CHAPTER 6 CON TRACTS AN D SPORTS: EN FORCEMEN T I. Introduction

Chapter 6 introduces the students to various aspects of sports contract enforcement. Included among the messages that this chapter hopes to send are the following: 1) Affirmative injunctions are unavailable in a personal services contract, due to problems of involuntary servitude and difficulty of administration. Students should be reminded that if an athlete were compelled to play for a particular team it would be impossible to assert whether subsequent poor performance is due to insufficient skill or contempt for the court's order; 2) Due to the difficulty of determining damages with any reasonable certainty there is seldom an adequate remedy at law when a player jumps a contract to sign a contract to play for another team. For this reason, and the rationale explained above, the jilted team's choice of remedy against the player is limited to an injunction enforcing the negative covenant. In seeking such relief, the plaintiff will have to establish the existence of a valid contract and satisfy the traditional standards of equity. See N&Q 3 on page 209. The critical overarching inquiries in these cases center on the reasonableness of the negative covenant and the uniqueness of the athlete; 3) Because the relief sought is equitable in nature, plaintiffs must come to court with clean hands. Given the fierce bidding wars for players' services and the tenuous nature of early player contracts, player raiding was not uncommon, and clubs who were "raider- turned-victim" often found themselves charged with being in pari delicto when they sought to enforce their negative covenants. II. The Negative Injunction

Case: Central New York , Inc. v. Barnett

Primary reason for inclusion: To present interpretations of the term "unique" as applied to a professional athlete and to provide an overview of the prerequisites to injunctive relief in the typical contract-jumping scenario. Points to emphasize:

1) Defendant Dick Barnett's standard player contract explicitly identified him as a unique player. Query: Should that boilerplate language end the inquiry into the player's uniqueness and virtually preempt any discussion of the irreparable injury issues? 2) The portions of the transcript where the parties were falling over themselves trying to show (from the plaintiff's standpoint) that the player is irreplaceable and (from the defendant's standpoint) that the player is possessing of only the most ordinary skills are both humorous and sad. In all likelihood, the transparency of such remonstrations should be obvious to any fact finder. 3) The modern definition of uniqueness seems to be based upon considerations of how difficult it is to replace the defendant player. Yet, there is language suggesting that all professional basketball players are unique. Again, if this definition of uniqueness were to be employed, then the irreparable injury component of the equitable equation would seem to be eviscerated in professional sports contract-jumping cases. Notes and Questions:

N&Qs 1 through 4 summarize the variables to be considered in injunction cases such as Barnett. They also make clear that arguments attacking the standard player contracts on grounds of lack of mutuality are dated and ineffectual. Again, these notes will have more meaning if discussed with reference to the appropriate portions of Chapter 4. Also, the standard player contract should be addressed, particularly the uniqueness language in Paragraph 9. N&Q 5 requires students to visit other portions of the standard player contract and familiarize themselves with option and renewal clauses, as well as the circumstances surrounding a club's exercise of an option. Recent collective bargaining agreements have called for the removal of option clauses as part of the standard player contract language. N&Q 6 explores the balancing of equities and asks whether the result may have been different if Barnett were a player of considerably fewer talents. The answer is perhaps yes for a few reasons. First, the uniqueness component, barring an automatic finding of uniqueness predicated on Paragraph 9, may not have been satisfied. Second, balancing the respective hardships, a court may have indulged the player's attempt to better himself, especially because the plaintiff-club's competitive advantage would not have been severely compromised. N&Q 7 considers alternative remedies that the plaintiff could have pursued. It bears mention here that in cases such as Barnett the plaintiff may have causes of action grounded in both tort and contract law. This could be relevant for several reasons, including the preservation of a delayed lawsuit where there may be different statute of limitations periods. At this stage, it is recommended that a brief discussion of tortious interference with contractual relationships be entertained; however, full-blown examination of this topic should probably be left for subsequent classes. N&Qs 8 through 11 focus upon the competitors' injury and the balancing of hardships as parts of the injunction calculus. This topic can provoke a lively classroom debate in the sense that one side may argue forcefully that enforcement of the negative covenant by injunction is the only relief available against a player who repudiates his or her contract with impunity. They would contend that the degree of competitive injury or the weighing of respective adverse consequences should be irrelevant to the appropriateness of injunctive relief. The other side will argue that in some circumstances there is not a "no harm-no foul" situation. Thus, no injunction is needed if the individual player and/or the new club/league are well-served by the contract abandonment and the jilted club is really none the worse for wear. N&Q 12 presents the general view that there is no adequate remedy at law in these types of cases; yet, the possibility of a damage award cannot be discounted. The students should be asked to develop their own theories of monetary recovery and to assess the viability of the theories posited in N&Q 12, itself. Cases: Boxing, Inc. v. Shavers

Primary reason for inclusion: To present an injunction case in a non-team sport context as well as to consider the reasonableness of the negative covenant and its impact upon the uniqueness question.

