Professional Sports Law Outline
CHAPTER 2 – CONTRACTS
· A valid K is formed when both parties intend the act of signing to be the last act in the formation of a valid K. Contracts in sports define the rights and responsibilities of various participants in the business of professional sports.
a. Drafted by the team
b. Team makes the offer and player accepts by signing K
a. Indicated by any showing that expresses the player’s willingness to be bound by offerors exact terms
a. Ambiguous or indefinite terms interpreted in light of all surrounding circumstances
Standard Players’ Contract (SPK) – the standardized agreement between athlete and team. It is the employment K that specifies the players’ rights; includes signing bonuses, option clauses, no-cut clauses, and various incentive bonuses
Ø Specifies player’s rights and states that this player, no matter how average he appears to be, possess unique skills
Ø Can be modified through collateral agreements (collective bargainning)
Ø Ambiguous terms interpreted against the drafter
Philadelphia Ball Club v. Lajoie à The services of an individual player are of such unique character, special knowledge, skill and ability that it renders him of peculiar value to his team and so difficult of a substitution that if he breaks the K, the team suffers irreparable injury.
Ø Negative Injunction – Cannot order specific performance of the player’s contract, but it can grant an injunction to prevent him from playing for another club.
(1.) Signing Bonus
a. Alabama Football v. Stabler – signing bonus is not considered salary
b. Player receives it merely by signing onto team
(2.) Option Clause
a. Allows a team to unilaterally bind the player for another year at a stated percent (usually 10% or less) of the prior year’s salary
b. Often exhibits antitrust violations, but that is fixed through collective bargainning
c. Hennigan v. Charger Football – When a team exercises a renewal option, a new, 1 year contract is created.
(3.) Reserve Clause
a. Essentially a perpetual option year, in that each year had an option year, which in turn had another option year.
b. In baseball’s old reserve system, a player belonged to a team for life.
c. If the player did not want to request a trade, his only option was to retire.
d. However, a team could release a player or trade him without consent.
e. Eliminated in 1976.
(4.) No-Cut Clause
a. Assures a player will not be cut during the life of the contract.
b. Because management can terminate a player for many reasons: skill, physical condition, off-season injuries, or suspension, there are several types of no-cut clauses that protect a player from certain types of termination.
(5.) Collateral Agreements
a. Each contract contains an incorporation clause that incorporates into the contract collateral agreements such as the union-management collective bargaining agreement and the league’s bylaws and constitution.
b. Collateral agreements are the way in which the SPK is modified or extended
– Considered a breach of K if termination is not justified
– Justification is interpreted broadly
o Physically unable to perform
– Club can rightfully terminate a player’s contract if the athlete is out of shape, lacks skills, or defies club and league rules, or for a material breach of the SPK.
– In reality, a player with unique, proven skills is rarely released, but a player with marginal skills is more often released due to lack of skills
– Player’s K is assigned to another team à he is traded
– Each SPK contains a clause that allows the team to trade player’s at will
– Player might have enough bargaining power to negotiate a no-trade clause
– Money damages
– Specific Performance
– Injunction – force an allegiance to a particular team (Lajoie)
o Player’s unique skill can allow a team to enjoin the from playing from another team while under K
(1.) Unclean Hands
a. A party cannot request the court to grant an equitable remedy if the party enters the court with unclean hands
b. Athletes have successfully used this doctrine to defend against teams that have attempted to enjoin a player from playing with another team
c. Houston Oilers v. Neely à Oilers signed a K with Neely before he was eligible (still at OU); Oilers agreed to keep quiet; when Neely tried to break the K to play f or Cowboys, Oilers tried to enjoin him. Court granted the injunction, but this is a minority view!!
d. Most courts held you cannot sign players illegally, keep it quiet, and then try to enforce the K because the K is illegal and therefore void.
a. Either side can attempt to void a K on the basis that its illegal or unfair
b. A court will not permit equitable enforcement if the K’s terms are too harsh or 1-sided
c. Connecticut Professional Sports Corp v. Heyman à Heyman was playing for Capitols, got paid by the game, but the team had the option to renew K for a 1 year period anytime. When Heyman got drafted into another league, Capitols exercise the option and tried to stop Heyman from playing for the other team. Court held that the K terms were too one sided and unconscionable because the Capitols had the right to bind Heyman for a 1 year while at the same time retaining the right to terminate him at will
a. Either inequality between the player’s obligation of many years and the team’s obligation f or a minimal amount of time, or the difference between the availability of specific performance for the team as opposed to
id punitive damages could only be awarded in an action based on constructive fraud à acts or a course of conduct from which an unconscionable advantage is or may be derived.
Bias v. Advantage International Inc – Player’s estate suing agent for not procuring a life insurance K on player which would have been payable to the estate and because he failed to secure the player a K with Reebok before he died. Estate lost because it was unable to prove that agent could have secured life insurance K (because of cocaine use) or that he could have obtained the Reebok contract
Duties and Responsibilities:
(1.) Good Faith
a. Implied is that the agent possesses the necessary skills and experience to perform; he has the skills and knowledge that are standard in the profession
b. Zinn v. Parish à A good faith effort overall in the negotiation of the K is called for when an agent represents an athlete
c. Agent must show that he was acting in good faith and evidence of due diligence to prevent player from suing under breach of K or breach of fiduciary duties
d. Bauer v. Interpublic Group of Companies à Carr signed with Baur (agent) at Fresno, then dumped him to go with someone else because Carr had heard bad things about Bauer. Bauer lost his suit because there was no evidence of ∆/new agent contacting Carr and telling him bad things about Bauer.
(2.) Conflict of Interest
a. Agent cannot have any conflicts of interest that will influence or affect his ability to represent the client
b. Must inform client of any conflicts that come to his knowledge which might be material or might affect his principal’s rights or interests or influence the actions that the athlete may or may not take
c. Detroit Lions v. Argovitz à Agent (∆) had a 29% investment interest in a new Houston football franchise. He was also acting as Sim’s agent and negotiating a K for him with the Lions. As soon as the Houston franchise was approved, ∆ significantly reduced his offer for Sims to the Lions. Court found that ∆ owed Sims fiduciary duties which he breached because he should have told him of the conflict of interest.
(3.) Miscellaneous Duties
a. Financial Planning
Basic tenet for money management and financial planning from the prospective of the agent should be the athlete’s