Nuclear Summer (and Winter?)

Until recently, the NBA-NBPA negotiations have been relatively quiet but now things are starting to get a bit funky.  The players have doubted the amount of money losses that the NBA has set forth in their financials, which has created an impasse.  More recently, the NBPA filed a complaint with NLRB claiming that the NBA has not been bargaining in good faith.  In other words, the NBPA did not like that the NBA was not budging and sought leverage by getting a ruling from the NLRB that would make the NBA make concessions.  The NLRB complaint is pending but it seems like a long shot since, absent some sort of proof of egregious behavior.  The complaint really just boils down to the fact that the NBPA doesn’t like that the NBA doesn’t want to move on a deal but there really isn’t a reason that a party to a labor negotiation can refuse to accede to terms it feels are unfavorable.

Rather, the NBPA’s best hope of killing the lockout was mapped out in this summer’s NFL labor dispute, where the NFLPA decertified, meaning that it no longer would exist as a union.  The import of this move, from a legal perspective, is that the league would no longer be permitted to lockout the players, since federal law only allows owners to lockout a formally certified union.  Once in violation of federal law, the owners would be exposed to a potential antitrust lawsuit and treble damages (triple the amount of financial damages that were proven, as well as attorneys fees). 

Earlier this summer, the NFLPA initially obtained an injunction lifting the lockout.  The lockout, however, was lifted by an appellate court which agreed with the NFL that the NFLPA had not truly disbanded but was really functioning as a union and was decertifying only to gain a legal advantage.  Ultimately, the NFL reached a settlement but it seemed likely that the NBPA, who retained Jeffrey Kessler, the same attorney that the NFLPA had, would try the same tactic.

Just today, the NBA showed that it would be a bit more aggressive than the NFL was.  Rather than sit back and wait for the NBPA to decertify and sue them, the NBA brought a preemptive lawsuit called a declaratory judgment action, seeking a court to rule, as a matter of law, that the NBPA cannot decertify and that they must comeback to the table and negotiate.  From a practical point of view, the lawsuit is no different than if the NBPA had sued the NBA and the NBA defended the action on the same ground alleged in the complaint.  The preemptive lawsuit, however, does provide a few advantages: (1) the NBA gets the psychological impact of suing first and getting some points for being perceived as aggressive, (2) the NBA can pick the venue of the lawsuit by suing first (the NBA sued in New York’s federal court, whereas the NFLPA lawsuit chose Minnesota, which was perceived to be a more labor friendly court), and (3) the NBPA must scramble to respond, as they have not yet publicly decided to decertify yet and now must make a decision on this point. Of course, the NBPA can allows decertify and then bring its own action or even have its individual players bring a counterclaim in response to the NBA lawsuit.

In reviewing the complaint we do see a few interesting notes:

-In addition to suing the NBPA and its executive members individually, the NBA sued Amare Stoudemire, Mike Dunleavy, and recently drafted rookies Jimmy Fredette and Charles Jenkins.  Amare, Dunleavy, Fredette, and Jenkins were all sued individually apparently because they all reside in New York State and thus provide a basis for a New York venue for the lawsuit.  All we can say to Fredette and Jenkins (a second-rounder) is: welcome to the NBA, rook.

-Speaking of aggressive, the NBA’s complaint even sues Kessler on the ground that he is encouraging the NBPA to decertify and pursue a lawsuit.  Ordinarily, it is highly unusual to also sue one’s adversary in a negotiation.  The NBA alleges that Kessler knows that decertification is really a sham to gain leverage in negotiations and thus he is also a proper party to be sued in this action.  This doesn’t seem to really pass the smell test or make Kessler a proper party to sue (and I suspect the NBA knows this).  To be a proper party, Kessler would have to do more than merely advise his client of a course of action but the NBA is not happy with Kessler and is using the allegations in the complaint as a way to call out Kessler’s credibility and perhaps to prevent him from overtly representing the NBPA in any lawsuit (because, as a defendant, Kessler would arguably have a conflict of interest in representing a co-defendant in the NBPA).  At the very least, the complaint takes all sort of potshots at Kessler’s and implies that he has lied in the NFL negotiations and is doing so again here.

-This has nothing to do with the current dispute but I thought it was interesting that the complaint also gives us the proper names of the companies that are the listed owners of each NBA club.  Most of the teams are owned by limited liability companies that can be referenced back to the team (i.e. Golden State Warriors, LLC owns the Golden State Warriors).  The only two teams whose owner doesn’t appear to have anything to do with the team’s name are the Grizzlies (Hoops, L.P.) and the Thunder (The Professional Basketball Club, LLC).

As for the potential for success of the lawsuit, it would seem that the NBA has a pretty good legal argument based upon the NFL’s experience in court.  Still, any litigation would take way too long (there would be tons of discovery) and could take years.  Assuming the NBA wants to get this matter resolve, tn the end, this lawsuit should accomplish a goal in forcing the parties to the negotiate, as the court will surely schedule some sort of mediation at some point.  In the short term, though, the lawsuit is quite vitriolic and will serve to harden views on both sides.  That doesn’t mean, ultimately, that it won’t heighten the sense of urgency on both sides but a deal seems far off right now.

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