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.
Wednesday, May 13, 2015
As some readers may recall, I posted twice back in November about The University of Tennessee, Knoxville's decision to drop the Lady Vols moniker and mark from all women's sports teams at UTK other than women's basketball. The first post primarily wondered about university counsel's consideration of trademark abandonment in the rebranding effort. The second post unpacked some additional issues raised by the first post and addressed some readers' and friends' concerns about my stance opposing the rebranding.
Interestingly, adverse reactions to the branding change, which is effective on July 1 (the beginning of the new academic year at UTK), have not died down since those original posts. Letters from concerned citizens have been published in the local paper, and the paper even published a recent news article documenting some of the back-and-forth between Lady Vol fans and the campus administration. [Ed. Note: this article may be protected by a firewall.] I have followed all of this with some interest.
Honestly, part of me just cannot wait for the university to drop the mark altogether so that I can start using it to mass merchandise retro Lady Vols t-shirts, hats, and other merch. Entrepreneurial pipe dream? Maybe. But it seems like a great idea, yes?
And there's a case involving Macy's that I will be following to help me to assess whether and, if so, when to launch my venture. The case, covered in an article in the New York Law Journal on Monday, involves Macy's and its disuse/limited use of department store names forsaken as a result of its own rebranding efforts. You know the names well if you're a person of a certain age--A&S, Filene's, Marshall Fields, Stern's, etc. (I shopped at all of them. Eek!) The defendant in the action, Strategic Marks, claims the right to use these so-called "heritage marks" for bricks-and-mortar and online shopping services. Apparently, Strategic Brands filed intent to use applications and statements of use with the U.S. Patent and Trademark Office. In the case, Macy's challenges Strategic Marks's right to use the heritage marks--asserting, among other things, that the marks have not, in fact, been abandoned (given that Macy's still uses them on the occasional plaque, t-shirt, and tote bag.) The case had been scheduled for trial earlier this year, but the trial date was postponed to reflect new claims by Macy's regarding Strategic Marks's use of additional marks earlier registered by Macy's.
The case apparently raises some interesting trademark abandonment issues that also may apply to the Lady Vols rebranding effort as time moves on. Among them: the length of time a mark must be in disuse before it is considered abandoned (although a presumption of abandonment apparently arises after non-use for three consecutive years), the types of behavior that constitute an intent not to resume use of a mark, and the effect of residual goodwill associated with a mark on claims of abandonment. Although Macy's and Strategic Marks do not agree on the facts of the case, it is the law as applied to those facts that I am most interested in knowing.
Of course, since UTK is keeping the Lady Vols name for the women's basketball team, at least for now, the trademark abandonment issue is not ripe. Accordingly, I cannot yet think about quitting my day job to promote the Lady Vols brand to all the passionate UTK women's sports fans out there. But I am keeping my entrepreneurial eyes on this issue. If they do away with tenure in The University of Tennessee system, for example, I may need an opportunity like this . . . !
Tuesday, May 12, 2015
I had planned to write a post about Delaware LLCs and who has standing to request judicial dissolution, but that post is going to wait. I'm knee deep in Sports Law exam grading, and so sports is on my mind. The big thing going on right now is, of course, Tom Brady's four-game suspension for his apparent participation in having footballs deflated to a psi that was not in compliance with league rules.
The science on the benefits of deflating footballs is not clear, as noted here. That, of course, is irrelevant to whether the rules were broken. Some have argued that the air pressure rules are stupid, especially given that the league not long ago change the rules to allow each team to prepare their own footballs for use on offense. Andy Benoit of SI.com explains,
With football being so much about strategy, the more comfortable the ball is for a quarterback and his receivers, the more entertaining the game becomes.
The NFL already agrees with this. Why do you think officials and ball boys go to such lengths to try to keep a football dry during a rainy game? Or, bringing it back to the inflate/deflate issue (or inflate/deflate controversy, since America has decided to be dramatic, if not hysterical, about this), why did the NFL permit quarterbacks to prepare their own balls before games in the first place?
The problem is, the league didn’t go far enough here. It should abolish all parameters regarding the ball’s air. Tom Brady didn’t cheat. Tom Brady’s job is to throw the football. Unfortunately, he had to go too far out of his way to do his job well.
I wouldn't think it would take a lawyer to explain that this reasoning is flawed, but perhaps it does. Even where a rule is stupid, counterproductive, or even obstructionist, it is still a rule. Failing to follow it leads to sanctions. If a speed limit is too low, it can limit my ability to get to a meeting on time or make it so the FedEx driver can't deliver as many packages in a day. But if either one of us gets clocked by a police officer's radar going 15 mph over the speed limit, we're going to get a ticket. And it's no defense to say, "But it's making it harder for me to do my job well!"
Brady, through his agent, has vowed to appeal, as is his right. Some people seem very concerned with Brady's image, and other have even suggested that the suspension could keep Brady from a future in politics. Maybe, but given that we live in a country that has re-elected many people who have tarnished their own images while in office, I'm not going to be too concerned about this.
The NFL, of course, has its own image issues, much of which is self-imposed. The sanctions against Brady seem reasonable but severe, if acting in a vacuum. But we don't, and it's hard to to look at other relative punishments for guidance. The NFL has been aggressive with suspensions in other areas, such as Sean Payton's year-long suspension for BountyGate. Saints fans were certainly not happy with the outcome of the NFL's punishment.
