available for student-athletes.
o In addition to financial aid rules, the NCAA has adopted numerous
other amateurism rules that limit student-athletes compensation and
their interactions with professional sports leagues.

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o An athlete can lose his amateur status, for example, if he signs a
contract with a professional team, enters a professional leagues
player draft, or hires an agent.
o An athlete is prohibitedwith few exceptionsfrom receiving any
pay based on his athletic ability, whether from boosters, companies
seeking endorsements, or would-be licensors of the athletes name,
image, and likeness (NIL).
o TWO RELEVANT MARKETS POTENTIALLY AFFECTED BY NCAA
RULES
The College Education Market
Wherein schools compete to recruit the best high school
players by offering them unique bundles of goods and
services that include not only scholarships but also
coaching, athletic facilities, and the opportunity to face
high-quality athletic competition.
The market specifically for FBS football and Division I
basketball scholarships is cognizable under the
antitrust laws because there are no professional (or
college) football or basketball leagues capable of
supplying a substitute for the bundle of goods and
services that FBS football and Division I basketball
schools provide.
The Group Licensing Market
Wherein, but for the NCAAs compensation rules,
college football and basketball athletes would be able to
sell group licenses for the use of their NILs.
o The Rule of Reason test determined that the NCAA had
anticompetitive rules that served a pro-competitive purpose and that
the rules could be achieved by less restrictive alternative restraints
and that the current rules were therefore unlawful.
o Anticompetitive Effects
But for these rules, schools would compete with each other by
offering recruits compensation exceeding the cost of
attendance, which would effectively lower the price that the
recruits must pay for the combination of educational and
athletic opportunities that the schools provide.
Anticompetitive effect on the college education market in that
there is one buyer (NCAA schools) for a particular good or
service (the labor and NIL rights of student-athletes)
By contrast, the court found that there is not an
anticompetitive effect on any of the submarkets of the group
licensing market.
There would be no competition if these rules were
abolished.
o Pro-Competitive Purposes

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 Amateurism: Court concluded that this is not a core principle
or a primary driver of consumer demand for college sports, but
did find that amateurism did serve some pro-competitive
purposes.
District court ultimately found that it plays some role in
preserving the popularity of the NCAAs product.
It found that the NCAAs current rules serve a pro-
competitive benefit by promoting this understanding of
amateurism, which in turn helps preserve consumer
demand for college sports.
Competitive Balance: District court concluded that the
challenged NCAA rules do not promote competitive balance.
Integrating Academics and Athletics: Deemed a viable
justification, but noted that other rules accomplish these
means.
o Less Restrictive Alternatives
(1) Allowing schools to award stipends to student-athletes up
to the full cost of attendance, thereby making up for any
shortfall in their grants-in-aid; and
(2) Permitting schools to hold a portion of their licensing
revenues in trust, to be distributed to student-athletes in equal
shares after they leave college.
The court determined that neither of these alternatives to the
total ban on NIL compensation would undermine the NCAAs
pro-competitive purposes.
The court also held the stipend alternative to be impermissible
o NCAA claims: A. Board of Regents Did Not Declare the NCAAs
Amateurism Rules Valid as a Matter of Law
The NCAA plays a vital role in enabling college football to
preserve its character, and as a result enables a product to be
marketed which might otherwise be unavailable.
Applying the Rule of Reason, the Court struck down the
television rules on the ground that they did not serve any
legitimate pro-competitive purpose.
HOWEVER, Board of Regents did not approve the NCAAs
amateurism rules as categorically consistent with the Sherman
Act.
Rather, it held that, because many NCAA rules are part
of the character and quality of the NCAAs product, no
NCAA rule should be invalidated without a Rule of
Reason analysis.
The NCAA is not asking us to find merely that its amateurism
rules are pro-competitive; rather, it asks us to hold that those
rules are essentially exempt from antitrust scrutiny.

