United States: The Herrick Scorecard - Summer 2014

Herrick and the 2014 Global Sports Summit

Last month Herrick co-sponsored the Global Sports Summit (GSS) in Aspen, Colorado. Each year GSS brings together owners of major sports franchises from all over the world for a few days of networking and collaboration, and to share their visionary leadership efforts in the industry. For more information about the event, please visit www.evanta.com/sports.

Herrick's New Sports Law Brochure is Here!

We are excited to share a link to our new sports law brochure.  Inside you'll find details about our recent work with many of the world's greatest sports franchises and entities, as well as feature sections on our pioneering work to help create new categories such as regional sports broadcasting (the YES Network), pay-per-view (Top Rank) and premium stadium experiences (Legends Hospitality).

Clippers Finally Set "Sale"

As widely reported in the media, earlier this year, TMZ Sports released a recording of a conversation between Donald T. Sterling and a female friend, V. Stiviano.  Mr. Sterling and his wife Shelly are the co-owners of the NBA's Los Angeles Clippers.  In the recording, Sterling was irritated over a photo Stiviano had posted on Instagram, in which she posed with Basketball Hall of Fame player Magic Johnson.  On that tape Mr. Sterling made a number of racially offensive comments to Stiviano.

On April 29th, NBA Commissioner Adam Silver announced that Mr. Sterling had been banned from the league for life and fined $2.5 million, the maximum fine allowed by the NBA constitution.  Silver stripped Sterling of virtually all of his authority over the Clippers, and banned him from entering any Clippers facility. He was also banned from attending any NBA games.  Commissioner Silver further announced that he would seek to force a sale of the Clippers, an action that would require the consent of three-quarters of the other NBA team owners.  While Shelly Sterling was not included in the NBA's ban on Mr. Sterling, the NBA stated that if three-quarters of the other NBA teams consented to the termination of Mr. Sterling's ownership interest in the Clippers, all other team owners' interests would automatically be terminated as well.

On May 29th, Shelly Sterling reached a deal, pending NBA approval, to sell the Clippers to former Microsoft CEO Steve Ballmer for $2 billion.  Shelly Sterling also agreed not to sue the NBA and to indemnify the NBA against suits initiated by her husband. The following day, Mr. Sterling sued the NBA for $1 billion, alleging it had violated antitrust laws and his constitutional rights. This was but the beginning of a long and winding road.

On June 4th, Mr. Sterling dropped his lawsuit against the NBA and stated that he was not opposed to the proposed sale.  On June 9th, Mr. Sterling withdrew his support for the sale and stated he would resume the lawsuit.  However, Shelly Sterling was granted a trial in probate court that began on July 7, to allow her to proceed with the sale of the Clippers.  At the trial, Shelly Sterling introduced medical evidence in support of her claim that her husband was suffering from Alzheimer's  and lacked mental capacity.  On July 23th, Mr. Sterling sued his wife, the NBA and Commissioner Silver for damages alleging that they violated corporate law and defrauded him in order to sell the Clippers to Mr. Ballmer.  Mr. Sterling also sought an injunction to block the sale.  On July 28th, the probate court ruled in Shelly Sterling's favor and granted her request for an order permitting the sale of the Clippers.

On August 12, 2014, the closing of the sale of the Clippers to Mr. Ballmer occurred. Following the closing, Mr. Ballmer commented, "There's real earnings in this business. There's real upside opportunity. So compared to things I looked at in tech, this was a reasonable purchase [...]."

Players to N.C.A.A. -- Can You See Me Now?

On August 8th, a federal District Court judge issued an injunction against the N.C.A.A.'s prohibition on college athletes earning money from the use of their names and images in video games and television broadcasts.  The injunction applies to college athletes who enroll on or after July 1, 2016.  The lawsuit was filed by Ed O'Bannon, a former U.C.L.A. basketball player, and 19 other former college athletes.

