The law of real estate (property) is also key in sports—think about all that goes into planning and building a venue like the new Yankee Stadium or Cowboys Stadium; each of these cost upwards of $1 billion to construct. The manner in which the law of real estate pertains to sports, however, is not that much different from ordinary real estate law. I don’t wanna say that real estate is boring, because it’s oftentimes anything but; it’s just not something that I feel needs to be addressed in this blog.

Another area of law that is often overlooked in sports is antitrust, which has beleaguered professional athletes for over 100 years. So what is antitrust? The easiest way to describe it is that it functions as the law of competition—within the marketplace, that is. Antitrust laws, such as the Sherman Act prevent restraints on trade, by making it unlawful for companies to collude or conspire to fix prices of goods.  So what does this have to do with sports? Collective bargaining agreements (CBAs).

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The players’ associations are labor unions; their primary function is to organize and to coordinate the players’ efforts in dealing collectively with the owners. CBAs are designed to restrain trade in the labor market—that’s their intended purpose! So why is it okay for labor unions to organize, to maximize employee wages, but it’s not okay for manufacturers to do that with widgets? The short answer is, Labor Law. More specifically, the the Clayton Act (1914) and the National Labor Relations Act (1935), which the U.S. Supreme Court has interpreted to exempt collective bargaining and labor disputes from antitrust laws. This is referred to as the statutory exemption. So how does this apply in the real world? Remember Maurice Clarett?

As a college sophomore, Clarett sued the NFL, alleging that the league’s age/class requirement was anti-competitive, and an unlawful restraint on trade. Alan Milstein, Clarett’s attorney at the time, told the NY Times: ”I see Maurice’s case as a league trying to make certain players, young players, who are often poor, wait on earning a living, while the NFL and colleges, either directly or indirectly, make millions off of them.” U.S. District Judge Shira Scheindlin agreed, issuing this 71-page order that granted Clarett the right to enter the 2004 NFL Draft.

 

The NFL appealed the decision to the 2nd Circuit, which, in an opinion by then-Judge Sonia Sotomayor, reversed, finding that the NFL’s eligibility rule fell within the scope of the “nonstatutory exemption” to the antitrust laws, regardless of the fact that the owners and players’ association did not collectively bargain over the rule (2d Cir. decision pdf). Clarett’s lawyers petitioned the U.S. Supreme Court to stay the the 2nd Circuit’s decision, but the Court declined to hear the case (SCOTUS, cert. denied pdf). And we all remember what happened next…

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But Maurice Clarett was, by no means, the first athlete to take the NFL—or any other sports league, for that matter—to the U.S. Supreme Court. In 1972, it was St. Louis Cardinals center-fielder Curt Flood, who sued the commissioner of Major League Baseball, challenging the reserve clause in his contract. Twenty years prior, it was NY Yankees’ minor-league pitcher George Earl Toolson. And thirty years before that, in 1922, Justice Oliver Wendell Holmes wrote Federal Baseball, holding that professional baseball was not “interstate commerce.” With a stroke of the pen, however, Congress effectively erased all of those holdings when it passed the Curt Flood Act of 1997, which removed baseball’s antitrust exemption. This law also paved the way for the sharp rise in MLB player salaries over the past 15 years.

Given the history of baseball’s antitrust exemption, and the fact that it was eventually repealed, it’s probably only a matter of time before we see similar changes to the other professional sports leagues as well, especially in light of all the attention that the NFL is getting this year with regards to the impending expiration of its current CBA.

Next: Part III, IP