Tuesday, June 27, 2017
Reuters reports that minor league baseball players lost a claim for artificially low" wages. The court found, appropriately: "The employment contracts of minor league players relate to the business of providing public baseball games for profit between clubs of professional baseball players."
Samuel Kornhauser, the player's lawyer plan to ask the 9th Circuit to reconsider (probably en banc) or appeal to the U.S. Supreme Court. Kornhasuer, in an interview, stated:
"Obviously, we think it's wrong, and that the 'business of baseball' is a lot different today than it was in 1922. There is no reason minor leaguers should not have the right to negotiate for a competitive wage."
Kornhauser is certainly correct that things have changed in the last 100 years, though I would argue that the justification for the antitrust exemption was just as unfounded in 1922 as it is today. The origin is the Federal Baseball decision, and it was wrong then, and it is wrong now. But it is also the law of the land. The 1998 Curt Flood Act, as the court appropriately explains, "made clear [Congress intended] to maintain the baseball exemption for anything related to the employment of minor league players."
There is no question Congress can change the law, and there is no question Congress has not. This is one to be resolved via negotiation or legislation, issue, and not via the courts.
Friday, June 23, 2017
Brooks paid each participant $100 for 90 minutes.
The group was well-facilitated, and the group members stayed incredibly engaged. The 90-minutes flew by.
The research Brooks was conducting on both shoe design and marketing was extremely qualitative. It was essentially a brainstorming session. I do think Brooks could have gotten more out of the time if they would have had everyone privately write down their own ideas first, as there were about three or four of the ten of us who dominated the discussion.
While this type of focus group was not cheap---$1000 in payment plus renting the room plus travel for two employees from Seattle---it was surely a very small fraction of their production and marketing budget. And I do think Brooks got some valuable ideas. Brooks does this sort of thing all over the country, and their employees said that they do start to hear patterns in the responses. It is those patterns that Brooks acts on, as they can't possibly address every one-off comment.
This focus group made me think that universities should consider similar focus groups with applicants and with local companies. I know a bit of this happens informally at most places, and perhaps it happens formally at some places, but I do wonder if it is done with the same regularity and intensity as for-profit firms like Brooks. I think the insights would be valuable, and even if the insights are poor, the organizing institution does get to explain itself (and show it really cares) to the focus group participants.
Friday, June 16, 2017
Next week, I will write about my focus group experience with Brooks Running.
Last week, on Global Running Day, Brooks announced “the biggest athlete endorsement deal in sports history” saying that they want to endorse everyone who runs….with $1 and a chance to win Brooks running gear.
This would have made a decent April Fools Day joke, but as a serious attempt at building brand value, it is pretty weak.
Brooks would have done much better to follow the lead of Oiselle, a women's athletic apparel company that I have spoken and written about before in regard to their multi-level team of professional, semi-pro, and recreational athletes. The main differences between Brooks and Oiselle is that Oiselle provides value to the team members and creates shared experiences. Oiselle athletes get team gear (even though the recreational runners pay for the gear), and they get invited to numerous group events. Oiselle has state team leaders and helps connect the team members for training and races. The “birds”, as they call themselves, really seem to support each other.
Now, the Oiselle method is definitely more complicated, and it probably comes with various legal risks. For example, what if one the team leaders turns violent or what if a team member gets hit by a car on a run led by a team leader or what if someone gets a bit out of control at one of their camps or parties? (I am sure Oiselle has everyone sign waivers, but as we know, waivers don't always prevent costly litigation and liability). There is also a fair bit temporal and financial costs involved in creating the team singlet, sending out newsletters, updating social media, planning events, etc. But building real community and brand value is almost never easy. (And Oiselle is far from perfect and has its critics, but I applaud Oiselle's effort. That said, if they are still requiring the recreational athletes to both pay and only post photos of themselves on social media in Oiselle gear, that seems overly restrictive. If they are going for authentic, they should provide suggestions instead of mandates. With sponsored athletes, I better understand the restrictions, though even with sponsored athletes you can usually tell a difference between organic and forced marketing posts.)
Sadly, Brooks' “endorsement” isn’t about building community, rather it is a pretty transparent attempt to buy your e-mail address and lure potential customers for $1. (Also, I uncovered in the fine print that they limited the $1 payment to the first 20,000; they have over twice that many signed up already).
As I will write next week, I was impressed with the people running the Brooks focus group, but they didn’t ask us about this “endorsement” idea, and if they asked others about it, I think they got bad advice. Brooks might get a bit of press, and they will probably even get a fair number of email addresses from curious people, but I doubt they will get much of lasting value.
[I wonder how many people who signed up read the fine print. For example, there is a Code of Conduct that will be sent to participants. Also, see the clause below the break seemed incredibly broad.]
Friday, June 9, 2017
In August, 2015, Chinese conglomerate, Wanda Group, acquired IRONMAN (primarily known for its long distance triathlon races) from a private equity group for $650 million.
To start, I had no idea organizing endurance sports had become such big business, but given the increasing popularity and the increasing entry fees, perhaps I should have known.
Personally, I have mixed feelings about big corporations dominating endurance sports, which, previously, had been much less commercial. On one hand, because of their scale, larger corporations like Competitor Group can conduct their events in a very professional manner, produce slick event shirts, measure the courses precisely, host impressive expos before the races and impressive after-parties, maintain plenty of insurance, take proper precautions, and market effectively to bring new participants into the events.
