SBJ/20090817/Special ReportPrint All
Will new leadership change the tenor of the talks?
The NFLPA’s executive director, DeMaurice Smith, is new to sports. NFL Commissioner Roger Goodell has spent his entire career with the league but will be overseeing his first collective-bargaining sessions as its leader.
At the NHLPA, Executive Director Paul Kelly, who was elected in 2007, will be leading CBA negotiations for the first time. In baseball, the executive board of the MLBPA recently voted to name longtime general counsel Michael Weiner to replace Don Fehr as executive director, although the move is not official until the entire union membership votes on it.
Many say that neither Weiner nor Goodell should be viewed as new to the process, since both have been involved in labor negotiations for decades. Veteran baseball agent Tom Reich said of Weiner, “He is about as new in labor negotiations as I am in contract negotiations.”
But others think the new relationships between leaders on opposite sides in every sport but basketball could increase the time it takes to hammer out a deal.
“It is very difficult to make a deal with people who haven’t dealt with each other previously,” said NBA agent David Falk, who added that he thinks the process could be “extremely long” in the NFL, where both leaders are new.
But the NFL’s Jeff Pash said he doesn’t see the changes at the top as a problem if both people share good will and a common goal.
The NHLPA’s Kelly said new leaders could be a good thing, “particularly in our sport, when we went through such a tough time, back in ‘04 with the lockout,” he said. “I think new faces mean fresh ideas, a new start.”
The National Basketball Players Association’s Hunter said there’s much to be said for experience.
“I understand the nuances and the whole dynamic of a lockout, the pressures the players experience, the downside, the damage both sides suffer,” he said. “That is an experience that you now have that you didn’t have before.”
But, he said, “My stomach won’t have the butterflies in it that it had the first time.”
— Liz Mullen
Call it sports labor’s disharmonic convergence.
After suffering only one labor stoppage in the last 10 years, the major American sports leagues are headed into a time of unprecedented uncertainty. Each is dealing with its own complex set of issues between owners and players, including some points that have been controversial nearly from the day the previouscollective-bargaining agreements were signed.
And all of the leagues are dealing with an economy that has proved to be the worst in more than a generation and has affected nearly every corner of the business.
On top of that comes something no one at the four leagues or the four unions can remember happening before, the equivalent of a full solar eclipse on the sports labor calendar: All four major team sports have collective-bargaining agreements expiring in the same year, 2011.
It adds up to a lot of unknowns. A series of interviews by SportsBusiness Journal with top negotiators on both sides of the table in all four sports reveals hope from all sides that deals can get done, as well as frank acknowledgments that there could be a work stoppage in at least one of the sports.
The commissioners and some team owners in the NFL and NBA, both of which have begun formal bargaining, have made it clear that they are looking for changes in their salary cap systems, which regulate what they pay their most critical employees, their players. Those on the labor side of the table say major changes typically mean major concessions.
In the NHL, players are unhappy with the CBA they ratified in order to end the 2004-05 lockout. And despite numerous concessions from players, NHL owners are not entirely satisfied with it either.
In Major League Baseball, the MLB Players Association is investigating whether owners colluded to drive salaries down in the last free agent market. Both union and league officials say it is too early to say what will happen in 2011.
“We could have peace in all of them,” said Bob Batterman, who serves as outside labor counsel to the NFL and NHL as a partner at the powerful Proskauer Rose law firm. “We could have war in all of them, [although] I think that is very unlikely.”
But the heads of the two unions that have begun negotiations, NFLPA Executive Director DeMaurice Smith and National Basketball Players Association Executive Director Billy Hunter, both say they believe owners may be preparing to lock their members out.
“I have been through the lockout,” Hunter said. “I can see a fight coming into this one. I don’t want it. But you play the hand that is dealt to you.”
‘The world has changed’
For many of those coming to the bargaining table, everything starts with the recession.
“I think that our players understand completely that the world has changed,” said NBA Commissioner David Stern. “They look outside. They live in Detroit. They live in Phoenix. They live in California. They understand unemployment is at 11 percent, that office vacancies abound. The players understand those are our fans, the ones who aren’t working, who are in foreclosure, who don’t have jobs in offices.”
Revenue for professional sports leagues has increased regularly over the years, and that increase has made it easier for deals to be made between leagues and players unions. In the last 10 years, only the NHL has suffered a work stoppage, the lockout of 2004-05.
