Saturday, April 23, 2011

Pro Basketball Legal Cases 1969-1973

With the success of Connie Hawkins’ suit against the NBA for boycotting him after his name was mentioned in the investigation of the 1960-61 college point-shaving scandal, Doug Moe (who was dismissed after five minutes before the grand jury with all parties agreeing that his involvement was minor) and Roger Brown both filed their own lawsuits to recoup money lost due to the NBA’s boycott of them at the same time.  Moe been drafted by the Chicago Packers, but was blacklisted by the league, and then subsequently worked selling insurance, then did a stint in the United States Army and played professional basketball in Italy before signing with the ABA New Orleans club in 1967.  Brown was the first player signed by the Indiana Pacers in 1967 toiling as a factory worker at the General Motors Plant in Dayton, Ohio and playing AAU basketball for Jones Brothers Mortuaries. Ultimately they met with success as well and settled with the NBA out of court, with Brown remaining in the ABA as a player, and Moe as Larry Brown’s long-time assistant coach.

In 1969, after two years in Oakland, Pat Boone and Ken Davidson sold their ABA franchise to a group headed by Earl Foreman who moved the franchise to play in Washington, DC as the Washington Capitols.  Unhappy with the prospect of playing there, Rick Barry signed a five-year contract to play with the NBA’s San Francisco Warriors (who Barry had left in 1967 to join the Oaks) with the intent of joining them for the 1969-70 season, which the Capitols answered by filing a lawsuit seeking an injunction against the Warriors.  Despite claims from Barry and the Warriors that Barry’s contract with Oakland was not assignable to Washington and that Oakland signed Barry with “unclean hands,” the court ruled otherwise, granting the injunction and in effect forcing Barry to honor the final two years of his ABA contract.

In August, 1969 the ABA’s Denver Rockets signed underclassman Spencer Haywood to a three-year, $450,000 contract, and Haywood was clearly the best player in the ABA during the 1969-70 season averaging 30 points and 19.5 rebounds and winning the league’s MVP award.  Early in 1970 Haywood asked Denver to renegotiate his contract, and he and Denver agreed to rescind their prior agreement and they agreed to a six-year contract totaling an estimated $1.9 million.  The contract (which paid him $47,000 the first two years, $75,000 the remaining four and the rest through a mutual growth fund) was signed by Haywood and his legal guardian on April 1, 1970.  After consulting with an attorney in the summer of 1970 and being advised that the contract did not provide for guaranteed compensation totaling $1.9 million, Haywood gave written notice to Denver in November that he considered his contract to be invalid because of fraudulent misrepresentations made to him and that he disavowed and rescinded the contract.  In December Haywood signed a six-year, $1.5 million contract with Seattle of the NBA, despite the understanding that the NBA considered him to be ineligible because it had not been four years since the graduation of his high school class.  In January, Haywood was given a temporary injunction in U.S. District Court which prevented the NBA from taking punitive action against Seattle for signing him.  That temporary injunction was overturned by an Appeals Court in mid-February, but in early March the U.S. Supreme Court ruled in Haywood’s favor and allowed him to remain in the NBA.  Denver and Haywood then reached an out-of-court settlement clearing the way for him to remain in Seattle.

Filed in April, 1970 amidst rumors of an NBA/ABA merger, the Oscar Robertson Suit (named after the sitting NBPA President) charged the leagues with conspiring to restrain competition through use of the reserve clause, college draft and Uniform Players Contract, looking to block any proposed merger under antitrust laws. In May, 1970 the U.S. District Court in New York agreed, issuing a restraining order to prevent the two leagues form merging and allowing them to continue merger talks in order to make a petition to Congress in order to get an antitrust exemption. When their proposal to Congress was unacceptable to the players the temporary restraining order was changed to allow for an agreement under the provision that it "deal specifically with and indicate the disposition of uniform player contracts, the common draft, and the reserve clause." In February, 1976 the two sides finally settled the Oscar Robertson Suit as they negotiated a system that gave the players limited free agency (with compensation for all player signings until 1980, after which teams held the right of first refusal to match free agent offers), eliminating the perpetual reserve clause included in the Uniform Player Contract, and paying the players $4.3 million in damages (which went to over 500 different players) and $1 million in legal fees. The NBA and ABA then negotiated a merger of the two leagues in June with four clubs - Denver, Indiana, New York and San Antonio joining the NBA.

