The NBA Lockout: A Momentum-Killing Millionaire v. Billionaire Showdown

by Cynthia Flores November 2 2011, 23:24

On July 1, the National Basketball Association (NBA) instituted a lockout when its collective bargaining agreement (CBA) expired and negotiations, which began in January 2010, stalled. Over the past four months, owners and players have made multiple attempts to reach an agreement with no success. On October 10, NBA Commissioner David Stern canceled the first two weeks of the season and stated that both sides are still, “very far apart on virtually all issues… we just have a gulf that separates us.” A number of issues have been discussed including: revenue sharing, salary caps, luxury penalties, guaranteed contract lengths, and player exceptions. The owners and players have three ways to resolve these issues: bargaining, mediation, and/or legal action. After bargaining failed, a federal mediator was called upon and, after a week of mediation, Stern cut an additional two weeks. If mediation also fails to produce results, owners and players could choose to leave the bargaining table and head to federal court. If this occurs, a number of legal issues would have to be considered including: decertification, injunctions, and antitrust claims. It is estimated that the two-week cancellation will result in a loss of about $83 million in ticket sales, not counting parking and concessions revenue. The losses become much more significant considering the fact that the NBA could very well be alienating a critical fan base by prolonging the lockout.

Though owners and players disagree on many issues, negotiation talks have been primarily focused on the issue of revenue sharing. It is estimated that basketball related income (BRI), the money made through basketball operations, totaled $3.8 billion last season. Under the prior CBA, players received 57% of this revenue while owners kept 43%. After much back and forth, the owners are now in favor of a 50-50 split, while the players continue to insist on a 52.5% share, a difference of about $100 million per year. Considering that both the owners and players stand to lose a lot more than due to canceled games, it becomes pretty clear that both sides are more interested in “winning” than compromising.

Though the owners and players have expressed a desire to reach a deal through bargaining, there is still a possibility that the dispute will ultimately be resolved in court. Both sides have filed complaints with the National Labor Relations Board (NLRB) alleging that the other side was not engaging in good faith bargaining. However, the likelihood the NLRB will rule for either side is slim since it is apparent that some progress has been made. The players union (NBPA) has also considered following in the footsteps of the NFL union and decertifying. Decertification would allow the players to dissolve the union and file an antitrust suit against the league. In response to this threat, the league filed a federal lawsuit on August 2, seeking a declaratory judgment that the lockout is not in violation of federal antitrust laws and that if the NBPA’s decertification were found to be lawful, all existing player contracts would become void and unenforceable. The suit was filed in United States District Court for the Southern District of New York, a court that has previously ruled in favor of the league on similar disputes (in NBA v. Williams, the court held that the salary cap, college draft, and certain restrictions on free agency were not antitrust violations). 

In response to the NFL player’s union decertification, the Eighth Circuit held that the Norris-LaGuardia Act, which prevents federal courts from issuing temporary or permanent injunctions in cases involving labor disputes, prohibited them from enjoining the lockout. Even though the Eighth Circuit refused to enjoin the lockout, it is known to be a conservative-leaning court with a tendency to side with business on labor issues. Therefore, it is entirely possible that another court would rule in favor of the players and issue a preliminary injunction ending the lockout. Though the court for the Southern District of New York previously ruled in favor of the NBA in Williams, this may be of little help when it comes to avoiding an injunction, especially since the Williams court referred to the argument that the Norris-LaGuardia Act deprives the court of jurisdiction to enjoin a labor dispute as a “dubious proposition.” Therefore, if the players choose to decertify, it is possible that the court will decide to grant the injunction and end the lockout. If nothing else, they have a much better chance in the Southern District of New York than they would in the Eighth Circuit.

In the case of the NFL, the lockout ended before the court could rule on whether or not it was an antitrust violation. The application of the Sherman Antitrust Act to professional sports has been the source of controversy and litigation for decades. From joint broadcast deals to restrictions on players’ salaries, it is evident that professional sports leagues engage in conduct that can be deemed anti-competitive. However, Congress and the courts have created exceptions and exemptions to the Sherman Act that seeks to protect the leagues from antitrust litigation. For example, MLB has enjoyed total immunity from antitrust law since 1922 when the Supreme Court held in Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs that professional baseball did not constitute interstate trade or commerce and was, therefore, not subject to the Act. However, a lot has changed since 1922; professional sports leagues are now multi-billion dollar businesses that directly affect hundred of thousands of people. Due to the dramatic evolution of professional sports, it is highly unlikely that a court would grant another professional sports league total immunity as it did in 1922. However, it is likely that they will continue to make exceptions that protect the league against antitrust claims.

Though some may see decertification as the only viable option for players, the actual likelihood of success on the antitrust issue is slim. Not only have the courts previously ruled in favor of the NBA on these matters, this kind of litigation would likely take longer than most players are willing to wait. In the past, cases such as these have arisen not because players or owners were particularly interested in litigation; instead, both sides have simply used the courts as a bargaining chip in the collective bargaining process. This is an issue of labor law and as such, should be resolved through bargaining, not intervention by the courts. One thing is clear, this dispute will not end until both sides decide to compromise rather than try to “win.”

There’s a chance that NBA owners are ready and willing to lose an entire season, much like the NHL owners did in 2004. Coming off a season that was arguably the best the NBA has had in the post-Michael Jordan era, the stoppage seriously risks alienating the fan base responsible for the soaring revenues and television ratings the league experienced. The public’s perception of the lockout is likely to significantly hurt the NBA for years to come for an obvious reason: “the NBA is not the NFL; it doesn’t have the luxury of extraordinary and unassailable popularity.” By canceling the first four weeks of the season, each side has sacrificed more than they would have with the other side’s deal. Though loyal NBA fans will certainly be disappointed by the shortened season, they will wait for the games to resume and return to the arenas once they do. However, the chances of the casual fan waiting are slim to none, and this is not a risk the NBA can afford to take.

 

Comments (2) -

2/26/2012 6:07:29 AM #

Jason Simeon

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Jason Simeon United States

5/1/2012 12:24:45 AM #

<a href="http://otterboxipad.org">Otter</a>

"Though owners and players disagree on many issues, negotiation talks have been primarily focused on the issue of revenue sharing." It's always about the money!

<a href="http://otterboxipad.org">Otter</a> United States

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