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Owning a Player: Fantex and the Arian Foster IPO

November 23, 2013

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By Kevin Robertson – Thompson Rivers University 3L JD Student

A vast number of people grow up dreaming about becoming professional athletes but few ever reach that level.Instead they are relegated to playing sports recreationally, cheering on their team, and participating in a fantasy league.In a fantasy league a person acts as a combination of owner, general manager, and coach in an effort to run their team better then their opponent.While pride may be one the line, oftentimes there is also money up for grabs.

In American football, due to the constant injuries and changing focus of teams (say from running to passing, or vice versa) it is often necessary for a person to add or drop players based on how a person believes they will perform in future games.In a sense, a person is stating their belief over how the player will perform in the future.Simply put, if a person believes that a player will do well then they will play them.Alternatively, if the person believes that the player will not do well then they will not use them. 

In this way, a fantasy football league is similar to how a person plays the stock market.Buy the stocks that you think are going to perform well and sell the stocks that you believe are going to do poorly.When you consider the dedication that people put into researching their choices the parallels become even more apparent.

However, things are about to change.Fantex is launching a new program whereby for $10 a person can buy a percentage of a player’s future earnings. The first player to sign on with Fantex for this program is NFL Texans running back Arian Foster.In exchange for giving Fantex a 20% share of his future football earnings he will receive $10 million USD.Fantex will then take the 20% share and divide it into one million shares, which will then be sold to investors through an Initial Public Offering (IPO).

As with all things of this nature, someone is going to lose money.It’s possible that Foster will go on to have a healthy career and thus earn those who own his stock a healthy profit but it is also possible that he gets injured in his next game and never plays again.

What is fascinating and will be a huge point of contention in the future is that the contract does not only include his NFL salary but also includes any related fields.In defining related fields the prospectus for the stock gives a few examples such as broadcasting and coaching.That being said, there are a lot of things that could fall into the grey area and possibly result in disputes.If Foster opened a sports bar, which was named after him, could that be considered a related field?What about if he was selling autographs?

As well, there are a couple of other things that could pose problems in the future.The contract does not expire so Foster will be giving 20% of football related income to Fantex for the rest of his life.While the freedom of people to enter into contracts on their own volition is well established, the shear length of the contract will likely bring up concerns.One issues is that Foster has in effect “sold his soul to the devil” for a one time monetary payment.The contract only ends if he pays back the full amount plus a penalty.He cannot get out of the contract without Fantex’s agreement.In this way, if he retires within 2 years of signing the contract for any reason other than injury, illness or medical condition Fantex can unilaterally cancel the contract and demand repayment of $10.5 million USD.

In Foster’s case his contract might only be for 20% of his future income but what would happen if it were for more?Say 50% or 100%?There is something morally wrong for a society that has moved past slavery to then allow a person to become indebted to another for life.

It is unclear whether college players will sign up with Fantex.While the NCAA has been adamant that they are not interested in paying the players for their services, it would be hard for a lot of the players to turn down a lump sum payment even if the terms were not favorable in the long run.

In fact, it would be possible for a college player to game the system in a certain situation.Taking Foster’s contract as an example, a college athlete could get a lump sum payment and then pay it back (along with the penalty) with a signing bonus if they make it into the league and get a large contract.A strategy such as this would be very smart if the player knew that they had an even larger endorsement deal coming in the near future.Once again, legally this would be a grey area in that Fantex is registering each player under the Securities and Exchange Commission, which has strict rules governing insider trading.As well, with college players there may be issues due to them being minors.

Like many things in sports, the IPO into Arian Foster will garner a lot of money for some people, even if it isn’t in the best interest of the game or society.

The prospectus for the IPO is available to read here and contains some very interesting information not only on his health but also his contracts with both the NFL and endorsement deals. 

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Exceptional FIFA ruling orders Italian clubs to pay for player’s breach of contract

November 4, 2013

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By Shaun Foster – Thompson Rivers University 2L JD Student

Chelsea Football Club is no stranger to big money transactions in the footballing world. Since Russian billionaire Roman Abramovich purchased the club in 2003, the club has spent on players without much business concern for turning a profit. This practice was most recently demonstrated in 2010 with the record breaking purchase price for Fernando Torres of £50 million (which, incidentally, has been viewed by many as a failure, with each goal Torres has scored costing Abramovich £3.3 million to date).

Perhaps as a result of their extravagant purchases, or the impending Financial Fair Play rules that will soon come into force, there are signs that Chelsea is beginning to tighten the purse strings. Interestingly, the most recent financial development for the club is in its legal battle with former player Adrian Mutu.

Mutu signed with Chelsea in 2003 for a reported £15.8 million. He started brightly with the club, but the new relationship went sour in September of 2004 when he failed a drug test for cocaine use. He was released from the club the following month and received a 7-month ban for his failed test.

This was followed by a series of legal battles between Mutu and the club, which concluded with the Court of Arbitration for Sport affirming a FIFA Dispute Resolution Chamber ruling that Mutu would have to pay Chelsea compensation of €17,173,990 for breach of contract. Mutu attempted an appeal to the Federal Supreme Court of Switzerland, but that was also dismissed and the order of CAS was affirmed.

After being released from Chelsea, Mutu was essentially a free agent in the footballing market. Juventus was the first club to show an interest in signing the elite striker on a free transfer since he had been released. As league rules governing the signing of non-EU players from abroad prevented Juventus from signing him directly, Livorno FC signed the player and held him for them (clubs are limited to how many players they can sign directly from abroad, so Livorno signed the player and then transferred him to Juventus to avoid the rule.

