Players sit in driver's seat with lockout lifted; prepare for games
Pure and simple, the ruling is a game changer. It enjoins the NFL lockout, meaning the lockout is over. Whether players should report back to work will be determined in the next few days. The league is seeking a stay of Judge Nelson's order until the league can receive appellate review by the U.S. Court of Appeals for the Eight Circuit. Judge Nelson may grant a short stay, such a few days or a week for teams to resume their business operations, but she is unlikely to grant the length of stay desired by the league. The Eight Circuit would then be asked to review whether to grant a stay desired by the NFL.
Assuming the league is ordered to resume business operations in the near future, players will resume being paid under their contracts and receive their other employment benefits, including health care. Free agents will soon be able to sign with teams.
Absent a successful appeal by the NFL to the U.S. Court of Appeals for the NFL, Judge Nelson's order will last until there is a full trial of Brady v. NFL. A full trial would likely occur in 2012 or later and will probably be rendered moot by an eventual agreement between the NFL and NFL players on a new collective bargaining agreement.
Teams would be wise to proceed cautiously until a stay is granted or denied, and until the U.S. Court of Appeals decides on the NFL's appeal. Teams, however, should not act too cautiously, as they might unwittingly commit violations of federal antitrust law by refusing to sign players.
First off, there is uncertainty as to whether the terms of the recently expired CBA control. In a previous case, Powell v. NFL, the Eight Circuit held that an expired CBA between the NFL and NFLPA remained in effect indefinitely, even if in negotiating a new CBA, the NFL and NFLPA were to break off negotiations. Here, however, the NFLPA has decertified and, as Judge Nelson conspicuously notes in her order, "the Players have exercised their right to abandon the collective bargaining framework of labor law in order to pursue individual contracts." For that reason, collectively bargained rules, such as restrictions on free agency or the salary cap, are unlikely to remain in effect. In fact, if teams proceed as if they are, they could run afoul of federal antitrust law (which generally disfavors competitors, such as teams, from conspiring in ways that limit competition, such as restrictions on signing players).
For the time being, therefore, there do not seem to be restrictions on players who are without contracts, including those previously viewed as "restricted free agents," from signing with teams (players already under contract will resume their contracts). Ironically, if teams refuse to sign players because of the uncertainty, they could commit a separate antitrust violation: a group boycott of free agent players.
Judge Nelson's order benefits the players and hurts the owners in several ways.
First, it puts the players in the driver's seat in terms of negotiating a new CBA. They will return to work and cannot be locked-out by the league, which had banked on the lockout as its most threatening negotiation weapon. If the league does not agree on a new collective bargaining agreement, the league would be subject to antitrust violations by placing restrictions on teams signing players.
Second, the players now hold a huge bargaining card in dealing with the owners: Judge Nelson's order indicates that the players would probably win in their antitrust litigation. Successful parties in private antitrust litigation automatically receive treble damages, which in this case could total in the billions of dollars. While most antitrust lawsuits settle, some NFL team owners might thus be worried about the prospect of paying 1/32nd of a billion dollar-plus legal tab. This could cause dissension among some NFL owners, who to date have seemed unified.
Third, players can now demand what they have wanted all along: more transparency in the NFL books.
The league has already signaled that it will seek both a stay and appeal of Judge Nelson's order. The request for a stay could be heard by the Eight Circuit as soon as this week and, if granted, would allow NFL teams some time to restart operations. Whether or not the stay is granted, the NFL will appeal Judge Nelson's order to the three judges on the U.S. Court of Appeals for the Eight Circuit. It will be an "interlocutory" appeal in that it will be filed before the final disposition in Brady v. NFL.
The NFL's appeal will be characterized as expedited, with the hope of getting an appellate hearing in the coming weeks. While requests for expedited appeals are often reserved for emergency matters, the NFL has enjoyed recent success in obtaining such an appeal. Back in 2004, the U.S. Court of Appeals for the Second Circuit granted the NFL an expedited appeal after U.S. District Court Shira Scheindlin ruled in favor of Maurice Clarett in his antitrust litigation against the NFL and its eligibility restriction
. The NFL would go on and win the Clarett case before the Second Circuit.
Tom Brady and the other plaintiffs will go into the appeal with a big advantage: the Eight Circuit will review Judge Nelson's order under the deferential "abuse of discretion" standard. Under this standard, the Eight Circuit will first evaluate whether Judge Nelson correctly enunciated the proper standard for a preliminary injunction. Her order, which clearly outlined the normal standard for a preliminary injunction, suggests that she will easily meet that test.
