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Business Law Today

March 2024

Recent Developments in Sports-Related Disputes 2024

Walter F Metzinger III

Recent Developments in Sports-Related Disputes 2024 Callery

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§ 5.1 Introduction

Thanks to several landmark decisions and burgeoning conflicts, the calendar year 2023 could mark something of an inflection point in the field of sports law. From a number of cases revolving around the rapidly shifting landscape of college athletics; to a landmark European decision that pried open the door for the revival of a European Super League; to the merger (in principle) of the PGA Tour and LIV Golf; to a number of other high-profile decisions and suits, 2023 left plenty for sports litigation scholars to ruminate on. This chapter details many of 2023’s sports-related dispute highlights (or lowlights, for some of the losing litigants) and provides critical context when appropriate.

§ 5.2 Part I – NCAA

Atlantic Coast Conference v. Board of Trustees of Florida State University (Case No. 23-cv-040918, Mecklenberg County, N.C., December 21, 2023); Florida State University Board of Trustees v. Atlantic Coast Conference (Fla. 2nd Cir. Ct., December 22, 2023).

In the dying days of 2023, the Atlantic Coast Conference (“ACC”) and the Board of Trustees of Florida State (“FSU”) sued each other in an escalation of the dispute over whether (and under what conditions) FSU can finagle its way out of the “Grant of Rights” agreement that ostensibly tethers the university to the ACC until at least 2036.

FSU’s athletics programs have competed in the ACC since 1991, in which time they have amassed nine national championships, including three in football. In 2013, after long-time member the University of Maryland bolted for the Big Ten Conference, FSU and other member schools entered a new “Grant of Rights” agreement with the ACC. Under the Grant of Rights, FSU and the other members agreed to grant the ACC exclusive media rights over all their teams’ home games until 2027, irrespective of whether the schools remained in the ACC. The ACC and its members later extended the Grant of Rights to 2036.

Disgruntled by the value of the ACC’s media rights deal with ESPN and cognizant of the flurry of conference realignment in recent years—including the near-total implosion of the Pac-12 Conference in August 2023—FSU began publicly intimating that it intended to explore departing the ACC. The invitation of Stanford, California (Berkeley) (“Cal”), and Southern Methodist University (“SMU”) and FSU’s controversial exclusion from the 2023–2024 College Football Playoff only further exacerbated FSU’s discontent with the conference. By December 2023, it became evident that, to pave the way for a move to another conference, FSU would attempt to sue the ACC to vitiate or otherwise avoid any further obligations under the Grant of Rights.

The ACC struck first, suing in North Carolina (where it is headquartered) for a declaratory judgment requiring FSU to abide by the Grant of Rights and precluding FSU from challenging its validity or enforceability. According to the ACC, the Grant of Rights (as amended) remains a valid and binding contract under which FSU irrevocably and exclusively transferred media rights to the ACC through 2036. The ACC further argues that, because FSU voluntarily entered the Grant of Rights and has benefited substantially from it (via the ACC’s media rights deal with ESPN), FSU has effectively waived any right to challenge the Grant of Rights. plaintiffs in Alston were current and former student-athletes in men’s Division I FBS football and men’s and women’s Division I basketball players.

FSU filed its suit in Florida state court. Emphasizing that the ACC’s constitution affords it the inherent right to withdraw as a member, FSU argues that both the forfeiture of media rights to the ACC and the penalty member schools must pay to the ACC to leave the conference comprise an unjustly and illegally draconian restraint on FSU’s ability to compete in the media rights market. FSU further maintains that the ACC has breached its contractual and fiduciary duties to FSU by, inter alia, entering an unfavorable media rights deal with ESPN that diluted the value of those rights; inviting Stanford, California, and SMU; and “diminishing the members’ ability to complete in championships.” The Complaint estimates that, absent relief from the court or a settlement, withdrawing from the ACC will cost FSU and other members $572 million.

The burgeoning battle between the ACC and FSU is a watershed in that, unlike other schools to change conferences in recent years who waited for their respective grant of rights deals to expire, FSU is openly challenging the validity and enforceability of its grant of media rights to the conference. A protracted (and extremely expensive) dispute looks nigh on certain, and the ultimate outcome will impact not only the long-term future of the ACC but the broader landscape of major college athletics.

Case No. 102562-9, Washington State University, et al. v. The Pac-12 Conference et al. (Wash. Dec. 15, 2023).

Just as the legal fight between FSU and the ACC kicked into gear, the lingering dispute among the Pac-12’s remaining and former members came to a close. In November 2023, a superior court in Whitman County, Washington entered a preliminary injunction granting total control of the Pac-12 to Washington State University (“WSU”) and Oregon State University (“OSU”), the only two schools that had not announced their intent to depart the conference at the end of the 2023–2024 athletic year. The Washington Supreme Court later declined to review the preliminary injunction, and the schools reached a settlement with the departing members shortly thereafter.

By September 2023, ten members of the Pac-12 had provided notice of their intent to depart the Pac-12 and compete in other conferences beginning in 2024–2025. Concerned at the prospect of lame duck members making decisions regarding the future of the conference, the holdovers, WSU and OSU, moved for a temporary restraining order in Whitman County preventing the Pac-12 from holding any board meeting involving the departing members before a preliminary injunction hearing. Judge Gary Libey granted the temporary restraining order, noting the risk of irreparable and immediate harm to WSU and OSU and the likelihood that they would succeed on the merits given that the conference’s by-laws state that all member schools who deliver a notice of withdrawal before August 1, 2024 “shall automatically cease to be a member of the Pac-12 Board of Directors.” Judge Libey later granted a preliminary injunction that prohibited the Pac-12 from recognizing any board members other than WSU and OSU and from holding any meeting involving the departing members. On December 15, 2023, the Washington Supreme Court denied a discretionary review of the preliminary injunction.

