Sports Administration Midterm

Chapter 5
Legal Principles Applied to Sport Management

1

Introduction
Define sport law
Application of existing laws to the sport setting
Some new laws have been enacted specifically for the sport industry (e.g., SPARTA of 2004)
When a dispute arises over interpretation of a rule or regulation, sport lawyers often represent both the governing body/association and the participant(s)
Involvement of sport lawyers occurs because sport organizations hire lawyers to draft their rules and regulations; thus, lawyers are needed to interpret them

2

History
(1 of 2)
Tort law cases involving participation in sports and games date from early evolution of tort law (1600s)
Many of earliest U.S. lawsuits in sport industry involve professional baseball (first pro sport league)
Players challenged owners on reserve system that prevented players from free agency
Owners challenged each other on business of sports
First sport law course was offered in 1972 at Boston College School
Many sport management programs include Sport class in curriculum

3

History
(2 of 2)
Considerable growth over last 40 years caused by the following:
Legal profession is more specialized
Amount of litigation and diversity of cases in sport industry have increased as more people rely on the courts to resolve disputes
Many athletic associations have adopted own governance systems with rules, regulations, and procedures that are based on the U.S. legal system (e.g., administrative law)
Skills in legal education are beneficial to many positions in sport industry (GM, commissioner, etc.)

4

Key Concepts: Risk Management
Risk management: Developing management strategy to maintain greater control over legal uncertainty
Prevention: Keeping problems from arising
Intervention: Having action plan to follow when problems do occur
DIM Process:
Develop, Implement, and Manage risk
Include all employees in the three-stage process

5

Key Concepts: Judicial Review
(1 of 2)
Occurs when plaintiff challenges a rule in sport organization and court determines whether it should review the sport organization’s decision
Historically, courts decline to overturn the rules of voluntary athletic organizations unless certain conditions exist
Plaintiff’s interest is to keep rule from applying or to force athletic association to apply it differently
Plaintiffs seek injunction:
An order from the court to do or not do particular action

6

Key Concepts: Judicial Review
(2 of 2)
Court will intervene if athletic organization:
Violates/misapplies its own rule
Violates a statute
Violates public policy
Violates constitutional law and it is a state actor
Acts as arbitrator or in a capricious manner
Exceeds the scope of its authority

7

Key Concepts: Tort Liability
Tort: An injury or wrong suffered as the result of another’s improper conduct
Tort law provides monetary damages to compensate an injured person (plaintiff)
Intentional torts occur when a person purposely causes harm to another or engages in activity that is substantially certain to cause harm
Gross negligence occurs when defendant acts recklessly and fails to realize harm caused
Negligence is an unintentional tort and is the most common tort that sport managers encounter

8

Key Concepts: Tort Liability Negligence
Sport managers are negligent when:
They commit an act/omission causing injury to a person to whom they owe a duty of care
Negligence imposes a duty to refrain from careless acts
Plaintiff must show that sport manager (defendant) owed plaintiff a duty of care and breached it
A duty of care arises from a:
Relationship inherent in the situation
Voluntary assumption of the duty of care
Duty mandated by law

9

Key Concepts: Vicarious Liability
Allows plaintiff to sue superior for the negligent acts of a subordinate
Employer need not be negligent to be liable
Three defenses available
Employee was not negligent
Employee was not acting within scope of employment
Employee was an independent contractor

10

Key Concepts: Agency
(1 of 3)
Agency describes a relationship in which one party, the agent, agrees to act for and under the direction of another, the principal
Purpose of agency law is to establish duties that principals and agents owe each other
Agency law is an important component of player representation industry

Key Concepts: Agency
(2 of 3)
Fiduciary duties inherent in principal–agent relationship
Principal’s fiduciary duties:
To comply with a contract if one exists
To compensate the agent for his or her service
To reimburse the agent for any expenses incurred while acting on the principal’s behalf

12

Key Concepts: Agency
(3 of 3)
Agent’s fiduciary duties:
To obey
To remain loyal (disclose conflicts of interest)
To exercise reasonable care
To notify
To account (for information and finances on a reasonable basis)

13

Key Concepts: Contract
(1 of 2)
Contract: Written or oral agreement between two or more parties; creates legal obligation to fulfill the promises
Sport managers negotiate and enter into contracts regularly with or without legal advice
A valid contract must have the following elements:
Offer and acceptance (mutual assent)
Consideration (value)
Legality (subject matter legal and not against public policy)
Capacity (disaffirm at any time)

14

Figure 5-1 Contract Formation

Key Concepts: Contract
(2 of 2)
Breach: Contract “promise” is broken
Full (entire contract) or partial (some provisions)
Remedy usually money, can be injunction
Waiver and releases: Contract in which participant gives up right to sue
Waiver signed before participation in activity
Release signed after participation in activity
Legality and enforcement varies in different jurisdictions
Sometimes ruled invalid per public policy

16

Key Concepts: Constitutional
Developed from precedents established by courts applying language of U.S. Constitution and state constitutions to actions and policies of governmental entities
Four constitutional challenges frequently arise in sports
Due process
Equal protection
Unreasonable search and seizure
Invasion of privacy

Key Concepts: Constitutional
State Action
U.S. Constitution and state constitutions do not apply to private entities
Exception
In some cases, a private entity is so enmeshed with the public that courts apply constitution to private entity
When a private entity meets this standard, it is called a state actor

18

Key Concepts: Constitutional
Due Process: 5th and 14th Amendments
The right to notice and a hearing before life, liberty, or property may be taken away
Athletic associations may have an impact on liberty and property interests protected by due process clauses in Fifth and Fourteenth Amendments
Right to play, right to be free from stigma, right to work and earn salary, and so forth

19

Key Concepts: Constitutional
Equal Protection: 14th Amendment
No person shall be discriminated against unless a constitutionally permissible reason for discrimination exists
Standards of review for discrimination
Strict scrutiny: On the basis of race, religion, or national origin
Legitimate interest: On the basis of gender; discrimination can occur only if legitimate interest for doing so exists
Rational basis: Discrimination on any other status or classification

20

Key Concepts: Constitutional
Search and Seizure: 4th Amendment
People have the right “to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures”
Sport example: The act of taking the athlete’s urine or blood for drug testing
Several courts determined that private athletic associations (such as NCAA) or public high school drug testing programs do not violate state constitutional rights

21

Key Concepts: Constitutional
Invasion of Privacy
There is no specific amendment for invasion of privacy; Court has implied one from Constitution
Plaintiff must establish that invasion is substantial and in area for which there is an expectation of privacy
Sport cases most often arise as challenges to drug testing programs
U.S. Supreme Court has held drug testing of high school athletes is not invasion of privacy (1995)
Drug testing is usually addressed in collective bargaining

22

Key Concepts: Title IX
Comprehensive statute aimed at eliminating sex discrimination in educational institutions that receive federal funding
In athletics, cases focus on three areas:
Proportionate scholarship distribution
Equal treatment, benefits, and opportunities given in specific program areas
Degree to which educational institution has equally and effectively accommodated the interests and abilities of male and female students

Key Concepts: Antitrust
Sherman Antitrust Act (1890) goal
Promote competition in the free market, break up business trusts and monopolies, and prohibit anticompetitive activity by businesses
Application of antitrust laws to leagues left indelible mark on structure and nature of labor–management relations
There is just one major professional league for each sport; thus, their domination of the market gets challenged as monopolies violating the Sherman Act

24

Key Concepts: Antitrust
Exemptions
(1 of 2)
All professional sport leagues and tours (except MLB) are subject to antitrust rules
1922 Supreme Court Federal Baseball decision granted MLB antitrust exemption
Curt Flood Act (1998): Legislative response to Federal Baseball
Allows MLB players to sue their employers under the Sherman Act
Exempts the business of baseball (including the minor leagues)

25

Key Concepts: Antitrust
Exemptions
(1 of 2)
Labor exemption
Restrictive practices are exempt from antitrust law when those practices have been negotiated in a collective bargaining agreement if:
Party to CBA
Mandatory subject for bargaining
Arm’s length bargaining
Sport Broadcasting Act of 1961 exempts leagues from antitrust laws when pooling rights to enter into national broadcasting rights

26

Key Concepts: Antitrust
College Athletics
Commercialization of college athletics has spawned antitrust challenges to NCAA rules
To date, courts have found that eligibility rules are noncommercial and therefore not subject to antitrust law
Rules such as coaches’ earnings and television contracts have been deemed commercial and are subject to antitrust laws

27

Key Concepts: Antitrust
O’Bannon v. NCAA
Former UCLA men’s basketball player Ed O’Bannon and 20 other plaintiffs filed a case against the NCAA in regards to amateurism rules and a violation of antitrust laws
Players had issue with lack of compensation over their images, names, and likeness
Case has moved through the court system, even appealing to the supreme court
It is still unclear if the NCAA will be required to compensate athletes for their names and likeness
Changes have been made since these rulings and they tend to favor the Power 5 conferences due to their financial advantages

