Commentary

Chaos, cabal and catastrophe. Oh my!

The wacky world of sports and the law just keeps getting stranger and stranger

Originally Published: September 30, 2009
By Lester Munson | ESPN.com

As we mentioned in the debut of this occasional column a couple of weeks ago, we intend to address the headlines about issues of violence, money, drugs, sex, celebrity and race that seem to scream out at us every day. We'll try to put them into context, have fun with them when appropriate, and offer a look at what is likely to happen in the days, weeks and months to come as the headlines fade away or are pushed aside in favor of the next wave of arrests, investigations, indictments, lawsuits and legislation.

Today, we start with …

Chaos, cabal and catastrophe

If you could somehow listen in on conversations among NHL players as their season opens, you would hear those words, no doubt new to the language of many of the young men playing hockey. "Chaos" is the state of the players and their union after a group of team representatives voted to fire executive Paul Kelly in a 3 a.m. vote at a meeting in Chicago a few weeks ago. "Cabal" is the group of union staffers who organized the coup with considerable help from former NHL MVP -- and former union ombudsman -- Eric Lindros. And "catastrophe" is what many players now believe awaits the union as it stumbles along without the person who could be the best leader it ever had.

[+] EnlargePaul Kelly
Bruce Bennett/Getty ImagesFiring Paul Kelly was a messy affair. And, just as the NHL season is starting, it's about to get messier.
This isn't the first catastrophe in the union's bumpy history. It's at least the fourth, beginning with the thefts and frauds that put Alan Eagleson, the union's founder, in jail in 1998. It continued with Bob Goodenow, who began to reform the union but was baffled by an owner lockout that cost the players an entire season. Then it was Ted Saskin's turn. He was fired after he was caught snooping into players' e-mails.

Kelly, in contrast, brought a unique combination of intelligence and integrity to the union, and many players are wondering why their elected representatives chose to end what he had begun with such promise.

As the 2009-10 season begins, the turmoil facing the players includes:

• A players-only conference call Monday to discuss a possible investigation of the Kelly dismissal.

• Demands from elite players such as Sidney Crosby, Alex Ovechkin and Chris Chelios for an explanation from the player reps on their rationale for firing Kelly;

• A union executive board conference call this weekend in which the Kelly dismissal is certain to be considered.

• Kelly and a team of six talented and experienced attorneys preparing to battle for what remains on his contract: at least $1.5 million, a bonus and a two-year option.

• Player reps who cannot explain their action in firing Kelly.

• A search for a new leader or -- still a possibility -- a reinstatement of Kelly.

Here's a hint for the players: If they want to end the chaos, they must destroy the cabal. That's the way to avoid another catastrophe.

The RichRod rules

Here are a couple of things to keep in mind if ever you find yourself considering a major investment: (1) Never, ever sign a personal guarantee. And (2) Never, ever be the richest and most successful guy in the deal.

Michigan coach Rich Rodriguez finds himself in a $4 million hole because he ignored these two simple and basic rules.

It started out as a decent idea -- building condominiums in nice neighborhoods near college football stadiums in the South. Rodriguez was part of a group that financed the construction of condos near the University of South Carolina's Williams-Brice Stadium in Columbia and participated in another development overlooking Alabama's Bryant-Denny Stadium in Tuscaloosa.

[+] EnlargeRich Rodriguez
AP Photo/Tony DingThe view of the bank's lawsuit is about as ugly as the view from the sidelines was for Rich Rodriguez last season.
But it was a third condo complex -- the one a short walk from Virginia Tech's Lane Stadium in Blacksburg -- that caused the problem. The Legends of Blacksburg was intended to capture "the essence and excitement of college football." Now it's a bunch of boarded-up buildings with nothing under way.

Apparently, this one wasn't going very well from the beginning. Then one of Rodriguez's partners, 71-year-old Clegg Lamar Greene, was accused of looting the project's account and spending some of the money on cosmetic surgery ($18,000 for a face-lift). With the enterprise falling apart, debts began to pile up.

When Rodriguez and his partners failed to pay off a $3.7 million loan that was due in May, the Nexity Bank of Spartanburg, S.C., waited a bit, then filed suit. That could not have been a big surprise to Rodriguez, Greene and the other partners. But it was a surprise that the bank sued only Rodriguez and ignored Greene and the other investors. Bank officials knew that, alone among his partners, Rodriguez had entered the ranks of millionaires and is enjoying a huge contract at the University of Michigan.