Next the Eight Circuit will evaluate whether Judge Nelson plausibly -- as opposed to what the three judges deem "correctly" -- applied that standard. The Eight Circuit may question Judge Nelson's conception of jurisdiction and of "irreparable damages." Here's why:
The NFL insisted that Judge Nelson should not rule on the Brady lawsuit until the National Labor Relations Board decides on the legality of the NFLPA's decertification, which the NFL has challenged as an unfair labor practice. In making that argument, the NFL focused on the Norris-LaGuardia Act, which disfavors the use of injunctions while labor and management are at impasse. Judge Nelson rejected the NFL's reasoning and characterized the NFL as incorrectly conflating two distinct doctrines: the doctrine of primary jurisdiction, which would permit review by a judge and federal agency, and the doctrine of exclusive statutory jurisdiction, which would not. Essentially, Judge Nelson reasoned that the National Labor Relations Board's (NLRB) review of the unfair labor practice does not stop review of the players' antitrust arguments.
Judge Nelson also highlighted that she is not obligated or even encouraged to defer to the NLRB, despite its expertise in labor law. To bolster that contention, she stressed the frequent delay in parties receiving decisions from the NLRB, which has a heavy case load and could take a year to decide on the NFL's unfair labor charge. From that lens, Judge Nelson intimated that if she punted on the case until the NLRB decided, then the NFL would wrongly be in the driver's seat. A continued lockout may have wiped out the 2011 season unless the players' capitulated to the league demands.
Expect Judge Nelson's reasoning, which characterized the law as more interpretative than the NFL believed, to come under fire in the appeal.
Judge Nelson was convinced that players would suffer irreparable harm -- meaning a harm that cannot be adequately remedied by money damages, including even trebled damages in antitrust lawsuits -- if they lost the 2011 season. The players argued, to Judge Nelson's satisfaction, that by sitting out one season, players' skills would diminish and careers would be shortened. She also highlighted how unrestricted free agents are in "contractual limbo" and that 2011 rookies would be unfairly harmed by a lockout since they could not play in the NFL or college in 2011, and then they would return in 2012 and compete against next year's rookies, who would have benefited by playing the 2011 college football season.
To advance her claim of NFL players' suffering irreparable harm, Judge Nelson cited Spencer Haywood's nearly 40-year-old successful lawsuit against the NBA and its rule that prohibited players from signing with NBA teams until four years after their high school graduation. In that case, the court highlighted that given that NBA players are typically in their 20s and early 30s, missing up to four years in the NBA because of an age limit constituted irreparable harm.
On appeal, expect the NFL to highlight that courts can usually identify money damages, even for hard-to-quantify damages. The NFL will also characterize Judge Nelson's logic as speculative: while rookie NFL players locked-out would have to compete against players who played a season of college football, the best ones should still rise to the top.
Bottom line: the NFL has a decent shot in the appellate review, but the standard of review is still stacked in favor of the players.
If the Eight Circuit deems it appropriate to change its schedule of hearing appeals -- which could include appeals of cases where defendants have been sent to prison -- in order to accommodate the wishes of a professional sports league, it could hear the appeal as early as this week; more likely, an expedited review would be heard in the next few weeks.
Judge Nelson is noticeably dismissive of the NFL's unfair labor practices charge. In fact, she writes that, "it is likely, if not inevitable, that the NLRB will dismiss that charge now that the Players have exercised their right to abandon the collective bargaining framework of labor law in order to pursue individual contracts." While the NLRB need not rely on Judge Nelson's advice, her comments are telling.
Unless the Eight Circuit says otherwise, yes. And it means that when the players and owners eventually reach a deal on a new CBA, the players will be positioned to concede much less than what the owners had asked for.
The collective bargaining agreement between the NBA and the National Basketball Players' Association (NBPA) will expire on June 30. Just like we saw last month with the NFLPA and the NFL, the NBPA is poised to decertify and the NBA is poised to institute a lockout.
On one hand, Judge Nelson's ruling sends a warning to the NBA and its owners that, at least in her view, antitrust law holds a dim view of lockouts and that judges should not wait for the NLRB to decide on unfair labor complaints.
On the other hand, the NBA is in a very different situation.
For one, the NFL's legal argument has been hampered by the fact that not one NFL team can show that it is losing money. The inability of a team to do so suggests that enjoining the NFL lockout would not force an NFL team to lose money. The NBA, in contrast, asserts that 22 of its 30 teams will lose money in the 2010-11 season, and the league is willing to open the books to prove it. A court decision to lift a lockout instituted by the NBA would therefore subject NBA teams to losing money in the 2011-12 season. Such a consequence could motivate a judge reviewing an NBA lockout to be less willing than Judge Nelson to lift the lockout.
Second, irreparable harm may be more difficult for NBA players to show, since unlike NFL players who can play nowhere else and earn an NFL-quality income, some NBA players would be able to secure lucrative contracts in Europe and elsewhere during a lockout. If NBA players can't show irreparable harm, they would not be able to convince a judge to enjoin an NBA lockout.
Third, Judge Nelson's decision would not bind a court that reviews the NBA lockout. In fact, it is likely that such a court would be in New York, where both the NBA and NBPA are located. The NFL and NFLPA are litigating the lockout in Minnesota because the parties choose to do so in their collective bargaining agreement.
Bottom line: while Judge Nelson's ruling likely caused some concern for NBA teams, the NBA is in a very different situation and a lockout may be viewed more favorably by a court.