On the other hand, the big corporations often seem focused on a single, financial line. They raise entry fees as high as they can and often seem to spend an incredible amount on marketing. The races organized by big corporations often lack the individual touch of local races. That said locally organized races are a mixed bag. Sometimes they are organized by complete amateurs, and their lack of experience or financial backing shows in things like poorly measured and marked courses. Other times, when organized by devotees of the sport, locally organized races can provide a superior event without the marketing, frills, and shiny gadgets. Perhaps there will be room all types of organizers, especially because the locally organizers are usually nonprofit operations, and therefore are a bit of a different animal.
This strategic acquisition by IRONMAN may be telling regarding the trajectory of races. The long distance races like the IRONMAN (2.4 mile swim, 112 mile bike, 26.2 mile run) had skyrocketed in popularity, but, while those races are still currently popular, I think that many people are starting to realize they don't have the time or the money (the entry fee is often over $500) for that kind of event. Competitor Group brings not only a portfolio of marathons (26.2 miles) to the table, but also half marathons (13.1 miles, which is growing in popularity), 5Ks (3.1 miles), and even 1 mile races.
In any case, I do wish IRONMAN the best with this acquisition, and I hope they will consider all stakeholders as they move forward.
Friday, May 26, 2017
The Nike Oregon Project is coached by running legend Alberto Salazar, who, by all accounts, is both incredibly competitive and dedicated to his work.
Among the athletes who are or have been associated with the Nike Oregon Project (and coached by Salazar )are gold medalist (in the 5000 & 10,000m in 2012 and 2016) Sir Mo Farah, gold medalist (in the 2016 1500m) Matt Centrowitz Jr., and silver medalist (in the 10,000m in 2012 and in the marathon in 2016) Galen Rupp. These three athletes have been the most dominant male distance runners for the U.S. over the last two Olympic cycles.
Allegations of doping is nothing new for the Nike Oregon project coach and athletes. For example, Kara Goucher, U.S. Olympian and former member of the Nike Oregon Project herself, has been extremely vocal with allegations against the group for years. The Times of London published some of the same allegations against the Nike Oregon Project a few months before The New York Times. FloTrack has released what it thinks is the full report from USADA (US Anti-Doping Agency). The allegations are not only of doping, but of drug use that may have engaged the athletes' long-term health.
I haven't seen any of the contracts for the Nike Oregon Project, but I would be willing to wager they contain morals clauses, allowing Nike to terminate the contracts, for cause, if the coach or athletes' actions tarnish Nike's brand. Often these morals clauses do not even require a finding of liability or guilt - often the mere allegations are enough.
In this case, however, given the success of these athletes and coach, I expect Nike to wait to see if the allegations are confirmed. If, however, these athletes or coach were less popular and/or underperforming, the morals clause might have come into play earlier. These allegations do already appear to be hurting Nike's reputation among my friends who follow track & field. Sadly, however, I imagine that most of Nike's customers are more aware of the medals won by the athletes than the current allegations made against the athletes and coach.
This summer, I am working on a paper on morals clauses, including a discussion on when these clauses may be unenforceable, so I will continue to follow this story and may update with new information.
Tuesday, May 23, 2017
Last weekend, retired NFL receiver Calvin Johnson made news when he revealed that he was not pleased with the Detroit Lions and how they handled his retirement. Johnson is apparently frustrated that the Lions required him to pay back about 10% of the unearned $3.2 million remaining on his $16 million signing bonus from his 2012 contract. This is apparently a thing for the Lions, who sought all of the unearned signing bonus money remaining on Barry Sanders' contract when he abruptly retired in 1999.
This is in contrast to Tony Romo's retirement, in which the Dallas Cowboys released him, making the $5 million remaining on the signing bonus Romo's. Cowboys owner Jerry Jones said he was following the “Do Right Rule” when he allowed the team to release him. The Seattle Seahawks made a similar decision with Marshawn Lynch.
Some have argued that Johnson is being "pettier" than the Lions in this spat. Mike Florio, a sports writer and graduate of WVU College of Law, where I teach, argued that "while Johnson has every right to be miffed at the Lions, Johnson also should be miffed at himself. Or at whoever advised him to retire instead of biding his time until the Lions would have released him." Florio correctly notes that Johnson had a big cap number likely to come due had he not retired or accepted a restructured deal, so he was coming from a position of power in negotiating, which would have likely forced the Lions to cut him. Still, that doesn't mean Johnson is wrong to be frustrated.
Perhaps Johnson didn't ever want to be cut in his career, even at that point in his carerr. Maybe he just wanted to retire. The Lions were worried, perhaps about "precedent" that other players could use to walk away without paying back the bonus, though there is already such precedent out there, as discussed above, and the Lions have non-binding precedent already in the Barry Sanders case, where an arbitrator said Sanders had to pay back some of his signing bonus. Beyond that, the response to most players would simply be, "I know we didn't ask Calvin Johnson for any money back. You're not Calvin Johnson."
It is true that the Lions could seek money from Johnson, and that Johnson almost certainly, from a legal sense, owed the money. But having a legal right to something doesn't always mean it is a good idea. And that is important for lawyers to remember. The question I would have asked the Lions front office is this: "Is it really worth $320,000 when it is possible that one of your greatest players will feel disrespected by the process? Especially when you already created a rift with one of you other greatest players fifteen years ago?"
Maybe it was asked, and the answer was yes, but I just don't see the upside. My guess is that the Lions asked for a lot more and the two sides negotiated to this figure. But that process, not the payment, is likely what irked Johnson. Why does it matter? Because it tells future people the team wants, especially coaches and free agents, how the Lions do business. And when choosing between two similar offers, that could very well lead one to choose the other team.
