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Volume 21 No. 1

Labor and Agents

With the NFL collective-bargaining agreement scheduled to expire at midnight Thursday, the league is pursuing a strategy to lock out players rather than impose work rules even if the NFL Players Association disbands, according to sources familiar with the situation.

Conventional wisdom within football circles is if the union disbands in order to file an antitrust lawsuit, the league would impose work rules and play the coming season, similar to the sequence of events that unfolded in 1989. That year started a stormy and litigious four-year phase between the league and players that culminated with the current CBA, struck in 1993. But no games were lost between 1989 and 1993 because, while there was no union, the teams still signed the players.

Several key sources said the NFL believes allowing the players on the field would essentially fund a new antitrust lawsuit because it would take away the league's main leverage point: depriving the players of game checks. As a result, the league might not lift a possible lockout just because the union walked away, making it a condition of the players returning that they drop the lawsuit.

Editor's note

SportsBusiness Journal is using the term "decertification" in stories to describe the act of the NFL Players Association disbanding, as have most other publications covering the labor negotiations. Technically, however, what the union did in 1989, and may do so again, is what in labor parlance is called "disclaiming interest," or "a disclaimer."

"The union leadership is in control of disclaimer; employees are in charge of decertification," said Seth Borden, partner in the employment and labor law practice at McKenna Long & Aldridge.

When a union disclaims, Borden said, its executives essentially walk away from their leadership roles. In a decertification, the members vote to disband.

While NFLPA members were reported to have voted for decertification in the fall, it's unclear if that was simply a vote to approve of disclaimer, if necessary.

A true decertification requires the union filing a petition at the National Labor Relations Board, which would then conduct its own vote of members. In other words, a disclaimer is an easier path to disband.

If successful, either disclaimer or decertification would get the NFLPA to the point of being able to file an antitrust lawsuit. But the union, sources said, plans to disclaim if events reach the point where it decides to disband.

Because labor lawyers say that even they often use the two terms interchangeably, for easier reading and to avoid confusion, SportsBusiness Journal is using the term decertification to describe the possible disbandment of the union.

"The difference this time is there will be a lockout," a league source said. "In 1989, there wasn't."

The players would then almost certainly ask a federal court to force the league to let them play, a league source said.

Whether this is an academic exercise or a description of events to begin unfolding later this week is uncertain. The union and league last week engaged in lengthy negotiations overseen by a federal mediator and were scheduled to meet again on Tuesday. The mediator noted in a statement last Thursday that progress had been made but there were still large differences between the sides.

The NFL declined to comment on what it termed contingency plans. The NFLPA, like the NFL, was not commenting on all matters related to the CBA because the mediator had asked the sides not to talk publicly.

But if the sides move past Thursday without a deal, or if the deadline is not extended, the sources said the NFL is intent on not repeating what it sees as its mistake in 1989: allowing the players to compete while they sued the league.

It would be uncharted territory if the union were to disband and the NFL does not let the players on the field, said Gary Roberts, a former league outside counsel.

"If the union decertifies, it is not really correct to call it a 'lockout,'" he said. "As soon as you don't have a union, it's an employer ceasing operations."

Bill Gould, a Stanford University law professor and former chairman of the National Labor Relations Board, said a court would likely side with the players and allow them back on the field.

"I think it would be a violation of the antitrust law to lock players out if, in fact, there is no union," he said.

First, the NFLPA needs to disband, and the timing is important. While the NFL cannot lock out until the CBA expires, labor lawyers expect the NFLPA to decertify before that time. That's because the expiring CBA is worded such that players need to disband before Thursday midnight, the expiration moment, or it would have to wait six months to file the antitrust lawsuit.

The NFLPA would disband for the same reason it did in 1989: Unions cannot sue an employer for antitrust violations. The NFLPA's decertification 22 years ago was viewed then as a radical and risky maneuver, but it paid off when the antitrust lawsuits resulted in a settlement with the league tied to a new CBA. That pact gave the players free agency and the owners a salary cap.

The league, meanwhile, is already challenging the players' potential decertification. On Feb. 14, it filed a charge with the NLRB on the matter, arguing that decertification is a way to avoid serious bargaining, a charge the union denied.

Lawyers describe that filing as the first step in the league's effort to halt decertification, which could be followed by lawsuits. It's unclear if the union's agreement to the intensive series of negotiations overseen by the federal mediator undercuts the NFL charge that the union has been engaged in surface bargaining designed to simply reach decertification.

Because the NFLPA decertified once, only to reform as a union, Roberts predicted the NFL would surely emphasize the union move is not a sincere gesture to disband. "The NFL will no doubt argue that it is not a decertification and that no one on the planet will believe the union is going away," he said.

The league could ask the NLRB to go to a federal court to file an injunction stopping the disbandment as a ploy because the union likely intends to re-form as it did in 1993.

"At the end of the day, can you really require a union to perform its functions?" asked Josh Zuckerberg, a labor lawyer with Pryor Cashman, which advises unions and management. "I don't think the board can compel them."

