Legal Principles Applied to Sport Management

1. Legal Principles Applied to Sport Management

2. Introduction • Sport law • Application of existing laws to the sport setting • A few laws specific to sport industry (regulation of boxing and sport agent industries, Title IX, etc.) • When a dispute arises over interpretation of a rule or regulation, sport lawyers represent both the governing body/association and the participant(s). • Involvement of sport lawyers occurs because sport organizations hire lawyers to draft their rules and regulations; thus, they need lawyers to interpret them.

3. History • Tort law cases involving participation in sport and games date from the early evolution of tort law. • Many of the earliest U.S. lawsuits in the sport industry involve professional baseball. • Players challenged owners on reserve system that prevented players from free agency. • Owners challenged each other on business of sport. • First sport law course was taught in 1972 at Boston College Law School.

4. History • Considerable growth over last 30 years due to: • Legal profession is more specialized. • Amount of litigation and diversity of cases in the sport industry have increased as more people rely on the courts to resolve disputes. • Many athletic associations have adopted their own governance systems with rules, regulations, and procedures that are based on the U.S. legal system. • Skills in legal education are beneficial to many positions in sport industry.

5. Key Concepts: Risk Management • Developing management strategy to maintain greater control over legal uncertainty • Prevention: Keeping problems from arising • Intervention: Having an action plan to follow when problems do occur • D.I.M. Process: • Develop, Implement, and Manage risk • Include all employees in the three-stage process

6. Key Concepts: Judicial Review • Occurs when plaintiff challenges a rule in a sport organization and court determines whether it should review the sport organization’s decision • Historically, courts have declined to overturn the rules of voluntary athletic organizations unless certain conditions exist. • Plaintiff’s interest is to keep rule from applying or to force the athletic association to apply it differently (not in monetary damages). • Plaintiffs seek injunction: an order from the court to do or not do a particular action.

7. Key Concepts: Tort Liability • Tort: An injury or wrong suffered as the result of another’s improper conduct. • Tort law provides monetary damages to compensate an injured person (plaintiff). • Intentional torts occur when a person purposely causes harm to another or engages in activity that is substantially certain to cause harm. • Negligenceis an unintentional tort and is the most common tort that sport managers encounter.

8. Key Concepts: Tort Liability Negligence • Sport managers are negligent when: • They commit an act/omission causing injury to a person to whom they owe a duty to act with care. • Negligence imposes a duty to refrain from careless acts. • Plaintiff must show that sport manager (defendant) owed the plaintiff a duty of care and breached it. • A duty of care arises from a relationship between plaintiff and defendant (e.g., arena operator & fan). • When a duty is breached and that breach is the cause of an injury for which there are monetary damages, negligence has occurred.

9. Key Concepts: Vicarious Liability • Allows plaintiff to sue a superior for the negligent acts of a subordinate. • Employer need not be negligent to be liable. • Three defenses are available: • The employee was not negligent. • The employee was not acting within the scope of employment. • The employee was an independent contractor.

10. Key Concepts: Agency Law • Agency describes a relationship in which one party, the agent, agrees to act for and under the direction of another, the principal. • Purpose of agency law is to establish duties that principals and agents owe each other. • Agency law is an important component of the player representation industry.

11. Key Concepts: Agency Law (cont.) • Fiduciary duties inherent in the principal–agent relationship • Principal’s fiduciary duties: 1. To comply with a contract if one exists 2. To compensate the agent for his or her service. 3. To reimburse the agent for any expenses incurred while acting on the principal’s behalf • Agent’s fiduciary duties: 1. To obey 2. To remain loyal 3. To exercise reasonable care 4. To notify 5. To account (for information and finances on a reasonable basis)

12. Key Concepts: Contract Law • Contract: Written or oral agreement between two or more parties; creates legal obligation to fulfill the promises. • Sport managers negotiate and enter into contracts regularly with or without legal advice. • A valid contract must have the following elements: • Offer and acceptance (mutual assent) • Consideration (value) • Capacity • Legality (subject matter is legal and not against public policy)

