University of New Hampshire University of New Hampshire Scholars' Repository University of New Hampshire – Franklin Pierce Law Faculty Scholarship School of Law 1-1-2004 Illegal Defense: The Irrational Economics of Banning High School Players from the NBA Draft Michael McCann University of New Hampshire School of Law Follow this and additional works at: https://scholars.unh.edu/law_facpub Part of the Antitrust and Trade Regulation Commons, Collective Bargaining Commons, Entertainment, Arts, and Sports Law Commons, Labor and Employment Law Commons, Sports Management Commons, Sports Studies Commons, Strategic Management Policy Commons, and the Unions Commons Recommended Citation Michael McCann, "Illegal Defense: The Irrational Economics of Banning High School Players from the NBA Draft," 3 VA. SPORTS & ENT. L. J.113 (2004). 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L.J. 113 2003-2004 Content downloaded/printed from HeinOnline (http://heinonline.org) Mon Aug 10 13:54:45 2015 -- Your use of this HeinOnline PDF indicates your acceptance of HeinOnline's Terms and Conditions of the license agreement available at http://heinonline.org/HOL/License -- The search text of this PDF is generated from uncorrected OCR text. -- To obtain permission to use this article beyond the scope of your HeinOnline license, please use: https://www.copyright.com/ccc/basicSearch.do? &operation=go&searchType=0 &lastSearch=simple&all=on&titleOrStdNo=1556-9799 Article Illegal Defense: The Irrational Economics of Banning High School Players from the NBA Draft Michael A. McCann* In trodu ction ................................................................................................ 1 14 1. Evolution of the NBA, the NBPA, and the Rookie Salary Scale ........... 117 A. The Creation of the NBA and NBPA and Initial Attempts Visiting Scholar/Researcher & LL.M. candidate, Harvard Law School; JD., University of Virginia School of Law; B.A., Georgetown University. While a student at the University of Virginia School of Law, Mr. McCann was Editor-in-Chief of the Virginia Sports & Entertainment Law Journal and a Hardy Cross Dillard Fellow. After publishing this Article, he became a member of Maurice Clarett's Legal Team in his lawsuit against the National Football League (Clarett v. NFL, 369 F.3d 124 (2nd Cir. 2004)). Mr. McCann may be e-mailed at [email protected], or for more on this Article, see http://nbadraft.net/mccanninterview.asp. This Article is an expanded and updated version of the author's previous law review article entitled, Illegal Defense: The Law and Economics of Banning High School Players from the NBA Draft, I Va. Sports Ent. L.J. 295 (2002). Mr. McCann would like to especially thank his former sports law professor, Donald Dell, who is also the founder of ProServ and senior vice president of Clear Channel Communications- He also thanks: Gabriel A. Feldman and Mark S. Levinstcin of Williams & Connolly; William J. McCann of the University of Michigan Business School; Kevin J. O'Connor of Paragon Law Group; Gustavo Resendiz of Goulston & Storrs; Sanford A. Fine and Christopher W. Sanzone of Testa, Hurwitz & Thibeault; Professor John C. Harrison of the University of Virginia School of Law; Robert C. MeNamee of Day, Berry & Howard; Jennifer B. Wieland of Latham & Watkins; Melissa A. Lafsky of the University of Virginia School of Law; Walter Sun of the Massachusetts Institute of Technology; and Michael D. Sopko and Benjamin E. Lay of Kaye Scholer. VOL.3:2 VIRGINIA SPORTS AND ENTERTAINMENT LAW JOURNAL SPRING 2004 at Collective Bargaining (1949-1991) ............................................ 117 B. The Rise of the Rookie Salary Scale & the Decertification M ovem ent (1991- 1998) .................................................................. 118 C. The 1999 CBA & the Revised Rookie Salary Scale (1998-Present) ................................................................................ 12 1 II. The NBA Draft & Drafted Player Rights ..... ................................ 129 A. Rags to Riches (1949-January 1999) ............................................. 129 B. Reaffiriming Exclusivity & Normalizing Draft Rights (January 1999- P resen t) ....................................................................................................... 134 III. The Competing Interests of High School Players & the NBA ............ 143 A . Interests of H igh School Players .................................................... 143 B . Interests of the N B A ....................................................................... 