SBJ/Feb. 7-13, 2011/Leagues and Governing Bodies

When would NFL tap $4 billion in media fees?

The NFL is not budgeted to use the $4 billion in media fees that are at the center of a bitter dispute with the players union until a potential second year of a lockout, according to two well-placed sources.

The NFL Players Association has appealed to a federal district court judge a special master’s decision last week allowing the NFL to use those funds in the event of a lockout, which could begin as early as March 4. However, the NFL is not planning to tap the media money until March 2012, if necessary, the sources said, apparently making the outcome of the appeal largely moot in the context of the heated labor debate. Most observers expect the league and union to reach a new labor deal long before spring 2012.

If it’s true that the NFL does not even need the media money right away, it shows that the NFL has prepared for a doomsday scenario, said Bill Gould, a Stanford University law professor who writes on sports labor and is a former chairman of the National Labor Relations Board.

“The NFL has a lot of resources,” Gould said. “They can afford to be patient.” The players, Gould added, who were already nervous about what a work stoppage could mean for them may now have reason to be even more concerned.

The NFL declined to comment for this story, but last month, the league’s executive vice president of NFL ventures and business operations, Eric Grubman, told reporters, “There are a lot of risks we account for, and to prepare for them, we line up sources of capital. [The TV money] is only one. We have other sources of capital that we lined up to account for any risk that we can think of that might face the league.”

The union has aggressively challenged the league’s control of the TV money, charging that the NFL negotiated below-market rates for the broadcast deals in exchange for a promise that the money would flow whether games are played or not. The league is required to maximize revenue under the collective-bargaining agreement. Underlying the charge, of course, is that the money is critical for keeping the owners afloat during a labor disturbance.

“Now for the good news: The NFL, until the appeal in Minnesota, has $4 billion to not play football next year. VICTORY!”, union spokesman George Atallah tweeted soon after the decision on Tuesday. Atallah did not reply for comment for this story. The district court that the NFLPA has appealed to is in Minnesota.

The NFL already is building a $900 million lockout fund, seeded with national revenue the league has held back from teams along with savings from teams not paying players non-health care benefits last year. Under terms of the CBA, the teams’ obligation to pay these benefits, such as life insurance and pension-plan payments, ceased with the expiration of the salary cap last March.

The union spent heavily to lobby its case with the special master, Stephen Burbank, who under the CBA hears disputes between the sides. The NFL said the union spent twice the more than $6 million Burbank awarded the union, a penalty tied to what he judged as the mistiming of whether some TV money should have been counted in 2010 or 2011.

The union used two law firms to argue its case, a source said: Dewey & LeBoeuf, its longtime legal adviser, as well as Latham & Watkins. NFLPA Executive Director DeMaurice Smith worked for Latham & Watkins until 2006, when he moved to Patton Boggs. He left Patton Boggs when he assumed the NFLPA post in 2009.

The NFL has emphasized that the TV money has to be repaid, with interest, after games resume, presuming some of the 2011 season is lost. Grubman, speaking last month, said to think of the money as debt.

“This is cash money lost we can’t spend,” he said. “We have other sources we can tap, not just the money that is the subject of the [special master].”

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