Big news in the sporting and antitrust litigation worlds — which overlap considerably — on Friday when the U.S. Court of Appeals for the Eighth Circuit (which hears all appeals in federal cases filed in the states between North Dakota, Minnesota, Arkansas, and Nebraska), reversed a preliminary injunction imposed by the U.S. District Court for the District of Minnesota prohibiting the NFL owners from imposing a “lockout” on players.

The order is posted here; when I reference Opinion and Bye Dissent below, I’m referring to that PDF. Two judges, Colloton and Benton (both appointed by George W. Bush — hold that thought) voted in favor of dissolving the injunction while the third judge, Bye (Clinton), provided a lengthy dissent.

As with all sports law news, start with Michael McCann. Here’s his Sports Illustrated column on the ruling. It’s a good summary; I’m going to get more technical and legally opinionated than he can get in an SI column. (Short version of our conclusions: we both agree that a request for en banc review is unlikely, but I’m more sanguine on the players’ odds in a petition to the U.S. Supreme Court.) ESPN has a Q&A as well. Howard Bashman has a round-up of stories here.

It’s probably best to start with the court did not do: the court did not rule on any of the antitrust allegations made by the players. The antitrust case filed by the players can continue to go forward. The court didn’t even rule on whether the players were entitled to an injunction under antitrust law; rather, the court held that labor law precluded the current players from obtaining an injunction and restricted the type of injunction the prospective players could get.

That said, it seems unlikely that either the players or the teams (not to mention their coaches, most of whom live in a precarious existence in which they change teams every two years, and so sided with the players in the case in an amicus brief) have the stomach for years of antitrust litigation during a lockout. More likely, the players and the teams intend to use these preliminary rulings on injunctions and antitrust/labor law to inform their bargaining positions. As the New York Times reports:

According to one person briefed on negotiations, the timing of the court’s opinion — issued in the morning — was “awful” and “not helpful” to the talks, unsettling them just as the sides hoped to finish discussions on the revenue split, the heart of the dispute.

The decision emboldened the hawks among both parties, the person said, inspiring some owners to want more concessions from players, and some on the players’ side to want to press their case, with the prospect that the court could allow antitrust damages.

It seems more than a little strange that both sides could feel emboldened by the order, particularly because, on the most basic level, the players lost one of their most valuable bargaining chips, i.e., the District Court order enjoining the lockout. So let’s dig a little bit deeper into what the opinion actually held and what it holds for the future, both for the NFL and for everyday employees.

There’s a lot to unpack here. We’re going to do it with a lot of laterals, like The Play.

The Players’ Antitrust Trick Play

The most obvious question is: why are we talking about antitrust at all? For purposes of antitrust law, the players are all one big union, which makes the teams all one big employer, and so the teams — at least with regard to their dealings with players — are likely a “single entity” under antitrust law. The teams thus can’t, as a legal matter, set up a “contract, combination in the form of a trust or otherwise, or, conspiracy, in restraint of trade” as prohibited by § 1 of the Sherman Act. A “single entity,” as they say, can’t agree or conspire with itself.

The players tried to get around that by busting up their own union. Right before the players–teams agreement ran out, the players ended the NFLPA’s status as their collective bargaining representative. The NFLPA then amended its bylaws to prohibit collective bargaining with the teams and filed requests with the Department of Labor and the Internal Revenue Service to be reclassified as no longer being a union.

At that point, the teams cease to be a “single entity” and turn into 32 separate entities, and that likely subjects them to antitrust scrutiny. As the Supreme Court held last year in American Needle v. National Football League, a separate case:

The NFL teams do not possess either the unitary decision-making quality or the single aggregation of economic power characteristic of independent action.   Each of the teams is a substantial, independently owned, and inde­pendently managed business.

Thus, as the players have argued, the teams can be liable for engaging in anticompetitive practices that violate § 1 of the Sherman Act, including limiting compensation for just-drafted rookie players, capping salaries for current players, and imposing restrictions on free agents like the “franchise player” and “transition player” designations.

