Category Archives: NBA

November 21, 2012 · 8:51 am

Guest Post: A Proactive Cure for the Athlete Wealth Disease Epidemic – Part 2

By:  Todd Burach (Twitter:  @ToddBurach)

Todd Burach works in wealth management in New York City. He specializes in asset allocation and investment strategy for upper high net worth clients, including corporate executives, professional athletes and entrepreneurs.  He is a 2007 graduate of Syracuse University where he was a member of Coach Boeheim’s back-to-back Big East championship teams. In 2012, Todd completed his MBA at New York University with concentrations in Finance and Economics.

2. Facilitate and encourage the conversation.

The NFL is currently working vigorously to improve player safety as it relates to concussions. In June of 2012, 2,000 NFL players filed a unified lawsuit against the league “alleging that the NFL failed to acknowledge and address neurological risks associated with the sport and then deliberately failed to tell players about the risks they faced.”  The NFL would be wise to apply lessons learned from the concussion epidemic to its current experience with ‘Athlete Wealth Disease’. Both issues impact long-term player health and can be minimized, altered, and arguably avoided when players are armed with relevant knowledge. Further, in both cases, many of the negative outcomes are born from a pervasive culture that exists amongst players – on the playing field, it is the machismo culture of hitting, while off the field, it is the ‘baller’ lifestyle. Both the concussion and post-career financial problems that result can impede the ability of players to live normal, productive lives. What we need is for players, leagues, media outlets and fans to discuss all aspects of Athlete Wealth Disease, especially solutions, in the same manner in which we discuss concussions.

We demand that athletes be role models on and off the field, at all times. We demand that athletes do the right thing. As a result, we discuss, dissect and debate players’ offfield behavior, good or bad. However, these discussions tend to shy away from the facts that Sports Illustrated brought to light three years ago. Our heroes are going broke just as much if not more often than they are debilitated by playing injuries. (65% of NFL players retire from the league with permanent injuries). So why don’t we talk about it? ESPN’s 30 for 30 film “Broke,” directed by Billy Corben, could be seen as a step in the right direction. The film offers the usual examples of athletes who have struggled financially and certainly encourages the conversion. However, the discussion needs to shift towards solutions. And, rather than an occasional headline about a former star who has fallen or a documentary on the sexy lifestyle that carries players into bankruptcy, this must become an ongoing conversation. Embracing the discussion will force the hand of players associations, leagues, media and fans to find solutions and accountability for this epidemic – just as we have begun to do with respect to concussions.

3. Nudge

In “Nudge: Improving Decisions About Health, Wealth, and Happiness”, University of Chicago economists Richard Thaler and Cass Sunstein discuss innovative ways in which to encourage people to follow the most advantageous path. The trick is simple: start them on it. Thaler and Sunstein suggest ‘nudging’ people in the right direction with what they call ‘libertarian paternalism’. According to the libertarian paternalist, “one must not just maximize choice for others, but must set a default or no-action-required option that will cause people to make optimal choices (i.e., those widely agreed upon to make one better off, e.g., saving money for retirement)”.  In studying 401(k) retirement plans, for example, Thaler and Sunstein found that the vast majority of people never adjust the allocations of their 401(k) retirement portfolio after the initial set-up. The authors attribute this inaction to the tendency of individuals to become too overwhelmed by the decision making process, choosing instead to avoid it altogether. Therefore, when one starts a job and is required to enroll in a retirement portfolio, the libertarian paternalist recommends that the default option be set for a ‘Target Retirement Date’ fund, a portfolio that reallocates holdings automatically as retirement approaches. This ‘default option’ would help to steer those too overwhelmed with making big financial decisions to paths widely considered optimal.

Nudge-like provisions have, in fact, begun to emerge in sports. As a result of negotiations for the most recent collective bargaining agreement, the NBA Player’s Association will now default players into a league retirement plan, with the option to opt out. Those who go through the effort to opt out tend to be those well versed in personal finance, while those who do not know to opt out or do not want to deal with it have been nudged to the right path (and Thaler and Sunstein are somewhere smiling).  What the NBA has quietly done represents an important step toward preventing Athlete Wealth Disease. We need more nudges, in more forms, and next time it should not be so quiet.

For a long time we have known that professional athletes struggle with money and with the growth of sports business, we are talking big money. Occasionally, when financial market news becomes Main Street news, we will read a headline about a Mark Brunell or a Terrell Owens. Yet, when markets turn around, and Wall Street worries subside, we too quickly stop talking about a very correctable problem that still exists. The Athlete Wealth Disease epidemic is preventable. We should demand more out of the players associations whose mission is to ensure “that every conceivable measure is taken to assist players in maximizing their opportunities and achieving their goals, both on and off” the playing surface. We need to give the issue a voice – on TV, in the papers, in the blogosphere – the way we talk about and worry about concussions. Finally, leagues should follow the lead of the NBA and continue to ‘nudge’, by being more thoughtful in the structured programs used to secure the financial futures of our sports heroes.

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Filed under NBA, NFL

November 19, 2012 · 8:47 am

Guest Post: A Proactive Cure for the Athlete Wealth Disease Epidemic – Part 1

By:  Todd Burach (Twitter:  @ToddBurach)

Todd Burach works in wealth management in New York City. He specializes in asset allocation and investment strategy for upper high net worth clients, including corporate executives, professional athletes and entrepreneurs.  He is a 2007 graduate of Syracuse University where he was a member of Coach Boeheim’s back-to-back Big East championship teams. In 2012, Todd completed his MBA at New York University with concentrations in Finance and Economics.