Rodriguez was "the financial strength behind the loan," says the bank's attorney, Wesley Few of Columbia, S.C. Even though the others were equally responsible, the bank is looking only at Rodriguez. And, as a result of the personal guarantee he signed for the loan in September 2007, there is not much Rodriguez can do. He could sue his partners, asking that they contribute something toward repayment of the loan, but that might be a costly and ultimately futile effort. Now, because he signed the personal guarantee and because he's the most successful guy in the deal, Rodriguez appears to be on the hook.

The interest payments alone add $933.07 each day, seven days a week.

Supreme Court slam dance

When the National Football League asked the U.S. Supreme Court to consider granting it unprecedented legal and economic power over players, coaches and fellow owners in the form of antitrust immunity, its lawyers suggested that the court use a "more nuanced, economics-based approach." The suggestion came in the league's highly unusual request for review of a case the NFL had already won.

Now, after the high court agreed to hear the case known as American Needle v. NFL, a group of 20 of America's leading economists has given the league the type of analysis it requested: an unsolicited, scholarly, 61-page amicus (friend of the court) brief that explains what the NFL's theory would do to the sports industry. And the "more nuanced, economics-based" analysis from the 20 economists is exactly what the NFL did not want to hear.

In a remarkable display of unanimity for scholars who can argue for hours over a footnote, the economists warn the high court that the NFL's single entity theory would be disastrous in its "net effect on consumers." Their brief says that instead of granting the league monopoly power over coaches and players' unions, the court should bar "collusive activities that are not essential for the efficient operation of the league." Those activities include player contracts, coaching contracts, selection of new owners and movement of teams.

It isn't an easy read, but the economists' report offers powerful arguments in support of their suggestions. They rely heavily on the breakthrough theories of Ronald Coase, a Nobel Prize-winning professor of law and economics at the University of Chicago Law School who first defined the economic dynamics that govern the behavior of firms such as the NFL. Relying on Coase's iconic 1937 essay, "The Nature of the Firm," and research that followed it, the professors conclude that the NFL's demand for single entity status and antitrust immunity would be "anticompetitive" and exactly what the nation's antitrust laws were designed to prevent. If the teams must compete with each other and with other sports in a free market, the economists argue, then fans, players and coaches will benefit.

The lineup of economists is as impressive as their argument. The group includes professors from the California Institute of Technology, the University of Chicago, Stanford, and the University of Michigan. Members of the group have testified as expert witnesses for leagues, teams, unions and broadcasters in previous antitrust litigation. Although most legal briefs cite previous court decisions as authority, the professors rely on 45 books and articles they have produced, all of them focused on the economics of sports.

Although the NFL and its legal team would not comment on the brief, it is a safe bet that the league's lawyers are looking for other economists who will attempt to answer and to blunt the suggestions from this impressive group. The NFL's economists will offer their own version of a "more nuanced, economics-based" analysis.

Prayer + Experts = Acquittal

Although former high school football coach Jason Stinson and his family prayed loudly and often in the corridors of the courthouse in Louisville, Ky., as he faced charges of reckless homicide and wanton endangerment in the heat-related death of a player, it was a panel of expert witnesses that produced a jury verdict of acquittal, according to Stinson's lead attorney, Brian Butler, a highly skilled and talented advocate.

[+] EnlargeStinson & Butler
AP Photo/Michael HaymanWere Jason Stinson, right, and his attorney Brian Butler discussing experts or prayers during this pretrial hearing?
"Our experts showed conclusively that the boy was not dehydrated and that he had not been overextended," Butler said. "The things that were under the control of the coaches were done correctly."

The experts included Dr. George Nichols, the former state medical examiner, and Dr. Daniel Danzl, the chairman of the University of Louisville's department of emergency medicine. Both told the jury that the death of the player, Max Gilpin, was an "accident" and that he might not have lived no matter how he was treated after his collapse during a practice in 94-degree heat. They suggested that his death was the result of Gilpin's use of Adderall, a drug that treats attention-deficit problems; his use of creatine, a supplement for building muscle tissue; and a virus that had bothered Gilpin throughout the day of his death.

The prosecution's answer to the highly credentialed -- and local -- star defense witnesses was a professor from Connecticut, Douglas Casa, who teaches athletic training.

Gilpin's parents have sued Stinson and other coaches for damages in a civil lawsuit that will be tried in January. There will be more expert witnesses, and -- no doubt -- more prayers in the corridors of the courthouse.

Lester Munson, a Chicago lawyer and journalist who reports on investigative and legal issues in the sports industry, is a senior writer for ESPN.com.

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