The conference, WSU and OSU, and the ten departing schools announced a settlement of ongoing litigation on December 21, 2023. Although specific terms of the settlement were not disclosed, WSU and OSU averred that the ten other members agreed to forfeit a portion of revenue distributions for the remainder of the 2023–2024 school year.

Case No. 4:23-cv-06325, Carter et al. v. National Collegiate Athletic Association (N.D. Cal. Dec. 7, 2023).

In what amounts to an attempt to resurrect arguments that faltered during the Alston v. NCAA litigation, three current NCAA Division I athletes have filed a putative class action seeking to nullify the NCAA’s restrictions on the compensation member schools can provide to student-athletes on antitrust grounds.

In Alston, the Supreme Court of the United States held that the NCAA’s restrictions on so-called education-related compensation for Division I football, men’s basketball, and women’s basketball participants (including research stipends, academic scholarships, and educational materials and equipment) violated the Sherman Act. The plaintiffs in that case had originally attempted to vitiate all restrictions on compensation exceeding a “grant-in-aid” scholarship as defined in the NCAA. However, the district court found (and the Ninth Circuit affirmed) that restrictions on payments “unrelated to education” were justified insofar as they helped ensure a differentiation between the product of collegiate sports and professional sports.

The Carter Complaint, filed by the same attorneys who represented the Alston plaintiffs, revives the challenge to compensation restrictions unrelated to education and expands it to include all Division 1 athletes. The Plaintiffs assert that the NCAA and its members has effectuated “draconian, collusive” rules that “prohibit what the NCAA refers to as ‘pay-for-play,’ but what anyone else would call market-value compensation.” Highlighting “new factual developments” since the Alston trial—particularly the purported lack of effect that the proliferation of NIL compensation has had on consumer demand for college sports—the Plaintiffs contend that the NCAA’s cap on the grant-in-aid universities can supply to student-athletes acts as an unlawful price-ceiling on the amount athletes can earn for provision of their services, without procompetitive justification. The case is pending before Judge Richard Seeborg in the Northern District of California.

The plaintiffs filed suit just days after NCAA President Charlie Baker sent a letter to member institutions which marked the NCAA’s first true pivot from its longstanding adherence to amateurism. Baker proposed a new “competitive subdivision,” comprised of the wealthiest athletic programs, in which member schools would have to invest at least $30,000 into an enhanced educational trust fund for at least half of the institution’s eligible student athletes. Baker later sent an open letter to student-athletes detailing the proposal. The NCAA has yet to provide specifics regarding the precise framework or timing of implementation of this proposed new subdivision.

In re: College Athlete NIL Litigation, No. 20-cv-03919, 2023 WL 8372787 (N.D. Cal. November 3, 2023).

Striking yet another blow against the NCAA’s compensation framework, Judge Claudia Wilken of the Northern District of California granted the plaintiffs’ motion to certify a damages class in consolidated litigation challenging restrictions on NIL restrictions.

Consisting of both former and current Division I student-athletes, the proposed class alleges that both the NCAA’s prior prohibition on NIL compensation and its “interim” policy allowing some NIL compensation violate Section I of the Sherman Act. Plaintiffs moved for certification of three damages classes: a football land men’s basketball class; a women’s basketball class; and an “additional sports” class consisting of Division I student-athletes participating in the remaining sports.

In her November 3, 2023 decision, Judge Wilken—who also served as the trial court in the landmark O’Bannon v. NCAA and Alston v. NCAA decision—held that the plaintiffs had proven each of the elements for class certification under Federal Rule of Civil Procedure 23(a). The plaintiffs established that the proposed classes were sufficiently numerous; that there were common questions of law and fact among class members; that the claims of class representatives Tymir Oliver (football and men’s basketball), Sedona Prince (women’s basketball), and Grant House (additional sports) were typical of their respective classes; and that the representatives would adequately represent the respective classes.

The NCAA and conference defendants argued that Plaintiffs could not show that the common questions of law and fact among class members predominated individual issues in accordance with Federal Rule of Civil Procedure 23(b). According to the NCAA, because of the variety of evidence and disparity of NIL value across class members, the plaintiffs could not establish antitrust impact and damages on a class-wide basis. But the court disagreed, affording credence to plaintiffs’ experts in finding that class issues predominated individual issues. Judge Wilken also deemed a class action a superior means of adjudicating plaintiffs’ claims to a series of individualized trials.

Bowen v. Adidas Am. Inc., 84 F.4th 166 (4th Cir. Oct. 12, 2023).

In a 2–1 decision, the U.S. Court of Appeals for the Fourth Circuit affirmed the summary judgment dismissal of civil RICO claims brought by former high-profile college basketball recruit Brian Bowen Jr. against Adidas America, Inc. and a number of other individuals, including notorious aspiring sports agent/manager Christian Dawkins.

