End of NBA Lockout Came Sooner than We All Thought

End of NBA Lockout Came Sooner than We All Thought
NBA sides together as tentative end to lockout announced.

While Black Friday shoppers camped out all night to secure the best deals, key players in the NBA lockout negotiations committed themselves to a 15 hour ordeal to secure the best deal to return basketball to the hardwood just in time for Christmas. News of the end of the NBA lockout no doubt came as a surprise. When NBA owners presented a take it or leave it proposal to the players on November 10th, the players balked and filed a disclaimer of interest, leading to 2 separate antitrust lawsuits against the basketball league. NBA Commissioner David Stern declared the start of “nuclear winter in the NBA”. Even some of the league’s biggest stars such as Kobe Bryant and Dwayne Wade fielded offers of playing overseas. Each side threatened the increasingly contentious and now litigious battle would effectively eliminate the 2011-2012 NBA season. Some prognosticators even speculated the demise of parts of the 2012-2013 season, or even the end of the NBA as we know it.

Turns out the situation was not as bad as everyone thought. So why did it seem like it?

Negotiations between the NBA and the NBA Players Union started as early as two years ago. The NBA never intended to complete a deal then, and neither did NBA Players Union Executive Director Billy Hunter. The NBA’s primary strategy was clear from the start: they wanted to recoup some of the losses brought on by the downturn of the economy and protect their revenues for years to come and were willing to lock the players out as part of that strategy. Creating greater league wide competitive balance through restricting player movement was a secondary issue. Hunter’s strategy was a professional and personal one: complete a deal without looking like he caved to the owners.

Antagonistic words ensued and negotiations started and stopped over and over again. The NBA claimed it was losing over $300 million while the players union disputed the NBA’s accounting methods. The NBA huffed and puffed over changing its entire structure, including possible contraction of one or more teams. Only when LeBron James bolted Cleveland did the NBA consider rolling back player movement to a pseudo reserve clause system. David Stern even pushed the possibility of rolling back BRI from 57%-43% Players to Owners to 53%-47% Owners to Players. On July 1st, the league locked out the players.

Meanwhile, the NBA Players Union gave percentage point after percentage point (and hundreds of millions of dollars in the process), secretly acknowledging the league was losing money but unwilling to share the burden equally. The players union decided against decertification of its union or disclaiming its union’s interest in bargaining for the players after start of the lockout unlike the NFL Players Union in the NFL lockout earlier in the year.

The effect of the NBA Players Union waiting to disclaim interest played into the NBA owner’s true strategy of receiving 50% of the NBA’s basketball related income (BRI) and starting games no later than Christmas. The NBA could swing as much as $2.5 billion dollars over the life of the deal back into their hands by making the union give more of players BRI. While the NBA was asking the union to concede more of its BRI the league could legislate itself to a better spending model in the process.

The secondary position of restricting player movement was evident in the league’s proposal on November 10th. The league’s proposal eliminated sign and trade deals (like the ones used on LeBron James and Chris Bosh) as well as incorporated harsher penalties for teams operating over the league's luxury tax. The luxury tax proposals included a $3 million limit on the mid-level tax exemption for teams to sign players as opposed to $5 million of non-taxpaying teams, as well tacking on an additional $1 tax penalty to the owners’ proposed luxury tax rate for every incremental dollar spent above the luxury tax threshold for any team over the luxury tax threshold 4 out of any 5 seasons.

Although final details of the new CBA continue to trickle in, it appears the players cared more about individual freedom to contract for their services more than the dollars involved in those contracts. The players were willing to fight over it in the boardroom as well as the courtroom.  Drafting creative out clauses in overseas contracts are further evidence of the position. Players were willing to lose as much as 8% of BRI to keep that freedom.

The NBA cared more about putting additional money its owners’ pockets more than restricting player movement. The NBA discarded its smaller mid-level exception for taxpayers as well as the additional $1 tax penalty. Although several smaller stringent luxury tax provisions remain in the league’s proposal to prevent teams from overpaying marginal talent, the NBA essentially preserves the player movement that resulted in players like Carmelo Anthony moving teams during last season.

The NBA took the biggest barriers to player movement off the table and the deal was essentially done.  The NBA already received what it wanted in lieu of achieving a larger share of revenue. All the NBA needed was convincing by Davd Boies and Jeffrey Kessler,  lawyers representing the players in their anti-trust suit against the owners , what the players were fighting for.

Major ancillary legal issues remain before a final CBA is completed, the lockout is formally lifted, and basketball training camps open December 9th. There are several minor contractual points left to be negotiated which also must be included in a new CBA. All of the lawsuits existing between the parties must be dropped and a settlement reached with named plaintiffs. The union must be reinstated before a CBA is voted on by the players. The disclaimer of interest outweighed union decertification because only 51% of players are required to reinstate the union as the bargaining unit for NBA players as opposed to a more lengthy process with recertification. 15 of 29 owners must ratify the new CBA (New Orleans Hornets are operated by NBA and thus not part of vote). Finally, a simple majority of the league’s 450 players have to approve the new CBA.

The ancillary issues seem now to be a mere formality to the start of the now 66 game NBA regular season. The NBA season will start on Christmas Day with the Dallas Mavericks accepting their championship rings before playing the Miami Heat, its vanquished opponent in the 2011 NBA Finals.

What once appeared a nuclear winter is now a clear new CBA winter and the gift of professional basketball for fans.

Exavier B. Pope, Esq. is an entertainment and sports attorney and legal blogger for Chicago Now. All opinions expressed are those solely of Mr. Pope.

(c) 2011, Exavier Pope

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  • With all the posturing over negotiating positions, I figure it was settled now for two reasons, one of which I mentioned on a basketball forum here:

    1. There seemed to be some bargaining in bad faith. In the NLRA context that would get an unfair labor practice charge, but if the antitrust suit went much further, that would get the owners behind a lockout liable for treble damages (15 U.S.C. sec. 15). The more interesting question would have been if the vendors, et al. would also have had standing to sue.

    2. Neither side wanted to give up the ESPN on ABC big Christmas money.

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