The NFL Gets to Keep A 4 Billion-Dollar Bargaining Chip

With all the press from Super Bowl week and the talk about the upcoming CBA deadline, many people overlooked a very important ruling by NFL Special Master Stephen Burbank last Tuesday, February 1. Under the existing Collective Bargaining Agreement the league is required to maximize revenue for the mutual benefit of both sides. The NFL Players Association alleged that the NFL improperly negotiated below value television contracts, in exchange for a structuring deal that would pay the league $4 billion in 2011 (knowing that a lockout was possible), and was therefore not getting the most revenue possible in other seasons when the income would be shared with the players.

The Special Master rejected the Union’s complaint; however the he did rule that the NFL violated the Reggie White settlement agreement governing the CBA, regarding the NFL’s specific media contracts with ESPN and ABC. Liz Mullen of SportsBusiness Journal reported that the Special Master did not grant the injunction, but instead, awarded $6.9 million in damages for the CBA violations of the ESPN and ABC contracts. According to the Associated Press, the NFLPA was asking for $60 million in damages, but was awarded $6.9 million. Most importantly, the Special Master did not grant the Union’s request for an injunction, thus allowing the NFL to keep $4B from the TV contract deals with networks in 2011.

After the ruling both sides claimed a victory. The Union was happy the Special Master found minor CBA violations with the ABC and ESPN contracts. NFL Executive VP & General Counsel Jeff Pash called the award a “modest” amount at a press conference, but had to be delighted with the outcome. Union spokesman George Atallah tweeted after the decision, “Now for the good news: The NFL, until the appeal in Minnesota, has $4 billion to not play football next year. VICTORY!”

I believe this is a clear victory for the NFL. Comparing an award of $6.9 million with $4 Billion from what the Union called “lockout insurance” gives the NFL a lot more chips at the bargaining table.

The fact that the Union immediately appealed the ruling, and is now asking U.S. District Court Judge David Doty, the judge in charge of overseeing the NFL’s CBA, to issue a decision on its appeal before the March 3^rd CBA officially expires is another example of how the Union is truly taking this ruling. One of my favorite quotes from an NFL statement over the weekend read, “As we have said all along, a new CBA has to be hammered out at the negotiating table, not in the courtroom. If the union commits to invest as much time, energy and other resources in negotiations as it has in its litigation strategy, a new agreement could well be reached by March 4.”

Although the NFL appears to have an advantage after the Special Master’s decision, the ruling could be beneficial to both side’s progress and enhanced efforts for a new CBA. This ruling could entice the NFLPA to negotiate more fervently in hopes of coming to an agreement before the critical March 4^th deadline, just like the league’s statement above suggests.

On a side note, the league’s Exec VP/Business Operations Eric Grubman also mentioned to reporters in January that the TV money at issue has to be repaid, with interest, once the games resume. Conversely, the NFL recently mentioned that it would not touch the $4 billion from the television contracts until a potential second lockout year in March 2012, if a new CBA still has not been reached. If these statements are true then the NFL now has even more incentive to come to an agreement for a new CBA and get these funds active.

Moving forward, Judge Doty will hear oral arguments for the appeal on February 24^th in an open federal courtroom in Minneapolis, Minnesota. Judge Doty has been favorable to the players in recent rulings. The NFL even asked the judge to remove himself from his role overseeing the NFL’s CBA after his decision in the Michael Vick ruling, claiming Doty was showing bias towards the NFL players by meeting with player representatives before hearings and making inappropriate public comments. However, I am not so sure about Doty ruling with the players on this decision.

NFL Management and the NFLPA will be enhancing the intensity of negotiations between the two parties over the next several weeks. Hopefully the Union will let Judge Doty decide this decision on appeal, and not let it disrupt the flow of negotiations. As we all know, the sides have many other issues to agree on before March 4.