Curt Schilling had a storied baseball career. He accomplished feats on the field of play that most athletes can only dream of achieving. Schilling won World Series rings with the Arizona Diamondbacks and the Boston Red Sox, highlighted by his 2001 World Series MVP Award. He is one of four pitchers to amass 3,000 strikeouts and fewer than 1,000 walks over the course of a career, joining Ferguson Jenkins, Greg Maddux, and Pedro Martinez.  However, despite athletic triumph that most players will never know, Schilling recently experienced a career milestone of sorts that, regrettably, many professional athletes will more than likely achieve:  bankruptcy.

“According to Chapter 7 bankruptcy documents filed in Delaware, Mr. Schilling’s company, 38 studios, and three subsidiaries owe more than $150 million to creditors, but have assets of no more than $50 million.”

Unfortunately, this is a familiar tune for many of us who follow sports. See the below statistics from the 2009 Sports Illustrated report, “How (and Why) Athletes Go Broke” by sports writer Pablo S. Torre published in the midst of the Great Recession, and highlighted again at the start of ESPN’s 30 for 30 documentary “Broke”:

- By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce. 

- Within five years of retirement, an estimated 60% of former NBA players are broke.

Torre’s article outlines several theories intended to explain how athlete after athlete can blow through so much money time after time. While the article is worth reading in its entirety, the quick synopsis of the how (for the sake of this writing) is summarized below:

1. The Lure of the Tangible – ‘chronic over-allocation to real estate and bad private equity’

2. Misplaced Trust – ‘hiring the wrong people as advisors’

3. Family Matters – ‘the divorce rate for pro athletes ranges from 60% to 80%’

Torre called attention to the epidemic of financial troubles amongst athletes at a time when financial markets were a hot topic even outside of Wall Street. Yet now, more than three years removed from the onset of the most impactful financial crisis since the Great Depression, with stock markets marking new highs, real estate prices off their bottoms, and credit markets beginning to open, professional athletes and their business ventures are still going broke. What this tells us is a very important, albeit somewhat readily apparent lesson: the epidemic of financial duress for professional athletes is not cyclical.  Athletes do not go broke only when markets go down. Athletes will go broke all the time.  That is, unless, something changes.

The fact of the matter is that we – professional athletes and those charged to support them – need to do more. We need to implement proactive solutions that address the root of the issue before an athlete ends up in the next Pablo Torre article or “Broke” documentary.

How can we influence professional athletes to make smarter decisions?

1. Demand more from Players Associations.

The NFL Players Association as a whole strives “to do whatever is necessary for the betterment of our membership,” while the NBA Players Association pledges to ensure “that every conceivable measure is taken to assist players in maximizing their opportunities and achieving their goals, both on and off the court.”  It is safe to say that the long-term financial health of players falls squarely within the confines of these stated objectives. However, of the four major sports leagues in the United States, only one players association (the NFL) has a formal Financial Advisor Program. The NFLPA Financial Advisor Program’s mission is ‘to provide an additional layer of protection – not just from poor financial advice, but from outright fraud.’  While this stated mission is certainly just and warranted, it inadequately addresses the overarching problem. As Torre explained, trusting the wrong people is just one reason that players go broke.

For more effective and meaningful financial support, players and their advocates should demand their players associations form Player Finance Divisions, tasked specifically with promoting the current and long-term financial health of its players. In addition to services similar to those offered by the current NFL Financial Advisor Program, these divisions would provide education and outreach programs, alumni initiatives, foundation management workshops, and research of potential programs. The necessity of such support has been widely recognized. Forbes contributor James Crotty wrote in his February 2012 article on Allen Iverson that “an NBA that cared more about its personnel and brand would have required that Iverson, as well as all players, pass a yearly financial planning and retirement course before they were allowed on the hardwood.”  The NBA is a corporation much the same way my employer is a corporation.  My firm offers annual educational seminars on 401(k) plans and retirement benefits and takes an interest in the health of its employees. Why? Employees who are physically, emotionally, and financially healthy are superior employees. They are more productive, more committed, and ultimately present a stronger representation of a company’s brand. 

Between the NFLPA Financial Advisor program and Rookie Transition Program, which provides business training to new players, players associations have certainly demonstrated a commitment to aiding athletes in their financial health. The documentary “Broke” includes clips of Former NFL player and coach Herm Edwards speaking at a rookie symposium highlighting this fact. “A goal without a plan is a wish,” Edwards told the players in attendance. The Financial Advisor programs and Rookie Symposiums currently in place seem to be just that. Bankruptcy statistics suggest that these programs need broader scope, new life, increased funding, more staffing, and a lot more media attention.

Visit RulingSports.com tomorrow for Part 2 of Mr. Burach’s piece.

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Filed under Bankruptcy, NBA, NFL

August 7, 2012 · 11:25 am

NCAA and Major Professional Sports Leagues Seek to Prevent Sports Betting in New Jersey

On Tuesday, the NCAA, NBA, NFL, NHL and MLB filed a lawsuit in the United States District Court for the District of New Jersey seeking declaratory and injunctive relief challenging the State of New Jersey’s “plan to sponsor, operate, advertise, promote, license and authorize gambling on amateur and professional sports.”  The lawsuit names New Jersey Governor Christopher Christie, the state’s Director of Gaming Endorsement and the Executive Director of the New Jersey Racing Commission as defendants.

