Blog Entry

Decertification: The Nuclear Option

Posted on: November 4, 2011 11:23 am
Edited on: November 4, 2011 1:51 pm
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By Matt Moore 

With reports surfacing Thursday night of a possible coup being attempted on the part of outraged players with regards to concessions granted by NBPA leadership in negotiations with the NBA on a new CBA, the talk is now shifting to the courts. Players are threatening an "involuntary decertification," in which 30 percent of union membership signs a petition to bring a vote to the union with regards to decertification. From there a simple majority would be needed to decertify the union. That opens the way for the players to bring individual antitrust suits, which could potentially damage the owners and even end the lockout. 

But what does any of this mean?

To find out, we spoke with David Scupp of Constantine Cannon LLP, an antitrust firm based on the East Coast. Let's try and get to the bottom of what any of this means.

What is decertification?

In an effort to protect employees, the National Labor Relations Act put into law a compulsion for employers to collectively bargain with unions. Under the terms of collective bargaining, Scupp says that in time businesses were protected from antitrust laws as long as both sides were involved in collective bargaining, which must be done through a union recognized by the NLRB. 

"A rule emerged in the 1980's which says antitrust laws are out of bounds except when there is no longer a CBA between union and management," Scupp says. "The only way around that is to decertify the union. That's the result that came out in the 1990's."

So as long as the NBPA exists, the owners are protected from antitrust litigation. Thus, decertification. 

Decertification can be committed to in separate ways. Disclaim of interest is a faster process that involves union leadership essentially scuttling their own ship. However, it is less likely to hold up in court. What the 50 players (and their agents) are seeking is an involuntary decertification, which requires the 30 percent petition, the majority vote, and recognition from the National Labor Relations Board. In doing so, the action would dissolve the union, ending protections for the owners against antitrust suits and paving the way for players to pursue suit against the owners. It is believed that this option represents the only true way to gain leverage against the owners. 

In short, Scupp says, "the law gives the right for the players to be and not be a union." 

What are the legal challenges to decertification?

Before we get into antitrust considerations,  it's important to consider that the league has already challenged any move from the NBPA to decertify or disclaim interest. The league filed suit against the NBPA attempting to protect itself from any suit resulting from decertification on the grounds that the NBPA has not bargained in good faith and that any decertification on the part of the players is not legitimate. This is where the term "sham decertification" comes from. This same consideration was brought up but not settled, Scupp says, during the NFL lockout and subsequent court battle with the NFLPA. 

"The argument says that the union is decertifying, but it's not a good faith decertification," Scupp says. "It shouldn't be a lightswitch that can be turned on and off. That argument needs to be tested. It wasn't one of the issues that was resolved in the NFL case. The league is arguing that if the players' union decertifies, it would be a sham and the court should not entertain a suit."

The biggest problem with this particular suit, Scupp says, is that it's attempting to block something that hasn't occurred yet. Scupp says that the court is essentially tasked with reading intent towards the NBA's decision to decertify, which it has yet to do. How do you evaluate the intent of a party regarding an action they have not taken yet? That's the challenge to the NBA's suit, as outlined by the NBPA in their reply memorandum

Should the union elect to decertify involuntarily, as is being proposed by the players, the sham argument becomes more difficult to prove. The sham argument proposes that the union's decertification is merely being used as a tactic towards negotiation. Having the players (at least on surface) detonate their own union without consultation or approval from NBPA leadership would be pretty difficult to challenge as a sham.  

So the union decertifies, what happens then? 

Why would you give up the protections afforded you by the National Labor Relations Act to collectively bargain by decertifying your own union, essentially putting you out on your own against the power of the NBA?

Because it allows you to sue for antitrust. And it is here we enter the wild, and the one last, desperate hope of the players gaining leverage or an outright victory over the union.

Players would file suit against individual owners claiming that the lockout itself is an antitrust violation, Scupp says. "It's a group boycott, outside the context of collective bargaining, an anti-competitive element, would be their argument," according to Scupp. 

 The league acts in collusion regarding all matters of the CBA, according to the plan of attack for the players. 

