February 6th, 2013
(AP Photo/Rich Pedroncelli)
Ninety-three percent of the Sacramento Kings are ready to make the move to Seattle, possibly granting the city’s 5 year long wish to bring back the Sonics, but seven percent may say otherwise. A court-appointed bankruptcy trustee, David Flemmer, who controls the 7 percent share owned by team-limited partner Bob Cook, has stated that an issue regarding the sale to Seattle has arose.
Flemmer claims some of the Kings’ limited partners have been denied their legal right to match a Seattle investment group’s purchase offer for the team. The Maloof Family, who recently announced their binding agreement and sale of the team to the Seattle investment group, specifically hedge fund manager Chris Hansen, may be in the midst of a complex legal issue if Mr. Flemmers’s allegations are proven true.
Flemmer believes Cook and other minority owners have a “first right of refusal” or “right of first opportunity,” a contractual right to be given the opportunity to enter into a business transaction before anyone else. Flemmer further asserts that this right is guaranteed in the Kings’ partnership agreements governing ownership of the team. Rights of first refusal are usually seen in joint venture agreements. The partners in a joint venture normally possess the right of first refusal on buying out the stakes held by other partners if a partner decides to exit the agreement.
“If there is no right of first refusal with the 7 percent, then the 7 percent is not a material roadblock to the Kings moving to Seattle,” said Michael McCann, a legal analyst for NBA TV. “The right of first refusal is everything.” Feller’s claim has become an urgent issue as the NBA is expected to vote on the Maloof sale April 19th in New York. NBA bylaws require approval from 23 of 30 owners to complete the sale of a team, but there can be no vote if there has been no sale.
If the limited partners do indeed have a right of first refusal, the Maloof to Hansen sale could be terminated. The 7 percent issue makes it difficult to judge whether Seattle will have a team to call their own again in 2014. The Seattle Times has reported Sacramento’s Mayor Kevin Johnson will be doing everything he can to keep the Kings in Sacramento. We know Chris Hansen has made a sizable offer to gain majority control of the Kings, but we have not found out if the Kings’ limited partners’ have been given an opportunity to match his offer. There has been no official public sale announcement from the Maloofs, and it looks as if the 7 percent of Sacramento will keep it that way, at least for some time.
February 5th, 2013
In general, workers’ compensation does not receive the same level or exposure and attention from both the world of academia and the media that other areas of law garner. However, in recent months there have been multiple decisions by courts that are being labeled as “landmark” in the workers’ compensation arena, especially in regards to professional sports teams. Professional athletes have long used the state of California to receive favorable decisions by exploiting its weak workers’ compensation laws and system by filing claims for career-long cumulative trauma. These athletes argue for jurisdiction in California, although only one or very few games actually take place in California. After such athletes’ careers come to an end, they often find themselves suffering from long terms injuries and trauma that they attribute to their time spent participating in sports. One such example is the case of Booker.
On February 16, 2000, Vaughn Booker signed an NFL Player Contract with the Cincinnati Bengals, which covered five football seasons. The contract included an addendum which stated in relevant part that:
As a material inducement for the Club to employ Player’s services, Player promises and agrees that any workers compensation claim, dispute, or cause of action arising out of Players employment with the Club shall be subject to the workers compensation laws of Ohio exclusively and not the workers’ compensation laws of any other state. Player further agrees that any claim, filing, petition, or cause of action in any way relating to workers compensation right or benefits arising out of Players employment with the Club, including without limitation the applicability or enforceability of this addendum, shall be brought solely and exclusively with the courts of Ohio, the Industrial Commission of Ohio, or such other Ohio tribunal that has jurisdiction over the matter.
In the three seasons that Vaughn Booker played for the Cincinnati Bengals, he played in one game in the State of California. After an unfavorable outcome in the decision regarding his workers’ compensation claim, Booker filed a petition seeking reconsideration of the February 8, 2012 Opinion and Decision After Reconsideration. In that decision, the Workers’ Compensation Appeals Board (“Board”) concluded that under California Labor Code section 3600.5(b), there was no subject matter jurisdiction (“SMJ”) over the applicant’s claim against the Bengals. The applicant contended in his petition that:
(1) where an employee is injured while temporarily employed in California, section 3600.5(b) provides for subject matter jurisdiction unless certain elements are met and, here, the Bengals did not satisfy all of these elements; (2) he paid California income taxes on his earnings for the game he played here and, therefore, he is entitled to equal protection under California laws; and (3) our decision left him without a remedy in the State of Ohio.