The injunction will permit, but not require, universities to offer college football players in the top ten conferences and all Division I men's basketball players trust funds that would first be accessible after graduation.  The amounts in the trust funds would be left up to the discretion of the universities.  The injunction further permits the N.C.A.A. to place a cap on the payments, provided that the minimum payment would be $5,000 per year per qualifying football and basketball player.  At a payment amount of $5,000, qualifying football and basketball players could earn an estimated $300 million combined over a four-year period.

In ruling against the N.C.A.A., the court found unpersuasive the N.C.A.A.'s argument that its amateur rules, while potentially restrictive in the marketplace, were vital to its business model.

O'Bannon v. Natl. Collegiate Ath. Assn., No. C 09-3329 CW (U.S. Dist. Ct., N.D. Cal., August 8, 2014)

U.S. Supreme Court Pulls the Plug on Aereo Broadcasts

In a prior edition, we reported on American Broadcasting Co. v. Aereo, a case then up on appeal to the U.S. Supreme Court.  Aereo developed a business model that used thousands of dime-sized antennas to pick up free, over-the-air TV signals which were transmitted to customers via the Internet for a monthly subscription fee.  Aereo was sued by the major broadcasting networks, who claimed that Aereo's service amounted to outright theft, because Aereo did not pay a retransmission fee to the networks.  Aereo countered that no such retransmission fee was due because each viewer was temporarily assigned an antenna at one of Aereo's antenna farms.  Under this arrangement, Aereo contended that its service transmitted "private performances" to individual viewers over a dedicated personal licensed antenna, rather than copyright protected "public performances."

On June 25th, the Supreme Court ruled in favor of the broadcast networks.  The Court found that Aereo had infringed copyrighted content of the broadcast networks by retransmitting such content to Aereo subscribers.  In support of its ruling, the Court noted that Aereo's business model closely mimicked cable television systems which are prohibited under the Copyright Act from making unauthorized retransmissions.

Amer. Broadcasting Co. v. Aereo, Inc., No. 13-461 (U.S. Sup. Ct. June 25, 2014)

Social Media Bedevils Saints Player's Salary Dispute

A Twitter account was at least partially to blame for an arbitrator's recent ruling against New Orleans Saints star Jimmy Graham.  After the Saints and Graham reached an impasse in contract extension negotiations, the Saints placed a franchise designation on him as a tight end.  By making this designation, the Saints could force Graham to re-sign by paying him the average salary of the five highest-paid tight ends on other NFL teams.  However, Graham disputed the designation, claiming that he was more properly classified as a wide receiver.

And why wouldn't he? Graham led his team in receptions, yards and receiving touchdowns. As a franchise wide receiver he would be paid $12.3 million in 2014, versus $7 million as a franchise tight end.

Although the full text of the arbitration decision was not made public, media reports have stated that the Saints listed Graham's reference to himself as a tight end on his Twitter bio as one of the justifications for the tight end designation. Graham subsequently appealed the arbitration decision. However, his appeal was rendered moot after he reached a four-year $40 million contract agreement with the Saints that makes him the highest paid tight end in the NFL.

"Wooooooo Pig Sooie" a Registered Sound Trademark

Since the 1920s, fans of University of Arkansas athletic teams have cheered "Wooooooo Pig Sooie" in support of the teams' Razorback pig mascot.  Over time, this cheer has become one of the most recognizable in collegiate athletics.  In an effort to protect the cheer, the University of Arkansas has obtained a sound trademark for the hog call.  This sound trademark is believed to be the first collegiate cheer or chant officially registered with the U.S. Patent & Trademark Office.  In support of its sound trademark application, the University of Arkansas submitted several examples of audio and video showing Razorback fans calling the hogs.  Some clips were crowd shots at football games, while others showed individuals, such as University of Arkansas Chancellor and Athletic Director making the hog call.

Trend Spotting – OTT Programming

One development that has recently caught our eye is the increasing amount of on-demand programming being made available directly to consumers through platforms such as Netflix, Hulu and Apple TV.  This programming, which is known in the broadcast industry as "OTT" or "over-the-top," does not require a cable or satellite TV subscription.  OTT programming obviously has the potential to disrupt the broadcast distribution industry.

