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A Minnesota federal judge has ruled that the NFL breached its agreement with the players union in negotiating its TV rights deals and is expected to decide soon whether the NFL should be enjoined from having access to some $4 billion in rights fees from television networks.
On the verge of seeing its members locked out, the NFL Players Association is appealing a decision by an arbitrator. Earlier this year, a Special Master imposed a $6.9 million fine on the NFL as the result of it agreeing to give NBC an extra game in 2010 without benefit to the union, but fell well short of meeting the players’ association’s demands to have various deals with CBS, NBC, Fox, ESPN, and DirecTV deemed to be a breach of faith and duty.
The players association cites a 1993 agreement that put the NFL under obligation to negotiate new TV contracts to maximize total revenue. In a recently-unsealed complaint filed in Minnesota District Court, the union says the league failed in that obligation, pointing to internal documents presented at owners’ meetings suggesting the league merely wanted to be in a strong financial position headed towards labor strife with players.
Today, a federal judge agreed with the union that the league breached its agreement with the union to maximize revenue. The judge hasn’t yet enjoined the league from using the $4 billion yet, but will schedule a hearing to determine damages.
How much more than $4 billion could the NFL have gotten from television networks for rights to televise games?
Jeffrey Kessler at Dewey & LeBoeuf, who is representing the union in this dispute, won’t speculate, but he argued in court that DirecTV CEO Chase Carey testified that he would have paid more but never did the analysis because he was never asked by the league.
The league countered that it never asked because it knew the perilous television business, and the poor state of advertising in a depressed economy. The league also believed it behaved reasonably, in particularly by freeing up rights so as to run its Red Zone channel, which it says will lead to increased distribution of the NFL Network and lead to substantially increased revenues.
For now, the players association is only asking that a judge shut off the league’s access to $4 billion in rights revenue, which it deems “lockout protection.” Asked if the players’ association would consider naming television networks as co-defendants in a possible antitrust lawsuit or whether the players’ association might seek to declare those rights deals to be null and void, Kessler carefully preserves his options but focuses on the decision at hand.
“What we are looking to do is to restore players from an injury standpoint,” he says. “What’s injuring players is the $4 billion war-chest. That will eliminate the worst injury that players have suffered.”
Although Kessler says the players association has no plans to sue TV networks, if the union decides to decertify upon a lockout, as has been widely speculated, the move would likely be in anticipation of further legal action challenging anti-competitive behavior by the league and possibly by its partners.
*This post has been updated.
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