13. Key Concepts: Constitutional Law • Developed from precedents established by courts applying the language of the U.S. Constitution and state constitutions to the actions and policies of governmental entities • Four constitutional challenges arise in sport: • Due process • Equal protection • The right to be free from unreasonable searches and seizures • Invasion of privacy

14. Key Concepts: Constitutional Law State Action • U.S. Constitution and state constitutions do not apply to private entities. • Exception: In some cases the private entity is so enmeshed with the public that courts apply the constitution to the private entity. • When a private entity meets this standard, it is called a state actor.

15. Key Concepts: Constitutional LawDue Process: 5th and 14th Amendments • The right to notice and a hearing before life, liberty, or property may be taken away. • Athletic associations may have an impact on liberty and property interests protected by the due process clauses in the Fifth and Fourteenth Amendments. • Liberty and property (right to play, right to be free from stigma, right to work and earn salary, etc.)

16. Key Concepts: Constitutional LawEqual Protection: 14th Amendment • No person shall be discriminated against unless a constitutionally permissible reason for the discrimination exists. • Standards of review for discrimination: • Strict scrutiny: On the basis of race, religion, or national origin. • Legitimate interest: On the basis of gender; discrimination can occur only if legitimate interest for doing so exists. • Reasonable basis: Discrimination on any other status or classification.

17. Key Concepts: Constitutional Law Search and Seizure: 4th Amendment • People have the right “to be secure in their persons, houses, papers and effects against unreasonable searches and seizures.” • Sport example: the act of taking the athlete’s urine or blood for drug testing • Several courts determined that private athletic association (such as NCAA) or public high school drug testing programs do not violate state constitutional rights.

18. Key Concepts: Constitutional Law Invasion of Privacy • No specific amendment for invasion of privacy; court has implied one from the Constitution. • Plaintiff must establish that invasion is substantial and in area for which there is an expectation of privacy. • Sport cases most often arise as challenges to drug testing programs. • U.S. Supreme Court has held that drug testing of high school athletes is not an invasion of privacy (1995).

19. Key Concepts: Title IX • Comprehensive statute aimed at eliminating sex discrimination in educational institutions that receive federal funding • In athletics, cases focus on three areas: • Proportionate scholarship distribution • Equal treatment, benefits, and opportunities given in specific program areas • Degree to which educational institution has equally and effectively accommodated the interests and abilities of male and female students

20. Key Concepts: Antitrust • Sherman Antitrust Act (1890) goal: • Promote competition in the free market; break up business trusts and monopolies and prohibit anticompetitive activity by businesses • Application of antitrust laws to leagues left indelible mark on the structure and nature of labor–management relations • Just one major professional league for each sport; thus, their domination of the market was challenged as monopolies violating the Sherman Act.

21. Key Concepts: Antitrust Antitrust Exemptions • MLB is exempt from antitrust laws as a result of a 1922 Supreme Court Federal Baseball decision • All professional sport leagues and tours are subject to antitrust rules. • Curt Flood Act (1998): Legislative response to Federal Baseball and dozens of unsuccessful congressional acts; allows MLB players to sue their employers under the Sherman Act, but exempts the business of baseball.

22. Key Concepts: Antitrust Antitrust Exemptions (cont.) • Sport Broadcasting Act of 1961 exempts leagues from antitrust laws when pooling rights to enter into national broadcasting rights. • Labor exemption: Restrictive practices are exempted from antitrust law when those practices have been negotiated in a collective bargaining agreement by labor and management.

23. Key Concepts: Labor and Employment Laws National Labor Relations Act (1935) • Establishes procedures for union certification and decertification and the rights and obligations of union and management once a union is in place. • Areas of the sport industry where unions occur are facility management and professional sports. • Unions can be found in interscholastic athletics, but state labor laws would apply.

