Quiz 1- Sport Law

Law

• a collection of rules and regulations that govern the affairs of a community and are enforced by a legal authority

-U.S. law is developed at the federal (which applies to all 50 states) and state (applies to claims within that particular state) levels

-At both levels, constitutions and all three branches of government have a specific and important role in establishing the law

Three Branches of Government (state and federal)

1) The Legislative Branch: which is responsible for enacting new laws and amending existing laws through federal or state legislatures

2) The Executive Branch: which enforces existing laws through elected officials or administrating agencies

3) The Judicial Branch: through the federal and state court systems

Four Primary Sources of Law are issued by the Three Branches of Government

1) Constitution: a document that sets forth the basic principles of government, including limits on government power

• the federal government and all 50 states have a constitution; each provides citizens many protections

2) Statutes

3) Regulations

4) Case or Common law

• These sources of law are used to develop, define, interpret, and apply the law to specific situations

Legislative Branch

• A congress (or legislature), either state or federal, is the legislative branch of the government, comprised of elected officials in the House of Representatives and the Senate.

-responsible for enacting and amending statutory laws

Statutes: written laws adopted by legislatures at all levels, including federal, state, city, county, and municipal (statutes at the local level are typically called “ordinances”)

-only valid in the area governed by the authority legislature

Ex: An Arkansas statute is only valid in Arkansas (any citizen or visitor participating in an activity in Arkansas must abide by its statutes; however, Arkansas statues don’t have any legal significance in any other state)

• The function of statutes is to create the law within a particular area

Executive Branch

• Enforces existing law through elected officials or administrative agencies, which are created by the executive branch

-when statutes require further explanation to be applied to real-life scenarios, the executive branch or an administrative agency will create regulations

Regulations: rules and administrative codes issued by governmental agencies at all levels, municipal, county, state, and federal. Although they are not laws, regulations have the force of law, since they are adopted under authority granted by statutes, and often include penalties for violations.

Judicial Branch

• Although the legislative branch creates law and the executive branch helps to enforce it, the judicial branch interprets and applies it in disputes (interprets constitutions or other existing laws through federal and state court systems)

Case law: when a court decides in a case and authors a written opinion

Common law: the collective body of case law

-these cases help develop patterns called precedent and are important sources for sport and recreation managers

Precedent

Precedent: exists when a reported opinion of an appeals court establishes the legal rule for future cases involving the same legal question

Two types of precedent

Binding precedent: exists within a specific court system and must be followed by all courts within that system at the same or lower level

Persuasive precedent: can come from any court system

Court System

• a structured collection of individual courts, each court being an “organized body with defined powers, meeting at certain times and places for the hearing and decision of causes and other matters brought before it”

-Multiple court systems can apply the laws

The Primary Court Systems

1) Federal Court Systems

2) State Court Systems

3)Administrative Court Systems (Executive Branch) *

• Vast majority of recreation and sport is in federal and state cour

Federal Court System

District Court: the courts of origin in the federal court system

-if a lawsuit is filed in the federal court system, a district will be the first to hear the case (94 district courts in the U.S.)

• The middle tier in the federal hierarchy is the circuit courts (two geographic circuits and a separate circuit for the District of Columbia)

• The highest tier in the federal court system is the U.S. Supreme Court (USSC)

State Court System

• Each state has its own court system, most states also use the hierarchal approach, separating the courts into three levels

-Most states have trial courts of either limited or general jurisdiction, appellate courts, and a supreme court

• The country courts hear a variety of cases, including those w/ alleged damages under $15,000; the district courts hear civil cases in any amount (and, uniquely, serve as an appellate court for the county courts)

• District courts do not have juries; rather, trials are by judges only and cover civil claims up to $30,000 and other civil and criminal matters

• Circuit courts handle major civil cases, along with more serious criminal matters, and do allow for trial by jury

• In the appellate courts, the court of special appeals serve as the intermediate appellate court, reviewing cases from the trial courts; the court of appeals (aka the “Supreme Court” in other states) is the highest court and hears cases almost exclusively based on certiorari

Certiorari: an order of a higher court to a lower court to send all the documents in a case to it so the higher court can review the lower court’s decision

Administrative Court System

• The executive branch of government includes administrative agencies that create regulations, or rules to operationalize statutes created by legislatures

-Administrative courts sit as fact-finding bodies that apply these regulations

-When disputes arise regarding the implementation of the regulations, evidence is presented to an administrative law judge, who will make a decision

-Selecting the proper court system requires a determination of which court has jurisdiction

Jurisdiction

Jurisdiction: the ability to hear a case and provide remedy

• A court must have both personal jurisdiction, which is power over the parties in the case, and subject matter jurisdiction, the power to hear the type of case

Personal Jurisdiction: to determine if this exists, the court will consider such factors as location of the parties, location of property, or consent to personal jurisdiction by the defendant.