On January 17, 2012, Governor Christie signed into law N.J.S.A. 5:12A-1, which according to the lawsuit, “purport[ed] to permit wagering at casinos and racetracks on the results of certain collegiate and professional sports or athletic events.”  According to the lawsuit, the act signed into law by Governor Christie violates federal law.  In particular, the plaintiffs assert that allowing gambling on amateur and professional sports in New Jersey violates the Professional and Amateur Sports Protection Act, and contravenes the Supremacy Clause of the United States Constitution.  The Professional and Amateur Sports Protection Act generally outlaws sports betting, save for certain exceptions, which the plaintiffs argue do not apply to New Jersey’s law.  Notably, those exceptions are:  that New Jersey conducted sports gambling activity prior to the law’s enaction in 1992, New Jersey authorized sports betting in a one-year period following the law’s 1992 enaction or the gambling relates to pari-mutuel animal racing and jai alai games.

The plaintiffs’ lawsuit comes just three weeks before the public comment period for comments on proposed regulations concerning the licensure and operation of sports gambling in New Jersey expires.  The timing is notable, because according to the lawsuit, once the regulations are in place, New Jersey casinos and racetracks will be able to allow their patrons to gamble on sporting events.

Ultimately, the plaintiffs are seeking a declaration that New Jersey’s sports gambling law and its regulations violate Professional and Amateur Sports Protection Act in that the New Jersey law allows sports gambling in contradiction to the federal law.  Additionally, the plaintiffs seek an injunction preventing the implementation of New Jersey’s sports gambling law and regulations.  The plaintiffs are also seeking costs, attorney’s fees and other relief as the court finds appropriate.

The defendants will now have to file an answer in federal court responding to the allegations in the complaint.  Given the nature of this matter, one can expect that it will not be settled out of court.  Rather, those planning on placing bets in New Jersey during the football season will more than likely have to hold onto their money, as the legal process will likely drag out to determine whether New Jersey’s sports betting initiative violates federal law.

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Filed under Gambling, MLB, NBA, NCAA, NFL, NHL

July 3, 2012 · 9:25 am

Which Team Will Sign Dwight Howard?

By:  Richard Braun, Ruling Sports Intern (Twitter:  @RicBraun)

When the Nets traded for Joe Johnson last night, Dwight Howard’s desire to move to Brooklyn took a major hit. As a result, if he wants to maximize his future earnings, Howard is going to need to be open-minded about his future home.

Howard’s next contract will almost certainly be for the maximum salary allowed under the NBA collective bargaining agreement, which for him starts at $15.5 million in the first year of the contract. However, under the new CBA, players who re-sign with the team who owns their Bird Rights can get a maximum of a five year deal with 7.5% annual raises. A free agent, on the other hand, can only get a four year deal with 4.5% annual raises. Any team Howard is traded to gets his Bird Rights, which is why he has such a vested interest in where Orlando trades him – wherever he gets traded to can offer him significantly more money than anyone else. By forcing Orlando to trade him where he wants to go, he is trying to have his cake and eat it too.

His dream of going to Brooklyn, however, now appears unlikely of ever becoming a reality. Even though the Nets and Magic have engaged in trade talks that would send Brook Lopez and filler to Orlando for Howard, the Magic can get better deals elsewhere. Houston, Atlanta, and both Los Angeles teams can all offer much better deals for the Magic than Brooklyn can. And given the falling out Howard has had with the Orlando front office this past year, they are unlikely to do him any favors. And because of last night’s Joe Johnson trade, New Jersey no longer has any cap flexibility going forward, and would not be able to sign Howard as a free agent for anything more than the Mid-Level Exception.

This leaves Howard with two options – play out the season in Orlando and sign elsewhere in the offseason, hoping that Orlando agrees to a sign-and-trade so he can get the 5 year deal, or agree to sign an extension with whatever team he is traded to. If he isn’t traded, he stands to lose around $40 million for the life of the contract because of the lower annual raises and the shorter term deal.

Atlanta in particular now seems to offer Howard more than he originally thought was possible. After shedding the contracts of both Joe Johnson and Marvin Williams (sent to Utah for the expiring contract of PG Devin Harris), Atlanta is now loaded with enough cap space to make a run at two big time free agents next offseason. Not only is Howard potentially a free agent next offseason, but so is Chris Paul. Atlanta doesn’t need to wait that long, however. They could offer all-star big man Al Horford in a deal, which would trump just about any deal any team can offer. Horford has five years left on a deal that pays him $12 million annually, so Orlando could build around him for the long term. Atlanta could throw in promising PG Jeff Teague in a deal as well, and likely would need too in order to make salaries match up (as a non-luxury tax paying team, if Atlanta sends out less than $19.6 million in outgoing salary, they can bring back in that amount plus $5 million). The fact that Atlanta is Howard’s hometown is just icing on the cake. A Dwight Howard-Josh Smith tandem on the court would certainly be a menace defensively, and Atlanta would then be a major player in free agency in 2013.

Houston can also make a better offer than the Nets, and they appear willing to do so despite Howard’s refusal to agree to an extension there. Houston has six first round picks from the past three years, plus PG Kyle Lowry and the expiring contract of SG Kevin Martin. It makes for a decent offer, and certainly would be a better package than what the Cavs and Raptors got in return for their exiting superstars. If Howard was unwilling to resign in Houston, however, it would result in him passing up on a 5th year in his contract and the higher annual raises. He would be dependent on Houston agreeing to a sign-and-trade that would allow him play wherever he wants to play but still get his big contract.

