Chapter 5

Legal Principles

Applied to Sport Management

Introduction• Sport law

– Application of existing laws to the sport setting– A few laws specific to sport industry (regulation

of boxing and sport agent industries, Title IX, etc.)

• When a dispute arises over interpretation of a rule or regulation, sport lawyers often represent both the governing body/association and the participant(s)

• Involvement of sport lawyers occurs because sport organizations hire lawyers to draft their rules and regulations; thus, need lawyers to interpret them

History• Tort law cases involving participation in sports and

games date from early evolution of tort law.• Many of earliest U.S. lawsuits in sport industry

involve professional baseball.– Players challenged owners on reserve system that

prevented players from free agency.– Owners challenged each other on business of

sports.• First sport law course was offered in 1972 at Boston

College Law School.

History• Considerable growth over last 30 years caused by:

– Legal profession more specialized– Amount of litigation and diversity of cases in sport

industry have increased as more people rely on the courts to resolve disputes

– Many athletic associations have adopted own governance systems with rules, regulations, and procedures that are based on the U.S. legal system

• Skills in legal education are beneficial to many positions in sport industry

Key Concepts: Risk Management• Developing management strategy to maintain

greater control over legal uncertainty – Prevention:

• Keeping problems from arising– Intervention:

• Having action plan to follow when problems do occur

• DIM process: – Develop, Implement, and Manage risk– Include all employees in the three-stage process

Key Concepts: Judicial Review• Occurs when plaintiff challenges a rule in sport

organization and court determines whether it should review the sport organization’s decision

• Historically, courts decline to overturn the rules of voluntary athletic organizations unless certain conditions exist

• Plaintiff’s interest is to keep rule from applying or to force athletic association to apply it differently

• Plaintiffs seek injunction: – An order from the court to do or not do particular

action

Key Concepts: Judicial Review (cont.)• Court will intervene if athletic organization:

– Violates/misapplies its own rule– Violates a statute– Violates public policy– Violates constitutional law and it’s a state actor– Acts as arbitrator or in a capricious manner– Exceeds the scope of its authority

Key Concepts: Tort Liability• Tort:

– An injury or wrong suffered as the result of another’s improper conduct

• Tort law provides monetary damages to compensate an injured person (plaintiff).

• Intentional torts occur when a person purposely causes harm to another or engages in activity that is substantially certain to cause harm.

• Negligence is an unintentional tort and is the most common tort that sport managers encounter.

Key Concepts: Tort Liability Negligence

• Sport managers are negligent when:– They commit an act/omission causing injury to a

person to whom they owe a duty of care– Negligence imposes a duty to refrain from careless

acts• Plaintiff must show that sport manager (defendant)

owed plaintiff a duty of care and breached it– A duty of care arises from relationship between

plaintiff and defendant (e.g., arena operator and fan).– When a duty is breached and that breach is the cause

of an injury for which there are monetary damages

Key Concepts: Vicarious Liability

• Allows plaintiff to sue superior for the negligent acts of a subordinate

• Employer need not be negligent to be liable• Three defenses available:

– Employee was not negligent– Employee was not acting within scope of

employment– Employee was an independent contractor

Key Concepts: Agency Law

• Agency describes a relationship in which one party, the agent, agrees to act for and under the direction of another, the principal.

• Purpose of agency law is to establish duties that principals and agents owe each other.

• Agency law is an important component of player representation industry.

Key Concepts: Agency Law (cont.)

• Fiduciary duties inherent in principal–agent relationship– Principal’s fiduciary duties:

1. To comply with a contract if one exists2. To compensate the agent for his or her service3. To reimburse the agent for any expenses incurred while acting on the principal’s behalf

Key Concepts: Agency Law (cont.)

