College Athletes Suffer Legal Setback In Marshall v. ESPN; Is Plaintiffs' Poor Choice Of Forum To Blame?

In a widely overlooked antitrust decision from earlier this month, the U.S. District Court for the Middle District of Tennessee recently dismissed the claims of eight former college football players in Marshall v. ESPN -- one of the many spin-off publicity rights and antitrust lawsuits to O’Bannon v. National Collegiate Athletic Association. The plaintiffs’ loss in Marshall can be largely attributed to their poor choice of forum. Tennessee’s right-of-publicity statute is uniquely tough on the televised use of athletes’ likenesses. Meanwhile the U.S. District Court for the Middle District of Tennessee is one of the toughest federal courts in which to bring a Sherman Act claim against college sports entities.

In contrast with Judge Wilken's generally favorable decision for the plaintiffs in O’Bannon v. NCAA, the court in Marshall held that the eight college football-player plaintiffs do not have any cognizable publicity rights in the televised use of their likenesses under Tennessee state law. This is because Tennessee's statutory right of publicity explicitly states that "[i]t is deemed a fair use and no violation of an individual's rights shall be found ... if the use of a name, photograph, or license is in connection with ... [a] sports broadcast or account."

Additionally, the district court in Marshall held the football-player plaintiffs cannot state an antitrust claim against the college sports industry’s collective restraints on athlete compensation because of numerous circuit-specific amateurism defenses. This is not surprising as it has been repeatedly explained in academic literature that federal courts based in the Third and Sixth circuits have adopted a uniquely broad level of deference to the NCAA’s amateurism rules. Because the U.S. District Court for the Middle District of Tennessee lies within the Sixth Circuit, prior decisions from cases such as Bassett v. NCAA, 528 F.3d 426 (6th Cir. 2008) and Gaines v. NCAA, 746 F.Supp. 738 (M.D. Tenn. 1990) foster significant deference to the status quo in college sports.

The main lesson that should be learned from the Marshall ruling is that plaintiffs’ lawyers need to be very careful when selecting where to challenge the restrictive practices of college sports entities. Because defendants in Marshall encompassed most U.S. states, there was absolutely no reason for lawyers in Marshall to choose to sue in the U.S. District Court for the Middle District of Tennessee, or to argue exclusively a violation of Tennessee’s right of publicity statute. From a purely antitrust perspective, the U.S. District Court for the District of Kansas or the U.S. District Court for the Western District of Oklahoma would have made for more reasonable forums based on favorable past precedent involving antitrust challenges against the NCAA. Similarly, with respect to the right of publicity claims, the plaintiffs in Marshall perhaps should have argued the violation of a publicity rights statute based on the law of a state other than Tennessee. Indeed, many other states do not include an express statutory carve-out for the use of likenesses in televised sports broadcasts.

More Legal Implications of Houston Astros breach

On 120 Sports I break down the potential legal consequences of the Houston Astros breach and also do so on Inside St. Louis and WEEI Boston:

The Legal Implications of MLB's Hacking Scandal

As almost everyone is probably by now aware, the New York Times broke a major story on Tuesday reporting that the Federal Bureau of Investigations is looking into whether the St. Louis Cardinals may have illegally accessed computers belonging to the Houston Astros without authorization. Depending on how high up within the Cardinals' organization this activity went, this has the potential to be one of the more explosive sports law scandals of the year.

I've written a couple pieces on the scandal for the baseball website FanGraphs over the last two days. The first piece considers which federal laws the Cardinals' employees may have violated through their alleged hacking into the Astros' computers, as well as whether the Cardinals team itself could be facing potential criminal liability. The second piece looks at the ways in which MLB's Constitution and collective bargaining agreement may both restrict Commissioner Manfred should he eventually issue sanctions against the Cardinals for the incident.

I hope you have a chance to check the two pieces out.

Ambidextrous pitchers and default rules

The Oakland A's have called up pitcher Pat Venditte, who is genuinely ambidextrous and a MLB-quality pitcher with both hands. He pitched against Boston at Fenway on Friday evening, getting outs with both arms in the Seventh. More interesting, Venditte raises the prospect of a switch-pitcher facing a switch-hitter in the Majors. In July 2008, Venditte, then pitching for the Staten Island Yankees, got into a lengthy back-and-forth, with Venditte switching hands and the batter switching sides of the plate (video below).

The Professional Baseball Umpires Corporation soon after announced a new rule to address the situation: The pitcher must indicate which arm he will throw with (usually by stepping onto the rubber with his glove on a given hand), after which the batter can choose which side of the plate to hit from. After throwing one pitch, the pitcher and batter can each change once during an at-bat.

This is a fun example of default rules in action. Someone has to be the first mover in these situations, with the reacting player having the benefit of being the second mover. Needing to get the game moving, the umpires resolved that 2008 situation by making the batter choose a side first and allowing Venditte to respond.