Dallas is another team that has reportedly been on the fabled Howard “wish list”, but like Brooklyn they can offer very little. Dallas could sit on their cap space for one more year and hope Howard signs there as a free agent next offseason, but they risk coming away with nothing in that scenario. And again, Howard would be accepting less money, short of a sign-and-trade.

A sign-and-trade next offseason for Howard, whether he stays in Orlando or is traded to a place he doesn’t want to be long term, is a tricky proposition for him. A sign-and-trade occurs when a player signs with the team that owns his Bird Rights, but he is then traded immediately to another team. The benefit to the player is that he gets a bigger contract than he may have if he had just signed with a team as a free agent. The team, meanwhile, gets something in return in the trade, which usually isn’t much more than a trade exception but is better than nothing. A team gets a trade exception (TPE) when they trade a player into another teams cap space and does not get equal salary in return. You get one year from the date of the trade to use the TPE. Cleveland and Toronto both got trade exceptions when LeBron James and Chris Bosh were sent to Miami, but neither team used them. In fact, usually teams don’t use the TPEs when they get them – the Lakers had one after trading Lamar Odom last off-season, but have yet to use it and likely won’t. What this means for Howard is that he will be at the mercy of whatever team owns his Bird Rights – they could easily decide it is not worth it for them to get the TPE, and just let Howard walk.

All of this leaves Howard in a sticky situation unless he opens his mind about his future home. By overplaying his hand and being stubborn with his demand to go to Brooklyn, he risks missing out on the max contract he can earn. By agreeing to go to Houston or Atlanta, he will be making it much easier for Orlando to trade him and will guarantee him a massive contract extension.

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Filed under Contracts, NBA, NBPA

June 14, 2012 · 1:40 pm

Former NBPA Executive Director Charles Grantham’s Analysis of the New NBA Collective Bargaining Agreement

From 1988-95, Charles Grantham served as the first executive director of the NBPA.  Grantham rose to the ranks of executive director after beginning work with the NBPA upon completing his MBA at the Wharton School at the University of Pennsylvania.  Prior to holding the position of executive director, Grantham served as the NBPA’s vice president of marketing and administration and executive vice president.  The vast roles that Grantham held at the NBPA provided him with extensive insight into the inner-workings of one of the nation’s most recognized labor unions.  As the Miami Heat and Oklahoma City Thunder face off in the 2012 NBA Finals after a shortened season caused by a labor dispute, Ruling Sports asked Grantham to provide his assessment of the labor deal that the NBA and NBPA struck in December 2011.

When asked to assess the deal that the NBPA was able to obtain for players in the new collective bargaining agreement, Grantham noted that when an employer locks employees out during the course of labor negotiations, the bargaining power shifts in such a way, that most of what the union can obtain for employees will not necessarily be characterized as “good.”  Grantham explained, “When you’re in the environment of a lockout, most if it will not be good.  It’s really about maintaining what you have.  At the end of the lockout, you look at how much you were able to keep and what you had to give away.” 

Given the negotiation predicament a union is placed in when management locks employees out, Grantham strongly suggests that unions work to fully negotiate a new collective bargaining agreement prior to the expiration of the collective bargaining agreement that is in place.  If completing a new agreement is impossible, Grantham  believes that the union should agree to extend the in-place collective bargaining agreement for one year, with the hope that a new collective bargaining agreement will be adopted during that time and a lockout or strike can be prevented.

Grantham’s basis for strongly suggesting that the NBPA work to enter into a new collective bargaining agreement or extend the term of an in-place collective bargaining agreement to prevent a lockout is based largely upon the career span of NBA players.  Reports indicate that the average career length of an NBA player is 4.8 years.  Given this, NBA players have a short time frame upon which they can capitalize upon their talents and secure enough financial resources to keep them financially afloat for a lifetime.  Missing games due to strikes or lockouts caused in part by the NBPA’s inability to negotiate a new labor agreement with the NBA, can substantially affect an NBA player’s earnings potential.  Thus, when the NBPA fails to reach an agreement with the NBA before a collective bargaining agreement expires, Grantham says that the union must ask itself, “For what reason may players lose some portion of their salary?”

In the case of the new collective bargaining agreement that the NBPA entered into with the NBA, Grantham does not believe that reason enough existed for the players to lose a portion of their salary as a result of the lockout which shortened the 2011-12 NBA season.  “What did you get in return for the lockout?  I don’t see much that was gained by the NBPA in the lockout.  In the long-term, they got a ten-year deal with an out after six years.  They lost 20 percent of their salary for what?  They came into an abbreviated season, and because the number of games was reduced, there’s the question of whether injuries could have been prevented through training camps and the number of games.  I just can’t put my arms around what the lockout gained for the players.  I know what it gained for management.” Grantham said.

Given Grantham’s belief that the NBPA should strive to adjust its position in labor negotiations in a way to prevent players from missing games, how then does the executive director of the NBPA prepare players for labor negotiations?  According to Grantham, “The biggest component is getting the players mentally prepared for what these negotiations are about.  These are business negotiations; too often, we get bogged down in the legality of the negotiations.  We’re looking at an ever-growing economic pie.  What percentage of that pie do we perceive as being equitable and the players entitled to as the league’s performers?  You really should be preparing them for negotiations five to six years out from when the negotiations begin.  Timing is everything.  There are some things that you have to build in to get the players to understand the value of the union’s representation.  If you tell them that there is a collective bargaining agreement process every few years, and that everything that their life revolves around is contained in that collective bargaining agreement, then you can get them involved.  It takes the players’ support to make the union effective.  “

One way to get players involved in the collective bargaining agreement negotiation process is to educate them upon the processes’ importance in their ability to collect lucrative salaries.  According to Grantham, “What a player has to understand, is that there were hundreds of players before him that fought through this process and enabled him to negotiate a fair share of the NBA’s revenue, so that he could enjoy a six-year, $50 million contract.”

