Legal Principles
Applied to Sport
Management
Chapter 5
Introduction
• Define Sport Law
– Application of existing laws to the sport setting
– Some new laws have been enacted specifically for
the sport industry (e.g., SPARTA of 2004).
• When a dispute arises over interpretation of a rule or
regulation, sport lawyers often represent both the
governing body/association and the participant(s).
• Involvement of sport lawyers occurs because sport
organizations hire lawyers to draft their rules and
regulations; thus, lawyers are needed to interpret
them.
History
• Tort law cases involving participation in sports and
games date from early evolution of tort law (1600s).
• Many of earliest U.S. lawsuits in sport industry
involve professional baseball (first pro sport league).
– Players challenged owners on reserve system that
prevented players from free agency.
– Owners challenged each other on business of
sports.
• First sport law course was offered in 1972 at Boston
College Law School.
• Many sport management programs include Sport
Law class in curriculum.
History (cont.)
• Considerable growth over last 40 years caused by the
following:
– Legal profession more specialized
– Amount of litigation and diversity of cases in sport
industry have increased as more people rely on the
courts to resolve disputes.
– Many athletic associations have adopted own
governance systems with rules, regulations, and
procedures that are based on the U.S. legal system
(e.g., administrative law).
• Skills in legal education are beneficial to many
positions in sport industry (GM, commissioner, etc.)
Key Concepts: Risk Management
• Risk Management: Developing management
strategy to maintain greater control over legal
uncertainty
– Prevention: Keeping problems from arising
– Intervention: Having action plan to follow when
problems do occur
• DIM Process:
– Develop, Implement, and Manage risk
– Include all employees in the three-stage process
Key Concepts: Judicial Review
• Occurs when plaintiff challenges a rule in sport
organization and court determines whether it should
review the sport organization’s decision
• Historically, courts decline to overturn the rules of
voluntary athletic organizations unless certain
conditions exist.
• Plaintiff’s interest is to keep rule from applying or to
force athletic association to apply it differently.
• Plaintiffs seek injunction:
– An order from the court to do or not do particular
action
Key Concepts: Judicial Review (cont.)
• Court will intervene if athletic organization:
– Violates/misapplies its own rule
– Violates a statute
– Violates public policy
– Violates constitutional law and it’s a state
actor
– Acts as arbitrator or in a capricious manner
– Exceeds the scope of its authority
Key Concepts: Tort Liability
• Tort: An injury or wrong suffered as the result of
another’s improper conduct
• Tort law provides monetary damages to compensate
an injured person (plaintiff).
• Intentional torts occur when a person purposely
causes harm to another or engages in activity that is
substantially certain to cause harm.
• Gross negligence occurs when defendant acts
recklessly, and fails to realize harm caused.
• Negligence is an unintentional tort and is the most
common tort that sport managers encounter.
Key Concepts: Tort Liability Negligence
• Sport managers are negligent when:
– They commit an act/omission causing injury to a
person to whom they owe a duty of care
– Negligence imposes a duty to refrain from
careless acts
• Plaintiff must show that sport manager (defendant)
owed plaintiff a duty of care and breached it.
– A duty of care arises from a:
1. Relationship inherent in the situation
2. Voluntary assumption of the duty of care
3. Duty mandated by law
Key Concepts: Vicarious Liability
• Allows plaintiff to sue superior for the negligent acts
of a subordinate
• Employer need not be negligent to be liable.
• Three defenses available:
– Employee was not negligent.
– Employee was not acting within scope of
employment.
– Employee was an independent contractor.
Key Concepts: Agency Law
• Agency describes a relationship in which one
party, the agent, agrees to act for and under
the direction of another, the principal.
• Purpose of agency law is to establish duties
that principals and agents owe each other.
• Agency law is an important component of
player representation industry.
Key Concepts: Agency Law (cont.)
• Fiduciary duties inherent in principal–agent
relationship
– Principal’s fiduciary duties:
1.To comply with a contract if one exists
2.To compensate the agent for his or her service
3.To reimburse the agent for any expenses incurred
while acting on the principal’s behalf
Key Concepts: Agency Law (cont.)
– Agent’s fiduciary duties:
1.To obey
2.To remain loyal (disclose conflicts of
interest)
3.To exercise reasonable care
4.To notify
5.To account (for information and
finances on a reasonable basis)
Key Concepts: Contract Law
• Contract: Written or oral agreement between two or
more parties; creates legal obligation to fulfill the
promises
– Sport managers negotiate and enter into contracts
regularly with or without legal advice.