A McDonald’s All-American and five-star recruit in the class of 2017, Bowen Jr. committed to play at the University of Louisville under then-coach Rick Pitino. In September 2017, however, the FBI unveiled a criminal complaint involving Adidas, Dawkins, and others that alleged, inter alia, that Brian Bowen Sr. (Bowen Jr.’s father) had accepted a bribe from Adidas to steer Bowen Jr. to Louisville. The NCAA declared Bowen Jr. ineligible soon thereafter, and Bowen Jr. has yet to establish a foothold on an NBA roster. In 2019, Bowen filed a RICO suit for treble damages in the U.S. District Court for the District of South Carolina against Adidas and the individuals who allegedly concocted the bribery scheme: Dawkins, James Gatto (a former Adidas executive), Merl Code and Thomas Gassnola (Adidas consultants), Christopher Rivers (an Adidas employee), and Munish Sood (a financial advisor). The district court granted the defendants’ motion for summary judgment on the basis that Bowen Jr. lacked evidence that the defendants’ actions proximately caused a cognizable injury to his business or property.

On appeal, Bowen Jr. argued that the defendants (through their bribery scheme) deprived him of the “contractual benefits” of his scholarship with Louisville, including “elite coaching, preferred playing positions on the court, athletic training, strength and nutrition services, competitive playing time, and experience reading game film.” Because the scholarship agreement did not promise these benefits, however, the Fourth Circuit held that Bowen Jr. had failed to demonstrate an injury to a cognizable business interest. Nor did the court find that Bowen Jr. held a property interest in right in his proposed NCAA eligibility. Since his putative eligibility would have afforded him only the opportunity to participate in college sports, rather than any concrete economic or property right, Bowen Jr. could not establish injury on this basis, either. And the majority further agreed with the trial court that Bowen Jr.’s alleged incurrence of attorney’s fees and costs in attempting to restore his eligibility could not preserve his RICO cause of action, as these pecuniary losses flowed from non-cognizable RICO injuries.

In dissent, Circuit Judge King opined that Bowen Jr.’s loss of NCAA eligibility did, in fact, constitute a cognizable injury under RICO. Citing the Supreme Court’s determination in Alston that Division I comprised the sole, relevant market for elite college football and basketball, Judge King reasoned that an athlete such as Bowen Jr. “certainly has a property interest in his NCAA eligibility.” To Judge King, Bowen Jr. suffered an injury not only by virtue of his inability to participate but through the loss of coaching and playing experience that would have better equipped him for the NBA.

§ 5.3 Part II – Professional Soccer

Case C-333/21, European Superleague Company v. Federation Internationale de Football Association (FIFA) et al. (Court of Justice of the European Union, December 21, 2023).

Two and a half years after the announcement and immediate, backlash-fueled collapse of plans for a so-called European “Super League” (“ESL”), the Court of Justice of the European Union (“ECJ”) declared that FIFA and UEFA rules were unlawful on antitrust grounds.

In April 2021, 12 of the biggest clubs in European football (soccer) announced plans to form a new Super League that would consist of 12 to 15 permanent members and additional rotating spots for other high-achieving European clubs. Immediately thereafter, FIFA (which purports to govern and regulate world football), UEFA (governing European football), and other national associations announced that they would prohibit clubs and players who joined the Super League from participating in their respective competitions (such as the UEFA Champions League, among others). The announcement triggered an uproar among UEFA, national football associations, and fans, particularly in England. In response, nine of the 12 “founding” clubs abandoned their plans to join the ESL. The remaining clubs (Barcelona and Real Madrid of Spain and Juventus of Italy) sued FIFA and UEFA in Spain, where the court referred the matter to the ECJ. The Super League argued that FIFA and UEFA were abusing its monopoly power in the markets for world and European football competitions, respectively, to pretermit a potential competing league and protect its own financial interests.

The ECJ acknowledged that, although FIFA and UEFA enjoy “dominant” positions in their respective markets (for regulating and organizing football competitions), the ascension to market dominance does not per se violate European antitrust law. The court recognized that organizations such as FIFA and UEFA may lawfully subject clubs and players to “common rules intended to guarantee the homogeneity and coordination” of international professional football competitions, including rules affording FIFA and UEFA the right of prior approval and the power to sanction or ban putative participants. But the ECJ found that European law did require that implementation of such rules be subject to “framework for substantive criteria and detailed procedural rules for ensuring that they are transparent, objective, precise and non-discriminatory.” Because FIFA and UEFA’s rules with respect to interclub competitions were not subject to such a “framework”—in other words, because they were implemented and enforced without objective oversight or scrutiny—the court held that their enforcement of such rules amounted to an abuse of their dominant market positions. The ECJ did not provide any opinion as to whether the Super League must be approved. The matter will be remanded to the Spanish court that referred the dispute to the ECJ.

A22, the sports development company created to assist in the creation of the Super League, announced revamped and revised plans for a new league hours after the ECJ announced its decision. The new proposed league would involve 64 clubs spread across three “leagues” and contemplates that clubs would remain in their respective domestic competitions.

§ 5.4 Part III – NFL

Michael Oher v. Sean Tuohy & Leigh Ann Tuohy (Shelby County, Tennessee).

In a lawsuit first filed in August 2023, former NFL offensive lineman Michael Oher, whose high school years were dramatized in the smash-hit 2009 film The Blind Side, accused Sean Tuohy and Leigh Ann Tuohy of fooling him into entering a conservatorship when he was 18 and of depriving him of millions to which he is entitled.