The Board followed the February 8, 2012 decision and conclusion regarding their jurisdiction over the applicant’s cumulative injury claim against the Bengals. The Board found that even if they were to assume SMJ were established, they would still decline to exercise jurisdiction since the contract between the applicant and the Bengals contained a forum selection clause requiring that any and all workers’ compensation claims be made in Ohio.
The Board has SMJ over all injuries sustained in California with the exception stated in section 3600.6(b). Under this section, the laws of a state other than California provide the exclusive remedy for an employee hired outside of California who is injured while working in California if:
(1) the employee is working only “temporarily” in California; (2) the employer has workers’ compensation insurance coverage under the workers’ compensation insurance or similar laws of a state other than California; (3) this insurance covers the employee’s work in California, and (4) the other state recognizes California’s extraterritorial provisions and likewise exempts California employers and employees covered by California’s workers’ compensation laws from application of the laws of the other state.
1. Evidence of Sufficient Coverage-
The Applicant first argued in his petition that the evidence failed to show that for the one game he played in California, the Bengals:
[f]urnished workers’ compensation insurance coverage under the workers’ compensation insurance or similar laws of a state other than California, so as to cover such employee’s employment while in this state.
The applicant attempted to supplement his claim by referencing to the second paragraph of 3600.5(b), asserting that this paragraph “unambiguously requires a certificate” and not “an unauthenticated photocopy of a letter” from the duly authorized appeals officer of the appeals board or a similar department of the other state. However, section 3600.5(b) merely requires evidence of the insurance coverage, but not that the evidence be in any particular form. Additionally, the last paragraph of section 3600.5(b) allows such a “certificate” to serve as prima facie evidence that the requisite insurance coverage exists when it is:
[f]rom the duly authorized officer of the appeals board or similar department of another state certifying that the employer of such other state is insured therein and has provided extraterritorial coverage insuring his employees while workin[g]…within California.
The Board found it sufficient that the Bengals provided evidence including a letter from the Director of the Self-Insured Department of the Ohio Bureau of Workers’ Compensation (“OBWC”) as well as the Chief Legal Officer and General Counsel, verifying the team’s authorization to operate as a self insuring employer. In addition, testimony of the executive vice president was used to support the Board’s decision as she was the individual who coordinated the team’s workers’ compensation coverage.
2. Notice of Extraterritorial Coverage-
Applicant argued that the Board had jurisdiction under 3600.5(b) because the Bengals did not comply with an Ohio Revised Code requirement that notice be given to an Ohio administrative agency of its extraterritorial insurance coverage. In response, the Board reiterated that section 3600.5(b) requires only that the out-of-state employer have valid extra-territorial insurance coverage under that other state’s laws. It was further stated that even if the applicant’s allegations were accepted, the applicant did not show that under Ohio law such an omission on the part of the Bengals would lead to the invalidation of their extra-territorial workers’ compensation self-insurance coverage.
However, in Ohio, if an employer elects to obtain extra-territorial workers’ compensation insurance coverage from an out-of-state insurance carrier, only then is notice required to be given to the Administrator. The Board determined that section 4123.292(A) of Ohio law was inapplicable since the Bengals instead chose to be self-insured for extra-territorial coverage. Ohio Revised Code § 4123.292(A).
3. Coverage of Employment in California-
Another argument raised by the applicant was that the Bengals did not furnish insurance that would cover his employment in California since his injuries were not covered by Ohio Workers’ compensation law. Applicant claimed that Ohio law did not cover his injuries and he would not have a remedy in the State of Ohio because:
1) there was no evidence that Ohio recognized cumulative trauma injuries; and 2) Ohio does not toll its statute of limitations for workers’ compensation claims if an employer fails to give notice to the employee of his workers’ compensation rights.
