Category: Litigation

$500 Million New Years Resolution

The National Basketball Association’s (“NBA”) 2014 New Year resolution: Get out from underneath the worst sports contract in the history of sports (well, maybe with the exception of the 1st Century Roman Gladiators).   Meet Ozzie and Daniel Silna – Brothers who once owned the Spirits of St. Louis in the defunct American Basketball Association (“ABA”). It all began with the Spirits exclusion from the 1976 merger of the NBA and the ABA. The Silnas watched unhappily as the New York (now Brooklyn) Nets, the Denver Nuggets, the Indiana Pacers and the San Antonio Spurs were absorbed into the NBA, while they were left on the sidelines – scheming. And successfully scheme they did. The Silnas and their attorney, Donald Schupak, slyly negotiated an astonishing benefit that was critical to the merger: an agreement to be paid one-seventh of the national television revenue that each of the four teams was to receive, as long as the NBA continued to exist.  Yes that is right – That amounted to be paid in perpetuity- forever. To date the deal has provided the Silnas with approximately $300 million.

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The NBA has repeatedly been reminded of  its haste and folly in structuring the deal and has repeatedly tried to buy the Silnas out.  However, the gold nest egg of the Silnas’ has remained elusive in light of ever growing popularity of the NBA. Finally, earlier this month, the Silnas, the NBA and the four former ABA teams announced a conditional deal that will end the Silnas’ access to the gold pot at the end of the rainbow. Well sort of. The Silnas are to receive a $500 million upfront payment, financed through a private placement of notes by JPMorgan Chase and Merrill Lynch, according to sources familiar with the proposed agreement. The deal would end the enormous perpetual payments and settle a lawsuit filed in federal court by the Silnas that demanded additional compensation from sources of television revenue that did not exist in 1976, including NBA TV, foreign broadcasting of games and League Pass, the service that lets fans watch out-of-market games.

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The “sort of” part of the deal is that the Silnas’ will continue to get some television revenue, some of it from the disputed sources named in their lawsuit, through a new partnership that is to be formed with the Nets, the Pacers, the Nuggets and the Spurs. Albeit, the Silnas can be bought out of their interest in the partnership in the future.

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$52.6 Million Scammed – Same Sad Story

Sixteen current and former NFL players are suing North Carolina-based bank BB&T for nearly $53 million in alleged investment losses in connection with now-banned financial adviser Jeff Rubin and his employees at Pro Sports Financial. The allegation state that Rubin and his employees at Pro Sports Financial opened accounts in their names and place tens of millions of dollars in dubious, unauthorized investments – including an illegal Alabama casino venture. Roughly $30 million of the losses are tied to the casino project, while another $30 million is tied to other investments, according to the players’ attorney Andrew Kagan of the Ft. Myers (Fla.)-based Kagan Law Firm. If substantiated, this lawsuit would represent the biggest reported financial loss by a group of players in the history of the NFL.

