December 23, 2012
As Easy As CBA
Be Careful What You Wish For

by Doug Abrams

This article addresses the current status of CBA negotiations between the NHL and NHLPA from my perspective as an attorney who has litigated complex personal injury cases since passing the Bar in 1979. From my point of view, both sides' negotiation strategies have been bewildering. Both share responsibility for creating a situation where the business enterprise of the NHL has sustained extensive damage.

For full disclosure, I am unashamedly pro-player and pro-union. I have been raised in a pro-union family and hopefully am raising my sons to be pro-union. That said, I intend to be as objective as possible. After all, there is plenty of blame to go around.

Donald Fehr

When the NHLPA decided to make Donald Fehr its executive director, I feared the CBA negotiations were almost certainly doomed to failure. While Fehr brought many desirable attributes to the table—he is intelligent, loyal, a true believer in union causes, and from my point of view, one of the most storied leaders in the history of professional sports—he came to the table with significant baggage, and that was the overriding problem.

Fehr's reputation preceded him. When the 1994 World Series was canceled under his leadership, the sports world learned that he was a man willing to go to extraordinary lengths to achieve a union's goals. At first blush, that attribute would appear to be of tremendous value in negotiations, but that is not so in reality. What the owners saw was an NHLPA already planning to miss a season to prove a point.

When Fehr stalled on the negotiations, the messenger and the message became crystal clear to the owners. They were facing a lead negotiator for whom the Stanley Cup was a curiosity and not a way of life. Further, the owners perceived Fehr as an ideologue obsessed with his legacy rather than focused on making a deal consistent with the economic realities of the NHL and the interests of the players he represented.

Of course, the players' perception is quite different. Fehr is highly skilled in working toward building a consensus, so unsurprisingly, the players are unified to an amazing degree. The union vote of 706-22 to empower the NHLPA with the right to have the union file a disclaimer of interest is a remarkable show of unity.

Gary Bettman

From the perspective of many players, commissioner Gary Bettman is a caricature. He speaks in condescending cadences. He came from a basketball management background and lacked personal gravitas as someone whose career put the game of hockey first.

But it certainly can be said that commissioner Bettman extended the footprint of the NHL across the United States. Likewise, the revenue for the league skyrocketed as did its popularity, despite two prior lockouts with one lost season under his tenure as commissioner.

Nonetheless, for some players, and frankly for some owners, the Bettman persona is easy to dislike. The commissioner has managed to consolidate his power such that it will be very difficult for any group of owners to wrestle any significant part of that power away from him. Bettman also appears to have a difficult time hiding his sense of superiority over those he believes are not as intellectually gifted as himself.

From the players' perspective, Bettman has no understanding of or compassion for their lives as professional athletes. He has never ridden the buses of the Major Juniors or the AHL. He hasn't felt the sting of a hockey puck against bone or the absolute radiance of the last minute goal, stealing victory from certain defeat. He is not one of them, and he has no intention of being one of them. Bettman also disdains Fehr, a man they adore. NHL players, for the most part, are those who have risen to the top based on their skill and their will to win. They are team players almost to a fault. So when Bettman takes on their "captain", he takes on all the players.

In the end, there is no trust between the sides. There is no respect between the sides. There is no sense that either side has heard the other or that facts matter. It's the type of situation where, in our society, litigation beckons.

The inevitability of litigation

In my estimation, both sides made a mistake in the CBA by having no set procedure for good faith mediation of irreconcilable differences. In light of Bettman's tendency toward a scorched earth negotiation strategy, it was a mistake in crafting the last CBA not to have certainty as to the litigation path if negotiations on the next CBA were to fail entirely.

A vote to authorize the NHLPA Executive Committee to determine whether to have the NHLPA file a Disclaimer of Interest was an all but certain outcome once Bettman and Fehr lined up against each other and each refused to be the first to budge. Before the days turned into weeks and weeks turned into months, the NHLPA should have empowered its executive committee with the ability to disclaim its interest as a union. The NHLPA had limited leverage and ability to reach a voluntary settlement. The union merely had the ability to reject offers, to submit offers, and ultimately to decline to sign an agreement. In general, there is strength in numbers for labor disputes, but for a Bettman-led NHL, the goal all along was to first lock out the players and then drive a harsh bargain. The players needed to have moved more quickly to a decision which would have forced the NHL to choose either the path of reasonable compromise and negotiation or litigation.

Accordingly, given the limited leverage of the NHLPA, the chances of a resolution were minimal after the tone was set by the NHL's draconian first offer. Waiting to obtain the permission to file a disclaimer of interest at an early stage and then failing to file the disclaimer seems to have been a significant tactical mistake. Disclaimers of interest are appropriate methods for a union to dissolve its relationship with its members in terms of their union status, but are not intended to be negotiating tools used to enhance leverage. Either the union has a sincere intent to cease representing its members as a union or it does not have any true intention to dissolve. Whether a particular union disclaimer is valid or not depends on the intent and the circumstances.

Given the NHLPA's hesitation to authorize a disclaimer of interest, the NHL launched a preemptive strike by filing a declaratory judgment complaint in the Southern District of New York. The essence of the NHL's Declaratory Judgment Action is its contentions that a disclaimer of interest was not valid, the lockout was a legitimate and well-recognized means of negotiating a collective bargaining agreement, the NHL is not subject to Antitrust laws, and that if the disclaimer of interest were to be held valid, all NHL player contracts are also immediately voided.

In opposing the NHL's Declaratory Judgment Action, the NHLPA, however, can point to the draconian first offer tendered by the NHL as indicative of owners bargaining in bad faith. The subsequent offers by the owners, which almost uniformly appeared as ultimatums rather than points of negotiation, can be cited as further proof of the absence of good faith by the NHL owners. Perhaps the strongest evidence from the NHLPA's perspective is that the owners have literally offered no single benefit or term that is better than the expired CBA. Although there is no requirement that the terms of the expired CBA remain intact, the Court could well find it compelling evidence that the owners are systematically taking away players' compensation and contracting rights.