-Usually in the federal court system, a district court determines whether personal jurisdiction exists by using the procedural rules of the state in which it is located

Ex: A federal district court in Michigan will follow Michigan procedural rules

Subject matter jurisdiction: a) the claim must arise from federal statutes or the U.S. constitution (federal question jurisdiction); b) the claim must be filed by (or against) the federal government; or c) the amount in dispute exceeds $75,000 and all opposing parties live in different states (diversity of citizenship jurisdiction). one of the following criteria must be met

• Federal courts have exclusive subject matter jurisdiction over lawsuits b/w states; federal criminal cases; bankruptcy; patent, trademark, copyright, antitrust, + maritime cases; + cases arising out of federal statutes

  • In the State court system, a court has personal jurisdiction over parties that reside in the state, conduct business in it, consent to jurisdiction or have sufficient “minimum contact” w/ the state (a court determines if a party has enough contact with the state to make jurisdiction appropriate)

The Legal Process

• Civil Procedure= Money

• Criminal Procedure= Jail Time

-Cases must be filed in accordance with a well-established legal process

Trial Phase

Standing: the legal right to file a lawsuit

Plaintiff(s): party filing the lawsuit

Defendant(s): party against whom the claim is filed

Class action: large group of people filing lawsuit collectively against defendant

Complaint: a formal pleading to the court that must state both the federal and legal basis for the claim

-it must follow specific statutory requirements regarding form

-when a complaint is filed, the court, will issue a summons, which gives the name and file number of the lawsuit and instructs the defendant to file an answer or other response

-Before filing a complaint, a plaintiff must be aware of the statute of limitations in the selected jurisdiction regarding the claim

Statute of limitations: the maximum amount of time that a potential plaintiff can wait before filing a legal claim; these statutes can vary by court system, both state and federal

Answer: a pleading to the court that responds to each allegation in the complaint

-a defendant may deny the claims, admit the claims, or do either in part

Discovery: when both parties gather facts and information to be used as evidence in a trial

-includes requests for documents, requests to admit facts into evidence (declarations), and depositions (statements given by parties to the case under oath)

-Opposing counsel has the right to discover any material reasonably related to the case

Motions: formal requests made to the court seeking a specific action or decision

-can be made before or after

• Motion for judgment on the pleadings, which asserts that no cause of action exists if everything in the complaint were true; Motion to dismiss, often based on expiration of the statute of limitations or filing in the wrong jurisdiction; Motion for summary judgement, which is filed when one party believes that no questions of fact are present in the case and the legal issue can be decided as a matter of law (generally not made until all discovery has been completed)

Settlement

Settlement: carried out using formal contractual agreements that are filed with the court; often times, settlement agreements are not made public and only the parties to the case know the final result

Alternate Dispute Resolution (ADR): Arbitration or Mediation

-these formalized resolution processes are intended to reach an outcome yet avoid litigation

• The parties may opt not to settle or use ADR and proceed to trial, seeking adjudication

Damages: the monetary compensation awarded as a remedy for defendant liability

• If the defendant is found liable, damages will likely be awarded to the plaintiff

-they can be compensatory (intended to compensate for harm) or punitive (intended to punish the wrongdoer + deter similar future acts) and vary based on the specific claim and individual outcome of each trial

Appellate Phase

• After of trial court adjudicates a claim, either party has the opportunity to file a notice of appeal, requesting that the appropriate appellate court review the case

• Appeals are requested based on legal error- a misinterpretation or misapplication of the law (neither party has the right to appeal simply because they disagree w/ the trial court outcome)

Business Structure

• One of the first, and perhaps most important, decisions a sport or recreation business owner must make is how to organize or structure the new business

Sole Proprietorships

• The most common business structure in the U.S and the easiest one for an individual to start and maintain

-unincorporated business, owned by one individual that has no legal existence apart from the owner

-no paperwork needs to be filed w/ the state; the courts will automatically view the businesses under a separate name, however, even sole proprietorships should file DBA