• A valid contract must have the following elements:
– Offer and acceptance (mutual assent)
– Consideration (value)
– Legality (subject matter legal and not against
public policy)
– Capacity (disaffirm at any time)
Key Concepts: Contract Law (cont.)
• Breach: Contract “promise” is broken
– Full (entire contract) or partial (some provisions)
– Remedy usually money, can be injunction
• Waiver and releases: Contract in which participant
gives up right to sue
– Waiver signed before participation in activity.
– Release signed after participation in activity.
– Legality and enforcement varies in different
jurisdictions.
– Sometimes ruled invalid per public policy.
Key Concepts: Constitutional Law
• Developed from precedents established by courts
applying language of U.S. Constitution and state
constitutions to actions and policies of governmental
entities
• Four constitutional challenges frequently arise in
sports:
– Due process
– Equal protection
– Unreasonable search and seizure
– Invasion of privacy
Key Concepts: Constitutional Law
State Action
• U.S. Constitution and state constitutions do not
apply to private entities.
• Exception:
– In some cases, a private entity is so enmeshed
with the public that courts apply constitution to
private entity.
• When a private entity meets this standard, it is called
a state actor.
Key Concepts: Constitutional Law
Due Process: 5th and 14th Amendments
• The right to notice and a hearing before life,
liberty, or property may be taken away
• Athletic associations may have an impact on
liberty and property interests protected by due
process clauses in Fifth and Fourteenth
Amendments.
– Right to play, right to be free from stigma,
right to work and earn salary, and so forth
Key Concepts: Constitutional Law
Equal Protection: 14th Amendment
• No person shall be discriminated against unless a
constitutionally permissible reason for
discrimination exists.
• Standards of review for discrimination
– Strict scrutiny: On the basis of race, religion, or
national origin
– Legitimate interest: On the basis of gender;
discrimination can occur only if legitimate
interest for doing so exists
– Rational basis: Discrimination on any other status
or classification
Key Concepts: Constitutional Law
Search and Seizure: 4th Amendment
• People have the right “to be secure in their
persons, houses, papers, and effects against
unreasonable searches and seizures.”
– Sport example: The act of taking the
athlete’s urine or blood for drug testing
• Several courts determined that private athletic
associations (such as NCAA) or public high
school drug testing programs do not violate
state constitutional rights.
Key Concepts: Constitutional Law
Invasion of Privacy
• There is no specific amendment for invasion of
privacy; Court has implied one from Constitution.
• Plaintiff must establish that invasion is substantial
and in area for which there is an expectation of
privacy.
• Sport cases most often arise as challenges to drug
testing programs.
• U.S. Supreme Court has held drug testing of high
school athletes is not invasion of privacy (1995).
• Drug testing usually addressed in collective
bargaining.
Key Concepts: Title IX
• Comprehensive statute aimed at eliminating sex
discrimination in educational institutions that
receive federal funding
• In athletics, cases focus on three areas:
– Proportionate scholarship distribution
– Equal treatment, benefits, and opportunities given
in specific program areas
– Degree to which educational institution has
equally and effectively accommodated the
interests and abilities of male and female students
Key Concepts: Antitrust
• Sherman Antitrust Act (1890) goal:
– Promote competition in the free market; break up
business trusts and monopolies and prohibit
anticompetitive activity by businesses
• Application of antitrust laws to leagues left indelible
mark on structure and nature of labor–management
relations.
• Just one major professional league for each sport;
thus, their domination of the market gets challenged
as monopolies violating the Sherman Act
Key Concepts: Antitrust
Antitrust Exemptions
• All professional sport leagues and tours (except MLB)
are subject to antitrust rules.
• 1922 Supreme Court Federal Baseball decision granted
MLB antitrust exemption
• Curt Flood Act (1998): Legislative response to Federal
Baseball
– Allows MLB players to sue their employers under
the Sherman Act
– Exempts the business of baseball (including the
minor leagues)
Key Concepts: Antitrust
Antitrust Exemptions (cont.)
• Labor exemption
– Restrictive practices are exempt from antitrust
law when those practices have been negotiated in
a collective bargaining agreement if:
• Party to CBA
• Mandatory subject for bargaining
• Arm’s length bargaining
• Sport Broadcasting Act of 1961 exempts leagues
from antitrust laws when pooling rights to enter into
national broadcasting rights.
