• NHL v. NHLPA I

    by Tyler Dellow • December 17, 2012 • Hockey • 18 Comments

    The long hoped for NHL/NHLPA legal war kicked off with a filing in a New York court on Friday. While I don’t practice American law, nor do I practice in these areas in Canada, I’ve got a law degree and a long history of interest in this area, which has led me to read a lot about it over the years. I thought a review of the NHL’s pleading, along with some comment on it, might be of interest to readers. As always, this isn’t legal advice, and if you are considering your own first strike litigation in a multi-jurisdictional dispute involving various competing areas of law with billions of dollars at stake, you should retain and instruct counsel.

    From the beginning: the NHL and its member teams commenced an action on Friday against the NHLPA and various named NHLers, free agents and draft picks, in which it seeks various declarations from the courts in respect of its rights and the rights of the NHLPA and NHL players in the event that the NHLPA disclaims interest in representing the players or decertifies as a union. The action takes the procedural form of a piece of class action litigation. A class action is a vehicle that permits a court to adjudicate various claims that rely on identical facts without having a separate case for each plaintiff or, in this case, defendant. You may have heard of, for example, litigation about breast implants. In those cases, the question of the safety of the implants and what implant makers knew would be common to all parties, even if there might be different issues of damages. The theory is that it’s more economical to deal with these cases by way of a single proceeding rather by way of hundreds of proceedings.

    The NHL is seeking a number of declarations from the court. These include:

    a) A declaration that because the lockout involves or grows out of a labour dispute, the Norris-LaGuardia Act deprives the federal courts of jurisdiction to to issue any restraining order or temporary or permanent injunction against the lockout;

    b) A declaration that, regardless of whether the decertification or disclaimer is legally valid as a matter of labour law, the lockout is lawful and protected from antitrust attack by virtue of sections 6 and 20 of the Clayton Act as well as the Norris-LaGuardia Act and thus cannot result in any legally compensable injury to the NHLPA and players;

    c) A declaration that the lockout is lawful and protected from antitrust attack by virtue of the non-statutory labour exemption from from antitrust law and thus cannot result in any legally compensable injury to the NHLPA and players;

    d) A declaration that, under the implied repeal doctrine, a court is precluded from invoking antitrust laws to condemn the lockout because such an action would be inconsistent with rights of the NHL that are guaranteed and protected by labour laws;

    e) A declaration that any purported harm flows from a statutorily protected lockout and thus cannot serve as the basis for an antitrust damages award;

    f) A declaration that the lockout is lawful under the antitrust laws because, ín a relevant product market for the services of professional hockey players and a worldwide relevant geographic market, it constitutes a reasonable, temporary bargaining measure designed to secure a new collective bargaining agreement, is ancillary to the legitimate purposes of the NHL’s joint venture, and its procompetitive justifications therefore outweigh any alleged anticompetítive effects. As such, the lockout cannot result in any legally cognizable or compensable injury to Defendants; and

    g) In the event that the aforementioned declarations aren’t granted, the NHL requests a declaration that if the NHLPA’s decertification or disclaimer is not deemed invalid by the National Labour Relations Board and the collective bargaining relationship does not otherwise continue, all existing contracts between NHL teams and their players are void and unenforceable.

    I wanted to break up what is going to be a long post a bit, so I’m going to talk about some general stuff in this post and then some more specifics about the declarations sought in a second post. The first thing that you need to understand is that cases like this, as well as the various NFL and NBA litigation, take place at the intersection of labour law and antitrust law in the United States. Gabe Feldman, who’s written several excellent pieces at Grantland about sports labour negotiations that I’ve directed people to, put it this way, in discussing what’s known as the “non-statutory labor exemption”:

    This doctrine essentially requires the players (and all employees) to choose between labor law (and collective bargaining) and antitrust law (and individual bargaining and litigation). If the players choose labor law, an antitrust shield is raised that prevents them from attacking NBA rules under the antitrust laws. To lower the shield and choose antitrust law, the players must end the collective bargaining relationship. That’s why the players dissolved their union through a disclaimer of interest — to surrender their collective bargaining rights and choose antitrust law instead of labor law.

    Basically, these are two different legal regimes that the players can use. If they act collectively as a union, the rules of labour law apply. If they choose to forego unionization, the rules of antitrust law apply. It’s widely believed amongst academics that many of the features of North American professional sport, such as restrictions on players early in their career, drafts and salary caps would be subject to challenge under antitrust law in America if the players ever made the move from collective bargaining under the labour law regime to the antitrust regime, in which individual players would challenge restraints in court as being anti-competitive. As I’ll discuss more in my next post on this, it appears that the NHL may not share that view.

