I have a couple of articles for SI.com tonight on Donald Sterling's lawsuit against the NBA and the indemnity agreement his wife, Shell Sterling, has signed with the league:
Friday, May 30, 2014
Sterling lawsuit
Here is Donald Sterling's federal Complaint against the NBA. I think I'm with Lester Munson that this is frivolous, particularly the anti-trust and state constitutional claims; Munson thinks Sterling will be hit with sanctions, although I doubt it, knowing how judges wield FRCP 11 with wealthy plaintiffs. As for the breach-of-contract claims: If, as reports are suggesting, the league is going to approve the Shelly Sterling-brokered sale of the Clippers to Steve Ballmer and the league is going to cancel the hearing on forcing Donald to sell, then he has no claim against the NBA, only against Shelley and/or the family trust.
Correction/Further Thoughts: I should have looked more closely at the relief sought, including on the breach claims (which have more merit than the federal antitrust claim): As to all counts, Sterling seeks injunctive relief eliminating the fine and lifetime ban, reinstating his preferred CEO, and halting the NBA's termination proceedings (which the NBA already appears to have halted).
And here is where, I think, it has the makings of a Civ Pro exam: If the NBA approves the sale, these claims all become moot (assuming the NBA waives the fine, as I imagine it would to make this all go away). Sterling's next move is to enjoin the sale. But to do that, Shelly Sterling (and the family trust, to the extent she claims to be running it) become compulsory defendants under FRCP 19, since Shelly purports to control the trust and is making decisions (whether the NBA's fingerprints are on those decisions or not) and she thus claims an interest in this matter that Sterling will not represent. Alternatively, Shelly will move to intervene to protect her interests. Resolving that issue also will require determinations of Sterling's competency and who is in control of the trust--these are complex issues of state law, which might cause a federal court to decline to exercise supplemental jurisdiction over the state law claims (the three breach counts and the state constitutional law count) and leave Sterling to pursue this in state court. That would leave only the antitrust claim in federal court, which everyone seems to agree is a non-starter, regardless of relief sought.
Correction/Further Thoughts: I should have looked more closely at the relief sought, including on the breach claims (which have more merit than the federal antitrust claim): As to all counts, Sterling seeks injunctive relief eliminating the fine and lifetime ban, reinstating his preferred CEO, and halting the NBA's termination proceedings (which the NBA already appears to have halted).
And here is where, I think, it has the makings of a Civ Pro exam: If the NBA approves the sale, these claims all become moot (assuming the NBA waives the fine, as I imagine it would to make this all go away). Sterling's next move is to enjoin the sale. But to do that, Shelly Sterling (and the family trust, to the extent she claims to be running it) become compulsory defendants under FRCP 19, since Shelly purports to control the trust and is making decisions (whether the NBA's fingerprints are on those decisions or not) and she thus claims an interest in this matter that Sterling will not represent. Alternatively, Shelly will move to intervene to protect her interests. Resolving that issue also will require determinations of Sterling's competency and who is in control of the trust--these are complex issues of state law, which might cause a federal court to decline to exercise supplemental jurisdiction over the state law claims (the three breach counts and the state constitutional law count) and leave Sterling to pursue this in state court. That would leave only the antitrust claim in federal court, which everyone seems to agree is a non-starter, regardless of relief sought.
Thursday, May 29, 2014
More Breaking News: Clippers may be sold to Steve Balmmer, but Donald Sterling reportedly declared Mentally Incompetent
The never settled Donald Sterling has taken some new twists over the last five hours. I have a new article for SI.com examining what has happened and what to expect next.
Breaking News: NBA willing to fast track sale of Clippers and postpone Donald Sterling hearing
I have some breaking news on SI.com on the Donald Sterling matter. I hope you can check it out and also read Nathaniel Grow's excellent post below this post analyzing the Fair Labor Standards Act and pro sports--a very timely topic.
