By Cari A. Stern[1]
Adjunct Professor of Sports Law at The John Marshall Law School
Associate at Chapman and Cutler LLP
Introduction
Unlike other industries, sports cannot exist without some sort of controlled competition; there is a constant struggle over who controls competition, what are the limits on competition, and how disputes should be handled when competition results in circumstances that cannot be addressed amicably between parties. Despite these unique characteristics of sport, disputes have traditionally been settled through the courts. Players in early antitrust and contract cases turned to litigation to vindicate their rights. However, with the growth of unionization among the big four sport leagues[2], arbitration has developed as a mechanism to resolve disputes. Arbitration is one of many forms of alternative dispute resolution (or ADR) – out of court mechanisms for resolving conflicts, which include, but are not limited to arbitration, mediation, conciliation, mini-trials, and ombudsmen.[3]
Today, as courts have become inundated with a backlog of cases, ADR offers athletes, owners, sponsors and other third parties in the professional and amateur setting, opportunities to address disputes in a cost-effective, informal, private and more expedient setting. These advantages are especially attractive in the sports environment, where conflict resolution is often extremely time sensitive due to short career spans and the constant scheduling of sport competitions. Additionally, ADR offers parties the ability to somewhat have control over the person who resolves their dispute: primarily, someone who has expertise in the applicable sport. While arbitration continues to remain the most well-known form of ADR, globally, various sport leagues, sport associations and sport governing bodies are turning to both mediation and arbitration to resolve disputes. Specifically, mediation has grown quite prevalent among sport leagues during periods of labor strife; the most recently publicized being the 2011 NFL and NBA lockouts.
Based on current developments in ADR, most of the materials in the ensuing article are both relatively modern and still undergoing change. After a brief overview of the advantages and disadvantages that ADR has played in the sports industry, this article will explore what contemporary ADR developments indicate for the future of team and individual sports. While ADR has impacted the sports world on both a national and international level, this article will predominantly focus on American sports and the impact the out-of-court mechanism has had among the big four leagues.
Table A: Summary of Key forms of Alternative Dispute Resolution Mechanisms
ADR Mechanism
Description
Arbitration
An adjudicatory process in which one or more neutral arbitrators, chosen by the parties, issue a final and binding award that is enforceable in court and subject to limited judicial review. In order for the parties to seek arbitration, there must be a valid arbitration agreement or arbitration clause between the parties.
Mediation
A voluntary, non-binding process in which a neutral third party, often chosen by the disputing parties, facilitates and guides the parties to reach a voluntary settlement. While the mediator has no authority to issue any decision or award, he/she plays a more proactive role than a conciliator, and also takes feelings into account. Similar to conciliation, mediation does not require a mediation clause or agreement between the parties.
Conciliation
An independent third party brings disputing parties together to talk. Conciliation differs from arbitration since it does not require a preexisting conciliation clause or agreement between the parties; conciliation differs from mediation since the conciliator typically meets with each party separately, and has the main goal of seeking concessions. A conciliator may draw up terms of a settlement and send to parties for approval.
Mini-Trials
A voluntary, non-binding procedure in which disputing parties state their case before executives of each party, as well as a neutral “expert” who may give an opinion concerning his/her legal view on the outcome of the case should litigation result/continue. Just like mediation and conciliation, the parties are not bound to an outcome.
Ombudsmen
An impartial third party selected by an institution, such as a university, provides advice to constituents. Unlike arbitrators, ombudsmen are not confined to strict legal guidelines, and can utilize subjective notions of fairness when giving advice to others.
A. How ADR has Enhanced the Sports World
Due to the profuse number of relationships that transcend the world of sport, there are insurmountable opportunities for conflict. It is no wonder then that sport disputes – or the compilation of disputes arising in the sport world – continuously arise. If the courts, and only the courts, were the only forum available for addressing sport disputes, eligibility disputes would cause competition to be disrupted; those athletes with poor earnings would not be able to seek redress due to the extensive costs often involved in litigation; someone not familiar with the intricacies of sport would be deciding the disputes; and athletes would not realize their full potential earnings, as the time-lag involved in litigation would sideline athletic participants for much of their already short career spans. Because of these reasons, among others, many nations have turned to ADR in lieu of the courts to resolve sport disputes.[4]
Sports are uniquely embedded with a self-contained dispute resolution system. In the big four, a commissioner acts as the “chief executive officer” of league disputes. The commissioner commonly hires and maintains the sport’s umpiring crews, negotiates marketing, labor, and television contracts, and maintains a range of disciplinary powers to address conflicts; in some leagues, like the NFL, this disciplinary power is sometimes unreviewable. In addition, American sports, both at the collegiate and professional level, have referees and umpires. These “sport judges” have the authority to make critical calls that can impact the outcome of any game or athletic competition. Yet, despite this distinctive system only found in the sports industry, it has not been enough to control all disputes. Thus, ADR has been the answer to the abundance of arising problems and crises that plague the sports world.
