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The Evolution Of Sports Law

Tuesday, October 13th, 2015

Evolution of Sports LawI am excited to announce that my article, The Evolution of Sports Law has been published in the latest October 2015 Article of the NWLawyer Magazine.  You can check out the article HERE.  I will also post the full article below for your reading consumption.

The first thing that anybody involved in sports law will tell you is that there is no such thing as sports law. The term “sports law” can encompass numerous practice areas that concern athletes and the business of sports.  For instance, one single client athlete can have issues in business, criminal, contract, family, intellectual property, non profit or tort law to name a few.  Other athlete issues involving league rules or National Collegiate Athletic Association (NCAA) rules must also be able to be interpreted so that the athlete’s best interests are protected.  On a bigger scale, the business of sports is big business and billions of dollars are at stake when negotiating TV contracts, dealing with public relations nightmares, and collective bargaining agreements among sports leagues.

This has not always been true. Believe it or not, the business of sports was not always big business and athletes were not always highly compensated, subjected to drug testing or allowed to use their name and likeness from their college days for profit. This article will discuss some key decisions that have shaped the way athletes participate in sports and how we view them today.

Free agency, with regards to the major sports leagues such as Major League Baseball (MLB), Major League Soccer (MLS), National Basketball Association (NBA), National Football League (NFL), and the National Hockey League (NHL), was not always so free and star players in the early days of professional sports were much more likely to play their entire career with one team. This was due to something called the reserve clause which stated that at the expiration of a player’s contract, the rights to that player were to be retained by that team.  In 1972 the Supreme Court in Flood v. Kuhn, 407 U.S. 258 (1972), held that MLB could uphold the reserve clause through an anti-trust exemption, however the Court admitted that the exemption was an anomaly and baseball was considered part of interstate commerce. That admission led to an arbitrator later nullifying the reserve clause and opening the door to free agency in all sports.  This was a big win for professional athletes everywhere as they could now negotiate with all interested parties for the highest compensation any one suitor would pay.

With this new found freedom, athletes now had to change teams through free agency came the need for athlete agent representation, and thus the sports agent was born. In the early days of sports anybody could call themselves a sports agent, as the barrier to entry was nonexistent.  There was essentially no regulation of agents and athletes would often suffer the consequences by receiving poor advice. Today, the business and regulation of sports has evolved such that most states have laws that regulate athlete agents, most sports leagues have their own certification programs to regulate agents of their respective leagues, and the NCAA has rules in place that affect how athletes may interact with sports agents.  In Washington State RCW 19.225 is on the books, otherwise known as the Uniform Athlete Agent Act.  Those who violate the Washington Uniform Athlete Agent Act could face a stiff penalty of up to $10,000 and be charged with a class C felony.  These regulations were put in place to look out for the best interest of the athlete and make sure agents are not taking advantage of athletes. Young athletes, who upon an initial meeting with an agent, are usually still in college and may come from underprivileged backgrounds. Currently there are more than 460,000 college athletes and less than two percent will go pro in their sport.[1]  This creates a scarcity of potential clients for athlete agents to represent and the competition is fierce to represent the best prospects.

Due to the social and financial allure the sports industry provides, agents have been known to bend if not break the rules and regulations in order to land a top client. Agents have previously admitted or been found guilty of paying athletes or providing improper gifts to athletes in college in exchange for the opportunity to represent them when they go pro.[2] This conduct of course violates NCAA rules and many state rules which may lead a player to be kicked off his/her college team, cause the athlete financial loss due to a drop in draft position, and leaves the athletes’ university left to face potential sanctions.

Once an athlete has finished his or her amateur career, there is only a limited number of years to maximize the athlete’s earning potential in the pros. For example, the average career of a professional athlete in one of the major sports leagues is only three to five years[3]. With success comes great rewards in the form of long term contracts that can be in the form of standard player contracts or lucrative endorsement deals. This will in turn drive the athlete to do whatever it takes to reach the peak of success. Professional sports leagues know the stakes are high and therefore have recently taken measures to ensure their leagues are putting pure, non enhanced athletes in play by regulating substances athletes can consume.  The goal is to make sure that performance enhancing drugs are not being consumed as well as regulating any illegal substances which could negatively reflect on the leagues.

One of the first challenges to drug testing happened in 1990 when student athletes at Stanford University challenged their school and the NCAA’s drug testing policy and said it invaded their constitutional right to privacy which was upheld.[4]  However, later, in 1999, a California appellate court ruled that schools had a compelling interest to keep drugs out of their schools and therefore drug testing was not an invasion of student athletes privacy.[5] On the professional level, athletes are subject to their leagues and associations’ policies and procedures. These policies and procedures can regulate doping, drug abuse, and other issues such as personal conduct. The penalties for violating such rules can include fines, suspensions, or even banishment for extreme violations.

One such example of a league policy rule came to the forefront in the Seahawks most recent Super Bowl run involving Marshawn Lynch. The NFL has stated in their policies and procedures that players must make themselves available to the media or else they could be fined.  Lynch did the minimum to comply with the rule by barely speaking to the media, but nonetheless making himself available, and thus avoiding a fine.  If a player disputes a suspension or a fine issued by a league there are usually league policies in place in which players can appeal an ad adverse decision.

In a recent case decided last summer, O’Bannon et al. v. NCAA et al., No. 09-3329, 2014 WL 3899815 (N.D. Cal. Aug. 8, 2014)., the issue of whether student athletes should be able to profit from their own name and likeness used in college was decided.  The NCAA argued that paying its student athletes would be a violation of its concept of amateurism in sports, while O’Bannon, a former basketball star who played on UCLA’s 1995 National Championship team, argued on behalf of all division I men’s football and basketball players that upon graduation players should be compensated if colleges use their images for commercial purposes.  The court ruled in favor of O’Bannon and stated that the NCAA rules and bylaws operate as an unreasonable restraint on trade, in violation of antitrust law.  This is the first step in what I believe will eventually lead to student athletes being paid a modest stipend while playing collegiate sports and, incidentally, making their schools billions of dollars.[6]

The evolution of sports law is no different than any other type of law.  It continues to evolve with the changing times and technology. New rules and court decisions will be put in place to react to the need for change when issues arise. If we have come this far over the last 50 years in sports, it’s hard to imagine what the business of sports and the laws that regulate them will look like in another 50 years.

[1] http://www.ncaa.org/about/resources/research/probability-competing-beyond-high-school

[2] See Confessional of an Agent, Sports Illustrated, Josh Luchs, October 18, 2010.

[3] See The Average Career Earning of athletes across America will Shock you, By Nick Schwartz, USA Today, October 24, 2013.  http://ftw.usatoday.com/2013/10/average-career-earnings-nfl-nba-mlb-nhl-mls

[4] See Hill v National Collegiate Athletic Association, Board of Trustees of Leland Stanford Junior University (Court of Appeal of California, USA, 25 September 1990)

[5] Miller v Cave City School (United States Court of Appeals (8th circuit), 31 March 1999).

[6] See http://www.usatoday.com/sports/college/schools/finances/

 

ESPN Documentary “Broke” Should be Must See TV For All Future Professional Athletes

Tuesday, October 2nd, 2012

Some debtors need to file bankruptcy due to no fault of their own. These individuals usually have suffered some kind of enormous medical expense or maybe their home is severely under water.  For others, such as the athletes profiled in ESPN’s new 30for30 documentary “Broke” need to file for bankruptcy because they had a really good time living outside of their means, with nothing saved up for a rainy day. The documentary profiles athletes who were at the top of their game and then lost/spent all their money, only to be living a very pedestrian lifestyle in this day and age.  What viewers and readers need to realize is that most athletes professional careers only last on average 3-4 years, and most don’t make superstar money.  Athletes have a short time frame to make serious money before having to get a real job outside of sports.  Many athletes fall into the trap of spending all of their hard earned paychecks because they are young and are often times from under privileged backgrounds and have no concept of saving money, because they never had any money to begin with.  Often times athletes help out their friends and families with bad investments and then they go on to blow a substantial amount of money on cars and bars to name just a few of the bad choices.

So what can we learn from these athletes as well as various lottery winners and entertainers?  Be smart with your money.  If you got it, invest in things that will show you a profit, unlike vehicles, alcohol, and zany start up business.  Go with what works and get professional investment advise before making any substantial decisions, and always live within your means.  You don’t want to have to file for bankruptcy because you charged up your cards trying to keep up with what everybody else around you was doing.  If you have made bad investments or end up going late on your credit card payments which end up hurting your credit or you end up getting sued by a debt collector, you can either hire help or seek out legal help online to represent yourself.  Either way the worst thing somebody can do is nothing, so consumers and athletes need to take action and get help if they are in need.

Even Sports Agents File for Bankruptcy

Sunday, February 5th, 2012

Leigh Steinberg

Prior to becoming a Seattle trademark lawyer, I was preparing myself to start working at a sports agency and picked up the book “Winning with Integrity” by Leigh Steinberg. The book gives a great glimpse into the world of sports agents and the business of sports. What it left out however was how Mr. Steinberg was an alcoholic and took loans from clients and other creditors in order to support his lavish lifestyle. Mr. Steinberg was known for his amazing parties, especially during the week of the Super Bowl. Granted, some of these parties were to help support charities, but Mr. Steinberg simply borrowed more than he could pay back which is a common theme among people who file for bankruptcy. Mr. Steinberg just did it on a larger level.

According to Mr. Steinberg’s chapter 7 bankruptcy filing as reported by ESPN it appears as though he may have a tough time discharging a debt owed to a former client of his since a judgment was already entered against him for $900,000 plus interest. The former player/client, Chad Morton, plans filing an adversary proceeding against Steinberg to obtain a judgement in the bankruptcy court stating that this debt will not be dischargeable due to allegations that Steinberg made fraudulent conveyances to avoid paying off the debt. Debts that are are owed to creditors and that were incurred due to fraud or involve fraudulent conveyances will not be dischargeable. It’s funny that a man who once wrote a book entitled “Winning With Integrity” seems to have been lacking integrity for some time. Steinberg alleges that the debt owed to the former player was not authorized by him, but rather his company. However, as the owner of the company he should have been aware of who his business was borrowing from.

This story just goes to show you that anybody can find themselves filing for bankruptcy, even those that have had a tremendous amount of success in the past.

If you have additional questions please will out the contact form or give us a call at 206-682-7975.

Former Major Leaguer, Dykstra Allegedly Commits Bankruptcy Fraud

Sunday, May 15th, 2011

Lenny Dykstra

When filing for bankruptcy it is imperative that you disclose all of your assets and income to your bankruptcy lawyer so that you can avoid bankruptcy fraud and avoid not receiving a discharge of your debt in bankruptcy.  It appears that former Major League All-Star Lenny Dykstra may not have disclosed all of his assets in his bankruptcy and is now being indicted for bankruptcy fraud.  Mr. Dykstra is accused of hiding more than $400,000 of assets that should have gone to his creditors as part of his bankruptcy estate.  He is accused of selling, destroying and transferring his property immediately prior to filing his bankruptcy case.  His legal troubles could have been avoided if he just disclosed all of his assets to his bankruptcy attorney prior to filing his case.  This is usually done through a bankruptcy attorneys questionnaire that a debtor is provided prior to filing bankruptcy.  For somebody who was handling the financial matters of other athletes, this also serves purpose to show that athletes should be careful in choosing who should be advising them on financial and legal matters.

Most debtors want to know why they have to disclose certain debts or assets.  In bankruptcy, all debtors and assets must be included regardless of whether you want to list them or not.  Just because you list an asset doesn’t mean you will lose it, in fact there are several bankruptcy exemptions that allow for debtors to keep property.  Unfortunately in in order to file bankruptcy, a debtor must give full disclosure, there are no exemptions.  Debtors should avoid transferring property in order to hide assets right before filing bankruptcy.  Especially if you transfer property to family members, as that raises suspicions.   It also should be noted that whether you are a former major league baseball player or an average Joe six pack, you may be found guilty of bankruptcy fraud should you decide to deceive the bankruptcy court and your bankruptcy lawyer.

If you have additional questions please visit our bankruptcy attorney homepage to speak to one of our Washington state bankruptcy attorneys.

WWE Lays the Smackdown When Protecting It’s Trademark

Friday, October 16th, 2009
WWE

WWE

World Wrestling Entertainment Inc. “WWE” has sent a cease and desist letter to the Philadelphia Wine School for using the trademarked word “Smackdown” in advertising an event at the school.  The wine school has advertised that it will be holding a Sommelier Smackdown for a food and wine pairing competition it has held since 2007.   The WW is claiming that the school has infringed upon their trademark and the school should be forbidden from using the word Smackdown.  http://www.law.com/jsp/article.jsp?id=1202434525206&rss=newswire

In order for trademark infringement to occur the WWE will have to prove that the average person would confuse the Sommelier Smackdown with the WWE’s Smackdown and that the WWE has suffered a financial loss because of the use of the trademark.  I find it very hard to believe that a food and wine pairing competition can be confused with a bunch of large shirtless wrestlers in spandex hitting each other over the head with folding chairs.  Furthermore the only financial gain from the event will most likely be from attendees of the event which will be minimal.  Therefore the wine school would have a good case if they decided to challenge the trademark infringement claim.  However, because litigation is an expensive endeavor for both parties, the wine school will most likely back down and let the WWE lay the Smackdown on enforcing their trademark even though the school has a very good chance of winning of the case went to court.

It is sad that large companies are this adamant about protecting trademarks, even if the trademark is being used for a fun and educational purpose for very little profit.  This claim is ridiculous and paper should not have been wasted to bring the claim or cease and desist letter.  Let the people have their fun, a potential claim will rack up lawyer fees which will be much more expensive than any judgement the WWE could win in this case.  The WWE and other large corporations need to find something better to do with their money than make frivolous claims that waste the courts time.

If you have additional questions please fill out the contact form to schedule an initial consultation today.

Who Decides Who can Own a Professional Sports Team; a Sports League or a Court of Law?

Friday, August 28th, 2009

CoyotesAn interesting case coming from the NHL will most likely decide whether a sports league or a court of law may decide who may purchase a professional sports franchisehttp://www.law.com/jsp/article.jsp?id=1202433401660&rss=newswire

The Phoenix Coyotes of the NHL filed for bankruptcy earlier this year in which the bankruptcy court will decide whether Jim Balsillie, a wealthy businessman from Canada, may purchase the team.  If Balsillie is successful he intends to move the team to Hamilton, Ontario, Canada, a move that the NHL apposes.   Balsillie had previous run ins with U.S. regulations and NHL owners have already voted 26-0 in favor of not allowing Balsilli to own an NHL team.

“Balsillie and the NHL have accused each other of negotiating in bad faith.  Balsillie claims NHL Commissioner Gary Bettman holds an unreasonable grudge against him, while the NHL has claimed Balsillie is hurting the value of the Coyotes by smearing greater Phoenix as a hockey market.” http://www.law.com/jsp/article.jsp?id=1202433401660&rss=newswire.  Balsillie currently has placed the highest bid for the franchise at $212.5 million while other lower bids have been placed by the NHL and private investors group entitled Ice Edge Holdings who bid $150 million.  Creditors of the Coyotes are hoping that Balsillie is allowed to purchase the team so that they can recoup the debts owed by the Coyotes.

Generally a sports league and other owners in the league must approve a new owner and an owners request to move a franchise.   The reason behind this is that most leagues engage in profit sharing among the franchises.  If the current owners do not feel that a new owner will be profitable for the league or the owner wishes to move a team to a new smaller market location, the rest of the league and franchises may lose money.   In this case, a judge must weigh whether paying off the Coyotes creditors is more important than current NHL rules and potential damage to the NHL brand.  Even if Balsillie is allowed to purchase the team I don’t think the court can force the NHL to approve moving the franchise.  The ruling on whether Balsillie can continue to be a bidder for the franchise is expected on September 2, 2009 and the team is expected to be sold on September 10, 2009.  The outcome of this case will have an impact on all other major sports leagues in the future.

UPDATE 10/1/09 – Bankruptcy judge Redfield Baum rejected Canadian billionaire Jim Balsillie $242 million bid for the Phoenix Coyotes, concluding that it would interfere with the league’s relocation rights and procedures.  http://sports.espn.go.com/nhl/news/story?id=4520635

For more on this top please contact Seattle Bankruptcy attorney, Richard Symmes

Will former NCAA Athletes be allowed to Profit from the NCAA for the Use of their Own Name and Likeness in the Future?

Sunday, July 26th, 2009
Ed O'Bannon

Ed O’Bannon

In what would be a change of NCAA policy, former NCAA athletes may soon be entitled to receive compensation for the use of their name or likeness.  Currently, former NCAA athletes are not allowed to gain royalties from the NCAA whenever the organization or member schools use athletes names or likenesses for profit on items such as video games, DVD’s or promotional items.  When an NCAA athlete signs on with a school to participate in athletics, they must sign a waiver, giving the NCAA the rights to the name, image, and likeness while they are a student athlete and beyond.  Former UCLA basketball player Ed O’Bannon aims to challenge this policy and gain royalties for all former football and basketball student athletes from the past and future in the class action lawsuit Ed O’Bannon v. NCAA filed in U.S. District Court for the Northern District of CaliforniaFor a full discussion about the case see Michael McCann’s article at:    http://sportsillustrated.cnn.com/2009/writers/michael_mccann/07/21/ncaa/index.html

The NCAA’s main arguments will be, if the former players are compensated for the use of their image and likeness, it would go against the NCAA’s policy of having amateur athletes, that the athletes waived their rights when they signed the required NCAA forms, giving the NCAA the rights to the images and likenesses and that if the players did not wish to play for an NCAA institution they had a choice not to sign the required forms.   O’Bannon will argue that this case is only involving former student athletes who are no longer are bound by the NCAA bylaws and that the forms giving the NCAA the right to all images and likenesses violate the governments Sherman Act due to a restraint in trade.

This case will set a precedent for all future and past NCAA athletes.  Both sides have valid arguments and I am sure the all present and future NCAA athletes will be watching closely as they all have a vested interest in the outcome.

 

Supreme Court to Decide Whether the NFL Licensing Agreement Violates Antitrust Laws

Sunday, July 5th, 2009

nfl1The Supreme Court of the United States has decided to take on the case of American Needle v. National Football League which is scheduled to be heard later this year or in early 2010.  http://seattletimes.nwsource.com/html/politics/2009391296_apussupremecourtnfl.html

The case will have a significant impact on all sports leagues and will determine whether the NFL is acting as a single entity or 32 different businesses when negotiating licensing agreements or other contracts on behalf of NFL franchises.  The case arose after the NFL signed an exclusive apparel contract to Reebok International Ltd in 2001.  American Needle was one of many firms who manufactured head gear for some NFL teams prior to 2001, and they argue that the the NFL is breaching antitrust laws by dealing with only one company in outfitting teams.  The NFL seeks to end antitrust law suites against  them in the future by arguing the NFL is acting as a single entity when entering into contracts on behalf of NFL franchises.

This case will have a significant impact on all sports leagues going forward.  If the NFL wins, it will not have to fear being suied for antitrust lawsuits in the future which could significantly impact how all sports leagues conduct business.

Cardinals Manager Tony La Russa takes Twitter to Court, Will Probably Lose

Sunday, June 14th, 2009
Tony La Russa

Tony La Russa

The name, image, and likeness of a celebrity or sports figure is viewed by the courts to be the intellectual property of that particular individual.  With the creation of Twitter, Facebook and other social networking sites, individual’s intellectual property in their names  have the possibility of being infringed upon in a new medium.  Tony La Russa, the St. Louis Cardinals manager, is the first well known celebrity or sports figure to sue Twitter for the actions of an individual who used a name or likeness that didn’t belong to them on a Twitter page. http://www.law.com/jsp/law/careercenter/lawArticleCareerCenter.jsp?id=1202431321477&rss=careercenter

La Russa alleges that an unknown person had been tastelessly using his name and image, tweeting from an account named “TonyLaRussa.”  La Russa’s suit claims that the impersonator is ruining his reputation among other things.  In order to win a case for trademark infringement La Russa would have to prove that the average viewer of the fake Twitter page would confuse the postings as being those of the actual La Russa.  Therefore, because of the nature of the posts (making fun of his drunk driving, and a Cardinals pitcher who had died earlier) it is unlikely that the average person would be confused that the actual La Russa made the offensive “tweets.”

La Russa could have also brought some torts claims against the individual posters who made the tweets for misappropriation of his name and likeness and being portrayed in a false light.  The false light claim would have the best chance to succeed as he would have to prove (1) publication, (2) of views he doesn’t believe, (3) which are objectionable to reasonable person.  Misappropriation of name or likeness requires a person to use another’s name or image for profit which did not happen in this case.  The outcome of a suit of this type would probably be up to a jury to decide.

Celebrities and athletes should be careful in suing their own fans and those that actually follow their careers, especially if any damage is minimal as it is in this case.  Suing fans of the game, could cause a backlash and project a negative image upon a person or sport.  La Russa should have accepted that Twitter agreed to remove the page from the site and move on with his life.  This is a frivolous claim that he will probably lose.

UPDATE 7/7/09:  La Russa pulls Twitter suit –  http://www.law.com/jsp/article.jsp?id=1202432045385&rss=newswire

 

Redskins Win Right to Keep Their Nickname…..For Now

Sunday, May 17th, 2009

RedskinsThe NFL’s Washington Redskins have won another legal decision against a group of Native Americans who claim that the team’s nickname “Redskins” is racially offensive.   http://sportsillustrated.cnn.com/2009/football/nfl/05/15/redskins.ap/index.html

The battle between the Native Americans and the NFL franchise for the right to use the “Redskins” has been going on for over 17 years.  The attorneys for the Redskins based their case on trademark law, claiming that if the team lost to their right to use the nickname, the organization would lose millions that have been spent on the Redskins brand.  The Redskins trademark was first registered and used in commerce in 1967. The Native Americans challenging the trademark, first challenged the mark in 1992, 25 years after it was first used in commerce and the court ruled that the Native Americans waited too long to challenge the mark.

Another group of Native Americans plan on challenging the mark and will try to get the case challenged on its merits, that the term “Redskins” is racially disparaging and scandalous.  The Native Americans plan on challenging the mark under under section 2(a) of the Lanham Act which states that “no trademark shall be refused unless it “consists or comprises of immoral, deceptive, or scandalous matter.”  To determine whether a mark is disparaging the court must look at (1) the likely meaning of the matter in question, as it appears in the marks and as those marks are used in connection with the services identified in the registrations and (2) whether that meaning may be disparaging.   To determine whether a mark is scandalous the court will look at (1) the view of the general public and (2) in the context of contemporary attitudes.

As the court ruled in Harjo v. Pro Football Inc. (1999), I believe a court would find that disparagement could be proven, but not that the mark is scandalous.  The Scandalous test cannot be met as the general public views the Redskins mark in association with a proud NFL franchise in which the players are akin to warriors.  Some Native Americans have even been quoted as saying that they don’t mind the Redskins mark as long as the team depicts Native Americans in a favorable manner.  Disparagement could be proven under the test stated above, as it is possible that the mark is disparaging.

Even if it can be proven that the trademark is disparaging, it will be extremely difficult for anybody to challenge the mark at this point as the mark should have been challenged when it was first approved by the U.S. Patent and Trademark office in 1967.  The mark is now accepted by the general public and a multi-million dollar brand.  The courts are hesitant to take away a mark if those offended by the mark did not challenge the mark at an appropriate time when they had the chance.

 

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