The Sports & Entertainment Law Playbook

Yesterday, the NCAA and the big four professional sports leagues filed a lawsuit against New Jersey Governor Chris Christie, alleging that the state law that was approved by NJ voters last November is a "clear and flagrant violation of federal law." The five sports organizations (plaintiffs) are asking the U.S. District Court for the District of New Jersey for preliminary and permanent injunctions against NJ officials, to enjoin (prevent) them from carrying out the law that authorizes sports betting in New Jersey. Here's why the State of New Jersey will prevail:

First of all, there's a legitimate argument that the federal statute at issue—the Professional & Amateur Sports Protection Act (PASPA), 28 U.S.C. § 3702—is unconstitutional. Second, even if the statute is constitutional on its face, because the NJ voters overwhelmingly approved the referendum, the state can argue that the statute is unconstitutional as applied because it violates the Tenth Amendment (state sovereignty).

And perhaps the most compelling reason that New Jersey will prevail is that courts don't hand out injunctions like Roger Goodell hands out fines and suspensions. There's a strict, three-part test that the plaintiffs must prove: 1) a likelihood of success on the merits of the lawsuit; 2) irreparable harm is likely if the court doesn't grant the injunction; and 3) that the injunction is necessary to "balance the equities" in the controversy.

Success on the merits essentially means that the plaintiffs have a clear right to relief, or, that there's very little doubt that they will ultimately win the case. In this case, even if the plaintiffs could ultimately win, it's not so clear or obvious as to sufficiently prove a likelihood of success. To try to show their likelihood of success, the plaintiffs simply cited the federal statute at issue—which purportedly bans sports betting in all states except Nevada, Delaware, Montana, and Oregon. But there is a countervailing argument—that the federal law could be unconstitutional. Even though the plaintiffs have the burden of proof, all Gov. Christie (who was a fairly astute lawyer and federal prosecutor in his day) has to do is show the court that there's doubt.

With regard to irreparable harm, the plaintiffs said this in their complaint: 

[A]uthorization of sports gambling in New Jersey would irreparably harm amateur and professional sports by fostering suspicion that individual plays and final scores of games may have been influenced by factors other than honest athletic competition. Plaintiffs cannot be compensated in money damages for the harm that sports gambling poses to the character and integrity of their respective sporting events. Once their reputations and goodwill have been compromised, and the bonds of loyalty and devotion between fans and teams have been broken, Plaintiffs will have been irreparably injured in a manner that cannot be measured in dollars.

Once you consider the undeniable fact that, even without being lawful, sports betting is a multi-billion-dollar industry, the irreparable harm argument is almost laughable. Further, the NJ law specifically carves out local collegiate sports betting from being permissible, which chips away even more of the NCAA's assertion that they will be irreparably harmed by the law.

But there are a couple more reasons that New Jersey will prevail. Say what you want about Chris Christie; you may not like him, his mouth, or his politics, but he has a proven track record of winning. Finally, the pink elephant in the room is Atlantic City, NJ, which for all intents and purposes is the Gambling Capital of the East Coast. With all due respect to Mike Florio, I don't believe that the Third Circuit's ruling on sports betting in Delaware will be controlling in this case. As I said back in November, the state of New Jersey spent a great deal of money getting this law passed. They knew about PASPA, and they got sports betting in NJ on the ballot anyway. It wasn't easy, and it wasn't cheap, and they wouldn't have done it if they didn't believe that the benefits outweighed the risks.

READ:

 Complaint for Declaratory & Injunctive Relief, No. 3:12-cv-04947 (D.N.J. filed Aug. 7, 2012) (PDF)

SEE ALSO:

NJ Says 'Yes' to Sports Betting, But Why?

Tim Dahlberg, Time to do away with sports betting stigma

PHOTO CREDIT: DonkeyHotey

If you follow the NFL at all, it probably comes as no surprise that narcotics investigators recently tracked a 2.5 lb. package of marijuana from the so-called Emerald Triangle region of northern California to the northern Kentucky home of Cincinnati Bengal wide receiver Jerome Simpson.

Yesterday, a reader emailed me to ask questions about this most recent Bengals criminal investigation, and since they are questions I get a lot, it seemed like a good idea to post the answers here.

Q. I could kind of understand not arresting them for the 2.5 pounds they signed for (because you technically can't prove that they knew what was in the package), but how did they not get busted for the other six pounds of weed that the cops found in the house?

A. Just because they weren't taken into police custody doesn't mean they weren't "busted." The way it works when you commit any crime is pretty much like this:

1) Officer witness crime, or has an arrest warrant

2) Depending on the type of crime, suspect is placed under arrest, or the officer issues a summons (requires suspect to answer to charges in court)

3) If there is an arrest, the suspect is usually taken into custody, fingerprinted, photographed, etc., and then they sit in holding until they post bail (some felonies and violent crimes require holding without bail until court holds a hearing)

4) After the suspect posts bail, they are released subject to their subsequent appearance(s) in court

In the case of a non-violent crime, where the suspect's ID and whereabouts are not in question (e.g. as is the case with most public figures), there isn't much purpose in taking the suspect into custody, because it's unlikely that they will flee.