Although arbitration is not a new phenomenon (it dates back to more than 400 years ago in Great Britain ), it has only been widely used in the sports sector the past few decades. Moreover, other forms of ADR used in sports are still very much in their infancy. The growth in ADR among American sports disputes can be traced to Congress’ passage of The Alternative Dispute Resolution Act of 1998 (ADRA), 28 U.S.C. § 651-58 (1998). Prior to the Act, Congress gave federal district courts authority to use ADR in the courts, but limited this authority to less than all federal districts. The ADRA not only authorizes all federal district courts to use ADR in legal disputes, but it also mandates all district courts provide ADR to litigants; it requires at least one type of ADR process in each district; it gives the courts considerable discretion in deciding how to implement its requirements, thereby addressing the great diversity in litigation cultures across districts; and it requires litigants to consider ADR. Two recent examples of how the ADRA has impacted the sports world are: (i) the use of mediation in the 2011 NFL and NBA lockouts and (ii) the emergence of ADR clauses in stadium leases.
B. Recent ADR Developments in Sports
1. The 2011 NFL and NBA Lockouts: The Role of Mediation
The 2011 NFL lockout (March 11, 2011-July 25, 2011) and the 2011 NBA lockout (July 1, 2011-December 8, 2011), were two separate work stoppages that occurred upon the expiration of the 2006 NFL collective bargaining agreement (2006 NFL CBA) and the 2005 NBA collective bargaining agreement (2005 NBA CBA). While the media portrayed both lockouts as consisting of one contentious issue (i.e., the sharing of league revenue), the reality was there was much more at stake. The divisive issues in the NFL lockout were the sharing of league revenue, the salary cap, rookie salaries, safety and health benefits, free agency and season length. In contrast, the divisive issues in the NBA lockout were the sharing of league revenue, the salary cap and luxury tax. One common, yet often unspoken, similarity between both work stoppages is how mediation was used to narrow bargaining gaps. While both leagues voluntarily chose to use federal mediators to help reach an agreement, only one league participated in court-mandated mediation.
Prior to the expiration of the 2006 NFL CBA, both NFL owners and the National Football League Players’ Association (NFLPA) completed 16 days of voluntary mediation in Washington, D.C. with federal mediator George Cohen of the Federal Mediation and Conciliation Service. Cohen was selected to mediate the dispute due to his significant experience in mediating sport labor disputes (Cohen was formerly outside counsel to the Major League Baseball Players’ Association (MLBPA), the National Basketball Players’ Association (NBPA) and the National Hockey League Players’ Association (NHLPA)). By relying on an experienced mediator, both the NFL and the NFLPA stood to gain by having a fresh set of objective eyes view both parties’ positions, while having the personal aspects of bargaining removed. Although the optimal solution would have been for a new collective bargaining agreement to be immediately entered into, the initial mediation session did not result in a settlement or new NFL collective bargaining agreement. As a result, the NFLPA decertified; the NFL’s 32 owners imposed a lockout against the players and then filed unfair labor charges with the National Labor Relations Board; and the current players and retired players filed two antitrust class action lawsuits in federal district court: Brady et al v. NFL et al and Eller et al v. NFL et al. Ultimately, after weeks of litigation, U.S. District Judge Susan Nelson, who presided over the Brady antitrust suit, ordered the NFL and NFLPA to court-supervised mediation, under the ADRA’s mandate. Judge Nelson appointed Chief Magistrate Judge Arthur Boylan to serve as mediator. While neither the Cohen nor Boylan NFL mediation sessions were ever open to the public, such mediation sessions may have helped bridge the gaps between both sides. Some weeks later, the NFLPA recertified as the players’ bargaining representative, the Brady antitrust suit was settled, a new 2011 collective bargaining agreement was entered into and the lockout was officially over.
In contrast, prior to the expiration of the 2005 NBA CBA, federal mediator Cohen met with the NBPA and league owners to help facilitate discussion (albeit in informal meetings). After the 2005 NBA CBA expired and the owners imposed a lockout, Cohen continued to meet with owners and players in more structured mediation sessions. The intent of these mediation sessions was to use Cohen’s prior experience in the NFL lockout; in particular, to avoid what many feared would be a cancelled 2011/12 NBA season. Although the NBA lockout dragged on much longer than the NFL lockout, and also, reduced the regular NBA season from 82 to 66 games, arguably, mediation played a significant role in having the NBPA and owners bridge their differences and reach a new collective bargaining agreement. The NBA owners and players shared a long and contentious labor history, which had led to a tarnished NBA image: the owners had locked out the players in both 1995 and 1998, and the players had previously attempted to decertify the NBPA in 1995. Had the parties used litigation to resolve their differences during the lockout, the litigation proceedings would have been open to the public and created quite a media circus. Public airings would have been far from ideal for a league that has been trying to rebuild its negative image in recent years. Mediation, on the other hand, is done in a confidential forum so that information shared during any sessions cannot be used in court or made known to the public, thus, allowing both sides to be creative in discussing ideas and issues they may not have otherwise discussed in a court room.