While the most recent NBA lockout largely centered upon the NBA and NBPA’s negotiations over the percentage of revenue players would receive, Grantham believes that in going forward, the NBPA must begin finding leverage for itself by negotiating what he calls “quality of life issues.”  Grantham detailed this notion by explaining, “What’s harming most of our athletes today?  Dementia, mental incapacitation, the inability to maintain financial footing, making transitions after retirement and suicide.  For the first time, you can see that the real issues facing athletes are quality of life issues.  The real issues facing athletes today aren’t necessarily their salaries.  These are all things that unions can take a leadership position in, and a lot of it starts with collective bargaining agreement negotiation.  As salaries start to rise, and revenues continue to, quality of life issues are much easier for the union to obtain during negotiations.”

Finally, if the NBPA is unable to prevent the NBA from locking out players in the future due to stalled labor negotiations, Grantham believes that the union must find a way to circumvent a lockout other than decertification of the union.  Grantham noted, “There was a time that decertification worked, and that was many years ago.  It was before the legal system caught up with the system whereby a union would decertify itself to put more antitrust scrutiny on management.  Back then, the application of decertification was so new, that the machinery wasn’t tuned and the court couldn’t figure out that this was a maneuver.  More recently though, the courts have adjusted.  Ultimately, we all knew when the agreement expired that we would be facing a lockout.  The problem though, is what happens to the players in the meantime?  The NBPA could say, ‘We’ve got this lawsuit going which will allow the guys to keep working.’  That would be great, but that is not the way that the system works.  As a strategic plan, I no longer see the value of decertifying.  If anything, it was demonstrated in the recent NFL and NBA labor negotiations that the unions need to re-think that strategy going forward.”

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May 31, 2012 · 8:24 am

Legal Implications Surrounding the Brooklyn Nets’ Move to the Barclays Center

By:  Richard Braun, RulingSports.com Intern (Twitter:  @RicBraun)

            Whenever a new stadium is approved to be built or remodeled for a team, such as what has recently been approved in Minneapolis for the Vikings and in San Francisco for the Warriors, the controversy typically revolves around how these facilities are financed. The Brooklyn Nets, however, face a different series of legal issues as they prepare to move into their new home, the Barclay’s Center.

            Back in 2003, real estate developer Forest City Ratner proposed the Atlantic Yards project – a multi-billion dollar plan to develop the Vanderbilt Yard and Prospect Heights, a neighborhood just outside downtown Brooklyn. Headed by then-Nets owner Bruce Ratner, the plan would come to include the future home of the Nets, the Barclays Center. About half of the proposed area was already owned by the city, but various private parties owned the remaining half. To acquire control of the remaining half, the state declared the area blighted and seized the property using eminent domain.

            The modern formulation of the limitations of eminent domain can be traced back to the 2005 Supreme Court Case Kelo v. City of New London. The 5th Amendment of the United States Constitution states that private property cannot be taken for public use without just compensation. The Kelo ruling loosened the “public use” requirement, meaning that the land must be used by the public, for simply a “public purpose.” In writing the majority opinion, Supreme Court Justice Stevens allowed “public purpose” to include economic development and the removal of blight, but the Court mostly wanted state legislatures to determine on their own the full extent of their eminent domain power. In dissent, Justice O’Connor, while stating different public uses that the Court has allowed in the past, said that “the sovereign may transfer private property to private parties, often common carriers, who make the property available for the public’s use—such as with a railroad, a public utility, or a stadium.” (emphasis added) What O’Connor is saying any building that is open for the public counts as a public purpose, and that includes stadiums. This passage in the Kelo dissent specifically outlined the authority New York had to seize private land for Ratner’s Atlantic Yards project and the Barclays Center.

            In order to comply with the law as stated by Kelo, the private land still needed to be classified as blighted, and the Empire State Development Corporation (ESDC) in 2006 came to the conclusion that the area was indeed blighted. In their study, the ESDC claimed that it was highly unlikely that blighted conditions on the project site would be removed without public action[1]. This assertion has been met with a great deal[2] of[3] skepticism[4], and eventually the land owners took Ratner and the State of New York to court over what they considered an unconstitutional taking, in violation of the Fifth Amendment. The New York Court of Appeals, however, followed the holdings from Kelo and other cases in upholding the State’s ability to seize private land for the Atlantic Yards project, even if not all of the property being seized was blighted. The property owners also sought to stop the taking by claiming that the actual motivation behind the approval of Atlantic Yards was for the private gain of Forest City Ratner, not any public purpose. The Court disagreed, holding that eminent domain was just a means to an end, the end being the public purpose.

            In the wake of the Kelo decision, 43 states[5] imposed new limitations on their eminent domain laws. New York was not one of them, and as a result it was next to impossible for the residents in the proposed Atlantic Yards area to mount a successful challenge to the State’s eminent domain power. The Court ruled that any property that was underdeveloped was subject to eminent domain.  However, this is a ruling that can apply to just about any piece of property. Further, the New York Court of Appeals was very deferential to the ESDC in their decision, even though the ESDC is an agency appointed by the State that is comprised entirely of unelected officials. As a result, Ratner secured the legal victories he needed in order to begin building the Barclays Center, which is scheduled to open in time for the 2012-13 NBA season.