"The salary cap, draft rules, etc., if those practices are part of the CBA," Scupp says, "if you're going to restrict free agent movement, and all your teams are going to act together, that's a violation of antitrust, according to the argument." 

We're used to hearing about open markets with regards to antitrust. The NBA is the only real "market" that exists in the United States for professional basketball since the ABA-NBA merger. But Scupp says that the suit would be focused more on the elements and practices of the NBA that may constitute an antitrust violation.

"There are certain violations which are what are called per se violations," Scupp says," that are so anti-competitive, you don't have to prove what the market is. If it is not a per se violation, they go with a rule-of-reason analysis. The players would have to prove what the global market is. That's a very good question, what the market is."

Does the professional basketball market include minor leagues like the barely-in-existence current ABA? Does it include Europe? Does it include exhibition games to the degree it can be argued players can make a living off that option? 

"Is it a worldwide market for basketball and if so does the NBA have market power?" Scupp asks. "Is the NBA a market inside itself? I don't know, but it's a very good question. If the lawsuit ever progressed to that point, would be important."

Scupp says that other questions that would come into play are what percentage of the market does the NBA control, and are there barriers to that market for the players? It gets trickier the further this process goes. 

What happens if the players win an antitrust suit?

The owners go down like Michael Spinks. Scupp says that a possible result would be the court enjoinging the lockout, effectively ending it. The players wouldn't be bound by it, and would start receving checks again. This could actually be enacted while the suit is taking place, putting even more pressure on the owners. For that to occur, the NBPA would need to prove irreparable harm stemming from the lockout, which involves combating a likely claim from the NBA that Europe and other employment options undermine the idea of irreparable harm.

Should the court enact an injunction, the league would no doubt appeal. The question of whether the injunction would hold during such an appeal is up for debate. The original judge in the NFL case in Minnesota held that the injunction would hold during an appeal and the lockout would be withdrawn, but the Minnesota district court ruled to suspend the injunction during the appeals process, opening up the lockout once more. While Scupp says a ruling on such an injunction would come quickly, that would still take a month or more, time neither side has if they wanted to save a season.

But the monetary result is the real hammer for filing the suit. 

"At the end of the day, if the players could win an antitrust suit, you get treble (triple) damages, the payout at the end would be very significant." 

Furthermore, if it looked like the players were going to win such a suit, the league would likely cave and grant the players huge concessions or keep elements the same in the next CBA. It would represent a dramatic win over the owners. 

So the decertify-and-antitrust-suit option has to be the best choice for the players, right?

Not at all, according to multiple experts, including Scupp.  

Provided they manage to get the required votes for a decertification, and that decertification holds up in court, and the players file suit, and the court hears that suit, and the players win, what's the timeline on that? Years, Scupp says. Years.

"The question is whether the players can sustain through that period," Scupp says. "I'm sure a lot of players can, but I'm also sure a lot of players can't." 

Consider who is linked to the 50-player initiative. At least seven All-Stars and probably more were reportedly on the calls. Those players have the means to survive such a monetary drought. Dwyane Wade isn't going under in three years. But the majority of the NBPA is made up of role players and end-of-bench guys, along with rookies and young players who don't have those means.

Additionally, losing the league for multiple years would likely simply mean the end of the NBA. It's unfathomable to think about, but that's the reality. Even once a case is decided and damages set by a court, the appeals process would take further years. Scupps says that the only way this is a feasible option for the players should they pursue this route, considering the money lost in one or more lost seasons, is if an injunction is placed on the lockout, and that is far from certain. This isn't a quick process, it's a painfully slow one, and one that would bleed the league to a flatline on the national spotlight.

Which is why Scupp says decertification and subsequent lawsuits only work as a negotiating tactic, not as a viable strategy towards conflict resolution.  

"An antitrust suit would take years to resovle and neither side takes that."

If the suit is merely being filed as a negotiating tactic, wouldn't the court want to avoid participating in such a process? Scupp says it's likely that the court would urge both sides to settle the dispute at the negotiating table, rather than using the courts as a means to an end.

So what's the end game here? What happens next?