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 Nothing in Board of Regents supports such an
exemption.
To say that the NCAAs amateurism rules are pro-competitive,
as Board of Regents did, is not to say that they are
automatically lawful; a restraint that serves a pro-competitive
purpose can still be invalid under the Rule of Reason if a
substantially less restrictive rule would further the same
objectives equally well.
Held that the amateurism rules validity must be proved, not
presumed.
o NCAA claims: C. The Plaintiffs Demonstrated that the Compensation
Rules Cause Them Injury in Fact
To satisfy antitrust injury, a plaintiff must show injury of the
type the antitrust laws were intended to prevent and that flows
from that which makes defendants acts unlawful.
NCAA alleges that the plaintiffs have not been injured in fact by
the compensation rules because those rules do not deprive
them of any NIL compensation they would otherwise receive.
We conclude that the plaintiffs have shown that they are
injured in fact as a result of the NCAAs rules having foreclosed
the market for their NILs in video games.
Video game argument that no injury occurred because of
severed relationship with EA Sports does not work.
District court believes video games will resume due to
high profit previously attained by NCAA and that EA
Sports will be able to cooperate with players.
o Three-step framework of the Rule of Reason: (1) The plaintiff bears
the initial burden of showing that the restraint produces significant
anticompetitive effects within a relevant market; (2) If the plaintiff
meets this burden, the defendant must come forward with evidence of
the restraints precompetitive effects; (3) The plaintiff must then
show that any legitimate objectives can be achieved in a substantially
less restrictive manner.
o Significant Anticompetitive Effects Within a Relevant Market
First, NCAAs contention that plaintiffs claim fails because they
did not show a decrease in output in the college education
market is simply incorrect.
Although output restrictions are one common kind of
anticompetitive effect in antitrust cases, a reduction in
output is not the only measure of anticompetitive effect.
At trial, plaintiffs prove price-fixing as anticompetitive effect.
Second, the NCAAs argument that student-athletes NILs are,
in fact, worth nothing is simply a repackaged version of its
arguments about injury in fact, which we have rejected.

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 Finally, we reject the NCAAs contention that any NIL
compensation that student-athletes might receive in the
absence of its compensation rules would be de minimis and
that the rules therefore do not significantly affect competition
in the college education market.
Since we agree with the district court that the compensation
rules have a significant anticompetitive effect on the college
education market, we proceed to consider the precompetitive
justifications the NCAA proffers.
o Pro-competitive Effects
We accept the district courts factual findings that the
compensation rules do not promote competitive balance, that
they do not increase output in the college education market,
and that they play a limited role in integrating student-athletes
with their schools academic communities, since we have been
offered no meaningful argument that those finds were clearly
erroneous.
We reject the NCAAs claim that, by denying student-athletes
compensation apart from scholarships, the NCAA increases the
choices available to them.
The district court found, and the record supports that there is a
concrete pro-competitive effect in the NCAAs commitment to
amateurism: namely, that the amateur nature of collegiate
sports increases their appeal to consumers.
We therefore conclude that the NCAAs compensation rules
serve the two pro-competitive purposes identified by the
district court: integrating academics with athletics, and
preserving the popularity of the NCAAs product by promoting
its current understanding of amateurism.
o Substantially Less Restrictive Alternatives
To be viable under the Rule of Reason, an alternative must be
virtually as effective in serving the pro-competitive purposes
of the NCAAs current rules, and without significantly
increased cost.
Plaintiffs bear the burden of proof
We hold that the district court did not clearly err in finding that
raising the grant-in-aid cap would be a substantially less
restrictive alternative, but that it clearly erred when it found
that allowing students to be paid compensation for their NILs
is virtually as effective as the NCAAs current amateur-status
rule.
Our affirmance of the grant-in-aid aspect of the district courts
decision should be taken to establish only that where, as here,
a restraint is patently and inexplicably stricter than is
necessary to accomplish all of its pro-competitive objectives,

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 an antitrust court can and should invalidate it and order it
replaced with a less restrictive alternative.
The second alternative is rejected.
In finding that paying students cash compensation
would promote amateurism as effectively as not paying
them, the district court ignored that not paying student-
athletes is precisely what makes them amateurs.