Under California law, it is required that the out-of-state employer have extraterritorial workers’ compensation coverage that is valid under that other State’s laws so that the employee is covered during their temporary employment in California. The Board did not agree with the applicant’s first assertion because Ohio Workers’ compensation law did cover both professional athletes and the cumulative injuries of professional athletes and the fact that neither the Bengals nor the Board cited to a case addressing this issue could not in itself provide the applicant with an argument that Ohio law does not provide such coverage.
In addressing the applicant’s second argument for why Ohio law did not cover his injuries, the Board stated that nothing under California law requires the other State’s statute of limitations to be the same or even stronger than that of California and if the applicant fails to timely file his injury claim in a state that has a shorter statute of limitations period, this does not mean that the insurance lacks coverage, but instead simply means that the applicant failed to comply with the other state’s statute of limitations.
Payment of Income Tax to Establish SMJ:
The applicant raised both legal and public policy arguments that SMJ in California should be established because nonresident professional athletes pay California income taxes. The Board responded by stating that these arguments were “unavailing,” better suited for the state legislature, and although nonresident professional athletes pay California income taxes for games played there based on a “duty day” formula, such taxes do not establish a basis for SMJ even if playing there caused or contributed to the athlete’s injury.
Forum Selection Clauses:
Forum selection clauses may be used to negate the ordinary assumption that when a judicial body has jurisdiction over a case, they must exercise that jurisdiction by hearing and determining the case of its merits. In dealing with the issue of forum selection clauses, a California court stated that:
[T]he parties may not deprive courts of their jurisdiction over causes by private agreement… [however,] courts possess discretion to decline to exercise jurisdiction in recognition of the parties’ free and voluntary choice of a different foru[m].
It was further stated that forum selection clauses are valid and may be given effect:
(1) in the court’s discretion and (2) in the absence of a showing by the plaintiff that enforcement of such a clause would be unreasonable.
The court’s discretion has typically been swayed in the interest of judicial economy. In Booker, the Board did not find the forum selection clause used by the Bengals to be unreasonable because it was not an adhesion contract in light of the circumstances. The employee in this case did in fact have bargaining power, which was evidenced in the contract by the fact that he was represented by a “certified agent,” received a multi-million dollar signing bonus, and during the years in question received a yearly salary of 1 million dollars or more. The Board also found Ohio to be a reasonable forum in light of the facts that the Bengals were based in the state and the applicant played half his games there.
Although Booker is a case involving professional sports teams that have constantly traveling athlete employees, the same problem applies to all businesses that have traveling non-athlete employees. Since California is often a desirable location for conferences, training, and even recruiting, similar claims and arguments to those made in Booker can be used in the future by disgruntled employees seeking damages for trauma or injuries sustained while participating in company activities in California. Therefore, it is important for such employers, insurers, and even self-insured employers to protect themselves from liability against workers’ compensation claims made by employees seeking jurisdiction in California.
Much can be taken from the Booker decision to limit liability. First, employers should purchase a California workers’ compensation insurance policy or confirm that the current policy covers employees when traveling out of the state. Secondly, employers should obtain a certificate from the state concerning its workers’ compensation reciprocity laws with California. Employers can only hope that their state does have reciprocity or similar laws, otherwise it might be worth lobbying the legislature to establish legislation to that effect. For example, in 2011, Florida adopted House Bill 723, which finally established a set of reciprocity laws in the state. Finally, all employment contracts should contain a valid and enforceable forum selection clause such as the California approved one in the Booker case. The Booker decision provides a road map for all employers to limit the liability of any workers’ compensation claims made against them, and if followed, can afford employers a certain level of protection that will save mass amounts of money in the long run.
February 4th, 2013
Baltimore Ravens strong safety Bernard Pollard is worried about the game potentially changing. Credit: Geoff Burke-USA TODAY Sports
“Thirty years from now, I don’t think it will be in existence. I could be wrong. It’s just my opinion, but I think with the direction things are going – where [NFL rules makers] want to lighten up, and they’re throwing flags and everything else – there’s going to come a point where fans are going to get fed up with it.” Bernard Pollard, safety for the Baltimore Ravens, has a bleak outlook on the future of the NFL, and it all stems from the NFL seeking ways to make the game safer for its players.
