November 12th, 2013
The National Basketball Association has recently re-engaged in settlement talks with the former owners of the defunct American Basketball Association franchise known as the Spirits of St. Louis to end what many sources close to situation have dubbed “the greatest sports business deal of all time.” In 1974, brothers Ozzie and Daniel Silna purchased the ABA’s Carolina Cougars and quickly moved to the team to St. Louis, Missouri, then the largest city in the United States without a professional basketball team. In 1976, however, the ABA ceased to exist due its merger with NBA. Four out of the seven ABA teams—the Indiana Pacers, San Antonio Spurs, Denver Nuggets, Brooklyn Nets—merged with the NBA; however, due to the fact that the Spirits were not included, in order to effect completion, the NBA agreed to give the Silna brothers one-seventh of the national TV revenue generated annually by the four ABA team survivors. Approximately once a month, the NBA sends a check to the Silna Brothers containing revenue garnered from its national television contracts. In the 1980-81 season, the first year the Silnas were eligible to receive their check, they received $521,749; this past season before the 2013-14 tip-off, the brothers received a reported $19 million. In total, since the deal was reached in 1976, the NBA has paid the Silnas close to $300 million in TV royalties; recently, a judge ruled that the brother have rights to internet revenue as well. Pursuant to the language of the agreement, the Silna brothers are set to receive checks from the NBA as long as the league is in existence.
The NBA tried once before to settle its Sports Law case with Silnas, offering them a buyout of $5 million over eight years. The Silnas countered with a demand of $8 million over five years, which the league immediately rejected. Based upon the fact that the NBA currently has $7.4 billion in TV contracts with ABC/ESPN and TNT, rejecting the Silna’s offer is most likely one of, if not the, biggest business blunders made by the NBA since its existence. Based on the 2013-2014 NBA’s national television schedule, the San Antonio Spurs will play fifteen nationally-televised games; the Denver Nuggets will play thirteen; the Indiana Pacers will play ten; and the Brooklyn Nets will play the most out of the group with seventeen. Accordingly, the Silnas should look to cash in on another big payday from the NBA.
When approaching settlement talks, an important factor both parties should consider before accepting or demanding concessions is their bargaining power. In this situation, the Silnas have nothing, while the NBA and its teams have significant amounts of revenue, to lose. The NBA is known to broadcast its signature teams and also those expecting to make significant runs for the Championship in June. The Indiana Pacers so far are 8-0 on the season and have a budding superstar in Paul George; the Brooklyn Nets recently completed a highly-anticipated move from New Jersey and have made a series of off-season acquisitions that have fans feeling confident of multiple championships in the upcoming seasons; and the San Antonio Spurs are perennial powerhouses, winning four championships in the past fourteen years, and recently having a fifth snatched away from them by the Miami Heat in a 7-game championship series thriller. As a result, these teams should be expected to be broadcasted on national TV numerously for the upcoming seasons. The NBA will serve itself well by not balking at any settlement offers given by the Silnas brothers this time around.
October 15th, 2013
NCAA Men’s College Basketball season tips-off Sunday, November 3rd. This date also marks the beginning of what is sure to be a trying season for Maryland junior guard/forward, Dez Wells.
Dez Wells found himself on the current Maryland roster after being expelled from Xavier University in 2012 over sexual assault allegations; these allegations were later found unworthy for trial. In response to the public backlash received pursuant to his expulsion, especially from opposing team’s fans on away games who shout “No means no” whenever he shoots free throws, Wells filed a lawsuit for defamation against his former school and its president, Michael Graham, seeking an apology and monetary compensation for “personal suffering and reputational damage”. The lawsuit, filed in United States District Court in Cincinnati, alleges that Xavier rushed its internal judiciary process after a fellow student accused Wells of sexual assault. Local prosecutor, Joseph Deters, declined to indict Wells, as did a grand jury, and publicly called the school’s investigation “fundamentally unfair”
Xavier, on the other hand, has stood by its judicial process, despite it being called “rushed and flawed” by Wells’ lawyer, Peter R. Ginsburg. While Xavier has never expressly stated the specific reason for Wells’ expulsion, it relies on the fact that Wells was found responsible for violating the Student Code of Conduct by the Xavier University Conduct Board, and that this decision was upheld on appeal to assert that it properly conducted its judicial process.
