MINNEAPOLIS -- A federal judge handed NFL players a key ruling Tuesday in their fight to strip the league of $4 billion in TV revenue they contend was unfairly and illegally secured as a way to survive a lockout that could begin by the end of the week.
U.S. District Judge David Doty backed the NFL Players Association in its closely watched fight over the so-called "war chest" of broadcast revenue that the union contends is leverage the NFL is wielding against it in the labor fight.
The NFL's current collective bargaining agreement expires at midnight Eastern time Thursday night.
“[Y]ou know you've reached the absolute limits of your power as a major network ... [when] the commissioner of the National Football League calls you ... and says ... [w]e're done, pay this or move on.”-- Unidentified network executive on TV rights talks with NFL
In his 28-page ruling, Doty criticized special master Stephen Burbank for legal errors and erroneously concluding earlier this month that the NFL can act like a self-interested conglomerate when in fact it is bound by legal agreements to make deals that benefit both league and player.
Doty instead declared that the NFL violated its agreement with the union, which had asked that the TV money be placed in escrow until the end of any lockout. A hearing, yet to be scheduled, will be held to determine potential damages for the players as well as an injunction involving the TV contracts.
NFL spokesman Greg Aiello downplayed the significance of the ruling, saying the 32 teams were "prepared for any contingency."
"Today's ruling will have no effect on our efforts to negotiate a new, balanced labor agreement," Aiello said. He told The Associated Press that the NFL had not immediately determined whether it would appeal.
The case, however, has billions at stake.
The union accused the NFL of failing to secure the maximum revenue possible when it restructured broadcast contracts in 2009 and 2010, and claimed the deals were designed to guarantee owners enough money to survive a lockout. The union argued this violated an agreement between the sides that says the NFL must make good-faith efforts to maximize revenue for players.
Doty agreed.
"The record shows that the NFL undertook contract renegotiations to advance its own interests and harm the interests of the players," wrote the judge, who has overseen NFL labor issues since he presided over the 1993 decision that cleared the way for the current free agency system.
Doty cited an NFL "Decision Tree" as a "glaring example" of the league's intent, and quoted from it: "Moving forward with a deal depended on the answer to the questions: 'Does Deal Completion Advance CBA Negotiating Dynamics?' If yes, the NFL should 'Do Deal Now'; if no, the NFL should 'Deal When Opportune.'"
Said George Atallah, the NFLPA's assistant executive director for external affairs: "This ruling means there is irrefutable evidence that owners had a premeditated plan to lockout players and fans for more than two years. The players want to play football. That is the only goal we are focused on."
The NFL has described the $4 billion as a loan that the league eventually would need to repay -- or make up to -- the networks, with interest. Doty said $421 million of the total would have been guaranteed without repayment.
In his ruling, the judge also revealed previously confidential details of NFL TV contracts and said that the NFL "consistently characterized gaining control over labor as a short-term objective and maximizing revenue as a long-term objective ... advancing its negotiating position at the expense of using best efforts to maximize total revenues for the joint benefit of the NFL and the Players."
He suggested that the NFL had acquired vast negotiating power and pointed to an unidentified network executive's comment from the case.
"[Y]ou know you've reached the absolute limits of your power as a major network ... [when] the commissioner of the National Football League calls you ... and says ... [w]e're done, pay this or move on .... [the NFL has] market power like no one else, and at a certain point in time, they'll tell you to pack it up or pay the piper," the executive said.
Doty said at least three networks expressed "some degree of resistance to the lockout payments"; that the NFL "characterized network opposition to lockout provisions to be a deal breaker"; and that DirecTV "would have considered paying more in 2009-2010 'to have [the work-stoppage provision] go away."
The decision revealed that DirecTV, in fact, would pay up to 9 percent more to the NFL if no games are played in 2011. And of the total amount payable if there is a canceled season, 42 percent of DirecTV's fee is nonrefundable.
Under the CBS and Fox contracts set to expire at the end of the 2011 season, the NFL would have been required to repay CBS and Fox that same year if there were a work stoppage. Under the contracts extended to the 2013 season, the NFL will repay the funds, plus money-market interest, over the term of the contract, Doty wrote. And if the season is canceled, the contracts would be extended another season.
NBC's contract through the 2011 season contained the same work-stoppage provisions as the CBS and Fox contracts, according to Doty.
He wrote that during extension negotiations, NBC felt the NFL was "hosing" the network by its demands. To "bridge the gap," the league agreed to award NBC an additional regular-season game for the 2010-2013 seasons. The NFL did not seek additional rights fees for the 2009, 2010 and 2011 seasons, and NBC agreed to pay increased rights fees for 2012 and 2013.
Although ESPN's contract was not set to expire until 2013, the work-stoppage provision was amended. In the negotiations, ESPN requested that the rights fee not be payable if there is a work stoppage, but the NFL rejected the request. Doty wrote: "The NFL stated that the digital deal and the work-stoppage provisions were 'linked,' ... To secure ESPN's agreement to the work-stoppage provision, the NFL granted the right to a Monday Night Football simulator via the wireless partner."
NFL lawyers argued that the league used sound business judgment to maximize revenue for both sides to share, but Doty wrote in his ruling that the NFL enhanced "long-term interests at the expense of its present obligations."
Indianapolis Colts center Jeff Saturday, a member of the NFLPA's executive committee, said the ruling was a "really good reversal."
"I'm not sure what all that means, as of yet," Saturday told The Associated Press as he left Tuesday's mediation session in Washington. "We haven't been debriefed. We just got the news when we were in the meeting, so I'm sure we'll hear more tonight. But it sounds very favorable."
Copyright 2011 by The Associated Press