But the subsequently codified rule goes the other way, giving the batter the initial advantage by making the pitcher declare a side first, allowing the batter to select the advantageous response. The logic was that the pitcher always goes first--we always know which hand the pitcher throws with (since every other pitcher throws with only one hand) and the batting team can seek an advantage against that (in selecting a pinch-hitter or in deciding which side a switch-hitter will hit from). Essentially, the rule forces Venditte to choose whether to "be" a righty or lefty at the outset of each at-bat, eliminating the uniqueness of the switch-pitcher.

Congrats to Timothy L Epstein!

Our own Timothy Liam Epstein has been hired by Duggan Bertsch, LLC, a wonderful law firm in Chicago. As one of the nation's top lawyers serving the sports and entertainment industries, Tim has been named Partner & Chair of the firm's litigation practice. He will also Chair the firm's Sports Law Practice.

Tim's new firm currently serves a number of athletes and sports business owners as general counsel, and specialized counsel in tax, corporate, and estate work. Looks like a great marriage of Tim's own general counsel work, litigation, compliance, and regulatory work!

Here's a full description of Tim's job and very impressive accomplishments.

Waiting on the NJ Sports Betting Decision

The future of legal sports betting in this country rests in the hands of three robed judges from the U.S. Court of Appeals for the Third Circuit. In a matter of weeks, perhaps even this week, the Third Circuit will decide the fate of New Jersey’s plan to legalize sports betting. This decision—regardless of the result—will have far-reaching consequences. If New Jersey prevails, sports betting could become a reality at the state’s licensed casinos and racetracks in time for the beginning of the 2015 NFL season. But the impact of the court's decision will extend far beyond New Jersey’s borders. Other states (most notably, Pennsylvania and Delaware) will likely follow New Jersey’s “court-blessed” blueprint and enact their own sports wagering laws, in reliance on the Third Circuit’s decision. Looking beyond the Third Circuit territory, we could see as many as 10 to 20 states pass sports wagering laws modeled after New Jersey’s version within a matter of just a few months following a New Jersey victory. Several states—Minnesota, Indiana, South Carolina, and New York, to name just a few—are not even waiting. The legislatures of those states have already proposed bills legalizing single-game sports wagering. While these bills are only in a preliminary stage at this juncture, expect them to be fast-tracked if New Jersey wins.

Further, a victory by New Jersey will undoubtedly—and perhaps quickly—lead to new federal legislation that would expand legalized sports betting beyond Nevada. This is because New Jersey’s version of legal sports betting would be “unregulated" (meaning no governmental oversight). While NBA Commissioner Adam Silver has come out in favor of legal sports betting, he maintains that it needs to be “regulated” in order to preserve the integrity of the league’s games. A New Jersey victory would open the door to “unregulated” sports betting, a prospect that the NBA, the other sports leagues, and Congress are desperate to avoid. But the leagues and Congress have offered no definitive timetable for federal legislative reform, or any guarantees. Most observers believe that there is little chance of any Congressional action before 2017 (especially with a Presidential election next year). A New Jersey victory would likely change all that, and accelerate the timetable for federal legalization to 2016 (or perhaps this year). But even if New Jersey were to lose the appeal, the eventual Third Circuit opinion will likely include language that provides New Jersey officials with some guidance for future legislative efforts. New Jersey would then be poised to follow such a “roadmap” and propose new legislation right away. Thus, regardless of the result, the Third Circuit’s decision will likely determine the “timing” of when sports wagering becomes legal in the United States.

New paper on NCAA compliance and corporate law

I've posted my latest paper, "Institutional Control and Corporate Governance," inspired by the Penn State scandal, on SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2611630#.  Here's the abstract: 

In January, 2015, the NCAA agreed to restore Penn State’s football wins, vacated as part of sanctions imposed for the University’s handling of the Sandusky sex abuse scandal. This represented a curious end to one of the most attention-grabbing and unusual NCAA enforcement actions in history. In the summer of 2012, the NCAA had strong-armed Penn State into accepting draconian sanctions based on the conclusion that the University failed to exert proper “institutional control” over its athletics program as required by NCAA rules. The foundation for that conclusion was the Freeh Report, which faulted Penn State’s senior leaders and Board members for their role in failing to stop Sandusky’s abuse.

This paper steps back to consider an unexplored aspect of the Freeh Report. In describing the University Board’s obligations, and failings, the Freeh Report relied upon two Delaware business law cases on the fiduciary duties of corporate directors. The connection between corporate oversight and NCAA “institutional control” is intriguing, since fiduciary duties typically arise in absence of contract and the NCAA is a voluntary association arising from contract.

By exploring the parallels and divergence between Delaware fiduciary oversight obligations and the NCAA “institutional control” rule, important insights regarding the development of compliance and enforcement regimes can be gained. Delaware fiduciary law arises through vigorously contested, adversarial litigation. This gives clarity and nuance to its rules and standards, and provides direct implementation guidance on best practices to business firms. By comparison, the NCAA’s institutional control rule is rarely subject to clarity and the process for enforcement used by the Association is far from adversarial. Important lessons about the potential of private associations to engage in self-governance and the value of an adversarial approach to deriving oversight obligations can be gleaned.