Even though it is not uncommon for former college students to sue their former schools—for example, see Peter Yu v. Vassar College or Brian Harris v. Saint Joseph’s University—for a current college student-athlete to sue his former school three months before the season is set to begin is truly unprecedented. Lawsuits such as these are detrimental to the concept of a student-athlete. While Wells does have the support of Maryland coach, Mark Turgeon, he is on his own against a major university with this lawsuit. The outcome of this case likely has strong implications on the potential formation of a union or other future forms of representation for student-athletes. A national campaign, known as “APU” (“All Players United”), has already started to get the ball rolling regarding student-athlete representation. This national athletes’ rights campaign started about a month ago when 28 football players from Georgia, Georgia Tech, and Northwestern made national headlines by writing APU on their gear during televised games; this symbol of unity recently reached the University of Kansas football team this past weekend. The APU campaign was initiated by current athletes on the Players Council for the National College Players Association (NCPA), an advocacy group founded by former UCLA football player Ramogi Huma. Its main goals include concussion reform, benefits, and post-career medical coverage.
Additionally, with New York-based law firm, Winston & Strawn LLP, starting what it describes as the first college-focused division at a major law firm to represent players, coaches, schools, and conferences against what it describes as the “unbridled power and influence of “ NCAA, the outcome of Wells’ case has even more bearing on the future of athlete representation. While the focus may initially be on claiming a student-athletes right to the gross revenue the NCAA acquires every year, it is fathomable to envision Winston & Strawn extending its reach to make cases such as Wells’ less of an “I” and more of a “we” against overbearing establishments who presumably have unlimited power.
The facts and details surrounding Dez Wells’ case against Xavier is tough for any student to handle, let alone a student-athlete subject to hostile territory and media coverage on a weekly basis. However, with the advent of movements such as APU and the establishment of major law firms willing to defend, the times of student-athletes bending and subjecting themselves to the will of higher powers seems to be fading. Dez Wells will undoubtedly have a tough upcoming year, but his fight now will help future student-athletes not have to go through similar struggles alone.
September 16th, 2013
New York Yankees third baseman Alex Rodriguez (13) returns to the dugout during the ninth inning against the Boston Red Sox at Fenway Park. The Boston Red Sox won 5-1. Photo Credit: Greg M. Cooper-USA TODAY Sports
Alex Rodriguez’s appeal of his historic 211 game suspension—the longest non-lifetime ban in Major League Baseball history—is set to begin on September 30th. While Rodriguez is the only player out of the thirteen suspended to appeal, the chances of him winning his claim are thought to be quite strong based upon his allegations; Rodriguez’s team of lawyers plan to argue that his suspension was the result of an excessive abuse of power by Commissioner, Bud Selig, based upon the provisions of the Basic Agreement, the collective bargaining agreement that governs the relationship between the Commissioner and the players. Rodriguez will also receive backing from the Major League Baseball Players Association, the union established by the Basic Agreement to protect the interests of players against the league. Together, both sides will argue that the Commissioner exceeded his authority because: 1) this is Rodriguez’s first offense, which merits only a 50-game ban; and 2) MLB’s claim that Rodriguez was given a longer penalty because he interfered with the MLB’s investigation is invalid, because Milwaukee Brewers star Ryan Braun allegedly did the same but was only given a 65 game suspension.
