Antitrust And Labor Litigation In The Pro Sports Arena

Tuesday, January 15, 2013 - 13:09

The Editor interviews Bruce Meyer, Litigation Partner in the New York office of Weil, Gotshal & Manges LLP.

Editor: Please tell us about your professional background.

Meyer: I’ve been a litigator and trial lawyer at Weil Gotshal for my whole career, which has spanned a little over 26 years. I focus on general complex commercial litigation, and I also do a fair amount of intellectual property. Literally since the day I started, I’ve practiced sports law, which I find very interesting. Over the years I’ve represented many clients, generally on the players’ side, including at one time or another, the NFLPA, the NBPA and, most recently, the NHLPA, whom we represented in the recent NHL labor dispute.

Editor: I understand the NHL lockout ended in a tentative collective bargaining agreement on January 6. Would you share with us your thoughts on the outcome?

Meyer: While there were some improvements, there’s no question that for the players this deal is a step backward from the previous one in terms of their overall share of revenues, which went from about 57 to 50 percent, similar to declines in 2011 for players in the NBA and the NFL. However, you have to ask yourself whether it was the best deal that could be had under the circumstances, and I think agreeing to the deal was the right choice, certainly when weighed against potentially losing an entire season had they not agreed.

Editor: You mention the reduction in the share of revenues for players in several sports. How have the owners in the NFL, the NBA and the NHL been able to pull this off?

Meyer: In the last few years, the owners in the NBA, the NHL and the NFL have simply sought to get a bigger slice of the pie. It’s really a question of negotiating leverage, and the owners, who tend to be billionaires, have it. Not only do they have more resources, they’ve also developed a strategy that gives them maximum leverage – specifically, instituting a lockout at the very beginning of the season, when the players haven’t been paid yet, as opposed to waiting until the end of the year, when the players might strike.

Editor: What options do the players’ unions have in response to a lockout?

Meyer: There are really only two alternatives for the players in this circumstance: one is to try and wait it out as long as possible through a lockout, which would include missing games and paychecks. The other is to determine at some point that it’s no longer in their interest to continue to be unionized and vote for the union to disclaim its status as a collective bargaining agent.  

The existence of a players’ union gives the owners a labor exemption to the Sherman Act antitrust laws. In the 1995 case Brown v. ProFootball, the Supreme Court made clear that essentially as long as there is a union and collective bargaining, the owners are exempt from the antitrust laws with respect to player restraints such as salary caps, free agency restrictions and college drafts. Absent the presence of a union, the labor exemption disappears, and potentially anything the owners do is subject to antitrust laws: a salary cap is a price-fixing agreement; a lockout is a group boycott. Any action that restricts competition for players may be met with an antitrust attack.

So, if the union disclaims its collective bargaining status, the players can sue the owners under the Sherman Act. I should say here that our group at Weil was the first to represent players who actually took this step in order to invoke the Sherman Act. In the late ’80s, Weil represented the NFLPA and NFL players in  disputes over free agency. In 1989 the union disclaimed its interest in collective bargaining on behalf of the players, and the players brought a new antitrust action. In 1992, that case, McNeil v. NFL, went to a trial by jury. We prevailed, and the NFL’s free agency restrictions – known as “Plan B” – were struck down under the antitrust laws.

More recently, we represented both the NFLPA and NBPA in connection with the 2011 lockouts. As for the recent NHL negotiations, the hockey players were prepared to have the union disclaim; for the first time, the NHLPA went as far as actually authorizing the executive board to disclaim. However, the players’ union held off in the hope that an acceptable deal could be reached through the collective bargaining process, which  ultimately happened. I do think that the disclaimer option remains an important and viable option.

Editor: Would you tell us about your role in the 2011 negotiations that ended the NBA lockout?

Meyer: In 2011, following an owners’ lockout and players’ union disclaimer of interest, NBPA Executive Director Billy Hunter reached out to my Weil colleague Jim Quinn and me to see if we could meet with the NBA and help find a resolution. Jim and I had a series of meetings with the NBA, and these culminated in a marathon negotiating session at our firm that I led. We negotiated all night with the NBA and eventually reached a deal to settle the existing litigations. We held a press conference here at Weil at about 4:30 in the morning on November 26. It was Thanksgiving weekend, and the first games were Christmas Day.

Editor: You were also counsel in Brady vs. NFL following the NFL lockout in 2011.