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Week 12 Notes11/18/15

POTENTIAL EXAM TOPICS

ANTITRUST (4.5 CLASSES)

LABOR (2.5 CLASSES)
COMMISSIONER AUTHORITY (2 CLASSES)
CONTRACT (1 CLASS)
INTERCOLLEGIATE SPORTS (UNLIKELY, BUT)(2 CLASSES)

--BE PREPARED IN THESE AREAS TO MAKE ARGUMENTS

Commissioner Discipline
Players Market Restraints
Franchise Ownership/Admission/Relocation
TV Contracts
Group Licensing (Merch/IP)
Monopoly (challenges by third parties)
Collective Bargaining
Non-statutory Labor Exemption

Northwestern University: NLRB Decision and Regional Director Decision

Northwestern doesnt want players to be labeled as employees

In addition to having to meet NCAA regulations, Northwestern also expected
to meet Big Ten regulations.
ANALYSIS
o If the players are not statutory employees, then the Board lacks
authority to direct an election or certify a representative.
o As SCOTUS stated: Even when the Board has the statutory authority
to act (which it would in this case, were we to find that the
scholarship players were statutory employees), the Board sometimes
properly declines to do so, stating that the policies of the Act would
not be effectuated by its assertion of jurisdiction in that case.
o Decision is primarily premised on a finding that, because of the nature
of sports leagues and the composition and structure of FBS football, it
would not promote stability in labor relations to assert jurisdiction in
this case.
No precedent. Athletes different from student workers
(cafeteria, janitors, etc.)
o Asserting jurisdiction would not promote stability in labor relations
o We conclude, without deciding whether the scholarship players are
employees under Section 2(3), that it would not effectuate the policies
of the Act to assert jurisdiction in this case.

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 o This decision does not concern other individuals associated with FBS
football, but is limited to Northwesterns scholarship football players.
o Open for reconsideration in the future, pending circumstances
ISSUES
o Petitioner contends that football players receiving grant-in-aid
scholarships from the Employer are employees within the meaning
of the Act, and therefore are entitled to choose whether or not to be
represented for the purposes of collective bargaining.
o The Employer, on the other hand, asserts that its football players
receiving scholarships are not employees under the Act. It further
asserts that these players are more akin to graduate students in
Brown University whom the Board found not to be employees under
the Act.
o In the alternative, the Employer contends that the petitioned-for-unit
is arbitrary and not appropriate for bargaining.
DECISION
o Players receiving scholarships from the Employer are employees
under Section 2(3) of the Act.
STATEMENT OF FACTS
o The Employers Football Staff and Grant-in-Aid Scholarship Players
Under NCAA rules, a scholarship can be reduced or canceled
during the term of the award if the player:
Renders himself ineligible from intercollegiate
competition;
Engages in serious misconduct warranting substantial
disciplinary action;
Engages in conduct resulting in criminal charges;
Abuses team rules as determined by the coach or
athletic administration;
Voluntarily withdraws from the sport at any time for
any reason;
Accepts compensation for participating in an athletic
contest in his sport; or
Agrees to be represented by an agent.
o The Employers Football Players are Subject to Special Rules
In addition to standard rules, Players are also required to sign
a release permitting the Employer and the Big Ten Conference
to utilize their NIL.
o Football Players Time Commitment to Their Sport
Basically its a year-long commitment
o The Recruitment and Academic Life of the Employers Grant-in-Aid
Scholarship Players
Recruited for athleticism and not athletic ability
To be eligible to play on the football team, the players must be:
Enrolled as full-time students;