Pro Sports Teams and the Fair Labor Standards Act
One legal issue that will need to be resolved in these lawsuits is whether the professional sports industry is exempt from the FLSA's minimum wage and maximum hour requirements under Section 213(a)(3), a provision covering seasonal amusement and recreational establishments. Under the exception, any business providing amusement or recreational services to the public may pay its employees a sub-minimum wage (without overtime) should one of the following two conditions exist: either (a) the business does not operate for more than seven months in any calendar year, or (b) the business's receipts from its six lowest revenue months in the previous year were less than 33 1/3% of its receipts in its six highest revenue months (e.g., the business's receipts from April-September were at least three times greater than its receipts from October-March).
While sports franchises clearly provide amusement or recreational services, it is less certain whether they satisfy the exception's seasonality requirement. Professional sports teams hoping to claim seasonal exempt status under the FLSA will likely have to rely on the first condition under Section 213(a)(3). Indeed, because teams tend to receive a significant percentage of their revenues during the off-season (from season ticket deposits, television broadcast agreements, sponsorship deals, etc.), they typically will not satisfy the six-month receipts requirement set forth in Section 213(a)(3)(b). See Bridewell v. Cincinnati Reds, 155 F.3d 828 (6th Cir. 1998) "Bridewell II").
Meanwhile, courts are split regarding the status of professional sports teams under Section 213(a)(3)(a)'s seven-month operation provision. Two of the three courts to consider the issue to date have held that sports franchises effectively operate year-round, and therefore do not qualify for the FLSA's seasonal exception. For example, in Bridewell v. Cincinnati Reds, 68 F.3d 136 (6th Cir. 1995) ("Bridewell I"), a group of stadium maintenance employees sued the Cincinnati Reds alleging that the team had failed to pay them overtime as required under the FLSA. The team asserted that it was exempt from the law because its season ran seven months (including spring training). The 6th Circuit rejected this argument, concluding that the team was a year-round business. In particular, the court noted that the team's operations extended beyond just the playing season, as evidenced by the fact that the Reds employed nearly 120 people on a year-round basis. As a result, the appellate court concluded that the team was subject to the FLSA.
Similarly, the Eastern District of Louisiana held that the NBA's New Orleans Hornets were likewise subject to the FLSA in a suit brought by former ticket sales and fan relations employees. In Liger v. New Orleans Hornets, 565 F.Supp.2d 680 (E.D. La. 2008), the court concluded that the Hornets were not exempt under Section 213(a)(3)(a) because the totality of their operations lasted more than seven months. In particular, the court stressed that the Hornets' season could potentially last as long as nine months if pre-season and post-season games were considered, while also noting that the team participated in the NBA Draft each June. Moreover, the court emphasized the fact that the Hornets employed 100 or more employees on a year-round basis.
However, at least one court has held that that a professional sports franchise was a seasonal operation exempt from the FLSA. In Jeffery v. Sarasota White Sox, 64 F.3d 590 (11th Cir. 1995), a grounds keeper for a minor league baseball team sued the franchise for unpaid overtime. The 11th Circuit rejected the challenge, holding that the team was exempt from the FLSA. In particular, the court stressed that the proper focus under Section 213(a)(3)(a) was on the duration of the team's amusement and recreational-related operations themselves, not the fact that some of its employees may be employed on a year-round basis. Consequently, because the minor league team's season only ran for five months, the court held that the franchise was not required to pay overtime. Undoubtedly hoping to take advantage of this precedent, the MLB defendants in the Senne minor league wage lawsuit filed a motion to transfer the case from California to the Middle District of Florida (the original site of the Jeffery litigation) last week.
Thus, the status of professional sports teams under the FLSA is currently unsettled. Should the courts in the pending lawsuits follow the Bridewell and Liger precedents, then it appears that the defendant professional sports franchises will be subject to the FLSA. However, if future courts were to follow the Jeffery v. Sarasota White Sox precedent, then the applicability of the exemption would likely vary by league depending on the duration of its playing season. In fact, a court could even determine that the status of teams in the same league differs depending upon whether the franchise qualified for the playoffs the year before. Given the number of suits currently pending, we will likely receive additional clarification from the courts on this issue in the near future.