I often use these kinds of issues facing a business when teaching the importance of the business judgment rule and allowing a board of directors not to pursue claims it can win (as long as there is no fraud or self dealing). Sometimes, it is better for the entity to let a claim go than to extend a bad story or scare off potential talent. Back in 2007, for example, Billy Donovan was hired to leave his head coaching job at the University of Florida to lead the NBA's Orlando Magic. Just days later, Donovan decided he did not want to leave Florida, and asked the Magic to let him return to the college game. The Magic decided to let him do so without any financial penalty, though they did ask him to agree not to coach in the NBA for five years.
Why let Donovan back out and return to Florida without a payment? For one, the Magic needed to hire a new coach, and you want to send a message that you are a good employer. Second, Donovan was beloved in Florida. He had won two NCAA championships in a key market for the team. Don't irritate your prime audience is always a good bit of advice. There was little upside to being difficult. The team was almost certainly irritated, but there is little value in letting that lead to bad publicity and unnecessary public spats. This principle extends well beyond the sports realm, but it is especially important in any area where employers fight for talent, which is common in the sports and entertainment areas.
In assessing the legal (and business) options for the Calvin Johnson situation, good lawyering requires a recognition that key issues were likely related to perception and respect, not money. As such, the fact that there was an argument about repayment at all was the issue that made Johnson frustrated (and now could have repercussions in the future free agent market). It is certainly possible the Lions assessed this risk and decided it was worth it. I disagree that it was worth it, but that would be a reasonable decision. (As a life-long Lions fan, I will need more evidence the problem was properly assessed, though I do hold out hope for the new front office.)
Such decisions, if made simply on the legal merits (e.g., Would I win in court?), run the risk of what Jeff Lipshaw calls "pure lawyering," which is essentially legal reasoning without context or assessment of non-legal impacts or opportunities. As Lipshaw explains in the preface to his book, Beyond Legal Reasoning, A Critique of Pure Lawyering:
Legal reasoning is merely one way of creating meaning out of circumstances in the real world. In its pure form, it does nothing more than convert a real-world narrative to a set of legal conclusions that have no necessary connection either to truth or morality.
Or the ability to recruit free agents.
Tuesday, March 28, 2017
The Oakland/Los Angeles/Oakland Raiders are soon to become the Las Vegas Raiders. This has fans in an uproar, with some saying the move is like losing "family." Moves of sports teams are rarely well received in the place the team leaves, and this move is no different.
Teams move for a variety of reasons, though the primary reason comes down to money. And there's nothing wrong with that. Although it is a loss for long-time fans, the team will get new fans in the locations (if history is any indication), and it's certainly the right of the business owners to decide what is best for their business. In the judgment of Raiders' ownership, it's time for Vegas Baby.
The structure of the NFL is such that team owners need approval of the league to make such a move, which makes sense because a sports league is necessarily dependent on other teams. As such, the teams have created some obligations to one another and agreed to give up some level of control for the good of the league. All but one team voted to support the move to Vegas (the Miami Dolphins dissented), giving the Raiders 31 votes, when they only needed 24. Thus, it means the other league owners (sans the Dolphins' owners) thought the move was in their best interest, too.
This makes three recently announced NFL team moves. In addition to the Raiders, the former St. Louis Rams returned to Los Angeles, and the former San Diego Chargers are now a second L.A.-based team. This means the super majority of NFL owners feel all of these moves are in the best interest of the league, or are at least neutral to the moves. This makes some sense, as there had been relative stability for the league teams, with the last move before these three taking place in 1997, when the Houston Oilers left for Tennessee (Memphis temporarily, then Nashville in 1999).
Moving forward, though, how much will fans take? If several more teams make a move in the next few years, will it upset fans to the point that they stop watching? Hard to say, but the league will be able to put a stop to it if they are concerned. There are a number of older stadiums in the league, so there may be more moves to come. There will almost certainly be threats to move, even if teams end up staying put.
If teams keep moving, it's possible the league could be hurt, but that would require the NFL fans in the old league cities to stop watching the NFL. That could happen, but it seems unlikely. Either way, it probably won't be a move that tells us the league is being harmed. Instead, it will probably be when teams without a lease don't get a lucrative offer to move another city.
Friday, February 17, 2017
Last week Runner’s World reported:
Mariya Savinova-Farnosova, a Russian middle distance runner, was given a four-year ban for doping by the Court of Arbitration for Sport on Friday. She will also be stripped of two gold medals she won at the 2011 world outdoor championships and 2012 London Olympics, as well as a 2013 world silver medal, all in the 800 meters.
As a result, U.S. athlete Brenda Martinez will likely soon be upgraded to a silver medal for her performance in the 800 meters at the 2013 world championships and American Alysia Montaño will receive bronze medals for her races at the 2011 and 2013 world championships. Officials will first need to verify the new results.
In this post, I’ll examine how the presumably clean athletes—like Brenda Martinez and Alysia Montaño in this case—should be treated with regards to their endorsement contracts. The main question is:
- Should the clean athletes be awarded their endorsement contract performance bonuses based on world rankings than have been revised to exclude doping athletes?
Respected law firm Reed Smith has some helpful contract interpretation materials available here, which is relevant to the discussion. All of the following is merely an academic exercise and not legal advice.
Contract Drafting and the Text of the Contract.
As with any contractual issue, we should start with the text of the contracts. Since few of these endorsement contracts are publicly available, I will use the language in Nike’s endorsement contract that was filed in the Nike v. Berian case last year.
A great many contract disputes could be avoided with clear drafting. If an endorsement contract stated that performance bonuses would be paid based on any revised rankings that remove doping athletes, then I imagine that language would control and the clean athletes would promptly get paid the difference between their old and new ranking. Doping has been uncovered frequently enough in sports like cycling and track & field (aka “athletics”) that such a contractual clarification might be helpful to include on the front end of the drafting process.
