David Stern (right), with deputy commissioner Adam Silver, says 22 of the 30 NBA teams are losing money.
NFL labor decision could hold clues to what NBA will face
The decision of a Minnesota judge Monday to end the NFL's lockout of its players --and her refusal on Wednesday to delay the implementation of her ruling -- is a potentially significant development in the NBA's stalled negotiations with the National Basketball Players Association on a new collective bargaining agreement, giving the basketball union a possible game-changing weapon to use in case of last resort. But it is not a guarantee that the NBPA will ultimately win in court should it opt to decertify, or terminate, its union as the NFL Players Association did. Nor is it certain that the union even wants to decertify.
Judge Susan Richard Nelson's 89-page decision was, on the surface, a clear win for the NFL players, who had gone to court seeking a lifting of the lockout imposed by owners on March 12, the day after the NFLPA formally decertified as a union. She said the plaintiffs -- 15 current, former and future NFL players, including high-profile quarterbacks Tom Brady, Peyton Manning and Drew Brees -- had proven "that it is likely that they will suffer irreparable harm absent the preliminary injunction" unless she ended the lockout. And she dismissed the NFL's argument that monetary damages alone could make up for the harm done to the players' careers if they were barred from playing next season.
The league asked Nelson for a stay, or a delay, on her ruling until an appeal can be heard by the U.S. Eighth Circuit Court of Appeals in St. Louis. But Nelson ruled against the owners on Wednesday and again ordered the lockout ended. NFL teams have begun to permit some limited activities with their players, including voluntary offseason workouts and meeting with coaches. But the league cautioned its teams against making any moves such as free-agent signings or trades until its appeal is heard by the Eighth Circuit.
Judge Nelson's ruling raises a huge yellow flag to the NBA and its owners if they thought a lockout could be used to compel the players to make a deal quickly without fear of legal challenge.
"If I was the NBA, I would be seriously concerned, and I would see if I could get a date on George Cohen's calendar," said Roger Abrams, the Richardson Professor of Law at Northeastern University and a longtime arbitrator for Major League Baseball and other industries. He was referring to the federal mediator that has been overseeing negotiations between the NFL and the NFLPA.
"What you want to avoid and what both sides want to avoid, is an unnecessary work stoppage," Abrams said. "Sometimes, work stoppages are necessary. For example, the '94-'95 strike (in Major League Baseball), I think that was necesaary. Management needed to get that out of its system. It wanted to see once and for all if it could crush the union, and it tried, and it didn't do it, and it hasn't tried again."
Decertification has long been thought of as the "nuclear option" for sports unions. By dissolving as a union, players no longer have the right to collectively bargain for wages, and lose union representation if a team or league undertakes some sort of disciplinary action such as fine or suspension. But by decertifying, players end the collective bargaining process with leagues. And that leaves leagues vulnerable to lawsuits claiming violations of the Sherman Antitrust Act, which limits monopolies in U.S. businesses.
Pro sports leagues such as the NFL and the NBA have successfully lobbied Congress over the years to grant them limited exemptions from laws that allow the individual teams to act as a single entity, sharing revenues such as rights fees when it comes to negotiations with television networks -- and to negotiate as one group with their players in collective bargaining. (Major League Baseball has had complete immunity from Sherman since a 1922 Supreme Court decision that has been upheld at every challenge since.)
Pro sports leagues also have limited immunity from Sherman, in part, because provisions such as the Draft and restrictions on player movement and pay -- like a salary cap, for example -- have been negotiated with their player unions. In the absence of a union, players can sue leagues, as the Brady plaintiffs have, and argue that the leagues are restraining their right to make a living by locking them out. If a court agreed, it could award monetary damages to the players, and triple them under existing law. That's what can scare a league back to the bargaining table.
On the other hand, if a court rules for the league, the players are the ones without any leverage. It's a high-stakes gamble for both sides. (Pointedly, Nelson wrote in her decision that she was not making a ruling on the antitrust implications of the NFL players' lawsuit, but only ruling on whether the lockout could continue.)
As NBA.com first reported March 14, the NBPA already has enough signatures from a majority of its players to authorize decertification if it chooses to go that route, though a formal vote of the entire union would have to take place before it could officially dissolve.
A source involved with the discussions said that during a meeting of the owners and players during All-Star Weekend in Los Angeles last February, union attorney Jeffrey Kessler, a longtime advocate of decertification and one of the most successful labor litigators in the country, told NBA commissioner David Stern and the assembled owners that the union would decertify if the league locked out the players. But Billy Hunter, the executive director of the NBPA, has not committed himself or the union to decertification.
Hunter told SI.com on Monday that the ruling was "like the first round in a 15-round fight," and that he expected Nelson's ruling to be stayed.
