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The Weekly Sports Law Briefing

A comprehensive breakdown of recent legal cases and their impact on the sports industry.

Blake Yagman

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The weekly sports law brief will cover trending stories inside the sports industry.

An Introduction to Sports and the Law

From the USA Gymnastics lawsuit to Deflategate, the past year has shown the increasing interplay between the sports industry and litigation. It’s vital that executives and personnel in the sports industry keep apprised of the legal battles that could affect how business is done within their respective sphere.

Beginning this week, Front Office Sports and I will be producing a weekly briefing on the key legal issues that are arising from the sports industry. Many of these legal issues encapsulate several different areas of law, and our hope is to categorically break each story down so that non-lawyer sports executives and personnel can understand how the sports industry conforms to the law and what changes can be expected in various leagues and entities.

Ultimately, sports are governed by whatever set of rules they abide by—comparatively, the law dictates the rules of the game itself. A better understanding of the law positions sports professionals to be more successful in the sphere that they operate in. Because legal problems arise as a result of conflict, knowledge of what the law is and how it affects what you do on a daily basis can help to avoid future conflict and to insulate yourself from legal issues that other teams or entities might have had. Such knowledge could save your organization time and a significant amount of resources.

The intersection of sports and the law arguably began in Chicago, Illinois in 1919. At the time, the Chicago White Sox were in the World Series and accused of one of the worst scandals in sports history: throwing the 1919 World Series.

In 1919, Major League Baseball had only been around for a few decades and was not nearly as dynamic as the league is today. And, after the White Sox threw the World Series, the league was left with little recourse of how to best address the situation.

Major League Baseball’s team owners appointed a league commissioner, a Judge by the name of Kennesaw Mountain Landis, to serve as the first commissioner of a professional sport. The league justified the decision to hire Landis by explaining that the most important aspect of sports is it’s parity— or equal treatment for each of the teams. Fans began to assume that the league favored certain teams and that those teams were not winning based on talent, but rather based on secret arrangements between players and owners.

Once fans began to lose faith that the outcomes of games were fair, MLB felt the need to add a commissioner to assure that teams would work toward making the league as competitive as possible. Although this theme has come up multiple times through each league’s history, they have been able to stand the test of time because of the standards that were rooted in hiring Commissioner Landis in 1919: that each team act “in the best interests of the game.” Landis would ban each of the players involved in the scandal from the game of baseball for life.

Since Landis’ appointment to MLB commissioner, a lot has changed in the professional sports sphere. However, one thing remains constant: that the law will always have an effect on how the game itself is played. Today, it is in the best interests of the game for each member of the sports profession to understand how the law affects the industry.

It is our hope here at Front Office Sports that we will be able to help you help your organizations succeed and to help recognize important developments amongst a 24-hour news cycle of consummately breaking sports news.

These are the sports law stories that you should be aware of that have developed over the past week:

PLAYER OPERATIONS

With the onset of NFL free agency, the contracts that teams have been giving out have deviated from those in the past—in a very pro-player way. NFL contracts this off-season feature, generally speaking, more guaranteed money. This is a key issue that the NFLPA has been seeking to address and it appears as though they’ve been able to secure more guaranteed money as opposed to higher per-game salary checks and signing bonuses. Comparatively, the other major sports leagues feature fully guaranteed contracts: the ultimate goal of the NFLPA. This off-season, Kirk Cousins’ new, fully guaranteed contract with the Vikings has been seen as the guiding light for future deals. The Minneapolis Star Tribune, however, believes Cousins’ contract is the exception rather than the new rule.

The NFL concussion litigation going so poorly that stories about how well it’s going need to be read to be believed.

LEAGUE LITIGATION

The U.S. Soccer Federation is a defendant in an antitrust lawsuit filed by the North American Soccer League. Antitrust law is an older body of law that deals with fighting monopolies and conspiracies between market actors to keep other market actors out of the market. For example, in this U.S. Soccer Federation case, NASL is alleging that the U.S. Soccer Federation and Major League Soccer are colluding to keep NASL from competing as a professional soccer league in the United States. NASL is represented by Winston & Strawn’s Jeffrey Kessler—one of the top sports antitrust litigators in American history. Keep an eye on this case, it could affect the new leagues that are developed in the future and how they compete with bigger, pre-existing leagues.