The proposed Nike contract in the Berian case does contain promised performance bonuses, based on world rankings, with additional bonuses for Olympic and World Championship Medals (pg. 14), but I did not see any guidance regarding world rankings that are revised due to doping. The potential bonuses in the Berian case were fairly significant, with the top bonus of $150,000 exceeding the proposed annual base pay of $125,000. The contract does allow Nike to terminate the contract due to any sponsored athlete’s doping offense (pg. 9), but, again, I don’t see anything about doping by the athlete’s competitors.
As the Reed Smith contract interpretation flowchart correctly states, judges attempt to construe contracts in accordance with the parties’ intent. We first look at the text of the contract, and can only look at the contract language if the wording in unambiguous. If the contract language is ambiguous (reasonably susceptible to more than one interpretation) then the court may be able to look beyond the contract (parol evidence) to determine the intent of the parties.
Here, I think the parties' intent might be interpreted either way. On one hand, the athlete could argue that the intent was to award bonuses based on the fair world rankings, which would exclude drug cheats. On the other hand, the sponsor could argue that they were paying for publicity, and that the revised rankings publicity is typically significantly less than the publicity surrounding achievement during the actual Olympics or World Championships.
As a practical matter, like most legal disputes, it probably makes sense for the athlete and the sponsoring company to settle the matter outside of court. An example of a principled negotiation could involve the sponsor paying the difference in the performance bonuses, and the athlete promising to do an anti-doping ad for the sponsor or a few extra appearances related to the new rankings.
It future posts, I may write about the appropriate punishment for athletes who use performance enhancing drugs. For example, is jail time appropriate? I may also post on ways to further compensate the clean athletes for their lost earnings, publicity, and recognition.
Tuesday, September 13, 2016
I think, by now, most people have heard about Colin Kaepernick's protest, which he manifested by his refusal to stand for the national anthem before the 49ers' August 26 preseason game against the Green Bay Packers. Kaepernick explained his actions as follows:
I am not going to stand up to show pride in a flag for a country that oppresses black people and people of color. To me, this is bigger than football and it would be selfish on my part to look the other way. There are bodies in the street and people getting paid leave and getting away with murder.
Many were offended by his decision; others have applauded it. What is it that makes people (particularly white people) so upset about someone choosing not to stand for the national anthem? I thought the anthem and flag were supposed to stand for freedom, which includes the freedom to dissent and disagree. It fascinates me that one football player could get this much press for deciding not to do something he was under no obligation to do (as his employer made clear). But it certainly explains why he did it. If nothing else, Colin Kaepernick reminded of us both of our ability to speak freely and that there are potential costs when doing so. He got people to talk about an important issue, and he used his platform to focus on a necessary conversation.
Free speech can, though, have consequences. And in many ways, it should. The Bill of Rights just protects our right to speech and limits the government's ability to impose consequences for exercising that right. The Denver Broncos' Brandon Marshall lost a credit union sponsorship for his actions in support of Kaepernick's protest. Personally, if I did business with that sponsor, they'd lose my money because I support his Marshall's right to protest and because I think the the protest, conducted in a peaceful way, raised issues worthy of discussion. (I will note that the sponsor cut ties in what appears to be a respectful and above-board way. I just disagree with the decision). That's the free market working in a (mostly) free country. I don't have any problem with the sponsor acting as they did, either. They, too, were exercising their rights (assuming they did not breach a contract, and I have seen no evidence they did). I am not mad the credit union made the decision it did; I just disagree with the decision, and I would let them know that by walking away.
Most striking to me about this uproar is the apparently binary way so many people view protests. One can love this country and hate injustice. We can protest as we try to reach our ideals. And we can disagree about the method of protest or the ideals themselves. But let's consider the point and be respectful of one another as we try to work through our differences. Brandon Marshall stated this position especially well. He explained, "I'm not against the military. I’m not against the police or America. I’m just against social injustice.”
Businesses, like people, have the right to associate with those they choose, and consumers (in turn) have a right to respond. That is not just free speech, it is how a free market operates.
Th United States, to me, is a great, yet greatly flawed, nation. The flag (and our national anthem) can represent the best of this nation and its people. The song and flag, like almost anything related to this nation that is more than 200 years old, also has ties to some of our very worst history, including slavery. That is also a reality. We have real and significant remaining institution problems related to race and gender, even if we're better than we used to be.
No matter what, the national anthem and the flag are neither bigger than, nor more important than, the citizens they are intended to represent. Speaking freely, even when it is not popular, is honoring the best of what the flag should represent, the best of this nation’s history, and (I sincerely hope) a sign of a great future. Free speech is not a liberal or conservative issue, and exercising our right to speak should be celebrated, whether you agree with the speech or not. Free speech begets free markets.
“All we say to America is, ‘Be true to what you said on paper.’ If I lived in China or even Russia, or any totalitarian country, maybe I . . . could understand the denial of certain basic First Amendment privileges, because they hadn’t committed themselves to that over there. But somewhere I read of the freedom of assembly. Somewhere I read of the freedom of speech. Somewhere I read of the freedom of press. Somewhere I read that the greatness of America is the right to protest for right.”
— Martin Luther King, Jr., Civil Rights Leader
“We are so concerned to flatter the majority that we lose sight of how very often it is necessary, in order to preserve freedom for the minority, let alone for the individual, to face that majority down.”
— William F. Buckley Jr., founder of National Review magazine
“We cannot have a society half slave and half free; nor can we have thought half slave and half free. If we create an atmosphere in which [people] fear to think independently, inquire fearlessly, express themselves freely, we will in the end create the kind of society in which [people] no longer care to think independently or to inquire fearlessly.”