When Atlanta signed Pete Maravich to a $2 million contract in 1970 it drastically changed their financial position and their relationship with joe Caldwell.  Caldwell held out for a similar contract, and eventually signed with the ABA’s Carolina Cougars in October (5 years, $1.1 million - $150,000 a year, $70,000 in deferred compensation through 1980).  The Hawks filed suit in Federal Court in Greensboro against Caldwell and Southern Sports Corp. of Greensboro in November, claiming the option year of his contract meant they held his rights for the 1970-71 season.  Judge Edwin M. Stanley ruled in Caldwell’s favor in January, 1971 stating that the Hawks had offered Caldwell less than 75% of his previous salary, which violating the reserve clause in his contract and made him a free agent.

After signing with the ABA’s Denver Rockets as an undergraduate in 1969 and being named the league’s Most Valuable Player Spencer Haywood took advantage of a loophole in his contract to sign a six-year $1.9 million contract with the NBA’s Seattle Supersonics in December, 1970 despite the NBA 25-year-old rule against signing college undergraduates. After receiving a temporary restraining order in U.S. District Court in Los Angeles and sorting out a litany of lawsuits Haywood eventually suited up for Seattle (despite the protests of the league and the other clubs). After the temporary restraining order was overturned in the U.S. Circuit Court of Appeals in San Francisco the U.S. Supreme Court ruled in Haywood’s favor, preventing the league from taking action against the Sonics for playing him. Haywood’s challenging of the NBA ‘four-year rule’ lead to players being allowed to enter the league before their high school class had attended four years of college, first through by proving financial hardship, then eventually by simply announcing their intention to turn professional.

In August, 1969 the Carolina Cougars of the ABA signed Billy Cunningham, who was under contract with Philadelphia for the 1969-70 season, to a three-year, $455,000 contract to take effect after Cunningham played out his option year (1970-71) with Philadelphia.  Included in the contract was a provision that if Cunningham played the season with Philadelphia for a salary less than $100,000 Carolina would make up the difference no later than May 15.  In January, 1971 Cunningham orally agreed to sign a five-year, $1.175 million contract with Philadelphia, but the contract was not signed while insurance was being arranged.  In the meantime Cunningham, who was playing for $225,000, filed for payment of the agreement with Carolina.  When Carolina refused to make the payment, Cunningham notified the Cougars that he considered the contract breached, and then signing the contract with Philadelphia.  Carolina then filed a lawsuit in U.S. District Court against Cunningham to prevent him from playing for any team other than Carolina, but the court ruled that Carolina had “unclean hands” and had breached their contract with Cunningham.  On appeal the court ruled that Carolina did not have “unclean hands” and that any breach of the contract was to unsubstantial to justify denying an injunction and issue an injunction for the duration of the contract, and that the contention that Cunningham’s contract was not assignable was meritless.  Cunningham then went on to play from 1971-72 to 1973-74, returning to Philadelphia in 1974-75.