2 Points to emphasize:

1) The court was unwilling to disturb the finding of the boxing commission -- although it acknowledged that it had the authority to do so. This deference to the expertise of a lower, non-judicial authority is a recurrent theme in the text and sports jurisprudence generally. See Chapters 3, 13, 14, 15, and 16. 2) The parties' credibility had a great deal to do with the court's ultimate conclusions. Here, students should be reminded of the idiosyncracies of the industry involved and how they may form the predilections and inform the judgment of adjudicating bodies. The public's perception is that the boxing business has not been peopled by persons of unimpeachable character and integrity. Doubtless, as reputations are formed, and reinforced by the decisionmakers' observations of testimony, the outcome of a case can be dramatically affected. 3) Footnote 11, referred to in N&Q 5, seems to have far-ranging consequences, suggesting not only that negative covenants can be implied and inferred from the fact of an athlete's unique talents, but also that professional athletes are unique per se. In N&Q 5, we consider just how significant such an implication or inference can be. 4) The injunction in this case precluded Shavers from fighting until "October 11 or such earlier time as he fulfills his contractual obligations to the plaintiff." Students should be asked whether this relief was consistent with the relief requested by the plaintiff. If not, what did the court do in fashioning its remedy? See discussion of N&Q 2, below. Notes and Questions:

N&Q 1 necessitates a review of problems presented by oral agreements that are not intended to be effective until memorialized in a subsequent writing. Here, the right of first refusal language had not been properly memorialized and any mention of those terms in the telegram was omitted in the "final" written correspondence. N&Qs 2 and 3 deals with overly broad negative covenants. Courts often will correct the evil of an unreasonable covenant by interpreting it in a purposeful way or narrowing its unconscionable scope by construction. Students should be advised that this approach has a certain curb appeal and seems to place everyth in g in equipoise. However, from a long range perspective it may be harmful to the general contracting process because it does little to discourage the insistence upon adhesive provisions by the party in the stronger negotiating position. This type of analysis can present difficulties for students who feel that they are being trained to negotiate the best deal for their clients only to be told now to "soft-peddle" the killer bargaining and reach accord on a reasonable negative covenant. The message is that sometimes "less is more." N&Q 4 asks a somewhat rhetorical question. The statute doesn't apply because the contract is certainly capable of performance within a year and no other provisions of the statute are implicated. The limited purpose of the question is to differentiate the need for a writing "by law" from the need for such a writing by stipulation of the parties or on a showing of the requisite intent to be bound. N&Q 5 raises the issue considered above in the Points to emphasize section. The court comes close to suggesting that a breach of contract between an athlete and club or promoter will

3 inevitably trigger issuance of injunctive relief. If a boxer's talents are presumptively unique (as declared by the court in Footnote 11), and if such status de facto justifies the implication of a negative covenant, then the finding of a valid contract will necessarily pave the way for injunctive relief with little opportunity for resistance. N&Q 6 describes the nature of fight promotion and current trends in that area. A worthwhile discussion of a promoter's duties and responsibilities is found in the Foreman case considered in Chapter 20. Also, here a review of Chapter 2's discussion of the business of individual sports may be appropriate. Case: Boston Celtics Limited Partnership v. Shaw

Primary reason for inclusion: To underscore the relationship between the arbitration and judicial forums and to set the stage for later discussion of unclean hands. Points to emphasize:

1) Brian Shaw presented himself as a player who was more urbane than he would have the court believe, and as a player who sold himself to the highest bidder with little regard for his contractual obligations. Yet, given the deal that he negotiated regarding his delay of free agency, he was not as sophisticated or well-advised as one might assume. As will be discussed later in the chapter, the court's impression of the defendant player's level of sophistication or avarice may be critical when the amorphous balancing of equities comes into play. 2) The collective bargaining agreement entitled the club to activate an expedited arbitration procedure, which the club invoked. The arbitrator ruled in favor of the club, again casting the die in a way that virtually assured Shaw's defeat on appeal. The court acknowledged the persuasive aspects of Shaw's arguments, but, relying upon the overriding importance of arbitration and judicial deference to that dispute resolution mechanism, affirmed the arbitrator's award. 3) The court's discussion of the criteria to be employed in ascertaining the appropriateness of injunctive relief is worthwhile. While courts articulate the standards in countless ways, the major points remain consistent and the court carefully explained how the facts of this case justified the lower court's issuance of an injunction. 4) The First Circuit responded to the defendant's protests about the simultaneous injunction and enforcement of the arbitration award -- Shaw claimed that the enforcement of the order deprived him of due process and, in effect, constituted a premature grant of summary judgment in contravention of the Federal Rules of Civil Procedure. The court's response at pages 220-21 is a good example of exalting substance over form. The students should be alerted to the functional fungibility of the injunction order and enforcement of the arbitration award -- and, likewise, they should be aware that Shaw's arguments were paper tigers whose transparency was not lost on a savvy Judge Breyer. Notes and Questions:

N&Q 1 explains that the plaintiff club in th is case chose to litigate this matter through the arbitration process. In the past, clubs have left the door ajar to seek reprisals in court without

4 the need to proceed first through the grievance machinery. Students should be asked generally whether, as counsel for the team owners, they would want clubs to have, and be bound by, the same grievance mechanism as the players. This question will set the stage for future discussion regarding arbitration as a benefit to employees (counterbalanced by the union's agreement to waive the employees' right to strike) and whether employers would be better served by seeking redress in a forum other than the arbitration route. Some employers, particularly in the context of a collective bargaining agreement with a standing arbitrator (who may be prone to compromise), feel that they have a greater chance of securing the full range of available relief in a judicial forum. N&Qs 2 and 3 speak for themselves and have been addressed in the Points to emphasize above. It is worthwhile to stress the significance of judicial deference to arbitration and the perceived sophistication of the defendant as critical overarching variables in consideration of the issues raised in these notes. N&Q 4 hopes to trigger the students' recollection of the interplay between an unconscionable negative covenant (possibly warranting avoidance of the contract) and unclean hands (which will serve as a defense to the plaintiff's request for injunctive relief). These two potential responses to the plaintiff-club's legal action are opposite sides of the same coin.

N&Qs 5 and 6 simply serve to introduce material that will be covered in subsequent parts of the text, both following immediately below as well as in Chapter 16. III. Unclean Hands Doctrine -- A Defense to Plaintiff's Request for Injunction Relief

Case: W eegham v. Killefer

Primary reason for inclusion: To discuss the notion of in pari delicto ("unclean hands") in greater detail and to explain how it could affect a plaintiff-club's request for injunctive relief in a professional sports context. Points to emphasize:

1) Judge Sessions adopted an almost puritanical approach in the way that he assessed the worthiness of the plaintiff's request for equitable relief. He did not limit the unclean hands defense to questions of illegality, choosing rather to hold putative plaintiffs to a higher standard of accountability. His controlled vitriol is evident in the first and last paragraphs of the opinion. 2) The original contract that defendant Killefer repudiated was of dubious validity and may very well have "failed" in an action for declaratory judgment. This fact becomes very relevant when discussing how an attorney viewing the original agreement would counsel a player who seeks to escape from the contract. 3) Judge Sessions made it abundantly clear that he has no use for either party to this litigation, but he makes a telling point that will have relevance to other cases of this sort. Killefer did not ask the court for anything. Therefore, his somewhat questionable character is of no real legal moment -- except to the extent that it is cranked into the balancing of harms. Thus, he may be "blessed" in much the same way as the illegal gambler who has been sued on a gambling debt. When the court leaves the parties where it finds them, one of the evil-doers generally is the beneficiary of the court's "indifference." Notes and Questions:

5 The Notes and Questions following this case need little elaboration. A worthwhile exercise would test the students' creativity and sensitivity to ethical concerns by pushing the questions posed in N&Q 2. The ultimate solution to the Catch-22 probably rests in an action to declare the original contract void, thus paving the way for the negotiation of a new deal and avoiding the problem of coming to court with sullied hands. Case: Munchak Corp. v. Cunningham

Primary reason for inclusion: To juxtapose the Fourth Circuit's indulgent approach with Judge Sessions' pristine view of the standards applicable to injunction-seeking plaintiffs. Points to emphasize:

1) The Fourth Circuit, while apparently not disputing the lower court's legal assessment of the unclean hands standard, simply disagreed with that court's conclusions regarding the applicability of the defense to the subject case. This point underscores the "iffy" nature of an equitable action and the varying judicial predilections as to what constitutes a "fair" result in a given case. In these types of actions, courts have wide latitude to fashion an equitable disposition, and, as is evident, they frequently use every inch of it. 2) The district court frowned upon the solicitation of employees (under a contract) by a rival employer. The Fourth Circuit is not nearly so troubled by this conduct, apparently reasoning that there can be no meaningful player mobility unless some type of pre-contract expiration contact is permitted. 3) The plaintiff club failed to meet its obligations on the promissory note referenced in the opinion. This factor further influenced the district court's decision to deny the injunctive relief. For several reasons, however, the court of appeals refused to condemn the Cougars for declining to pay the note. Most importantly, the court found that the failure to pay the amount, while possibly a breach, did not warrant Cunningham's rescission of his contractual obligations. Further, the court noted that, given the scenario that had unfolded, Cunningham should have refunded the payment in any event. Here students' attention should be drawn to two items. First, there should be some discussion as to why the withholding of payment would not justify Cunningham's repudiation of the contract. The court concluded that the failure to pay, at that stage, did not constitute a material breach. Again, a revisitation of the factors relevant to a finding of material breach may be worthwhile. See RESTATEMENT (SECOND) OF CONTRACTS ยง 241. Second, the court's assumption that equity does not require the performance of a futile act should be addressed. Was Carolina certain that the payment would be futile and would simply result in the return of the amount paid? Even if so, should not the club be required to demonstrate that it at least was in a position to tender the promised amount? 4) Cunningham's claims that his no-trade clause freed him from contractual obligations because of the change in team ownership. The court rejects out of hand the argument that a change in ownership is the rough equivalent of a trade to a new club. Students should focus on the underpinnings of the assumption that assignments of rights in a personal services contract are generally taboo. However, as addressed further in the Notes and Questions following the Barry case, standard player contracts generally contain a waiver that permits an assignment -- unless the player has negotiated a no-trade or no- assignment clause.

6 Notes and Questions:

The Notes and Questions following this case focus on the comparison between the W eegham and Munchak approaches. Certainly, the district court adopted a view more along the lines of W eegham -- but the court of appeals saw things differently. N&Qs 2 through 4 address issues raised in the Points to emphasize, above. A lively discussion should be provoked by the questions posed in N&Qs 2 and 3. There, of course, is no definitive answer, but the questions will force the students to think creatively. The promissory note arrangement on page 228 has generated more speculation and outright "guesswork" as to what prompted the court's observation that the "new" club had actually provided Billy Cunningham an incentive to play. Have the students read this section carefully to divine how the deal actually provides Cunningham with an incentive to play out the final year with the new club. Like Herman Melville's Captain Ahab seeking the great white whale Moby Dick, one of us has posted a reward on the yardarm for any student leading to a plausible explanation for the court's arcane conclusions in this regard. An additional question that will provoke some debate is whether a potential new employer should be able to communicate with, or solicit the services of, a player who is under contract to another employer. There is ample reason to permit such benign discussion -- an outright prohibition would functionally eliminate all job mobility, because employees would be functionally precluded from encouraging or entertaining overtures regarding another position until their current contract had expired. N&Q 4 reviews the basic rules governing assignments in a personal services contract and sets the stage for the Barry case, which explores the change in ownership factor in a different context. Case: W ashington Capitols Basketball Club, Inc. v. Barry

Primary reason for inclusion: To provide a perspective on the negative injunction where the club seeking the injunction is a successor to a club that may have had unclean hands. Points to emphasize:

1) Barry had already been enjoined from jumping clubs in an earlier case. As a result of that injunction the player had been forced to "sit out" an entire season (see page 236). 2) Washington purchased the club from the Oakland Oaks and does not stand in the shoes of the Oaks for purposes of seeking equity. It is noteworthy here that there was no meaningful discussion of Washington's knowledge of the Oaks in this regard.