Similarly, the Eastern District of Louisiana held that the NBA's New Orleans Hornets were likewise subject to the FLSA in a suit brought by former ticket sales and fan relations employees. In Liger v. New Orleans Hornets, 565 F.Supp.2d 680 (E.D. La. 2008), the court concluded that the Hornets were not exempt under Section 213(a)(3)(a) because the totality of their operations lasted more than seven months. In particular, the court stressed that the Hornets' season could potentially last as long as nine months if pre-season and post-season games were considered, while also noting that the team participated in the NBA Draft each June. Moreover, the court emphasized the fact that the Hornets employed 100 or more employees on a year-round basis.
However, at least one court has held that that a professional sports franchise was a seasonal operation exempt from the FLSA. In Jeffery v. Sarasota White Sox, 64 F.3d 590 (11th Cir. 1995), a grounds keeper for a minor league baseball team sued the franchise for unpaid overtime. The 11th Circuit rejected the challenge, holding that the team was exempt from the FLSA. In particular, the court stressed that the proper focus under Section 213(a)(3)(a) was on the duration of the team's amusement and recreational-related operations themselves, not the fact that some of its employees may be employed on a year-round basis. Consequently, because the minor league team's season only ran for five months, the court held that the franchise was not required to pay overtime. Undoubtedly hoping to take advantage of this precedent, the MLB defendants in the Senne minor league wage lawsuit filed a motion to transfer the case from California to the Middle District of Florida (the original site of the Jeffery litigation) last week.
Thus, the status of professional sports teams under the FLSA is currently unsettled. Should the courts in the pending lawsuits follow the Bridewell and Liger precedents, then it appears that the defendant professional sports franchises will be subject to the FLSA. However, if future courts were to follow the Jeffery v. Sarasota White Sox precedent, then the applicability of the exemption would likely vary by league depending on the duration of its playing season. In fact, a court could even determine that the status of teams in the same league differs depending upon whether the franchise qualified for the playoffs the year before. Given the number of suits currently pending, we will likely receive additional clarification from the courts on this issue in the near future.
Sports law quote of the day
From the June/July Esquire, there is a sidebar on the ages at which "your child is capable of learning to" do certain sports-related things. On the list: "Understand the infield fly rule: 34"
Wednesday, May 28, 2014
More on Sterling's defense
Mike and Jimmy both mentioned that Sterling had filed his written defense to the NBA's proceedings to oust him from the league; here is the full brief. A couple additional things of note.
Sterling's arguments are steeped in statutory interpretation, including some issues I previously noted. He insists that the $ 2.5 million fine is impermissible because the NBA is relying on the wrong provision. Article 24(l) is not in play, since it applies only if no other penalty is fixed for a given rule, but Article 35A(c), which prohibits speech detrimental or prejudicial to the best interests of the league, does provide for a fine of no more than $ 1 million. He also argues against the NBA's use of Article 13(d) as the basis for the forced sale--the NBA cannot use that as a catch-all provision to capture violations of all other rule or agreement, since Article 13(a) already serves as a catch-all by prohibiting willful violations of any provision of the Constitution and By-Laws, resolutions, or agreements. Presumably the NBA relied on 13(d) to get around the willfulness requirement; Sterling's point is the league cannot do that.
Sterling leads off by challenging the NBA's reliance on the secretly recorded conversations as evidence, which gets interesting. He points to California's penal code, which prohibits recording confidential communications without consent and excludes evidence obtained through unconsented-to recordings "in any judicial, administrative, legislative, or other proceeding." From this, Sterling insists he has a constitutional right not to have his private conversations recorded or having the evidence of his conversations used against him. That seems overstated--that the state offers a statutory protection against being recorded in furtherance of the constitutional right of privacy does not convert the right against being recorded into a constitutional right.