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With names like Jevon Kearse, Ray Lewis, Frank Gore, Santonio Holmes and Clinton Portis, the scammed enveloped some of the NFL’s greatest players. “It’s unbelievable that this could happen, and happen to so many people,” Kagan said. “Unfortunately, BB&T [formerly BankAtlantic], ignored plenty of red flags and allowed tens of millions of dollars to be transferred from clients’ accounts without their knowledge or permission. The sad thing is that by allowing this to happen, the bank has caused irreparable harm to the clients and ruined lives in the process. The money that was supposed to have supported these guys for the rest of their lives has been taken from them and many have been left with nothing. This is truly a tragic story.”   At the center of this saga is Jeff Rubin, who received a lifetime ban from working in the financial industry in March of 2012 by the Financial Industry Regulatory Authority (“FIRA”) for recommending an investment in an illegal gambling project which resulted in the loss of more than $40 million by 32 NFL players. Closely tied to this previous scandal was NFL super agent Drew Rosenhaus (Cut to scenes of Terrell Owens doing sit-ups in his driveway. However, Owens later filed suit against Rosenhaus for introducing him to Rubin and recommending that Owens hire Rubin to manage his finances. Owens says that accepting that recommendation ultimately cost him up to $6.5 million in investment losses). Rosenhaus and Jeff Rubin had an unusually close business relationship that spanned upwards of seven years. That relationship might have resulted in Rosenhaus breaching the fiduciary duties all agents who are certified by the NFLPA owe to their clients. The relationship has been scrutinized by the National Football League Players Association in part because of a series of issues surrounding Rubin, who is at the center of a bankruptcy filing for the failed casino that cost the players as much as $40 Million.  When asked to justify its stiff penalty the FIRA stated that “[t]his case demonstrates how broker misconduct can target high-income, inexperienced and vulnerable investors…Jeffrey Rubin took advantage of professional athletes who placed their trust in him.”   The NFLPA sent a memo to players in May – albeit two months after Rubin was banned by FINRA – announcing the ban and stating that Rubin was no longer registered in its financial adviser program. Fred Taylor, an alleged victim of the scammed, commented that he didn’t want “to talk about this because people almost try to put you in a shell of ‘the dumb jock’ and now you’re a victim. I was always afraid to open my mouth about it. But in my mind, at this point, I’m in a position where I’ve been taken advantage of and I want to shed some light on how these things can happen because I don’t want it to happen to any other guys. I can be one of those people to shed light on it and try to keep players from being taken advantage of in the future.”    
Taylor further commented that he thought that “a certain amount of responsibility should fall on the NFLPA’s shoulders for allowing a financial adviser to say, ‘Hey, I’m registered with the players’ union.’ Of course players put some stock in the [players association] registering financial advisers and it certainly creates a false sense of security. If they’re going to allow financial advisers to sport the registration through the [players association], they should do something on an on-going basis to [vet them]. They should go and see the pattern of investments advisers are putting players into so they can see what kind of risk level they’re exposing the players to. If they’re going to let these guys tout their registration with the [players association], the union should engage in some kind of risk analysis. Otherwise, eventually, they might find themselves involved in lawsuits.”

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  The following is a list of the athletes who are bringing suit against Rubin:

Alleged losses in players’ lawsuit against BB&T

Jevon Kearse – $7,958,000

Jamaal Anderson – $5,813,000

Lito Sheppard – $5,011,000

Santana Moss – $4,852,000

Ray Lewis – $3,778,000

Brandon Meriweather – $3,545,000

Jacob Bell – $3,339,000

Clinton Portis – $3,136,000

Gerard Warren – $3,000,000

Fred Taylor – $2,993,000

Derrick Gaffney – $2,295,000

Greg Jones – $2,006,000

Kenard Lang – $1,648,000

Frank Gore – $1,600,000

Santonio Holmes – $1,159,000

Tavares Gooden – $515,000

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Sigh…. This behavior and lack of due diligence appears to be par for the course these days in the athlete world. Athletes blinding trusting advisors who turn out to be predators that take advantage of the inherent trust bestowed upon them by their clients.  However, a large percentage of the responsibility still lies with the athlete. With any business venture there needs to be “checks and balances” that act as a safeguard against this type of fraudulent behavior. This lesson rings true not only with athletes, but with any business owner – enact safeguards to protect your assets and have a second set of eyes looking over ventures. One can only hope that Fred Taylor’s optimism becomes a reality, when he hoped that this newest saga would “shed light on and try to keep players from being taken advantage of in the future.”

Last Call…For A-Rod Antics

The game of baseball will forever be tainted by the use of performance enhancing drugs (“PEDs”) over the last 15-20 years. A handful of notable names rush to mind when thinking about MLB’s “Steroid Era”; Rafael Palmeiro wagging his finger in front of Congress, proclaiming his innocence, Mark McGwire evading Congressional questioning and repeating ad nauseum “I’m not here to talk about the past,” or Barry Bonds being indicted for perjuring himself to a grand jury regarding his alleged use of PEDs. But the most notorious of all may end up being Alex Rodriguez.  A-Rod refuses to go quietly into the twilight of his career. In spite of the numerous “sincere apologizes” for using PEDs, A-Rod continues year after year to spew his cavalier rationalization of his actions over network television and the sports back page.

