Bloomberg News

NBA Players Miss First Pay as Stern Says Season Jeopardized

November 15, 2011

(Adds Maurice Evans’ team in fourth paragraph.)

Nov. 15 (Bloomberg) -- National Basketball Association players won’t get their first paychecks of the season today. NBA Commissioner David Stern says they may not get the rest either, after they dissolved their union yesterday.

Under the labor agreement that expired 138 days ago, most of the league’s 450 or so players received 1/12th of their salaries on Nov. 15 of each season. With average salaries last season at $5.1 million, that’s a $425,000 payday.

The date arrived this year with no new deal after negotiations collapsed and the National Basketball Players Association said it was disbanding as a union to allow for antitrust lawsuits against the league.

“This goes far beyond paychecks,” Maurice Evans, a member of the union’s executive board who finished last season with the Washington Wizards, told reporters following what he said was a unanimous vote. The union will become a trade association. “It’s bigger than just basketball. It’s about guys who will play after us and it’s about guys who played before us.”

Stern, 69, responded to the union’s announcement by saying in a statement, “There will ultimately be a new collective bargaining agreement, but the 2011-12 season is now in jeopardy.”

The union, through Executive Director Billy Hunter, said talks on a contract had “completely broken down.” Without a union, players can sue the NBA and pursue a solution to the stalemate in the courts.

“That’s the best situation where players can get their due process,” Hunter, 69, said yesterday at a news conference in New York.

‘Sham,’ ‘Charade’

Stern, whose league has annual revenue of about $4.3 billion, called the union’s decision to become a trade association a “sham” and “charade.”

“The franchises will be here and they’re not going away,” Stern told ESPN. “This is going to wind up being a very unwise position.”

The NBA season was to start Nov. 1. So far, Stern has canceled games through the end of this month and said the league needs 30 days after an agreement to resume regular-season play, allowing for contract signings and training camp.

The only other time labor unrest forced the NBA to lose games was in 1998-99, when the season was shortened to 50 games by a lockout. The two sides agreed on a contract in early January 1999, signed the agreement on Jan. 20 and began play on Feb. 5.

The NBA’s 30 teams generated more than $1.1 billion in gate receipts during the 2010-11 campaign, according to the annual postseason audit conducted by the league and the players’ union.

Knicks’ Gate

For example, the New York Knicks generate at least $1 million in ticket revenue a game, according to former Madison Square Garden Inc. President Bob Gutkowski. That’s about $45 million over the course of a season for the Knicks, excluding playoff games and the team’s effect on MSG Network advertising.

“The disruption turns all of your financing upside down,” David Carter, executive director of the Sports Business Institute at the University of Southern California’s Marshall School of Business, said in a telephone interview. “Not just owners making debt payments, but things like venue-management companies deciding whether to lay off ushers and concessionaires. The ripple effect and the negative public relations throughout the NBA community are going to be substantial.”

Union President Derek Fisher of the Los Angeles Lakers said the players are willing to sacrifice to ensure a fair agreement is reached.

At Stake

“A lot of individual players have a lot of things personally at stake in terms of their careers and where they stand,” Fisher said at a news conference. “We all feel it’s important that we not only try to get a deal done for today but for the body of NBA players that will come into this league over the next decade and beyond.”

The players will be represented by Jeff Kessler, who had served as the union’s chief outside counsel, and David Boies, who represented Vice President Al Gore in the 2000 U.S. presidential election and late New York Yankees owner George Steinbrenner in a suit against Major League Baseball. Boies also represented National Football League owners in their antitrust case against players this year.

“We’re in agreement that this lockout is unlawful,” Kessler told reporters, declining via e-mail to identify which players would be the named as plaintiffs in the lawsuit. “That’s a pretty powerful statement to have two former adversaries on this issue now being in complete agreement.”

Lawsuit Tomorrow

Hunter, speaking after a meeting of player representatives, said he expects a lawsuit to be filed by tomorrow. He said his group wasn’t prepared to accept a take-it-or-leave-it offer from owners that included a 50-50 revenue split and stricter controls on player movement. Stern had said his next offer would call for players to receive no more than 47 percent of revenue.

The union’s disclaiming of interest, as the strategy is known, strips the NBA of antitrust protection that comes with a collective bargaining agreement and places the fight over how to divide the league’s annual revenue before the courts.

Kessler and Boies said that in a departure from the NFL players’ actions, NBA players are not going to seek an injunction to end the lockout but could sue to receive the triple damages that would be included with a successful antitrust claim.

Triple Damages

“If you look at it from the players’ standpoint, collective bargaining has totally failed, so rather than exercise their labor-law rights to futility, they’ve decided to free up all players to assert their antitrust rights to triple damages,” Kessler said. “The players think that is the best protection for all NBA players.”

The lead plaintiffs in the NFL case were Super Bowl-winning quarterbacks Tom Brady, Peyton Manning and Drew Brees.

“Every day you are continuing to violate antitrust laws you are increasing the level of damage, and this will presumably become a bargaining chip,” Paul Haagen, a professor of sports and contract law at Duke University in Durham, North Carolina, said in a telephone interview.

Stern had said that if an agreement was reached this week a 72-game schedule could be played. The NBA usually plays 82 games.

“We knew this was coming,” Stern said on ESPN, noting that league lawyers in August filed a pre-emptive lawsuit in New York, asking the court to rule that the lockout doesn’t violate antitrust law. The union this month asked the judge to throw out the case. No ruling has been made.

NLRB Charge

The league also filed an unfair labor practice charge with the National Labor Relations Board, asserting that players were using the threat of decertification as a negotiating tool. No ruling has been made. The players, meantime, filed an unfair labor charge of their own, accusing the owners of failing to bargain in good faith.

Stern and Hunter, while recognizing that a labor standoff risks the goodwill developed from a postseason that produced record television ratings, were unable to bridge the gap that separates them.

Stern says teams lost a combined $300 million last season, when players received 57 percent of what’s called basketball- related income. While the players were willing to accept close to 50 percent, other issues related to free agency and contract length were too onerous for the players to accept, Hunter said.

Conciliatory Owners

Owners of the big-market, large-revenue teams such as the Knicks and Lakers, as well as the Miami Heat, were among the more conciliatory during negotiations. Among the hard-line owners were Phoenix’s Robert Sarver and San Antonio’s Peter Holt, who was chairman of the league’s labor relations committee. Miami’s ability to sign LeBron James and Chris Bosh last year is a big reason why the smaller-market owners want stricter rules governing player movement.

Hunter has said since negotiations began that it was the league’s intent to break the union. Stern and Deputy Commissioner Adam Silver said owners needed a contract that would enable well-managed teams to not only compete for a championship but make money, too.

“No one’s happy about it but you have to believe there were a handful of owners who prefer fixing the business model and sacrificing the season to simply acquiescing and continuing their financial pain,” Carter said.

--With assistance from Aaron Kuriloff in New York. Editors: Michael Sillup, Dex McLuskey.

To contact the reporters on this story: Mason Levinson in New York at mlevinson@bloomberg.net; Scott Soshnick in New York at ssoshnick@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net


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