Law students look at labor issues in hockey and other pro sports
The National Hockey League has been embroiled in a player lockout since September 16, 2004, and arenas remain dark at press time; the 2004-2005 NHL season appears to be entirely lost.
In October, Duke law and business students took a close look at the sources of, and possible solutions to, labor strife in the NHL, as well as other professional sports, convening a panel of attorneys with extensive experience in managing and representing teams, leagues, and players. The event was organized by 1L Branch Furtado and 2L Teddy Schwarzman of Duke Law’s Sports and Entertainment Law Society, and co-sponsored by that group, the Business Law Society, and Fuqua’s Sports and Entertainment Business Association. Professor Paul Haagen served as moderator, calling the event a “remarkable effort” by students.
“As a member of the Law School faculty, I’m delighted to see what the students have done.”
James Lites, president of the NHL’s Dallas Stars
and a member of the NHL Board of Governors, characterized the lockout as purely economic.
“We have a business model that’s in a mess. In 1994, when the existing labor agreement was negotiated, we negotiated what we thought was the most restrictive ‘non-cap’ system [we could]. Team revenues had good growth, but at the same time, player salaries grew from 60 percent of revenues in 1994, to over 74 percent now. For every new dollar the League created over the course of this collective bargaining agreement, 98 cents went to players.” There have been four team bankruptcies in the course of the agreement, Lites added.
“That 98 cents the players got they didn’t steal from the owners,” countered Richard Berthelson, general counsel for the National Football League Players Association (NFLPA). “Individual owners, in individual clubs, made a conscious decision to pay that 98 cents. The players didn’t create that situation, but now the NHL is asking players to keep owners in line [by taking salary cuts, among other things.]” Claiming to have seen “all manner of labor confrontation” in his first 20 years with the NFLPA, he observed that he’s been part of an effective and peaceful “partnership” between NFL players and owners for the last 10.
“Every negotiation … is about agreeing on a fair division of dollars.”
The players “will need to take less” in any event,” replied Lites. “There is a discrepancy between where we are and where we need to be.” He was careful to avoid commenting directly on labor negotiations between the NHL and its players due to a league-imposed “gag” order.
James P. Cain, a partner with Kilpatrick Stockton in Raleigh, and a former president and chief operating officer of the NHL’s Carolina Hurricanes, cited salary caps as “the only way to fix the NHL.”
“It has to be a ‘hard cap’–a certain cap that will give future owners certain knowledge of what their expenses and what their revenues, their potential for stability as a franchise can be.”
From an economic perspective, a “hard cap” is not a disincentive to owners and managers to manage their teams well, observed panelist Jeffrey Mishkin. A partner at Skadden, Arps, Slate, Meagher & Flom with a wide range of sports clients, Mishkin spent seven years as executive vice president and chief legal officer of the National Basketball Association.
“The goal isn’t just to make more money, but to win. [Hard caps] can be a way of making sure each team starts with a certain number of ‘chips,’ but comes out winning.”
Lites expressed great admiration for the way the NFL has achieved labor peace and commercial success, engaging players in creating and preserving a revenue stream by, for instance, wearing standard equipment in order to ensure sponsor satisfaction. Hockey players, by contrast, do not wear standard helmets. He also lamented the sport’s relatively low television revenues.
“Hockey is not compelling on T.V. The cameras are up in the stands.”
Cain’s wish list for hockey included widespread acceptance of high-definition television for just that reason: “You can see the puck.”
“We also have to create some heros. We have to get our [ticket] prices down. And we have to treat our teams as community assets.”