With this one comment from a hard-hitting safety, a tragic autopsy report, and a slew of lawsuits, it seems as if the NFL’s concussion risks are once again back in the public eye.
The National Institutes for Health recently analyzed the brain tissue of the late Junior Seau, and determined that prior to Seau’s suicide, he suffered from chronic traumatic encephalopathy (CTE). The Boston University Center for the Study of Traumatic Encephalopathy classifies CTE as a degenerative disease of the brain that can only be detected by autopsy. The disease is commonly found in athletes and is caused by repeated brain trauma. This repeated jostling of the brain causes brain tissue to progressively degenerate and causes a build-up of an abnormal protein called tau. Typically CTE shows symptoms in the form of memory loss, confusion, impaired judgment, impulse control problems, aggression, depression, and progressive dementia. Gina Seau, Junior’s ex-wife, has said that Junior exhibited many of these symptoms leading up to his eventual suicide.
Upon learning of the diagnosis, Gina Seau and her four children filed suit against the NFL and Riddell Inc. (helmet manufacturers) in California Superior Court in San Diego. The suit alleges that the NFL was aware of the evidence and risks associated with repeated brain injuries, but ignored the information and concealed such information from players. It also alleges that “although the NFL voluntarily assumed its role as the unilateral guardian of players safety, the NFL has exacerbated the health risk to players by promoting the game’s violence and lauding players for returning to play despite being rendered unconscious and/or disoriented due to their exposure to sub-concussion and concussive forces.”
The Seau suit is by no means alone in this fight against the NFL for player safety. In February, the estate of former Chicago Bears player Dave Duerson filed a very similar suit upon finding that Duerson had also been diagnosed with CTE following suicide. Along with Seau’s and Duerson’s lawsuits, nearly 190 other lawsuits by almost 4,000 NFL players have been consolidated into one class action suit in federal court in Philadelphia. United States Eastern District Judge Anita Brody is scheduled to hear oral arguments pertaining to this class action suit in early April of this year.
Although much of this is happening in the present, the fight for player safety, especially the fight against concussions and progressive brain damage, is not a new fight. Sports Illustrated, all the way back in 1978, wrote, “As football injuries mount, lawsuits increase, and insurance rates soar, the game is headed towards a crisis.” This warning was repeated in 1994, and Sports Illustrated called concussions, “the silent epidemic of football.” The attention to the issue, though, really gained its steam in the early 2000’s. In a 2000 survey, it was reported that 51% of players had been knocked unconscious more than once, and that 73% of those players were not required to sit on the sidelines following the injury. Until recently, it seemed as if the NFL was not addressing the concussion conversation. In 2007, the NFL produced a pamphlet that stated “current research with professional athletes has not shown that having more than one or two concussions leads to permanent problems if each injury is managed properly.” Unfortunately, nothing indicates that the concussions sustained by former and even current NFL players were managed properly. Players were not required to sit out following a crushing blow, but rather, many simply waited for the initial wooziness to pass, and then reentered the game.
In 2009, for the first time (and a whopping 15 years after Sports Illustrated highlighted the concussion epidemic), the NFL acknowledged that long-term effects existed from multiple concussions. Roger Goodell, NFL Commissioner since 2006, soon mandated that players with concussion-like symptoms could not return to play without being cleared by a neurologist whom was not affiliated with the team. Although this was the first step in a long process towards keeping athletes safe, is it too little, too late? By this time, lawsuits had already been filed, and the class-action suit was well on its way. Upon filing the class-action suit, the NFL attempted to have the case dismissed from the courts, arguing that an arbitrator, under the terms of the NFL collective bargaining agreement, should hear the action, since the litigation reflects a labor dispute. Oral arguments regarding this issue are set to be heard on April 9th.