But in most leagues that revenue growth has run into a brick wall in the form of the recession, which could make new agreements much more difficult to reach, labor experts say.
Howard Ganz, Batterman’s partner at Proskauer Rose, who serves as outside counsel to the NBA and to Major League Baseball, said the current economy is the biggest issue for owners and leagues as they prepare for collective bargaining with players unions.
Ganz said the economy’s overall effect on sports leagues isn’t yet clear because many of the leagues’ biggest revenue-generating deals were made when times were better and stretch over multiple years.
“Those arrangements will be coming to a conclusion over the next year or two. And who knows whether sponsors are going to continue to spend lots of money on sports promotion,” he said. “At the same time costs have not declined.”
Batterman said the economy is affecting how sports team owners look at their costs of doing business, and players’ salaries make up the majority of costs in all of the leagues. “The feeling among all the owners and all the senior management teams in all the leagues is the business is changing,” he said.
Owners are questioning whether growth opportunities for revenue are going to continue “or do we need to revisit the revenues or shares [guaranteed to players] as a result?” Batterman said. “ I don’t know that there are any answers yet, but I think that question is being raised all over.”
At the same time, they say their expenses outside player salaries also continue to rise.
“You’ve got a lot of costs with sponsorship, with fulfillment, our fans are asking more. Our business partners are asking more,” said NFL chief legal officer Jeff Pash.
Before the recession, sponsors and advertisers increasingly were asking leagues and clubs what return on investment they would get in a deal. Now “it seems like you get those questions much more quickly and that there is a lot more rigor in the analysis that goes into it,” Pash said.
But NFLPA officials say the NFL has not provided them with any information about their costs. “The union thus remains in the dark as to what the owners consider to be the main items for the negotiations,” NFLPA outside counsel Jeffrey Kessler said after two formal bargaining sessions with the NFL.
And the NBPA’s Hunter noted that the NBA bought a full page ad in The Wall Street Journal touting the league’s third-highest attendance ever and increases in television viewership. “So you tell me what they mean,” Hunter said.
Although other issues often emerge in CBA negotiations, like age limits and marketing rights, negotiators on both sides of the table say that in this round of talks, the main issue is players’ share of league revenue. “It’s about dividing up the Benjamins,” Hunter said.
The economy, and whether it improves between now and 2011, is also a wild card. Labor experts say that a bad economy favors owners seeking concessions, but negotiators on both sides of the table said it is much easier to get a deal done in good times versus bad.
Update for salary cap?
The salary cap system that exists today in the NFL, NBA and NHL, in which team payrolls are capped at a percentage of league revenue, was invented by Stern in 1982, when he was executive vice president of the NBA.
But now, there is talk from Stern about a whole new system.
“As we begin [negotiations] there may be just a completely different way of doing it that doesn’t involve any percentage or salary cap,” Stern said. “I don’t know. We’ll have to see. There may be a system the players suggest to us that brings our teams to profitability that isn’t … a system we are familiar with.”
And in the NFL, the salary cap system that began in 1993 is not working for owners anymore, said Pash, who is leading negotiations for the owners. “It may have been perfectly sound in 1993 when it was entered into, but it has not evolved in a way that reflects the operations of the National Football League in 2009,” Pash said. Among other things, Pash said that system does not take into account owners increased costs, including more privately financed stadiums and debt service.
But on the players side, no one seems convinced that there is a need to throw out the salary cap system for a new system that they believe would further restrict players’ earnings.
Speaking before the Sports Lawyers Association in Chicago earlier this year, MLB Players Association Executive Director Donald Fehr — who has led the baseball players’ successful fight for 25 years against a salary cap — questioned why team owners, who sold the salary cap in the first place, were now saying the system was not working.
“One of the benefits of the salary cap system that has been in effect in the other sports has been the suggestion that it automatically adjusts for economic conditions,” Fehr said. “Players do better when the games do better… everyone sees a decline when revenues decline, and therefore, we don’t have to continually rebargain everything.”
“It doesn’t surprise me — although I think it is inconsistent with the basic philosophy as expressed for the cap — that when revenues go down, management wants to revisit the cap … because it doesn’t do what they said,” Fehr said.