            The use of eminent domain does not receive the same amount of press as public stadium financing, but it is a popular tool for securing land for new stadiums. Its use is more liberal in New York than in other states, but just about every state can seize private property for a new stadium if the property meets that state’s definition of blight. And unlike public financing, which is typically voted on either by a legislature or public referendum, the public has little recourse in the event of a taking.

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Filed under NBA, Stadiums

May 30, 2012 · 7:20 am

The NBA Draft Lottery: Which Team Should Pick First?

On May 30, 2012, the 2012 NBA Draft Lottery will be held.  Since 1990, the NBA has engaged a weighted lottery to determine which of the fourteen teams that did not make the playoffs in the previous year (or the team to which they traded their draft pick) will receive the top draft pick.  The NBA’s process of selecting which team will receive the number-one draft pick for its draft differs from that of other major sporting leagues.  Other major sporting leagues generally assign draft picks through an opposite win-loss record, meaning that the team with the most losses in the previous season will be awarded the first draft pick.

Under the NBA’s weighted draft lottery system, the NBA team with the worst record in the previous season receives the greatest number of lottery combinations (250).  The rationale behind this is that by giving the team more combinations, it is more likely that they will be awarded with the number one pick through the lottery.  However, this has not always proven true.

Over the last ten years, the following teams have been awarded the number-one pick in the NBA Draft through the Draft Lottery:

Year Team Record Player Selected
2002 Houston Rockets 5th worst Yao Ming
2003 Cleveland Cavaliers Tied for worst LeBron James
2004 Orlando Magic Worst Dwight Howard
2005 Milwaukee Bucs 6th worst Andrew Bogut
2006 Toronto Raptors 5th worst Andrea Bargnani
2007 Portland Trail Blazers 6th worst Greg Oden
2008 Chicago Bulls 9th worst Derrick Rose
2009 Los Angeles Clippers 2nd worst Blake Griffin
2010 Washington Wizards 5th worst John Wall
2011 Los Angeles Clippers (to Cavaliers) 8th worst Kyrie Irving

The chart above notes which teams received the number-one pick in each respective year, and also notes their previous season record.  Notably, only twice in the last ten years have teams ranked last received the number-one draft pick through the NBA Draft Lottery.

This fact obviously raises some concerns, especially for the first NBA Draft Lottery following last year’s NBA lockout.  One thing owners attempted to accomplish through the NBA lockout was parity amongst all 30 NBA teams.  As such, owners attempted to create salary structures and revenue sharing provisions which would allow teams in smaller markets to compete with teams in larger markets.  While market shares are one way in which a league can create parity, allowing teams across the league to draft the greatest talent possible also assists in creating parity.  Understandably, the better players that a team can draft, the more likely that fans will be energized to buy tickets and attend games.  In contrast, the worse players that a team drafts and subsequently, the worse that a team plays, the less likely that fans will purchase tickets to attend games.

Interestingly, though, receiving the number-one draft pick does not always correlate to a team having a successful season in the following year.  The following chart denotes whether the teams who received the number-one draft pick from the lottery made the playoffs in the season following the lottery:

Team Did Team Make Following Year’s Playoffs?
Houston Rockets No
Cleveland Cavaliers No
Orlando Magic No
Milwaukee Bucs Yes (Eastern Conference 8-seed)
Toronto Raptors Yes (Eastern Conference 3-seed)
Portland Trail Blazers No
Chicago Bulls Yes (Eastern Conference 7-seed)
Los Angeles Clippers No
Washington Wizards No
Cleveland Cavaliers No

Notably, only three of seven teams receiving the number-one pick in the last ten years made the playoffs in the season following the draft.  Those teams were:  the Milwaukee Bucs, Toronto Raptors and Chicago Bulls.  Interestingly, neither of the two teams which had the worst ranking and received the number-one pick (i.e., 2003 Cleveland Cavaliers and 2004 Orlando Magic) made the playoffs in the year following the draft.  The Bucs, Raptors and Bulls had the 6th, 5th an 9th worst records, respectively, going into the years that they won the lottery for the number-one pick.  Thus, one could argue that the better a team’s record is in the season before it wins the lottery for the number-one pick, the more likely it is that the team will make the playoffs.

Given the playoff history of teams who have received the number-one pick in the NBA Draft Lottery, which shows that the better a team’s record the previous season, the more likely they are to make the playoffs with the number-one pick on their roster, one must question whether the NBA Draft Lottery needs to be revamped.  This year, the following fourteen teams will be put into the lottery to receive the number-one pick in the 2012 NBA Draft:

2012 Lottery Teams Likelihood of Receiving #1 Pick
Charlotte Bobcats 25%
Washington Wizards 19.90%
Cleveland Cavaliers 13.80%
New Orleans Hornets 13.70%
Sacramento Kings 7.60%
Brooklyn Nets 7.50%
Golden State Warriors 3.60%
Toronto Raptors 3.50%
Detroit Pistons 1.70%
Minnesota Timberwolves 1.10%
Portland Trailblazers 0.80%
Milwaukee Bucs 0.70%
Phoenix Suns 0.60%
Houston Rockets 0.50%

Looking at the teams listed above, there are clearly some whose need for the talent a number-one draft pick brings to a team is greater than others. Clearly, the Charlotte Bobcats, who went 7-59 in the 2011-12 season, are the team needing the talent of a number-one pick the most.  Notably, a number of small market teams will be contending for the lottery pick.  Cleveland, which used its 2003 lottery pick to draft LeBron James in 2003, felt the sting of being a small market team when as a free agent, James decided to sign with the large- market Miami Heat.  The lottery contenders also include small market teams, the Sacramento Kings and Golden State Warriors, whose owners are seeking to relocate their respective team to a larger market.  Then, there is the team which was recently sold to new owners after being held by the NBA, the New Orleans Hornets.  Arguably, given their win-loss records last season, along with the challenges they face with respect to ownership and market issues, Charlotte, Cleveland, Sacramento, Golden State or New Orleans are the most deserving of winning the lottery for the number-one pick.

