Breaking down Wednesday's ruling by Judge Susan Nelson denying the NFL's request for a stay of her lockout decision ...
1. What does Judge Nelson's decision mean?
It means that NFL teams must resume business operations and allow players to work out, practice and conduct other normal activities. While teams are not obligated to conduct organized practices or even provide coaching sessions, players must be allowed the same employment opportunities they would typically enjoy.
Teams will most likely comply with Judge Nelson's order. Team officials who refuse the order would be subject to penalty -- including monetary fines or even imprisonment -- for disregarding a court order. Judge Nelson could also request enforcement assistance from the U.S. Marshal Service, the federal agency entrusted with enforcing court orders. If necessary, marshals could be asked to escort players into team facilities. If players believe that teams are in any way limiting their access to facilities, expect Judge Nelson to take decisive action against teams and their officials.
2. Judge Nelson said the NFL has to get back to business. What will be the rules for free agency, the salary cap and other critical components of NFL football?
Here's the dilemma for the NFL: with the NFLPA decertified, the NFL cannot collectively bargain any rules, and only collectively bargained rules are exempt from antitrust law. The NFL is thus faced with the onerous task of figuring out a set of restraints on competition that would ensure that the league can function effectively, but not prove so anticompetitive that the restraints violate federal antitrust law. The NFL, with its emphasis on team sharing and competitive balance, is probably the least-equipped of the four major pro sports leagues to withstand antitrust scrutiny.
To illustrate this challenge, consider the NFL's salary cap. Although NFL teams are competitors on and off the field, they agree on a salary cap that prevents teams from spending on players as much as some teams might like. Some teams are presumably worse off because of this restraint, since absent it, they would sign better or at least more expensive players (imagine how the Yankees and Red Sox might fare if they, along with every other MLB team, could only spend $90 million annually on player salaries, instead of $200 million or $160 million). The 32 NFL teams nonetheless believe they are collectively better off because the salary cap promotes competitive balance.
While the goal of competitive balance may sound laudable, the salary cap harms the market of players, who would collectively earn more money if there was no salary cap. Those players are protected by antitrust law, which disfavors agreements among competitors that harm markets. Antitrust law is also quite threatening, as successful plaintiffs automatically receive trebled damages.
The compatibility of the NFL salary cap with antitrust law has yet to be determined, as the salary cap did not become part of the NFL until the league had begun collectively-bargaining with the NFLPA. If the NFL imposes a salary cap, a player or group of players could file an antitrust lawsuit that would mimic arguments made in Tom Brady et al. v. NFL: the salary cap is illegal absent collective bargaining.
For similar reasons, it is conceivable that the NFL could postpone Thursday night's draft for fear of antitrust exposure. Keep in mind, in 1978, the U.S. Court of Appeals for the District of Columbia held that the NFL draft was illegal under federal antitrust law. A player drafted Thursday night or this weekend could argue that he should be able to negotiate with multiple teams, rather than one. In antitrust verbiage, he would insist that competing NFL teams have joined hands to prevent him from multi-employer bargaining and from selecting the employer he most prefers.
On the other hand, the NFL may feel more confident about its chances under contemporary interpretation of federal antitrust law. In recent years, courts have generally become more permitting of defendants' collaborative activities. The NFL could also reason that antitrust litigation tends to take a long time, and lawsuits brought by players would likely be settled out of court once a new CBA is reached. Still, antitrust law is very threatening and the NFL has to proceed carefully.
3. But if the NFL uses the rules from 2010, wouldn't the league be OK?
Not necessarily. Those rules were borne from collective bargaining and were thus exempt from antitrust scrutiny. Some of those rules, if unilaterally imposed by the league, might violate antitrust law.
4. So what would you recommend the NFL do?
First, NFL teams should re-open business without any physical or other obstructions to players. A court has told the league to resume operations. It should do just that and not pull any gimmicks. It may be an awkward time for teams and players, but only if they let it be.
Second, the NFL should -- for the time being -- not employ a salary cap, meaning teams should be able to sign free agents without restriction. Teams would still be deterred in their spending because a new CBA will eventually be reached and it will contain a salary cap -- no team wants to be way over the cap when the new CBA is put in place.
Third, teams should remove franchise tag designations and other restrictions on players' free agency rights. History should convince the league of this point: the NFL has lost antitrust cases involving unilaterally imposed restrictions on movement of free agents between teams. Judge Nelson notably stipulated that teams are not obligated to sign free agents. In one respect, that stipulation benefits teams since they cannot be alleged to have engaged in a group boycott under federal antitrust law by not signing free agents. But as a matter of practice, the stipulation may not prove meaningful: teams may not be legally obligated to sign free agents, but if they don't, their competitors will.