The players are playing a dangerous game of chicken right now. Basically, they have no weapons to aim at the league in this negotiation and feel they're backed into a corner with no acceptable solution in sight. So they've pulled out the antitrust hand grenade and are daring to pull the pin. If the players go down, they're taking the owners with them. 

The problem is that the likely result of this is a lost season, something that the owners have been hinting at and Billy Hunter has explicitly said some owners are pursuing anyway. It's threatening the NBA with something it's already made clear it's ok with. How do you get someone to back off by punishing them with something they're fine with?

The only chance the NBPA has here of victory or even a marginal survival is that the prospect of leaving the process up to the courts takes it out of the NBA's hands. The owners no longer control the field, despite the many obstacles in the way of such suits. That kind of wild card might be enough to shake the moderates to align with those owners who do want a deal and a season, wrestling control from the hard-line owners who so far have carried the day.

Decertification and antitrust litigation is the nuclear option. Once it starts, stopping it becomes harder and harder. The case won't even be brought to court until after the entire 2011-2012 NBA season would be cancelled, and the process could and would probably take up to another full year to reach an initial resolution, prior to the appeal process. The players would be ending professional basketball in this country to protect themselves from the owners' efforts which have been draconian and brutal.

Saturday will be day 128 of the NBA lockout. If it is not the last, the future of the NBA looks dark for all involved.


Additional resources: 
Huffington Post lockout primer.  
Sports Illustrated FAQ.
NBA vs. NBPA legal documents, via Brian Cuban on Twitter. 
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Comments

Since: Nov 7, 2011
Posted on: November 12, 2011 5:21 am
 

Forget Antitrust

Antitrust suits won't work for players because labor law is 100% settled with lockouts allowed before there is an labor impasse. Players could find they have no actionable cause to bring being their contracts become void upon decertification. League will argue, among many things, players rights to bring antitrust complaints before a court went out the window with decertification along with  player contracts. Then there is the question of immunity against antitrust suits for all sports teams per Brown v. NFL.

Players should look for the good in what the NBA is offering instead of giving it a blanket trashing before they decide to go the decertification route that can't possibly deliver their demands.




Since: Dec 5, 2006
Posted on: November 7, 2011 5:59 pm
 

Decertification: The Nuclear Option

An effective explanation of the decertification issue. In the NFL case last summer the league did decertify early. They achieved the result they wanted from a Minnesota District Court who ordered the league to end the lockout. That lasted a day, The league appealed to the 8th Circuit Court and won a stay on the lifting of the lockout order, first a preliminary stay and then as a permanent stay. It is noteworthy that the NFL is a unique game and is not played in Europe. Basketball, on the other hand, is played professionally by nearly every country. That provides hundreds of alternative markets for players to get paid (with proof being supplied by the 70 some who actually have gotten paid during the lockout.)

The winners on decertification are most obviously the lawyers. Maybe hundreds of millions of dollars will go to legal fees as both sides shift to all-out attack. This time the venue is likely to be New York which is savvy to the ways of big business and big labor and will apply a more fair determination to the issues. But whoever loses is still sure to appeal - thus stopping play for years. The amazing thing to me is that players would rather throw away $4.7M per year in hopes of getting $4.9M per year. That old bird in hand thing has not been remembered.


shangg
Since: Nov 6, 2011
Posted on: November 6, 2011 8:15 pm
This comment has been removed.

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Since: May 7, 2009
Posted on: November 6, 2011 2:30 am
 

Decertification: The Nuclear Option

A little pessimistic.  A court will normally permit interim arrangements to minimize losses.  In this case new money and management steps in and offers to buy out the franchises that are worth anything or just opens new teams and makes offers.  With no antitrust protection, the NBA disappears and is replaced by new teams fairly quickly and with much better management and marketing strategy.  Probably a true international league, with divisions in Asia and Europe.  It's win for the players and fans and for the owners of the larger franchises.  Smaller franchises are folded or form a second division.



Since: Dec 19, 2006
Posted on: November 5, 2011 3:57 pm
 

Decertification: The Nuclear Option

Only tough part about the NBA lockout is enduring the tremendous amount of soccer highlights they show on ESPN to fill up their show. gah.