Earning more than $300 million and a Best Actress Oscar for star Sandra Bullock, The Blind Side depicted the Tuohys’ adoption and nurturing of the previously homeless Oher, who went on to star at the University of Mississippi and become a first-round draft pick for the Baltimore Ravens. In reality, the Tuohys never adopted Oher. Instead, after Oher turned 18, Oher and the Tuohys signed documents making the Tuohys his conservators and giving them full control over his finances and ability to make business deals utilizing his name, image, and likeness (including with respect to The Blind Side). Oher alleges that the Tuohys deceived him into entering the conservatorship; failed to make regular accountings to the court as required; and cheated him out of millions of dollars in royalties from the film. The Tuohys denied Oher’s claims that they misled him, referring to the lawsuit as a shakedown and averring that Oher never asked them to terminate the conservatorship before filing suit.

Shelby County Probate Court Judge Kathleen Gomes terminated the conservatorship in September 2023, but did not dismiss the entire case. Judge Gomes conveyed that she was “disturbed” that the agreement ever materialized, given that Oher was (and is) not disabled. The Tuohys later filed documents with the court proving that they had paid $138,311.01 to Oher for proceeds from The Blind Side. According to Oher, however, these amounts fail to account for millions generated from public speaking engagements or $2.5 million Oher purportedly gave to Sean Tuohy to invest, but which was never returned. The Tuohys agreed to remove any reference to or description of Oher as their adopted son from advertisements, web pages, and public speaking materials.

Favre v. Sharpe, No. 2:23-CV-42-KS-MTP, 2023 WL 7132949 (S.D. Miss. Oct. 30, 2023).

A federal judge dismissed NFL Hall of Famer Brett Favre’s defamation lawsuit against fellow Hall of Famer Shannon Sharpe, concluding that Sharpe did not make any actionable misrepresentations of fact in criticizing Favre’s role in a welfare fraud scheme.

In 2021, the Mississippi Office of the State Auditor determined that more than $77 million in federal aid to needy and destitute families had been illegally diverted and spent by politicians and other wealthy and powerful Mississippians. Allegations later surfaced that Favre received more than $1 million in payments for public speaking engagements he did not honor and more than $5 million for the construction of a new facility for the University of Southern Mississippi volleyball team, of which his daughter was a member. Sharpe discussed the scandal on Skip and Shannon: Undisputed, his former sports talk show with Skip Bayless, in 2022. Excoriating Favre for his alleged role in the scheme, Sharpe made the following three statements that Favre asserted were defamatory:

  • “The problem that I have with this situation, you’ve got to be a sorry mofo to steal from the lowest of the low.”
  • “Brett Favre is taking from the underserved.”
  • “[Favre] stole money from people that really needed that money.”

Judge Keith Starrett identified the dispositive question under Mississippi defamation law as “whether a reasonable factfinder could conclude that the statements Sharpe made on the air would imply an assertion that Favre actually stole money from the poor.” Favre maintained that even though he neither stole nor was accused of stealing money from anyone else, Sharpe’s comments created an impression to the contrary. But Judge Starrett noted that applicable law required him to evaluate “highly charged” language in a “broad context” to determine whether a reasonable person could construe assertions of “fact” literally. The court found that “no reasonable person listening to the Broadcast would think that Favre actually went into the homes of poor people and took their money.” Rather, given the maelstrom of media coverage zeroing in on Favre’s role with the welfare scandal, Sharpe’s “rhetorical hyperbole” warranted First Amendment protection.

Favre has appealed the decision to the U.S. Court of Appeals for the Fifth Circuit. Favre filed a similar defamation suit against sports personality Pat McAfee but ultimately dismissed it.

Patrick v. Nat’l Football League, No. CV231069DMGSHKX, 2023 WL 6162672, at *1 (C.D. Cal. Sept. 21, 2023).

Relying on the Collective Bargaining Agreement (“CBA”) entered by the league and its players’ association, Judge Dolly M. Gee of the U.S. District Court for the Central District of California dismissed negligence and premises liability claims brought by a player against the NFL.

Aaron Patrick, then of the Denver Broncos, tore his ACL when, while attempting to tackle a Los Angeles Chargers punt returner, his cleats became lodged in the cords and cables connected to the NFL’s instant replay monitor. Patrick sued a number of defendants, including the NFL and the Chargers, under negligence and premises liability theories. The league and Chargers dismissed on the basis that the CBA preempted Patrick’s California tort claims.

Judge Gee agreed. Because any duties owed by the NFL and Chargers to Patrick arose solely from their responsibilities under the CBA and Patrick’s claims were “substantially dependent” on the CBA, and because Patrick had not instituted (much less exhausted) arbitration proceedings as required by the CBA, Patrick could not proceed in federal court.

§ 5.4.1 Commanders Settle Claim Brought by D.C. Attorney General over Failure to Return Ticket Deposits

In one of the final blemishes of Daniel Snyder’s maligned tenure as the franchise’s owner, the Washington Commanders agreed to pay $625,000 to their fans and to Washington, D.C. after then-Attorney General Karl Racine sued the team for purportedly bilking season ticket holders out of their security deposits.

According to Racine’s complaint, the Commanders sold premium seating packages that required fans to put down security deposits. The team promised to return the security deposits within 30 days after the contracts’ expiration but allegedly pocketed the money instead, sometimes for a decade or more. The Commanders denied any wrongdoing and further asserted that they had not collected security deposits since before 2014. Per the terms of the settlement, the Commanders agreed to pay $200,000 to affected fans and $425,000 to the District of Columbia.

The NFL approved the sale of the Commanders from Snyder to an ownership group helmed by Philadelphia 76ers co-owner Josh Harris in July 2023.

Maragos v. Bradley et al., No. 2019-11-000972 (Pa. 1st Jud. Dist. Court of Common Pleas, February 13, 2023).

