This afternoon it will be my pleasure to discuss with you the most important actions taken in sports law this year and emphasize Frasier v. MLS where Judge O'Toole in the First Circuit declared that Major League Soccer was a "single entity." I will spend time at the end of this presentation discussing the significance of the "single entity" sports league, antitrust aspects of sports league operation, exemptions and limitations on exemptions.
 

• Just about a year ago, major league owners voted to change the name of the Major League Agreement to the Major League Constitution. This centralizes the power in the Commissioner and abolishes the separate offices of the League Presidents. Also, the Commissioner's power was theoretically enhanced to act in the best interest of the sport in various ways that would alter the current distribution of centrally created revenues. The question that remains is whether or not any change in the current system of distribution would be viewed by the players as an alteration to the collectively bargained revenue sharing scheme requiring their approval. That test is obviously in the future. This issue could be a major issue in the coming baseball labor negotiation.

 

• Atlanta Braves relief pitcher, John Rocker, made comments in Sports Illustrated last December concerning New York City, welfare mothers, homosexuals, certain immigrants and minority groups. Commissioner Selig suspended Rocker until May 1, levied a fine of $20,000 and ordered him to undergo sensitivity training. The Players' Association filed a grievance that was heard by the arbitrator who ruled that discipline was proper, but lacked just cause for its severity. The arbitrator reduced the fine to the collective bargaining limit of $500 and limited the suspension to the first 14 days of the regular season. The most interesting aspect of the Rocker case is that the Players' Association was able to cross examine Commissioner Selig for four and a half hours or more.

 

• Commissioner Bud Selig decided on January 14, 2000 not to void the contract between the Los Angeles Dodgers and their new third baseman, Adrien Beltre, even though Beltre was only 15 years old at the time of the signing. Major league rules prohibit signing players before their 16^th birthday. Selig did not allow Beltre to become a free agent, as his agent had requested. Selig chose to penalize the Dodgers instead by prohibiting the team from signing any Dominican player for one year beginning February 1, 2000. The Dodgers, by the way, signed a shortstop, Wilim Rybar, a 16 year old, to a $1.4 million contract before the stroke of midnight on the 31^st of January.

 

• Athlete agents and contract advisors have become the third force in sports labor matters. The growing trend in the business is for sports agents to sell their practices to full service agencies such as SFX, Octagon and IMG. Of course, these agencies are only interested in the stars and have little interest in the average player. The question that remains is whether or not the agencies will be able to exert pressure on the players' unions with respect to the negotiation of collective bargaining agreements in the future.

 
• In agent battles with agents, the most significant baseball case was that of Speakers of Sports, Inc. v. ProServe, in which the Federal Appeals Court in Chicago denied Speakers of Sports' complaint with respect to damages resulting from the loss of Texas Rangers star catch Ivan Rodriguez. Judge Posner indicated that all ProServe had done is compete in a very competitive field and had been successful, and Speakers of Sports had no basis for complaint. What's interesting to note, however, is that Ivan Rodriguez had fired ProServe before the decision came down.

 
• In Major League Baseball, labor matters were focused on its various umpiring organizations during the last year. As you recall, at the conclusion of the 1999 season the Major League Umpires' Association, blocked by a no strike pledge in its collective bargaining agreement, decided on a strategy whereby umpires would tender resignations in an effort to compel Major League Baseball to renegotiate the contract. Major League Baseball, of course, welcomed this action by its umpires and accepted the resignations and began hiring new umpires at that time. The umpires then attempted to rescind the resignations and Major League Baseball selectively accepted those rescissions. This led to a grievance and an effort of decertification of the union, which led directly to the creation of a new union now named the World Umpires' Association, which has been recognized as the new union by National Labor Relations Board. Also, Minor League Baseball umpires have successfully organized in an overwhelming vote. So we now have a more effective umpires' organization in the Major Leagues and a new umpires' organization in the Minors.