— Henry Steele Commager, U.S. historian
Thursday, August 18, 2016
There has been a lot of debate online about Ryan Lochte (#LochteGate or #LochMess) and whether he and his swimming friends were actually robbed in Rio after their Olympic events had finished. See here, here, and here for some of the commentary.
While I agree that jail time is unlikely based on the facts available at this time, Lochte's endorsements could be at risk. Earlier this year, I blogged about morals clauses in endorsement contracts. If Lochte's contracts include morals clauses (as many do), and if he lied about the robbery, it is possible that he may lose some lucrative endorsements deals. It is still not clear what the motive for lying was (if they did lie). I assume we will learn more in the next few days.
Update: Speedo and Ralph Lauren dropped (or are not renewing) sponsorship of Ryan Lochte. Spokespeople for both companies cited Lochte's statements about the occurrence in Rio. My wife let me know that some are now calling Lochte "Swim Shaddy."
Friday, July 22, 2016
While the Olympics is sure to be heavily watched, the Games are not that lucrative for many of the participants. The average Olympian supposedly only makes around $20,000 a year from sponsorships and has significant travel, medical, and coaching costs.
For those who will be attending the SEALS Conference and are interested in crowdfunding, my co-blogger Joan Heminway is moderating a discussion group on "The Legal Aspects of Small Business Finance in the Crowdfunding Era" on Tuesday, August 9 from 9am-12pm, which promises to be interesting. Most of the Olympic athletes appear to be using gift-based crowdfunding, but in the SEALS discussion group, I will present on a proposal for firms to use equity crowdfunding in connection with building athletic communities that could include Olympic athletes.
Friday, July 1, 2016
Today a number of athletes will compete in various track & field events in the Olympic Trials.
One of those events is the qualifying round of the 800m, and one of the 800m runners, Boris Berian, was recently caught in a legal dispute with his old shoe sponsor (Nike) because of his attempt to sign with a new shoe sponsor (New Balance). The story of the dispute even made The Wall Street Journal.
As I understand the timeline from the reporting and legal filings:
- After the 2012 season, Boris dropped out of his division II college (Adams State) to pursue pro-running.
- For a couple of years, Boris struggled to find world class success, and he worked at McDonald's.
- Boris didn't have a real breakthrough until mid-2015, when he ran the fastest time for an American that year.
- On June 17, 2015, shortly after his breakthrough race, Boris signed a short-term exclusive sponsorship deal with Nike (chosen from among many suitors).
- On December 31, 2015, the Nike-Boris contract expired, though the contract gave Nike the right to match any competitor's bona fide offer within 180 days of 12/31/15.
- On January 20, 2016, Boris' agent notified Nike than New Balance had made Boris a 3 year, $375,000 offer ($125,000 per year guaranteed).
- Nike's response to New Balance offer is disputed and at the center of a breach of contract lawsuit that Nike filed on April 29.
- Nike supposedly served Boris with notice of the lawsuit at a track meet.
- In short, Boris claimed that New Balance's $375,000 offer was guaranteed, while Nike's "match" was full of potential reductions. Nike claims that the contract they sent was simply a standard form. Nike claimed that guaranteed money is unusual in track contracts and Boris' agent had not shown proof of the lack of reductions in New Balance's offer, and that if the lack of reductions was proven, Nike would have matched those terms within the deadline.
- On June 7, a judge granted Nike's TRO, restraining Boris from competing in non-Nike gear until June 21.
- On June 22, a judge declined to extend the TRO and stated that he would rule on June 29.
- On June 23, Nike dropped its lawsuit (without prejudice), claiming that they wanted to "eliminate this distraction for Boris" given the upcoming Olympic Trials.
- On June 30, Boris Berian signed with New Balance.
In the fall of 2014, Robert Bird (UConn) and David Orozco (Florida State) published a nice short article in the MIT Sloan Management Review entitled Finding the Right Corporate Legal Strategy. This has been a key article in the growing Law & Strategy area. The article notes five main legal strategies; "The five, in order of least to greatest strategic impact, are: (1) avoidance, (2) compliance, (3) prevention, (4) value and (5) transformation."
This Nike v. Boris Berian situation, in my opinion, is an interesting example of the use of corporate legal strategy. In particular, Nike appears to be using litigation as a move for firm-wide value (#4 on the Bird & Orozco list).
Why did Nike sue? In my opinion, Nike likely sued not just because they believed Boris breached the contract, but also to send a message to its other athletes that Nike "plays hardball." This message may have been especially important given Kara Goucher's doping allegation against the Nike Oregon Project and its coach; a number of prized Nike athletes may have been watching Boris' situation and may have defected (right before the Olympics!) if Boris was treated with a light touch. Also, especially given that Boris claimed that he would rather sit out that run for Nike, perhaps Nike was simply trying to distract what could soon be a potential star for its competitor New Balance. While Nike has a number of track athletes with the star power of Boris, New Balance has a shallow bench of star track athletes and a good bit would ride on Boris' performance for NB. If Boris medals, especially with his McDonald's to track star story, that could be a huge deal for New Balance. Nike, on the other hand, has a absurd number of track stars with good stories and a high likelihood of medaling.