Management side sources say the traditional cap is not working anymore because it was based on an old cost structure, and that cost structure has significantly changed in the last few years.
Stern, who recently revealed that fewer than half of the 30 NBA clubs are profitable, said the current cap in the NBA doesn’t take care of the problem of a decline in revenue, in part because the cap is set after the revenue has declined. Stern said. “I mean, if it takes care of it, presumably there wouldn’t be any losses.”
No ‘pattern bargaining’
Unless deals are cut before the leagues reach their deadlines, the CBAs will expire near the end of each quarter in 2011. The NFL’s deal is up in March, the NBA is next in June, the NHL is third in line in September, and Major League Baseball is last in December.
Though no one can predict what will happen in the labor talks between the four leagues and the unions, there is an oft-repeated sentiment that nothing ever gets done in labor negotiations until there is a deadline. The expiration of the CBAs is the major deadline, since players can not strike and owners can not lock out until the labor deals expire.
The timing is unprecedented, but all league and union officials interviewed for this story agreed that no one conspired to engineer the timetable. At the same time, sports management and labor leaders aren’t sure what it will mean, other than a greater emphasis by the mainstream sports media on sports business and labor issues.
“Obviously, all the sports look at what is going on in the other sports,” said Rob Manfred, MLB executive vice president, who leads labor negotiations for the clubs. But the sports industry does not engage in “pattern bargaining” like the auto industry, in which the first labor deal struck dictates successive labor deals, he said. Kessler, who serves as outside counsel to both the NFLPA and NBPA, said one negotiation may have little or no effect on another negotiation in another sport because the CBAs and the issues associated with them are so different.
“The amount of revenue sharing in the four sports is vastly different, the amount each sport depends on national revenues; the average career length in the four sports is different; the overall financial health in the four sports is different,” Kessler said.
There is, however, what Kessler calls a “psychological intersect” in which owners in one sport will be mindful of how negotiations are going or labor tactics are being used in another sport. “If one strategy is successful in one sport, people might think it could be successful in another sport,” he said.
Other industry experts noted that because there is cross-ownership among the sports, owners who win a labor victory in one sport could push harder for gains in another sport.
The sports unions, too, have historically supported each other, at least verbally, in times of labor unrest.
Hunter said the expiration of all four deals in the same year was something he discussed at length with Gene Upshaw, his good friend and the former NFLPA executive director, before Upshaw died unexpectedly last year.
“If it resulted in any one group being locked out, I think he sort of saw himself at the front because the NFLPA agreement is the first to expire.” Hunter said. He has not yet addressed this issue with Upshaw’s successor, Smith.
Upshaw, Hunter said, “thought it provided an opportunity that I guess we could all … unify if we all kind of took a universal position about the concerns of our players.”
With the collective-bargaining agreement between the National Basketball Players Association and the league due to expire in 2011, will the players once again capitulate to the demands of management? The past several negotiations have seen a series of compromises by the players — the most humbling after a 1998 standoff over a luxury tax and maximum player salaries that prompted a three-month lockout, the only labor stoppage in NBA history.
This time around the union must stave off shorter contracts, a hard salary cap, a higher age limit on incoming players, elimination of the midlevel cap exception, and an overall reduction in the players’ percentage of revenue. Prior to any negotiations, the union must, for once, subject the issues to thorough analysis and educate players about the consequences of previous concessions.
Past sacrifices have resulted in the virtual elimination of free agency with players now having to accept less money to jump teams. In addition, rather than protecting veterans, the last pact led to a significant reduction in the number of vets getting multiyear contracts commensurate with their true worth. Furthermore, the shrinking cap has increased tenfold the number of players making the league minimum.
In the absence of revenue-sharing, the well-heeled Lakers now pull in more than $120 million from gate receipts and local TV deals while the cash-strapped Grizzlies pocket barely a fifth of that. Clearly, the system must be changed. Popular wisdom is that the owners have the power to impose their will on the players and their weak union, but ultimately the players will have as much power as they have the courage to exert.
Arn Tellem is president of management at Wasserman Media Group. He has been a member of the National Basketball Players Association’s agent advisory committee for labor for about 15 years. He is known as an ardent and vocal defender of players’ and unions’ rights.