A Philadelphia jury awarded former Philadelphia Eagles safety a $43.5 million verdict after finding that that orthopedic surgeon James Bradley and Rothman Orthopedics were negligent in operating on and treating Maragos’s meniscus tear in his right knee.

Maragos, a special teams ace and team captain for the Eagles, hurt his knee in a 2017 game against the Carolina Panthers. According to Maragos, Bradley failed to repair the medial meniscus root tear in surgery, resulting in Maragos undertaking rehab on a knee that remained severely damaged. He never played again. The defendants, in turn, highlighted a congenital defect in the knee that they maintained would have likely precluded him from returning to professional football after the injury irrespective of his rehabilitation program.

The jury found Bradley 67 percent responsible and Rothman 33 percent responsible for Maragos’s damages. The verdict reflects the substantial lost earnings Maragos forewent due to his inability to return to the field.

§ 5.5 Part IV – Major League Baseball

Cangrejeros de Santurce Baseball Club, LLC v. Liga de Beisbol Profesional de Puerto Rico, Inc., No. CV 3:22-01341-WGY, 2023 WL 4195663 (D.P.R. June 27, 2023).

In a matter of first impression for a United States District Court, the court in the District of Puerto Rico held that the long-standing “baseball” antitrust exemption applied to a Puerto Rican baseball team—even though the organization lacks any affiliation with Major League Baseball.

The plaintiffs, representatives and affiliates Cangregjeros de Santurce Baseball Club, LLC (“Cangregjeros”), asserted a number of claims under the Sherman Act against a number of defendants, including the Liga de Béisbol Profesional de Puerto Rico (the territory’s top professional baseball league) (“Liga de Béisbol”) and other fellow Liga de Béisbol members. According to the plaintiffs, the defendants had conspired to stifle Cangregjeros from improving their roster and investing in the organization, including by wresting control of the team from its former owner (Thomas J. Axon). The defendants moved to dismiss the complaint on a number of grounds, including that the Supreme Court’s decision in Federal Baseball Club, Inc. v. National League of Professional Baseball Clubs exempted the “business of baseball” from antitrust scrutiny.

In seeking to preserve their antitrust claims, the plaintiffs styled the rule as the “MLB” exemption and emphasized that courts had only ever applied it to the MLB and its minor league affiliates. But Judge William Young (a District of Massachusetts judge sitting by designation) highlighted that, in each of its prior articulations and examinations of the exemption, the Supreme Court had alluded to the exemption of “professional baseball” from antirust laws. Because Cangregjeros is a professional baseball team; the Liga de Béisbol a professional baseball league; and the “conspiracy” forming the basis of plaintiffs’ suit emmeshed within the “business of baseball,” Judge Young held that the baseball exemption barred Plaintiffs’ antitrust claims, irrespective of any ties (or lack thereof) between the Liga de Béisbol and Major League Baseball.

The plaintiffs appealed the district court’s decision to United States Court of Appeals for the First Circuit.

Nostalgic Partners, LLC v. Office of the Commissioner of Baseball, No. 22-2859, 2023 WL 4072836 (2nd Cir. June 20, 2023).

In another case centering on the application of the longstanding baseball antitrust exemption, the United States Court of Appeals for the Second Circuit affirmed the dismissal of Sherman Act claims brought by three minor league baseball franchises against Major League Baseball.

In 2020, MLB reorganized its minor leagues and severed several minor league teams’ affiliations with major league franchises. Three of these minor league teams—the Staten Island Yankees, Norwich Sea Unicorns, and the Tri-City ValleyCats—contended that the reorganization constituted an illegal restraint of trade.

Citing the exemption from antitrust scrutiny first articulated in Federal Baseball Club, Inc. v. National League of Professional Baseball Clubs, the Second Circuit dismissed the suit on the basis that it “must continue to apply Supreme Court precedent unless and until it is overruled by the Supreme Court.” The court further declined the parties’ invitation to opine on other, non-dispositive issues.

TCR Sports Broadcasting Holding, LLP v. WN Partner, LLC, 214 N.E.3d 1137 (N.Y. Apr. 25, 2023).

In the denouement of a convoluted, decade-long dispute, the Court of Appeals for New York confirmed an arbitration award fixing the telecast fees owed by the regional Mid-Atlantic Sports Network (“MASN”) to the Baltimore Orioles and Washington Nationals for the right to have broadcasted their games from 2012 to 2016.

Upon relocating to Washington, D.C. in 2005, the Nationals (formerly the Montreal Expos) agreed with the Baltimore Orioles to create MASN as the regional broadcaster for both teams. Under the parties’ original agreement, and in an effort to compensate Baltimore for the arrival of a regional competitor, the Orioles assumed a 90 percent interest in MASN and the Nationals 10 percent, with their respective stakes set to gradually move toward the middle so that the Orioles will be a 67 percent owner (and the Nationals a 33 percent owner) by 2032. The agreement further required MASN to pay the Orioles and Nationals equal annual fees for the rights to televise their respective games. When it came time for the parties to negotiate the amount of that fee for the period between 2012 to 2016, the parties failed to reach an agreement. Although the Nationals sought to maximize the telecast fees, the Orioles (as MASN’s majority owner) advocated for lower fees to maximize MASN’s (and hence its own) profits.

