Legal Look: The NHL's lawsuit and what's next

Eric Macramalla, TSN Legal Analyst

12/17/2012 9:10:43 AM

So it finally happened: the NHL filed a lawsuit in New York asking the Court to declare the lockout legal. The lawsuit is against the NHLPA, but also names 36 players as defendants, including Shane Doan, John Tavares and Henrik Zetterberg. The NHL also filed an unfair labor practice charge against the NHLPA with the National Labor Relations Board alleging that the NHLPA hasn't bargained in good faith.

The NHL sued because it believed there was a real threat the NHLPA was going to file a disclaimer of interest, and after that, sue the league to get the lockout lifted.

Eric, please remind me of the basics first. Thank you.

It's unlawful for competitors to get together and fix the marketplace. If they do so, they open themselves up to antitrust lawsuits. This applies to the NHL, because the 30 team owners are competitors and they get together and place restrictions on the NHL marketplace. Things like a salary cap, free agency restrictions and rookie pay are all on their face antitrust violations. Another thing that is an antitrust violation is the lockout since it's the owners getting together and agreeing to lockout the players.

Here's the thing though. Since these restrictions are inside the protective bubble that is the collective bargaining agreement (CBA), the NHL is protected and the players can't sue for these antitrust violations. So the CBA insulates the NHL from antitrust lawsuits.

That's where a disclaimer of interest comes in. It refers to the NHLPA terminating its right to represent the players, which effectively dissolves the Union. It's not a very formal process, and can be as quick as Donald Fehr sending a letter to the Commissioner's office declaring the NHLPA no longer represents the players as a bargaining agent. Before Fehr does that, he needs the support of the players.

And that leads to the important part - by disclaiming interest, the CBA rule protecting the NHL against antitrust lawsuits may no longer apply and players are now free to sue the NHL for antitrust violations. So a disclaimer of interest is like the pin that bursts the protective CBA bubble.

And the first thing the players would ask a court is to lift the lockout because it's not legal.

Would a player lawsuit be serious?

Potentially yes. If the players took their lawsuit all the way to trial (which would take years and for that reason is completely unlikely), and a court found the lockout was illegal, the NHL could be forced to pay the players hundreds of millions of dollars in damages.

Okay, let's move on. Why did the NHL sue first?

This was a pre-emptive strike. As I wrote in my November 26, 2012 column, A Primer on Decertification, if I was the NHL I'm filing a lawsuit first, I'm doing it yesterday, and I'm doing it in New York. And that's what the NHL did.

The reason the NHL filed a lawsuit first was to secure home court (or ice) advantage. There are some courts in the U.S. that may be more sympathetic to the league, while others may be more pro-player. For example, a court in New York may be more likely to side with the NHL owners, while a court in California, which is seen as a more progressive and pro-employee state, might side with the players. So the idea for the NHL was to file a lawsuit in a state that is more likely to agree with its position that the lockout is legal. By doing that, and doing it first in a jurisdiction where both sides are connected to, it may be tougher for the players to have their case heard in a court they prefer.

Are you saying that the NHL players can't sue somewhere else?

No - they can. Once the NHLPA is dissolved, the players could bring a court action in a state like California. Thereafter, a messy battle could follow as to where the case should be heard – New York or California.

What is the NHL asking for in its lawsuit?

The NHL is asking for two key things. First, in anticipation of the NHLPA possibly disbanding and the players thereafter looking to ask a court to lift the lockout, the NHL is asking the Court to rubber stamp the lockout as legal. As part of its argument, the league is taking the position that a disclaimer of interest filed by the NHLPA would be a sham since it would be nothing more than a transparent ploy to extract leverage in CBA negotiations with a view to getting the NHL to settle on more favourable terms. A disclaimer of interest is a serious move, the league has argued, and it should not be akin to turning a light switch on and off simply when convenient. The NHLPA's disclaimer of interest is therefore not good faith bargaining and is contrary to law.

What's the second thing the NHL is asking for?