Since: Dec 19, 2006
Posted on: November 5, 2011 10:07 am
 

Decertification: The Nuclear Option

Go ahead and blow up your only source of income.  None of the big stars are going to play in Europe.  Sit on your asses and take it to court.  If you win, it's a hollow victory, since you've already lost millions of dollars in paychecks.  And if you lose?  Be prepared to bend over and take whatever the owners give you, and it probably won't be fair in any way.  Where is the win here?  I don't see it.




Since: Sep 20, 2006
Posted on: November 5, 2011 9:57 am
 

Decertification: The Nuclear Option

If the NBPA isn't smart enough to reduce salaries by $300,0000 and go back to making millions, they aren't smart enough to understand this :

80% of NBA franchises lost money last year. Collectively, the NBA lost $300 million. You can't operate a league and honor existing contracts with 6 teams.

If players "won" an antitrust suit 4 years from now, what would a FORMER pro basketball league have left to pay out ?

Courts can't force bankrupt franchises to pay more that they have. Owners aren't sole proprietors, and their personal wealth isn't at stake- franchises are corportations, with their own financial entities...and TAXPAYERS and INVESTORS on the real property are first debtors in a bankruptcy. If owners just folded the NBA to insolvency, owners would go back to what made them billionaires before basketball...claimants would probably get pennies on the dollar, and the employees, investors (taxpayers), and NCAA scholarship players majoring in NBA, would be the ones to lose.

Even these slumdog millionaires should be smart enough to know you can't rob a convenience store for $100 if there is only $50 in the register.

If the NBA folded, salaries in Europe and China would drop faster than the stock market ever did. Don't let anyone fool you- 90% of these guys have a 6th grade education, and absolutely no skills off the court. Basketball players would be scrambling to make $100K a year overseas, most would be destitute in a short time. NCAA basketball would change dramatically, as players couldn't hide eligibility for one semester before leaping to the NBA anymore.

...all so the top 30 players in the NBA could squeeze a little more cash out RIGHT NOW.

A fool and his money are soon parted.




Since: Oct 13, 2011
Posted on: November 4, 2011 3:33 pm
 

Decertification: The Nuclear Option

Do you think that the current players give a rats ass about future players? C'mon man. These players only care about themselves and money. What is really crazy about this whole thing is that the 100 million that they are fighting for is just 10 percent of thier pay. So in reality, they are willing to go years without a paycheck for that amount not to mention the about of fans they will lose if not completely dissolve the NBA. Hmmm, if you want to blame somebody, blame the players agaents who are and always be the scum suckers who will sell thier souls to the devil for money. Also blame superstars who care less about the other 80 percent of the players as long as they get thiers. I say srew them, I wasn't on either side of the fence but now I hope they all lose. The real victims are the fans and businesses who are getting the cold shoulder. Adios NBA, hello NCAA!



Since: Sep 19, 2011
Posted on: November 4, 2011 3:32 pm
 

Decertification: The Nuclear Option

Technically they cant go out and hire replacement players because to open the NBA to replacements would essentially end the lockout.  The owners would then be bound to the contracts they signed the players to as long as the signed players made an effort to play.  The reason the lockout is saving them monetarily, at the moment, is because the players dont have the option to live up to their contracts hence they arent getting paid. 



Since: Sep 5, 2006
Posted on: November 4, 2011 3:05 pm
 

Decertification: The Nuclear Option

Rams man - yes, the owners could go out and hire replacements, but they won't. There's nothing for them to gain by doing so. And if this comical lockout has taught us anything, it's that the owners have no interest in doing anything unless they gain.
As far as the forgotten people in the lockout (stadium employees, team employees, local businesses that rely on the NBA), they're out of luck. Certain cities are threatening to sue the NBA (since taxpayers foot the bill for the owners' basketball palaces that are sitting unused right now), but it's an empty threat made out of anger. The cities have ample reeason to be pissed off just like players and fans do, but that's about all they have. This will end when the owners have bled the players to the bone. Not before, and there's nothing anyone can do about it except not show up when this madness ends.


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