On the other hand, as the Washington Post reported, A lot of people noticed that Tom Brady got twice as long a suspension as Ray Rice’s initial punishment. The NFL could argue, of course, that Brady broke the league's rules, while Rice was subject to punishment from thecriminal justice system, too. And they might, if they wanted to remain as tone deaf on domestic violence as they have been in the past.
Why the NFL has this inflation rule, though, is a fair question. As Andy Benoit noted in the article linked above, why not just let each team provide footballs with whatever inflation they want? If it is easier to catch a deflated ball, then it's also easier to intercept. The league knows that offense sells tickets, so why not provide an advantage to all teams, if there is one to be had? Seems like a win-win option, and it reduces the number of things NFL officials have to worry about enforcing. Less regulation of regulations that are hard to enforce and have dubious value to the integrity of game helps everyone involved, and it reduces people trying to game the system through largely irrelevant technical rule enforcement. (I'm looking at you, pine tar.)
Still, a rule is a rule, and if you get caught knowingly breaking a rule, there will (and should be) sanctions. And let's be honest: The New England Patriots, with Bill Belichick and Tom Brady know what they are doing better than most. They are arguably the most successful coach and quarterback combination in NFL history, and they are very, very good at what they do. They only do things they think will help them win, and if they do something risky, there's a good chance they're correct that there's an advantage to be had.
Respect them for their skills, and hold them accountable for actions. And let's keep it all in perspective. It's still just football, and this time, no one got physically hurt.
Tuesday, April 7, 2015
So, Duke is the 2015 NCAA Men's Basketball champion. As a Michigan State basketball fan, this was at least mildly gratifying because the Spartans final losses the past two seasons have been to the eventual champion. (MSU's final two losses this season: Wisconsin and Duke.) Hardly the same as winning the whole thing, but after a loss, one takes what one can get.
This semester I am teaching Sports Law for the first time, and it has been an interesting and rewarding experience. As our recent guest, Marc Edelman, recently noted, there is a lot going on right now in college sports (there probably always is), with questions about paying NCAA players and players' rights to unionize, among other things, leading the way.
I am a big fan of college sports, and I generally prefer college sports to professional sports. I don't, however, have any illusion that big-time college sports are, in any real sense, pure or amateur. (For that matter, I don't know what "pure" means, but I hear complaints that colleges sports are "no longer pure," so it appears there is some benchmark somewhere.) College sports are a modified form of professional sports or, as the term I used to hear from time to time in other contexts, semi-pro sports.
What College Sports Are
College sports, in the simplest sense, are highly talented young people competing on behalf of educational institutions in exchange for the opportunity to pursue a mostly funded college education, if they so choose and can make it fit in with their athletic obligations. The athletes are compensated for their efforts with opportunities that are varied and wide ranging, depending on the athlete and the institution for which they compete.
Obviously, the experience for the high-profile college athlete -- generally football and men's and women's basketball -- is different from that of the less-watched sports, such as gymnastics, track, and golf. But in all instances, the athletes represent their institution on and off the field, and they all have significant obligations that come along with their participation on their team. (Not all athletes have full or even partial scholarships, which can vary the obligations, though often all athletes have similar requirements.)
(To read more, please click below)
Friday, April 3, 2015
If you pay attention to college sports news, you know that Shaka Smart is leaving VCU to coach men's basketball at the University of Texas.
As a professor, my interest, of course, is in the coaching contract.
Like most coaching contracts, Shaka Smart's contract with VCU includes a buy-out provision, which is currently $500,000. (The buy-out was set at $600,000, with a $100,000 reduction per year. This is the second year of this VCU-Smart contract, hence the $500,000 amount).
More interestingly, the contract includes a provision that requires a home-and-home series with VCU and Smart's new team or payment of an additional $250,000 to VCU. Smart took VCU to the Final Four in 2011, so in 2013 when this new contract between Smart and VCU was signed, VCU knew that Smart was one of the most sought after coaches in the country. As such, this seems like an excellent (and creative) clause to include; if Smart left VCU, he would likely be headed to a top-program and games with that top-progam could be quite valuable.
All of the above has been reported in other outlets. What I haven't seen reported (though I obviously haven't read all the reports) is the required timing of the home-and-home series. The VCU-Smart contract states that the series is "to commence at [VCU's] venue within one year of the resignation." I am not an expert on college basketball, but I believe the schedules are usually finalized well in advance. To comply with the contract and avoid the additional $250,000 buyout, it appears that Texas would have to agree to play VCU this coming season. If VCU prefers the $250,000 payout to the home-and-home series, then maybe this tight time table makes sense. If VCU prefers the home-and-home series, then this seems like it might be an impractically tight deadline. Perhaps VCU will attempt to negotiate with Texas and give Texas another year to comply if they need it.
Also of possible interest, it appears that if Texas had waited from March 29 until April 1 to fire their former coach (Rick Barnes...who we are welcoming to Tennessee) they could have possibly saved $250,000. If Smart would have waited until May 1 to resign from VCU, Texas could have saved $100,000 on Smart's buyout. But perhaps time was of the essence in this case. If Texas would have waited, maybe Smart would not have been available, or maybe the time is needed for other things like recruiting, media promotion, and fundraising.
In related news, football coach John Chavis, LSU, and Texas A&M are litigating over the date that Chavis "resigned," which impacts his buyout. Like the VCU-Smart-Texas situation, careful attention to the wording of contracts is quite important.
*Creative Commons photograph
Many thanks to Marc Edelman (Zicklin School of Business, Baruch College, City University of New York) for guest blogging with us in March.
His posts are linked to below: