Good read on the implications of decertification

[AHF]

http://sportsillustrated.cnn.com/2011/writers/michael_mccann/11/03/nba.labor.decertify/index.html?eref=sihp&sct=hp_t11_a2

Frustrated by an inability to negotiate a new collective bargaining agreement with owners, some NBA players have sought the advice of an antitrust attorney on the possibility of decertifying the National Basketball Players' Association. Such a maneuver would likely be followed by the filing of a class action antitrust lawsuit against the league and it would make the cancellation of the 2011-12 NBA more probable.

Here are the biggest questions with players considering decertification of the union:

1. What would decertification mean for NBA players?

Decertification would mean that NBA players formally remove the capacity of the union to collectively bargain on their behalf. Players would become independent employees of NBA teams and would lose union protections they currently enjoy. The NBPA would continue to exist, but only as a trade association, which would have limited capabilities for bargaining (for instance, the players' association could continue to bargain in regards to licensing deals, such as for players' images and likenesses in video games). Billy Hunter, Derek Fisher and other union leaders would likely see their influence over players wane, while other players or possibly player agents could attempt to fill the leadership void. Without a unifying entity, however, rival factions of players and agents could emerge and hinder attempts to resolve the labor crisis, especially if the NBA is not sure with whom they should negotiate.

Decertification would provide players with a powerful legal weapon: the ability to file federal antitrust litigation against the league. Indeed, without collective bargaining between NBA players and the league, various restrictions on how teams compete with one another -- such as the salary cap and the NBA draft -- would become subject to federal antitrust law. Although generally popular with fans and although they promote parity, these restrictions are also at least partly anticompetitive. After all, they reflect agreements among competing teams to refrain from free-market competition for players.

This reduced competition limits players' earning potential and choice of employers. Without an NBA draft, for instance, top amateur players could encourage multiple teams to bid for their services and those players could sign with teams in preferred locations. The comparative competitiveness and anti-competitiveness of these rules would provide the basis of any antitrust litigation; if sufficiently persuasive, players could convince a judge to issue injunctive relief in the form of ending the lockout until a full trial on the merits of the claims. If players ultimately prevailed in such a trial -- which would likely take years -- they would be entitled to treble damages, which would likely mean billions of dollars.

Decertification is not an immediate event, nor is it instantly reversible. Instead, it normally requires recognition by the National Labor Relations Board, a federal agency that regulates union-management activities. In the alternative, players could seek a disclaimer of interest, which is a similar but swifter and more retractable step and refers to the players' association disclaiming interest in representing players. Either decertification or disclaimer of interest would enable players to file antitrust litigation.

NBA players are inclined to opt for decertification because it could help them defend against the league's unfair labor practices charge with the NLRB. Decertification would signal that the players are serious about the Players' Association no longer representing them; only disclaiming interest could suggest that the players' association will reclaim interest the moment a deal is reached with the NBA. The NBA could argue that the players are only disclaiming interest to bring antitrust litigation.

2. How likely is it that the players would prevail in an antitrust litigation?

Not likely.

For starters, the NBA has been one step ahead of the players when it comes to antitrust litigation. In August, the league filed a lawsuit in the U.S. District Court for the Southern District of New York, decisions from which are reviewed by the U.S. Court of Appeals for the Second Circuit. The NBA asks the court for preventative relief, namely to block players from challenging the lockout on antitrust grounds. More ambitiously, the league also asks the court for permission to void player contracts in the event the union legally decertifies. This week U.S. District Judge Paul Gardephe ruled that he needs more time to evaluate the claims. His decision would likely delay the filing of separate antitrust litigation by players.

In antitrust litigation with players, the NBA is bolstered by recent precedent, specifically the U.S. Court of Appeals for the Eighth Circuit's opinion in Tom Brady et al. v. NFL. In that case, the Eighth Circuit clearly stated that the NFL was authorized to conduct an injunctive-proof lockout under federal law, specifically the Norris-La Guardia Act. Although the Eighth Circuit's opinion is only influential -- rather than binding -- in other federal jurisdictions, it supplies the NBA with a favorable opinion from a very similar and recent dispute. Indeed, had the NFL lost before the Eighth Circuit, it is possible the NBA would have adopted a different legal strategy than the one it has shown.

The NBA's choice of filing the lawsuit in the Second Circuit, instead of the Eighth Circuit, is intriguing. With the Timberwolves based in Minneapolis, the NBA would have seemingly possessed sufficient nexus to file the lawsuit in the Eighth Circuit, which has appellate jurisdiction over federal district courts in Arkansas, Iowa, Missouri, Minnesota, Nebraska, North Dakota and South Dakota. And had the NBA's lawsuit been filed in the Eighth Circuit, it would have been governed by favorable precedent set in the Tom Brady litigation. However, the NBA probably reasoned that 1) since both the NBA and players' association are headquartered in New York, the players could have sought to have the case moved to the Second Circuit, a process which would have delayed the litigation process; and 2) the Second Circuit has its own set of league-friendly labor and antitrust law rulings, including in Maurice Clarett v. NFL (NFL age limit) and Silverman v. Major League Baseball Player Relations Committee (MLB owners unilaterally changing rules during the 1994 baseball strike).

By filing a lawsuit in the Second Circuit, the NBA also makes it much harder for players to seek redress in a more sympathetic circuit, such as the U.S. Court of Appeals for the Ninth Circuit, which has appellate jurisdiction over courts in California, Oregon and Arizona and which is regarded as more pro-labor than other federal circuits. While players could still file an antitrust claim in the Ninth Circuit, courts there would be poised to refuse to consider the claims given that the relevant issues are already being heard in the Second Circuit.

In terms of its legal arguments, the NBA may be poised to offer more persuasive reasoning for the legality of its lockout than the NFL could muster for its own lockout. One key factor in a legal analysis of whether a lockout should be enjoined is the irreparable harm to the locked out employees. Unlike NFL players, who had nowhere else to play professional football during the lockout and some of whom would have never returned to the NFL had the 2011 season been canceled, some NBA players have already signed lucrative contracts with teams in foreign basketball leagues. The NBA can maintain that if players can sign to play abroad, then a lockout will not cause their professional basketball careers irreparable harm (or at least will cause much less harm than NFL players suffered/would have suffered). In response, the players would likely contend that playing abroad, and living in a foreign country (and possibly relocating one's family there), constitutes a materially different experience than having an NBA career and living in a U.S. city. Plus, many NBA players have not been able to find roster spots abroad.

The NBA also boldly demands that if the union decertifies in a way endorsed by a court, the league should be able to declare all player contracts void and unenforceable. The league insists that because the Uniform Player Contract (signed by every NBA player) is contained in and governed by the collective bargaining agreement, player contracts should become void once the collective bargaining relationship between the league and players ends. In response, the players can argue that the dissolution of a union should not empower an employer to void contracts between individual employees and the employer. If the NBA ultimately prevails in its argument on player contracts, players would collectively stand to lose billions of dollars. It would also throw the league and its franchises in an uncertain state, with every player, save for those drafted in 2011 and who haven't signed contracts, becoming a free agent.

3. Where does the NLRB fit into this discussion?

A lengthy litigation process would give commissioner David Stern greater reason to cancel the remainder of the season.

AP

Both the NBA and the union have filed unfair labor practices charges with the NLRB. They each argue that the other has failed to bargain in good faith. In May, the players' association asserted that the league refuses to offer any meaningful concessions in negotiations because, in the players' view, owners want a prolonged lockout. Two months later, the league contended that players, who have threatened to decertify their union and thereby commence antitrust litigation, have failed to bargain in good faith in hopes of filing antitrust litigation. The NLRB has to gauge whether the NBA and players' negotiation tactics are reasonable bargaining measures or merely abuses of the bargaining process.

The NLRB normally takes a few months to investigate and resolve charges, although that time frame appears extended for league-player disputes. These disputes are rare and tend to involve numerous facts and unique applications of labor law. Keep in mind, the NFL filed an unfair labor practices charge in February and that charge was still not resolved by the conclusion of the NFL lockout. Along those lines, by filing a charge of its own, the NBA may have gained a tactical advantage in terms of delayed timing: the NLRB will probably take longer to consider both charges instead of just one -- particularly since both charges emanate from the same set of facts -- and that could mean the NBA receives favorable and decisive court rulings long before the NLRB acts.

If the NLRB ultimately determines that either charge is meritorious, it would then issue a complaint against the offending party and try to work out a settlement. If a settlement cannot be reached, the NLRB could seek a court order for injunctive relief, such as one that would enjoy the NBA from continuing the lockout. A trial for money damages could also be held and verdict from the trial could be appealed. The entire timeline could take a year or more and not end until possibly after a 2011-12 season will have been played or canceled.

There is reason to believe that the NLRB will not find that either the players' association or league has engaged in unfair labor practices. The willingness of the two sides to engage in substantial negotiations over the last few months, and the ability of the two sides to bridge some of the gap, suggests that they regard themselves as engaged in difficult, but substantive discussions.

4. If the players decertify, is a 2011-12 season more or less likely to occur?

Less likely. Decertification would probably be followed by the filing of antitrust litigation, which would take weeks or months to unravel, let alone resolve. While the league and players could still in effect negotiate during the litigation, since (like during the NFL lockout) settlement discussions over the antitrust lawsuit tend to cover the same issues driving the lockout, the litigation process itself would give commissioner David Stern greater reason to cancel the remainder of the season.

Consider also that financial considerations may only heighten owners' resolve to impose a lockout for as long as is necessary to procure a very different system of player compensation. Keep in mind, while the NFL struggled to show that any of its teams were losing money, the NBA has maintained that 22 of its 30 teams lost money last year (despite records in attendance and TV ratings) and that player salaries are rising to average about $5 million a season.

NBA players dispute the league's numbers and argue that sharing of local TV revenue by teams would mean that more teams turn a profit. Still, it is clear that the league's financial situation is troubling from the vantage point of its owners. This matters considerably in the owners' calculus of whether to continue a lockout into the season.

Put bluntly, if most teams will make more money by not playing games in 2011-12, then the prospect of losing those games is less troubling. With players appearing unified in their core arguments and also apparently prepared to withstand a lengthy work stoppage, the season could very well turn into one that never occurs.

Read more:

http://sportsillustrated.cnn.com/2011/writers/michael_mccann/11/03/nba.labor.decertify/index.html#ixzz1ckFa3Sdb

[coachx]

Here is a good piece by Larry Coon too:

http://espn.go.com/n...-strong-message

What I like about the process of decertification is that once 1/3 of the players agree on decertification there is then a 45 day window before a majority vote decides whether or not to actually decertifiy. This would put pressure on the owners and Stern to make an agreement within that 45 day window.

I do not think an agreement will be found in court after decertification........much like the NFL. I just see the decertify threat as leverage to get something done in that 45 day window. If they take this to court after decertifying there will be no 2011-12 season at all and will be ulgy for all sides involved.

Edited November 4, 2011 by coachx

[coachx]

This is the best article I have found simplifying the Decertification process without boreing people of the court-room details if it gets that far:

http://espn.go.com/n...resume-saturday

The New York Times reported on its website that the group of dissatisfied players, frustrated with both the pace of talks and the many concessions made by the union to this point, intend to push for the dissolution of their union if a new round of labor negotiations fails this weekend -- or if the talks generate what is deemed to be an undesirable deal.

The conference calls, according to one source's estimate to ESPN.com, have mobilized close to 100 players either in favor or giving strong consideration to signing a petition to request a formal decertification vote. The rules in place dictate that 30 percent of the union -- roughly 130 players -- sign a petition to request a vote. The case would then be taken to the National Labor Relations Board, which would have an estimated 45 days to decide on whether such a vote should be held.

During those 45 days, Hunter and union president Derek Fisher can continue to negotiate with NBA commissioner David Stern and the league's owners. The belief among many agents, sources said, is that a deal with the league would be struck during that 45-day window, based on the idea that decertification -- while by no means a guaranteed successful strategy for the players -- could create sufficient uncertainty and legal threat to convince the owners to get a deal done before it gets to that point.

If a new labor deal was not completed within that 45-day span and a second vote is sanctioned by the NLRB, decertification would then require a simple majority vote of the league's 450-odd players to pass. At that point, players would have the freedom to sue the NBA under antitrust law and attempt to bring an end to the lockout via court system.

Yet there are widespread fears around the league that, if decertification gets that far, any hope of playing even a reduced schedule in 2011-12 would be lost.

Edited November 4, 2011 by coachx

[AHF]

In my personal opinion, the idea that the NFL or NBA player really decertify is a sham used for leverage. After the NFL decertified, the Union continued to make public statements on behalf of the players, it negotiated a new deal, and then recertified to sign the new deal. If the players were actually going to stop bargaining collectively after decertifying then it would be a different story but they really just want the best of both worlds.

One thing Coon is wrong about is his statement that the NBA's lawsuit becomes irrelevant if the Union decertifies. The Union is not the only party to the lawsuit - individual players are named to preserve the issues as well.

[frosgrim]

Desertification is a bad move. The owners will entrench at that point in time. As the articles point out, players haven't had much success in winning anti-trust suits. There is definitely a group of owners that are willing (wanting?) to lose the entire season so that a player compensation system similar to the NHL is implemented. IMO, if the union decerts, this sort of system WILL happen.

From where I sit, it appears that this labor dispute is more about ego than it is economics. If both sides were willing to deal just a fraction more, then we'd have a new CBA. Instead, we have entrenchment on both sides. It appears that neither side wants to say they "lost" this round, thus they hare staying where they are to see who'll blink first. This current impasse is only going to lead to future ones. Baseball FINALLY figured out that MLBPA and MLB need to be in partnership. Until the NBAPA and NBA figure that out, we're going to continue to see labor-owner unrest.

[AHF]

Thanks for the article. One thing I am miffed about is this:

OK I understand NBA players have outside options (as I have argued about before), but I do not see how this takes away from the antitrust issues of the NBA. The US has 0 control/jurisdiction outside of the US especially in a court of law (I'm thinking of the cartel OPEC, we can't do anything about that), so how is it that options that are outside of the US can be claimed as a way to distinguish that the NBA does not have anti-competitive policies within the US? It has already been established by American Needle v. NFL that sports franchises are independent entities and through the CBA they are setting prices for labor. Since there are only a fixed number of NBA franchises and a small number of general basketball franchises within the US they have a dominant market share over the basketball industry in the US.

First, I don't know that an antitrust case is a loser for the players. That is a big risk for the owners.

Second, I don't know how the NBA could possibly function without some restraints - which the more recent NFL decision hinted might be OK. If you purely opened it up, draftees would be unrestricted free agents, there would be no limit on teams/franchises (i.e., Vegas could open their own team unless you think it is legal for businesses to agree they won't allow competitors in an industry), there would be no limit on number of players on rosters, etc. I don't know how you sort that out.

Third, I haven't researched the question of whether options outside the US would be a defense against anti-competitive practices in the US. It would clearly be relevant on the issue of damages but those are two separate inquiries. So I don't know the answer on this one and I am not sure whether foreign leagues would be relevant to the issue. You can be certain the fact that foreign leagues are out there signing guys can only help the owners, though, and that their counsel will at least make the argument. You have never had that with baseball or football so there is no precedent in the sports world.

Fourth, Needle doesn't shut down the NBA with the argument that it can still make collective decisions that ultimately restrain competition. Remember that the Supreme Court left the door wide open on this as it pertains to collective action other than marketing of intellectual property:

Football teams that need to cooperate are not trapped by antitrust law. The fact that the NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate to produce games, provides a perfectly sensible justification for making a host of collective decisions. Because some of these restraints on competition are necessary to produce the NFL’s product, the Rule of Reason generally should apply, and teams’ cooperation is likely to be permissible. And depending upon the activity in question, the Rule of Reason can at times be applied without detailed analysis. But the activity at issue in this case is still concerted activity covered for §1 purposes. Pp. 18–19.

Fifth, if the courts buy the argument that the NBA is collectively losing $300M/season, it puts the NFL in a different box. For the NFL, the league as a whole made tons of operating income and only one of the 30 teams was in the red. For the NBA, the same accounting standards show $300M loss in operating income and 22 of 30 teams in the red during the 2010-11 season. That might make a difference on whether it is permissable to lock out players or not since from an operating income perspective in one situation it is economically rationale not to play (when doing so costs you money) and in the other it is irrationale (you would forego a lot of positive income).

Hopefully we won't have to see this go forward, but it will be an interesting case if we do.

Edited November 4, 2011 by AHF

[AHF]

Those restraints aren't antitrust violations though (eh maybe roster size limitations...). Limiting the ability to ever enter a league and how much teams can spend are clear anti-trust violations. I wouldn't find the restraints you are talking about to be a bad solution at all, I'm mainly against anti-trust violations that clearly exert monopoly power for the owners over players. I'm not a fan of that at all.

What?

#1 Draft - Limiting what employer you can work for. This is an obvious restraint. If you can only work for Team A then obviously Team A doesn't have to compete in deciding how much they can pay you. Under your theory, teams could pay their #1 picks $1 next season. That is classic monopoly power.

#2 - Roster size. - Limiting how many people can work in an industry. That is an obvious restraint.

#3 - Number of teams. - That is monopoly power to restrict competition - not on the players but on other potential businesses. If IBM and Apple could have effectively agreed to stop Gateway, Dell, Toshiba, etc. from coming into the market that would have been a bigtime monopoly power.

So the overseas argument only applies to damages sought by the players but not determining whether or not NBA owners are in violation of anti-trust actions? If I'm reading that right, then it definitely clears up my confusion since my big issue is that available competition outside of the US has no bearing on a particular activity within the US as being anti-competitive.

No - I am saying I am not sure. It clearly does apply to damages but as far as whether it is anti-competitive there is no precedent in the sports arena. I have not researched this issue in other industries to see if they have looked to foreign competition. The law professor in the SI article suggests that it is relevant to determining whether anti-trust laws have been violated but I am not confident he is right.

I was only pointing to Needle for reference that franchises are individual entities and not a subsidiary of the organization league at all. If you believe the organization (NBA, NFL, MLB...) is the business then the business of basketball is not in violation of anti-trust actions. You need to identify these are distinct firms in order to show anti-trust violation (mainly the collusion aspect). With just "one firm" (i.e. NBA) then there isn't an issue with the competition rules they are doing.

My understanding is there have been no cases of major note that dealt with anti-trust actions of sports leagues because the major sports league either already have an anti-trust exemption or collectively bargain. I don't know if I am forgetting or unaware of a case, but true decertification (not just a leverage/negotiations ploy like all other decertifications have been) would have a major impact on all sports.

I think true decertifiation would destroy sports leagues unless the courts carved out big exceptions for them which is what the Needle case leaves open the door to do. I agree with you that it is largely uncharted territory that would have major, major implications for any league. If I was the player's union I would have followed the NFL script and filed for decert months ago for the leverage ploy.

[AHF]

I won't rehash old arguments of decertification, but in case anyone is reading this thread and it is the first time they have seen this issue: there are certainly valid arguments for decertification increasing the welfare of the league (and its players and fans) as well as valid arguments that decertification would harm the league. I think its obvious where I stand on this.

You and I definitely have different views. Best to just leave it at that or start a new thread I think!

[DrReality]

Both sides are playing with a loaded gun. The NFL reigns supreme on Monday night and Sundays, something that the NBA only dreams about. And so many people are struggling $$$ I think this will drive them away.

[Brokentree]

I think its kind of interesting because the whole purpose of the NBA and what they are trying to do with this new CBA is almost exactly what antitrust law tries to do in other segments. It is trying to create a competitive market where any team/business can compete and making it harder for monopolies/dynasty's from forming.

How can anyone really fault the NBA for asking what they are asking for after players started trying to form their own monopolies in the form of the Miami Heat and the talk of one forming out of the Knicks in the next couple of years. Big markets/rich owners can spend whatever they want so the players can call each other up and all play for whoever they want? I know at first glance that sounds awfully fair but the NBA's job is competition and level playing fields. It creates more excitement and grows the business. If things continue the next few years like is being hinted then the NBA will flounder and then no one gets paid because they're getting a percentage of a lower number (BRI) instead of a higher one.

The players seem to care more about legacies and not giving up what they've fought to attain over the years like its been some sort of hardship or struggle against some evil power. If they really want to be considered an equal partner then they better start caring about competition and integrity and increasing the BRI so that even if they get a lower percentage they still end up with more wealth. Some players probably really do care that teams are competitive but lets be realistic and assume most only want their team to win. It is, after all, their job.

All I really want to see out of a new CBA is the death of guaranteed contracts. Talk about a competition killer. Signing bonuses? Limited guarantees? I don't know. I'm all for players getting theirs if they earn it. This getting paid based on what they should be doing is getting old. For every player out there arguing that they are what people come to see there is a player out there that is keeping people at home.

My CBA would be something like a no hard cap and only slightly more punitive luxury tax system much like the one that existed previously. Something along the lines of half way between what it was and what the NBA wants but not quite. The MLE would decrease slightly or at least increase at a slower rate to slow down the richer teams from getting better quickly. Guaranteed contracts would have to change in some way, shape, or form. Contracts being limited to fewer years? Guarantees only lasting a certain number of years for a contract? Teams getting an "oops my bad" ability to cut 1 underperforming player every 3 years? It's alot easier to design one of these things when your not involved at all isn't it? The BRI split would be something like 52% to players and 48% to owners but the number would have the ability to fluctuate up or down from one year to the next based on how big that number actually is and perhaps economic indicators such as employment rates etc. The worse the economy does the higher the percentage of BRI would go for the owners with a clause that they wouldn't be allowed to downsize team operations like laying people off at the arenas etc.

Oh well. I kind of went off topic.