In September, 1971 a Senate subcommittee began hearing on a possible ABA/NBA merger.  In March, 1972 the ABA filed an antitrust suit against the NBA seeking $100 million in damages, charging the NBA and its 14 clubs with violations of the Clayton Anti-Trust Act and asked the court to enjoin the NBA from continuing its illegal practices (which included applying economic pressure which enabled the NBA to sign 39 of 40 “superstars” for the 1967-68 season, using the option clause and inducing ABA players to breach their contracts).  In May Senator Sam J. Ervin Jr., chairman of the Senate antitrust and monopoly subcommittee tells Congress that the proposed merger between the NBA and ABA should be delayed until the league handles the discipline of the owners of the Cincinnati ownership who were revealed to be illegally concealing ownership of a Las Vegas casino, and until Curt Flood’s antitrust suit against Major League Baseball concludes. A Senate Judiciary Committee then agreed in September to a bill that would allow a merger while doing away with the reserve clause, but amendments to the bill (such as no entry fee for ABA clubs, a guarantee of 30% of the home gate to visiting teams, players being signed to one-year contracts with an option for a second year, and prohibition of the television of Tuesday, Thursday and Friday night games during the high school and college basketball season) made the bill unappealing to the NBA, and at the same time, a merger bill which the owners approved by a Senate committee, but did not meet the approval of the Senate or the NBA players.  In March, 1973 Senator Birch Bayh of Indiana introduced a bill in Congress that would allow a merger and do away with the uniform player's contract and the option clause but this alternative proved unpopular with the owners.  A decision by a federal court in August followed authorizing the ABA and NBA to seek a merger without Congressional approval, but the 1971 merger agreement in 1971 expired in January, 1974 and the merger talks stalled.

In 1969 when John Brisker became eligible for the annual NBA draft he went unselected, and the Philadelphia 76ers requested that Brisker be places on their supplemental draft list so they would have negotiating rights to him.  Brisker with Pittsburgh of the ABA and remained there until the club folded in 1972.  Brisker’s agent, AL Ross, then contacted the Seattle SuperSonics of the NBA expressing a desire to play there.  In June, 1972 NBA Commissioner Walter Kennedy then notified Brisker that he was a free agent and Brisker signed with Seattle in August. A week after the signing Philadelphia filed formal charges with Commissioner Kennedy claiming that Seattle’s signing of Brisker violated NBA by-laws since he was still on Philadelphia’s draft list, Kennedy then went on to approve Brisker’s contract with Seattle and Philadelphia brought the signing before the NBA Board of Governors, who ruled that Seattle had violated the league constitution.  Kennedy then fined Seattle $10,000 and awarded their 1973 first-round draft choice to Philadelphia.  A suit was then filed in U.S. District Court in New York to invalidate the finding and compensation and U.S. District Court Judge John B. Tenney ruled that Kennedy had “usurped the authority of the NBA Board of Governors” and enjoined Philadelphia from exercising Seattle first-round draft choice and ruled that the NBA was not a party to the decision and the decision and did not require them to restore the pick to Seattle.  After delaying the NBA draft two weeks the NBA Board of Governors chose to restore the pick to Seattle and then award a bonus selection at the end of the 1973 draft and 1973 and 1974 second-round draft choices from Seattle.

After a stellar rookie season with the ABA’s Virginia Squires, Julius Erving signed with the NBA’s Atlanta Hawks in April, 1972, agreeing to a five-year, $1.5 million contract (compared to the four-year, $500,000 deal Erving had received in 1971).  Erving then filed a suit against the Squires in District Court in New York in June, 1972, seeing the rescission of his contract and a awarding of damages for misrepresentation by his agent, Steve Arnold, who was also an agent for the ABA. Erving’s contract included an arbitration clause that the ABA Commissioner would arbitrate any contract disputes.  However, the Commissioner was listed as a partner of the law firm which represented Virginia.  A District Court had ruled that the Commissioner could not serve as arbiter and ordered the appointment of a replacement.  In an attempt to prevent Erving from playing for the Hawks Virginia filed a counterclaim asking that the case be sent to an arbiter and an injunction be issued to prevent Erving from playing for any other team than the Squires (he appeared in two preseason games as a Hawk).  The court granted the injunction to the Squires and remitted the case to arbitration.  Ultimately, Erving retired to the Squires for the 1972-73 season and was then traded to the New York Nets in 1973, where he was signed to a new contract.

Filed by The Munchak Corp. (owned by Ted Munchak), which assumed the business interests of the Carolina Cougars, who maintained that a typographical error in Joe Caldwell’s original contract with the Cougars multiplied his pension benefits tenfold (claiming that it should have read $60 per month for each year he played professional basketball, rather than $600).  It was ruled that the Cougars were in fact obligated to pay Caldwell pension payments of $6,000 a month beginning at age 55.  An appeal by Munchak was denied in 1980 by the North Carolina Court of Appeals.

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