When NFL clubs voted unanimously in 2008 not to extend the current deal, the NFL explained that a big problem is this CBA does not adequately recognize the costs of generating revenue, of which our players receive the largest share. The problem has worsened as those costs continue to rise in the current economy. Clubs have been required to make ever-increasing investments and take on even more risk as the share of the overall pie devoted to players has increased.
The NFLPA has access to an extraordinary amount of financial information and will have the necessary financial data it needs to make informed decisions, as has been true for the past 15 years. One reality is that player costs are rising at a faster rate than revenue.
Apart from economics, we can improve the system to benefit veteran players contributing on the field. Clubs need the authority to recoup bonus money from suspended players so it’s available to players performing on the field. We need a more reasonable way to pay rookies so that more money is available to proven veterans. Today, rookies drafted in the first round are often among the NFL’s highest-paid players at their position. This isn’t good for owners or players.
We need to return to jointly operating and improving our substance abuse and steroid programs. For the first time, the NFLPA has sponsored litigation over our collectively bargained steroids program. Why isn’t the union standing behind this negotiated national program that has brought so much credit to NFL teams and players?
We want to further address retired player issues and explore restructuring the season to add more value and quality for fans, players and teams.
As a player, I served as vice president of the players union. Now I am on the other side. I know we can get it done.
Mark Murphy is president/CEO of the Green Bay Packers and a member of the NFL’s management council executive committee. Murphy played for the Washington Redskins 1977-84, and served as the Redskins’ player rep to the NFLPA 1980-84, including the position of vice president of the players union (1983-84). He later served as assistant executive director of the NFLPA 1985-88.
Labor relations in the NFL have been what professional labor negotiators would call “mature” for 16 years — no strikes or lockouts and no rupture in a relationship characterized, for the most part, by respect and recognition that the competition was baseball and movies, not the other side of the table. That may change quickly unless DeMaurice Smith and Roger Goodell can prevent mass amnesia on the part of their constituents.
Sure, let’s return to the good old days when team owners, led by Hugh Culverhouse, did their level best to divide retired and active players, fought fiercely against player freedom of movement, would brook no dilution in commissioner authority and worked to weaken the NFLPA to the point of irrelevance. And, let’s return to the days when retired players were uninvolved in the NFLPA and routinely attacked it, when active players argued bitterly over choosing between better pensions and free agency, and when the NFLPA had few resources and no financial reserves.
Or, we could look to the model of leadership practiced by Gene Upshaw and Paul Tagliabue. Represent and defend your constituency first, but within the context of a business partnership dedicated to growing the business and sharing in that growth fairly.
There are, of course, some real thorny problems to resolve. Roger Goodell has to figure out how to get the owners to share their revenue more equitably among small market and big market teams. That is not the players’ problem and the solution can’t be to let the smallest or worst-run team set the standard for reasonable player costs; a race to the bottom that the players shouldn’t enter. DeMaurice Smith needs to prepare his members to renounce collective bargaining (“decertify”) if, once again, the owners unwisely try to use collective bargaining to restrict player movement and prevent a real market for player talent. The players weren’t recognized as partners at the table until they exercised the leverage of antitrust challenge to unlawful restrictions on player movement and compensation. It is ironic that the best way to avoid a strike, lockout or protracted antitrust lawsuit is to be fully prepared for each possibility.
Doug Allen was assistant executive director of the NFLPA for 20 years and on staff for 25 years. He participated in hundreds of CBA negotiation sessions as a key member of the NFLPA’s bargaining team.
Management has the burden of protecting its product, the “game,” the balanced distribution of talent among the teams and protection of the integrity of the game so that the outcome of each game is in doubt. This last concept is the very essence to the appeal of sports. To accomplish this, management will strive to balance revenue among the teams, control player entry into the league, the period of a team’s control before free agency, the rules of compensation for free agents lost and, the most important issue today, drug testing. This last issue gets at the “outcome in doubt” issue and is of critical importance. Of course, overall player compensation, salary caps and luxury taxes will be vigorously negotiated.
The union has the easier chore, as its job is to increase salaries, including salary protection, and reduce team control. Unions have no interest in competitive balance and resist intrusions into a player’s personal life, like drug testing.
The stage is set and each side has power. For management — the lockout; For unions — a strike. Both have been used often. Of interest to me is the presence of two new union leaders in MLB and NFL. Both will try to make a mark.
