NBA Lockout: The NBA’s Nuclear Winter — Where Do We Go From Here?Patrick McDermott/Getty Images
We’re in yet another NBA-less week of November, and the labor talks between the players and owners took an ugly turn last week when the NBPA dissolved its union and players filed antitrust suits. With a lawsuit already pending in New York between the owners and the players, we have now officially moved from the sometimes-contentious collective bargaining phase to always-contentious litigation period.
And, instead of battling over BRI and salary-cap exceptions, the players and owners, represented by some of the best litigators and antitrust lawyers in the country, will now battle over labor exemptions and antitrust violations. In other words, as some have put it, basketball fans are about to enter a “nuclear winter,” the “doomsday scenario,” and “a foul, hilarious, and surprisingly heartwarming holiday experience that utilizes its eye-popping technology to take gross-out humor to a new level.” (That last one may refer to A Very Harold & Kumar 3D Christmas.)
I’m not here to talk about why things broke down. Instead, I want to talk about how we put them back together — how do we go from no union, no collective bargaining talks, and antitrust suits to an NBA season? It will be a bumpy road, and we might not get there in time to save the season, but here are some of the answers to the key questions that might arise over the next several weeks of this fight.
What exactly happened last week?
The NBPA “disclaimed interest,” which means the union terminated its right to represent the players in collective bargaining. It was a relatively simple, informal process that only entailed a letter from NBPA executive director Billy Hunter to NBA commissioner David Stern, explaining that the association had renounced its interest in serving as the players’ union. And, as far as the players are concerned, the NBPA ceased to be a union as of last week.
Is a disclaimer of interest different from the decertification rumors that have been floating around the past several weeks?
Yes. In a disclaimer, the union walks away from the players. In a decertification, the players walk away from the union. More specifically, decertification occurs when employees formally revoke the authority of their union to engage in collective bargaining on their behalf. Unlike disclaimer, decertification is a formal process that can take up to 45 to 60 days.
From the perspective of the players and the NBPA, however, both disclaimer and decertification effectively dissolve the union and permit the employees to negotiate as individuals rather than engage in collective bargaining. And, more significantly, disclaimer and decertification both allow the players to challenge the lockout under antitrust law. Of course, the owners would (and will) argue otherwise. (More on that later.)
Why did they disclaim interest instead of decertifying the union?
There are at least two possibilities. First, disclaimer of interest gave the NBA players the ability to immediately file their antitrust lawsuit rather than wait the 45- to 60-day period that would have been required if they had decertified. Of course, there is a downside to this instant access. With decertification, there would have been a 45- to 60-day window for the union to continue collective bargaining negotiations with the owners. With the disclaimer, the window closed immediately.
Second, disclaimer allowed the NBPA leadership — including Billy Hunter and Jeff Kessler — to maintain control of the litigation. If the players had decertified the union, they might have opted for new leadership and new antitrust counsel.
Why did the players have to dissolve their union to bring an antitrust suit?
Because of a doctrine known as the “non-statutory labor exemption.” (Don’t worry, it’s even more complicated than it sounds.) This doctrine essentially requires the players (and all employees) to choose between labor law (and collective bargaining) and antitrust law (and individual bargaining and litigation). If the players choose labor law, an antitrust shield is raised that prevents them from attacking NBA rules under the antitrust laws. To lower the shield and choose antitrust law, the players must end the collective bargaining relationship. That’s why the players dissolved their union through a disclaimer of interest — to surrender their collective bargaining rights and choose antitrust law instead of labor law. A key question remains, though: Is the disclaimer of interest enough to end the non-statutory labor exemption and lower the antitrust shield?
Didn’t the NFLPA disclaim much earlier in their negotiations?
Yes, while the NBPA waited until Day 138 of the lockout to disclaim interest, the NFLPA actually disclaimed interest the day before their CBA expired and the NFL lockout began. But, the NFLPA’s hand was forced — pursuant to a clause in their CBA, if the NFL players did not dissolve their union before the CBA expired, they had to wait six months to bring an antitrust suit. The NBA CBA had no such provision.
Why did Billy Hunter wait so long after the CBA expired to disclaim interest?
There are a number of possible explanations.
- Maybe he thought he would be able to get a good deal for the players at the bargaining table.
- Maybe he thought the NLRB would rule in the players’ favor on their unfair labor practice charge.
- Maybe he though the delay would strengthen the players’ argument that the disclaimer ended the non-statutory labor exemption.
- Maybe he was an early-riser and liked to pack in the morning. And maybe he didn’t have any friends. I’m an educated man, but I’m afraid I can’t speak intelligently about the timing of the disclaimer habits of William Hunter.
In their lawsuits, the players are alleging that the lockout is an illegal “group boycott.” What does that mean?
