A federal judge from the District of Minnesota has ruled that a roster bonus paid to a National Football League player as part of his contract constituted a “salary escalator” and not a signing bonus as contemplated by the “Stipulation and Settlement Agreement” (SSA).
The ruling means former Denver Bronco Ashley Lelie will not have to repay the roster bonus he received from the club, which the club had sought after Lelie failed to report to the Broncos’ mandatory mini-camp or preseason training camp.
While a federal judge was ruling for Lelie, an arbitrator ruled against him, requiring him to repay $600,000 of a signing bonus he had received when he was drafted and signed to a contract by the Broncos
The legal decision, reviewed here, affirmed the ruling of Special Master Stephen B. Burbank, which had been appealed by the National Football League Management Council.
By way of background, Lelie originally signed a five-year NFL player contract with the Broncos on July 25, 2002. Attachment II to the contract in question included a provision that gave the Broncos an option to extend Lelie’s contract for a sixth season through the 2007 League Year. As additional consideration “for the exercise of the Option for the 2007 NFL season and for (Lelie’s) adherence to all provisions of said Contracts,” the attachment included an option bonus of $1.1 million to be paid in two equal payments. Ultimate payment of both installments was subject to the provisions of Section II of the attachment, which stated:
“In the event Player fails or refuses to practice or play with Club at any time for any reason other than due to injury or death . . . or leaves Club without its consent during the contract years, then Player shall be in default, and upon demand by the Club, Player will return the proportionate amount of the bonus for the period of time effected [sic] by the default. Club shall have a right of setoff and recoupment with respect to any amounts owed to Club.”
The Broncos exercised the option and paid Lelie both installments of the option bonus in 2003.
However, when Lelie did not report in 2006 to the Broncos’ mandatory minicamp or preseason training camp, the team claimed that it was entitled to recover, among other amounts, $220,000 (one-fifth) of the roster bonus, pursuant to Section II.
Lelie wrote a $220,000 check to the Broncos. However, he ultimately sought to recover the $220,000, initiating a proceeding with the Special Master.
“The primary issue addressed by the Special Master, now before the court, is whether Section I of the Attachment authorizes a ‘forfeiture’ not permitted under Article XVII, § 9(c) of the SSA (‘§ 9(c)’). Special Master Burbank concluded that § 9(c) prohibited the forfeiture and that Lelie was entitled to return of the $220,000 he paid the Broncos.”
Specifically, § 9(c) states that “No forfeitures permitted (current and future contracts) for signing bonus allocations for years already performed, or for other salary escalators or performance bonuses already earned.”
The plaintiff maintained that the bonus is a “’salary escalator’ that was ‘earned’ at the time the Broncos exercised the option and therefore ‘already earned’ when Lelie breached the Contract. The NFLMC asserts that the option bonus is not a ‘salary escalator’ and was not ‘already earned’ when Lelie breached.”
The court sided with the plaintiffs on whether Lelie’s option bonus should be considered an “escalator.” Central to the court’s rationale was its focus on the entire phrase “other salary escalators.
“To understand the meaning of ‘other salary escalators,’ the court applies the rule of noscitur a sociis and looks to the rest of the sentence and the words surrounding the phrase for guidance. See Popkin v. Sec. Mut. Ins. Co. of N.Y., 48 A.D.2d 46, 48, 367 N.Y.S.2d 492 (N.Y. App. Div. 1975). In this case, § 9(c) states: ‘no forfeitures [are] permitted . . . for signing bonus allocations for years already performed, or for other salary escalators.’ The ‘or . . . other’ means that a ‘signing bonus allocation’ is a type of ‘salary escalator.’ Therefore, ‘salary escalators’ include bonuses.”
Similarly, the court agreed with the plaintiff on the question of whether the bonus was already earned. “The option bonus served as consideration for holding the option open, and the Broncos reaped benefits merely by exercising the option. First, exercise of the option adjusted Lelie’s pay scale and allowed the team to work more freely with its Rookie Allocation and Salary Cap. Second, the option exercise extended Lelie’s contract with the team, delaying Lelie’s free agency. This delay proved important given the eventual trade with the Falcons. Had the Broncos not exercised the option in 2003, Lelie would have been a free agent in 2006, and he could have signed with another team without the Broncos realizing any benefit from his departure. Instead, the Broncos received two high-round draft selections in return for assigning Lelie’s contract to the Falcons. There is no inequity in finding that Lelie earned the option bonus upon the team’s exercise of the option. At that point, there had been a bargained-for exchange and each side received benefit.
“The NFLMC argues that interpreting “already earned” in this manner means that players could breach contracts after the exercise of options and payment of option bonuses yet suffer no consequences. This assertion fails to account for the myriad ways teams can punish players for failing to comply with the performance terms of their contracts. For example, the NFL Collective Bargaining Agreement allows teams to fine players for missing training camp, team meetings and practices. These fines increased in 2006 to coincide with the addition of the anti-forfeiture provision contained in § 9(c). The team is also free to seek recoupment of signing bonus allocations which, pursuant to § 9(c), depends on player performance. Between the fines and signing bonus money, the Broncos stand to recover over $ 800,000 from Lelie for his failure to perform and subsequent trade. Thus, while § 9(c) forecloses forfeiture of option bonuses already earned as a means of punishing players for failing to perform provisions of their contracts, teams have other avenues to penalize such behavior.
“For these reasons, after a de novo review, the court affirms Special Master Burbank’s decision that Lelie’s option bonus was a ‘salary escalator . . . already earned.’ Therefore, the bonus is protected from forfeiture pursuant to § 9(c), and Lelie is entitled to return of the $ 220,000 he paid to the Broncos under the Acknowledgment.”
Reggie White et al. v. National Football League et al.; D. Minn.; Civil No. 4-92-906 (DSD), 2007 U.S. Dist. LEXIS 21536; 3/26/07
Attorneys of Record: (for plaintiffs) Carol T Rieger; Charles J Lloyd, Livgard & Rabuse, PLLP, Mpls, MN; David G Feher, Dewey Ballantine, New York, NY; David Greenspan, Dewey Ballantine LLP, New York, NY; Edward M Glennon, Lindquist & Vennum PLLP, Minneapolis, MN; James W Quinn, Weil Gotshal & Manges, New York, NY; Jeffrey L Kessler, Dewey Ballantine, New York, NY; Mark A Jacobson, Lindquist & Vennum PLLP, Minneapolis, MN. (for defendants) Daniel J Connolly, Faegre & Benson LLP, Minneapolis, MN; Gregg H Levy, Covington & Burling, Washington, DC; Shepard Goldfein, Skadden Arps Slate Meagher & Flom, Four Times Square, New York, NY. Maxwell M Blecher, Blecher & Collins, PC, Los Angeles, CA; Peter S Hendrixson, Dorsey & Whitney LLP, Minneapolis, MN. Gregg H Levy and Neil K Roman, Covington & Burling, Washington, DC