Pursuant to the parties’ 2005 agreement, MASN, the Orioles, and the Nationals agreed to arbitrate their dispute before the Revenue Sharing Definitions Committee (“RSDC”), a standing committee with representatives from three other MLB franchises. After the Orioles and Nationals presented competing valuations of a fair market fee, the RSDC set the fee at $53 million in 2012 and rising $3 million per year to $67 million in 2016. However, the Orioles and MASN filed a motion to vacate the award on at least here grounds: (1) that the RSDC failed to properly disclose that Proskauer Rose LLP, the Nationals’ counsel, represented the MLB and RSDC member teams in concurrent unrelated matters; (2) that the MLB had an impermissible stake in the process after advancing $25 million to the Nationals that it could recoup in the event the Nationals received a favorable fee determination and (3) that the MLB improperly controlled the arbitration process. A New York court vacated the award based on Proskauer’s concurrent representation but specifically denied that the other two bases cited by the Orioles and MASN demonstrated “partiality” by the RSDC.

After the Nationals agreed to repay the $25 million advance to the MLB, the parties then participated in a second arbitration before the RSDC. After this arbitration, the RSDC issued an opinion setting the average annual fee from 2012 to 2016 at about $59.3 million. Again, the Orioles and MASN challenged the award based on RSDC’s alleged partiality. They argued that (1) the agreement for the Nationals to repay the advance was an incentive for the RSDC to not recuse itself; (2) the RSDC failed to disclose its communications with the MLB; and (3) that commissioner Rob Manfred had made a series of public comments demonstrating bias.

Like the lower courts, the Court of Appeals refused to vacate the second arbitration award based on RSDC’s participation. The court further held that the Orioles and MASN had failed to demonstrate by “clear and convincing evidence” that the RSDC exhibited evident partiality in making its award, finding no evidence that the repayment of the $25 million advance, MLB’s communications with the RSDC, or Manfred’s comments reflected improper bias. The Court of Appeals did, however, hold that the lower court had erred in awarding the Nationals a money judgment and pre-judgment interest, as such actions exceeded the authority granted to the RSDC via the original 2005 agreement between the Orioles and Nationals.

A few months after the court’s decision, MASN agreed to pay the Orioles and Nationals approximately $100 million each to settle the dispute over fees from 2012 to 2016. The teams and network later agreed on fees for the 2017 to 2021 seasons, forestalling another round of protracted litigation.

§ 5.6 Part V – NBA

New York Knicks, LLC v. Maple Leaf Sports & Ent. Limited. d/b/a Toronto Raptors et al., No. 1:23-cv-07394-JGLC (S.D.N.Y.).

The New York Knicks escalated their rivalry with the Atlantic Division counterpart Toronto Raptors in a different kind of court in August 2023, suing the Raptors, head coach Darko Rajaković, and other Raptors employees for misappropriation of the Knicks’ proprietary information.

According to the Knicks, the Raptors directed a former Knicks employee, Ikechukwu Azotam, to funnel insider information about the Knicks organization to his personal Gmail account before accepting an offer to join the Raptors in 2023. The Knicks asserted claims for violation of the federal Computer Fraud and Abuse Act (“CFAA”); the federal Defend Trade Secrets Act (“DTSA”); misappropriation of trade secrets in violation of New York law; breach of contract; tortious interference; conversion; unfair competition; and unjust enrichment.

In response, the Raptors characterized the lawsuit as a “baseless … public relations stunt” and moved to dismiss or stay the case in favor of arbitration with the NBA. Citing the broad language of the NBA Constitution’s Arbitration Clause, the Raptors argued that NBA Commissioner Adam Silver had exclusive jurisdiction over the dispute and that the dispute was, in fact, arbitrable.

The Knicks’ opposition, by contrast, characterized the NBA Constitution’s arbitration clause as impermissibly overbroad and spurned the notion that a multi-party dispute centered on alleged intellectual property theft was arbitrable. The Knicks further emphasized that the NBA Constitution supplied no basis for the arbitration of the Knicks’ claims against individual defendants such as Rajaković and Azotam. In their reply, the Raptors-affiliated defendants signaled that they would pursue potential counterclaims for defamation upon the determination of the proper forum for the dispute.

As of the writing of this article, the Knicks’ claims remain pending before Judge Jessica G.L. Clarke. While the parties remained embroiled in litigation, the Knicks and Raptors executed a trade that sent O.G. Anunouby and others to the Knicks in exchange for R.J. Barrett, Immanuel Quickley, and other compensation.

Hoops, LP v. Commissioner of Internal Revenue, 77 F.4th 557 (7th Cir. August 9, 2023).

A federal appellate court upheld the denial of a $10.7 million deduction that the former majority shareholder of the Memphis Grizzlies, Hoops LP, attempted to claim based on deferred compensation owed to former stalwarts Mike Conley Jr. and Zach Randolph.

Hoops LP sold its stake in the Grizzlies in 2012. At the time, the Grizzlies owed Conley and Randolph $12.6 million in deferred compensation accrued during their (successful) 2009–2011 seasons. As part of the sale of the team, the buyer (Memphis Basketball, LLC) agreed to assume the liability for the still unpaid deferred compensation. In subsequently reporting the details of the sale to the IRS, Hoops LP requested a $10.7 million deduction, taking the position that the deferred compensation was a “deemed payment” reflected in the ultimate sales price. The IRS and tax court disagreed, disallowing the deduction.

