What is David Stern up to with his federal lawsuit?

This week the NBA filed a complaint in New York Federal Court against the NBAPA and a representative class of NBA players, asking the court to make the following declarative rulings:

(1) NO ANTITRUST VIOLATION BECAUSE OF LABOR EXEMPTION:

The NBA asked the court to rule that the NBA’s institution of its player lockout does not violate antitrust laws because it constitutes a legitimate collective bargaining tactic that is protected under the non-statutory labor exemption;

(2) LABOR EXEMPTION WOULD SURVIVE A DECERTIFICATION:

The NBA asked the court to rule that the non-statutory labor exemption would survive any attempted decertification action by the NBAPA because such a move would be a sham;

(3) NO ANTITRUST VIOLATION EVEN IF NO LABOR EXEMPTION:

In the alternative, the NBA asked the court to rule that even if the lockout is not protected under the labor exemption, the lockout still would not violate antitrust laws because it is an action intended to secure a collective agreement that, if instituted, would have pro-competitive results that would outweigh any anti-competitive consequences;

(4) THAT THE COURT HAS NO POWER TO END THE LOCKOUT

Next, the NBA is asking the Court to rule that because the lockout grows out of an on-going labor controversy, and therefore cannot be enjoined by the Court under Norris-LaGuardia. If you remember, the NFL won a similar ruling in July, but in a different federal jurisdiction;

(5) IF THE NBAPA DOES DECERTIFY, ALL CONTRACTS UNENFORCEABLE

Here is the real “nuclear bomb”. On its fifth count, the NBA asked the Court to rule that, in the event the NBAPA does decertify as a union and the Court finds the move legitimate, then every existing NBA player contract unenforceable because each contract was predicated upon terms and conditions negotiated in collective bargaining, and if the collective bargaining relationship ceases to exist, then the player contracts are void.

ANALYSIS

Why did the NBA bring this “preemptive” Complaint? Why would it willingly invite litigation into this labor matter?

I think two things are going on.

First, the NBA is trying to discourage any parallel “litigation strategy” the NBAPA might be considering.  The NBA wants the Court to declare ahead of time that: (a) decertification would be an obvious sham that the Court would not recognize and that would not end collective bargaining and thus would not cause the NBA any antitrust problems by removing the labor exemption; or, (b) if such a move did effectively end collective bargaining, it would not cause the NBA any antitrust problems anyway because of the “Rule of Reason”, and at the same time (c) that a decertification would have the effect of terminating every existing contract for every single player, which would be a disaster for the players.

But beyond that, I think David Stern filed preemptively to establish the matter in a friendly jurisidiction. He probably did not want to see the matter end up in front of someone like the Eighth Circuit judge that originally ruled against the NFL Lockout.

By filing first, Stern established the controversy in his jurisdiction of choice: the Southern District of New York.  Remember, in the ’90s the NBA convinced a judge in the same federal district that a collusive salary cap agreement was actually a “pro-competitive” measure that did not violate antitrust laws even if it were imposed outside the framework of collective bargaining.  The ruling did not establish a specific precedent (because it was essentially an “alternative” ruling, and the appellate court ignored it on appeal).  Nonetheless, a federal judge, applying SDNY precedent arrived at the ruling.  Odds are strong that another similar judge, faced with similar facts, might come to the same conclusion.  And if the NBA got a similar ruling in this case, it would be game, set, match in their on-going negotiations.  The NBA would suddenly wield a large hammer.

So while David Stern claims the NBA filed their suit to avoid “wasting time”, ultimately I don’t think that was his motivation. I think the move was all about building leverage, and establishing friendly jurisdiction.  Stern knows how important each is to his end goal: TOTAL VICTORY.

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