Unfortunately, because of the confidential nature of both voluntary and court-mandated mediation, it is unclear just how effective mediation was in the 2011 NFL and NBA collective bargaining agreement negotiations. However, what is clear are the benefits that the out-of-court mechanism provided to all parties involved (i.e. confidentiality and an unbiased, objective third party to help facilitate discussion in a less expensive forum than a court room). When disputing parties turn to mediation, they often reach a settlement on their own without court intervention. Because of that, mediation is particularly helpful in unionized sports leagues, where players’ associations and owners have an ongoing relationship. Had mediation not been used in the NFL, and had the Brady lawsuit gone to trial, quite possibly, the NFL owners and players’ relationship could have been damaged by the adversarial process.
2. The Interplay between Stadium Financing and ADR
The rampant use of ADR processes in professional sports no longer is only prevalent on a league-wide basis via unionization, but also, appears in many agreements that teams have with third parties, such as stadium lessors. Today, many stadium leases contain specially tailored ADR clauses to address disputes that may arise in the future. The forms of ADR available to litigants sometimes lean on: (i) how the stadium dispute is characterized; (ii) the type of relief sought; and (iii) the stage of the dispute.
Leases often differentiate between two types of conflicts: construction and operational. A construction dispute is one that occurs prior to substantial completion of the facility and relates to aspects of construction (i.e., date of completion, plans and specifications, etc.). An operating dispute relates to the day-to-day operations of the facility, including the use of the facility and capital budget, improvements, repairs, and leasehold issues. Because of the time-sensitive nature of construction disputes, some teams’ leases (i.e., those of the Philadelphia Phillies, the Philadelphia Eagles and the Chicago Bears) require construction disputes be resolved through expedited arbitration while operating disputes must follow normal arbitration procedures. Expedited arbitration, as its name suggests, follows a faster timeline and method for selecting an arbitrator than standard arbitration.[5]
The types of ADR available to a facility lessor or lessee also may depend on the type of relief sought. For example, in both the Pittsburgh Pirates’ and Seattle Mariners’ leases, defaults by either party that result in a claim solely for monetary relief less than $500,000, are subject to arbitration. Yet, defaults by either party that result in a claim over $500,000, or are not solely limited to monetary relief and are subject to mediation; if mediation proves futile, then the non-defaulting party may bring an action in court.
Finally, leases differentiate as to what ADR mechanism may be utilized depending on the stage of the dispute. The San Antonio Spurs’ lease obligates the parties to pursue mediation immediately upon a conflict arising, but parties may then pursue arbitration or litigation if mediation does not resolve the dispute. The Miami Heat’s lease, on the other hand, first requires an attempt to negotiate. Then, if a settlement has not been agreed to within ten days of negotiation, the disputing parties must mediate. The Buffalo Bills’ lease, meanwhile, mandates that all disputes relating to the stadium agreements, no matter at what stage the dispute arises, must be settled by arbitration.
ADR is especially advantageous in the sport industry – an industry that is repeatedly criticized by the public media – because the proceedings are confidential and very rarely are decisions made public. Typically, substantially more money is at issue with stadium lease disputes than residential lease disputes. Due to the already close attention that the media gives to the construction of some sport facilities, ADR offers teams a way to take a subset of the stadium issue out of the public spotlight. Thus, not surprisingly, there continues to be a trend of more and more teams including ADR provisions in their respective facility leases.
Conclusion: The Future of ADR in Sports
ADR is not without its imperfections. Sometimes the out-of-court mechanism leads to a series of redundant or overlapping proceedings; sometimes it only leads to an unbinding settlement that disputing parties choose not to follow; and sometimes it does not point to a clear answer as to how a sports dispute should best be resolved. This is of critical concern, especially when the issue in question involves an athlete’s participation or when there is much money at stake, like in a league lockout or players’ association strike. Notwithstanding the foregoing, the underlying flaws do not suggest that ADR processes should be abandoned altogether in the sports world in favor of litigation.
Does ADR better protect the interests of individual or team sport athletes? Individual sports like boxing and tennis are not unionized, and so participants are not presented with an internal dispute mechanism like grievance arbitration and/or salary arbitration. What the future of ADR will bring for team and individual sports remains unforeseen. However, based on the attractiveness that ADR sport forums offer athletes, and the rising costs of litigation, it seems likely that athletes will continue to avail themselves of the out-of-court mechanism. How and whether ADR can be improved are questions to be reckoned with.
[1] The author can be reached at cstern@chapman.com or @sportslawstern (twitter).
[2] The big four sports leagues consist of Major League Baseball (“MLB”), the National Basketball Association (“NBA”), the National Football League (“NFL”) and the National Hockey League (“NHL”).
[3] See discussion infra Table A.
[4] In England , the United States and Spain , for example, courts are of the mindset that sport disputes are better left to sport bodies themselves, and the courts should only intervene in situations where the sport bodies violated their own rules or the issue in question was unusual. See Ian S. Blackshaw, Mediating Sports Disputes: National and International Perspectives 3-5 (2002).
[5] For example, the Phillies and Eagles’ respective leases require a pre-selected arbitrator to be named in the lease. The expedited arbitration is then conducted in accordance with the American Arbitration Association’s rules, and typically where the arena or stadium is located.