MARKETING

The New York Jets were sued this week by a season-ticket holder. The Jets sell “Personal Seat Licenses” which is essentially when a fan pays a premium price for the right to buy tickets in a specific area of a stadium. The Jets marketed their PSL’s as containing rights to be able to purchase pre-season, post-season and regular season tickets in the Mezzanine level of MetLife Stadium in New Jersey. Initially, fans could not purchase certain tickets in the Mezzanine level without a PSL but the Jets have amended the policy. As such, PSL owners are upset for having paid extra for benefits which no longer are protected. This is an important case because it could lead to a chilling effect of the sale of PSLs, which are a key way which teams use to finance new stadiums.

SPORTS GAMBLING

The Supreme Court is due to make a monumental decision on the legalization of gambling across the United States. The State of New Jersey is challenging PASPA, a bill that claims to protect the integrity of sports by restraining gambling, in a case rooted in the Tenth Amendment, which reserves certain powers to the states. PASPA outlaws gambling across the United States save a few states (including Delaware, Oregon, Montana and Nevada) and New Jersey is seeking to have the law struck down so that it can legalize gambling within the state.

Stay tuned for future breaking sports law stories and our weekly updates here at FOS!

Blake, a recent law school graduate, lives in New York City. Blake attended undergrad at the University of Miami where he worked for Hurricanes football, WVUM and student government. Blake writes about legal issues related to the sports industry for Front Office Sports.

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Meet the WNBA’s New Boss

Deloitte CEO Cathy Engelbert will become the first commissioner of the WNBA and the first woman to lead a Big Four professional services firm in the U.S.

Front Office Sports

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Photo Credit: Jennifer Buchanan-USA TODAY Sports

*This piece first appeared in the Front Office Sports Newsletter. Subscribe today and get the news before anyone else.

For the first time ever, the WNBA will have a commissioner. Before now, all of the league’s previous leaders like Val Ackerman and Lisa Borders were given the title of president. 

Cathy Engelbert, the current CEO of Deloitte, will take control of the role on July 17th and will report directly to Adam Silver. 

What should you know?

1. By the time she is done at Deloitte, Engelbert will have spent more time at the company (33 years) than the WNBA has been a league (23 years)

2. Engelbert is the first female to lead a Big Four professional services firm in the U.S.

3. She is the fifth person to lead the league after Val Ackerman (1997-2005), Donna Orender (2005-10), Laurel Richie (2011-15) and Lisa Borders (2016-2018)

4. Engelbert has spent the past four years in charge of Deloitte’s U.S. operation.

Basketball is in her blood…

Although she might be an accountant by trade, Engelbert is no stranger to the game of basketball. 

According to Bob Hille of Sporting News, she played at Lehigh for Hall of Fame coach Muffet McGraw and was a team captain as a senior. Her father Kurt also played and was drafted in 1957 by the Pistons.

What are they saying?

“Cathy is a world-class business leader with a deep connection to women’s basketball, which makes her the ideal person to lead the WNBA into its next phase of growth. The WNBA will benefit significantly from her more than 30 years of business and operational experience including revenue generation, sharp entrepreneurial instincts and proven management abilities.” – Adam Silver on the hiring of Engelbert

“I think that’s probably one of the reasons I was selected for this role, to come in and bring a business plan to build the WNBA into a real business and a thriving business, quite frankly.” – Engelbert to ESPN’s Mechelle Voepel

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Adam Silver Wants More Gender Diversity

The NBA commissioner states his desire to get more women into the sports industry. The NBA currently has a 31.6 percent ratio of women in team management.

Front Office Sports

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Photo Credit: Bob Donnan-USA TODAY Sports

*This piece first appeared in the Front Office Sports Newsletter. Subscribe today and get the news before anyone else. 

If Adam Silver has his way, 50 percent of the new incoming NBA officials will be women.

That number applies to coaches too, Silver said speaking at the Economic Club of Washington.

How do the leagues stack up?

The following numbers, outside of MLB, come from 2018 reports put together by The Institute for Diversity and Ethics in Sports (TIDES) at the University of Central Florida. MLB is the first league to have a report done on it this year.

1. NBA – 31.6% of team management are women / 37.2% of team professional admins are women

2. NFL – 22.1% of team senior admins are women / 35% of team professional admins are women

3. MLB – 28.6% of team senior admins are women / 26% of team professional admins are women

4. MLS – 26.5% of team senior admins are women / 31.6% of team professional admins are women

5. WNBA – 48.6% of team VPs and above are women / 58% of team managers to senior directors are women

6. NHL – No report done

Quotes from Silver… 

“It’s an area, frankly, where I’ve acknowledged that I’m not sure how it was that it remained so male-dominated for so long. Because it’s an area of the game where physically, certainly, there’s no benefit to being a man, as opposed to a woman, when it comes to refereeing.”