They are asking the Court to declare all player contracts void if the NHLPA disclaims or decertifies. The term 'void' means invalid. To read about the differences between decertification and a disclaimer of interest, click here.

Please explain!

The league is arguing that player contracts are governed by the CBA. By extension, if the collective bargaining relationship between the players and the owners ceases by way of the disclaimer of interest or decertification, then the player contracts should also cease. That would make them void. This might be a tough argument for the NHL to make successfully. A judge may not want to strike down the contracts unless the player contracts actually say they are void under these circumstances.

Is the NHL's lawsuit a surprise?

No. The NBA did precisely the same thing in August 2011. The NBA filed its lawsuit in New York, asked the Court to declare the lockout legal, and requested that the Court declare all NBA player contracts void if the NBPA was dissolved by way of a disclaimer or decertification.

So that's why the NHL's strategy sounds familiar.

I hate lawyers.

I understand. I barely like myself.

Why does the NHL lawsuit also name the players personally? That doesn't seem very nice.

Apart from naming the NHLPA as a defendant, the NHL lawsuit also personally names a bunch of players including David Backes, Martin Biron, Scott Hartnell and Shea Weber. There is a reason for that. Under antitrust law, different types of players may suffer different types of damages and be treated differently. So the NHL is looking to account for these different scenarios when asking the court to do certain things. For example, the NHL is aware that in the NFLPA Brady court action related to the NFL lockout, the Appeals Court put the lockout back in place except against "free agents and rookies".

Which side would win in court?

There is a lot of uncertainty in this area. The law is sorted and complex and it's too tough to say which side is favoured in court. The only certainty here is uncertainty.

What's all this NLRB stuff about?

Apart from its lawsuit in New York, the NHL also filed an unfair labor practice charge with the National Labor Relations Board (NLRB). The league has alleged that by threatening to disclaim interest, the NHLPA has failed to negotiate in good faith, which is a violation of labor law.

Is the NLRB complaint another lawsuit?

No, it's not a lawsuit. The NLRB is a specialized U.S. agency charged with dealing with such things as allegations of unfair labor practices. The NLRB gets about 20,000 cases a year from employees, unions and employers covering a range of unfair labor practices.

The NLRB will determine if the NHLPA has bargained in good faith, or if its tactics constitute bad faith bargaining. At first glance, the NHLPA has made substantive offers to the NHL and has seemingly been engaged in these negotiations. Under the circumstances, the NHLPA may say that with no more room for compromise, the disclaimer of interest was filed as a last resort. If that's the case, this would not be an easy case for the NHL. In any event, don't expect a ruling from the NLRB any time soon. They can take months to issue decisions. In the case of the NBA, the NLRB did not issue a decision despite the lockout lasting over 4 months. So the NLRB is unlikely to be a factor in this lockout.

Could the NHL lawsuit and NHLPA disclaimer end the lockout quicker?

Yes. No. Maybe. It's not unreasonable to share the view that the introduction of antitrust litigation will encourage the sides to settle. The players filing their own lawsuit, which would not be a surprise to see this week, may also result in further pressure to get a deal done.

There is a precedent. On November 14, 2011, the NBPA disclaimed interest, filed an antitrust lawsuit the next day, and twelve days later the sides agreed on a new CBA. On the flip side, though, after the NFLPA disclaimed interest, the case didn't settle for another four months. Of course, the difference between the two is that the NBA was missing games, whereas the NFL season wasn't even underway.

Litigation may also make it more likely the entire NHL season will be lost. However, at this point, declaring that the season is done is grossly premature. In 2005, the season was only called off on February 16. So there remains time to bridge the gap between the sides. As the NHL is not looking to fundamentally change its business model as it did in 2005, conventional wisdom suggests that this should get settled and the NHL should return this season. This lockout, however, has been filled with surprises, and as a result, it's tough to know when the sides will strike a deal.

Eric Macramalla is TSN's Legal Analyst and can be heard each week on TSN Radio 1050. You can follow him on Twitter @EricOnSportslaw.