By Jeffrey Birren
In 2009, certain former NFL players must have awakened from a long nap and realized that, for decades, NFL Films had used their name, image and likeness in their productions. They filed a class-action lawsuit against the NFL, with claims of false endorsement, unjust enrichment, common law and statutory rights of publicity based on the laws of various states. The case was filed in the players’ court of first choice, U.S. District Court in Minnesota, Dryer et al v. NFL v. NFL, No. 09-cv-02182 (PAM/AJB) (D. Minn, 2009). Named plaintiffs included former Fred Dryer of “Hunter” fame, former NFL VP Michael Haynes, current Oakland Raiders general manager Reginald McKenzie, and Irv Cross.
In a world of “lawyer see, lawyer do,” similar cases were subsequently filed in other courts, though all were transferred to Minnesota and assigned to the same judge, Paul Magnuson, who was presiding in Dryer.
The case survived a motion for judgment on the pleadings and discovery ensued. Current SEC Chair Mary Jo White was part of the defense team. Two years later, District Court granted the NFL’s motion for partial summary judgment, ruling that all claims prior to August 23, 2003 were time-barred.
In 2012, Magistrate Judge Arthur Boylan appointed a single lead counsel to represent the plaintiffs in settlement discussions, as there were “serious disagreements among the three lead counsel for plaintiffs” (Id. at Dkt. No 252 at 1.). He sought to “restart the settlement negotiations without the distractions presented by Plaintiff’s co-lead counsel disagreements” (Id. at 2.).
It worked; the parties entered into a sixty-page settlement agreement. The settlement created a “Common Good Entity” — a nonprofit organization, payment of up to $42M by the NFL to the Common Good Entity, the creation of a licensing agency and payments of $100K worth of media value to it annually until 2021, payment of attorney’s fees and settlement costs, a reserve of funds to cover NFL fees and costs to defend against plaintiffs who opt out, and a full release of claims by all class members.
The Common Good Entity exists to support the health and welfare of retired NFL players. It will spend its money to charitable organizations for the benefit of class members, including medical research, housing, health and dental insurance, medical screening and evaluations, mental health and wellness programs, career transition programs, medical costs not paid for by insurance and other uses approved by the Board.
The licensing agency was created to assist third parties to license the retired players’ publicity rights. Players can withdraw from it at any time. IMG was hired to assist the agency, and the NFL pledged to cooperate in good faith with it. Profits from the agency will be split between the Common Good Entity and the players whose rights were sold.
After preliminarily settlement approval, nearly 25,000 remained in the class, while 2,073 opted out. The District Court approved the settlement in November, 2013 (Id. 2013 WL 5888231 at 1.). Six class members appealed the District Court’s Order approving the settlement. The Eighth Circuit, affirmed, rejecting all objections on May 21, 2015 (Marshall et al v. NFL, No. 13-3582, (Eighth Circuit, 2015).
The Circuit began its discussion by stating that approval of a class-action settlement is reviewed for “abuse of discretion” (Id. at 8). The district court can only approve such a settlement if it is “fair, reasonable and adequate,” based on “(1) the merits of the plaintiff’s case weighed against the terms of the settlement, (2) the defendants’ financial condition, (3) the complexity and expense of further litigation, and (4) the amount of opposition to the settlement” (Id. at 8/9).
The Court first addressed the objectors’ contentions that the settlement failed as a matter of law. Those objections “distill to two arguments. First, that the settlement did not provide ‘any direct benefit to the class’ and secondly, that it makes the financial payment to a third-party and not each class member directly” (Id. at 9).
The Court stated the objectors “characterize the settlement as simply giving away their proceeds to a third party charity. Plainly, this is not true and the argument is wholly without merit” (Id.). The objectors also argued that the settlement fails because it did not provide a direct payment to each class member. That argument was also unsuccessful: “all class members receive a direct benefit from the settlement: the opportunity to license their publicity rights through the Licensing Agency, as well as the payments by the NFL to the Licensing Agency. If the players’ publicity rights are as valuable as Appellants claim, the players should be able to realize the value of their publicity rights through the Licensing Agency” (Id. at 10.) (Emphasis in the original).
The Court went on to state that the $42M “is clearly designated for the benefit of the class…Therefore, we do not believe that the mere fact that the financial payout for the benefit of the class is made through a third party renders the settlement impermissible. The relevant question is for whom the money will be used, not whose name is on the check. Appellants cite to no authority to the contrary” (Id. at 11). They did rely on cases involving cy pres distributions to non- parties, though they did not argue that it was a cy pres distribution (Id.). The concurrence specifically stated that it was not a cy pres distribution (Id. at 31/33).
The district court found the obvious, that the NFL’s financial condition “would permit it to adequately pay for its settlement obligations or continue with a spirited defense in the litigation. No party disagrees with this finding. As such, we find this factor neutral” (Id.).
The second factor was the complexity and expense of further litigation. The Court noted “the parties had already spent three years in litigation and had not yet even achieved class certification…the resolution of the publicity claims would have required tremendous efforts regarding the issue of statutes of limitations for the various class members’ home states, complex conflict of laws analyses involving multiple states, the application of numerous states’ common and statutory publicity rights, affirmative defenses involving constitutional principles, and the review of each individual player’s contracts” (Id. at 15).
Moreover, any damages analysis would have been extremely complex as “each class member’s notoriety and recognition also varies.” Any “evaluation of what each player’s appearance during the varying NFL Films’ videos was worth” would be both “speculative” and to do that for each class member would be “Herculean” (Id.). This factor favored settlement.
