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As the collective bargaining agreement (CBA) between the National Football League (NFL) and the National Football League Players Association (NFLPA) expires today and the two sides continue to maneuver in anticipation of a lockout, the owners now will likely have to go to the mattresses with a slightly smaller war chest. And by slightly, I mean four billion dollars less.
Judge Doty, the Federal Judge for the District of Minnesota, ruled Tuesday that the NFL violated its duty to NFLPA in negotiating the recent TV contracts. The contracts included provisions where TV networks agreed to pay guaranteed money to the NFL (the owners) in the event of a work-stoppage. Judge Doty overturned a magistrate judge that held that the Court needed to review NFL’s actions under the deferential business judgment rule and therefore the Court could not second guess the NFL’s decisions. On appeal, the NFLPA successfully argued to Judge Doty that, as a business partner under the collective bargaining agreement, the NFL had an explicit contractual duty to negotiate in good faith with the TV networks to maximize the revenue which the owners and players association split. Instead, the NFL turned down more money in order to get guaranteed money in the event of a lockout, during which they would not have to distribute any of the funds to any of the players. Also, they did this after they opted out of the old CBA that expires this week; in other words, they negotiated with a clear intent to give themselves, as Judges Doty put it, a “war chest,” in preparation for a lockout.
All in all, the NFL’s conduct in the negotiation of these contracts was fairly obviously self-interested. It appears that the NFL was blatant in what they were doing and didn’t seem to consider the fact that the NFLPA might sue them for breach of contract, which is even more ironic considering that the NFL’s actions were deliberately made to position themselves for a lockout. In any case, this is a classic example of employment-management tension, where even while the two parties are technically in business together, there still exists remarkable adversarial positioning and antagonism within the partnership. This is another in a series of publicity blunders by the NFL owners in the past few weeks: first, the Superbowl seating debacle, then Carolina Panthers owner Jerry Richardson publicly insulted Peyton Manning and Drew Brees, and now they are caught acting in bad faith towards the Players Association.
While, not shockingly, the NFL is quickly preparing an appeal, several factors weigh against any effective success. First, the CBA is expiring now, and unless there’s an extension to the mediation agreed to by both parties or a last second agreement, the lockout begins Friday. Judge Doty has yet to rule whether the funds from the contract remain in escrow or are distributed between the two sides under the current CBA, in which case the players get sixty percent (roughly) of the money with the rest distributed to the owners. Considering that Judge Doty has traditionally been favorable to the NFLPA, something which the owners are very bitter about, there’s at least a fair likelihood that the entire amount will ultimately be held in escrow.
In any event, this proceeding is still pending, and the ruling needs to be finalized before an appeal can occur. Afterwards, even if the appeal is expedited (which is unlikely), it will still take time. During that time, the money will be locked away. That’s a lot of money that the owners would like to have that’s going to put some pressure on settlement, especially considering how many owners currently are sitting on stadiums with huge debt payments. Secondly, as to the merits of the appeal, it is at the very least unlikely that Judge Doty will be overturned. As noted above, the evidence on its face is not favorable to the NFL, and Judge Doty has a lot of experience in these types of disputes. Since he approved the “White Settlement” agreement in 1992 which gave NFL players free agency, he has had jurisdiction over any disputes arising under the old CBA. Moreover, he was actually a labor lawyer before he became a judge.
In any event, I’m sure the thought that NFL owners won’t have access to additional revenues of four billion dollars is really going to sadden the average NFL fan facing the prospect of losing an entire season over this labor mess.
To read the entirety of Judge Doty’s decision, click here.
– Edwin Chadwick
Tagged with: breach of contract • business judgment rule • collective bargaining agreement • contrac dispute • courts • employment law • entertainment • film/television • football • good faith • government • Judge David S. Doty • labor • lawsuit • lawsuits • lockout • National Football League • National Football League Player's Association • negotiation • NFL • NFLPA • sports • TV
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