The union last fall won the blessing of its members to decertify. Decertified, the NFLPA could not collectively bargain for players or file grievances on their behalf and instead would operate as a trade association. NFLPA Executive Director DeMaurice Smith would run the group, and other employees are expected to retain their jobs in that circumstance.

Some NFL sources, however, said that the league might not be willing to deal with Smith at that point on any issue. If he no longer runs a union, said these sources describing the league's thinking, and if an antitrust lawsuit is filed, the NFL could insist on talking only with the class counsel, likely Jeffrey Kessler, the union's outside counsel.

In 1989, the league unsuccessfully challenged the NFLPA's decertification. After the NFLPA declared it disbanded, the league contacted the union on several occasions to bargain proposed changes to working conditions, according to an NLRB case. The union's then-executive director, the late Gene Upshaw, replied in writing that the organization was no longer engaged in collective bargaining. The NLRB, in a case brought by some players at the time, found the NFLPA was a trade organization.

Liz Mullen
While the NFL Players Association and the NFL have been meeting about a new collective-bargaining agreement, the union and the league also have been meeting about another deal: a new commercial agreement that covers NFL sponsors’ rights to use NFL players in advertising.

The overall sponsorship agreement between the NFLPA and the NFL is a separate document from the NFL CBA, but it expires at the same time: on March 4.

“The position of NFL Players is we would be willing to do a commercial deal outside of the CBA and remain willing to discuss the possibility,” said Keith Gordon, president of NFL Players, the NFLPA’s marketing and licensing arm. “At this point, no deal has been reached and no additional sessions have been scheduled to discuss the commercial agreements since prior to the Super Bowl,” Gordon said early last week.

Under the agreement, the NFL pays NFL Players a fee, which was about $25 million in 2009. In exchange, NFL sponsors have the right to use six or more NFL players in advertising, and NFL Players does not sign separate deals with companies that compete with NFL sponsors.

NFL Players has sent two letters to NFL sponsors — one in August, one later last year — offering them a chance to sign deals with them in order to continue their rights to use NFL players in advertising. As of March 4, NFL Players would also be able to sign companies that compete with existing NFL sponsors to agreements.

A source said that about 80 percent of the NFL’s current sponsors have had dialogue with NFL Players about renewing a deal, and other interested sponsors also have contacted the union’s licensing arm.

ORNSTEIN EXPECTED TO REPORT TO PRISON: Mike Ornstein, best known as the former marketing agent to Reggie Bush, is expected to begin serving eight months in prison this week, sources said, after pleading guilty last year to two federal felonies involving plans to sell Super Bowl tickets and NFL jerseys falsely advertised as game-worn.

Ornstein has not officially been assigned to a prison, said Chris Burke, spokesman for the Federal Bureau of Prisons. The bureau website last week stated that Ornstein was “in transit,” which generally means he is in custody to some degree. “The marshals have him somewhere, but he hasn’t gone to his designated facility,” Burke said.

Ornstein’s attorney didn’t return a phone call, but he has previously asked the U.S. District Court in Cleveland that Ornstein be assigned to Taft Correctional Institution, a medical facility prison in California.

Ornstein was sentenced in November to eight months in prison at a hearing in which federal prosecutors said he was cooperating with multiple ongoing federal investigations. In January, his attorneys and the government asked for more time before he had to report for prison in a motion that was filed under seal.

AGENT PAUL LAWRENCE DIES: Paul Lawrence, an agent with NFL player rep firm Maximum Sports Management, died suddenly of a heart attack earlier this month while playing basketball near his home in Seattle. He was 44.

“It was a big loss for us,” said NFL agent and Maximum President Eugene Parker. “He was so personable. All of our clients and everybody in the company were extremely close to him.”

Lawrence worked with Parker on a number of player clients, including New Orleans Saints cornerback Tracy Porter and Arizona Cardinals wide receiver Larry Fitzgerald. Despite the cutthroat nature of the NFL agent business, Lawrence was respected and liked by rival agents.

He is survived by his wife, Holli, two daughters and a son. Memorial contributions are being taken at Chase Bank branches for the Paul O. Lawrence Children’s Memorial Fund.

SIGNED FOR REPRESENTATION … : CAA Sports has signed Philadelphia 76ers guard Lou Williams for representation. A team of CAA agents, led by Leon Rose, will represent Williams, who was previously represented by Merle Scott. … NFL agent Drew Rosenhaus has signed USC defensive tackle Jurrell Casey for representation in the NFL draft. Casey was previously represented by Impact Sports.

Liz Mullen can be reached at Follow her on Twitter @SBJLizMullen.

Labor disturbances are no stranger to sports, but if the NFL locks players out after the collective-bargaining agreement expires Thursday night, it would stand as one of the few times team owners shut down their business not because of red ink, but rather for insufficient profit.

When players and owners began battling in boardrooms decades ago, the prime fights initially concerned free agency. More recently in the NBA, NHL and MLB, the issues have related largely to teams losing money.
Now comes the NFL and NFL Players Association fight, where the terrain is not what’s a tolerable loss, but instead what’s an acceptable rate of return.

“We have never claimed we are losing money,” NFL Commissioner Roger Goodell has insisted many times over the last year.