Why did Nike drop its lawsuit? I think the press was getting worse for Nike than Nike originally imagined. Also, perhaps the case was not resolving as quickly as Nike had guessed, and if Nike pursued the lawsuit into the Olympic Trials, the negative coverage may have exploded. That said, Nike must have known the coverage was going to be negative, so I imagine that factored into their original calculation, to some degree. Their lawyers might have gotten the impression that the judge was not going to rule in their favor when he decided against extending the TRO, so maybe Nike decided to try to win back some fans by dropping the lawsuit voluntarily. I agree with this author, eliminating the distraction for Boris was likely not Nike's main motivation, if so, they would have not sued him during the Olympic Trials build-up. As any runner knows, the months before a meet are much more important than the week before (at least as a physical matter). More likely, and perhaps unanticipated at the filing of the lawsuit, 19-year old Donavan Brazier of Texas A&M announced that he was turning pro just a few days before Nike dropped its lawsuit. Brazier, who had recently won the NCAA championships in the 800m in record time, was probably even a bigger signing target for Nike than Boris. By dropping the lawsuit, Nike may have been able to come off as altruistic to Brazier (saying something like - we had legal grounds to pursue the Boris lawsuit, but we want to do what is best for our current and former athletes). A few days after Nike dropped the lawsuit, Brazier signed with Nike. In addition, around the same time, Nike also signed another 800m star, Clayton Murphy. Both Braizer and Murphy were underclassmen and it was uncertain, until recently, whether they would turn pro. Not only did dropping the lawsuit against Boris likely help Nike in pursuing these two young athletes, but the recent strength of these athletes in the 800m made it possible that Boris would not even make the team, much less medal in Rio.
Personally, I think Boris is going to race well today (we will know in a few hours) and over the next few days, but maybe the stress of the legal battle took a toll. Brazier and Murphy and the entire field will both be tough, but the field will be a bit more open given that two-time Olympian Nick Symmonds scratched from the 800m Olympic Trials field with an injured ankle. Boris has the best qualifying time (1:43:34 v. 1:43:55), but Brazier has the best time this season (1:43:55 v. 1:44.20). Should be exciting to watch and now you know the legal background.
Finally, perhaps of interest to some readers, Boris Berian was using crowdfunding to pay for his legal defense. Boris even got this shout-out from Malcolm Gladwell on Twitter: "Nike earned 30 billion in 2015. Berian was flipping burgers at McDonalds two years ago. Isn't one bully in American public life enough?"
Update #1: In one of the biggest surprises of the Trials, Donavan Brazier was knocked out in the first round of the 800m, running roughly 5 big seconds slower than he did in the NCAA Championships. Boris Berian won his heat. Nike was diversified with Clayton Murphy who won his heat, and Nike also had four others who qualified for the next round in the 800.
Update #2: Boris Berian led his 800m semi-final from start to finish. Looked strong. Clayton Murphy won the second semi-final race, in a bit slower race, but he also looked strong. Finals are Monday.
Update #3: In the finals, Boris Berian grabbed the lead around 400m and held on until the final 10m or so. He placed second to Clayton Murphy (Nike) who out-kicked him. Charles Jock (Nike OTC) finished third. Those top three finishers will represent the US in Rio in the 800m.
Update #4: After getting 4th in one of his heats and needing to qualify on time rather than automatically, Clayton Murphy won the U.S.A.'s first medal in the 800m in 24 years. Murphy grabbed third place over the last 50m, and Boris Berian faded to 8th after going out fast. Berian looked strong in his heats, qualifying automatically for the final, but perhaps he did not have the necessary endurance. Clayton Murphy's specialty was the 1500m prior to the Olympics, so he likely had a stronger base. Looks like Nike hedged well and got quite the payoff from signing Murphy. All of that said, Dave Wottle (former Dean of Admissions at my alma mater, Rhodes College) still ran the most exciting 800m race ever. Watch Dave Wottle come from last place to win gold in the 1972 Olympics.
Wednesday, May 25, 2016
Last week the SEC announced insider trading charges against former-Dean Foods Company board member Thomas C. Davis and professional sports gambler, William “Billy” Walters of Las Vegas. Involved in the case is professional golfer, Phil Mickelson, named as a relief defendant in the case. Davis owed money to Walters and began passing along confidential information first about Dean Foods, and later about Darden Restaurants. Walters passed along his insider knowledge of Dean Foods to Mickelson, who also owed Walters money.
For those unfamiliar,
"the SEC may seek disgorgement from “nominal” or “relief” defendants who are not themselves accused of wrongdoing in a securities enforcement action where those persons or entities (1) have received ill-gotten funds, and (2) do not have a legitimate claim to those funds." S.E.C. v. DCI Telecommunications, Inc., 122 F. Supp. 2d 495, 502 (S.D.N.Y. 2000).
The SEC issued a statement on Friday detailing the alleged wrong doing by all parties and announcing that "Mickelson will repay the money he made from his trading in Dean Foods because he should not be allowed to profit from Walters’s illegal conduct.”
As most insider trading cases are, the facts are fascinating. This would make a great exam hypo, and I am flagging it for my casebook section on insider trading.
Friday, March 25, 2016
I usually look forward to the Olympics for months, if not years, before they start.
This year, however, all of the doping news, and buzz around Rule 40 has left me less enthusiastic.
For now, I am going to leave the doping news to one side, and focus on Rule 40.
From July 27 to August 24, 2016, Rule 40, prohibits Non-Olympic Commercial Partners from using the word "Olympics" and (depending on context) "Olympic-related terms," including:
- Rio/Rio de Janeiro
Now, I understand why the International Olympic Committee ("IOC") and the U.S. Olympic Committee ("USOC") might want these restrictions (given the large sums of money official sponsors pay), and from what I understand from experts in this specific area, the IOC & USOC may have a defensible legal stance.
This, however, seems one of the many areas where (1) the law has not kept up with advances in technology, namely social media, and (2) even if the IOC & USOC are right on the law, they may lose in the court of public opinion. Here, it seems, there is a good bit of difference between a company running a detailed TV-ad noting that it sponsors an Olympian and simply wishing an athlete "Good luck in Rio" on Twitter. Also, even if the law treats social media the same as other forms of advertising, I could see the public (including me) judging the IOC & USOC harshly if it punishes brands and/or their athletes for minor violations. Outside of the most popular Olympic athletes, significant sponsorships are difficult to secure and outlawing short displays of appreciation on social media seems like overreaching. Adding to the problem, I think, is that this rule makes the IOC & USOC look like single bottom line, money-hungry organizations, when most of us would like to associate the Olympics with a broader, higher purpose.