3) The court denied applicability of the unclean hands defense not only because the plaintiff was an innocent purchaser untainted by acts of the predecessor, but also because the alleged misconduct was supposedly unrelated to the transaction subject to the instant litigation. These points should be stressed to the students, and the court's conclusions should be questioned in terms of their long-range implications. See discussion of N&Qs 1 through 4. 4) Again, Rick Barry is a player who was extremely savvy and capable of cutting great deals for himself. The court doubtless recognized that Barry was no babe in the woods, and it had no compunction about holding him to his commitments pending a trial on the merits. Notes and Questions:

7 N&Qs 1 through 4 require a close look at the two principal bases for the court's refusal to apply the unclean hands doctrine to the facts of this case. The rationale that the Capitols were bona fide purchasers distanced from the Oaks' untoward conduct is plausible. However, further discussion is warranted in terms of the court's failure to delve further into the Capitols' knowledge of such conduct and the possibility that the purchase price of the club may have taken into account the risks presented by the Oaks' activity. With regard to the remoteness of the transaction, serious questions arise as to whether the remoteness should play a part. Students should be asked whether this rationale should be extended to preclude all unclean hands defenses where the taint was attributable to an earlier transgression. It is certainly arguable that the court has stretched the notion of remoteness to insulate the plaintiff from the reach of the unclean hands defense and to ensure that Barry would receive his comeuppance. In N&Q 1, please note that the second sentence should read: "First, the transaction that was the subject matter of the suit (the Warriors' offer to Barry while he was still under contract to play basketball for the Oakland Oaks) is unrelated to the Oaks' tampering with Barry's Warrior contract origin ally, misconduct which is

1) Charlie Flowers in the Giants case and Ralph Neely in the Oilers case were presented as two dramatically different athletes in terms of their intellectual sophistication. When combined with the court's pointed criticism of the professional league's tactics (see page 240, where words like "sordid" and "disgust" are graphic illustrations of the court's dismay in the N ew York Giants case), the handwriting was on the wall. 2) In both cases, the players were led to believe that their eligibility for "post season" play in bowl games would be preserved by maintaining the confidentiality of the agreement. Thus, these factual scenarios are quite different than a battle solely between two professional teams vying for a player's service. Here, the actions of the clubs were not limited to the professional ranks, but rather played fast and loose with amateur sports. Doubtless the deception that was practiced was presumed to be all the more heinous because it implicated college football, bowl eligibility, and the principles of amateurism that have been sacred conceptions.

8 3) Both transactions arose out of the tumult created by the rivalry between the American and National Football Leagues. As numerous outside sources and personal recollections will attest, the incidence of unsavory backroom deals was by no means limited to these two cases. Moreover, the results of these intriguing activities dictated the eventual merger of the two leagues. Many commentators have speculated that the New York Jets' signing of Joe Namath after a vigorous bidding war with the St. Louis cardinals and the Jets' Super Bowl victory over the NFL's Baltimore Colts in 1969 forecasted the inevitable joining of the NFL and AFL. 4) While there was a difference of opinion between the courts of appeals in these cases, both district courts had concluded that the injunction requests should be denied. Again, some discussion should be entertained regarding lower courts' opportunities to observe the demeanor of the witnesses and possibly derive adverse inferences from the comparisons of young, impressionable, and unwary athletes to urbane team owners who had attempted to subvert the rules governing college football eligibility and to enforce the contracts that were part of such subterfuge. 5) In the New York Giants case, the court of appeals' unclean hands conclusions dispensed with the need to consider the lower court's finding regarding the invalidity of the contract. If these issues had been considered, the issues addressed in Los Angeles Rams v. Cannon would have been resurrected. Students should consider these arguments and tie them in to the "avoidance" question posed in N&Q 4. Notes and Questions:

N&Qs 1 and 2 speak for themselves and revisit earlier questions surrounding the influence of idiosyncratic aspects of the case such as athlete's gullibility, the institutional background of the individual negotiations, etc. N&Q 3 simply illustrates that the Statute of Frauds and similar concepts treated in the primer chapter hold more than academic curiosity. The one-year provision of the pertinent Statutes of Frauds would presumably require a writing in these types of arrangements, thus necessitating an examination of the sufficiency of the writings in those situations. N&Q 4 requires a further review of avoidance principles and the ways in which the subject athletes in the foregoing cases could have escaped from their contractual obligations. It is reasonable to assume that fraud, undue influence, and perhaps even duress or illegality may have formed bases for the players to avoid the contracts. Again, it is also arguable, a la Cannon, that a contract was never formed, thus obviating the need to employ those avoidance devices.

N&Q 5 presents a classic problem/examination question. It simply entails a review of the requirements for an injunction including contract validity, reasonable negative covenants, irreparable injury, etc. Similar questions are presented in the Appendix.

9