While the MLBPA has expressed support towards Alex Rodriguez’s appeal, according to the New York Daily News and its sources, Rodriguez’s team is gaining the impression that the MLBPA will not adequately represent and defend him during his appeals process. This belief stems from recent comments made by Michael Weiner, head of the MLBPA. These recent comments have led Rodriguez to think that Weiner believes Rodriguez used banned performance enhancing drugs, a thought that goes against the defense Rodriguez plans to implement in his case. If Rodriguez’s loses his appeal and blames the MLBPA for inadequate defense, he could file a Sports Law suit against the league and allege a breach of duty of fair representation. However, according to both Robert Boland, a former prosecutor, criminal defense attorney, and sports agent who is now the academic chairman for New York University’s Tisch Center for Sports Management, and University of Illinois sports law professor, Michael Leroy, such lawsuits are difficult to pursue. First, Rodriguez would have to submit his case to the National Relations Labor Board to determine if his case alleged sufficient facts to pursue litigation. Second, if Rodriguez’s allegations are deemed sufficient and he is able to bring his suit to court, the standard he would have to meet to show the MLBPA improperly mishandled his case is extremely high.
Generally speaking, courts have taken a deferential approach when reviewing cases alleging a breach of duty of fair representation. Because of this, courts have held that a union has breached its duty only if it acts arbitrarily, in bad faith, or discriminatory nature. Neither negligence nor a mistake in judgment will support a claim that a union has acted in bad faith. Additionally, because a union is often required to represent a wide range of interests that may at times conflict, the deferential range of reasonableness allowed by courts is quite substantial.
Essentially, Rodriguez would have to claim the MLBPA was grossly negligent in their representation by not putting forth their best effort and acted with a discriminatory purpose by not defending him as diligently as it would other players on appeal. However, both Boland and Leroy have said they have not seen any evidence that would lead courts to believe that the MLBPA has handled Rodriguez’s case improperly. Therefore, it would be difficult for Rodriguez’s lawyers to muster up the sufficient evidence to support this allegation.
September 9th, 2013
On August 29, the NFL and more than 4,500 retired players agreed to a settlement in the ongoing Sports Law concussion lawsuits, in which the players claimed they suffered significant brain injuries resulting from their time on the field. Pursuant to the settlement agreement, the NFL will pay $765 million; this money includes: 1) $675 million to compensate the players, or their families for those players who have passed away, suffering from severe cognitive injuries; 2) $75 million for baseline medical exams used to check for brain injuries; and 3) $10 million for concussion and cognitive related research and education. Additionally, according to Peter King of Sports Illustrated, the total cost of settlement may reach upwards of $1 billion when factoring in the cost of attorney’s fees used to litigate these concussion lawsuits.
Specifically, when breaking down the money rewarded to the retirees, those who suffer from Alzheimer’s disease will be capped at $5 million, families of former players who were diagnosed with chronic traumatic encephalopathy (CTE) after death will be capped at $4 million, and those with dementia will be capped at $3 million. What is noticeably missing from this reward breakdown is compensation for those players who suffered from lesser forms of cognitive impairment, such as severe migraines for example—as aforementioned, the settlement only addresses those with “severe cognitive impairment”, meaning those that suffer from injuries not deemed “severe” will not be included in the $675 million dollar payment to be divvied out to the former players. As a result, new concussion litigation is being pursued by those plaintiffs exercising their right to opt out of the settlement and pursue their own remedy from the NFL. Three days after the settlement, former players Jimmy Williams, Rich Mauti, Jimmy Keyes, and Nolan Franz filed a new concussion lawsuit against the league in New Orleans federal court. In their complaint, they allege that they have experienced “headaches, dizziness, memory loss, depression, cognitive dysfunction, and medical bills because of concussions and other brain injuries, and will have future expenses which they and their wives will have to pay for and future problems that will require their wives’ care.”
This new lawsuit begs the question of will former players whose cognitive injuries are not deemed “serious” enough to be included in the recent settlement opt out and form a new class of plaintiffs to take on the NFL in a new concussion lawsuit? Lawyers involved in the initial settlement anticipate this new claim and any other future claim to be included in the settlement, bypassing any future litigation. However, the designation of a “serious” cognitive injury seems to render that ideology moot. Also, at what point will the scale begin to lean in the NFL’s favor and players will be found to have assumed the risk of playing in the NFL? As younger generations of players begin to take over the league, the likelihood of them knowing the potential perils of participating in this dangerous sport increases, and may increase eventually to the point where their knowledge of the consequences of playing in the league renders the NFL no longer liable for any injuries suffered.