Clark Griffith is a former owner of the Minnesota Twins and served on the MLB labor committee for six years. He conducted labor relations for the Twins from the advent of the union to his departure in 1984. He is a lawyer and arbitrator and teaches sports law at two Twin Cities law schools.
The NHL collective-bargaining agreement could have expired next month, but the NHL Players’ Association extended the deal in January.
That could give the impression that players are content with their deal — now set to expire in September 2011 unless the players decide to extend it one more year — but they’re not.
“I think that the players are very unhappy with some aspects of the deal,” said NHLPA Executive Director Paul Kelly. “They clearly believe the players’ share [of NHL revenue] could be more generous.”
The percentage of league revenue that players receive is based on the total revenue figure. The percentage for 2008-09 has not been determined, but it is expected to be 56.7 percent, the same as the previous season.
Players put a portion of their paychecks into escrow accounts during the season, money that is either paid to owners (in case salaries exceed the percentage of revenue that is ultimately set) or returned to the players with interest. After getting back all the money they paid into escrow accounts in the first two years of the deal, players could end up losing as much as 16 percent of their paychecks for last season.
Kelly said that when players extended the CBA in January it was not clear to them how big a bite would be taken out of their paychecks.
With its hard salary cap and its ability to impose an unlimited escrow on players, the NHL CBA is widely viewed as the most owner-friendly labor deal of the four major sports, but owners aren’t entirely satisfied with it, either.
“There are obviously improvements that can and need to be made,” said NHL Deputy Commissioner Bill Daly, but he wouldn’t say what changes owners are looking for.
Unlike the situation in the NFL and NBA, and the situation NHL owners were in back in 2004, NHL owners are not planning a major overhaul of the CBA signed in 2005.
“Our next negotiation will be negotiating changes to the existing model, as opposed to creating a new model,” Daly said.
Kelly indicated players may request a bigger say in league business decisions, including TV contracts. He and some players have made it clear in recent months that they feel the league’s deal with Versus does not give them and the game enough exposure.
“If we are not trying to work cooperatively and constructively in a lot of the things we do — and getting a new TV contract is one of those things — I think we are making a huge mistake that will hurt everybody,” Kelly said.
Even as the NFL and the NFL Players Association have begun collective-bargaining talks more than a year and a half ahead of the March 2011 CBA expiration, hopes for an early deal seem to be vanishing.
The NFLPA’s negotiating team, led by NFLPA Executive Director DeMaurice Smith, and the league’s team, led by chief legal officer Jeff Pash, have held two formal negotiating sessions in the last two months, but league negotiators have not “come forward with a serious proposal so that we can begin fruitful negotiations,” said NFLPA outside counsel Jeffrey Kessler.
“While De remains optimistic that the parties can reach a deal this year, thus far the owners have apparently not been in a position to … move the ball forward.”
NFL players have said publicly in the last few weeks that they expect to be locked out. And last month, the union posted on its Web site a story in which Smith told players in locker rooms that “I am absolutely convinced that the default plan is to lock us out in 2011.”
NFL officials say the league doesnot want to talk lockout. “I don’t know what [Smith] is telling players … but we are a long way from anything,” Pash said.
What the NFL does want to talk about is what it sees as a need for a new economic system. The salary cap, which gives NFL players a percentage of NFL revenue, has been the basis for 15 years of labor peace, but Pash said it is no longer working.
Things have changed for the league since 1993, when it began using a cap, he said. Among them: NFL stadium projects are less likely to get public funding, and the costs of attracting and maintaining corporate sponsorship partners are rising.
Multiple sources said what the NFL is looking to do is have players recognize some of those costs by deducting them from the total revenue figure that is divided between players and owners under the current CBA. The NFL now gets credit or deducts for certain costs, but the league is looking for more. Sources asked for anonymity because they were not authorized to speak publicly about CBA negotiations.
“We do believe that the system has to account for the costs associated with making investments that generate revenue, which certainly includes stadiums,” Pash said. “If we can promote a pro-growth, pro-investment economic structure, players will certainly earn more money under a new system, not less.”
Pash did not elaborate on how players would earn more if they pay more of the upfront costs, but sources said gains could come in the future if players, instead of taxpayers, shoulder some of the costs of building new stadiums that generate more revenue. The salary cap might even go up under the system, but players’ share of the revenue — which is now about 60 percent — would go down, sources said.