In its most basic terms, a group boycott occurs when individual entities (such as the 30 NBA teams) agree to refuse to do something. To use an example from outside of the antitrust world, you might recall the classic college football group boycott, when all of the players on the Notre Dame football team agreed to refuse to play in the big game against Georgia Tech (but Georgia Tech is one of the best offensive teams in the country!) unless their 5-foot-nothing, 100-and-nothing-pound teammate got to dress for the game.
In the NBA litigation, the allegation is that the owners have agreed to deprive the NBA players of their ability to work and to get paid, with the goal of coercing the players into “succumbing to a new anticompetitive system of player restraints which will, among other things, drastically reduce player compensation levels below those that would exist in the competitive market.”
What are the players asking for in their lawsuit?
Unlike the NFL players, who earlier this year (in Brady v. NFL) asked for an injunction to block the NFL lockout, the NBA players are asking for monetary damages. Antitrust law provides a particularly powerful weapon for the players because it entitles them to the three-times (or “treble”) damages. So, for example, if the players are able to prove that a yearlong lockout caused the players to miss out on $2 billion in total salaries, the players would be entitled to $6 billion in damages.
What is the owners’ primary defense?
The owners have a number of defenses, but their primary argument is that the disclaimer of interest is a “sham.” The essence of the argument is that the players are not truly choosing to give up their union — rather, they’re choosing to make the union go away temporarily while they bring an antitrust suit to gain leverage. And, as soon as the players gain leverage, the union will immediately reappear. As Stern explained it, the disclaimer is “just a negotiating tactic. This sham of magically saying, ‘We’re taking the union and we’re performing an act of magic and becoming something else.’ It’s just a big charade and irresponsible, given the timing of it.” The league thus contends that the disclaimer should not allow the players to bring an antitrust suit challenging the lockout.
Didn’t the NFL players already lose this fight in Brady v. NFL?
Not exactly. Let’s be clear as to exactly what happened in the Brady case. After the NFLPA disclaimed interest, the NFL players brought an antitrust suit against the NFL lockout and asked for two things — an injunction and damages. The district court preliminarily concluded that (1) the disclaimer ended the collective bargaining relationship (and the non-statutory labor exemption) and allowed the players to bring the antitrust suit challenging the lockout as a group boycott; (2) the lockout was illegal; and (3) an injunction of the lockout was necessary to prevent the players from suffering irreparable harm.
The Eighth Circuit Court of Appeals reversed, narrowly holding only that the Norris-LaGuardia Act prevents federal courts from enjoining lockouts. The court did not conclude that the lockout was legal, did not conclude that the disclaimer was a sham, and did not conclude that the non-statutory labor exemption prevented the players from bringing their antitrust suit. In other words, the result in Brady does not prevent the NBA players from dissolving their union and bringing a successful antitrust suit against the lockout. Rather, the NBA players will likely use the reasoning in the district court opinion in Brady to support their case.
Is there any other disclaimer precedent out there that can guide us?
Yes, the NFLPA disclaimed interest in representing the NFL players in 1989. Following the dissolution of the union, a small group of players filed an antitrust suit in Minnesota (McNeil v. NFL) challenging the restrictive “Plan B Free Agency” rules that the owners unilaterally implemented after the expiration of the CBA. The district judge ruled that the non-statutory labor exemption did not apply post-disclaimer, and a jury eventually found that Plan B was an unreasonable restraint of trade and awarded damages to four of the players, ranging from $50,000 to $240,000. As part of the settlement of additional litigation that would follow, the NFL agreed to give true free-agency rights to the NFL players.
Won’t an antitrust lawsuit take years?
Yes. Antitrust litigation is notoriously slow. For example, the NFLPA disclaimed interest in the McNeil case in December of 1989. The jury didn’t reach its verdict until September of 1992.
Antitrust litigation is also expensive and unpredictable. So the hope is that the time, expense, and risk of litigating the case while the lockout persists will force both sides to sit back down and come to terms on a new CBA. After all, the players will be risking billions of dollars in lost salaries, while the owners will be risking three times that in antitrust damages. And both sides will be risking alienating fans, networks, and sponsors and destroying much of the goodwill they have built up during the LeBron-Kobe-Durant-CP3-Wade-Nowitzki-Scalabrine era. In other words, the NBA and its players could be in danger of going the dangerous route of the NHL in 2004, with the added bonus of antitrust litigation.
But as David Boies, outside counsel to the NBA players, put it: “We would hope that it’s not necessary to go to trial and get huge damages to bring them to a point where they are prepared to abide by the law,” Boies said. “I think it is in everybody’s interest to resolve this promptly.”
Will there be any preliminary legal skirmishes between the parties before the antitrust case proceeds?
Yes, and they’ve already started. Although the ability of the players to challenge the lockout under antitrust law is the key underlying issue, the players and owners will be fighting over a number of preliminary questions. These are key battles that might help shift the leverage relatively early on in the proceedings.
We expected the players to file suit in labor-friendly California, but why did they also file one in Minnesota raising essentially the same claims?