"What it does is put pressure on us to sit down and settle this," Hunter said.
Stern was unavailable for comment, a league spokesman said, though he did give a radio interview to ESPN's Doug Gottlieb on Wednesday in which he again expressed hope that the owners and players could avoid a lockout.
"At the end of the season, we're going to have $4 billion sitting under guaranteed contracts that would be gone if the union decertified," Stern told Gottlieb. "So, they can (decertify), but we think that the better view is for us and the union to knock ourselves out to get a deal."
The NFL's fight
In her detailed ruling, Nelson appeared to back the NFL's players in every area of contention.
As a legal document, "it's a remarkably good job," Abrams said. "It's not easy to create more than 80 pages of pretty heavy duty stuff. I don't know (Nelson's) background, but I'm always amazed when federal judges step in like Sonya Sotomayor (now a Supreme Court justice) did in New York in '94 when she decided the baseball dispute. She did a really good job."
Nelson dismissed the NFL's argument that the NFLPA's decertification was a sham, pointing out that by decertifying their union, players have given up the right to strike; given up the right to collectively bargain; given up the right to have union representation in grievances both against the league and in defending grievances filed by the league. And she pointed out that the union took several steps -- including amending its bylaws, filing notice with the Department of Labor and the IRS that it was decertifying and informing the NFL that it would no longer represent players in grievances -- that proved the action was legitimate.
"This Court finds that the disclaimer (decertification) is not a mere tactic because it results in serious consequences for the Players," Nelson wrote.
She agreed with the players that they were already suffering, and would continue to suffer "irreparable harm" if the lockout were to continue, in part because of the relatively short career of professional athletes in general and NFL players in particular. Losing a year of service would be an injury that could not be made up by financial damages, she argued, and would harm both free agents and players currently under contract.
She disagreed with the NFL's contention that players cannot just "flip the 'light-switch" and dissolve the union, saying that any group of people can opt not to be part of a union just as they have the right to try and organize as a union. "Moreover, if negotiating as a union has proven unsuccessful, such organized employees also have the right to terminate the union," she wrote. This is, a source said, precisely the standard that the NBPA will use when determining whether or not to decertify.
She also dismissed the NFL's argument that her court didn't have jurisdiction over the case and that the National Labor Relations Board should hear the case. Nor did she accept the league's contention that a long-established law -- called the Norris-LaGuardia Act -- limited the court's ability to issue an injunction against the lockout, declaring that Norris only applies in labor disputes between parties. Since the NFLPA decertified, there was no longer a negotiation going on between the two sides.
"To propose, as the NFL does, that a labor dispute extends indefinitely beyond the disclaimer of union representation is fraught with peril," Nelson wrote. "For example, in light of the fact that employees come and go over time, it would be patently unfair to impose labor law restrictions or conditions upon employees who began working for the employer only after a union had disclaimed representation of other employees."
The NFL immediately announced it would appeal the ruling to the Eighth Circuit, a court generally regarded as more conservative than Judge Nelson's bench in Minnesota.
"It is more conservative," Abrams said. "On the other hand, the one person who knew that was Susan Nelson. She didn't write that for the parties; she wrote it for her colleagues on the Eighth Circuit ... I don't know if this decision is perfect, but it is pretty solid. The NFL would like to think that the Eighth Circuit will set it aside. I don't see any clear errors in it, and at this point, you're looking for clear errors."
Differences in NBA, NFL negotiations
The implications of Judge Nelson's ruling for the NBA's current negotiations with the NBPA were less clear. There are significant differences between the NFL and NBA labor situations that could make legal victories by the NBPA more problematic.
The NFL says its owners will start losing money if the current system continues, but hasn't shown that they currently are losing money. This is in part due to the NFL's refusal to provide detailed financial information for its 32 teams to the NFLPA, as that union has requested for months during the negotiations. By contrast, the NBA has opened its books to a much greater degree to the NBPA. But the two sides strongly disagree about how to interpret those numbers.
The NBA and its owners are adamant that a significant number of teams are losing money. The league's estimate is 22 of 30 teams are operating in the red, and that the league's teams lost approximately $340 million in 2009-10 and are on track to lose another $300 million this season. The union says the number of underperforming teams is much smaller, and that the NBA is exaggerating the number of teams losing money by assuming losses in its owners' other businesses.
For example, according to sources, the NBA claims that two of the league's biggest revenue producing teams, the Knicks and Celtics, were either close to unprofitable or lost money in the 2009-10 season (the league does not yet have final numbers for this season), despite perennially being two of the top revenue-producing teams in the league. And that was before the Knicks' announcement in February that they will raise ticket prices next season by an average of 49 percent across the board at Madison Square Garden.