106
 Making adequate progress towards obtaining their
degree; and
Maintain a minimum GPA
More requirements second paragraph of page 12
Class conflict with the QB
Wanted to take a medical class but coaches didnt
encourage it because it conflicted with morning football
practices.
QB fell behind and then changed majors
On the other hand, the coaches say they let them out of
practice 30 minutes early, had rides and meals to-go
prepared for players taking classes close to practice
time.
The Employers Student-Athlete Handbook states that players
academics must take precedence over athletics.
o The Revenues and Expenses Generated by the Employers Football
Program
The Employers football team generates revenue in various
ways including: ticket sales, television broadcast contracts
with various networks, and the sale of football team
merchandise.
DISCUSSION AND ANALYSIS
o The Burden of Proof
A party seeking to exclude an otherwise eligible employee
from the coverage of the Act bears the burden of establishing a
justification for the exclusion.
Accordingly, it was the Employers burden to justify denying its
scholarship football players employee status.
Court finds that the Employer failed to carry its burden
o The Applicable Legal Standard
Section 2(3) of the Act provides in relevant part that the term
employee shall include any employee
SCOTUS has held that in applying this broad definition of
employee it is necessary to consider the COMMON LAW
definition of employee.
Under the COMMON LAW definition, an employee is a person
who performs services for another under a contract of hire,
subject to the others control or right of control, and in return
for payment.
Prong 1: Performs services for another
Clearly, the Employers players perform valuable
services for their Employer.
Or do they?
o Are players services valuable if they result in a
loss?

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 o Do players perform the services for their own
benefit?
Prong 2: Under a contract for hire
Players are required to sign a tender before the
beginning of each period of the scholarship
Prong 3: Subject to the others control or right of control
Players under strict control
Prong 4: In return for payment
It is clear that the scholarships the players receive is
compensation
Is it so clear?
o Scholarship funds remain within the University
and never enter the hands of student-athletes
o University pays for the courses that a student-
athlete enrolls in
o Scholarships are not taxed by the IRS
As a result, the Board has subsequently applied the COMMON
LAW test to determine that individuals are indeed statutory
employees.
As the record demonstrates, players receiving scholarships to
perform football-related services for the Employer under a
contract for hire in return for compensation are subject to the
Employers control and are therefore employees within the
meaning.
Players, in exchange for their services, receive a substantial
economic benefit for playing football (tuition and shit).
The fact that the Employer does not treat these scholarships or
stipends as taxable income is not dispositive of whether it is
compensation.
o Coaches have control of players and their activities
o The Employers Grant-in-Aid Scholarship Players are Employees
Under the COMMON LAW Definition
Walk-ons are not employees because they do not receive
compensation
Brown University IS NOT APPLICABLE
o The Employers Grant-in-Aid Scholarship Football Players are not
Primarily Students
Players would have to spend more time doing academia than
athletics
o Grant-in-Aid Scholarship Football Players Athletic Duties do not
Constitute a Core Element of Their Educational Degree Requirements
Players dont receive academic credit for playing football
Playing football is also not a requirement to graduate
o The Employers Academic Faculty does not Supervise Grant-in-Aid
Scholarship Players Athletic Duties

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 THE EMPLOYERS GRANT-IN-AID SCHOLARSHIPS PLAYERS ARE NOT
TEMPORARY EMPLOYEES WITHIN THE MEANING OF THE ACT
THE PETITIONED-FOR-UNIT IS AN APPROPRIATE UNIT
o The Employer contends that the petitioned-for-unit is not an
appropriate unit for two reasons: (1) the unit consists of scholarship
players who are not employees; and (2) the unit is an arbitrary,
fractured grouping that excludes walk-ons who share an
overwhelming community of interest with the sought after unit.
o To constitute a fractured unit, the putative group must consist of
employees as defined by the Act, and the Employer concedes that the
lack of scholarship precludes a finding that the walk-ons are
employees under the Act.
o In the absence of a finding that the walk-on players are employees a
fractured unit cannot exist, and the petitioned for unit is an
appropriate unit.
THE PETITIONER IS A LABOR ORGANIZATION WITHIN THE MEANING OF
THE ACT
o The Employer argues that the Petitioner is not a labor organization
within the meaning of the Act unless the following two conditions are
met: (1) its players who receive scholarships are found to be
employees within the meaning of the Act; and (2) the petitioned-for-
unit is found to be an appropriate unit within the meaning of the act.
o Both of these are met, therefore it is a labor organization
NLRB: Board Decision on Review
o Are football scholarship athletes employees?
o As the Supreme Court has statedand as Northwestern and several
amici at least implicitly argueeven when the Board has the
statutory authority FUCK.
o Single Team Bargaining Unit?
o Public vs. Private
Implications of Recognizing Football Student-Athletes as Employees?
o Workers Comp?
o Benefits?
o Minimum Wage?
o Taxes?
o Title IX?
o Competitive balance?