The interesting statutory question is whether internal dispute-resolution proceedings of a private organization constitute an "other proceeding" under California law. On one hand, the language seems to contemplate public proceedings, since the three enumerated types of proceedings are all public in nature (so under ejusdem generis, that catch-all should be read to cover only similarly public proceedings). It also makes sense that the criminal code would regulate evidence in public rather than private proceedings. On the other hand, what sorts of public proceedings exist that are not judicial, administrative, or legislative? Perhaps the catch-all refers to something like arbitration or mediation, which can be considered quasi-public--they are privately controlled processes to which parties agree to send otherwise-public disputes. Even so, however, does that capture the entirely private and internal proceedings the NBA is using here?
Moreover, the answer to that question may be affected by the 2001 decision in Bartnicki v. Vopper. Bartnicki held that Congress could not punish publication of an illegally intercepted and recorded phone call, where the publishers were uninvolved in the unlawful interception or recording. The First Amendment protects publication (and, implicitly, other uses) of truthful lawfully obtained information on matters of public concern, except where the government is serving a need of the highest order. So perhaps the NBA could argue that it is entitled under Bartnicki to use the recording in its private internal proceedings, meaning California law is limited only to public, California-established proceedings, but not to whatever private proceedings private persons or entities may choose to use the lawfully obtained recordings.
Sterling's arguments are steeped in statutory interpretation, including some issues I previously noted. He insists that the $ 2.5 million fine is impermissible because the NBA is relying on the wrong provision. Article 24(l) is not in play, since it applies only if no other penalty is fixed for a given rule, but Article 35A(c), which prohibits speech detrimental or prejudicial to the best interests of the league, does provide for a fine of no more than $ 1 million. He also argues against the NBA's use of Article 13(d) as the basis for the forced sale--the NBA cannot use that as a catch-all provision to capture violations of all other rule or agreement, since Article 13(a) already serves as a catch-all by prohibiting willful violations of any provision of the Constitution and By-Laws, resolutions, or agreements. Presumably the NBA relied on 13(d) to get around the willfulness requirement; Sterling's point is the league cannot do that.
Sterling leads off by challenging the NBA's reliance on the secretly recorded conversations as evidence, which gets interesting. He points to California's penal code, which prohibits recording confidential communications without consent and excludes evidence obtained through unconsented-to recordings "in any judicial, administrative, legislative, or other proceeding." From this, Sterling insists he has a constitutional right not to have his private conversations recorded or having the evidence of his conversations used against him. That seems overstated--that the state offers a statutory protection against being recorded in furtherance of the constitutional right of privacy does not convert the right against being recorded into a constitutional right.
The interesting statutory question is whether internal dispute-resolution proceedings of a private organization constitute an "other proceeding" under California law. On one hand, the language seems to contemplate public proceedings, since the three enumerated types of proceedings are all public in nature (so under ejusdem generis, that catch-all should be read to cover only similarly public proceedings). It also makes sense that the criminal code would regulate evidence in public rather than private proceedings. On the other hand, what sorts of public proceedings exist that are not judicial, administrative, or legislative? Perhaps the catch-all refers to something like arbitration or mediation, which can be considered quasi-public--they are privately controlled processes to which parties agree to send otherwise-public disputes. Even so, however, does that capture the entirely private and internal proceedings the NBA is using here?
Moreover, the answer to that question may be affected by the 2001 decision in Bartnicki v. Vopper. Bartnicki held that Congress could not punish publication of an illegally intercepted and recorded phone call, where the publishers were uninvolved in the unlawful interception or recording. The First Amendment protects publication (and, implicitly, other uses) of truthful lawfully obtained information on matters of public concern, except where the government is serving a need of the highest order. So perhaps the NBA could argue that it is entitled under Bartnicki to use the recording in its private internal proceedings, meaning California law is limited only to public, California-established proceedings, but not to whatever private proceedings private persons or entities may choose to use the lawfully obtained recordings.
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