Federal judge Davis Doty in Minnesota ruled today that the NFL breached its obligations to act in good faith and maximize total revenues in TV rights deals.
The ruling was on an appeal by the NFL Players Association of a decision earlier this year by a Special Master who was tasked with determining whether the $4 billion deal that the league negotiated with CBS, NBC, Fox, ESPN and DirecTV was executed in accordance with a 1993 agreement whereby the league pledged to bargain faithfully when negotiating licensing deals. The Players’ Association contended that the league accepted less money from TV networks in exchange for a guarantee that it would have access to the money in case of a lockout.
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Judge Doty in his decision today articulates why the NFL put its short-term interest of protecting itself heading into labor strife over its obligations.
For example, the judge notes that DirecTV has to “pay a substantial fee if the 2011 season is not cancelled and up to 9% more, at the NFL’s discretion, if the 2011 season is cancelled.”
The judge later notes that “the NFL negotiated access to over $4 billion in rights fees in 2011 if it locks out the Players. Of that sum, it has no obligation to repay $421 million to the broadcasters.”
The Players Association had pointed to testimony by TV executives that the league got these loans at below-market interest rates by never asking for higher fees. The union sought an injunction that would deprive the league of that so-called “lockout protection.”
Judge Doty hasn’t spelled out the remedy he is granting just yet. He has asked the parties to brief him before making a final ruling. In the meantime, the league’s owners will have to adjust to the latest development. The league was expected to impose a lockout on Thursday.
Here’s today’s decision:
