In review: sports governance and dispute resolution in USA – Lexology

Review your content’s performance and reach.
Become your target audience’s go-to resource for today’s hottest topics.
Understand your clients’ strategies and the most pressing issues they are facing.
Keep a step ahead of your key competitors and benchmark against them.
add to folder:
Questions? Please contact [email protected]

All questions
Organisation of sports clubs and sports governing bodies
Professional and collegiate sports leagues continue to evolve in 2022, after a seismic 2021 that saw major changes to both the playing of matches – as colleges and leagues navigated the covid-19 epidemic – and the legal regimes governing the sports world. More than anything else, 2022 has been a year of transition towards a ‘new normal’, both on and off the field.
The three major professional sports in the United States (the National Football League (NFL), Major League Baseball (MLB) and National Basketball Association (NBA)) are each organised into a league that coordinates activity between separate franchises, with each franchise under separate ownership.2 These leagues have rules limiting the number of partners who can own a franchise, and requiring one individual or family to have sufficient ownership to be the decision-maker.3 While the franchises themselves are typically organised as partnerships, some are themselves owned by corporations, which may be publicly traded.4 Some leagues, such as the NBA and MLB, are beginning to allow limited private equity investments into the ownership of franchises.5 Major League Soccer (MLS) notably instead consists of a single entity that owns and operates each of the separate teams.6
Many amateur sports leagues are organised as tax-exempt non-profits, whether corporations or partnerships.7 Several professional sports leagues, including the National Hockey League (NHL) and the Professional Golfers’ Association, are also organised as non-profits under Section 501(c)(6) of the Internal Revenue Code, which covers trade associations.8 The NFL and MLB each fairly recently renounced this status.9 College athletic organisations (conferences) are also organised as non-profits, even though many conferences have signed licensing deals worth billions of dollars.10
Sports organisations follow the same general rules for liability as other organisations. If organised as partnerships, the partners are held jointly and severally liable for any illegal actions by the other partners, though this rule does not include limited partners who only have a monetary stake.11 Investors in a corporation are only liable to the extent of their investment.12 Federal law does not single out owners or managers of sports leagues for special liability.
The dispute resolution system
Dispute resolution in professional sports is governed by various contracts: the constitutions of the leagues, the collective bargaining agreements (CBAs) between the player unions and the owners, and the standard player contracts (SPCs) signed by players.13
The major sports leagues have different dispute resolution rules that are each the result of the collective bargaining negotiation process. For example, the NFL’s personal conduct policy forbids both criminal conduct and behaviour that undermines or risks the NFL’s integrity or reputation, stating players are held to a ‘higher standard’.14 Discipline is automatic upon ‘disposition of a criminal proceeding’, but if there is no criminal disposition, the commissioner must conduct an investigation, notify the player and allow a response.15 The policy specifies that violations involving violence call for an automatic suspension from play, and that two such violations will result in permanent banishment from the league.16 Otherwise, the nature of the discipline is determined by a neutral disciplinary officer agreed upon by both parties, although either the player or the NFL can appeal that decision.17 The NBA CBA provides highly detailed rules for handling suspensions of fewer, or more, than 12 games.18 Players may appeal suspensions of fewer than 12 games and fines of less than US$50,000 only if they would cause a detrimental financial impact, but they may appeal longer suspensions and larger fines by right.19
The constitutions and CBAs of each league provide detailed guidance for when arbitration is available.20 Occasionally, these arbitrations have overturned commissioners’ decisions, including, in the MLB, reinstatement of players the commissioner had banned for life.21
Judicial review of disciplinary matters is rare, though it is not impossible. The parties to arbitration may appeal the decision to federal court under the Labour Management Relations Act (LMRA)22 and Federal Arbitration Act.23 This review is extremely deferential, as the courts have no authority to overturn an arbitration on the merits, unless the arbitrator’s decision was baseless or dishonest in light of the language of the disputed contract.24 NFL quarterback Tom Brady of the New England Patriots lost under this standard when he appealed his suspension for deflating footballs, a scandal known as ‘Deflategate’, to federal court under the LMRA. Brady argued there were numerous problems with the arbitration, including lack of notice under the CBA, but the Second Circuit upheld the suspension because ‘this case is not an exceptional one that warrants vacatur’ given the deferential standard.25
add to folder:
If you would like to learn how Lexology can drive your content marketing strategy forward, please email [email protected].
© Copyright 2006 – 2022 Law Business Research


Leave a Comment