By Nathan Martin
At this year’s Sports Lawyers Association (SLA) Conference, a very distinguished and experienced panel of experts discussed legal issues facing professional sport franchises. Moderated by Nona Lee, Senior Vice President and General Counsel for the Arizona Diamondbacks, the panel comprised Jason Hillman, Vice President and General Counsel for the Cleveland Cavaliers; John Keenan, Senior Vice President and General Counsel for Anschutz Entertainment Group (AEG), which owns the Los Angeles Kings; and Richard Thigpen, General Counsel for the Carolina Panthers.
Day-to-day Issues Faced by General Counsel
Lee began the session by asking the panel to discuss the day-to-day issues they face, both in legal and non-legal roles.
Hillman began joking seriously about playing whack-a-mole with the daily issues he faces. He noted the scope and the to-do list is so varied such that reviewing a sponsorship agreement, season ticket agreement, or an arena suite lease is just the beginning, as his company is now a media company, a real estate company, and a technology company all rolled into one. He described the job as 24 hours/day 365 days/year; there is no off-season.
Thigpen commented that it’s a lot of fun being in-house counsel, particularly because you get to be a part of the business enterprise and not just an outside legal advisor. You get to be involved in multiple facets, especially events. But, the 24 hours/day can wear on you, especially if you are small legal department.
Keenan added that you won’t likely see a successful general counsel in professional sport who doesn’t have a business skill set that complements their legal skill set. Being in the early meetings on a business deal affords you the understanding to do your job more effectively and efficiently. In fact, Keenan noted that his mentor expects him to listen to both parties in those early meetings and solve for any disconnects, and those business skills are essential to do so.
Player Discipline
Lee continued the session by asking about employment related issues, specifically player disciplinary matters.
Hillman basically reframed the issue to the non-player side since most player-related issues are handled through the league and the players association. He advised law students to focus on becoming well versed in employment law issues like workers compensation since that is where much of his issues take place.
Thigpen concurred with Hillman about player-related issues being handled by the league. But, he noted that player-related issues do present challenges for franchises on how they react and respond to such issues, especially in today’s age of instant notification through social media and other means. The organization must have a system in place to handle whatever may present, and be able to balance what the public is demanding with the player’s rights (both under the law and under the collective bargaining agreement) and what is best for the team and organization as a whole. While the league can get involved with non-player discipline when anyone affiliated with the franchise behaves poorly, it is most often taken care of in-house unless it rises to conduct that is detrimental to the league.
Keenan didn’t have day-to-day involvement in player issues, but when an issue rose to a level where it had implications on employment contracts or further aspects of AEG business, then he would get involved. Even with language that requires players to adhere to the highest standards or morality, integrity, and sportsmanship and that they must refrain from doing anything that will be contrary to the best interest of the club, league, and hockey in general, Keenan noted that it is extraordinarily difficult to terminate a player’s employment contract. Drug use, drug trafficking, and domestic abuse were actual player related issues that rose to such a threshold for which Keenan had to get involved. He highly recommended having a crisis plan in place that coordinates the organization response to media, sponsors, partners, etc. to maintain associations with these constituencies, and the overall business and its reputation.
Thigpen reminded the audience that although we hear about bad actors very quickly and easily because of the media attention professional athletes draw, the majority of them are good guys and most of the time issues like these do not affect organizations all that often.
Morals Clause in Sponsorship Agreements
With a nice segue, Lee redirected the conversation from morals clauses in player contracts to morals clauses elsewhere, asking the panel to what extent they see them in use in sponsorship agreements.
Hillman characterized morals clauses as alarmingly frequent in sponsorship agreements he has seen recently, and they are mostly rejected because they are often too broadly written, allowing them to serve as pretext. If he and his team are unable or unwilling to reject them, they qualify the morals clause more carefully and narrowly, as well as embed a cooling off period element to allow for whatever issue that may have triggered the morals clause to play out a bit further before terminating an agreement. Furthermore, they insist on the morals clauses being bilateral versus unilateral.
Keenan added that he sees them regularly and resists them as well, but when used he and his team include an objective measure of some material adverse impact on the business in order to trigger the termination based on a morals clause.
League Expansion
In a new line of questioning, Lee asked each member to discuss expansion specific to each panelist’s league and the issues and resolutions they encountered as part of it.
Hillman reminded the audience that the NBA has not had an expansion move since 2008 when the Seattle Supersonics moved to Oklahoma City and became the Thunder. However, he noted that the NBA is looking for franchise stability, and keeping them in their respective towns is a priority.
Thigpen concurred with Hillman’s stability comment for the NFL as well, but movement does happen as the Rams just moved back to Los Angeles. He mentioned that the Oakland Raiders situation is untenable in the long term and that they are looking at Las Vegas if a community solution near Oakland cannot be found. Five years ago the NFL would not have even considered getting that close to the gambling world, but they are now and if at least 24 owners agree to such a relocation, we may be watching football in Vegas live.
Keenan had some experience across different leagues with expansion, and although AEG failed to secure an NFL team in downtown Los Angeles with its Farmer’s Field endeavor, its Major League Soccer initiatives have panned out well. He also mentioned AEG recently opening T-Mobile Arena in Las Vegas where they hope to secure an NHL team. However, he cautioned that the amount of work, time, and effort that goes into preparing for an expansion franchise, without any guarantee, is daunting.
Media Rights
Lee concluded the session by asking about media rights in a changing world, specifically around issues with technology and social media, as well as new media opportunities and their anticipated legal issues.
Thigpen noted that carving out and separating new media rights could build value for franchises and expand partnerships. However, Hillman cautioned that the value of exclusivity is important, and looking at the relationship from a partnership perspective rather than a licensor/licensee relationship could avoid dilution and unnecessary competition. Keenan commented on a softening of the TV rights market and such uncertainty encouraged his company to re-focus on the in-seat consumer and how they can better the experience for them, citing Coachella and Stagecoach music festivals as examples. Thigpen concurred regarding the in-seat consumer citing that TV has gotten so good that making the stadium experience better (e.g. upgrading Wi-Fi, cellphone infrastructure, A/V systems) is critical to draw them away from the TV.
Keenan also noted that ticketing platforms provide another way to connect with and know more about customers, like beacon technology that provides ambient context identification and background positioning and detection. Such massive data collection has obvious legal implications. While it can help a business become more effective and efficient, it costs a lot of money and time talking about data security and privacy policies. Thigpen agreed that although the capacity to collect tons of data exists, the trick is utilizing it. Determining who needs to know what to take advantage, as well as how to do it while protecting rights of those from whom the data came. Hillman added that in 2006 they bought the Veritix to help them better understand the secondary ticket market so they could develop more targeted and meaningful sales offers.
Martin is an Assistant Professor of Recreation and Sport Management at California State University, Northridge and the Executive Director of the CSUN Aquatic Center at Castaic Lake.