It has recently been reported by Italian newspaper Gazzetta dello Sport that Juventus and Livorno have been ordered by FIFA to pay Chelsea £17.9 million in compensation. Although neither club was involved in Chelsea’s contract with Mutu, it appears that the FIFA Dispute Resolution Chamber feels that they significantly benefited from the circumstances, and have informed Chelsea that they can demand the money from the two Italian clubs. It has been suggested that Livorno will argue that they were simply a pawn in the process, used by Juventus to get around the league rules and that they did not benefit from the signing.

Juventus, on the other hand, will await the written decisions from FIFA as to why they should be paying the damages caused by Mutu’s contractual breach.

The general principle surrounding privity of contract is that only the parties named in the contract are permitted to sue for breach. However, there have been both British and Canadian cases that have made exceptions to this rule. In London Drugs Ltd v Kuehne & Nagel International Ltd, an exception was made to allow for employees to benefit from limitation of liability clauses even though they were not named in the contract.

In Beswick v Beswick, Lord Denning made an equitable exception to the privity rule, where not doing so would have meant that the state of the law would be deplorable. He said that “no third person can sue, or be sued, on a contract to which he is a third party,” but that “is only a rule of procedure.” It is clear that both Livorno and Juventus were not party to the contract between Chelsea and Mutu. There is, however, no doubt that Juventus benefited from the acquisition of a released player (who was arguably worth nearly £16 million, as that is what Chelsea paid for him) without having to pay a transfer fee. The legal question, though, is on what grounds FIFA will be saying that Juventus must compensate Chelsea.

Without seeing the written decision, we can only speculate that FIFA’s order may be a principled exception to the general doctrine of privity of contract, stating that Juventus were unjustly enriched by Mutu’s breach with Chelsea. On the other, hand, some would argue that Juventus simply completed a bit of good business. They saw a troubled player for free in the market, and were willing to take a chance on him after Chelsea had disposed of his services. Either way, it is almost certain that Juventus will be appealing the decision to CAS, and it will be interesting to see the legal arguments and how it is decided.

Contract law, and the doctrine of privity of contract is understood in general terms to apply to all situations. It could be that FIFA’s judgment will demonstrate an understanding of how contracts in football terms are different from general employment contracts. In the normal workforce, a company does not pay millions of dollars in order to acquire another company’s star employee. Most valuable employees’ contracts will contain some sort of restrictive covenant that prevents them from working for certain competitors within a certain period of time if they breach their contract. In football, as is demonstrated in Mutu’s case, clubs pay their competitors compensation in order to retain their star players. It could be that, in light of this distinguishing feature, FIFA feels the need to create an exception to the doctrine to prevent abuse by competing clubs.

No matter what happens, Chelsea will be looking to collect £17.9 million in compensation (the original judgment, plus interest) from either Mutu, Juventus, Livorno, or some combination of all three. If football were a game played in purely financials and statistics, that would buy them another 5 goals from Fernando Torres.

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FIFA Considers Move to Winter for Qatari 2022 World Cup

October 4, 2013

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By Chelsea Dubeau – Thompson Rivers University 2L JD Student

In 2010, FIFA, the international governing body of football, awarded the 2022 World Cup to Qatar. The agenda on this week’s meeting of the FIFA Executive Committee meeting is a discussion of the “period of the competition” of this event.

According to the FIFA Statutes, the Organizing Committee follows a “fair and transparent bidding procedure” with “the objective of securing the best possible hosting conditions.”The temperature of Qatar in the summer can reach up to 50 degrees Celsius, prompting concern from the FIFA medical chairman.In the interest of safety for all participants, FIFA is considering moving the month-long tournament to the winter. FIFA’s upcoming decision is unprecedented, as the World Cup has been held during the months of May through July since its inaugural event in 1930.

Football Federation Australia (FFA) recently declared their intention to sue FIFA if the games are officially moved to the winter.Australia was one of the unsuccessful countries that lost during the 2022 bidding process. According to FFA Chairman Frank Lowy, the Australian bid was put forward according to the FIFA requirement that the tournament must occur in June and July. Thus, their bid was put forward under false pretenses.

FIFA has responded to the FFA allegations by saying that the Committee is acting within its governing authority. FIFA’s President, Joseph S. Blatter, has stated that all bids were put forward under the same Bid Registration Agreement, which does not outright say that the games must take place during the summer.Therefore, FIFA does not owe Australia compensation, nor will they owe any other party affected by the move.

FIFA is relying on issues of interpretation. As the Bid Registration Agreements have not been made public, the exact terms of the contract are unknown. However, Blatter has stated that the Agreements refer to FIFA’s wishes for the event to occur in summer, not that the event must be held during this time. As such, no representations were made by FIFA that the World Cup is only a summer event.

If the FFA decides to pursue their legal challenge, it will be up to the courts to rule whether FIFA’s interpretations of the Agreements fit within a fair and transparent process. FIFA’s choice to rely on semantics is questionable, and this argument may not succeed in a court of law. Every tournament in the history of the World Cup has occurred in the summer, and the upcoming events that have been scheduled uphold this tradition. The logical conclusion of a reasonable person, or in this case a reasonable bidder, would be that FIFA intends the games occur in the summer, even in absence of the word ‘must’ in the document.

In addition to the FFA, there are many other interested parties that may pose a challenge for FIFA and the Executive Committee if the decision is made to move the World Cup to the winter. The move will interfere with the season for the European leagues, and the IOC has expressed concerns related to the timing of the Winter Olympics.

FOX Sports won the American broadcasting rights to the 2018 and 2022 World Cup, paying over $1 billion for the deal.Due to the fact that it has never happened before in the history of the event, it is not likely that FOX considered the change that the broadcast could happen in the winter. With this change, it is now possible for the month-long event to interfere with the NFL schedule, and it could even overlap with the Superbowl. Would FOX have put forward such an impressive bid, knowing that it would be competing for viewers against the most-watched sporting event in the United States? It would not be surprising if FOX proceeds with an action based on a misrepresentation of the contract. FOX can assert that they were induced to enter the contract based on an untrue representation that the event would occur in the summer.