“The goal is going forward, it should be roughly 50-50 of new officials entering in the league. Same for coaches, by the way. We have a program, too. There’s no reason why women shouldn’t be coaching men’s basketball.”

That’s not all Silver wants to see change…

Silver, who has been adamant about getting rid of the one-and-done rule, provided some clarity as to when that might be achieved.

According to the commissioner, the 2022 NBA Draft will likely be the first one since the 2005 NBA Draft to allow high school players to go straight into the league rather than playing a season in college first.

Citing “active discussions” with the NBPA, Silver noted that they are still “a few years away.”

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“I Thought This Was a Good Deal”: AAF Vendors Speak Out

Amidst the spring football league’s collapse, countless vendors are still waiting to get paid for services rendered.

Robert Silverman

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Ultimately, it was the little things that best told the story of how dire things had gotten for the Alliance of American Football (AAF), an ex-team social media manager said. Starting in Week Five, social media managers no longer traveled with the team for road games. Even before, they’d doubled up on hotel rooms. The final bit of penny-pinching was the most bizarre: For the eighth and final AAF game, social was told Getty’s photographers would not be in attendance. Instead they would have to rely on “generic images,” making the job vastly more difficult.

Less than a week later, on April 2, the chaotic, short-lived lifespan of the spring professional football league, launched in March 2018 by filmmaker Charlie Ebersol, the son of venerated TV producer Dick Ebersol, came to an abrupt end. A little over two weeks after that, the AAF filed for bankruptcy, as first reported by Front Office Sports.

In the aftermath, stories like the social media manager’s have become ubiquitous. A  former player was sent a medical bill for treatment received during training camp. Scores of others reportedly had to cover their own airfare or were sent four-figure bills for hotel rooms. There was the class-action lawsuit filed by two players, claiming that ownership misled them about the league’s long-term fiscal solvency. Founders pointed fingers at one another after the debt-ridden league came crashing down. All manner of now ex-employees, from team officials to players,  learned they were out of a job thanks to social media.

The league’s bankruptcy filing revealed that $48.3 million was still owed to a variety of creditors against a $11.3 million in concrete assets, a scant $536,160.68 of which remained in the league’s bank accounts. Moreover, the AAF informed the thousands of creditors that any attempts to recoup their losses would be pointless right now, because, per Sports Business Journal, its coffers are entirely bare… “If it later appears that assets are available to pay creditors, the clerk will send you another notice telling you that you may file a proof of claim and stating the deadline,” the filing states.

But like the social media manager, many of those selfsame creditors began to suspect the AAF was on rocky financial ground long before the league officially pulled the plug.

Shortly after Tom Dundon, the majority owner of the NHL’s Carolina Hurricanes, who built his financial empire on the backs of subprime auto loans, bought a majority share of the financially-strapped league, he started to cut corners, looking to pare down expenses by any means necessary according to a report by Sports Illustrated. “As soon as Dundon took over, our f——— expense reports were getting approved out of Dallas,” where Dundon Capital Partners’ office is located, a former mid-level AAF employee told the magazine. (Dundon did not respond to multiple requests for comment sent via the Carolina Hurricanes. The form to contact Dundon Capital Partners on their website was removed at some point in the past few months )

With the AAF bleeding millions each and every week it remained in existence, per USA Today, Dundon deemed it necessary to scrimp and save wherever possible including on the margins. So vendors—companies that supplied locker room supplies, traveling equipment and more—were approached hat in hand and offered less than the full amount owed by the AAF.

READ MORE: AAF Files for Chapter 7 Bankruptcy 

While AAF officials served as the point of contact, two sources involved with the negotiations told Front Office Sports that the debt-clearing plan was conceived and ordered by Dundon’s financial team. If that meant exploiting AAF officials’ pre-existing relationships with vendors and playing on the faith placed in the league, so be it. As one former AAF official told Front Office Sports, it was “just a shit situation.”

Some of the companies did take the lowball offers, but others refused to accept less, insisting on full payment. It didn’t matter. Both paths led to vendors getting stiffed by the AAF. Dundon’s financial team kept stalling, promising the equivalent of “the check’s in the mail,” right up until the moment when the AAF closed its doors for good.

Now those vendors have been reduced to poring over the bankruptcy filings. They know all too well that, despite being out five or six figures, they’re way at the back of the line, trailing giant conglomerates like MGM and Aramark which are owed millions. And they’re not happy about it.

“I definitely feel scammed,” one vendor said.

(more…)

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