– Agent’s fiduciary duties:1. To obey2. To remain loyal3. To exercise reasonable care4. To notify5. To account (for information and finances on a reasonable basis)

Key Concepts: Contract Law• Contract: Written or oral agreement between two or

more parties; creates legal obligation to fulfill the promises – Sport managers negotiate and enter into contracts

regularly with or without legal advice.• A valid contract must have the following elements:

– Offer and acceptance (mutual assent)– Consideration (value)– Capacity – Legality (subject matter legal and not against public

policy)

Key Concepts: Constitutional Law• Developed from precedents established by courts

applying language of U.S. Constitution and state constitutions to actions and policies of governmental entities

• Four constitutional challenges arise in sports: – Due process – Equal protection – The right to be free from unreasonable searches

and seizures– Invasion of privacy

Key Concepts: Constitutional Law State Action

• U.S. Constitution and state constitutions do not apply to private entities.

• Exception: – In some cases a private entity is so enmeshed

with the public that courts apply constitution to private entity.

• When a private entity meets this standard, it is called a state actor.

Key Concepts: Constitutional LawDue Process: 5th and 14th Amendments

• The right to notice and a hearing before life, liberty, or property may be taken away

• Athletic associations may have an impact on liberty and property interests protected by due process clauses in Fifth and Fourteenth Amendments – Right to play, right to be free from stigma, right

to work and earn salary, and so forth

Key Concepts: Constitutional LawEqual Protection: 14th Amendment• No person shall be discriminated against unless a

constitutionally permissible reason for discrimination exists

• Standards of review for discrimination – Strict scrutiny: On the basis of race, religion, or

national origin– Legitimate interest: On the basis of gender;

discrimination can occur only if legitimate interest for doing so exists

– Reasonable basis: Discrimination on any other status or classification

Key Concepts: Constitutional Law Search and Seizure: 4th Amendment• People have the right “to be secure in their

persons, houses, papers, and effects against unreasonable searches and seizures.”– Sport example: The act of taking the athlete’s

urine or blood for drug testing

• Several courts determined that private athletic associations (such as NCAA) or public high school drug testing programs do not violate state constitutional rights.

Key Concepts: Constitutional Law Invasion of Privacy

• There is no specific amendment for invasion of privacy; Court has implied one from Constitution.

• Plaintiff must establish that invasion is substantial and in area for which there is an expectation of privacy.

• Sport cases most often arise as challenges to drug testing programs.

• U.S. Supreme Court has held drug testing of high school athletes is not invasion of privacy (1995).

Key Concepts: Title IX• Comprehensive statute aimed at eliminating sex

discrimination in educational institutions that receive federal funding

• In athletics, cases focus on three areas: – Proportionate scholarship distribution– Equal treatment, benefits, and opportunities given

in specific program areas– Degree to which educational institution has

equally and effectively accommodated the interests and abilities of male and female students

Key Concepts: Antitrust• Sherman Antitrust Act (1890) goal:

– Promote competition in the free market; break up business trusts and monopolies and prohibit anticompetitive activity by businesses

• Application of antitrust laws to leagues left indelible mark on structure and nature of labor–management relations

• Just one major professional league for each sport; thus, their domination of the market gets challenged as monopolies violating the Sherman Act

Key Concepts: Antitrust Antitrust Exemptions

• MLB is exempt from antitrust laws as a result of a 1922 Supreme Court Federal Baseball decision. – All professional sport leagues and

tours are subject to antitrust rules– Curt Flood Act (1998): Legislative

response to Federal Baseball and dozens of unsuccessful congressional acts; allows MLB players to sue their employers under the Sherman Act, but exempts the business of baseball (including the minor leagues)

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Key Concepts: Antitrust Antitrust Exemptions

• Sport Broadcasting Act of 1961 exempts leagues from antitrust laws when pooling rights to enter into national broadcasting rights

• Labor exemption – Restrictive practices are exempt from antitrust

law when those practices have been negotiated in a collective bargaining agreement by labor and management

Key Concepts: Labor and Employment Laws National Labor Relations Act (1935)

• Establishes procedures for union certification and decertification and rights and obligations of union and management once a union is in place

• Areas of the sport industry where unions occur are facility management and professional sport

• Unions can be found in interscholastic athletics, but state labor laws apply

Key Concepts: Labor and Employment Laws National Labor Relations Act (1935), cont.