Friday, March 11, 2016
If you follow sports related news, you know that tennis star Maria Sharapova recently tested positive for a banned performance enhancing drug called Meldonium. Details here and here and here. According to one source, over 60 athletes have tested positive for Meldonium this year; the drug was just recently added the banned substances list. Sharapova claims she was unaware that she was taking a banned substance.
A number of Sharapova's biggest sponsors have suspended or ended their relationship with her and/or delayed planned events. These sponsors include, Nike, Porsche, and TAG Heuer. Head and Evian appear to be sticking with her. Head chairman Johan Eliasch claimed that Sharapova simply made an "honest mistake."
The companies that have cut ties with Sharapova have likely been able to do so through what is often called a morals clause or a morality clause in the endorsement contract. Some background on morals clauses can be found here and here and here. And here is an interesting contract law question from Eric Goldman that involves morals clauses.
Tuesday, February 23, 2016
Following is a guest post from by J. Scott Colesanti and Madeline Rasmussen. Scott is a former contributing editor to this Blog, and I am happy to share the post post below. This is sports and labor law post, to be sure, but employment issues, especially big time sports-related ones, are business law, too.
Why NFL Players Might Want the NFL to Win Its Appeal of Brady v. NFL
by J. Scott Colesanti and Madeline Rasmussen
It feels like weeks since we saw a meaningful NFL contest (well, actually it has been a little over a week). But it is nonetheless still weeks until the Brady appeal before the Second Circuit in March. Should the vacatur of the superstar’s 4-game suspension in “Deflategate” be upheld, alternative means of both implementing and reviewing NFL punishment seem likely, alternatives none too comforting for future disciplined football players.
Friday, February 5, 2016
I have been on the road a good bit over the past few months. Like Stephen Bainbridge, I greatly prefer driving to flying. On these road trips, I have noticed an increasing number of billboard advertisements for universities (my university included).
When I was in high school, I cannot remember any respectable 4-year universities or graduate schools using billboards to advertise. Maybe they did, and I just did not notice; but I do remember for-profit and community colleges using them. Today, however, I have seen billboard advertisements for schools ranked as high as the top-25 universities in the country, not to mention many solid public (including state flagship) and private universities. The Ivy League schools and their chief competitors seem to still be avoiding billboards, though even some them resort to billboards for their executive programs. (The for-profit schools still use billboards, but have also moved on to things like buying stadium naming rights).
I do wonder what accounts for the shift towards university billboard advertising, if there has been a shift. I also wonder about the costs and benefits of billboard advertising for universities. And I wonder about the comparative costs and benefits of alternative marketing.
Super Bowl ads – costing a record high $5 million for a 30-second spot – are likely a much more significant investment than your average billboard ad, but I imagine most companies that are advertising during the Super Bowl have decided that the costs outweigh the benefits. A few years ago, however, Pepsi decided to withdraw from the Super Bowl advertising frenzy for the first time in 23 years. Instead, Pepsi made more than $20 million in local grants, in the amount of $5,000 to $250,000 each. The local grants included things like buying uniforms for a high school's band. I imagine the local grants were powerful, relatively narrow in impact, and perhaps difficult to tie directly to sales. This year, it looks like Pepsi is back advertising during the Super Bowl where the advertising is much broader, if shallower. (Hat tip to the Coursera and University of Illinois digital marketing course for the link to the Pepsi story).
So maybe the decision for universities to use billboards is similar to the decision of multinational corporations to advertise during the Super Bowl: the ad might not be as personally powerful as something more individualized like local grants, but the ad will reach many more people. While I think the broader reach makes some sense, I do wonder if that will continue to hold true with social media; I imagine some of Pepsi’s local grants, for example, could “go viral” when shared on social media and could possibly rival the reach of a Super Bowl ad.
Friday, January 29, 2016
Sports have had some well-publicized legal and ethical problems over the past few months.
- "IAAF knew of Russian doping scandal, corruption" 1/14/16 (track and field)
- "The Tennis Files: Have top players been paid to lose?" (1/18/16) (tennis)
- "New FIFA indictment is bigger than the first one, and the DOJ isn't done yet" (12/3/15) (soccer)
I hope to look into these scandals more deeply in coming months, but it seems unchecked power and/or loose oversight are at least part of the problem.
As with many of the recent business scandals, I wonder if punishments need to be more severe to curb these problems, or if there is another, more effective, solution waiting to be uncovered.
Tuesday, November 10, 2015
Missouri’s president recently resigned amid protests about how his institution responded to racist and other deplorable acts on his campus. A graduate student staged a hunger strike, and players from the Missouri football team threatened to sit out their next game if the president did not resign.
Some have worried that the threat sets bad precedent, in that they think now a president can be forced to resign based on the racist acts of someone beyond his or her control. I don’t buy that, but more on that later. Others are upset that it took the football team to make the protests have legs. I don’t buy this one, either, though I give this one more credence.
As someone working in an academic environment, I will say that I would be sympathetic if the resignation really happened because of things that were out of the control of the university president. That is, if he were really being held accountable for what was said by an idiot racist student, I'd be supportive of him and think it was wrong he was being forced out. Based on what I have seen, though, the criticisms were valid about the institution's response to the racists acts, and specifically the president’s response, to issues of racism on campus.
I have seen administrations respond well and respond poorly to such events, and how they respond does a lot for how people feel about their institution. My read on this is that this president did not seem to care about an institutional response, when he did respond it was dismissive, and when he came under fire, he lashed back.