The NBPA finds this claim laughable, given that the Knicks, for example, are owned by Cablevision, the cable and communications behemoth that earned $361 million last year, and whose fourth-quarter profits for 2010 rose 45 percent, with earnings from the fourth quarter of last year rising to $114 million. Whether the Knicks as a business "lost" money doesn't matter, the union argues, if the overall financial health of the team's owners is robust.
The union argues that any financial shortfalls in the current system, such as high debt service or luxury tax payments by teams such as Boston that may technically show a loss for a given fiscal year, can be adequately addressed through enhanced revenue sharing, which would redistribute more money from the league's most financially successful teams to those that are losing more. The NBA has acknolwedged it needs to enhance its current revenue sharing plan and says that it is working with its teams on a new one. But the league always adds that any new revenue-sharing plan will not be enough alone to address the losses of its teams.
"It's an easy slogan, but it is true, that you cannot revenue share your way to a sustainable business model," Stern said during a conference call with reporters earlier this month following the league's Board of Governors meeting in New York.
Abrams, though, said the issue of whether a league is profitable does not matter.
"The underlying legal issues that Judge Nelson had to address -- Did the union become successfully not a union? Does the 1932 Norris-LaGuardia Act prohibit a federal court from issuing an injunction in a legal dispute? Was there the potential irreparable injury to the athletes as the result of a lockout? -- they're exactly the same" in football and basketball, Abrams said.
"The only difference I see in basketball is the claim -- and it's only a claim, by the commissioner -- that almost everyobdy is losing money. Frankly, as a legal issue, it's irrelevant. That's an argument you make across the bargaining table, not in a court ... the judge didn't say the NFL couldn't operate. She just said it couldn't lock out its players. The NFL could -- and it won't -- go out of business ... no one's ordering them to lose money. If the NBA were simply to say we have decided we are not going to hold a season in 2011-12, we're going to go on hiatus -- TV shows go on hiatus all the time. Then, presumably, they have not locked out their employees."
There are other differences. As SI.com's Michael McCann wrote this week, pro basketball players, unlike their NFL counterparts, have the option of making a living playing in leagues other than the NBA. They can go overseas, either in Europe or Asia. It's not as lucrative as NBA pay, but it is a living wage. As noted above, a major part of Nelson's ruling for the players centered on the fact that a lockout brought "irreparable harm" to the players because they couldn't earn a living if they couldn't play in the NFL.
Abrams said that argument, if offered by the NBA, has some validity -- but only to a point.
"European basketball is terrific basketball, but they don't have room for all the NBA players on a moment's notice," he said. "My understanding is that they already have players over there, signed to long-term contracts. Maybe they could go play on the moon if they wanted to, but nobody's going to hire them on the moon. It sounds like an argument made up at NBA headquarters. And they have really good, smart lawyers, and the the commisioner, of course, is a smart, good lawyer."
Unlike the NFLPA, which had to decertify before being locked out under football's collective bargaining agreement or have to wait six months to do so if it opted to decertify after the lockout, the NBPA can decertify even after the imposition of a lockout. However, Abrams cautioned that the NBPA does not have a history of being stalwart for long periods of time during work stoppages, making decertification a gamble.
During a contentious negotiation with owners in 1995, several prominent agents -- led by David Falk and Arn Tellem -- led a push for decertification, getting many of their star clients -- including Michael Jordan, Reggie Miller and Patrick Ewing -- to sign decertification pledges. The union held a vote on whether to decertify. But the membership voted by a 63-37 margin to keep the union together, and it ultimately worked out a new CBA with the owners.
In 1998, after an arbitrator sided with NBA owners in denying a players' suit that sought payment to 226 players with guaranteed contracts during the lockout, many of those same agents put enormous pressure on Hunter to decertify. At that time, Hunter was relatively new to his job, and many viewed the agents' stance as an attempt to wrest power from the union. (The 1995 dustup weakened and ultimately led to the ouster of then-union head Simon Gourdine.)
"The NBPA has never been strong enough to be a union, then to stop being a union, then to be a union again," Abrams said. "The NBPA has always had problems figuring out how the agents fit into its association. You do not have that in football. I would think twice before I made plane reservations for St. Paul (where Judge Nelson works) ... We're going to see how hard it is for the NBPA to be whole again" if it decides to decertify.
The 68-year-old Hunter is in a much different place now than he was in '98.
He's been the executive director of the union for 15 years, with a group of veteran, loyal attorneys working for him at the union's swank digs in Harlem. He's now a veteran of three collective bargaining negotiations with the NBA, has spent much of the past two years criss-crossing the country preparing his players for a work stoppage and has the hard-earned respect both of Stern and the players.
Stern frequently says that one of the reasons he remains optimistic a lockout can be avoided is his working relationship with Hunter. But Hunter, a source close to him says, is much more comfortable now going the litigation route if need be.