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Rodriguez tested positive in 2009 for PEDs while playing for the Texas Rangers. He apologized and rationalized that he felt pressured to continue his high level of play and that he didn’t use prior to his stint in Texas or since then.  However, just a few years later his name was linked to the Biogenesis Clinic in South Florida, along with a number of other Major League players. After a lengthy investigation, Commissioner Bud Selig suspended all the players linked to Biogenesis with various suspension lengths. The majority of players received a 50-game suspension, the mandated suspension the first time a player tests positive. The investigation was believed to have uncovered especially damning evidence, as all of the named players accepted their suspensions without appealing, even though none actually tested positive. Ryan Braun’s 65-game suspension stole the early headlines, due to the history surrounding his positive test in 2011, which he successfully nullified with palsy and weak procedural chain of custody allegations. But when it came to A-Rod, Commissioner Selig took his time handing Rodriguez a 211-game suspension, viewed by many to be a death sentence for a player who turned 38 in July. True to his rationalizing media spotlight loving nature, A-Rod was the only player to appeal the suspension.  As a sign of Major League Baseball’s true disgust the antics of Rodriguez, Commissioner Selig suspended Rodriguez under his commissioner power, not for a positive PED test for 211 games. Commissioner Selig deemed Rodriguez’s intimidating and bullying conduct towards potential witnesses as detrimental to the game of baseball. Rodriguez, however, magically saw the entire ordeal from a different perspective.   In addition to the appeal process, Rodriguez filed a civil lawsuit in the New York State Supreme Court alleging that it was the goal of Commissioner Selig and Major League Baseball

“to improperly marshal evidence that they hope to use to destroy the reputation and career of Alex Rodriguez.”

The lawsuit against Selig and MLB alleges tortuous interference with A-Rod’s contract and that: (1) MLB is paying $5 million to Anthony Bosch, the proprietor of the now-defunct Biogenesis anti-aging clinic suspected to be a source of illegal PEDs for players, for his cooperation in the league’s case against Rodriguez; (2) MLB has repeatedly violated terms of a confidentiality agreement between the parties by leaking information damaging to Rodriguez to selected news outlets; (3) MLB investigators have bribed and intimidated witnesses and, on at least one occasion, impersonated police officers.

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Continuing on his “justice rampage” (aka bring-as-many-down-as-many-as-you-can) Rodriguez filed a second lawsuit against his Yankees’ team doctor and the New York Presbyterian/Columbia University Medical Center alleging misdiagnosis of his left hip injury in 2012. Wow. Overwhelming public sentiment has cast Rodriguez as a villain and these lawsuits have evoked a “rolling of the eyes” response from fans and detractors alike. Public sentiment aside, these are serious allegations that, if proven, constitute egregious conduct by Commissioner Selig and Major League Baseball. The public may be sick of Alex Rodriguez and may not believe a word he says, but the allegations cannot be outright dismissed. Rodriguez’s playing days are likely over, which many fans rejoice in, but Rodriguez has a chance to prove that the process by which MLB and Selig arrived at the 211-game suspension was biased.   The take away here is that even with a homerun case (pun intended), as Major League Baseball has categorized this investigation and its subsequent claims, an entity must still protect itself from the random “scorch earth” retaliatory response elicited from a desperate individual. A-Rod personifies this mentality with his misdirection of the real issues presented and a last gasp at the spotlight. The burden now falls to Major League Baseball and Commissioner Selig to validate their position, in the court of law and in the court of the controversy tired fans of baseball.  

