SPORTS LAW, FALL 1998
PROFESSOR COZZILLIO
PRACTICE EXAM
FACT PATTERN FOR QUESTIONS 1, 2, and 3 (2 Hours)
During Major League Baseball’s 1986 winter meetings (November-December 1986), the consensus opinion among league owners was that something should be done to commemorate the 40th anniversary of Jackie Robinson’s breaking of baseball’s infamous color barrier. After discussing several options, the owners decided to mark the occasion by demonstrating their opposition to the apartheid policies of South Africa. Because the U.S. Congress had recently voted to repeal its earlier imposition of sanctions against South Africa, the owners drafted the following rule:
No player may enter into an agreement to endorse commercially (for profit) the product or services of any company doing business with the government of South Africa. Although existing contracts may be honored, new contracts are prohibited. Likewise, any contract which is renewable at the option of the player may not be renewed under this rule. Renewal of a contract through exercise of such an option is tantamount to executing a new contract. Any player who violates this rule shall be subject to discipline by the Commissioner, including a fine not to exceed $25,000 and/or a suspension not to exceed one year. The appropriate contractual grievance arbitration mechanism for any player disciplined under this section is a hearing before the Commissioner.
Shortly after the rule had been drafted, the owners met to decide the best means of promulgating it. At this meeting, there was considerable debate about the need to propose the rule to the Major League Baseball Players’ Association (“Players’ Association”). According to the collective bargaining agreement, the Players’ Association is the “sole and exclusive collective bargaining agent for all major league players with regard to all terms and conditions of employment except . . . Special Covenants to be included in Uniform Player Contracts, which actually or potentially provide additional benefits to the player.” After inconclusive discussions with their attorneys, the owners “out of an abundance of caution” (in their words) decided to bargain with the Players’ Association prior to implementing the rule.
Negotiations for a new collective bargaining agreement (due to expire at midnight on March 31, 1987) began in late February. From this point until late March, no mention was made of the “no endorsement” rule. However, on March 28, when all issues had seemingly been resolved except for a few, insignificant remaining player demands, the owners placed the “no endorsement” rule on the table. They offered to accept the remaining player demands in exchange for the players’ acceptance of the no endorsement language. After vehement protest by the players and three full days of hard bargaining, the players yielded at 11:49 P.M. on March 31. As a result, the rule was implemented and made a part of the new collective bargaining agreement, effective April 1, 1987.
On April 2, 1987, the Commissioner’s office, after considerable discussion with most of the club owners, sent a memorandum to every player advising them of the Commissioner’s intent to enforce strictly the letter of the “no endorsement” provision. In addition, the memorandum indicated that the Commissioner intended to enforce the spirit of the new rule through his broad “plenary” powers as custodian of baseball’s integrity. The Players’ Association responded to the Commissioner with a brief note cautioning him about, and objecting to, any “overstepping of his authority with respect to the South African situation.” There was no further correspondence between the parties.
Ricky Branch was a veteran superstar for the Texas Rangers and party to a lucrative endorsement package with Love Those Krugerrands, In. (“LTK”), an investment company doing substantial business with the government of South Africa. On April 30, 1987, the expiration date of his endorsement contract, Branch exercised a one year option to renew the contract at an increase of $50,000 per year (from $75,000 to $125,000). Because Branch had no legal or contractual duty to renew the contract, he was, by his own admission, in technical violation of the “no endorsement” rule. As a result, he was fined $25,000 and suspended for three months. Nonetheless, Branch continued to honor the endorsement contract and voluntarily (without pay) added to his endorsement duties three one-minute television commercials in which he offered his support for the government of South Africa and his encouragement of American commercial enterprise in that country. As a result of these commercials, the Commissioner levied an additional $5,000 fine on Branch. In each case, the Commissioner gave the proper notice of opportunity for hearing.
Branch admitted that he had violated the no endorsement rule by his endorsement contract, but denied that his voluntary T.V. ads constituted a violation of any established league rules. Further, he was infuriated at the Commissioner’s action and with what he considered to be his team’s complicity in it. As a result, he notified the club that he would terminate his relationship immediately, change sports, and join the Peoria Pillagers of the newly formed Summer Professional Football League (“SPFL”). Branch’s Rangers contract was “standard” in all respects including a clause prohibiting him from participating professionally in any sport during the duration of the agreement (three years). In addition, the contract contained a special covenant that required him to report to spring training on February 15 for the purpose of preparing annual training films to be presented to rookies at spring training each year. The contract provided for a $15,000 bonus for the completion of each training film. Note: this clause was drafted to override a provision in the collective bargaining agreement that prohibited clubs from requiring a player to report for spring training prior to March 1.
Within three days of his fine and suspension, Branch “made good” on his threat and executed a two year contract to play quarterback with the Pillagers. This contract, insofar as is relevant, contained standard language prohibiting him from participating professionally in any other sport during the duration of the agreement. This contract also contained a special provision that gave him the right to veto any trade, reassignment, or other material change in his employment status.
After signing with the Pillagers, Branch played two games and played very well. Unfortunately, the Pillagers were not doing as well as the box office. Alarmed at this dismal financial outlook, Pillagers’ owner Roz Davis offered the club for sale. Amazingly, within one week, wealthy entrepreneur Ivan Toesky came up with the cash and purchased the club “lock, stock, and barrel.”
A few days later, Branch was contacted by his former club, the Rangers. During this conversation, the Rangers encouraged him to return under his old contract and get back to playing his game – baseball. After pondering his decision for a few more days, Branch quit the Pillagers and immediately returned to the Rangers under his former contract terms. Given the foregoing fact pattern, discuss each issue and both sides of each issue in terms of the arguments that could be raised pro and con in the context of the following legal actions commenced shortly after Branch’s return to the Rangers:
1) Branch brings an action in the United States District Court alleging that the league’s action (the “no endorsement” rule) constituted an unlawful combination in restraint of trade violative of Section I, Sherman Antitrust Act. You may assume that this court is the proper forum and that there are no problems with ripeness. (50 minutes)
2) The Players’ Association files two unfair labor practice charges with the National Labor Relations Board alleging refusals to bargain in good faith against:
a. The Commissioner/League, for imposition of the $5,000 fine upon Branch for the voluntary T.V. commercials supporting South Africa. (15 minutes);
b. The Texas Rangers, for negotiating the February 15 spring training reporting clause in Branch’s Uniform Player Contract in derogation of the collective bargaining agreement. (15 minutes)
You may assume that there is a grievance/arbitration provision (calling for a neutral arbitrator) in the collective bargaining agreement and that it covers all disputes under that agreement, except where specifically indicated (e.g., the no endorsement clause) and except for matters involving Commissioner-imposed discipline for on-the-field misconduct or conduct affecting the integrity of baseball. Such “exceptions” are reviewable by the Commissioner as final and binding arbitrator.
3) The Pillagers sue Branch in U.S. District Court seeking an injunction prohibiting him from playing baseball for the Rangers during the term of his Pillager’s Standard Player Contract. Again, you may assume that this court is the proper forum and that there are no problems of ripeness. (40 minutes)