While the decision has not yet been made to move the World Cup, it is clear that there are multiple considerations that FIFA must keep in mind before the final decision is made. Regardless of the outcome, one can expect that this will not be the only challenge faced by the Committee leading up to the 2022 World Cup.

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Contemporary Issues in Sports Law and Practice 2011

November 15, 2011

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Friday November 4, 2011

Over the weekend, I finally managed to collate my various thoughts and notes into some semblance of order.

Firstly, our thanks must go to De Montfort University (DMU) and the British Association for Sport and the Law (BASL) for hosting what was once again a very enjoyable afternoon of speakers exploring a variety of key sports law topics. The half-day conference heard from six speakers, the first plenary session focusing primarily on football and Europe, the second plenary session focusing more on the investigatory and disciplinary processes behind the scenes:

Nick Craig (Director of Legal Affairs, the Football League) gave a presentation on ‘Financial Fair Play and the Football League’.  While the UEFA Club Licensing Regulations have been in place from the 2004/05 season (the current Licensing Manual is now in its 2nd edition), UEFA have also launched Financial Fair Play Regulations (FFPR) to be applied from the summer of 2011 with the view that all clubs in European competition break-even by 2018. The topic is hot news at the moment in both the mainstream press and more specialist legal coverage.

There were number of particularly interesting points about the contrast between the FFPR being applied in the Premier League as a condition of entry into European competitions, and the Football League (FL) model where the licensing regulations are intended more as a regulatory mechanism to control the clubs and force them to become more sustainable. Legally this agreement with the FL clubs represents a “soft” law approach where the clubs “agree  to actively work to introduce measures”, “increase transparency” and encourage clubs to operate”….  Time will tell how effective the league will be with this increased regulatory authority.

The big stick comes in Article 12(2) of the FFPR which states that:

2 The membership and the contractual relationship (if any) must have lasted – at the start of the licence season – for at least three consecutive years. Any alteration to the club’s legal form or company structure (including, for example, changing its headquarters, name or club colours, or transferring stakeholdings between different clubs) during this period in order to facilitate its qualification on sporting merit and/or its receipt of a licence to the detriment of the integrity of a competition is deemed as an interruption of membership or contractual relationship (if any) within the meaning of this provision.

This clause effectively holds that any club going insolvent restarts this three year process from scratch when it transfers its assets to a new owner, preventing clubs from ditching their debts and picking up where they left off free of all those troublesome creditors.

The devil as always is in the detail though, and while the cornerstone of the FFPR programme is in achieving break-even status, there are loopholes or ‘Acceptable Deviations’. In particular, the ability to lose €5m over the three years covered by the FFPR period (rising to a €45m loss if this is covered by equity contributions) neatly sidesteps the break-even provision, while Annex I A(d) of the FFPR lists an exception for:

d) Non-applicability of the three-year rule defined in Article 12(2) in case of change of legal form or company structure of the licence applicant on a caseby-case basis;   

or put another way, all clubs are equal, but some clubs are more equal than others, particularly if they might be a marquee name with large attendances and gate receipts!

 See also: http://www.financialfairplay.co.uk/ for more information on the FFPR rules

 

Chris Anderson (Associate, Brabners Chaffe Street Solicitors) gave a presentation on ‘Development Compensation for Young Football Players’.  One of the key drivers for this talk was the decision in ECJ – Case C-325/08 Olympique Lyonnais SASP v. Olivier Bernard & Newcastle United FC [41]:

“…In that regard, it must be accepted that, as the Court has already held, the prospect of receiving training fees is likely to encourage football clubs to seek new talent and train young players…”

 This will be a theme, the blog hopes to come back to in the near future, but essentially how much / little should be paid to clubs training (effectively as hot-houses) for new talent.

 Chris drew distinctions between:

  • the FIFA system which compensated for both the training costs of a player (although at times there were concerns these payments were ‘damages-based’ rather than a reflection of the actual training costs), and the ‘solidarity mechanism’ (which effectively acted as a wealth redistribution system to share up to 5% of any transfer between clubs training the player between the ages of 12 and 23).
  • The current domestic system which was based on agreeing costs (either by the agreement with clubs, or by reference to the Professional Football Compensation Committee (PFCC))
  • The proposed NEW domestic ‘Elite Player Performance Plan (EPPP)’ provisionally scheduled to start in July 2012. This system was created and driven by the PL to specifically produce greater numbers of talented home-grown players through increased coaching time and a more transparent (and legally defensible) fixed training cost mechanism. The new system is split into three main phases:
    • The Foundation Phase (U9-U11):  every academy charges a flat fee
    • Youth Development Phase (U12-U16): standardised model of fixed payments based on academy status
    • Professional Development Phase (U17-U21): Clubs (or PFCC) agree appropriate fee

 See also alternative perspectives from: http://www.bbc.co.uk/blogs/paulfletcher/2011/02/football_league_fears_over_pla.html; http://www.fiveyearplanfanzine.co.uk/News/football-league-votes-to-back-elite-player-performance-plan.htmlhttp://www.leedsunited.com/news/20111021/united-ceo-on-a-dark-day-for-football_2247585_2489344

 

Simon Boyes (Senior Lecturer, Nottingham Trent University) gave a presentation on ‘Sport and the European Union after the Lisbon Treaty’. The presentation traced the history of sport in the EU from its initial lack of academic interest, through the various reports, declarations, models and specificities to the present day and the Treaty of Lisbon. In doing so, Simon very much emphasised the evolutionary rather than revolutionary road to Lisbon. What was particularly interesting about the presentation was the thought that the EU was acting not so much as a regulator, but rather as a facilitator / supporter and using sport as a vehicle to engage in wider social missions (e.g. anti-doping, racism, corruption etc). These “softer” words such as “promotion…contribution…taking account of….developing” very much echoed Nick’s earlier talk on incorporating the UEFA licensing model into the Football League. Have all sporting regulators now embraced the softer stick? I thought that was just supposed to be horse-racing?