Hoops LP did not dispute that, in the absence of the sale, its failure to pay the deferred compensation would have precluded Hoops LP from claiming a deduction under 23 U.S.C. § 404(a)(5). The U.S. Court of Appeals for the Seventh Circuit accordingly identified the following question as dispositive: “Did Hoops’s sale, and Memphis Basketball’s assumption of its liability, change the tax treatment of the $10.7 million in deferred compensation under the otherwise clear rule Congress supplied in § 404(a)(5)?” Hoops LP argued that the assumption of liability by Memphis Basketball allowed Hoops to accelerate the deduction irrespective of its failure to actually pay Conley and Randolph the money owed. Like the lower courts, however, the Seventh Circuit was unpersuaded. Focusing on the “substance of what transpired”—namely, Hoops LP’s nonpayment of owed compensation to Conley and Randolph—the court held that the plan text of § 404(a)(5) precluded Hoops LP from claiming the $10.7 million deduction.

§ 5.7 Part VI – Golf

§ 5.7.1 LIV, PGA Merge, Settle Dispute

The PGA Tour, the DP World Tour, and upstart LIV Golf agreed in principle to a watershed merger in the summer of 2023, resolving pending litigation and irrevocably altering the landscape of top-tier professional golf.

Bankrolled by the Saudi-funded Public Investment Fund, LIV emerged in 2022 as a counterpart to the PGA Tour, with differentiating features such as 54-hole tournaments (instead of the customary 72); a season-long team competition; and the permissibility of wearing shorts. After the PGA Tour banned players signing contracts with LIV from competing in PGA Tour events, several prominent players such as Phil Mickelson, Bryson Dechambeau, and Patrick Reed sued the PGA Tour for illegally restricting their right to compete in violation of antitrust law. The PGA Tour countered by alleging that LIV tortiously induced prominent players to defect and thereby breach their contracts with the PGA. The PGA Tour won an early, preliminary victory in August 2022 when Judge Beth Labson Freeman of the Northern District of California denied a request from three LIV players for a temporary restraining order reinstating them as PGA Tour members.

Ultimately, after nearly a year of squabbling in court and in the media, the rival leagues decided to join forces. The parties agreed that the PGA Tour would hold a permanent controlling interest in the new, combined entity’s board of directors.Although the tours initially set a deadline of December 31, 2023, to trigger a formal merger, they agreed to extend that deadline into 2024.

After the tentative deal was announced, the New York Times moved to unseal documents filed into the record during the litigation. Judge Freeman found that LIV Golf demonstrated good cause for maintaining the vast majority of the documents under seal, given their disclosure of information regarding LIV Golf’s formation, strategic plans, internal financials, and other proprietary information.

Nicklaus v. Milstein, No. 23-CV-80764-ROSENBERG, 2023 WL 4930317 (S.D. Fl. Aug. 1, 2023).

Legendary golfer Jack Nicklaus has an all-time record 18 major championships and hundreds of millions of dollars in net worth. Per a recent decision in the U.S. District Court for the Southern District of Florida, however, there’s still something Nicklaus lacks: the right to use and profit from the name “Jack Nicklaus.”

In 1994, Nicklaus granted Howard Milstein the “non-exclusive right to use and register Mr. Nicklaus’ name, likeness, signature, and nicknames in connection with goods and services” in exchange for $145 million. In his Southern District of Florida lawsuit, Nicklaus accused Milstein and other related defendants of improperly using the Jack Nicklaus name to the detriment of Nicklaus himself. The defendants, however, had already filed suit in New York County Supreme Court and even obtained a preliminary injunction precluding Nicklaus form using the intellectual property Milstein obtained nearly 30 years prior. Accordingly, the defendants moved to dismiss the Florida suit in accordance with the United States Supreme Court’s decision in Princess Lida of Thurn & Taxis v. Thompson, 305 U.S. 456 (1939), which mandates that, when two in rem or quasi in rem suits regarding the same property are pending in different courts, “the jurisdiction of the one court must yield to that of the other.”

Judge Rosenberg deemed the Princess Lida doctrine squarely applicable to Nicklaus’ second-filed suit. Because the doctrine governs disputes over intellectual property; both suits “would necessarily involve the adjudication of the right to use, or the exclusive or non-exclusive right to use” the property in question; and the New York court had already granted injunctive relief, the Florida district court deferred to the New York court. Judge Rosenberg further remanded the matter to Florida state court, as complete diversity did not exist between the parties and Nicklaus’ remaining claims sounded in state law.

§ 5.8 Part VII – Sports Business/Media

Brandr Group, LLC v. Electronic Arts Inc., No. 23-CV-02994-HSG, 2023 WL 4297571 (N.D. Cal. June 30, 2023).

The Brandr Group (“Brandr”) agreed to dismiss its lawsuit against Electronic Arts (“EA”) in 2023, paving the way for EA to release its first college football video game in more than a decade.

A self-styled leader in “collegiate group licensing” for Name, Image, and Likeness (“NIL”) compensation, Brandr claimed to have entered exclusive group licensing arrangements with dozens of colleges and their football players. Although EA initially contemplated collaborating with Brandr to arrange for group licensing NIL deals for the use of schools’ and players’ likenesses in a college football game, EA opted to negotiate individually with schools, on the one hand, and individual student-athletes, on the other. Brandr filed suit, asserting that EA must negotiate through Brandr to use the NIL of three or more student-athletes from one specific sport for schools that had entered group licensing arrangements with Brandr.

Judge Haywood S. Gilliam, Jr. of the U.S. District Court for the Northern District of California denied Brandr’s request for a temporary restraining order—including on the basis that Brandr was unlikely to prevail on the merits of its ultimate claim. Although Brandr’s contracts with schools ostensibly named Brandr the exclusive agent for group licensing deals involving the schools and their respective players, the agreements did not require Brandr’s participation in separate NIL arrangements involving the schools and individual student-athletes. Indeed, Brandr’s agreements with students specifically provided that they did “NOT limit an Athlete’s right to grant the use of his/her individual Athlete Attributes or individual NIL for publicity, advertising, or other commercial purposes.” Because EA had resolved to reach separate agreements with each school and football player it wished to appear in the game, the court determined that Brandr’s claims were unlikely to succeed.