One of this things that struck me was that the football coach publicly supported his players. To me, it seems that when high-level folks step out front like that, it's likely the problems were recognized deeply and across boundaries.
Beyond that, personally, I had little patience with the president, based on reports of his responses. The one that sealed the deal for me was his description of “systematic oppression,” which goes as follows: "Systematic oppression is because you don’t believe that you have the equal opportunity for success.” Um, no, that's exactly wrong.
As such, I don’t think this was an issue where the president of a university was being held accountable for the racist behavior of some students. Unfortunately, that kind of behavior unavoidable, but worth trying to avoid. How we respond the racist behavior of others, though, is within our control, and we’re accountable for how we respond.
Furthermore, I don’t think it was just the potential $1 million loss a forfeit of a football game was the sole reason this resignation happened. I do think it accelerated the process, but I also get the sense this was a problem across the campus. I think the football players astutely noted that the time was right to join the movement, and knew they had support. Notoriously conservative football coaches (and I don’t mean politically) don’t jump out in front of things like this very often, at least not if they have a question about which way the wind is blowing. This seems more to me like a case where the lack of an adequate response -- meaning mostly that the administration was not showing they cared or noticed the problems -- was recognized by a critical mass as problematic. And things moved forward quickly.
I am responding only to my perception of reports, and maybe I am getting this wrong, but I get the sense the outcome here was right. And I think it is more complex than the fact that the football players complained, so change happened. That undercuts the work of the initial protestor, who did motivate change, and it underestimates how deep the lack of support for the administration seemed to go. And, sorry, it was more than financial, even if that was part of the story.
Frankly, I worry more about the gendered aspect of this, as colleges and universities are notoriously bad in how they handle Title IX violations, and I don’t know of many (read: any) protests like this leading to successful change on that front. But maybe, just maybe, we’re on the cusp of something like that. In a proper case, I sure wouldn’t mind if a football team took the lead on that, too.
Tuesday, October 6, 2015
As a life-long Detroit Lions fan, last night's loss to the Seattle Seahawks was largely expected. How they lost was new, though the fact that the Lions lost in a creative way, was also to be expected. As actor Jeff Daniels said, being a Lions fan is more painful than being a Cubs fan.
In recent years, there is ample evidence that random and uncommon rules have shown up to hurt my already mediocre team. This got me to thinking, though, of the old adage, bad facts make bad law. For the Lions, I think that's not necessarily apt. It may be that bad football makes for better football later.
To understand how one might get there, one needs to know a little what it's like to be a Lions fan, so here's a little insight into how life as a Lions fan works:
I watched the start of the game last night with my ten-year-old son. Part of the pre-game programming is all of the announcers and studio people make their pick for the game. The ten or so predictions were unanimously for the Seahawks. I turned to my son and said, "Well, the Lions will probably make a game of it then." He asked why. I replied, "Because the Lions have a better chance to win when absolutely no one objective expects them to. I don't know why. It's just true."
He went to bed shortly after kickoff. Lest anyone think I am cruel, I am not trying too hard to make him a Lions fan. I have tried to raise him and his little sister also as Saints fans. I am not going to bandwagon an make them Pats fans or anything, but New Orleans was home for three years, so I can reasonably adopt the Saints. I have been questioned on that choice as an alternative, and this year doesn't look too hot, but in my defense, my kids' team has a Super Bowl win in their lifetimes. More than I can say for me.
As the game went on, there was lost of social media complaining between me and my fellow Lions fans. Most of it along the lines of: "Did they forgot how to throw downfield?" "This is awful." "Where's Barry Sanders?" Then I posted something witty like, "Matt Stafford just checked down to me on my couch."
Despite an awful game, the Lions had a chance. With time running out, the team seemed to learned they could throw the ball down the field more than three yards.
The Lions were losing 13-10 with 1:51 left in the game when Stafford passed to Calvin Johnson, who dove for a touchdown. Just before the goal line, Seahawks safety Kam Chancellor punched the ball out of his hands, and the ball tumbled into the end zone. Another Seahawks play clearly hit the ball out of the back of the end zone. The play was call a touchback, giving Seattle the football at their own 20 yard line. The problem is that NFL rules make batting the ball illegal, and the ball should have been awarded to the Lions at the 1 yard line.
No call, and the Lions go on to lose. And yes, there were lots of other chances the Lions had to win, and you can't hope a refs call won't go against you. But it still stunk. Again, a social media glimpse into the life of a Lions fan.
Friend 1: Could an ending be more Lions than that?
Me: If you're going to screw it up, do it with panache. And no.
Friend 2: did you see the latest on ESPN.. apparently, it looks like it shouldn't have been a touchback, but 1 and goal at the 6 inch line
Me: That would be as about as Lions as it gets.
That's a long-winded bit of rambling, but it's cheaper than therapy.
All teams run into odd rules, but mediocre teams have more ways of finding challenges. The Lions find challenges like no one else. They have a history of struggling with (i.e., losing, in part, because of) arcane rules, as this article explains: Illegal bat continues Lions' proud tradition of getting hosed by the NFL rulebook. The Illegal Bat now joins the Calvin Johnson Rule and the Jim Schwartz rule.
This mediocrity can have value, though. Finding all these weird challenges can help make the game better by helping highlight risks for future games that matter. Better officiating and better rules will not make the Lions a better football team, but the challenges they seem to goof into might make for more aware officials and better rules for playoff games, which usually feature better teams.
Of course, the Lions finally made the playoffs last year, only to lose, in part, because of an oddly changed call. Nonetheless, if the Lions can't be good, at least some good is coming from their games. Right?
You don't need to answer that.