DBA: stands for “doing business as” and identifies your business’s trade name

-if you fail to do this under your SP, the legal name of business defaults to your name

Advantages: Low cost and ease of formation; Owner has unlimited control; No business or corporate taxes to be paid or additional tax forms to fill out

Disadvantages: No legal existence apart from owner; Unlimited liability; Limited access to capital; Limited lifespan of the business

Partnerships

General Partnerships: an association of two or more persons to carry on as co-owners of a business for profit

-Unless otherwise stated in a partnership agreement, the partners will share in the profit + losses of the business

-it’s important to help avoid future disagreements to have a formal written partnership agreement so that all partners understand their rights, obligations, how profits and losses will be shared

Advantages: Low cost and ease of formation; Conduit or pass-through taxation; Partnership pays no tax

Disadvantages: Fiduciary duty toward other partners (act in best interest); Unlimited joint and several liability; Prohibited from selling/transferring shares despite consent (must dissolve and create whole new partnership)

LLP (Limited Liability Partnership)

• LLP is basically same thing as a general partnership

-under an LLP, partners who did not participate in the wrongdoing receive limited liability w/ respect to the negligence, misconduct, or malpractice of another partner

• In exchange for this protection, states require that the LLP register with the state, pay a fee, and keep certain minimum capitalization or insurance to ensure that the LLP has the funds available to meet their legal obligation in a lawsuit

Limited Partnerships

• Limited partners enjoy limited legal + financial liability for the debts and legal obligations of the partnership

-limited partner is usually only involved as an investor

-if they do become involved in the management of the business, they forfeit their status as a limited partner and become a general partner

Limited Liability Limited Partnership (LLLP)

• Just like LLP, LLLP is intended to provide general partners in a limited partnership protection from personal limited liability for the wrongdoing of other general partners

-no partner is personally liable for the business debts of the partnership

Corporations

Basic Characteristics of all Corporations

1) Must file “Articles of Incorporation” w/ Secretary of State in the state of incorporation, which is usually the state in which the business is located

2) Treated as separate legal entities w/ many of the same legal rights as an individual

3) Because it is a separate legal entity, it can be sold or transferred through the sale of stock (makes changes in ownership simple)

4) The life of a corporation is unlimited

5) all corporations provide the owner or shareholders w/ limited liability for corporate obligations

-the only legal or financial liability of the owner or shareholder is the money they invested into the company

Disadvantages: Cost, formal legal requirements, state + federal rules + regulations, double taxation; More paperwork + record-keeping; Pay taxes on the income of the business (Shareholders must also pay taxes on any distributed dividends); Expense of hiring an attorney

C Corporations- tax decision

• C corporations are the most common form

-they may have an unlimited number of shareholders + issue more than one class of stock

-when considering this remember all taxes are subject to double taxation for shareholders

• Investors love C corporations because of greater access to capital

S Corporations - tax decision

• A corporation can also elect to be taxed under subchapter S of the Internal Revenue Code (IRS)

• To be eligible, corporations must have fewer than 75 shareholders, may not have shareholders who are nonresident aliens, + may only issue one class of stock

• Shareholders can elect to be taxed under conduit or pass-through taxation approach that is similar to partnership or proprietorship

Limited Liability Corporation (LLC)

• LLC’s combine the best of both partnerships and corporations

-provides greater flexibility in management of the business + has less-restrictive ownership requirements

• Not limited to individuals, can include partnerships, corporations, other LLC’s, + foreign entities

• Provides important protection from federal antitrust law

• If the members (partnership) manage the business, each has the same ability to bind the entire business through their acts

• If the members (corporation) manage the business, members do not have the ability to bind the entire business unless they are in the designated group managing the business

Advantages: Pass-through taxation; Limited liability; Unlimited # of Shareholders; Stockownership open to partnerships and corporations; Protection from Federal taxes

Disadvantages: Limited Legal precedent; Conversion expense

Ex: Major League Soccer

• LLC’s file Articles of Organizations

Publicly Traded Corporations

• The main reason for “going public” w/ your business is financial (must be a corporation) *

Disadvantages: 1) The organization must comply w/ all Security and Exchange Commission rules and regulations; 2) Must make full financial disclosures concerning profits + losses; 3) Common shareholders are owners of the corporation, they have certain rights, such as voting on the makeup of the board of directors + attending annual meetings; 4) added costs to the organization (annual board meetings, create + mail annual financial reports, assign staff for investor relations, + incur added legal costs)

Non-profit Corporations

• The major difference between for-profit and nonprofit is that nonprofits do not pay taxes

• Another difference is that nonprofits do not have shareholders or owners of any kind

-they can make a profit, but it can’t be distributed to members

• To qualify a nonprofit must be formed to benefit a) the public, b) a specific group of individuals, or c) its membership

Ex: Green Bay Packers, Syracuse University, the U.S. Olympics Committee, Sierra Club, the LGPA, etc.