In regards to the latter question, the settlement’s provision requiring damages to go to cognitive research and education may expedite the tipping of that balancing scale. As new information is gathered and shared, the NFL may alleviate any potential claims that retired players may have against it. Only time will tell if that becomes a result of the NFL’s settlement, or if the NFL opened the door to new litigation against itself by finding new dangers that may have resulted on the field that players could not have accounted for.
September 2nd, 2013
Recently, the NCAA concluded its investigation against Texas A&M University’s Heisman winning quarterback, Johnny Manziel, by reaching a settlement agreement with the university to suspend him for the first half of its first game of the season against Rice University. Manziel was accused of accepting payments for signing autographs at several locations, including in South Florida around the BCS title game. Additionally, ESPN had reported that a group of autograph dealers claimed that Manziel accepted payments to sign more than 4,000 items, including footballs and autographs, at a late January event in Connecticut.
The NCAA takes claims of student-athletes accepting impermissible benefits seriously—look at cases such as Terrelle Pryor, who was suspended for the first five games of his senior season and ordered to repay $2,500 for selling his 2008 Big Ten championship ring, 2009 Fiesta Bowl sportsmanship award, and his 2008 “Gold Pants” award for beating archrival Michigan, and Dez Bryant, an All-American wide receiver who was ruled ineligible his final season for lying to the NCAA when asked if he visited and worked out at Deion Sanders’ home. Compared to these punishments, it may seem Manziel got off rather easy, especially considering the belief among A&M fans that Manziel wouldn’t have played the full game anyway. What makes the Manziel case different is that not only did he assert his innocence early and often, he lawyered up quickly, ready to fight any claim against him. According to sports and entertainment lawyer and legal analyst for Sports Illustrated, Michael McCann, a potential claim that Manziel could have asserted against Texas A&M regarding an unwarranted punishment handed down by the NCAA is tortious interference with business expectations, which is a common cause of action in commercial litigation cases.
Tortious interference with business expectations occurs when false claims and accusations are made against a business or individual’s reputation in order to drive business away. Manziel, a potential NFL prospect with some question marks still left to answer—durability, size, questions about his ability to repeat his redshirt freshman Heisman season— could have alleged that an undeserved NCAA suspension harmed his chances to respond to the critics on the field, leading to a drop in draft value and affecting the money he would have received with his rookie contract. The elements to prove tortious interference typically include: 1) the existence of a contractual or beneficial business relationship between two parties; 2) knowledge of that relationship by a third party; 3) intent of the third party to induce a party to the relationship to breach the relationship; 4) lack of any privilege on the part of the third party to induce such a breach; 5) the contractual relationship is breached; and 6) damage to the party against whom the breach occurs. Damages for tortious interference include economic losses that can be proven with certainty and negative injunctive relief to prevent the wrongdoer from carrying out their interference.
In his case, Manziel could have alleged that the NCAA induced Texas A&M into breaching the mutual beneficial relationship between it and its star quarterback by forcing the university to suspend him, resulting in a drop in draft value, and resulting in economic damages. Manziel, however, would have had a tough task in proven the NCAA, as governing body of student-athletes, lacked the privilege to encourage Texas A&M’s suspension and also proving the economic damages he suffered with absolute certainty.
Fortunately, due to the settlement agreement reached, the answers to this potential lawsuit will never have to be answered, and Texas A&M can focus on repeating the success it had in its second year in the SEC.