    You may find it odd that the NHL is suing in respect of the NHLPA’s disclaimer/decertification now, given that it has yet to occur. It’s something that various lawyers I follow on Twitter have commented on as being unusual. The general rule in Canada is that courts aren’t interested in hearing hypothetical disputes – there are enough problems in the world that are real and exist and require court time without spending court time on problems that have yet to become real and may never become real.

    It would seem that the NHL sees a jurisdictional advantage in having this litigation conducted in a certain forum. Most of the American law to which I pay attention is social issue stuff – I have a particular interest in death penalty litigation and civil rights litigation. For appellate purposes in the United States, various states are grouped together into circuits. I’ve always understood that, in the American federal court system, certain jurisdictions are seen as having certain ideological slants and being more friendly to plaintiffs or defendants on certain issues. For parties who have some choice of jurisdiction then, they would prefer to have their case heard in a jurisdiction that is more friendly to their position, as they’re more likely to get a result favourable to them.

    In August of last year, the NBA filed a very similar piece of litigation against the NBPA and various NBA players. It was filed in the same jurisdiction as this action. The NBA was represented by the same law firm that represents the NHL. It seems safe to suspect that this is a tactic identified by counsel as being useful in having the dispute between the parties heard in a certain jurisdiction. When the NBPA ultimately did disclaim interest, lawsuits were brought in Minnesota and California, which fall in different appellate circuits. This was discussed by Michael McMann of Sports Illustrated during the NBA lockout last year:

    By filing a lawsuit in the Second Circuit, the NBA also makes it much harder for players to seek redress in a more sympathetic circuit, such as the U.S. Court of Appeals for the Ninth Circuit, which has appellate jurisdiction over courts in California, Oregon and Arizona and which is regarded as more pro-labor than other federal circuits. While players could still file an antitrust claim in the Ninth Circuit, courts there would be poised to refuse to consider the claims given that the relevant issues are already being heard in the Second Circuit

    The NBPA brought a motion to strike the litigation commenced by the NBA. Amongst the grounds raised by the NBPA were that the NBA had sued before there was an issue to be adjudicated by the courts – the “hypothetical dispute” issue that I mentioned above. The NBPA also argued that there were additional pleadings defects, that the court had no jurisdiction and that the NBA was forum shopping. In effect, what the NBPA was hoping to accomplish was to have the issues as between the NBA and NBPA resolved in another jurisdiction. Unfortunately for those of us who find this stuff fascinating, I can’t find a decision and, given the timing of the motion, I suspect that the parties settled their dispute in the form of a CBA, and resolution of these issues was left to another day.

    The “hypothetical dispute” issue is an interesting one and plays into the point that I raised previously about the NHL having drafted its pleading and then sat on it. While I’m certainly no expert on American law as to when a dispute moves from being hypothetical to being one that a court will adjudicate, looking through the material that was filed in the NBPA’s motion to dismiss is interesting. In particular, the NBA’s responding material makes much of comments that were made during the negotiations that it viewed as being threats to abandon collective bargaining and move to antitrust litigation. There was an affidavit sworn by the NBA’s deputy commissioner, Adam Silver, in which he discusses various comments made by the NBPA and its counsel during the course of negotiations that the NBA perceived as being threats that the union would dissolve itself and litigate before it would accept the terms offered by the NBA. The last paragraph of Silver’s affidavit kind of sums up the position:

    The Union’s antitrust position – that at any moment of its choosing, it can render the lockout a per se antitrust violation by decertifying or disclaiming – is having a current impact on the parties’ ability to reach a new CBA. In Mr. Hunter’s words, the NBPA’s “lastresort” bargaining positions on a number of difficult “blood issues” is to disclaim and file an antitrust suit. Thus, when the Union says it will “never” agree to a particular proposal (or characterizes a proposal as a “blood issue”), it is clear to the NBA that the Union is implying thatit would never agree to such a proposal without first engaging in the de-unionization/antitrustlitigation strategy. If the Court were to declare, as the NBA requests in this declaratory judgment action, that such a strategy is based on the Union’s incorrect understanding of the antitrust laws,it is much more likely that the parties would reach a new collective agreement.

    The theory here seems to be that the NBA has an issue that is not hypothetical because the NBPA’s belief as to to its options under antitrust law is affecting the willingness of the union to concede ground on certain positions. The affidavit’s worth reading because it refers to a long list of statements said to have made been by NBPA counsel or Billy Hunter, the head of the NBPA which indicated this. I’ve followed the NHL collective bargaining process pretty closely and the legally trained guys who speak for the NHLPA – the Fehr brothers – have been very circumspect with their comments in public. Similarly, I have a recollection of someone from the NHL, either Bill Daly or Gary Bettman – saying publicly that the NHLPA hadn’t raised disclaimer or decertification with them.