At least that’s the players’ theory. Will it work? Maybe not: despite the American Needle case, which came to the Supreme Court on a very narrow issue — that is, if it was legally possible for the teams to be sued under antitrust laws — the Supreme Court and other federal appellate courts have been notoriously hostile to antitrust claims over the past few years. Consider AT&T v. Twombly (I discussed it briefly here; Twombly kicked off the line of cases later generally referred to as Ashcroft v. Iqbal), which dismissed — before even allowing discovery, much less trial — a fairly compelling antitrust case against the telecommunications companies. Truth is, the Supreme Court just plain doesn’t like consumers and employees.

The players at this point have three options:

  1. Giving up on the injunction, and just moving forward with the antitrust case;
  2. Appealing the Eighth Circuit’s injunction opinion either to the full Eighth Circuit sitting en banc (the current opinion was just a three-judge panel); or,
  3. Appealing to the Supreme Court (which they can do even after an en banc appeal, though it takes longer, and if the Supreme Court accepts the case, though certiorari isn’t assured).

I don’t see why they wouldn’t do #2 or #3. My hunch is that they’ll skip straight to #3: the Eighth Circuit is the most Republican Circuit in the nation, with 9 of its 11 active judges appointed by Republican Presidents (7 by George W. Bush), and so they’re arguably the most hostile Circuit towards unions, employees and consumers. With the Supreme Court, the players at least have a chance.

So let’s figure out what happened in the opinion.


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[Update, December 2012: as predicted, case dismissed, and dismissal just affirmed by the Second Circuit. The court didn’t even reach the class action issue, it just denied it on the merits. “[P]laintiffs were perfectly aware that The Huffington Post was a forprofit enterprise, which derived revenues from their submissions through advertising. Perhaps most importantly,

Fred Wilson, the always inspiring venture capitalist, posted yesterday A Challenge To Startup Lawyers:

We closed an investment recently. It was a seed round. Our firm priced the round and we were joined by a number of small VCs and a few well known angels. We agreed to close on a standard set of "light preferred" documents without negotiation. There was no investor counsel on the transaction. We just signed the standard documents which were tweaked to reflect the round size, share price, and board provision in the term sheet.

The legal fees for this transaction were $17,000. I talked this over with the entrepreneur and we agreed to pay the legal bill. We are both big fans of the law firm involved and felt they earned their fees on this transaction.

But I’ve been thinking about this situation over the past week and I’d like to issue a challenge to startup lawyers. When you have a seed stage company that needs to incorporate and close a seed round where all parties are willing to close on a set of standard docs without negotiation and where the investors agree to go without counsel, I think the legal fees for such a transaction should be $5000 or less. I just don’t see why it should cost more than that.

Down in the comments, DGentry asked:

Why have a lawyer involved?

If the documents are standardized and previously vetted, then what value does the presence of a lawyer provide?

To which Fred replied, "maybe that’s what we have to do. but there are filings to be made, the charter, the state forms, etc. i think you need someone to do this stuff for you."

There’s an unspoken requirement in Fred’s reply: Fred doesn’t want just anyone to do that "stuff," or else he’d ask someone at his office to do it. He wants a lawyer to do it.

Why?


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The Wall Street Journal Law Blog points us to a typical deposition transcript out of Cleveland about a copy machine:

Plaintiffs’ lawyer: During your tenure in the computer department at the Recorder’s office, has the Recorder’s office had photocopying machines?

Deponent’s Lawyer: Objection.

PL: Any photocopying machine?

Deponent: When you say

 You know what’s cool? Apparently a billion dollars isn’t cool, according to Sean Parker, no matter what Justin Timberlake in The Social Network might have to say about it.Not a personal injury lawyer.

But what is cool is third-party litigation financing. Don’t believe me? Binyamin Appelbaum at the NYTimes and the Center for Public Integrity did a whole

The American Lawyer describes the case:

Quinn Emanuel Urquhart Oliver & Hedges has been hit with a malpractice lawsuit that claims the firm botched a $48.8 million settlement even as it took in some $12 million in contingency fees.

… The complaint against Quinn Emanuel highlights how — as a result of a contingency