The 11th U.S. Circuit Court of Appeals has affirmed a lower court, holding that the Labor-Management Relations Act (“LMRA”) preempts the state law negligence claims brought by several former NFL players against the league and the NFLPA concerning the defendants’ alleged approval of several financial advisors.
The decision hinged on the fact that the duties underlying that claim arose directly from terms in the collective bargaining agreement between the NFLPA and the NFL, triggering the LMRA.
The plaintiffs included several former NFL players, the spouse of one of the players, and several investment entities controlled by them. During 2004 and 2005, they invested approximately $20 million with Kirk Wright and Nelson “Keith” Bond, who along with others operated an investment company, International Management Associates. Unbeknownst to the plaintiffs, Wright was actually conducting a Ponzi scheme through which he stole most of the money the plaintiffs invested with IMA. IMA eventually sought bankruptcy relief. Wright was convicted on a number of federal felony charges and thereafter killed himself.
The plaintiffs sued the NFL and the NFLPA, alleging the plaintiffs would not have invested money with IMA had the defendants given them accurate information about Wright, Bond and IMA. More specifically, they complained that the NFLPA listed Wright and Bond with the NFLPA’s Financial Advisors Program without first conducting a proper investigation. As for the NFL, the plaintiffs claimed that they requested, and the NFL provided, background checks on Wright, Bond and IMA that were inadequate. Based upon these allegations, the plaintiffs sued the NFL and NFLPA under Georgia law for negligence, negligent misrepresentation, and breach of fiduciary duty.
The NFL and the NFLPA argued that § 301 of the LMRA preempted the plaintiffs’ state-law claims because these claims arose from, or were substantially dependent upon an interpretation of, the CBA between the NFL’s Management Council and the NFLPA. The district court agreed.
One of the plaintiffs’ key arguments on appeal was that the NFL is not a signatory of the CBA. While admitting that the league is not a formal signatory, it “is bound by the CBA’s terms,” wrote the court. “The CBA was entered into between the NFLPA, ‘which is recognized as the sole and exclusive bargaining representative of present and future employee players in the NFL,’ and the National Football League Management Council, ‘which is recognized as the sole and exclusive bargaining representative of present and future employer member Clubs of the National Football League.’”
Turning the question of preemption, the court wrote that “the negligence claims against the NFLPA were preempted because the alleged duties (investigating and approving financial advisors) arose directly from the CBA’s Career Planning Program provision. Background checks were performed as part of that CBA-mandated Program. And, the court would have to consult the CBA to determine the scope of the legal relationship between the players and the NFL and their expectations based upon that relationship. And, determining reasonable reliance for the misrepresentation claim was dependent on disclaiming language that players were solely responsible for their personal finances, the fiduciary duty claims directly arose from the CBA’s mandate that the defendants use best efforts to establish the Program, which included providing information to players on handling their personal finances. That claim was also substantially dependent on interpreting the CBA’s disclaiming language.”
Stephen D. Atwater et al. v. The National Football League Players Association; 11th Cir.; No. 09-12556, 626 F.3d 1170; 2010 U.S. App. LEXIS 24067; 189 L.R.R.M. 2834; 160 Lab. Cas. (CCH) P10,322; 22 Fla. L. Weekly Fed. C 1555; 11/23/10
Attorneys of Record: (for appellants) Fidelma L. Fitzpatrick, Motley Rice LLC, PROVIDENCE, RI., Marlon Kimpson, Esq., MT PLEASANT, SC; Frederick J. Jekel, Esq., Jekel-Doolittle, LLC, MT PLEASANT, SC; Lance V. Oliver, Motley Rice LLC, MT PLEASANT, SC. (for appellees) Joshua F. Thorpe, Bondurant, Mixson & Elmore, ATLANTA, GA.; Leah E. Pogoriler, Covington & Burling – DC, WASHINGTON, DC.;
Gregg H. Levy, Covington & Burling LLP, WASHINGTON, DC; Earl W. Gunn, Weinberg, Wheeler, Hudgins et. al., ATLANTA, GA; Michael A. Sexton, Weinberg Wheeler Hudgins Gunn & Dial, ATLANTA, GA; Jason James Carter, Bondurant, Mixson & Elmore, LLP, ATLANTA, GA; Joseph A. Yablonski, Joseph A. Yablonski, P.L.L.C., WASHINGTON, DC; Benjamin C. Block, Covington & Burling-DC, WASHINGTON, DC.