Fourth, and more controversially, the NFL should think seriously -- and quickly -- about postponing the draft. Article XVI of the recently-expired CBA between the NFL and NFLPA stated that the 2011 draft would take place even without a new CBA, but the NFLPA is no longer bargaining on behalf of NFL players or -- more relevantly -- draft-eligible players. A draft-eligible player could persuasively argue that Article XVI is no longer controlling and instead the "free market" system, as described by Judge Nelson and which means every player represents himself, controls. While no drafted player may end up commencing an antitrust lawsuit, the NFL draft has been deemed illegal under antitrust law when not borne from collective bargaining. Obviously, postponing the draft with 24 hours till its scheduled start would be very unpopular with teams, players, fans and media, but legally it may be worth doing.
5. How will Judge Nelson's ruling impact negotiations for a new CBA?
In a way, the players, with the help of Judge Nelson, have backed the NFL into a corner. Per Judge Nelson's ruling, the league has to re-open. And in order to have a functional league, the league must establish rules of competition. With the NFLPA decertified, those rules will be subject to antitrust scrutiny.
The NFL could avoid antitrust scrutiny of the rules by convincing NFL players to recertify the NFLPA and sign a new CBA. The NFL, however, would likely have to offer a CBA much more in line with NFLPA demands.
At least for now, the players clearly have the bargaining leverage in discussions for a new CBA. The labor decertification/antitrust lawsuit strategy of DeMaurice Smith -- a seasoned litigator by training -- has proven highly successful to date.
6. Could Judge Nelson's order cause dissension among NFL owners?
Yes. This has been a rough week for the league and some owners may be wary of the league's lockout strategy. Then again, the Eighth Circuit could change everything by reversing Judge Nelson. The speed at which the Eighth Circuit conducts its review may prove crucial in preserving unity among owners. If the review takes months, the patience of some owners will be tested and off-the-record statements of frustration to the media could arise; if it takes days or weeks, the owners are more likely to stand behind commissioner Roger Goodell.
7. How quickly will the U.S. Court of Appeals for the Eighth Circuit review Judge Nelson's order?
Normally an interlocutory appeal -- one filed before the final disposition of a case -- takes in the range of four to eight months. The NFL, however, will seek an expedited review. The Eighth Circuit has discretion to provide an expedited review, which could come as quickly as the Eighth Circuit chooses. Normally, though, expedited reviews are reserved for emergency matters, such as whether a defendant has been wrongly convicted and sent to prison. Whether the Eighth Circuit decides that the plight of a professional sports league warrants an expedited review remains to be seen. The NFL received an expedited review from the U.S. Court of Appeals for the Second Circuit in 2004 after Maurice Clarett won in his trial against the NFL and its eligibility restriction.
8. What happens if the Eighth Circuit reverses Judge Nelson?
It depends on the type of reversal. If the Eighth Circuit only reverses Judge Nelson's denial of the stay, the NFL could resume its lockout until the Eighth Circuit reviews Judge Nelson's preliminary injunction. In that scenario, the Eighth Circuit might indicate that it needs several weeks to conduct such a review. Thus an Eighth Circuit reversal of the denial of the stay might prove to be a fleeting victory, as the Eighth Circuit could, after several weeks, sustain the preliminary injunction.
If the Eighth Circuit decides to reverse the preliminary injunction, it would be a game changer. The NFL would no longer be enjoined from locking out the players and the league could reinstitute the lockout for the entire 2011 season. The pendulum of leverage would swing firmly back to the owners. In that scenario, the owners could tell the players that there will be no 2011 season, and thus players will be denied their game checks, unless the players recertify the NFLPA and collectively agree to a new CBA that contains league-favorable terms.
Technically, even if the Eighth Circuit removes the preliminary injunction, the NFLPA could continue to wage its antitrust litigation against the league. The Eighth Circuit would have only decided on the preliminary injunction, not the merits of Tom Brady et al. v. NFL. However, the NFLPA would have to wait for a trial and antitrust litigation is often slow and lengthy; a period of years between the filing of an antitrust complaint and an actual antitrust trial is common. It may thus be well into 2012 or longer before the NFLPA received its antitrust trial.
9. Can the NFL or NFLPA get the U.S. Supreme Court to review the Eighth Circuit?
It can petition the U.S. Supreme Court for a writ of certiorari, but it will probably fail. The Supreme Court rejects approximately 98 or 99 percent of writs. There is a slight chance the Supreme Court might be tempted to hear the dispute, as the dispute has raised novel questions of how labor and antitrust laws, along with the National Labor Relations Board and courts, interact with one another during a lockout. Still, the odds of Supreme Court involvement are slim.
10. How does the NLRB fit into Wednesday's ruling?
At some point in the future, and probably not until after the 2011 season (whether it is played or not), the NLRB will determine whether the NFLPA engaged in unfair labor practices by decertifying. While that hearing will be significant in terms of potential damages, the NLRB will likely not play a role in determining whether there is a 2011 season.