Two types of nonprofits

1) eleemosynary (charitable): public benefit + religious (private schools + universities)

2) Mutual benefit: private clubs

Benefits of nonprofit: limited legal liability, being exempt from most federal and state taxes, special advertising and postage rates, free radio and tv public service announcements, + exemption from certain labor law requirements

• For a business to be recognized as a nonprofit, it must file the required forms + meet the established legal requirements

Public Corporations

• These are usually municipalities, such as cities, towns, and villages, but are sometimes formed by special legislative acts to perform some special purpose

-In forming a formal corporation, Congress hopes to take the org. + its operation + finances from the governmental sphere of influence and place them in a more businesslike structure

Ex: National Park Service

Litigation

• The process in which judges and the courts or other administrative agency, such the National Labor Relations Board, decide cases

Alternate Dispute Resolution

• refers to all legally permitted processes of dispute resolution other than litigation

-Three of the most forms of ADR, are negotiation, mediation, and arbitration

• ADR mechanisms are established to settle disputes outside the courts

Fundamental Concepts

Benefits of ADR: Reduced costs (no attorney fees, limited discovery); faster/less time in dispute; greater flexibility in outcome, sides can find creative solutions instead of win/loss; proceedings and outcome can be kept confidential; ADR panelists frequently special in the types of disputes they hear/decide

Limitations of ADR: Although decisions are in writing, they do not create legal precedent; Limited opportunity for appeal (in most cases appeals are only granted for arbitrator bias, or fraud); Enforcement of decisions is voluntary unless bound by contract (ex: collective bargaining agreement); Absence of procedural safeguards if an arbitrator makes an error of law or fact; ADR panelists are usually appointed by one side of the dispute- calling their independence into question

Benefits of Courts: Established legal precedents; due process allows time for discovery of all the facts; enforcement of decisions is backed by the state; everything is public- no hidden deals; decision rendered by independent judges- not involved in sports

Limitations of Courts: Expensive- attorney fees and court costs; can take considerable amount of time to reach a decision; no flexibility- one side wins, one side loses; Because everything is public, the sides are more adversarial; Decision rendered by nonexpert jury or judge

Arbitration

• Arbitration is a process for the settlement of disputes that is based on a combination of private and public law

-the private law component is contract law: the basis for requiring parties to arbitrate

-the public law component is statutes that govern the use of arbitration in lieu of judicial proceedings to adjudicate disputes

• A dispute is submitted to an impartial third party or arbitrator, chosen by parties to the dispute, who listens to the issues of the dispute and then reaches a decision or award

-Arbitration differs from negotiation + mediation in that arbitrator is not concerned with reaching a decision that is agreeable to the disputing party but instead will decide the dispute in favor of one of the parties

• In 1925, Congress passed the Federal Arbitration Act, established to reverse the judicial hostility to arbitration agreements as an alternative to litigation

• In 1955, many states began to adopt the Uniform Arbitration Act (UAA), which established a set of procedures and policy standards for arbitration

Voluntary Arbitration

• the arbitration is mutually agreeable to both parties and may be binding or nonbinding, as determined in advance by the parties or arbitration agreement

Mandatory Arbitration

• the parties are often required to use arbitration as their sole method of addressing unresolved grievances according to the arbitration clause, and the decision is typically binding

5 elements of arbitration agreements

1) Demand for arbitration. A written demand identifying the parties, dispute, and relief or remedy sought must be submitted to the opposing party. The arbitration request is less formal than writing, but the issues to be arbitrated must be clear

2) Response. The opposing party typically responds in writing, stating whether they agree that the issue is subject to arbitration under the existing contract or other relevant documents

3)Selecting of arbitration panel. There are two common approaches to determining the arbitration panel; either the disputing parties agree on an arbitrator, or they each select one arbitrator and a third impartial arbitrator joins them to form an arbitration panel

4)Arbitration hearing. Arbitration hearings allow for the presentation of witnesses, documents, briefs, and closing arguments; the process differs from a trial in that written transcripts are not always provided