Any current discussion on Europe would not be complete without mentioning the recent Karen Murphy ruling (see here for a more in-depth analysis), and this was no exception! Interestingly, Simon suggested that fairness and openness were starting to creep into the ECJ rulings as values to be protected and upheld. This might be a trend to watch, particularly given the agenda for good governance and transparency.

 

 

Max Duthie (Partner, Bird & Bird Solicitors) gave a presentation on ‘The Sports Disciplinary Process’. The presentation started with, what seemed to be a recurring theme at the conference, the reluctance of the law to become involved in regulating sport (unless there was a clear departure from the rules / natural justice). Instead, Max pointed to the private, contractual nature of the disciplinary process, with governing bodies imposing their own regulatory codes of behaviour on the athletes under their jurisdiction.

Where I think that this presentation became more controversial was in the issue of jurisdiction, in particular who the sports were purporting to regulate. Max gave a number of examples:

  • Direct contractual links (Paul Stretford)
  • Implied contracts / contracts by conduct (Petr Korda)
  • Voluntary submission to jurisdiction (Dean Richards)

However, where I think the issue becomes greyer is in Sports Codes like the recent Lawn Tennis Association (LTA) Competition Regulations, effective from 1 September 2011:

1.3 By organising, entering, playing tennis in and/ or participating in any way in an LTA Official Competition (including as officials, staff, coaches, representatives, agents, medical staff, relatives and associates of a Player, a Player’s entourage and spectators), a person and/or entity agrees to be bound by and to comply with these Regulations.

It is one thing to bind an athlete to a particular code of conduct, but quite another to hold that they should be responsible for the conduct of all spectators, especially when the player is court-side during a match. On a similar theme, the regulations merely state ‘relatives’ – does this mean all relatives? Or do we need to apply an Alcock-esque ‘close-ties of love and affection test’?

There was also a particularly interesting discussion on whether disciplinary sanctions should be fixed or variable and Max talked about the trade-off between consistency (fixed) and discretion / proportionality (variable), before warning of the cautionary tale of Delon Armitage and the implications that plea-bargaining might have on future tribunals.

See also: http://www.guardian.co.uk/sport/2011/nov/08/delon-armitage-london-irish-england?newsfeed=true  

 

 

Adam Brickell (Head of Legal Compliance, British Horseracing Authority) gave a presentation on ‘The Investigative Processes of the British Horseracing Authority (BHA)’. The highly technical and diagrammatic nature of the presentation makes it somewhat difficult to summarise in any way that could begin to do justice to it. That said, Adam did make a number of interesting observations about the role of the BHA, and in particular the 5 areas that it is currently addressing:

    • Clear rules and regulations for participants
    • An effective investigative and intelligence capability
    • Robust disciplinary and licensing structures
    • Comprehensive, on-going education programme
    • Partnership approach with the Police, Betting industry and Gambling Commission

Two areas that may be of particular interest to watch in the future, are the concern that a number of betting firms are based offshore and, while they currently assist the BHA through Memorandums of Understanding (MoUs), these MoUs are not legally binding should the companies wish to subsequently withdraw their support. The second issue is linked to this and concerns the lack of regulation surrounding spread betting companies.

As an aside, Adam’s talk also continued Max’s theme from earlier about the regulation (or failure to regulate) members of the public not bound by the organisations rules. In particular, Adam gave the example of 6 individuals who placed suspicious bets on a particular horse, but fell outside the jurisdiction of the BHA when they decided not to cooperate with the investigation.

The final presentation belonged to Jonathan Merritt (Senior Lecturer, DMU) who gave us a sneak preview of his new PhD research into ‘Anti-Doping and Equestrianism’. We wish you every success in this venture…

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Battle of the Beers

October 24, 2011

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Sports Litigation Alert (Volume 8, Issue 19) just published a short piece I wrote entitled, ‘Battle of the Beers.’ It is reproduced below:

—–

In a country where ice hockey and cold beer go hand in glove, two of Canada’s biggest breweries have been battling it out over sponsorship rights as the official beer of the National Hockey League. On 3 June 2011, Newbould J. of the Ontario Superior Court of Justice held that the NHL and Labatt Brewing Company Limited reached a binding sponsorship agreement on 12 November 2010 which would have run from July 1, 2011 — June 30, 2014. As such, the NHL was consequently not free to enter into a similar but superior agreement with Molson Coors Canada Inc. on 8 February 2011. The NHL and Molson appealed and the court held in their favor on 12 July 2011.

In a ruling which has left Labatts all wet (and sudsy), the Court of Appeal for Ontario found that Newbould J. erred by making his finding in a manner not anchored to the pleadings, evidence, positions or submissions of any of the parties to the case. It was accordingly “procedurally unfair, or contrary to natural justice” for this conclusion to be reached [5]. Citing Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74 (C.A.), the court held that a theory of liability which emerges for the first time in the reasons for judgment is never tested in the crucible of the adversarial process and thus raises concerns about the reliability of that theory [6].

It is noteworthy that Labatt did not plead that the parties had reached a binding sponsorship agreement on 12 November 2010 [12]. Labatt did not assert during the application hearing that a binding sponsorship agreement existed between the parties and expressly disavowed that it had reached a binding sponsorship agreement with the NHL [13]. The appeals court accepted the NHL’s submission that if it had known that the existence of a binding sponsorship agreement between the NHL and Labatt was at issue, it would have conducted its defence to Labatt’s application in a very different fashion [15].