Q. But in Kentucky I thought people did 20 years for [getting caught with] a joint?

A. I'm not familiar with KY law, but I get what you're saying.

Q. Where I live, pot is quasi-legal in small amounts, but I'm pretty sure even the dispensary employees and patients would go to jail for having 6 lbs. of it?

A. Who says these guys aren't going to jail? We don't know anything yet. The case remains an ongoing investigation.

Q. It's curious that they found all that weed, plus scales, and other paraphernalia, but no cash—how can you move that much weed through one house and have no money on hand?

A. I didn't see any reports as to whether or not investigators did find money at the house, but regardless, maybe they don't sell it (unlikely, but not entirely impossible). Maybe they had cash on hand but it wasn't an amount that was too unusual for professional athletes to possess. Maybe we'll find out more after additional details of the investigation are released.

Q. Two other kind of puzzling things about this case are: Why would anyone consent to a search of their house when it's full of weed? And why would you sell weed when you're making NFL money?

A. It does sound stupid to consent to a search when you know you have contraband, but under the circumstances the officers may not have needed consent. Sometimes they ask for consent even when they don't need it, which in my opinion happens for one of two reasons: (1) They are trying to come across as being polite, and respectful of the suspect's civil rights; or (2) They don't know the law, and are therefore unaware that the circumstances allow them to conduct a warrantless search.

Nonetheless, if the cops had a warrant for the 2.5 pound package, and they found that, they could continue searching for more contraband. Another possibility is that the homeowner believed that his stash was hidden well enough that the cops wouldn't find it. Drug dealers often underestimate cops' ability to track down drugs.

As to the second part of your question, I didn't look up these players' contracts, so I don't know how much they make, but I do know that I never heard of them before today, and that the league minimum salary is $340,000. After the agent takes his 15%, and then taxes and child support, who knows what's left—could be a somewhat modest amount.

Photo credit: Navin75

The law of real estate (property) is also key in sports—think about all that goes into planning and building a venue like the new Yankee Stadium or Cowboys Stadium; each of these cost upwards of $1 billion to construct. The manner in which the law of real estate pertains to sports, however, is not that much different from ordinary real estate law. I don't wanna say that real estate is boring, because it's oftentimes anything but; it's just not something that I feel needs to be addressed in this blog.

Another area of law that is often overlooked in sports is antitrust, which has beleaguered professional athletes for over 100 years. So what is antitrust? The easiest way to describe it is that it functions as the law of competition—within the marketplace, that is. Antitrust laws, such as the Sherman Act prevent restraints on trade, by making it unlawful for companies to collude or conspire to fix prices of goods.  So what does this have to do with sports? Collective bargaining agreements (CBAs).

The players' associations are labor unions; their primary function is to organize and to coordinate the players' efforts in dealing collectively with the owners. CBAs are designed to restrain trade in the labor market—that's their intended purpose! So why is it okay for labor unions to organize, to maximize employee wages, but it's not okay for manufacturers to do that with widgets? The short answer is, Labor Law. More specifically, the the Clayton Act (1914) and the National Labor Relations Act (1935), which the U.S. Supreme Court has interpreted to exempt collective bargaining and labor disputes from antitrust laws. This is referred to as the statutory exemption. So how does this apply in the real world? Remember Maurice Clarett?

As a college sophomore, Clarett sued the NFL, alleging that the league's age/class requirement was anti-competitive, and an unlawful restraint on trade. Alan Milstein, Clarett's attorney at the time, told the NY Times: ''I see Maurice's case as a league trying to make certain players, young players, who are often poor, wait on earning a living, while the NFL and colleges, either directly or indirectly, make millions off of them.'' U.S. District Judge Shira Scheindlin agreed, issuing this 71-page order that granted Clarett the right to enter the 2004 NFL Draft.

The NFL appealed the decision to the 2nd Circuit, which, in an opinion by then-Judge Sonia Sotomayor, reversed, finding that the NFL's eligibility rule fell within the scope of the "nonstatutory exemption" to the antitrust laws, regardless of the fact that the owners and players' association did not collectively bargain over the rule (2d Cir. decision pdf). Clarett's lawyers petitioned the U.S. Supreme Court to stay the the 2nd Circuit's decision, but the Court declined to hear the case (SCOTUS, cert. denied pdf). And we all remember what happened next...

But Maurice Clarett was, by no means, the first athlete to take the NFL—or any other sports league, for that matter—to the U.S. Supreme Court. In 1972, it was St. Louis Cardinals center-fielder Curt Flood, who sued the commissioner of Major League Baseball, challenging the reserve clause in his contract. Twenty years prior, it was NY Yankees' minor-league pitcher George Earl Toolson. And thirty years before that, in 1922, Justice Oliver Wendell Holmes wrote Federal Baseball, holding that professional baseball was not "interstate commerce." With a stroke of the pen, however, Congress effectively erased all of those holdings when it passed the Curt Flood Act of 1997, which removed baseball's antitrust exemption. This law also paved the way for the sharp rise in MLB player salaries over the past 15 years.

Given the history of baseball's antitrust exemption, and the fact that it was eventually repealed, it's probably only a matter of time before we see similar changes to the other professional sports leagues as well, especially in light of all the attention that the NFL is getting this year with regards to the impending expiration of its current CBA.

Next: Part III, IP