This litigation would likely cause long-term damage to the owner/player relationship. First, the Court would have to determine who among the spokespersons are appropriate witnesses on the issue of good faith negotiation, and whether the disclaimer of interest was in good faith. The owners themselves are subject to being deposed and the Court would have to decide which emails will be subject to disclosure. The Court's inquiry would include making a determination whether the disclaimer of interest is intended to be a permanent abandonment of the players' right to bargain as a collective group. The Court would have a discovery scheduling order that would ultimately require the production of hundreds of thousands of pages of documents. It would take two or three years for the case to proceed to conclusion if treated as a typical case.

Unfortunately, the NHL's Declaratory Judgment complaint could well lead to unintended results. As mentioned above, the complaint seeks specific remedies, including a finding that the lockout is legitimate and that the disclaimer is a sham. The complaint further seeks to have all existing contracts voided if the disclaimer is valid. In a typical lawsuit involving these kinds of complex issues, the Plaintiff will engage in significant discovery, including depositions of witnesses and expert witnesses. Both Bettman and Fehr may well have waived their attorney-client privilege by their public statements. In other words, the Trial Judge will have to determine if Fehr and Bettman are legitimate witnesses in the case and therefore cannot serve in the role of attorneys.

My impression is that neither side is enthralled with the concept of full-scale litigation. The NHLPA's delay in obtaining the right to disclaim interest seems to play into the NHL's hands. The NHL asserted in its complaint that the NHLPA members were unified behind Fehr. Indeed, the NHLPA has indicated Fehr will stay on as the attorney for the new NHL players' trade association if the disclaimer of interest is filed.

The NHL's Declaratory Judgment Action is based largely on the premise that the NHLPA does not intend to disclaim interest in reality, only in form, as a negotiation ploy. For example, paragraph five of the NHL's complaint sets forth a summary of its contention as to why the disclaimer/decertification was invalid:

5. Whatever the NHLPA may choose to call itself after its decertification or purported disclaimer—such as a "trade association"—it will remain a "labor organization" within the meaning of Section 2(5) of the National Labor Relations Act, 29 U.S.C. 152(5), and thus, the Union's threatened decertification or disclaimer is not intended as a good faith, permanent relinquishment of the right to bargain with the NHL concerning the terms and conditions of employment of NHL players. It instead is designed only to misuse the antitrust laws in an effort to secure more favorable collective terms and conditions of employment and to deny the NHL its right to engage in a lawful lockout.

The case is assigned to a relatively new Federal Court District Judge, Paul A. Engelmayer. Judge Engelmayer is a graduate of Harvard law school and a former U.S. District Attorney. Federal Judges tend to be serious people who are not amused by efforts to use their Courts to leverage negotiations. Whether the NHL and the NHLPA want full scale, intense Federal Court litigation or not, once the litigation was filed, there was no halfway. Absent a quick settlement, there was no turning back once this step was taken.

How both sides have created a lose-lose situation

From a litigation standpoint, the NHL owners and the NHLPA have created a classic lose-lose situation. I can imagine Judge Engelmayer ruling that the NHLPA must make an election and must commit not to reform as a union for one year from the date of his order, or in the alternative, he will rule the disclaimer was not in good faith. I can also envision Judge Engelmayer concluding the NHL owners signed players to contracts and that they each took the risk that a new CBA would fail. Contracts entered into at arms' length, and in this case with the guidance and counsel of experienced NHL-certified agents and attorneys, are meant to be enforced. By filing the lawsuit, the NHL owners invoked the jurisdiction of the Federal Court. The NHLPA may well successfully persuade the judge that the NHL owners were engaged in a harsh, unyielding series of ultimatums, rather than true give-and-take negotiations; and as a result, the union was unable to achieve an agreement satisfactory to a majority of its members. Deputy Commissioner Bill Daly's multiple comments that the owners had gone as far as they were willing to go may well be persuasive on that point.

If the case goes to conclusion, I believe Judge Engelmayer will rule that the lockout will no longer be valid if the NHLPA commits to having its members refrain from union representation for a year. I also predict Judge Engelmayer will rule that all pending contracts are valid and enforceable. I expect him to reason that the owners made a business calculation in entering the contracts when they realized the new CBA negotiations could be unsuccessful, and that in the absence of a specific exclusion, the owners are bound by the terms of the contracts.

Both sides are taking an enormous risk—a risk vastly beyond the differences that separate them. Either side's last best offer, while not perfect, was well within the range of reason and was far superior to the extensive loss of revenue and brand destruction that has occurred throughout the lockout and since these last best offers. Consequently, there is no logical explanation for the conduct of either side. As such, Judge Engelmayer is likely to see both sides as being unreasonable and stubborn. It has been my experience that when judges—and especially Federal Judges—find both sides to be intransigent, they bring to bear the full majesty of their judicial powers.

For any years that end up played without a CBA, the owners will rule the roost. They will forego guaranteed contracts for all but their prized stars. The GMs will be able to sign third and fourth line wings and sixth, seventh, and eighth defensemen at bargain basement prices. There will be no RFAs and likely no draft, although the NHL owners may well ask the Court to appoint a referee to create legal guidelines for them to conduct their business, such as having a draft. In a world without a CBA, players will go to teams that have the best combination of funding and success.

I would not want to be the owner of the Florida Panthers, Phoenix Coyotes, Columbus Blue Jackets, or St. Louis Blues in a world without a CBA. It is proof positive of the adage "Be careful what you wish for, because you just might get it."