While hockey is a small fish in the big frozen pond of professional sport relative to their much larger counterparts in football, baseball and basketball, there is still significant money to be made (and lost). Kyle Norrington, marketing director of Budweiser and regional brands for Labatt in Canada, commented in an affidavit filed with the Ontario Superior Court of Justice on the relationship of hockey and beer: “The NHL and the access it provides to Labatt … is the single greatest opportunity to grow Labatt’s share in Canada. The nexus of sports / heritage / emotional / tradition in hockey has no other Canadian comparable.” In contrast to the $37.2 million over three years agreement that Labatt was pursuing, the Molson deal is worth a reported $375 million over seven years.

It is the combination of the trial judge’s analysis of the renewal option in the 2002 Labatt/NHL agreement and his conclusion that a binding agreement was reached at the 12 November 2010 meeting that created the procedural unfairness problem [18]. Quoting Cronk J.A. in Grass (Litigation Guardian of) v. Women’s College Hospital (2005), 75 O.R. (3d) 85 (C.A.), leave to appeal refused, [2005] S.C.C.A. No. 310, the appeals court held that, “at the end of the day, the issues between the parties are defined by and confined to those pleaded” [53]. Since this did not happen, the NHL and Molson were denied procedural fairness and the judgment of Newbould J. was set aside.

Revenge is a beverage best served cold. Earlier this year, Coors Light lost the bragging and sponsorship rights as the official beer of the National Football League to Anheuser-Busch for $1.2 billion over six years. The $375 million Molson Coors/NHL deal reportedly includes approximately $100 million for the rights, $100 million in guaranteed advertising buys and $100 million in activation costs for staging special promotions to capitalize on its rights.

On 6 October 2011, Labatt disclosed that it had received confirmation that the Ontario Superior Court of Justice had dismissed its suit against the NHL and Molson Coors thus ending this round of the battle of the beers. The court plans to release the reasons behind its decision at a later date and Labatt said it would review its legal options at that time.

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Double Jeopardy: CAS 2011/0/2422 USOC v. IOC

October 17, 2011

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Read the CAS verdictIOC rules; WADA Code

The case of the United States Olympic Committee (USOC) v. International Olympic Committee (IOC) (CAS 2011/O/2422) concerned the validity and enforceability of a particular IOC regulation prohibiting drug violators from competing in the next edition of the Olympic Games following their period of suspension.

The IOC rule was known as the “Osaka rule” and was enacted in Japan on 27 June 2008:

“The IOC Executive Board, in accordance with Rule 19.3.10 OC and pursuant to Rule 45 OC, hereby issues the following rules regarding participation in the Olympic Games:

  1. Any person who has been sanctioned with a suspension of more than six months by any anti-doping organization for any violation of any anti-doping regulations may not participate, in any capacity, in the next edition of the Games of the Olympiad and of the Olympic Winter Games following the date of expiry of such suspension.
  2. These regulations apply to violations of any anti-doping regulations that are committed as of 1 July 2008. They are notified to all International Federations, to all National Olympic Committee and to all Organizing Committees for the Olympic Games.“

While this rule applied to all Olympic athletes, in practice only a certain sub-set of athletes were affected:

  • Athletes not guilty of a doping violation – rule does not apply
  • Athletes guilty of a doping violation (with less than 6 months suspension) – rule does not apply
  • Athletes guilty of a doping violation (over 6 months suspension) who wish to compete in non-Olympic competitions  – rule does not apply
  • Athletes guilty of a doping violation (over 6 months suspension), but not selected by their National Olympic Committee (NOC) – rule does not apply
  • Athlete guilty of a doping violation, still serving their suspension – rule has no immediate effect
  • Athlete guilty of a doping violation at an Olympic Games  – rule has no immediate effect
  • Athlete guilty of a doping violation (over 6 months suspension), and selected by their National Olympic Committee (NOC) – RULE APPLIES

The case was brought against the IOC because one of those affected athletes, LaShawn Merritt was prevented by the rule from representing the USA at London 2012. Merritt had previously tested positive in an out-of-competition test for ExtenZe (a ‘male performance’ product containing the banned substance DHEA); and while the doping panel accepted that the substance was used inadvertently and that there was no intention to dope, Merritt still received a ban from competitions.

The crux of the case can be seen from Merritt’s current position. His ban ended earlier this year on 27 July 2011, however despite his eligibility to compete in any other competition, Merritt was still prevented from competing in next summer’s 2012 Olympics Games. He and USOC argue that this additional ban is unfair for two main reasons, because it violated the principle of double jeopardy (ne bis in idem) [7.2] and that the imposition of an additional doping sanction was in contravention of the WADA Code (article 23.2.2). USOC also argued that the rule resulted in unjustifiable discrimination between athletes and that the IOC rule should be “cancelled and declared null and void, or alternatively, that a mechanism be allowed for a case by case review of the appropriateness of the applicability of the Decision to each specific athlete” [2.9]

By contrast, the IOC argued that the rule constituted an eligibility rule [7.4] as to who could qualify as a competitor in the Olympics under Rule 45.2 of the Olympic Charter rather than as an additional sanction, that the rule protected the values of the Olympic Movement from the “scourge of doping” [7.5], that athletes had no automatic right to participate in an Olympic event [7.8] and that the rule did not conflict with double jeopardy (ne bis in idem), as it pursued a wholly different purpose than an anti-doping ineligibility sanction [7.8].

 

THE CAS RULING

All parties recognised that uncertainty surrounding the application of the decision was unhelpful, particularly since CAS had previously provided two Advisory Opinions in this area, one requested by the IOC had concluded that Rule 45.2 was an eligibility rule [8.7], while a Confidential Opinion to an unnamed International Sporting Federation (ISF) held that the application of a similar rule by an ISF was intended to be penal in nature and therefore could not constitute an eligibility rule [8.8].