While a multitude of critics blast the NFL and the players for not figuring out how to divide a $9 billion-and-growing annual revenue pie, it’s precisely because of the scale of the business that the travails have developed. To generate so much revenue, and over a sliver of games compared with other sports, expensive capital investments are required, whether it’s a new stadium or a TV channel. Bulging revenue also triggers soaring franchise values, which affect player perceptions of owner demands.

“The revenue split is not as simple as it sounds,” said Andrew Brandt, a former Green Bay Packers executive. “There are factors of team debt [and] team operations. It’s not just how much, but breaking up chunks of revenues and seeing what the value is there.”
That is a paradigm different from the more traditional and easier-to-grasp sports labor confrontations of the past, when teams bled money and demanded player concessions.

“The lockouts that the NHL players were in were about survivability,” said Ian Pulver, an NHL agent who was associate counsel for the NHL Players’ Association when its players were locked out during the 2004-05 season. “It was about NHL franchise survival and losing, apparently, hundreds of millions of dollars.”

More recently, NBA Commissioner David Stern said his league loses $400 million a year, though the National Basketball Players Association disputes that figure. The NBA labor pact expires June 30, and the league is asking for salary cuts ranging between 30 percent and 40 percent.

For the NFL, the questions instead include how much should NFL players pay for new stadiums that ultimately generate substantial new revenue for them, or how much should they pay for new TV endeavors and concession companies? And, what is an appropriate rate of return for the owners to justify investing in these businesses?

The NFL demands additional financial credits for those investments. The NFLPA is not deaf to the pleas but requests proof that the profit margins are in the low single digits. The owners to date have rebuffed the union’s open-books proposal.

Although the NFL maintains its economic system needs an overhaul, the league has not, as the NHL and MLB did, hired an outsider to publicly document the need for change.

In 2000, MLB tapped former U.S. Sen. George Mitchell and other luminaries to author the Blue Ribbon Panel on Baseball Economics, which concluded that baseball suffered from a major disparity between high- and low-revenue clubs. The report’s findings formed the foundation of the MLB owners’ collective-bargaining position.

In 2004, the NHL picked former Securities and Exchange Commission Chairman Arthur Levitt to write a report on NHL losses. That report fueled the NHL’s demands and the subsequent 2004-05 lockout. The season-killing lockout resulted in a new system for the NHL that featured a first hard salary cap.

The NFL argument is even more forward-looking. The league warns that revenue growth will shrink without a restructured CBA, rather than arguing that the past is littered with eye-popping losses, the kind that expert reports trumpet.

“They are arguing the system will work better if it is changed,” said Gabe Feldman, director of Tulane University’s sports law program. “But they are not claiming the system is broken.”

Similarly, Gene Orza, retiring COO of the MLB Players Association, noted that MLB was not pleading poverty in that sport’s 1990 lockout. “The NFL is within its rights to call a lockout to exert pressure on the players, and, in doing so when it is not pleading poverty, [it] is not unique in labor relations,” Orza said.

Hollywood agencies have tried to enter the sports business over the past two decades, usually by having entertainment agents sign star athletes for entertainment work. Creative Artists Agency in 2006 took a different tack, hiring a powerful NFL agent and a leading MLB agent, each of whom had years of experience in athlete representation.

Last week, news broke that baseball agent Casey Close was leaving CAA Sports when his five-year deal is up next month.

Close is best known as the longtime representative of New York Yankees shortstop Derek Jeter and Philadelphia Phillies first baseman Ryan Howard.

Close did not return repeated phone calls, and CAA did not comment.

Close’s departure was somewhat expected. Hired originally to run the CAA Sports baseball division, he worked out of the New York office of Century City, Calif.-based CAA. After hiring Close, CAA beefed up the baseball practice by hiring several younger agents.

But for at least a year now, Close has not been running the practice. As reported last year, CAA quietly shifted the management of the division from Close to Nez Balelo, Brodie Van Wagenen, Jeff Berry, Joe Urbon and Greg Landry.

Casey Close’s client list includes Derek Jeter (left) and Ryan Howard.
Despite the apparent split within the baseball division, CAA had a very successful offseason in 2010, negotiating more than $400 million in new, guaranteed MLB contracts.

While the speculation that Close would leave has been going on for at least a year, in recent months there was also talk that CAA had been in discussions to extend his contract. Sources said those talks fell through, though, and Close has left.

It was not clear last week what Close will do. He could go out on his own and open his own shop, or he could merge with another firm.

Sources said CAA likely will have a continuing relationship with Close’s marquee clients, Jeter and Howard, especially since Jeter is not expected to sign another player contract and his next big deal may involve off-the-field work. Close is an MLB player contract agent.

Meanwhile, sources said Close’s departure is not expected to have any effect on whether Tom Condon, agent to a number of marquee NFL quarterbacks, including Drew Brees and brothers Peyton and Eli Manning, will end up staying at CAA when his deal is up next April.

Close and Condon both worked at IMG for years before joining CAA in April 2006. While Close signed a five-year deal, Condon, sources said, signed a six-year employment contract.