Lawsuits aside, the NFL is still faced with the issue of how to keep players safe. There is always going to be the continuous struggle between how to keep the players safe and how to keep the game “safe.” The players themselves are increasingly confronting the issue of player safety, and it has been reported that nearly 600 players have pledged their brains to science for research. But for every 5 people who want the NFL to continue implementing the new rules to keep the players safe, there is somebody with an idea like Bernard Pollard that if the game gets too “soft,” the NFL will lose its fans. The game of football is inherently violent; there is no way around that, but there are ways to mitigate the risks, and the NFL has begun to make efforts to do that. For now though, the NFL must make it the number one priority to keep their players safe. That does not mean that this has to be done solely through the implementation of rules, but the NFL must also make sure that each and every injury is dealt with in the proper manner.
It is likely that the class action lawsuit will eventually settle out of court, but the NFL still stands to lose significant money throughout the process in addition to public sentiment. For years, the issue was not addressed, and now the NFL must tackle it head on, by protecting the players doing the tackling on the field.
January 28th, 2013
Once music went digital, labels began losing money due to a drop in album sales, and to make up for these costs, labels found a way to take a cut of all profits with 360 Deals.
Modern music offers a wide variety of innovations, genres, styles, and sounds that are more available to the public then ever before. Not only has the Internet made this wide world a smaller place, but technology has made it both easier and more affordable for bands and artists to record their music at home. In one classic Weezer song, Rivers Cuomo sings:
“In the garage, I feel safe.
No one cares about my ways.
In the garage where I belong.
No one hears me sing this song.
In the garage.”
Artists primarily have three options today. First, an artist may never leave the safety of his garage and his music would never reach the general public. More likely than not, artists want to have their music heard. To do this, an artist can either take a “do it yourself” approach, or sign a 360 Deal (assuming someone is interested in signing that artist). 360 Deals are the norm for record labels today. In fact, both majors and indie labels use them, and even non-label organizations such as Live Nation have signed artists to 360 Deals.
360 Deals are contracts where the record label gets a cut from all of the artists profits: record rights, touring, merchandising, sponsorship, endorsements, fan clubs, music publishing, and the list goes on. Many artists feel like 360 Deals are like signing their lives away and would rather take the “do it yourself” approach. However, there are multiple advantages to the 360 Deal as long as an artist signs the right contract. Namely, the artist will have an experienced organization label perform all the functions an artist needs to go big.
While 360 Deals are the norm today, this was not necessarily the case just a decade ago. Where did these Deals come from and why are they so common now? A good place to start is Motown. Berry Gordy, founder of Motown, was at the forefront of the 360 Deal. Motown managed the music, touring, and just about everything else for its artists. Other forms of 360 Deals that took place in the 60’s and 70’s include the made-for-TV groups such as the Monkeys and the Partridge Family. A record label or TV network creates the band, then the label writes the songs, manages and controls all the touring for the band they created. This style of a 360 Deal is present today with groups such as the late 90’s Backstreet Boys, and the winners of reality shows such as American Idol.
Though hard to believe, music was not always instantly available on a computer. Until recently, consumers were not able to buy just the single they wanted, or have access to any song legally for free. In that distant age (pre-2001), labels did not use 360 Deals all that often. An artist would sign a record contract and the label would receive a cut of the record sales. The artist would then be free to have whomever he wanted to manage touring, merchandising, or even song writing. This all changed once music went digital. Labels began losing money due to a drop in album sales, and to make up for these costs, labels found a way to take a cut of all profits with 360 Deals.
Not all 360 Deals are the same. While some artists have signed their lives away, other artists, such as Paramore, have become amazingly successful with a 360 Deal. They have had several singles, play a busy tour schedule at large venues, and have merchandise sold in retailers across the country. While 360 Deals are sometimes viewed negatively, this is not the music industry of old. An artist is more capable of managing the “do it yourself” approach to making it in the business, and records deals are not as necessary as they were for artist ten to fifteen years ago. This gives today’s artists leverage to wait and strike the right 360 Deal for them. Both major and indie labels are now more capable of managing each facet of the music business, and with touring companies like Live Nation participating, artists can receive a large boost from today’s 360 Deals.
December 8th, 2012
The new Wolfe Law Miami blog launched in mid-December 2012. We’ll using the blog to be sharing news and updates on sports, business, and entertainment law.
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