August 23rd, 2013
The real Chubby Checker (Photo courtesy of Getty)
“Well you know what they say about big feet….”— A joke that never fails to make your buddy with a size 12 shoe feel uncomfortable, goes hand in hand with “Chubby Checker,” a smartphone application used to measure the size of a man’s genitals. The app, purports to convert a users shoe size, into a correlating penis size, and finishing the process by letting users select whether the size is “Sweet” or “Not so sweet.”
But what is “Not so sweet” about this App, is the current legal fall out that has ensued in response to the applications name; a “vulgar pun” as the Judge would put it. On August 15, 2013, the judge ruled that Ernest Evans aka Chubby Checker may move forward with his trademark suit against Hewlett Packard (HP) and Palm. Evans is a classic rock artist of the late 1950’s, becoming most famous after performing “The Twist” on American Bandstand. Although the rock star has written many songs in his career, none surpass the success of “The Twist,” which led to three of Evan’s other “Twist” favorites: “Twistin’ U.S.A.,” “Twist it Up,” and “Let’s Twist Again.”
However, it doesn’t look like Evans will be twisting very much anytime soon, as he and his lawyers will be too busy trying to settle this lawsuit. His complaint alleges “both direct and contributory liability for trademark infringement, dilution and use of Ernest Evans name and publicity rights.” Evans has accused Chubby Checker, the application, for damaging Evan’s reputation and of violating the “Chubby Checker” trademark by connecting the singer’s name and likeness to “obscene, sexual connotation and images.” Evans is seeking “injunctive relief to enjoin and restrain” the application, along with seeking an award of damages “equal to the diminished value of the Plaintiffs name, marks, brand and business.”
The App was in the market for 6 years before HP took it off their sale site in September of 2012. Because HP had constructive knowledge of the detailed application and put the application through an approval process, it therefore knew that it violated the trademark. I agree with the judge that HP should also be held responsible for allowing such an App to be sold in their marketplace, but is it likely that Evans will win his suit?
A trademark is a word, symbol, or phrase that is used to identify a particular seller’s product and distinguish it from another seller’s products. The goal behind trademark law is to make it easier for consumers to identify a product quickly and easily, and forces products to maintain their quality. In order for something to qualify as a trademark, the mark must be distinctive, which means the product must be (1) arbitrary or fanciful, (2) suggestive, (3) descriptive, or (4) generic. Since “Chubby Checker” has no logical relationship to the underlying product (Ernest Evan’s person), this trademark will likely fall under the distinctiveness of “arbitrary or fanciful.” However, even if Evans properly registered his trademark with the U.S. Patent and Trademark Office, it is possible that his trademark, over the years, could have been lost. A person may lose their trademark in several ways: abandonment, improper licensing or assignment, or the trademark becoming generic.
I believe HP’s lawyers may have an argument that Evan’s trademark has been lost, being that it could be possible that the creators of this App had no idea who Chubby Checker is. The App was meant to “check” the size of a man’s “chubby,” both words that may fall under the Fair Use defense. Additionally, I have in my lifetime heard the nickname “a chubby” to describe a guy’s genitals, so is it really fair to hold people responsible for a name that over time has changed its meaning? I guess we will find out.
August 23rd, 2013
Robin Thicke, Pharrell Williams, And Clifford Harris, Jr. (“T.I”) recently filed a claim seeking pre-emptive declaratory relief from Marvin Gaye’s ancestors and Bridgeport Music Inc. regarding their summer hit “Blurred Lines”. In their complaint, the three artists claim they did not commit copyright infringement because their single bears no resemblance to Marvin Gaye’s song “Got To Give It Up”, or to Funkadelic’s song “Sexy Ways”, which are owned by Bridgeport Music, Inc. The crux of the case rests upon whether Thicke, Pharrell, and T.I. could be held liable for copyright infringement if their song was influenced by the era that brought upon the defendant’s prior work, but did not actually sample or copy any of the prior work’s music.
Courts rely on a two-prong test to settle claims of copyright infringement: 1) copying of prior work; and 2) a substantial similarity to the prior work sufficient enough to show misappropriation of another person’s work. Copying can be shown either through direct or circumstantial evidence. To circumstantially prove evidence, courts rely on the alleged party’s access to the work and the similarity between the two. To show substantial similarity, courts look at if the work is extremely hard to distinguish from in the eyes of a reasonable person.