Meyer: Yes, following the NFL lockout and the subsequent NFLPA disclaimer, Tom Brady became the lead plaintiff in the class action suit Brady vs. NFL, which was in the Eighth Circuit, in Minnesota. We claimed that the lockout violated the antitrust laws and got a favorable decision in the district court, which enjoined the lockout, but the injunction was in place for only a day or two when it was stayed by the Eighth Circuit. The Eighth Circuit eventually overturned the injunction, but only on a fairly limited ground, solely under the Norris-LaGuardia Act; the Eighth Circuit never reached the merits of the antitrust claim nor did it address the NFL’s labor exemption defense.

The Norris-LaGuardia Act states  – I’m paraphrasing here – that courts can’t issue injunctions in situations that arise out of labor disputes, and we argued that this didn’t apply because there was no longer a union, and therefore this could no longer be considered a labor dispute. The appellate court held that even if there wasn’t a union, the Norris-LaGuardia Act would nevertheless apply to at least some of the players in this case, and therefore the remedy of a preliminary injunction was unavailable. The court’s ruling actually left open a path for rookies and free agents – players who weren’t then under contract – and said that they could still get a preliminary injunction of the lockout, but there would have to be an evidentiary hearing. So, while the injunction was overturned two to one based on the Norris-LaGuardia Act, the antitrust case wasn’t dismissed, and the labor exemption argument was never reached. We could have pursued further action, but at that point the parties reached a settlement.

Once you get past the labor exemption, there’s really no defense for the lockout. It’s a complete elimination of competition. Imagine if all the law firms in New York City got together and decided not to hire any more associates until they all agreed to a pay cut. Under the antitrust laws in some circumstances you can have pro-competitive justifications, but in the case of a lockout there’s no conceivable pro-competitive argument. We think it’s a per se antitrust violation.

Editor: Is it risky for players to cease to be represented by a union?

Meyer: It is, somewhat. No law forces employees to be in a union if they don’t want to be, and if the players decide they’re better off having access to their antitrust rights than having union protection, that’s a choice the players have to make. But there are certainly pros and cons.

As we saw during the NFL negotiations in the late 1980s, there are significant downsides. The players give up the meaningful protections that unions provide: they can’t strike, and they’re no longer represented in collective bargaining. As the NFL did in the 1980s, the leagues can make unilateral changes in working conditions subject only to the antitrust laws. So ceasing to be represented by a union is not just a tactical maneuver without substance: it has significant legal impact for the players. The owners portray the players’ decision to disclaim as an easy one, sometimes even using the analogy of a light switch that can be turned on and off, which simply isn’t true. The truth is that the players may decide that, in certain circumstances, they are better off having the protections of the antitrust laws as opposed to those of the labor laws, and the law as it currently stands allows them to make that choice.

One point I want to make is that every time such a union disclaimer is made and a settlement is made in the context of litigation, the league has insisted that any settlement must include a collective bargaining agreement and reformation of the union. I find it ironic that  management insists on the existence of a union before it’s willing to finalize a settlement. Management needs the players to be unionized in order to benefit from the labor exemption.

Editor: On another note, I understand you have done some work in the area of rights of publicity. Who owns which rights of publicity when it comes to professional athletes?

Meyer: I have done a lot of litigation, particularly for the NFLPA, involving player rights of publicity, especially around trading cards and fantasy sports. For the most part, the teams own the rights to their logos, trademarks, uniform designs and the like, while the individual players own rights of publicity as to their own names and likenesses. In most if not all pro sports, the players assign to their players’ associations the right to use their names and images, etc., in group licenses – usually defined as six or more players – which might be licensed to trading card and video game producers, for example. But while the players’ association may license to third parties the right to use groups of players in group licensing, the players generally still retain the rights to their own names and images and are free to make their own individual deals.

Editor: What trends in the sports industry do you imagine will emerge this year?

Meyer: Fans will be happy to hear that most of the major pro sports leagues have fairly long-term agreements in place, so we’re not going to see another one of these work stoppages for a while. The NHL agreement, for example, has a minimum eight-year term, while the current NFL agreement’s term is ten years. The near future should be a period of relative labor peace, and the hope of both players and management is that revenues will continue to grow with the explosion of new technologies and new channels of distribution. A rising tide lifts all boats. I also anticipate franchises will continue to increase in value in the coming years. 

Please email the interviewee at bruce.meyer@weil.com with questions about this interview.