The NBA is also advocating that a new system be found, but NBA Commissioner David Stern announced in July that fewer than half of the NBA’s 30 clubs are profitable. The NFL’s selling job may be more difficult.
“We are not contending that the NFL is not a profitable business,” Pash said.
One issue that has come up early in the NFL negotiations, as well as with the NBA, is the question of financial disclosure by the owners. Unlike the NFL, the NBA has pledged to fulfill the players’ request for financial disclosure. “We think if you are saying to your players you want a different model, the best way to get there is to share the data,” Stern said.
Smith says financial disclosure is the first step in making a deal and the best way for the league to demonstrate whatever financial hardships it may be facing. “It seems to me that if they are not pleading poverty, what is it?” Smith asked.
Pash noted the NFL has extended the CBA five times without providing the audited financial statements the union is seeking. “Agreements can get done, and there is substantial history to support that,” Pash said.
As Smith has begun negotiations for a labor deal, he says, he also has planned strategies to combat a lockout, including decertifying the union.
If the NFLPA were able to decertify, players would be allowed to bring an antitrust lawsuit to challenge any lockout as a group boycott, as well as sue for damages, a strategy that has worked for the NFLPA in the past.But the NFL is expected to challenge any decertification under existing law, and a future U.S. Supreme Court decision could provide another roadblock. The Supreme Court has agreed to hear a case brought by former NFL licensee American Needle against the league, and if the court rules that the league is a single entity rather than 32 businesses competing with one another, the players could lose the ability to sue under certain antitrust laws, making decertification a less attractive option. (However, labor law experts say a broad Supreme Court decision for the NFL that applies to labor is unlikely.)
Smith has other strategies he wouldn’t elaborate on, but one of them may involve Congress. The day after the league and the union had their second bargaining session in July, Smith and about 20 players went to Capitol Hill to talk to lawmakers. Smith has indicated that the NFL’s antitrust exemption to sell its broadcast rights on a pooled basis could be an issue.
“If you are using that monopoly status to get television contracts and you are using that monopoly status to share revenue and that status is a gift to you from the American people, the question is, should you be allowed to use those gifts to hurt the businesses that would be affected in a lockout?” Smith said.
Former White House press secretary Ari Fleischer, who now runs his own sports PR firm, said Smith’s trip to Congress was “an aggressive move,” especially since the two sides are in the early stages of bargaining.
Sports and Congress can be a double-edge sword, because legislative gains can be offset by public perception that lawmakers have more important things to do than regulate sports, Fleischer said, but “showing a flair for bold, political public relations is an interesting tactic.”
Could it be that Major League Baseball, which has endured eight work stoppages, more than any other sport, is the league most likely to come to a peaceful settlement? Ironic as it may seem, sports industry and labor experts say that could happen.
Unlike the other leagues and unions, there are no plans by MLB or the MLB Players Association to begin labor negotiations years before their deal expires in December 2011.
Rob Manfred, MLB executive vice president of labor, would not comment on potential bargaining objectives for MLB club owners in 2011, but he indicated they were pleased with the deal in place.
“The current collective-bargaining agreement has operated well from an economic perspective,” Manfred said. “I think the combination of revenue sharing, competitive balance tax and the debt service rule has allowed us to get the kind of financial stability and competitive balance we have been looking for.”
MLB Players Association general counsel Michael Weiner said it was too early to anticipate what challenges the players may face in 2011. (The MLBPA executive board voted in July for Weiner to succeed Donald Fehr as executive director, but that vote still must be ratified by the full membership.)
“If the current economic environment is still in place when we begin bargaining, I would expect it would have some effect on management’s demands here,” Weiner said. “Having said that, our system is a market-based system. And you would think a market-based system has the flexibility to respond to different economic environments.”
Unlike the other three leagues, there haven’t been many public statements from either side calling for changes to baseball’s system.
The union is investigating whether it wants to bring a collusion case against the league, which could damage relations between the two sides, but a decision had not been announced as of last Wednesday. It’s not clear what effect a collusion case might have on collective bargaining.
Some note that baseball owners still haven’t gotten what owners in the other three leagues have achieved: a salary cap. The MLBPA, historically viewed as the strongest of all the major sports unions, has successfully beaten back efforts to install a cap system.