Key Concepts: Labor and Employment Laws
National Labor Relations Act (1935)
• Establishes procedures for union certification and
decertification and rights and obligations of union
and management once a union is in place
• Areas of the sport industry where unions occur are
facility management and professional sport.
• Unions can be found in interscholastic athletics, but
state labor laws apply.
Key Concepts: Labor and Employment Laws
National Labor Relations Act (1935) (cont.)
• Players associations differ from unions in other
industries:
– Turnover rate for sport union members is high
because of short careers of athletes.
– Forces players associations to constantly spread
their message to new members throughout North
America.
– Unions struggle to keep superstars and players on
bench equally satisfied.
– Management in professional sport favors unions
to achieve the labor exemption for restrictive
practices.
Key Concepts: Labor and Employment Laws
Equal Pay Act (1963)
• Prohibits employer from paying one employee less than
another on basis of sex when performing jobs of equal skill,
effort, and responsibility
– Only applies to sex-based discrimination on basis of
compensation
• Four defenses available when disparity is caused by:
– Seniority system
– Merit system being followed in good faith
– System measuring pay on the basis of quality/quantity of
production
– Factor other than sex
Key Concepts: Labor and Employment Laws
Title VII of the Civil Rights Act of 1964
• Federal law prohibiting discrimination in many
settings, including housing, education, and public
accommodations
– Covers employers with 15 or more employees,
but exempts Native American tribes and private
clubs
• Protects all classes of people from dissimilar
treatment on the basis of race, color, national origin,
sex, or religion
Key Concepts: Labor and Employment Laws
Title VII of the Civil Rights Act of 1964 (cont.)
• Defense where being a member of a certain class is
a bona fide occupational qualification (BFOQ)
– Race and color can never be BFOQs
– Examples
• Hiring male resident directors to monitor dorms
at all-male school
• Hiring a Catholic to teach religion at a Catholic
school
Key Concepts: Labor and Employment Laws
Age Discrimination in Employment Act (1967)
• Prohibits employment discrimination on the basis of
age
– Applies to employers engaged in commerce who
hire more than 20 workers for 20 or more
calendar weeks, as well as labor unions and state
and federal governments
• Employer can defend a claim by proving decision
was made because of reasonable factors other than
age.
Key Concepts: Labor and Employment Laws
Americans with Disabilities Act (1990)
• Prohibits employment discrimination on the basis of
disability
• Applicant or employee must be able to perform all
essential functions of the job.
– Employer must assess responsibilities required for
job and assess an individual’s ability to do them.
• ADA extends beyond employment to places of
public accommodation—common in sports
– Places of public accommodation: stadiums,
arenas, golf courses, health clubs, YMCAs
Key Concepts: Intellectual Property
• Trademark
– Word, name, or symbol used by a manufacturer or
merchant to identify and distinguish its goods
from those manufactured and sold by others
• Service mark
– Used to identify the source of an intangible
service (e.g., professional sport franchises’ marks)
• Lanham Act
– Governs trademarks and service marks, gives
protection to the owner of a name or logo, keeps
others from selling goods as the goods of the
original source
Key Skills
• By practicing problem solving, sport managers can
improve their logical and analytical reasoning skills.
• Analysis of case and statutory law will lead to more
persuasive and clear written and oral communication
and build skills.
Putting Skills to Practice
• Managers can effectively manage legal problems by
knowing and understanding law.
• By knowing legal pitfalls, managers can avoid,
prevent, or reduce many kinds of problems.
• A well-written and well-administered risk
management plan can help a sport manager avoid
legal liability.
• Analysis should include a list of issues to consider.
Current Issues: Olympics
• Growing number of challenges over rules and
regulations imposed on participants
• Ambush marketing occurs when an
organization misappropriates trademarks,
logos, and goodwill of events or organization
(e.g., Subway in 2010 Vancouver)
Future Issues: Collegiate Sports
• Challenges may arise regarding NCAA amateurism
rules.
• Key legal issues:
– Restrictions on athletes’ involvement with sport
agents
– Restrictions on athletes’ abilities to market
themselves
– Protection and licensing of collegiate trademarks
and logos
– Gender equity
Future Issues: Professional Sports
• League structure and collective bargaining
negotiations
• Labor peace in pro sport
• Drug testing (BALCO)
– Individual sports
– Team sports
Future Issues: Governmental Scrutiny
• Performance-enhancing drug use
– Amateur and professional sports
• Possibility of taxation of college athletics
– Unrelated business income
• Commercialization of Division I college athletics
• Possibility of BCS antitrust violation