178 III. Overview of Relevant Labor & Antitrust Law on Group Boycotts ...... 195 A. The Labor Exemption, Collective Bargaining, & Decertification.. 195 B. Antitrust Law & Group Boycotts ................................................... 201 IV. Application of Economic and Legal Principles to the NBA Draft ....... 209 A. Collectively Bargained Rule to Ban High School Players ............. 209 B. Unilateral Imposition of NBA Rule to Ban High School Players... 213 Conclusion ....................................................... 223 INTRODUCTION On June 26, 2004, the National Basketball Association ("NBA") will conduct its annual entry draft ("NBA Draft"), which is the exclusive process by which amateur players gain entrance into the NBA. As will be discussed in far greater detail, the NBA Draft consists of two rounds, with each NBA team allocated one selection in each round. Undoubtedly, at least one of the top selections in the 2004 NBA Draft will be a player who has just graduated from high school. In fact, Dwight Howard, a high school senior from Atlanta, Georgia, is the presumptive number one overall selection, with Josh Smith, a high school senior from Smyrna, Georgia, likewise expected to be selected among the top five picks.' On June 27, 2004, there will just as likely be a series of newspaper articles doubting whether these "undeveloped," "unrefined," and perhaps even "immature" teenagers made the right choice, even when many of them will sign multimillion dollar contracts before their college educations would have begun. No doubt, these articles will mention the names "Ta McDavid," "Korleone 1 See NBADraft.net, Mock 2004 Draft, available at http:/nbadraft.netlindex.asp (last visited Feb. 1, 2004). See also Andy Katz, NBA Draft: Howard's No. 1, ESPN Insider, Jan. 9, 2004 (noting that Dwight Howard and Josh Smith are expected to be selected amongst the top 3 to 5 selections in the 2004 NBA Draft). SPRING 2004 ILLEGAL DEFENSE VOL.3:2 Young," "Ousmane Cisse," and "Tony Key"-names only the diehard basketball fan will recognize-and such recognition will arise solely because these high school players failed to make the NBA, and have since been become poster children for the NBA's crusade to exclude high school players from the NBA Draft. Indeed, by declaring for the NBA Draft, these players lost their eligibility to play Division I college basketball ("collegiate eligibility"), and have since fallen off the face of the basketball map. Greedy agents, misguided "hoop dreams," poor role models, opportunistic friends and family, and the failure to appreciate the "value" of a college education will be among the reasons cited for their tragic decision. On June 27, 2004, however, there will be far fewer articles discussing how the vast majority of high-school basketball players made the right decision by declaring for the NBA Draft. Surely, few articles will mention how from 1995 to 2003, over 80%of drafted high school players became or will become multi- millionaires by the age of 21, or how they have maximized their earning potential by gaining the ability to become unrestricted free-agents-when as many as 30 teams bid for their services-by the tender age of 22, when, coincidentally, some of their counterparts will graduate from college and become bound by the nearly non-negotiable rookie salary scale for three to five years. In fact, this Article will show that most players who skip college may earn as much as $100 million more over the course of their careers than if they had done the "smart thing" and earned a college diploma. Moreover, this Article will explore how high school players who enter the NBA Draft are a small, self-selected group, comprised almost entirely of exceptionally talented players. Simply put, for every Korleone Young, there are two or three Kevin Garnetts. This result is not surprising, since the NBA's economic system provides incentives for premiere high school players to seek entrance into the NBA as soon as possible. In turn, since those players are often the most talented, they tend to develop at a uniquely accelerated rate, and thus their earlier arrival-and longer stay-ultimately benefits the NBA and its fans. At the same time, those high school players better off going to college tend to do so because of contrasting incentives created by this same economic system. In short, high school players have proven to be the best group of players entering the NBA because the NBA's economic system dictates that very outcome. Equally important, this Article will survey whether federal labor law and antitrust law might preclude