What do we think?  The jury is out with us as it is too early to tell.  But ESPN president John Skipper seems to have captured the current state of affairs with the following quote:  "With what the over-the-top services are currently offering, they are not going to drive much viewership.  My concern is where people become invested in their success and they decide they have to keep putting more and more compelling content on until it gets to where it is potentially a problem."

Do You Know the Way to San Jose? -- Part IV

In prior editions, we reported on the proposed relocation of the Oakland A's to San Jose.  The Oakland A's, however, will continue to call O.co Coliseum "home" through at least the conclusion of the 2018 Major League Baseball season.  In August 2014, the Oakland-Alameda County Coliseum Joint Powers Authority approved a ten-year lease extension of the O.co Coliseum by the Oakland A's.  This lease brought to a close a 15-month-long negotiating process to keep the A's in Oakland.

The lease contains an "out clause" permitting the Oakland A's to leave the O.co Coliseum after the 2018 Major League Baseball season. However, if the A's exercise that clause, they would be obligated to pay rent through the expiration of the lease in 2024, absent relocation to another site in Oakland.  The lease further provides the City of Oakland with the right to evict the A's from the O.co Coliseum if an agreement is reached for the development of the O.co Coliseum site into a football-only stadium for the Oakland Raiders.  The Oakland Raiders currently share the use of O.co Coliseum with the A's.

The lease marks an end to the Oakland A's current relocation efforts and will cause Dionne Warwick to search elsewhere for an answer to her popular song.

Washington Redskins Attract More Attention off the Field than on it -- Part III

In prior editions, we reported on Washington Redskins owner Daniel Snyder having been besieged by a firestorm of pressure to change the team's name and logo.  Numerous groups have charged that the Redskins' name and logo are out of date, offensive and racist.  Despite this intense controversy, Mr. Snyder has remained steadfast in his position that the team name and logo will not be changed.

The latest challenge to Mr. Snyder's position was the cancellation of six Redskins' trademark registrations by the U.S. Patent and Trademark Office's Trademark Trial and Appeal Board.  In a divided ruling, the Board found that the six trademark registrations "must be cancelled because they were disparaging to Native Americans at the time of registration" in contravention of Section 2(a) of the Trademark Act, which prohibits the registration of trademarks that disparage persons or bring them into contempt or disrepute.  This ruling, however, will only have a limited effect on the Redskins.  The ruling left undisturbed the team's exclusive ownership of common law rights in the Redskins trademarks, including the right to use such trademarks for commercial purposes.

Blackhorse v. Pro-Football, Inc., Cancellation No. 92046185 (Trademark Trial and Appeal Board (June 18, 2014))

Just Asking...

With the 2014-15 NFL season closing in quickly, we thought we'd offer up some NFL trivia:

The city of Oakland was awarded the eighth American Football League franchise in 1960. Right around that time the Oakland Tribune held a "name the team" contest, and the winning name was adopted by the team's limited partners...for a limited time, before it was ridiculed out of existence. For a few weeks in 1960, what were the Oakland Raiders known as?

Answers to Just Asking...

We posed two questions in our last edition of Just Asking. Without further ado, here are the answers:

1. Why does a Major League Baseball pitcher, when ahead in the count 0-2, typically "waste" a pitch by throwing a ball outside of the strike zone?

Answer: We posed the question to David Cone, a former New York Yankees and New York Mets pitcher and the "author" of a perfect game. David explained to us that the "waste pitch" traces its origin to the minor leagues where pitchers were often fined $50 for giving up a hit when ahead of a hitter in the count 0-2. David noted that back in his minor league baseball days, $50 was considered a "king's ransom" by minor league pitchers.

2. Only three Major League Baseball players have played for all four former and current New York Major League Baseball franchises — the Giants, Dodgers, Yankees and Mets. Who are they?

Answer: Darryl Strawberry, Jose Vizcaino and Ricky Ledee

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