However, should analysis like this even need to be completed?  Or, would the NBA be better suited by moving to a model in which the team with the worst record in the preceding season receives the number-one draft pick in the following year’s draft?  Arguably, basing draft positions solely upon a team’s ranking would provide a more fair model which better addresses the wide-scale needs of NBA teams.

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April 23, 2012 · 11:55 am

NBA Suspensions and Appeals

Nearly eight years ago, while playing for the Indiana Pacers, Ron Artest was handed the longest suspension in NBA history for his part in the “Malice in the Palace” brawl between the Pacers and the Detroit Pistons.  As a result of that suspension, Artest missed a total of 86 games.  Yesterday, Artest who recently changed his name to Metta World Peace, was ejected from the game between the Los Angeles Lakers and Oklahoma City Thunder, after elbowing the Thunders’ James Harden in the face.  World Peace’s actions yesterday clearly give rise to a suspension.  The real question, however, is how long he will be suspended, and what action he can take if the suspension is lengthy.

The NBA’s constitution grants NBA commissioner David Stern the right to assess fines or suspensions for a variety of reasons, including “conduct on the playing court” and “action taken. . . concerning the preservation of the integrity of. . . the game of basketball.”  Stern can issue fines or suspensions without much recourse by teams, players or the NBPA, so long as the fine is less than $50,000.00 and the suspension is for less than 12 games.  This is because, appeals to punishments of less than $50,000.00 or 12 games are heard by Stern.  Clearly, Stern has little reason to overturn his own sanctions.  As such, a player fined less than $50,000.00 or hit with a suspension of less than 12 games can plan on paying the fine or serving the suspension.

However, if and when Stern issues penalties above these thresholds, teams, players and the NBPA may file a grievance.  This grievance is not heard by Stern, but rather, by the NBA and NBPA’s grievance arbitrator.  In a sense, this is beneficial to the player or team opposing the NBA’s sanctions, as they are able to tell their side of the story to an unbiased third-party.  The hope for the player and team in doing this, is that the grievance arbitrator will completely do away with the punishment imposed by Stern, or severely decrease it.

In order to bring a grievance, several procedural items must be followed.  First, the grievance must be discussed with the party against whom the grievance is being brought against.  This is required with the hope that the parties will be able to settle their dispute before taking it to the arbitrator.  While in some cases this preliminary conversation may lead to a settlement of the dispute, it is again unlikely that Stern would change course and reduce his sanctions.

If the parties are unsuccessful in settling their dispute, then the team, player or NBPA may file written notice of the grievance with the NBPA.  At this point, the portion of the player’s salary that he is losing due to a suspension, or the amount of his fine, is placed in an interest-bearing account until the conclusion of the grievance process.  Ultimately, the parties meet at either the NBA or NBPA’s offices in New York City and the grievance arbitrator hears each side’s case.  Thereafter, a ruling is issued and the player’s fine or suspension is either upheld, modified or thrown out.

While no player wishes for a high fine or lengthy suspension, the benefit of either is that he receives the opportunity to present his case to a neutral third-party.  In this instance, World Peace maintains that his elbowing of Harden’s face was unintentional.  However, the game’s referees, the public at-large and numerous sports pundits seem to think otherwise.  Given World Peace’s history, along with a general outcry against contact in sports which may cause concussions, it is possible that Stern may levy a hefty punishment against World Peace.  If such action is taken, expect World Peace, the Lakers and/or the NBPA to challenge the sanction through the process outlined above.

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March 2, 2012 · 10:14 am

The Case of Clipper Darrell

There’s an old adage, that all it takes to succeed in the world, is for one other person to believe in you.

Then, there’s the idea, that all it takes to succeed in the world, is for one person to tell you that you’ll never become anything.

The latter is what prompted Darrell Bailey, the man better known as “Clipper Darrell,” to pursue superfandom.  According to his own account on his website, http://www.clipperdarrell.com, Bailey was once fired from his job and told by his boss on his way out the door, “that he would never be anything in life without him.” 

What Bailey did thereafter was not conventional.  Rather than starting a business to rival his former employer’s, Bailey set to work on becoming something, namely, the biggest fan that the Los Angeles Clippers had ever seen.  He donned a custom-made blue and red suit to over 400 games.  He painted his house Clippers colors.  He spent $12,000.00 to paint his BMW sedan red, white and blue with Clippers logos. 

There is nothing inherently illegal in being a superfan.  Someone with the level of fanatic devotion of Bailey is something most other teams would love to have the support of.  In fact, according to his website, Mark Cuban offered to make Bailey a Dallas Mavericks employee if he would relocate to Dallas and support the team.

So, where does one begin to cross the link from superfandom into illegal activity?  It starts with trademark law.