It was therefore agreed that CAS had the ability to definitively settle the dispute (R27 of the CAS Code) and three arbitrators were chosen to hear the case: Professor Richard H McLaren (Canada), Me. Michele Bernasconi (Switzerland), and David w. Rivkin, Esq. (USA).

Both parties agreed that the applicable regulations of the arbitration (R58 of the CAS Code) should be:

  • Swiss Law (including fundamental principles)
  • the Olympic Charter (OC), in particular, rules 41 (eligibility), 44 (applicability of WADA Code) & 45 (Olympic participation)
  • and the WADA Code, in particular, s.10.2 (sanctions for 1st violation), s20.1.1 (IOC implementation of Code), 23.2.2 (prohibition against substantive changes to the Code) and appendix 1 (definition of ineligibility)

WADA also independently submitted an amicus curiae brief on 13 July 2011 to ensure that the arbitration panel would have as comprehensive a view as possible of the potential issues surrounding the IOC regulation, particularly since there was a suspicion that tribunal doping sanctions were being manipulated to stay under 6 months to avoid being caught by this rule [3.11].

 

ELIGIBILITY RULES

Previous CAS Jurisprudence (RFEC v. Alejandro Valverde v. UCI (CAS 2007/O/1381 [76]) suggested that: “qualifying or eligibility rules are those that serve to facilitate the organization of an event and to ensure that the athlete meets the performance ability for the type of competition in question.” [8.9]. In particular it was noted that qualifying (eligibility) rules define certain attributes or formalities required of athletes, rather than sanctioning undesirable behaviour.

Because IOC Rule 44 expressly incorporated the WADA Code as underpinning the Olympic Games, the IOC were bound by WADA’s definition of ineligibility. Unfortunately for them, under Article 10 of the WADA Code, ineligibility was held to be a sanction. In making this decision, the Panel held that the fact that an athlete could participate at other International competitions was irrelevant [8.16].

From this conclusion, the IOC was always going to lose as under Article 23.2.2 of the WADA Code, signatories of the Code could not add any additional provisions “which change the effect of […] the periods of eligibility provided for in Article 10 of the WADA Code.”

Because Rule 44 increased the period of ineligibility from the original doping violation (between 6months to 2 years) to the number of days until the next Olympics Games, the IOC regulation was not in compliance with the WADA Code and as such had to be struck out as invalid [8.44].

The Panel did not state that such an additional sanction could never occur, simply that such a rule needed to be incorporated within Article 10 of the WADA Code when the Code was next reviewed. To satisfy any proportionality requirements, the Panel also recommended that a first instance adjudicatory body should review any appeals [8.27].

 

The British Olympic Association (BOA) By-law

Much of the talk this week has been over whether the BOA by-law is legitimate in the wake of this ruling, and what implications this might have for Dwayne Chambers and David Millar. BOA Bylaw 25 sets out that:

“any person who is found to have committed an anti-doping rule violation will be ineligible for membership or selection to the Great Britain Olympic team”.

Importantly, the bye-law also gives individuals the right to appeal (something that distinguishes the BOA Bye-Law from that of other NOCs).

Taken at face value though, the same issues from the USOC case apply, in that any athlete guilty of a doping violation is ineligible for selection on a British Olympic team. If this USOC decision was extended to the BOA, then it is strongly arguable that this requirement also constitutes a sanction attributable to the same behaviour and resulting in the same consequence (ineligibility from competition) [8.36]. Or more colloquially, If it looks like a duck, walks like a duck and quacks like a duck, it’s a duck!

Again, taken at face value, the only significant difference between the two rules would seem to be that the BOA by-law has an inherent appeals process, which would negate any proportionality requirement.

Is this enough though, arguably no.

There is one alternative argument though that may solve the BOA problem. At footnote 11 of the USOC decision, the CAS Panel noted that:

“If the IOC issued a rule that persons convicted of a violent felony were not eligible to participate in the Olympic Games, such a rule would likely not violate the principle of ne bis in idem, because the effective purpose of that sanction would be different from the purpose of the criminal penalty associated with that violent felony.”

Therein might lie a possible defence for the BOA. If the BOA rule was based around a different purpose than simply a sanction associated with taking drugs, but was linked to eligibility, for example an athlete’s role as an ambassador representing their country, then following footnote 11, it could be argued that the by-law had a different purpose and was therefore valid and enforceable. Such a stance echoes the comments of Colin Jackson, interviewed immediately after the judgment by the BBC:

http://news.bbc.co.uk/sport1/hi/olympics/15199159.stm

If the BOA by-law was interpreted as a ‘moral / ethical behaviour clause’, should it be limited to just drugs and doping violations though? Do we want athletes representing our country who were guilty of criminal offences? If the by-law was extended this would also help in removing the WADA ‘consistency’ argument, as different jurisdictions around the world impose different criminal sanctions and offences.

Or should we just fall into line with WADA and the rest of the world and reduce our rules to the lowest common denominator?

http://news.bbc.co.uk/sport1/hi/olympics/15159569.stm

 

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Hard questions about the NHL’s regulation of hockey violence

June 21, 2011

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I’ve just surfaced following the Vancouver Canucks’ collapse at last Wednesday’s Game 7 of the Stanley Cup Finals. Notwithstanding the Canucks’ loss and the Boston Bruins win, the Finals offered some interesting insight into the National Hockey League’s management and regulation of the game.