5)Decision. After hearing from all parties, the arbitrator renders a decision or award. Although the decision is usually binding, it may be vacated if a) the award was procured by corruption, fraud, or undue means; b) there was evidence of partiality or corruption in the arbitrators; c) the arbitrators were guilty of misconduct in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or d) the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final, + definite award on the subject matter submitted was not made

Negotiation

• refers to a consensual bargaining process in which participants

try to come up with a mutually satisfying agreement on their own or through representatives (sports agent)

-In business and in sports, negotiations are used to informally resolve disputes and complete transactions such as labor contracts (they are more flexible than the courts and other ADR courts)

Four Basic Steps

1) Planning how you will approach the other parties (it is important that you establish a resistance or walkaway point, which is the point you will not go over or under and will end the negotiations)

2) Exchanging information and requests (it is important that you understand the goal of the other side)

3) Offering and Counteroffering concessions and compromises

4) Reaching an agreement that is mutually acceptable to all parties

Bargaining Range: assuming some overlap between what you are willing to accept and what the other side is willing to pay

Two types of negotiating styles

Distributive Bargaining: used as a strategy to distribute fixed resources, such as money, resources, and assets, between the parties

• AKA the “zero-sum negotiations” because the assets or resources that need to be distributed are fixed

-in this style of negotiation, as there is a winner or loser, the aim of each side is to win as much as they can from the other

Integrative Bargaining: negotiations are based on the basic premise that both sides can often reach a better outcome if they work together rather than assuming that their interests are necessarily antagonistic

• AKA “positive-sum negotiations”; instead of looking at how to divide an asset, negotiators work together to achieve an agreement beneficial to both parties by creating value through discussing multiple issues

• require that the parties collaborate, share information on their goals + trust that the other party will not try to exploit the information

• with emphasis on relationship building, this style is a better approach when the parties have a long-term relationship and know that they will be involved in future negotiations

• the purpose of integrative bargaining is to achieve a win-win outcome.

Mediation

• The parties in negotiations often express frustration and difficulty, as they usually have opposing views, conflicting goals, and even personal antagonisms that make negotiations difficult

-although negotiations only involve the parties and the agents (lawyers), mediation adds an independent third party; the mediator

• Mediation, therefore, is facilitated negotiation

• Unlike arbitration, however, mediation is a nonbinding process, and the mediator has no power to impose or force a solution. That does not mean that they are w/o authority. Just having an outsider involved will often promote the parties seek an agreement

-as the mediation is nonbinding + voluntary, either party or the mediator may terminate it at any time

• In some cases, the parties agree to use the mediator as the arbitrator. Called a “med-arb proceeding,” the process provides the mediator/arbitrator addition power to settle the dispute

• Mediation is a good choice for people who seek ongoing relationships

• In 1947, the government created the Federal Mediation and Conciliation Service (FMCS), it is the nation’s largest public agency for dispute resolution and conflict management in the private, public, and federal sectors

-FMCS is tasked with mediating labor disputes around the country; it provides training and relationship development programs for management and unions as part of its role in promoting labor-management peace and cooperation

Collective Bargaining

• Under labor law, once a group of employees votes to join a union, the employees have the right to collectively bargain (negotiate), with their employers over the terms and conditions of their employment

-The final agreement reached by the two sides is called a “collectively bargain agreement” (CBA)

• In some labor matters, the CBA may mandate that certain disputes be resolved through mandatory arbitration or that medication may be sought by either party

ADR in College Sports

• In the contest of intercollegiate sports, NCAA has used ADR approaches to resolve disputes in limited cases

ADR in Recreation

• Arbitration agreements now commonly appear in waivers and service, requiring signers to pursue arbitration, not litigation

ADR in International Sports

• In international sports settings, disputes present several unique issues, such as jurisdiction, choice of law, and the need for nearly immediate decisions

-Because of the issues, the Court of Arbitration for Sport (CAS) was established in 1984

-Consists of three divisions: Appeals Arbitration, Ad Hoc, + Ordinary Arbitration

• CAS will use Swiss law or the law of the country where the involved sport federation is located

-Also has a mediation division, but this is typically only used to settle contractual disputes

-Disputes related to disciplinary matters, such as doping issues + corruption, are excluded

• CAS created an ad hoc division with the task of settling any disputes arising during the Olympic Games withing 24-hour time limit

-In addition to the Olympics, ad hoc divisions have been created for the Commonwealth Games, UEFA European Championship, + FIFA World Cup