Nevertheless, MLB owners “have been trying for one for 20 years,” said labor-side attorney James Quinn, outside counsel to the National Basketball Players Association and the NFL Players Association, who has worked for all four major players unions. “I am sure they will try again.”
In a first-of-its-kind quadruple play for sports labor, the four major team sports leagues head into negotiations all represented by the same firm: vaunted New York-based practice Proskauer Rose. Partner Howard Ganz represents the NBA and MLB, and partner Bob Batterman represents the NFL and the NHL.
Proskauer has been advising the NBA, NHL and MLB for many years but more recently added the NFL as a labor client. Covington & Burling, from which former Commissioner Paul Tagliabue and current top legal counsel Jeff Pash hail, had been the NFL’s exclusive outside counsel for decades, and also continues to represent the NFL in labor talks.
As outside labor counsel, Batterman and Ganz provide advice on strategy, as well as on issues that can emerge during talks, such as the legality of using replacement players, legal experts say. Both stress that they only advise their clients and do not set policy.
Labor sources say privately that the presence of either signals a tough negotiation.
Ganz has been through several lockouts, including the one that halted the NBA during 1998-99. “I principally deal with the inside lawyers, the principle people who are in charge of bargaining, Rob Manfred and Dan Halem (another former Proskauer lawyer) at baseball and Joel Litvin and Rick Buchanan of the NBA,” he said. “But there are certainly times where I am consulted by or get yelled at by David Stern or Bud Selig.”
Batterman (who also represents Major League Soccer, where the collective-bargaining agreement is set to expire in January) was principal outside counsel to the NHL when it shut down an entire season and emerged with a new CBA widely viewed as the most owner-friendly in sports.
Batterman has an almost mythical reputation, which only grew when the NFL hired him quietly — some would say secretly — in 2007.
When SportsBusiness Journal reported nearly a year later that he had been hired, in March 2008, the NFL did not provide much of an explanation as to why he had been brought on, but the late, former NFL Players Association Executive Director Gene Upshaw saw it as an effort by the NFL to replicate what happened at the NHL Players’ Association during the 2004-05 NHL lockout, when a divided players union acceded to owners’ demands.
Ian Pulver, who was NHLPA associate counsel during the lockout and is now an NHL agent, said, “I would urge any group who is negotiating with Batterman to respect, understand and appreciate their adversary.”
Pulver would not comment specifically on his dealings with Batterman while at the NHLPA. But when asked whether Batterman breaks unions, he said, “Bob Batterman is a hard-nosed, smart management attorney who leaves no stone unturned. He will do his best to attempt to execute the orders of his clients including, but not limited to, breaking unions if necessary.”
Batterman, told of the comment, said, “I would be proud to have that on my epitaph.”
NHL Deputy Commissioner Bill Daly, who led the negotiations with Batterman as principal outside labor counsel during the lockout, said the notion that Batterman is overly aggressive is overblown.
“He is only a hawk to the extent that his clients’ position needs to be hawkish,” Daly said. “He is a function of what his client wants, and that’s what lawyers do. In terms of his personal interaction, he is extraordinarily engaging; he is a very friendly guy who gets along with everybody.”
Although Batterman and Ganz both serve as outside counsel, Batterman, especially in recent years, has tended to be at the bargaining table more than Ganz.
Rob Manfred, MLB executive vice president of labor, who leads negotiations for the league, said that Ganz was at the table some of the time in 2002 and less so in 2006. But Manfred added, “He is deeply involved whether he is at the table or not.”
Proskauer Rose was one of the first full-service Wall Street firms to get into the business of labor law and represents only management. The firm boasts about 800 lawyers, about 150 of them labor lawyers. Two league commissioners, the NBA’s David Stern and the NHL’s Gary Bettman, started their careers at Proskauer.
Before formal bargaining sessions began this month in the NBA, Commissioner David Stern said he had already begun trying to solve one of the stickiest problems standing in the way of a new labor deal: creating a plan for big-market clubs to share more revenue with small-market teams.
Stern acknowledged that increased revenue sharing among clubs, as well as financial disclosure — things that National Basketball Players Association Executive Director Billy Hunter has called for — were key to a new labor deal.
Not only is Stern willing to give the union all the financial information players have requested, “I have begun working … quite assiduously to assure that there is more revenue sharing,” Stern said. “I am going to reach agreement with my owners.”