28

Key Concepts:
Labor and Employment s
National Labor Relations Act (1935)
Establishes procedures for union certification and decertification and rights and obligations of union and management once a union is in place
Areas of the sport industry where unions occur are facility management and professional sport
Unions can be found in interscholastic athletics, but state labor laws apply

29

Key Concepts:
Labor and Employment s
National Labor Relations Act (1935)
Players associations differ from unions in other industries
Turnover rate for sport union members is high because of short careers of athletes
Forces players associations to constantly spread their message to new members throughout North America
Unions struggle to keep superstars and players on bench equally satisfied
Management in professional sport favors unions to achieve the labor exemption for restrictive practices

Key Concepts:
Labor and Employment s
Equal Pay Act (1963)
(1 of 2)
Prohibits employer from paying one employee less than another on basis of sex when performing jobs of equal skill, effort, and responsibility
Only applies to sex-based discrimination on basis of compensation

Key Concepts:
Labor and Employment s
Equal Pay Act (1963)
(2 of 2)
Four defenses available when disparity is caused by:
Seniority system
Merit system being followed in good faith
System measuring pay on the basis of quality/quantity of production
Factor other than sex

Key Concepts:
Labor and Employment s
Title VII of the Civil Rights Act of 1964
(1 of 2)
Federal law prohibiting discrimination in many settings, including housing, education, and public accommodations
Covers employers with 15 or more employees, but exempts Native American tribes and private clubs
Protects all classes of people from dissimilar treatment on the basis of race, color, national origin, sex, or religion

Key Concepts:
Labor and Employment s
Title VII of the Civil Rights Act of 1964
(2 of 2)
Defense where being a member of a certain class is a bona fide occupational qualification (BFOQ)
Race and color can never be BFOQs
Examples:
Hiring male resident directors to monitor dorms at all-male school
Hiring a Catholic to teach religion at a Catholic school

Key Concepts:
Labor and Employment s
Age Discrimination in Employment Act (1967)
Prohibits employment discrimination on the basis of age
Applies to employers engaged in commerce who hire more than 20 workers for 20 or more calendar weeks, as well as labor unions and state and federal governments
Employer can defend a claim by proving decision was made because of reasonable factors other than age

35

Key Concepts:
Labor and Employment s Americans with Disabilities Act (1990)
Prohibits employment discrimination on the basis of disability
Applicant or employee must be able to perform all essential functions of the job
Employer must assess responsibilities required for job and assess an individual’s ability to do them
ADA extends beyond employment to places of public accommodation—common in sports
Places of public accommodation: Stadiums, arenas, golf courses, health clubs, YMCAs

36

Key Concepts: Intellectual Property
Trademark
Word, name, or symbol used by a manufacturer or merchant to identify and distinguish its goods from those manufactured and sold by others
Service mark
Used to identify the source of an intangible service (e.g., professional sport franchises’ marks)
Lanham Act
Governs trademarks and service marks, gives protection to the owner of a name or logo, keeps others from selling goods as the goods of the original source

Key Skills
By practicing problem solving, sport managers can improve their logical and analytical reasoning skills
Analysis of case and statutory law will lead to more persuasive and clear written and oral communication and build skills

38

Putting Skills to Practice
Managers can effectively manage legal problems by knowing and understanding law
By knowing legal pitfalls, managers can avoid, prevent, or reduce many kinds of problems
A well-written and well-administered risk management plan can help a sport manager avoid legal liability
Analysis should include a list of issues to consider

Current Issues: Olympics
Growing number of challenges over rules and regulations imposed on participants
Ambush marketing occurs when an organization misappropriates trademarks, logos, and goodwill of events or organization (e.g., Subway in 2010 Vancouver)

42

Future Issues: Collegiate Sports
Challenges may arise regarding NCAA amateurism rules
Fallout from O’Bannon v. NCAA
Student athlete regulation of social media
Key legal issues
Restrictions on athletes’ involvement with sport agents
Restrictions on athletes’ abilities to market themselves
Protection and licensing of collegiate trademarks and logos
Gender equity

43

Future Issues: Professional Sports
League structure and collective bargaining negotiations
Labor peace in pro sport
Drug testing (BALCO)
Individual sports
Team sports

44

Future Issues:
Governmental Scrutiny
Performance-enhancing drug use
Amateur and professional sports
Possibility of taxation of college athletics
Unrelated business income
Commercialization of Division I college athletics
Possibility of BCS antitrust violation
Impact of online gambling websites