As a reasonable person who has shown “Got To Give It Up” and “Sexy Ways” to other reasonable people who have also heard “Blurred Lines” on the radio roughly 100 plus times this summer, do I believe these songs incorporate some of the same elements? Sure. However, if I were to hear these songs back-to-back-to-back, I would be able to easily distinguish the differences between the three. As the complaint states, “there are no similarities between plaintiffs’ composition and those the claimants allege they own, other than commonplace musical elements[.]” Trying to allege “Blurred Lines” infringed upon the prior two works is similar to saying the Red Hot Chili Peppers infringed upon the Eagles because they both have songs that incorporate similar guitar riffs, or that similar rap songs copyright one another because they use similar bass and drum elements. This case boils down to each individual’s ear; does “Blurred Lines” sound similar enough to “Got To Give It Up” and “Sexy Ways” to prove copyright infringement? I think not, but others may not hear it the same. The song title may not be the only thing “blurry” about this case.
July 11th, 2013
The fight seems to be on between two of the music industry’s biggest stars. Within the past month, Pharrell Williams filed a declaratory judgment lawsuit in the Southern District of New York against William Adams, better known as Will.i.am, seeking to have the Court rule that Pharrell’s “I Am OTHER” mark associated with his new business does not infringe upon Adams’ “I Am” and “Will.i.am” trademarks. The dispute really came to fruition back in December of 2012, when Adams’ attorney sent a cease and desist letter to Pharrell, demanding that Pharrell disassociate the “I Am OTHER” mark from his company. In fact, as Pharrell’s attorney Brad D. Rose of Pryor Cashman, LLP, points out, the mark “‘I am OTHER’ does not infringe, dilute or unfairly compete with Will.i.am or any of [Adams’] alleged ‘I Am’ trademarks, virtually all of which have been rejected by the [U.S. Patent and Trademark Office].”
Not only have the bulk of Adams’ trademark applications been rejected, but upon further research into the U.S. Patent and Trademark Office records, there are hundreds, if not thousands, of federally registered trademarks containing the phrase “I Am”; the same phrase Adams’ seeks to protect. Adams solely owns the “I Am” and “Will.i.am” marks in connection with clothing and entertainment production.
“In order to prevail on a trademark infringement claim, a plaintiff must establish that ‘(1) it has a valid mark that is entitled to protection under the Lanham Act; and that (2) the defendant used the mark, (3) in commerce, (4) ‘in connection with the sale . . . or advertising of goods or services,’ (5) without the plaintiff’s consent.’” Tiffany Inc. v. eBay, Inc., 576 F. Supp. 2d 463, 495 (S.D.N.Y. 2008). In addition, the Plaintiff must establish that the infringing mark being used by the Defendant creates a likelihood of confusion among the relevant consumers. When applying the above standard to the claims asserted by Adams, it is hard to imagine that a court would rule in favor of Adams.
Pharrell claims, as asserted in his response to the aforementioned cease and desist letter, that the “I Am OTHER” mark is distinguishable, both in look and sound, from Adams’ mark, and that the two competing marks have substantially different meanings. Whereas Adams’ mark is simply a play on his name, Pharrell’s “I Am OTHER” mark is a moniker aimed at promoting the individuality of people across the world. Pharrell also points out that due to his and Adams’ celebrity status, it is unlikely that the relevant consumer base will be confused as to which celebrity the I Am OTHER brand is associated.
Pharrell, rather than sitting back and waiting for Adams to file a trademark infringement action, went on the offensive and filed this declaratory judgment lawsuit in an attempt to resolve this matter in a timely fashion. If declaratory judgment is granted, Pharrell will be able to use the “I Am OTHER” moniker in association with his new brand without further obstacle from William “Will.i.am” Adams.
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.