 
• In White v. NFL, the Federal District Court of Minnesota, Judge David Doty, who has retained supervisory authority as a result of the McNeil class action case, ruled that individual player agents can be sanctioned for intentional violations of the Collective Bargaining Agreement under the terms of that CBA. This is a very significant case in that it holds the agents liable for damages caused by their actions in contravention of the Collective Bargaining Agreement.

 
• In another David Doty case, he ruled In Re. Rob Moore v. Arizona Cardinals that the Arizona Cardinals were not committed to keeping Rob Moore as the team's designated "franchise player" for four seasons and thus were free to name another franchise player for the 2000 season. The CBA provides that when a player is designated as a team franchise player he is the franchise player for the length of the contract, but not for any term by which that initial contract is extended. When Moore was designated the Cardinals' franchise player for 1999, he signed a one year contract on August 9, but then signed a new four year contract extension on August 22. The union argued that the one year contract was a sham because the parties had agreed to a four year contract term before the one year contract was signed, which would have meant that the Cardinals could not use the franchise player designation on any other player for four years. The special master found that the one year contract was not a sham and Judge Doty upheld that factual finding. The Cardinals named Simeon Rice as its franchise player in 2000.

 
• The National Basketball Players' Association Committee on Agent Regulation filed an action against Steven Woods, an agent. George Nicolau found that the NBPA could properly decertify an agent whose public conduct was found to be injurious to the CBA. In doing so, Nicolau found that certified agents had a fiduciary duty to the law and to the union, as well as the players they represent.

 
• The NFLPA, always a leader in the agent certification business, is now requiring that financial advisors and investment advisors also be certified by them and that no certified NFLPA agent can recommend the use of a non-certified financial planner or investment advisor. There are some limitations to this, but the thrust of the effort is clear.

 
• In the area of franchise matters, The St. Louis Convention Visitors Commission v. NFL case was affirmed by the 8^th Circuit. The St. Louis Convention Visitors Commission had claimed that the NFL had engaged in a conspiracy to restrain trade with respect to the availability of teams to compete for a lease in its new building. After a month long trial, the judge granted judgment as a matter of law for the NFL.

 
• In yet another Oakland Raiders case, the judge in the Central District of California granted summary judgment for the NFL in the Raiders antitrust suit claiming the League violated Sherman I by conspiring to keep the team in Los Angeles when it wanted to move back to Oakland. In The Oakland Raiders v. City of Oakland, a state trial judge refused a motion by the Oakland Raiders to rescind its 16 year lease with the Network Associates (formerly, Oakland Alameda County) Coliseum. The Raiders claimed that they were duped and defrauded in signing the lease by false representations of ticket sales and revenues. The Raiders have amended their complaint to increase their damage claim to something over $1 billion. Trial is pending.

 
• In 1999 the Stadium Financing and Franchise Relocation Act was introduced in Congress. This act would take 10% of all revenues generated under pooled rights television contracts and place it in a trust fund that would be used to finance up to 50% of the construction or renovation of facilities for professional league teams.

 
• Major League Baseball in January 2000 voted to assign all of the teams' Internet rights to the League. Baseball retains an antitrust exemption, but some legal scholars have raised an issue concerning the application of the antitrust exemption, which applies to the business of baseball, to the business of the Internet.

 
• In March 2000 the NFL owners voted to prohibit individual clubs from operating their own web sites or generating Internet revenues other than through the League's NFL.com web site. Some policy and legal questions were raised by this action, and the National Football League is not protected by any antitrust exemptions. A limiting factor may be the fact that the Sports Broadcasting Act was found not to protect the NFL Sunday Ticket Package and the case is now proceeding on the merits of whether the Sunday Ticket Package violates Sherman Act §I. In this case, Scholl v. Dallas Cowboys and the NFL, a federal judge in Pennsylvania has denied the NFL's motion to dismiss based on the indirect purchaser doctrine of Illinois Brick. The judges found that the indirect purchaser rule does not apply in this case because the jury might find that the NFL controls the distributor and the distribution of the Sunday Ticket.

 
• In the area of taxation, the Kansas City Royals have sued the IRS over whether the damages in the free agency collusion grievance case require additional payments to the IRS for employment taxes. The IRS claims that while the interest payments are exempt from employment tax, damage payments are not. The Royals claim that none of the payments are subject to employment taxation.