The third factor was the amount of opposition to the settlement. Six of the twenty-three class representatives objected to the settlement, while less than ten percent of the entire class opted out: “we have previously approved class-action settlements even when almost half the class objected to it” (Id. at 16). The objectors “could have opted out of the settlement to pursue their own claims, as some class members did” (Id. at 17). The district court believed that the vocal minority was driven “by a very mistaken belief that they could reap significant financial benefits by continuing this case” (Id.). This factor favored settlement.
The “most important consideration,” “requires balancing the strength of the plaintiffs’ case against the value of the settlement terms to the class. The district court held ‘there is no question that the factor weighs heavily in favor of the settlement’” (Id. at 18). The district court found that chances of success “are slim at best” as the NFL had four defenses: (1) statute of limitations, (2) issues related to class certification, (3) plausible affirmative defenses, and (4) lack of substantial damages for most of the class.
The statute of limitations is six years and no plaintiff was entitled to compensation for use of his image before 2003: “No one disputes this limitation” (Id.). The district court also found that some states had right of publicity claims; some did not. Some treated it as a tort and some as a property right. The court would have been “required to apply individualized choice-of-law analysis for each plaintiff’s claim in the class action” and the district court “found that with a class of nearly 25,000 individuals, ‘the choice-of-law inquiry [would be] extremely complex and weighs heavily against the ultimate certification of the class’” (Id. at 19).
The NFL also had other defenses, including as apparently many class members “understood and consented” to the use of their names and likenesses, and a First Amendment defense as the films were “entertainment programming, not commercial speech” (Id. at 19). The California Court of Appeal had ruled the the use of baseball players’ publicity rights was protected by the First Amendment, (Gionfriddo v. MLB, 114 Cal. Rptr. 2d 307, 318 (Cal. Ct. Ap. 2001)) and the Eighth Circuit previously found that decision’s reasoning “persuasive” (Id. at 20).
The final factor was the damage potential. The Court found it “was not particularly large.” It could be “substantial” for a few class members but for “many, the payout would be minimal” and “would be very speculative” (Id.). Appellants Marc Gastineau and Abdul Salaam argued their claims had greater value, “[B]ut if Gastineau and Salaam were so confident in the likelihood of a substantial payout for their claims, they could have opted out of the settlement to pursue their own claims, as some class members did” (Id. at 21).
Three appellants Fred Dryer, Elvin Bethea and Ed White had done just that, only to have “their claims entirely dismissed by the district court” (Id.). See, “NFL Secures Victory in Publicity Rights Case”, Sports Litigation Alert, 10-31-14. The Court added a footnote to say: “we recently affirmed the dismissal of a plaintiff’s publicity rights claims on the basis that they were preempted by the Copyright Act.” (Id., fn.7).
The appellants also claimed that the settlement could not be approved because there was no specific value “for the expected recovery on the class members’ claims.” The Eighth Circuit previously held that the district court did not need to undertake such a detailed investigation: “in a case such as this one, where the damages are not easily calculable, are highly speculative, and are heavily dependent on expert opinions, it would be difficult if not impossible to derive the initial high, medium, low and zero potential value for the claims in such an accurate way as to allow for a meaningful conclusion.” The required detail is left “to the sound discretion of the district court” (Id. at 25).
The appellants asserted that the settlement “offers insufficient value to the class” (Id. at 26). The Court swept aside that objection, repeating the value of the Licensing Agency. It also quoted the district court’s statement that “should the Licensing Agency be unable to market individual and group publicity rights because of lack of market demand, then it is clear that the class did not truly suffer the damages alleged in this case” (Id. at 27).
Moreover, the district court believed payment of $42M “is a boon to those thousands upon thousands of former NFL player who can now reap the collective benefit of a large financial payout to a fund organized solely for their benefit, overseen by their comrades-in-arms” (Id.). It is possible that the appellants believed that the $42M figure was inadequate as it is less than NFL Commissioner Roger Goodell’s annual compensation. A January, 2015 newspaper article states that Goodell recently entered a new contract that “amounts to a total of about $300 million over seven years” (“Patriots owner Robert Kraft behind NFL Commissioner Roger Goodell’s $300 million salary.” Nathaniel Vinton, New York Daily News, 1-26-15.). Whether that is accurate or not, to receive less than what is reported to be a single year of Goodell’s compensation would understandably upset members of the class of 25,000.
Yet those that did not believe that they were receiving enough had option to opt out, though the three that did “had their claims dismissed with no recovery at all” (Id. at 28).
Finally, the Appellants argued that the denial of preliminary approval of the conclusion litigation “demonstrates the unreasonableness of the settlement in this case. …The concussion litigation involves different claims, subject to different risks, defenses, and likelihood of success, different class members and different potential damages. The mere fact that the litigation involves similar parties in way serves as a useful comparison in evaluating the reasonableness of the settlement for the claims at issue in this case” (Id. at 29).
The district court found that “this litigation involved dubious claims with highly speculative damages that were unlikely to be addressed in the context of class-action litigation.” The Circuit held the district court “properly considered the relevant factors and did not abuse its discretion in finding that the negotiated settlement in agreement in this case was fair, reasonable, and adequate to the class. We therefore affirm.” (Id.).
This case may be over unless the Supreme Court grants certiorari. What is certain is that at this very moment, there are lawyers crafting “dubious” claims with hopes that the NFL will settle. These days, NFL seems to stand for National Football Litigation.
Birren worked for the LA/Oakland Raiders for 34 seasons and was general counsel for much of that time. During that time he worked closely with owner Al Davis and Amy Trask, the NFL’s first female Club Chief Executive. He has an MA in History from USC and a JD from Southwestern. He can be reached at jebirren@comcast.net