109
Anderson v. NCAA

--DEFENDANTS MEMO IN SUPPORT OF MOTION TO DISMISS

Introduction
o This action raises the question of whether college students
participating in intercollegiate athletic competitions are employees
who must be paid to practice and play under federal wage and hour
law.
o Involves UPenn womens track athletes
Background
o The NCAA and the Role of Intercollegiate Athletics
Amateurism important
o Summary of Amended Complaint
Track athletes were employees and should have been paid
federal minimum wage of $7.25 per hour.
In addition, Plaintiffs seek a Declaration that NCAA bylaws aid
and abet unlawful conduct complained of, and of the
employment rights and legal relations of student athletes vis--
vis Defendants.
Argument
o Plaintiffs Have Failed to Plead Sufficient Facts to Raise a Plausible
Inference that an Employer-Employee Relationship Existed Between
Them and Any Defendant
Plaintiffs bear the burden of proving they performed work
for which they were not properly compensated.
Absent work there can be no employer-employee
relationship
To survive dismissal under federal pleading standards, the
complaint must contain sufficient factual matter, accepted as
true, to state a claim for relief that is plausible on its face. A
claim has facial plausibility when plaintiff pleads factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.
Merely alleging legal theories without supporting factual
allegations is not sufficient.
Student-Athletes have not been considered Employees for
virtually any purpose under State and Federal Statutes
Plaintiffs contend that because students who work at
food service counters or sell programs or usher at
athletic events, or who wait on tables or wishes dishes
in dormitories, are recognized, and paid, as temporary
employees of NCAA Division I Member Schools under
the FLSA, then so too must student-athletes be paid.
Plaintiffs analogy is illogical and, in a variety of

110
 circumstances, almost every court and agency to
address this issueincluding the U.S. Department of
Laborhas concluded that student-athletes are not
employees.
The Department of Labor does not regard college student-
athletes as employees
Section 10b24(a) provides: University or college
students who participate in activities generally
recognized as extracurricular are generally not
considered to be employees within the meaning of the
Act.
Interscholastic athletics are not work and do not
result in an employee-employer relationship between
the student and the school or institution.
In a variety of contexts, federal and state courts have
consistently held that student-athletes are not
employees
Finding that scholarships are not wages that establish
an employment relationship, the Supreme Judicial Court
of Massachusetts held that vicarious liability under the
doctrine of respondeat superior did not apply to a
schools student-athletes.
o Nor does a scholarship student work for the
school in exchange for that scholarship.
o Plaintiffs have failed to plead sufficient facts to raise a plausible
inference that they performed work for any of the defendants.
The regulations make clear that work must be controlled
and required by the employer, and pursued necessarily and
primarily for the benefit of the employer and his business.
Most notably, while Plaintiffs contend that Defendants
benefitted from the unpaid labor of Plaintiff and/or members
of the Student Athlete Collective, they do not allege that their
time spent on track and field-related activities was pursued
necessarily and primarily for the benefit of the NCAA, UPenn,
or any other Moving Defendant.
The FLSAs purpose as to wages was to insure that every
person whose employment contemplated compensation
should not be compelled to sell his services for less than the
prescribed minimum wage.
By any objective measure, Plaintiffs have not alleged
and cannot allege that they contemplated
compensation under the FLSA when they joined the
Womens Track team at UPenn.
o Indeed, at the time Plaintiffs joined, they were
fully aware that they would not be paid for their

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 participation.
In summary, there are no factual allegations supporting each
Plaintiffs conclusory statement that she worked as an unpaid
student athlete on the UPenns Womens Track and Field
roster.