Stern is willing to hand over the financial details in order to convince players that the current salary cap system, which guarantees them 57 percent of league revenue, isn’t working. Under that system, Stern said, fewer than half of the 30 NBA clubs are now profitable.
But as Stern was appealing to owners to share more revenue, Hunter was working on a plan of his own: to remind the NBA’s more tenured team owners about the 1998-99 lockout and to tell the newer ones just how painful it was.
“What we will make clear in the meetings … is the import of a lockout: what it really means and how people are affected,” Hunter said. “It took us, like, five years to kind of rebound.”
The NBA’s 11-member executive committee includes five owners or owners’ representatives who were not in the league, let alone at the bargaining table, during the lockout, which stretched more than 200 days.
Hunter, before the first bargaining session, was clearly wary of the owners’ claim that they needed a new deal. And the economic crisis was not a reason, not in Hunter’s mind.
“I would think in this economy, the last thing anyone would want to be talking about is a damn lockout,” he said. “Why? Because it could kill the business.”
Stern said, “The owners don’t want a lockout,” but did cite the economy as a reason for pressing for a whole new system. The players would see, too, there needs to be change.
“We are going to sit around together and say, ‘Look, guys, here are the facts. We have this great game. It’s very successful. It continues to be successful. It’s enormously fan-pleasing. There’s one little issue. It’s not currently profitable,’” he said.
Revenue is not growing at the same rate as the salaries of NBA players already under contract, Stern said. Gate receipts are softening and the NBA’s television contract is set to increase at 3 percent, at the same time that player contracts are increasing at 8 percent (for players going to new teams) and 10.5 percent (for those who stay with their old teams), Stern said.
Hunter says the real problem is that the NBA’s revenue-sharing model is the weakest of all the big leagues and that big-market clubs are making money while the small-market clubs struggle to keep up.
He has recommended the NBA adopt a revenue-sharing plan closer to the NFL model, in which visiting teams get a share of the home team’s gate. He also wants big-market clubs to share some of the money they get from local TV and radio deals.
“Our position is the players, they can’t be the fall person solely responsible for helping these owners in these small markets maintain viable operations,” Hunter said.
Going into bargaining, Stern seems to resemble an eager suitor, ready and willing to do anything for the players, including completely opening the NBA’s books. The players, Stern said, could actually be the party that comes up with solutions to the NBA’s current financial problems. We are so open to suggestions from players,” Stern said.
But at the same time that Stern is talking about openness and partnership, there have been shots fired across the bow by both sides, including a memo the NBA issued in July projecting a steep decline in the salary cap in 2010-11. Hunter returned the volley by publicly threatening the league with a collusion case. “If it turns out this is all a smoke screen, I intend to take action,” Hunter said last month.
Stern said that the league issued the memo, projecting a 2.5 percent to 5 percent decline for the season after next, something the league has not done before, “because teams were asking us what the story was going to be and we wanted to tell them, these are our best estimates.”
The rhetoric began in earnest this spring, soon after Stern and Hunter revealed at the All-Star Game that they had begun meeting privately to talk about collective bargaining.
Then in April, Stern made statements indicating that owners might be seeking a rollback in the 57 percent of revenue that players now get under the CBA. “I think even the 57 percent number is somewhat on the high side. So there’s tough negotiations coming,” he said then.
Hunter disagreed with Stern’s assessment that 57 percent was too high. “His position is that it is and our position is that it isn’t,” Hunter said. “The system works.”
In July, Stern did not want to talk about the 57 percent figure. Instead, he was touting the league’s willingness to be open in order to get a deal.
“The players will know more about the NBA’s finances than they ever wanted to know because we are going to complete disclosure,” Stern said.
Will the players have access to team’s profits and losses? “Absolutely,” Stern said. Will the players know NBA owners’ take? “Everything,” Stern said. Will the NBA fulfill the NBPA’s request for information in full? “Oh, yes.”
Because the NBA collective-bargaining agreement does not expire until June 2011, there is a question of what incentive the players have to meet owners’ demands for concessions now.
Stern said NBA players may want to consider a deal now, instead of two years from now, because now they could have what he calls “a soft landing.”
“They have the opportunity to consider changes that will allow a system change to be implemented over a period of time,” Stern said.