  • Spleens have been vented over how the on-ice officials swallowed their whistles, especially during the Finals, and how it played to the Boston Bruins’ advantage enabling them to browbeat the Canucks into submission and take them off their finesse game. It is generally agreed that the referees employed a different standard of officiating in the post-season than in the regular season. On the one hand, it’s dismissed as ‘that’s playoff hockey’ but it raises a fundamental question: How should a party to a contract respond when its terms and conditions are interpreted differently at the time when it matters most?
  • Even further, Bruce Dowbiggen of The Globe and Mail characterized Bruins’ Brad Marchand ‘using the head of Hart Trophy finalist Daniel Sedin as a speed bag – to the approval of hockey’s blood culture’ and rhetorically asked, ‘Imagine an NBA rookie speed-bagging [playoff MVP] Dirk Nowitzki’s head going into a timeout or a first-year NFL player hitting [all-star] Tom Brady in the head repeatedly after the play. What do you think the response would be from those leagues?’
  • Bruce Dowbiggen wasn’t done yet though. He also provocatively asked the following: ‘One final thought on rookie Marchand: How come when he abuses a superstar he’s applauded by Hockey Night in Canada and the media as a savvy kid who gets under the skin to win. But when Montreal Canadiens rookie P.K. Subban did the same, we were told by the same voices that he was a punk with no respect who needed to be taken down a notch? Is it because Marchand is a Bruin, a sacred squad on Hockey Night, because Sedin is a European or because Marchand is white while Subban is black, or all of the above. Take all the time you need to answer.’ Ouch.
  • The NHL is to be commended for its four game suspension of Aaron Rome for his open ice hit on Nathan Horton in Game 3 of the Stanley Cup Finals. Horton sustained a serious concussion and did not play the remainder of the series. The ends, however, do not justify the means. Rome was penalized not for a hit to the head in breach of Rule 48 but for interference. Mike Murphy, NHL Senior Vice President of Hockey Operations, applied a phantasmical formula to the hit in assessing the suspension. The existence of the formula is just as abstruse as the existence as the ‘hitting zone’ behind the net which enabled Vancouver Canuck Raffi Torres to flatten Chicago Blackhawk Brent Seabrook earlier in the playoffs or Boston Bruin’s Zdeno Chara’s vicious hit on Montreal Canadien Max Pacioretty which left Pacioretty with a severe concussion and an undisplaced fractured the fourth cervical vertebra which somehow escaped supplemental discipline from the league. The league appears to acknowledge the obtuseness of its approach to head shots. A blue-ribbon committee of former all-stars Brendan Shannahan, Rob Blake, Steve Yzerman, and Joe Nieuwendyk (the first two are now with the NHL hockey operations staff whilst the latter two are general managers with the Tampa Bay Lightning and the Dallas Stars respectively) has recently recommended to the league’s competition committee that Rule 48 be broadened and clarified. The solomonic challenge is to keep violence in the game but rid it of egregious violence. That’s easier said than done. As Ottawa GM Bryan Murray says, ‘We want hitting in the game, and there will be contact to the head, whether we like it or not, and it won’t be illegal all the time.’ Toronto Maple Leaf GM Brian Burke succinctly captures the flavour of inherent risk in hockey: ‘The tightrope we walk is [hockey] is a full contact sport …. We want to eliminate the really dangerous parts of the play but this is game where you’re going to get hit and there’s going to be injuries, and we’ve got to start with that basic understanding.’ Unspoken is the fact that the International Ice Hockey Federation, the Ontario Hockey League, the Quebec Major Junior Hockey League, and the NCAA (National Collegiate Athletic Association) prohibit any hit to the head and the quality and integrity of the game has not suffered as a result. If this is the case then how can traditionalists like Murray and Burke claim hits to the head are integral to hockey?
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NHL, Labatts and the ‘monster deal’ that got away

June 6, 2011

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The Vancouver Canucks are up 2-0 in the Stanley Cup Finals on an overtime goal scored by Alex Burrows 11 seconds into the extra period. Burrows had distinguished himself the previous game by inadvertently masticating upon and potentially dislocating or amputating Patrice Bergon’s phalange. In other words, Burrows bit Bergon’s finger.

Such bizarre incidents (bizarre because they’re condemned as classless and gutless – notwithstanding that they typically occur in the context of players ‘fashwashing’ one another in a scrum which begs the inane question, what was Bergon’s finger doing in Burrows’ mouth in the first place? – whereas fighting, egregious hits to the head and concussions are considered normal and condoned) occasionally occur in the NHL. The most infamous incident occurred in the 1989 Stanley Cup Final when Claude Lemieux bit Jim Peplinski ‘s finger, eliciting the quote,  ‘I didn’t know they allowed cannibalism in the NHL.’

Regardless, Burrows avoided suspension by the NHL because the league found no conclusive evidence that he intentionally bit Bergon’s finger. Burrows presumably chomped down on the errant finger as part of an involuntary gag reflex.

To quote OMC, ‘How bizarre, how bizarre.’

Meanwhile, the NHL’s $375-million sponsorship with Molson-Coors was rejected three days ago by an Ontario Superior Court Judge who ruled the league had reneged on its deal with the company’s archrival, Labatt’s. The decision by Judge Frank Newbould tosses out the most lucrative deal in NHL history. It was described as ‘a monster deal’ by NHL chief operating officer John Collins when it was unveiled in February 2011.

The Ontario Superior Court ruled Friday in favour of Labatt’s accusation that it already had an agreement in place with the NHL before the League committed to a $375-million sponsorship deal with arch-rivals Molson Coors. ‘In my view the NHL should not be entitled to profit from its breach of its agreement with Labatt, Newbould J. said. ‘Labatt should be entitled to its bargain and to its unique marketing position resulting from the agreement to be the Canadian sponsor of the NHL for the next three years.’