--PLAINTIFFS MEMORANDUM IN OPPOSITION TO DEFENDANTS MOTIONS TO

DISMISS AND STRIKE

Both work study participants and student athletes are students first
Defendants position is that student athletes are less deserving of employee
status and pay, under the FLSA, than work student participants, who work
at food service counters or sell programs or usher at athletic events, or who
wait on tables or wash dishes in dormitories.
Defendants Rule 12(b)(6) Motions must be denied because plaintiffs
have sufficiently plead, and given notice of, a claim upon which relief
may be granted
o In order to survive, the Amended Complaint must provide enough
factual information to state a claim to relief that is plausible on its
face.
A claim is plausible on its face if, plaintiff pleads factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.
o U.S. Department of Labor Field Operations Handbook 10b03(e)
(10/20/93) is not relevant because it does not speak to NCAA
Regulated Sports
On its face, the DOL FOH neither mentions NCAA regulated
sports in name, nor by example.
In fact, deductive reasoning suggests that NCAA
regulated sports were clearly not intended to be
covered by the DOL FOH and Defendants have offered
no evidence to contradict that fact as alleged in the
Amended Complaint.
Most activities listed in DOL FOH relate to supplemental
degrees. By contrast, NCAA regulated sports are not related to
any degree, and no academic credit is offered for participating
in NCAA regulated sports.
Each of the activities listed in DOL FOH are organized as
student groups and run by students. By contrast, NCAA
regulated sports are neither.
Each of the activities listed in DOL FOH is subsidized, in
part, by student activity fees and/or participant fees. By
contrast, NCAA regulated sports are not subsidized by
any student activity or participant fees, but rather are
fully integrated into university operating budgets and

112
 treated as a department for accounting purposes.
Full-time university employees are not hired, and paid
salaries, for the purpose of supervising these activities,
but supervision is a rarity. By contrast, NCAA regulated
sports are supervised full-time by well-paid coaches
and athletics department staff hired expressly to do so,
and as part of their duties.
None of the activities listed in DOL FOH is a regulated
NCAA sport.
Participation in the activities listed cannot be
compelled. By contrast, participation in NCAA regulated
sports can be compelled under a signed agreement,
subject to loss of activity eligibility or scholarship, and
monitored by daily timesheets.
Universities do not maintain timesheets related to
activities listed in DOL FOH because there is no
university supervision or compelled attendance. By
contrast, as required by NCAA Bylaws, universities
maintain daily timesheets related to student athlete
performance, akin to those maintained for work study.
Intramurals are different compared to NCAA regulated sports
o U.S. Department of Labor Fact Sheet #71 (Apr. 2010) is the
relevant standard for determining employee status in an
educational setting, and Plaintiffs sufficiently meet it at this stage
Defendants inexcusably fail to disclose federal guidance that is
relevant here, and such failure is striking for a number of
reasons.
First, on the face of the Amended Complaint, the Fact Sheet is
the clear basis for Plaintiffs claim of student athlete employee
status under the FLSA.
Second, Fact Sheet is more recent, and instructive of current
thinking and trends differentiating mere educational
experiences from work than any of the dated cases cited by
Defendants.
Third, considering criteria enumerated in Fact Sheet, there is
sufficient evidence to conclude that student athletes, like
student participants in work study programs, are properly
classified as employees covered by the FLSA.
Determination of broad vs. narrow definition of employ and
IMPORTANT BREAKDOWN OF CRITERIA ON PAGE 30.
Because activities listed in DOL FOH are organized and run by
students, rather than by university staff, there can be no
employer-employee relationship arising from those activities,
and DOL Fact Sheet is not applicable to those activities.
Sports dont always follow the 20 hour restriction required by

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 NCAA Bylaws
o The NCAAs Amateurism Rule Cannot Trump Requirements of
Federal Law
Per the OBannon case, the NCAAs current restrictions on
student-athlete compensation are not justified by the
definition of amateurism set forth in its current bylaws.

114