    My sense is that there’s at least something to this issue and that the reason that the NHL had been holding back on the litigation is that it wanted the NHLPA to give it something more overt that it could hold on to in terms of being able to say to a court that the NHLPA’s incorrect beliefs as to its ability to sue successfully under antitrust law was impacting on negotiations. A desire to avoid that would be consistent with neither of the Fehr brothers having raised the issue in negotiations with the NHL.

    There’s one other issue that, to me, floats above the entire piece of litigation. The NHL, uniquely amongst the major sporting leagues of North America, has multiple teams located in Canada. Canadian labour boards have indicated a hesitancy to get involved in NHL-NHLPA disputes, in part, because of the fact that the parties have availed themselves of the National Labor Relations Board in the United States. (Interestingly, to me anyway, when Dwayne Roloson filed a complaint against the NHLPA in 2006 alleging that it had conducted itself properly, the NLRB did not seem to think that jurisdiction was a slam dunk – in concluding that it had jurisdiction, significant weight seemed to be placed on the time that Roloson played for an American team, the Minnesota Wild at the time of the alleged unfair practices.)

    Labour board decisions involve a lot of policy considerations in addition to what’s referred to by lawyers as black letter law – the tribunals consider the impact of their decisions on the bigger picture, in other words, whereas, for example, in a criminal case, a judge is generally just supposed to be applying the law to the facts proven by the evidence. The hesitancy of labour boards to get involved has been driven, in part, by concerns by interfering with an existing bargaining relationship. It’s not black or white stuff – in British Columbia, an order was initially issued certifying the BC-NHLPA before it was set aside on appeal. In other words, I’m not certain that, in a different forum, Canadian courts would be as unwilling to get involved as labour boards have been.

    As a rule (and there are few rules in law with no exceptions; this is no exception to that rule, if you know what I mean), courts don’t adjudicate disputes that have no connection to the jurisdiction in which the court exists. If I punch you in the face in Toronto, a court in England is unlikely to care about it. Now, keep in mind the proposed form of the proceeding here: it’s a class action of the NHL and its member teams against the NHLPA and its member players. This includes Canadian teams and Canadian players who have contracts with Canadian teams.

    At least on the surface, there seem to me to be questions about how, precisely, American federal courts can claim jurisdiction over the relationship between, for example, Taylor Hall and the Edmonton Oilers. Hall is a Canadian citizen, who resides in Canada and is employed by an Alberta business. Similarly, Daryl Katz has entered into contracts of employment for players to work for his business in Alberta. Katz’ company is now suing a class of players that purports to include Taylor Hall. There are seven NHL teams in Canada, employing what I would guess is more than 100 Canadian resident/citizen players. It seems to me that there is a potential issue here with respect to the jurisdiction that American federal courts have over the relationship between Canadian citizens who are resident in Canada, with Canadian businesses.

    Which leads to this: if the NHLPA were to disclaim an interest in negotiating on behalf of its members, it seems to me that action in Canadian courts under the Canadian Competition Act is at least theoretically available to the players, as are other actions in respect of the validity of their contracts. The various American acts referenced in the NHL’s claim don’t apply in Canada. There are 160 or so players contracted to Canadian teams, the vast majority of whom have no connection whatsoever to the United States – they aren’t American and don’t reside there. The Edmonton Oilers might prefer to litigate Taylor Hall’s rights in America but then, if I were married and getting divorced, I might prefer to litigate in Saudi Arabia. My wife might have some objection to that.

    In other words, it seems to me that while Canadian labour boards effectively saying “You guys have decided to operate under the jurisdiction of the NLRB and we’re not getting involved” is one thing, it’s a bit of a different thing for a Canadian court to say “You guys decided to operate under the jurisdiction of the NLRB and, even though you’ve stopped doing that, we’re still not going to get involved in what is now a dispute between Taylor Hall and the Edmonton Oilers.” If I was the NHLPA, considering a response to this, one of the areas that I’d be considering is the extent to which American courts have jurisdiction over the Canadian aspects of the dispute, which are far more significant than in the case of the NBA which has only one team in Canada and likely no cases of Canadian residents making contracts with Canadian teams.

    I’ll leave this post here. If you have any questions about the hypothetical dispute issue or the jurisdictional issue, feel free to leave them in the comments. In my next post, I’ll look a little more closely at what the declarations that the NHL is seeking.

