Federal judge sides with players union in TV revenue dispute
Five days after saying he was unprepared to put his thumb on the scales of collective-bargaining negotiations between the NFL's owners and players, U.S. District Judge David Doty did just that Tuesday by reversing an earlier ruling that would have granted the owners access to $4 billion in television revenues during a lockout.
The ruling is considered a major victory of the union because, at least for now, the owners can't count on having the money to use as lockout insurance. Judge Doty will hold a hearing with both sides, at an undetermined date, to consider the award of monetary damages and equitable relief to the players -- which could include an injunction that would prevent the owners from being able to use the television revenues.
"This ruling means there is irrefutable evidence that owners had a premeditated plan to lockout players and fans for more than two years," said George Atallah, the NFLPA's assistant executive director for external affairs. "The players want to play football. That is the only goal we are focused on."
Said NFL spokesman Greg Aiello:
In early February, the union argued before Special Master Stephen Burbank that the league violated terms of the Stipulation and Settlement agreement -- which is the foundation of the current collective bargaining agreement -- when it redid several of its television contracts. The union said the league left monies on the table in 2009 and 2010 in exchange for lockout insurance in 2011.
Burbank ruled in favor of the league, although he did find two violations and awarded the union roughly $7 million in damages. The Players Association appealed the ruling last Thursday to Judge Doty, who declined to make a ruling from the bench that day in part because he did not want to impact negotiations one way or the other.
Tuesday's ruling is considered a huge victory for the union, which would have been at a decided disadvantage if the owners had access to the $4 billion during a lockout. It's unclear at this point whether the ruling will spur the sides to come to terms on a new agreement before the current CBA expires at midnight Thursday. However it clearly means the owners could have a harder time addressing their debt services if there is a prolonged work stoppage.
"I'm not sure what all that means, as of yet," said Colts center Jeff Saturday, who is a member of the NFLPA's executive committee. "We haven't been debriefed. We just got the news when we were in the meeting, so I'm sure we'll hear more tonight. But it sounds very favorable."
During last week's hearing, union attorney Jeffrey Kessler repeatedly drove home his contention that the owners violated terms of the Stipulation and Settlement Agreement by failing to "protect the economic interest of the players" while negotiating the new TV deals. He also hammered the point that the league sought to "inflict economic harm on the players" by securing lockout insurance from the networks.
"Their conduct was intentional in the extreme," Kessler argued. "It was carefully planned and executed by the people at the very top."
For instance, DirecTV's previous contract with the league contained no lockout provision. However Chase Carey, former CEO of the company, testified in the special master's hearing that he was told by league management it would be a "deal breaker" and "clearly a deal we would never do" if the satellite company failed to included lockout provisions in a new deal.
Also in his brief to the court -- which Doty unsealed last Thursday -- Kessler presented a memo obtained from a league broadcast committee meeting. In it Cowboys owner Jerry Jones is quoted as saying the owners "need to realistically assume [we are] locking out in 2011" to get a deal that works for the owners.
Among Kessler's other arguments in his brief, taken verbatim:
• Over the summer of 2008, they stated a "key consideration" for the TV contract negotiations was the "NFL strategic concerns" regarding a "CBA" and a "rationale" for an early DirecTV extension was "lock[ing] in rights fee with favorable work stoppage provisions as the "solution" for "guaranteed payments in NFL work stoppage."
• In October 2008, they stated that "Key considerations related to NFL labor situation" included the "NFL's ability to use media revenues to fund work stoppage."
• In February 2009, an NFL memorandum to the owners on defendants' broadcast, finance and labor committees state, in preparation for an usual joint meeting of these three committees: "The specific goals under consideration relating to the timing for key decisions include" -- "Securing revenue streams that will provide the necessary financial flexibility to remain committed to the right long-term labor agreement."
• On March 5, 2009, the presentation at the joint meeting of those committees stated that a key factor for defendants' negotiation decision making was their "cash needs during lockout" and indicated, in their Decision Tree, that the only reason for going forward with the new TV contracts "now" was because "Deal Completion Advance(s) CBA Negotiating Dynamics."
The league contends that lockout provisions have always been a part of TV contracts, although that wasn't the case with DirecTV and, according to Kessler, the previous ESPN deal would subjected the league to millions, if not billions of dollars in liabilities if there were no football for an entire season. Also, in previous deals the league was required to repay monies in the same work-stoppage year it received them. Now, the league is permitted to make restitution (with interest) at any point over the life of the agreement.
"Or repay in the form of rights for games," Levy said last week.
A lot of questions still must be answered, but for the moment the union has won a major ruling. Fans can only hope it leads to a quick settlement.