By Robert Clayton*
The NFL and the League’s Players Association have agreed to an extension of the collective bargaining agreement (CBA) which was set to expire after the 2007 season. While much attention has been given the preservation of a salary cap system, the new CBA officially addresses what can be best called “the Maurice Clarett loophole”. Although Clarett was unsuccessful in his litigation to win early entry in the NFL draft, it is clear that the League was aware a very different result could have occurred if the Clarett litigation were in a different forum.
Former Ohio State University running back Maurice Clarett challenged the NFL’s draft eligibility rule which restricted draft eligibility to players three years removed from college. The NFL draft eligibility rule was not part of the existing collective bargaining agreement, but was referenced in the NFL Constitution and Bylaws. By its letter, the draft eligibility rule required any college football player to exhaust eligibility, graduate from college, or be five football seasons removed from high school to enter the draft. In practice, the League granted “special eligibility” to those players who wished to enter the draft and had three League seasons elapse since they graduated high school.
Clarett challenged the rule as a sophomore in district court in New York under federal antitrust law. Since he was within the three year window, Clarett could not be drafted. He argued that as the eligibility rule was not part of the CBA, there was no labor exemption to the antitrust laws which would protect this restraint. Judge Scheindlin of the Southern District of New York agreed with Clarett and granted his motion for summary judgment with respect to the antitrust merits of his claim.
However, in a well-publicized opinion, the Second Circuit reversed this decision in favor of the League. The Second Circuit found that the nonstatutory labor exemption applied to Clarett’s claim. Under the nonstatutory exemption, which is a judicially created labor exemption created by the Supreme Court, union-employer agreements are accorded a limited exemption from antitrust sanctions. Since the court found the draft eligibility rule was a mandatory subject of bargaining related to a CBA, the rule was protected by the nonstatutory labor exemption.
The controversy regarding this analysis is that other courts, specifically the Eighth Circuit, have held that for a restraint to fall in the nonstatutory labor exemption, it must:
1. Only affect parties to the collective bargaining relationship;
2. Relate to a mandatory subject of bargaining; and
3. Result as a product of bona fide arm’s length bargaining.
Under the Eighth’s Circuit’s analysis, the nonstatutory exemption would not have applied since it affected a party outside the NFL/NFLPA collective bargaining relationship (draft applicant Clarett) and since the term was not in the actual CBA, it could not have been a product of arms-length bargaining. Nevertheless, the Second Circuit rejected this application of the nonstatutory exemption and held that it could apply even when the restraint to be protected is not written in the CBA. In doing so, the Second Circuit held that arms-length bargaining is not a requirement where one of the parties could have forced an issue on the bargaining table.
Given this clear split in appellate courts and the subsequent silence of the Supreme Court, it is highly likely that a prudent early draft applicant would have tested the eligibility rule in a different forum. The effect for the League and the NFLPA, which supported the League in its efforts to enforce the draft eligibility rule, would not have been favorable. Once stripped away of the nonstatutory labor exemption, the draft eligibility rule would have to stand on its merits against antitrust scrutiny. Under the Rule of Reason inquiry, it must be determined whether a restraint is justified by a legitimate business purpose and is no more restrictive than necessary. Given that not a single one of the other three major professional team sports uses a three year eligibility rule for its draft, it would be difficult to argue that less restrictive alternatives are not available. The draft eligibility rule would fall to the Rule of Reason, much like the Roselle Rule restricting free agent movement did 30 years ago.
Both the league and the NFLPA recognized this vulnerability and reduced the 16 year old draft eligibility rule to writing in a CBA for the first time with the current contract extension. While this act does not mean the draft eligibility rule has guaranteed legal protection, it certainly has more solid footing with respect to the nonstatutory labor exemption for antitrust liability. Perhaps the biggest winner of this new term in the CBA is the Bowl Championship Series of college football, which may never have had a championship game featuring stars such as Reggie Bush, Vince Young or LenDale White if this rule did not exist.
* Clayton is an attorney at Mintz Levin, where he practices in the Employment, Labor and Benefits Section of the firm’s Washington, D.C., office. Clayton’s management practice focuses on representing private and public employers in labor and employment litigation and collective bargaining. His clientele includes sports and entertainment entities, which he advises in negotiations, arbitrations, and mediations. He also provides counsel to educational institutions regarding NCAA, Title IX, and Title VI compliance matters. In addition, he is a certified arbitrator.