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Zip-lines and the Law

April 13, 2011

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Sports Litigation Alert (Volume 8 Issue 6) just published an article I wrote entitled, ‘Family Alleges Negligence after Man Dies on Zip-line’ which is about a zip-line lawsuit launched in the United States and another zip-line case just decided in Canada. Here are a few excerpts:

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A lawsuit was recently filed in the United States District Court, District of Utah — Central Division, by the estate of a man who died while zip-lining. The complaint alleges in Hoagland et al. v. Rockin’ R Ranch & Lodge Guest Operations Inc. et al. that on Aug. 11, 2008, at the Rockin’ R Ranch in Piute County Utah, Daniel A. Hoagland, M.D., dutifully followed the instructions given him, climbed the zip-line tower, held on to the strap which connected the stick to the zip-line, sat on the stick and left the tower. The strap immediately snapped causing Dr. Hoagland to fall resulting in his death. The complaint describes the strap as narrow, weathered and worn-out.

The lawsuit alleges negligence or, in the alternative, gross negligence, which the complaint describes as conduct that is willful, intentional or reckless, causing Hoagland’s death. The complaint lists 15 separate alleged breaches of duty. The two most salient allegations relate to failure to maintain a safe zip-line and failure to secure participants to the zip-line via a harness and lanyard.

The defense will likely rely upon the doctrine of inherent risk and that the plaintiff signed a waiver and release of liability. U.S. courts have dismissed similar claims under the doctrine of primary assumption of risk such that — for example — if falling is an inherent risk of climbing and if the plaintiff fell while climbing, then the eventuation of that risk is something to which the plaintiff accepted.

Coincidentally, in another zip-line case, a Canadian court in Loychuk v. Cougar Mountain Adventures Ltd. (2011 BCSC 193) ruled last month that the waiver signed was binding, thus barring the plaintiff’s recovery. The defendants conceded negligence in the communication breakdown which gave rise to the high-speed collision on the zip-line between the two plaintiffs, so the only substantive issue facing the Supreme Court of British Columbia was whether the waiver of liability and assumption of risks agreement was valid.

Among other claims, the plaintiffs argued that the defendant misrepresented the terms of the waiver, that it was obtained without past consideration, and that it was unconscionable. The plaintiffs had considerable experience and exposure to waivers; one plaintiff had just finished law school and the other was an owner of a fitness business which required its clients to sign a waiver and assumption of risks agreement.

The court disagreed with the plaintiff’s claims and found that the waiver was enforceable; that there was no evidence of duress, coercion or unfair advantage; and that the plaintiffs were given notice as evidenced in the defendant’s website which discloses that guests were required to sign a waiver of liability, and that the wavier was not unconscionable.

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US zip-line lawsuit

February 7, 2011

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A lawsuit was recently filed in United States District Court (District of Utah – Central Division) by the estate of a man who died whilst zip-lining. The complaint alleges that on 11 August 2008 at the Rockin’ R Ranch in Piute County Utah, Daniel A. Hoagland, MD dutifully followed the instructions given him, climbed the zip-line tower, held on to the strap which connected the stick to the zip-line, sat on the stick and left the tower. The strap immediately snapped causing Dr. Hoagland to fall resulting in his death. The complaint describes the strap as narrow, weathered and worn-out.

The lawsuit is seeking general damages, special damages including loss of financial support and lost wages, punitive and exemplary damages, plus other costs.

The lawsuit alleges negligence or, in the alternative, gross negligence which the complaint describes as conduct which is willful, intentional or reckless causing Dr. Hoagland’s death. The complaint lists 15 separate alleged breaches of duty. The two most salient allegations relate to failure to maintain a safe zip-line and failure to secure participants to the zip-line via a harness and lanyard.

The defense will likely rely upon the doctrine of inherent risk and that the plaintiff signed a waiver and release of liability. US courts have dismissed similar claims under the doctrine of primary assumption of risk such that – for example – if falling is an inherent risk of climbing and if the plaintiff fell whilst climbing then the eventuation of that risk is something to which the plaintiff accepted.

That Dr. Hoagland was not wearing a harness – while distressing – is not necessarily material to the case. It is probable that he was informed of this hazard and that, as a man of science, he understood the law of gravity and the risks herein.

Zip line using stick and no harness - photo is NOT from Rockin' R Ranch

Where it becomes potentially troublesome for the defendant is in the state of the equipment. Contrary to the claim, the defendant is under no duty to operate a ‘safe’ zip-line. Under the circumstances, it is unreasonable to assign a duty to make a contraption such as this infallible. Risks can be minimized or mitigated but never eliminated. To remove the risk of falling from a height whilst zip-lining or climbing, the only plausible option would be to not get off the ground. At issue then is what are reasonable risk management practices in the circumstances of operating a commercial zip-line operation.

Recall that the strap broke immediately after Dr. Hoagland weighted it. This might suggest that it was of insufficient integrity or quality to hold his weight. He would have consented to the ordinary risks inherent to zip-lining but have not consented to zip-line on defective or deficient materials or engineering.

It is possible, however, if the waiver was properly prepared and presented that it could bar recovery for a mechanical failure which was not reasonably foreseeable or detectable. Hypothetically, if the strap followed manufacturer’s specifications relating to its use, had not exceeded the manufacturer’s recommended shelf-life, and the alleged materials defect was not detected by the defendants in routine inspection, then its structural failure could not have been reasonably foreseeable.

It is unlikely that a waiver would cover a strap in the condition alleged by the complainant. If it can be shown that the strap was defective or deficient and that it was plain to see to anyone who directed their attention to it then it becomes a different story altogether. This is the second prong to the claim. Gross negligence would not be covered by the waiver.

The crux of this case will therefore be what is a reasonable zip-line and what are reasonable equipment inspection and maintenance practices.

Stay tuned.

Read the statement of claim here - Zip-line Statement of Claim – Hoagland v Rockin’ R Ranch.

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