Thursday, November 1, 2001
Court of Appeal Rejects Raiders Suit Against NFL Over Forced Participation in Europe League
By a MetNews Staff Writer
California courts have no place in resolving a dispute between the Oakland Raiders and the National Football League over required participation in NFL Europe, the Sixth District Court of Appeal ruled yesterday.
The court affirmed a judgment in favor of 16 NFL clubs, league President Neil Austrian, and several related entities, including NFL Properties, the league’s highly profitable marketing arm.
The judgment affirmed yesterday is based on a series of rulings by Santa Clara Superior Court Judge John Herlihy. It disposes of 11 of the Raiders’ 22 causes of action in a broader suit, and was granted after a series of summary adjudication rulings resolved all claims against those defendants.
The remaining defendants include the league itself and Commissioner Paul Tagliabue, who is the league’s chief executive officer and Austrian’s boss.
The claims rejected by Herlihy and the Court of Appeal involve the Raiders’ assertion that the NFL’s rules requiring every club to provide players and financial support for NFL Europe—which is basically used as a marketing tool for the NFL and Rudolph Murdoch’s media properties (one of which, Fox Television, owns 49 percent of the European league)—violate the NFL constitution.
As a full-fledged NFL member club, the Raiders charged, they could not be compelled to participate in a “minor” league—an interpretation, they conceded, not shared by the rest of the NFL. They also claimed that the arrangements between the NFL and the European league violated the NFL constitution’s ban on cross-ownership of other professional football teams by NFL owners.
The broader suit, as Justice Eugene Premo explained yesterday, charges “that NFL leadership has been marked by abuse of power, neglect of duties, mismanagement, discriminatory rule enforcement, inappropriate favoritism, and back room deal-making which has resulted in damage to the Raiders.”
Premo agreed with the trial judge that the courts must abstain from resolving disputes between a private association and its members over the affairs of the organization.
He cited California Dental Assn. v. American Dental Assn. (1979) 23 Cal.3d 346, in which the state high court ruled that courts could not force the ADA to follow the CDA’s tougher ethical standards in considering a dentist’s appeal from a CDA expulsion ruling.
That holding, Premo declared, is not limited to “quasi-judicial cases” and is consistent with general common law.
Premo went on to conclude that the trial judge was correct in rejecting several derivative claims against Tagliabue and Austrian based on alleged mismanagement of the overseas league, NFL Properties, and two employee benefit plans. Those rulings were based on the lack of a proper demand that the NFL and the entities controlling NFL Europe bring the claims themselves.
Premo rejected the contention that such a demand would have been futile.
A claim of demand futility, the justice explained, must be supported by proof that there are reasonable doubts as to the independence of the directors and the validity of the business judgment supporting the challenged transactions. The Raiders, Premo said, presented only “conclusory” facts to support those contentions.
The argument that individual clubs, who appoint the directors of the NFL and related entities, aren’t independent because they need to stay in Tagliabue’s good graces “appears to be a non sequitir,” the justice said.
“This follows because the structure does not permit the commissioner to control the clubs[—]the commissioner is a nonshareholder officer who serves at the pleasure of the directors (clubs),” the jurist reasoned. “ In short, any structural bias stemming from the influence of the commissioner and his appointees naturally flows from the consent of the clubs.”
Copyright 2001, Metropolitan News Company