Trademark protection initially existed at the state level.  It was created to prevent Merchant A from using the mark of Merchant B to deceive buyers into purchasing Merchant A’s goods.  In 1881, after nearly 100 years of federal attempts to protect company’s goodwill, Congress successfully enacted trademark legislation.  Today, federal trademark protection exists under the Lanham Act, a piece of legislation enacted in 1946.  In relevant part, the Lanham Act allows users of marks in commerce to register the marks as trademarks, and subsequently, protect the trademarks against infringement. 

Protecting the integrity of the trademark from infringement by non-trademark holders is important.  When a trademark holder allows non-trademark holders to use the trademark, it is said that the trademark is “diluted.”  When a trademark becomes diluted, the trademark holder runs the risk of losing trademark protection.  Given the goodwill and monetary rights associated with trademark protection, the risk of a trademark becoming diluted sends most trademark holders into swift action.

As noted above, there is not a legal cause of action against being a superfan.  However, when a superfan profits off of his superfandom by using trademarks associated with a team, the alarm goes off for the team’s trademark holders.

The Lanham Act provides that trademark holders can pursue civil lawsuits against those who, without consent of the trademark holder, “use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive.”  Amongst other things, this section of the Lanham Act protects against “false endorsements.”  Essentially, a false endorsement is one in which a non-trademark holder uses the trademark in a way to give the appearance that the holder of the trademark is endorsing the non-trademark holders activity.

It is likely, that the recent fallout between the Clippers and Clipper Darrell is strictly the result of the Clippers’ desire to prevent the dilution of the team’s trademarks.  LAC Basketball Club, Inc. (the Clippers) is the registered holder of the “Los Angeles Clippers” trademark.  If the Clippers allowed Clipper Darrell to pass himself off as an authorized user of the trademark in areas of commerce (i.e., paid appearances where Bailey appears as Clipper Darrell), then the trademark would arguably be diluted.  Thus, while many have called into question the “cold nature” of the Clippers’ recent actions against Clipper Darrell, it is clear that there is one simple basis for them:  trademark protection.

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January 26, 2012 · 5:56 am

Enough Love? Kevin Love’s Four-Year Contract Extension with the Minnesota Timberwolves

On January 25, 2012, the Minnesota Timberwolves signed PF/C Kevin Love to a four-year contract extension.  Working under the pressure of a looming midnight deadline, upon completion of the contract extension, both parties expressed their happiness that the deal was finalized.

However, in the long run, Love has a lot more to celebrate than the Timberwolves.

Entering the NBA in 2008, Love is currently coming off of his rookie scale contract.  As such, Love was eligible to become the Timberwolves’ designated player.  The designated player provision is a new rule system in place as of the collective bargaining agreement reached between the NBA and players in 2011. Under the old collective bargaining agreement, players, like Love, whose rookie scale contracts were ending, were given the chance to extend their contract with their current team for five more seasons, or seek free agency at the end of their rookie scale contract.  Under the new collective bargaining agreement, most players coming off of their rookie scale contracts can only extend their contracts for four seasons.  That is with the exception of the team’s designated player.  Each NBA team can designate one player whose contract it will extend for five years coming off of a rookie scale contract.  This rule was said to benefit teams, as it in a sense is a cost-saving tool, since they are able to offer shorter contracts to the majority of players coming off of their rookie scale contracts.

Love clearly would have been a solid choice for the Timberwolves to tap as their designated player.  A versatile PF/C, as of the date of his contract extension, Love was both an NBA offensive and defensive leader.  He was fourth in points, averaging 24.9 per game and second in rebounds, averaging 13.9 per game.  In his three seasons with the Timberwolves, Love has amassed impressive career numbers.  Last season, for instance, Love had a 53 game double-double streak.  This streak was the longest double-double streak obtained in consecutive games since the merger between the ABA and NBA.

Love previously indicated that he desired to sign a five-year contract with the team, signaling his interest in remaining in Minnesota and commitment to the Timberwolves organization.  One thing that the NBA is not short of, is young players willing to jump ship after the end of a contract to sail to bigger-market teams.  The extension which the Timberwolves signed Love to, allows Love to opt-out of the fourth year of the contract.  This means, that at the end of three seasons, Love has the option to become an unrestricted free agent and seek the opportunity to play elsewhere.  Given that the Timberwolves did not send Love a message that they are committed to him in the long-term, Love will absolutely take that option, if at the end of three seasons, the Timberwolves are not performing as he sees fit or offering him the money he wants.

Perhaps it’s because the NBA does not consider the double-double an official statistic, that the Timberwolves passed on this excellent opportunity to make Love the team’s designated player.  Yet, one thing is clear:  in not choosing Love as its designated player, the Timberwolves signaled their belief that the long-term future of the club does not rest in Love’s hands.  Most speculate that the Timberwolves will make Spanish basketball sensation Ricky Rubio the team’s designated player.  While the rookie has performed well this year in his role of point guard, it is to be seen if this level of play will remain consistent in upcoming seasons.

If there is one winner in this contract extension, it is Love.  He has the opportunity to become $60-62 million richer playing with a team he is happy to be playing for.  He will be playing there for at least three seasons, and possibly, four.  However, quite possibly the greatest benefit given to him in this contract, is the option to take his talents elsewhere, should the Timberwolves’ performance not match the level of play for a team he wishes to play on.

Needless to say, in three years, we will see whether the Timberwolves offered Love enough “love” in this contract, or whether the team let a tremendous talent slip away, without anything to compensate it for that loss.

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