24. Key Concepts: Labor and Employment Laws National Labor Relations Act (1935) • Players associations differ from unions in other industries: • Turnover rate for sport union members is high due to short athlete careers. • Forces players associations to constantly spread their message to new members throughout North America. • Unions struggle to keep the superstars and the players on the bench equally satisfied. • Management in professional sport favors unions to achieve the labor exemption for restrictive practices.

25. Key Concepts: Labor and Employment Laws Equal Pay Act (1963) • Prohibits employer from paying one employee less than another on basis of sex when performing jobs of equal skill, effort, and responsibility • Only applies to sex-based discrimination on the basis of compensation. • Four defenses available when disparity is due to: • Seniority system • Merit system being followed in good faith • System measuring pay on the basis of quality/quantity of production • Factor other than sex

26. Key Concepts: Labor and Employment Laws Title VII of the Civil Rights Act of 1964 • Federal law prohibiting discrimination in many settings, including housing, education, and public accommodations • Covers employers with 15 or more employees, but exempts Native American tribes and private clubs • Protects all classes of people from dissimilar treatment on the basis of race, color, national origin, sex, or religion • Defense where being a member of a certain class is a bona fide occupational qualification (BFOQ) • Race and color can never be BFOQs • Examples • Hiring male resident directors to monitor dorms at all-male school • Hiring a Catholic to teach religion at a Catholic school

27. Key Concepts: Labor and Employment Laws Age Discrimination inEmploymentAct (1967) • Prohibits employment discrimination on the basis of age. • Applies to employers engaged in commerce and who hire over 20 workers for 20 or more calendar weeks, as well as labor unions and state and federal governments. • Employer can defend a claim by proving the decision was made due to reasonable factors other than age.

28. Key Concepts: Intellectual Property • Trademark • Word, name, or symbol used by a manufacturer or merchant to identify and distinguish its goods from those manufactured and sold by others. • Service mark • Used to identify the source of an intangible service (e.g., professional sports franchises’ marks) • Lanham Act • Governs trademarks and service marks, gives protection to the owner of a name or logo, keeps others from selling goods as the goods of the original source.

29. Key Skills • By practicing problem solving, sport managers can improve their logical and analytical reasoning skills. • Analysis of case and statutory law will lead to more persuasive and clear written and oral communication skills.

30. Current Issues • Managers can effectively manage legal problems by knowing and understanding law and sport law. • By knowing legal pitfalls, managers can avoid, prevent, or reduce many kinds of problems. • A well-written and well-administered risk management plan can help a sport manager avoid legal liability. • Analysis should include a list of issues to consider.

31. Future Issues: Olympics • Growing number of challenges over rules and regulations imposed on participants. • Drug testing is a growing legal battlefield. • Ambush marketing occurs when an organization misappropriates trademarks, logos, and goodwill of events or organization (e.g., Nike in 1996). • Other issues: • The right of individual athletes to market themselves • Imposition of codes of conduct for athletes

32. Future Issues: Collegiate Sport • Challenges may arise regarding NCAA amateurism rules. Key legal issues: • Restrictions on athletes’ involvement with sport agents • Restrictions on athletes’ abilities to market themselves • Protection and licensing of collegiate trademarks and logos • Gender equity • Use of dietary supplements and other stimulants • Possible that issue of NCAA drug testing might be heard and decided by the U.S. Supreme Court.

33. Future Issues: Professional Sport • League structure and collective bargaining negotiations • Major League Soccer awarded single-entity status, thus exempt from antitrust challenges (2002) • NHL’s CBA expires October 2004, and a major labor struggle is expected • Viability of the 2002 MLB CBA; success centers on whether the disproportionate spending on player salaries decreases • Viability of women’s leagues (WNBA, WUSA)

34. Future Issues: Governmental Scrutiny • State regulation of player agents has increased from 2 statutes in 1986 to 28 statutes in 1997. • New federal regulation of sports agents (2004). • Federal Trade Commission is examining Bowl Championship Series structure for antitrust violations. • Many disputes are being resolved through the commercial and labor arbitration processes. • More widespread use of buyout provisions to release parties from their agreements.