There are a number of possibilities, but I’ll focus on two of them. First, just like the owners were looking for “home-court” advantage by filing their declaratory judgment action in New York, the players might be seeking home-court advantage of their own by filing in Minnesota. Why does Minnesota give the players a potential advantage in their antitrust lawsuit? Because two different district court judges in Minnesota have already ruled that a disclaimer of interest is sufficient to end the non-statutory labor exemption and allow players to bring antitrust suits against league action.
Additionally, more lawsuits mean more chaos, risk, and expense for the owners. The players are hoping the owners will decide it is it worth to give some concessions at the bargaining table to make the chaos and risk disappear.
It’s also possible that we might see additional lawsuits brought by different players and different antitrust counsel. The good news for the players is that this will only add to the risk and the chaos. The bad news is, the more divided the players become, the more difficult it may be to unscramble this divide-player egg.
On Monday, the NBA players withdrew their complaint in California and filed a consolidated complaint in Minnesota that essentially combines the Minnesota lawsuit and the California lawsuit into one action. Although this eliminates some of the chaos described above, it may help expedite the proceedings. Of course, there may be additional player lawsuits in other jurisdictions to follow, and the NBA owners will still argue that this case should be heard in New York, not Minnesota.
Can you compare the NBA labor battle to a classic ’80s movie starring Matthew Broderick?
Yes, yes I can. The NBA and the players are engaged in their own version of global thermonuclear war. The owners threatened to fire their “nuclear weapon” by locking the players out for the entire year, while the players responded with their own nuclear threat of a prolonged and costly antitrust battle. There’s no WOPR or an unmotivated (but brilliant) hacker high school student, but there is the same nasty case of mutually assured destruction going on here with the NBA. And, in both cases, if the two sides continue down the nuclear path, one thing is clear: “Winner: None.”
So, how do we get from antitrust litigation and DEFCON 2 to a new collective bargaining agreement and world peace?
There is a road that takes us from this litigation mess to a (shortened) NBA season. Although collective bargaining talks have ended, lawyers representing the owners and players can still sit down and talk. The key, of course, is for the talks to be about BRI split and salary-cap exceptions, not disclaimers and antitrust violations. Because there is no union, these talks can’t lead directly to a new CBA, but they can still end up serving much of the same purpose. That is, the players and owners can use settlement talks as a proxy for collective bargaining negotiations. Although a collective bargaining agreement cannot be negotiated without a union, the players and owners can agree to many of the economic terms of the eventual collective bargaining agreement during these talks. This is essentially what happened in 1993 and earlier this summer after the NFL players dissolved their union and filed their antitrust claim.
Getting the players and owners to sit back down and talk, however, may be easier said than done. If the NFL litigation is any guide, there might be a fight looming about how and where these talks will take place. On the one hand, the NBA may insist that any talks take the form of collective bargaining negotiations, given that they believe the NBPA is still a union. Or, they may insist that litigation settlement talks take place in New York. On the other hand, the players may insist that any conversations take the form of antitrust settlement talks in Minnesota. And on and on it goes
The quickest way to cut through this potential logjam may be for the district court judge to appoint a mediator to oversee the talks. Of course, that begs the question: Which district court judge would make the appointment?
Can you end with a note of optimism?
Sure. Let me start with this point — it’s not terribly surprising that we’re in the middle of November with no NBA and no new CBA. We have known for a long time that these labor talks would be ugly for one reason — the NBA owners are seeking a fundamental change in the structure of the CBA, while the players are just trying to hang on to what they had. Yes, owners are asking for a lot of money back from players, but they are also asking for a shift from a soft salary cap to a hard salary cap (or something that achieves the same effect as a hard salary cap).
Looking back at the history of collective bargaining in professional sports, a clear trend emerges: Significant work stoppages occur when one side is looking for a sea change in the relationship between the parties. For example, in 1998-99, the NBA owners’ insistence on a cap on maximum player salaries (which they got) led to a lockout that canceled 464 regular-season games. In 1994-95, the MLB owners’ insistence on a salary cap (which they didn’t get) led to a strike that canceled 920 games, including the postseason and the World Series. In the best professional-sports work-stoppage movie of all time, The Replacements, “salary disputes” led to a late-season strike by professional football players. (It’s not clear who got what, but Shane Falco saved the day.) And most recently, in 2004-05, the NHL owners’ insistence on a hard salary cap (which they got) led to a lockout that cost the NHL the entire season, including the playoffs and the Stanley Cup.
OK, fine, that doesn’t sound particularly optimistic. But, here’s the bright side. While initially driving them apart, the antitrust litigation might be the force that eventually brings the two sides back together. The owners might have been willing to cancel an entire season to get a better CBA for future years, but are they willing to cancel an entire season while also risking three-times damages under antitrust law? And are the players confident enough in their ability to win a wildly unpredictable case to sacrifice an entire year of player salaries (not to mention legal fees)? There is still time for the players and owners to talk, and there’s still time for a deal. Litigation isn’t the most direct route to a new collective bargaining agreement and an NBA season, but it can get us there.
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