 
• The most important tax matter of the decade is a bill in Congress which has been included in the Clinton Administration's 2001 budget package that would extend the time new owners of sports teams are allowed to depreciate the value of the acquired team's player contracts from 5 to15 years. This would have a very significant impact on the tax benefits of purchasing a team and inevitably have a negative influence on franchise values.

 
• Of interest to stadium operators, in Postlewaite v. Robbie Stadium Corporation a Broward County, Florida jury issued a verdict against the Marlins, Phillies and the stadium owner awarding $2.5 million to a fan hit by a baseball that flew over a protective netting. The jury found that the netting was not at its maximum height and fans do not assume the risk of such inherently dangerous conditions when arguably the employees of the stadium, as well as the players and coaches of the two teams, should have seen and corrected the condition.

 
• The problems that beset new sports leagues is amply shown by the activities of the Arena Football League during the last two years. The Arena Football League is not a single entity. The players formed an association, not a union, and filed an antitrust suit against the Arena League in Newark, New Jersey. The AFL Commissioner, David Baker, and his owners were actively trying to get the players to form a union. A union would grant the League immunity from the Sherman Act under the authority of Brown v. ProFootball, a 1996 Supreme Court decision. When the lawsuit was filed, the players canceled the 2000 season and the players filed an unfair labor practices charge against the owners under §8(a)(1) of the National Labor Relations Act. The League reinstated the season when it recognized the existence of a players' union, which it called the AFL Players Organizing Committee, which presented the Commissioner with authorization cards from approximately 378 players which constituted the majority and far exceeded the Labor Act's requirement for a 30% showing of labor support. The players association's lawyers responded by filing another National Labor Relations Act claim alleging that this was an effort to "dominate or interfere" with the creation of a labor union, a violation of National Labor Relation Act's §8(a)(2). The League has now announced that it has reached a collective bargaining agreement with the new union, which grants free agency for players after eight years' service. However, the antitrust case proceeds as does the prosecution of the National Labor Relation Act claims.

 
• The most significant case of 2000 was Judge O'Toole's decision in the Ian Frasier, et al.v. Major League Soccer case that was handed down April 19.

 

Antitrust claims by players against leagues and by teams against leagues have been the source of a considerable amount of antitrust litigation during the past 20 years. The search for an exemption has failed the National Football League and the National Basketball League, but has been found by the Major League Soccer League. The MLS is a limited liability corporation. Other leagues, by comparison, have no structure or are one of several types of entities, but no other league owns the teams.
 

In the MLS, all revenue belongs to the league. Several of the owners also have contracts that allow them to operate teams. As such, they are allowed to retain certain revenues or portions of revenues as an incentive to manage the local enterprise as well as possible. The players are all employees of Major League Soccer, who pays their salaries, and allocates them to teams.
 

The "single entity" is becoming the organizational form of choice for new leagues. It is necessary to form the league correctly as the requirements are technical and variance from stated norms can be fatal to the league and its search for antitrust immunity. This exemption is very valuable in that it allows the league to control its teams and manage labor problems in a more effective and efficient matter.
 

There are limits to what an exemption can provide. The best known exemption is the baseball exemption that covers the major leagues, minor leagues and, I believe, all of organized baseball. This exemption allows Major League Baseball to control its leagues and teams, and the National Association to control its leagues and teams. It does not, however, allow Major League Baseball or the National Association to take action injurious to the operation of teams not under the collective umbrella of each organization.
 

The most likely area of conflict is between the National Association and independent league baseball. However, there is little chance of a major confrontation because of the difficulty of describing a legal justification for it and the anti-competitive nature of such action. Finally, it is simply not worth the risk for leagues with antitrust exemptions to having the exemption judicially altered or Congressionally repealed by taking anti-competitive actions against employees, teams, players and owners of teams not part of their organization.
 

This document is available on my web site at www.ccgpa.com or can be e-mailed to you by contacting me at ccgpa@ccgpa.com.