A few months after Brandr dismissed its suit, EA released a teaser trailer for its “EA College Football 25” video game. The game is slated for release in summer 2024.

Panini America, Inc. v. Fanatics Inc., et al., No. 1:23-CV-09714 (S.D.N.Y.); Fanatics Collectibles Topco, Inc. v. Panini S.P.A., No. 1:23-cv-09714-JHR (S.D.N.Y.).

Two titans of the trading card industry dragged their rivalry into the courtroom in 2023, with Panini and Fanatics suing each other in federal court.

Upstart Fanatics has consolidated its power in the sports tradeable industry in recent years, purchasing card maker Topps in 2022 and winning the exclusive rights to produce cards for the NBA and NFL. Based largely on these developments, Panini—the longtime industry pace-setter—sued Fanatics on August 3, 2023 for attempting to monopolize the trading card market in contravention of antitrust law. Panini’s operative, amended complaint seeks permanent injunctive relief and assert claims under the Sherman and Clayton Acts; for tortious interference with contract and with Panini’s prospective business; and for business defamation and disparagement. Fanatics moved to dismiss Panini’s suit, framing its growing market power as the result of fair competition rather than illegal, anticompetitive behavior and denying that Panini had suffered an actionable antitrust injury. In response, Panini complained of suffering “the very real injury of being foreclosed from the relevant market” for up to 20 years and insisted that its amended complaint asserted actionable antitrust claims.

Just days after Panini filed suit, Fanatics filed its own complaint in a separate (later deemed related) action in the Southern District of New York. Casting itself as the “innovative disruptor” pitted against the “stagnant, long-time incumbent,” Fanatics accused Panini of a “protracted, unlawful and deceitful campaign” to stifle Fanatics’ market ascension. Panini characterized the Fanatics suit as a “public relations ploy intended to blunt the impact of Panini’s first-filed action” and denied that Fanatics had plausibly alleged any cause of action. Fanatics responded by amending its complaint, which Panini has indicated it will again move to dismiss.

As of the writing of this article, both parties’ suits against each other remain pending.

Fusion Elite All Stars, et al. v. Varsity Brands, LLC, et al., No. 2:20-cv-2600 (W.D. Tenn. Mar. 24, 2023).

Varsity Brands, LLC and its affiliates (“Varsity”) agreed to pay $43.5 million to settle a class-action arising out of its allegedly anticompetitive, monopolistic behavior in the national “All-Star” cheerleading event industry.

The plaintiffs’ class consisted of gyms and spectators who had paid fees to Varsity over the years to host and/or participate in Varsity-run All-Star Cheerleading events. These “direct purchaser” plaintiffs alleged that Varsity, in conjunction with U.S. All-Star Federation, Inc. (“USASF”), conspired to obtain monopoly power and impose exclusionary contracts and “loyalty programs” on the plaintiffs and charge artificially exorbitant prices. In turn, Varsity and USASF argued that applicable statutes of limitation barred many of Plaintiffs’ claims and that their actions were legal and procompetitive. The parties ultimately agreed that the $43.5 million settlement was fair to both parties and adequately compensated the plaintiffs. The court approved the settlement on October 5, 2023.

Adidas Am. Inc. et al. v. Thom Browne Inc., No. 1:21CV05615, 2023 WL 8642074 (S.D.N.Y. Jan. 12, 2023).

Thom Browne prevailed in litigation with Adidas, after a federal jury found that the fashion mogul’s four stripe design did not infringe on any of the sportswear company’s trademarks.

In 2021, Adidas asserted that Browne’s “four bar” and “grosgrain” designs were confusingly similar to the famous Adidas three-stripe design. Browne contended that his designs had become “brand identifiers” and denied that he or his company devised either the four-bar or grosgrain designs in an attempt to pass off their goods as Adidas goods. In addition, Browne adduced evidence that Addias had complained to Browne in 2007 about previous “three-bar” designs but made no complaints whatsoever from 2009—when Browne introduced his four-stripe design—and 2018. After less than three hours of deliberation, the jury found in favor of Browne and his company and entered a $0 verdict.

Sage Steele v. ESPN Productions, Inc. et al., HHD-CV-22-6154934-S (Conn. Sup Ct.).

Sage Steele and ESPN agreed to settle the SportsCenter anchor’s lawsuit against the channel in 2023, whereupon Steele announced her departure from the company where she had worked since 2007.

On a September 2021 appearance on the “Uncut with Jay Cutler” podcast, Steele called ESPN’s requirement that employees receive the COVID-19 vaccine “sick” and “scary” and indicated that she had gotten the vaccine in spite of personal objections to maintain her employment. Among other comments, Steele also discussed interactions between female reports and male athletes and President Barack Obama’s identification as a black man. In response to controversy generated by Steele’s podcast appearance, ESPN took Steele off the air for approximately 10 days in October 2021. Steele subsequently sued ESPN in 2022, arguing that the company had disciplined her for constitutionally protected speech and breached her employment contract.

Although ESPN had formerly offered to settle Steele’s claims for $500,000, the terms of the ultimate settlement between the parties were not disclosed. ESPN offered no comment on the settlement other than to confirm Steele’s departure from the network and thank her for her contributions.