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Take Me Out To The Ballgame, But You Better Not Hurt Me…

 

The earliest known mention of baseball in the United States was a 1791 Pittsfield Massachusetts ordinance banning the playing of the game within 80 yards of the town meeting house. However, it is now generally agreed upon that the most recognizable iteration of baseball came about in 1845, when Alexander Cartwright, a member of the New York Knickerbockers club, led the codification of a modern set of rules. Subsequently, the first officially recorded game took place in 1846, and the sport grew in popularity during the period of the Civil War. By the end of the war, journalists were already referring to baseball as “America’s Pastime.” So now that we have the backdrop to America’s Pastime, lets take a peak into its troubling present – A current landscape that is littered with lawsuits, errant foul ball and hotdogs? Yes that is correct, if you go to a baseball game and get clocked by an errant bat, ball or flying groceries you will have the pleasure of engaging in litigation (a.k.a. getting on the payroll) with your respective new “favorite” team. In a shocking opinion issued last month, the Idaho Supreme Court allowed a fan injured by a foul ball at a minor league baseball game to proceed with a negligence suit against the franchise.  Bud Rountree was at a Boise Hawks game in 2008 when a foul ball careened into foul territory and subsequently hit him in the face. According to reports, he had left his seat and was talking to someone, when he heard the crowd cheer and turned back toward the field just in time to get clocked in the eye. The resulting injury eventually cost him his eye.  Rountree subsequently sued the Hawks, a Single-A affiliate of the Chicago Cubs and five years later, after various procedural appeals, it turns out his case will go to a jury. Twelve people — not “The Baseball Rule”— will decide how much Rountree’s eye is worth.

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Specifically, the Idaho court refused to adopt what it called the “Baseball Rule,” in which most courts have held that baseball teams are generally not legally liable to fans for injuries caused by foul balls hit into the stands, so long as they have provided protective netting for the most dangerous seats in the stadium. The rule has several iterations, but basically holds that stadium owners can’t be held liable if fans are injured by thrown or batted balls. Frequently, ticket stubs to sporting events will be printed with a disclaimer saying the holder assumes all risks associated with ball-related injuries. However the Idaho court stated that, “[E]ven though the court may have the power to adopt a rule, such as the Baseball Rule … we find no compelling public policy requiring us to do so.” In a even more bizarre sporting event, a Missouri state appeals court is giving a Kansas man injured by a flying hot dog at a 2009 Royals game another proverbial “bite of the sausage.” According to reports the incident happened in between innings, when the Royal’s mascot, Sluggerrr, stands on a dugout roof and fires bubble-wrapped hot dogs into the stands with an air cannon. While an assistant reloads the cannon, Sluggerrr grabs a handful of foil-wrapped hot dogs and tosses them into the crowd. However, according to reports on the day in question, Sluggerrr did his best Lebron James impersonation and tried a behind-the-back throw but lost control of the sausage. John Coomer testified that he saw Sluggerrr make the behind-the-back motion, glanced up at the scoreboard and “a split second later” felt something hit him in the eye – allegedly causing him to suffer a detached retina. In applying a variation of the Baseball Rule, a jury ruled in March 2011 for the Royals, finding that being struck by flying sausages was an inherent risk that Coomer assumed by buying a ticket.  However, the Missouri Western District Court of Appeals said not so fast:

“The risk of being hit in the face by a hot dog is not a well-known incidental risk of attending a baseball game…Consequently, a plaintiff may not be said to have consented to, and voluntarily assumed, the risk by attending the game.”

The appeals court said the trial judge erred when he instructed jurors that if Coomer had accepted the risk, the Royals could not be held liable for his injuries.

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So what does all this mean for the dedicated lifetime fans of America’s pastime? Well what happens in this case could very well have implications beyond Bud Rountree and John Coomer.  The basic legal theory behind “The Baseball Rule” is the same one that many experts say could hinder lawsuits by the people injured at a variety of sporting events (i.e. the NASCAR race at Daytona Beach on February 24,2013). Take the time to imagine what would happen if The Baseball Rule fell out of universal favor. Mike Oz of Yahoo Sports creates/describes that depressing sports world best:

“Would stadiums and team owners move fans away from the action? Or play games in a glass bubble, separating players from fans? Would fans start suing for other, less serious injuries? Or even the mental anguish of a line drive whizzing past their face? Yes, these are purposely extreme scenarios, but make no mistake, the fear of litigation could be a paralyzing precedent.”

Rountree and Coomer still bear the burden of convincing a jury this was the respective baseball team’s fault and not their own, for taking his eyes off the action…(sorry couldn’t help it!) However, in the end one would believe that as with numerous other aspects of life, there are inherent dangers  akin to just getting out of bed in the morning and attempting to live one’s life. Just the same, next time you are at a sporting event flip your ticket over and read the warning wavier and remember to use your common sense. Because:
“On occasion, flying objects will leave the playing area and enter the stands. These objects are capable of causing injury. The stadium management asks that you keep your eyes on the field at all times.” (And your hands out of their pockets!)

Johnny Football Buttonhooks Through NCAA Loophole

I’ve written before about the NCAA’s amateur policy and how to fix it.  Now it’s been suggested that A&M’s Johnny Football may have found another solution:  sue somebody. Johnny Football, a.k.a. Johnny Manziel, is A&M’s popular quarterback and a recent Heisman trophy recipient.  But the NCAA’s strict amateur rules prevent either Manziel or A&M from capitalizing on his stature; A&M can sell copies of Manziel’s jersey and that’s about it.  An enterprising fan, Eric Vaughan, stepped into the gap and began selling t-shirts with the slogan “Keep Calm & Johnny Football.”

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Even though he’s unable to sell his own shirts, even the NCAA admits Manziel can protect his intellectual property.  To that end, Manziel had formed a company  (JMAN2, LLC) which owns the trademark to the “Johnny Football” nickname.  So when Vaughan began selling shirts, Manziel’s company fired off a “Seize and Desist” letter.  When Vaughan ignored the letter, Manziel filed suit to end the use of his nickname and recover damages.  Though the damages (if any) are as yet undetermined, the suit posed an unusual question:  can Manziel collect monetary damages without voiding his amateur status?  Is this any different than if Manziel sold the t-shirts himself? The NCAA answered that question with a resounding “yes,” clearing the way for Manziel to collect damages from Vaughan.  Commentators have eagerly seized on this as the death of the NCAA amateur model.  What’s to keep a booster from selling t-shirts on behalf of a player, and then turning over the profits in a suit?  The NCAA has rejected this claim, stating that player-booster collusion via such a fraudulent suit is no different than any other scheme to pay players.  It’s Vaughn’s unauthorized use, they argue, which differentiates Manziel’s suit from the proposed scheme. I hate to admit that the NCAA has a point, even if it’s a stupid one.  Yes, NCAA:  fraudulent schemes remain against the rules, and there’s no collusion between Manziel and Vaughan so there is a distinction.  But even the NCAA should realize that they’ve given the “ok” to a player profiting off his name during his amateur career.  The NCAA has made the kind of highly technical distinction which only makes sense in a courtroom.  Manziel’s nickname only has “value” to the extent that he can profit off it, and under the rules he shouldn’t be eligible to profit.  Unless he sues somebody who has made money off his name, apparently. That said, I think that the case of Johnny Football is going to be less of an issue than many anticipate.  Though Manziel is only a sophomore, he might have long since graduated by the time he sees a resolution.  Civil litigation moves at a  glacial pace, so absent a quick settlement it’s likely Manziel will have the NCAA monkey off his back by the time he’s able to recover from Vaughan. And I’m far from convinced we’re about to see a spate of suits from amateur athletes suing “businesses” run by boosters to facilitate fraudulent cash transfers.  It’s not that the scheme couldn’t conceivably work–Manziel’s pass suggests that it  could.  But why bother? It’s a lot of trouble to go about setting up a dummy corporation, sell t-shirts (with the permission of the athlete), and then orchestrate a fake lawsuit.  And it’s not a particularly attractive path when you consider the NCAA will be heavily monitoring any such transactions.  Court cases are all public record, and it’s only logical that the investigative arm of the NCAA will be watching for exactly this kind of suit.  It’s hard to hide in plain sight. If you’re already of a mind to pay off an athlete, it’s a lot easier to do so under the table and far from public view. So I don’t expect Johnny Manziel’s lawsuit to blow the lid off the NCAA’s amateur status conspiracy.  I’ll have to wait for the class action suit to do that. But I do think it’s highlighted just how hypocritical and myopic the NCAA has been with their amateur model.  Either these athletes have an interest in the value generated by their names, or they don’t, and the NCAA seems to want to have it both ways.