    Email Tyler Dellow at mc79hockey@gmail.com

    About Tyler Dellow

    18 Responses to NHL v. NHLPA I

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    2. OkotoksLawyer
      December 17, 2012 at

      How do you see the NHL getting around the subject-matter jurisdiction/hypothetical issue slap-down they got in Minnesota in that decision you linked to on Twitter? I presume that is why they “beefed-up” all the juicy quotes on decert etc. While that is all well and good, as I understood that Minnesota decision it was effectively a ruling that it’s all hypothetical until there is actually a disclaim/decert vote.

      Keeping in mind I haven’t the least idea how binding authority works in American courts.

      • Tyler Dellow
        December 17, 2012 at

        I don’t know enough about the law here to comment intelligently on this point. I’ve read the facta in the motion to dismiss in the NBA case but I haven’t dug into the cases or anything.

        I do understand that Minnesota’s in a different circuit than New York. District level decisions there, while presumably persuasive, aren’t going to be be binding on the court in NY.

        • December 17, 2012 at

          The Minnesota court has been very sampathic to NFL players read decisions regarding NFL and NFLPA

      • December 17, 2012 at

        The Minnesota court has been very sampathic to NFL players read decisions regarding NFL and NFLPA and the federal judge involved in those suits is a hockey fan (someone wrote an article on him about the hockey lockout)

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    4. rw970
      December 17, 2012 at

      I’ve never seen an NHL contract, but I assume there is a forum selection clause that would give jurisdiction to American courts, if not the Southern District itself (certainly choice of law). Further, isn’t the standard NHL player contract the result of a CBA between an American union and an American association? If the contract says American courts have jurisdiction, and the contract is signed by a sophisticated millionaire, who is also represented by a sophisticated union, why would an American court hesitate to take jurisdiction? This is besides the fact that even Taylor Hall plays many games in the United States (and can be transferred to a team in Oklahoma City at any time). I mean, it’s possible Canadian decision-makers could also elect to take jurisdiction, but I don’t think an American court would find it hard at all to justify taking it for theselves, and that’s without nebulous policy justifications.

      • Jacob
        December 17, 2012 at

        With the expiration of the CBA and no new one signed, I’d think that all contracts, and their forum selection clauses, signed under it’s aegis are no longer in effect.

        • rw970
          December 17, 2012 at

          I don’t understand. Don’t the contracts still exist? Taylor Hall is still under contract with the Edmonton Oilers, he’s just locked out from playing. Injured players are still getting paid, even. When Taylor Hall sues the Edmonton Oilers after decertification/disclaimer, isn’t he relying on his contract? “Let me play!” Even when unsigned players sue the teams for coordination, the nexus of that coordination will be in New York.

          Even if all contracts have been completely destroyed, Taylor Hall has still shown a willingness to be judged in an American court by American labor and competition law, from the fact that he’s played X amount of games in the US, and signed a contract saying so, and is represented by an American union.

      • Tyler Dellow
        December 17, 2012 at

        The SPC is appended to the CBA. There’s no forum selection clause or choice of law clause.

    5. Jacob
      December 17, 2012 at

      Two questions:
      1. Might the fact that (i) Edmonton plays a significant portion of its games in the US, (ii) derives some revenue from TV contracts with US media companies, and (iii) is represented in its labor relations by the NHL, an entity domiciled in the US (as far as I know), have any bearing on jurisdictional issues?
      2. What is the docket number for the NHL’s lawsuit?

      • Tyler Dellow
        December 17, 2012 at

        I’ve no doubt that there are arguments to be made in support of an American court taking jurisdiction. It seems to me that there are also arguments to be made in support of a Canadian court taking jurisdiction. The problem that Katz has, if a Canadian court is willing to assume jurisdiction, is that his business is in Canada. His assets are here. If a Canadian court were to to assume jurisdiction, he’s got a problem in that its the jurisdiction in which his assets are located. The American court, not so much.

    6. Les
      December 17, 2012 at

      Is it possible that US courts would find jurisdiction based on the fact that the league is headquartered in NYC, all contracts have to be approved by the league, in the contract the team is described as “a member of the National Hockey League,” etc.?

    7. CM
      December 17, 2012 at

      I believe I read somewhere (ESPN Maybe) that the NHLPA is a canadian union headquartered in Toronto and is therefor exempt from certain reporting requirements requied in America. Tyler do you think the NHLPA being Canadian will have a role to play before this is through?

    8. Les
      December 17, 2012 at

      I should remember the jurisdictional standards better than I do since I took the bar not that long ago, but a US court should be able to find jurisdiction over Canadian players and teams based on factors such as NHL HQ being in NYC, all contracts requiring league approval, the SPC identifying the team as “a member of the National Hockey League,” etc.

      • Les
        December 17, 2012 at

        I apologize for the multiple postings. I kept getting an error when I tried to post initially.

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