• Players associations differ from unions in other industries:– Turnover rate for sport union members is high

because of short careers of athletes– Forces players associations to constantly spread

their message to new members throughout North America

– Unions struggle to keep superstars and players on bench equally satisfied

– Management in professional sport favors unions to achieve the labor exemption for restrictive practices

Key Concepts: Labor and Employment Laws Equal Pay Act (1963)

• Prohibits employer from paying one employee less than another on basis of sex when performing jobs of equal skill, effort, and responsibility – Only applies to sex-based discrimination on basis of

compensation• Four defenses available when disparity is caused by:

– Seniority system – Merit system being followed in good faith – System measuring pay on the basis of

quality/quantity of production– Factor other than sex

Key Concepts: Labor and Employment Laws Title VII of the Civil Rights Act of 1964

• Federal law prohibiting discrimination in many settings, including housing, education, and public accommodations– Covers employers with 15 or more employees,

but exempts Native American tribes and private clubs

• Protects all classes of people from dissimilar treatment on the basis of race, color, national origin, sex, or religion

Key Concepts: Labor and Employment Laws Title VII of the Civil Rights Act of 1964, cont.

• Defense where being a member of a certain class is a bona fide occupational qualification (BFOQ)– Race and color can never be BFOQs– Examples

• Hiring male resident directors to monitor dorms at all-male school

• Hiring a Catholic to teach religion at a Catholic school

Key Concepts: Labor and Employment Laws Age Discrimination in Employment Act (1967)

• Prohibits employment discrimination on the basis of age– Applies to employers engaged in commerce

who hire more than 20 workers for 20 or more calendar weeks, as well as labor unions and state and federal governments

• Employer can defend a claim by proving decision was made because of reasonable factors other than age

Key Concepts: Labor and Employment Laws Americans with Disabilities Act (1990)

• Prohibits employment discrimination on the basis of disability

• Applicant or employee must be able to perform all essential functions of the job– Employer must assess responsibilities required

for job and assess an individual’s ability to do them

• ADA extends beyond employment to places of public accommodation—common in sports– Places of public accommodation = stadiums,

arenas, golf courses, health clubs, YMCAs

Key Concepts: Intellectual Property• Trademark

– Word, name, or symbol used by a manufacturer or merchant to identify and distinguish its goods from those manufactured and sold by others

• Service mark – Used to identify the source of an intangible service

(e.g., professional sport franchises’ marks)• Lanham Act

– Governs trademarks and service marks, gives protection to the owner of a name or logo, keeps others from selling goods as the goods of the original source

Key Skills

• By practicing problem solving, sport managers can improve their logical and analytical reasoning skills.

• Analysis of case and statutory law will lead to more persuasive and clear written and oral communication and build skills.

Putting Skills to Practice• Managers can effectively manage legal problems

by knowing and understanding law. • By knowing legal pitfalls, managers can avoid,

prevent, or reduce many kinds of problems.• A well-written and well-administered risk

management plan can help a sport manager avoid legal liability.

• Analysis should include a list of issues to consider.

Current Issues: Olympics

• Growing number of challenges over rules and regulations imposed on participants– Drug testing is a growing legal battlefield

• Ambush marketing occurs when an organization misappropriates trademarks, logos, and goodwill of events or organization (e.g., Nike in 1996)

• Other issues: – The right of individual athletes to market

themselves– Imposition of codes of conduct for athletes

Future Issues: Collegiate Sports• Challenges may arise regarding NCAA amateurism

rules. Key legal issues: – Restrictions on athletes’ involvement with sport

agents– Restrictions on athletes’ abilities to market

themselves– Protection and licensing of collegiate trademarks

and logos– Gender equity– Use of dietary supplements and other stimulants

• Possible that issue of NCAA drug testing might be heard and decided by the U.S. Supreme Court

Future Issues: Professional Sports

• League structure and collective bargaining negotiations

• Labor peace• Drug testing (BALCO)

– Individual sports– Team sports

• Viability of women’s professional sports © Image100/Jupiterimages