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Court Ruling Lets NFL Owners Keep 'Lockout Insurance' TV Money

Feb 1, 2011 – 6:47 PM
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Dan Graziano

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NFLPA chief DeMaurice Smith lost his attempt to block the NFL from using $4.5 billion in TV revenue as lockout insurance.DALLAS -- An NFL work stoppage grew a little more likely Tuesday when the players' union lost its bid to block owners from access to roughly $4.5 billion in guaranteed TV contracts.

According to the league and the union, Special Master Stephen Burbank found that two of the TV deals in question (those with NBC and ESPN) violated the agreement between the two parties and awarded damages to the union. But the union had been asking that the $4.5 billion be held in escrow until a new collective bargaining agreement is negotiated, and Burbank declined to do that. The union immediately said it would appeal the decision, and the league declared victory.

"Bottom line on TV case: A new CBA has to be negotiated at the bargaining table, not in the courtroom. Let's make a deal," league spokesman Greg Aiello wrote on Twitter. "If union commits to invest as much time and resources in negotiations as it has in litigation, a new agreement could well be reached by 3/4."

March 4 is the date on which the current collective bargaining agreement expires. The union has said repeatedly that it believes the owners intend to lock players out once that happens, and they cite the TV deals that guarantee to pay off even if no games are played in 2011 as evidence for their claim. In the Special Master case, the union argued that the league gave additional benefits to TV partners in 2010 in exchange for the guaranteed payments for 2011. By doing that, the union argued, the owners violated their obligation to maximize the TV revenue they share with the players.

Union spokesman George Atallah said Burbank did rule that the NBC and ESPN deals violated that agreement but declined to put the money in escrow. The union was hoping the money would be frozen and unavailable to the owners, thereby reducing the owners' leverage in negotiations. They have called the guaranteed TV money "lockout insurance," since they believe it would allow the owners to lock out the players and even cancel games without taking too much of a financial hit.

"The Special Master, who is appointed by a federal judge, found violations of the Reggie White Settlement agreement with respect to the NFL's negotiation of Lockout Insurance in its contracts with ESPN and NBC," the union said in a statement. "Although the Special Master awarded damages, the players intend to file an immediate and expedited appeal before the federal court in Minnesota."

The NFLPA declined to reveal the amount of damages awarded, saying the case had been sealed. Aiello, on his Twitter account, said that the union spent "twice as much on the case" as it received in damages, and called it "a small fraction of contracted TV revenue for 2011."

The union believed it had a strong case and a good chance to win and was clearly disappointed.

"Now for the good news," Atallah wrote on Twitter. "The NFL, until the appeal in Minnesota, still has ~ $4 billion to not play football next year. VICTORY! NFL's reaction to the result of this network case is like a team popping champagne after a preseason game."

The ruling shifts the negotiating landscape in favor of the owners just days in advance of a scheduled Saturday negotiating session between the two sides. The back-and-forth on Twitter probably says more, though, about where things stand. A new deal by March 4 looks extremely unlikely, especially since the owners' incentive to get one done soon took a big hit with Tuesday's ruling.
Filed under: Sports