City of San Jose Files Antitrust Suit Against MLB; Fantex IPO Offers Opportunity to Invest in Athletes; Alabama Crimson Tide Pursues Trademark Infringement Claim; Federal Appeals Court Deals New Jersey Sports Gambling a Losing HandFall 2013
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Do You Know the Way to San Jose? -- Part II
As previously reported in a prior edition, the City of San Jose filed an antitrust lawsuit against Major League Baseball (“MLB”) in an effort to expedite the Oakland A’s proposed relocation to San Jose. The Oakland A’s have been waiting for over four years for a committee appointed by MLB Commissioner Selig to make a determination on whether the relocation request should be submitted for a vote by the MLB Clubs. A relocation would require the approval of at least 75% of the MLB Clubs.
U.S. District Court Judge Whyte batted down the City of San Jose’s antitrust claim. Judge Whyte, while acknowledging that MLB’s antitrust exemption is an aberration that makes little sense, nonetheless ruled that the court was bound by prior U.S. Supreme Court rulings upholding MLB’s antitrust exemption. To date, the City of San Jose has not determined whether to appeal the dismissal of the antitrust claim to the U.S. Ninth Circuit Court of Appeals.
The City of San Jose, however, did not entirely strike out in the U.S. District Court. Judge Whyte refused to dismiss the City’s claim against MLB for tortious interference with contract. This claim arose out of a 2011 land purchase option granted by the City of San Jose to the Oakland A’s. The option afforded the Oakland A’s the right to buy half the property needed for a proposed downtown ballpark for approximately $7 million. The City of San Jose argued that it suffered damages as a result of MLB’s failure to allow a relocation vote to be taken. Nonetheless, although the City of San Jose can proceed with its tortious interference claim, Judge Whyte’s overall decision is a major victory for MLB. The tortious interference with contract claim can only result in a damages award, and not a court order directing that the Oakland A’s be permitted to relocate to San Jose.
City of San Jose v. Office of the Comm. of Baseball, Case No. C-13-02787 RMW (U.S. Dist. Ct. - No. Dist. of Cal., Oct. 11, 2013)
Washington Redskins Attract More Attention Off the Field Than on It
The owner of the Washington Redskins of the National Football League (“NFL”) is under an increasing firestorm of pressure to change the team’s name and logo. The initiative to change the Redskins’ name and logo is being led by the Oneida Indian Nation. The Oneida Indian Nation and numerous other groups have charged that the Redskins’ name and logo are out of date, offensive and racist. This controversy has not escaped the eye of President Obama. The President, siding with the opposition, stated, “If I were the owner of the team and I knew that there was a name of my team, even if it had a storied history, that was offending a sizeable group of people, I’d think about changing it.”
Team owner, Daniel Snyder, has remained defiant despite the mounting criticism. In an interview with a nationally distributed newspaper, Mr. Snyder stated that the Redskins name would never change. In a subsequent letter to season ticket holders, Mr. Snyder stated that the team name was never meant to be a label, but instead was, and continues to be, a badge of honor.
The NFL has lent support for Mr. Snyder’s position. In a press release, the NFL referenced the existence of sharply differing views held by Native Americans and fans in general regarding the Redskins’ name and logo. NFL Commissioner Goodell also has defended the Redskins’ name and logo publicly numerous times, including at a recent NFL owners’ meeting when he said that while growing up in Washington, D.C., he never considered the Redskins’ mascot derogatory.
IPO Offers Opportunity to Own a Piece of an Athlete
Fantex, Inc., a San Francisco-based company, launched the first athlete initial public offering (“IPO”) by selling shares of a tracking stock tied to the earnings of Arian Foster, a star running back for the Houston Texans of the NFL. The IPO, which has been registered with the Securities and Exchange Commission, covers the sale of approximately $10 million worth of tracking stock. The proceeds of the IPO will be used to make a $10 million payment to Mr. Foster in exchange for a 20% interest in his future income, which includes the value of his football contracts, corporate sponsorships and other business-related revenues.
Fantex’s capitalization consists of 100 million shares of non-tracking stock which are closely held by founders and financiers. The IPO covers the sale of another one million shares of tracking stock at $10 apiece.
Based on the 37 pages of risk factors contained in the prospectus for the IPO, an investment therein is fraught with risk. The biggest risk is that Mr. Foster’s football career ends prematurely by reason of injury or poor performance. Another risk is that the stock can only be traded on an exchange which is owned and operated by Fantex. Further, the Fantex directors are under no obligation to pay dividends based on positive performances by Mr. Foster. The Fantex directors also have the right, in their sole discretion, to convert at any time all of the IPO stock which tracks Mr. Foster’s performance into non-tracking stock of Fantex at any ratio such directors determine to be fair.
Fantex’s second IPO will cover shares of a tracking stock tied to the earnings of Vernon Davis, a star tight end of the NFL’s San Francisco 49ers. The second IPO will cover the sale of approximately $4 million worth of tracking stock. The proceeds of the IPO will be used to make a $4 million payment to Mr. Davis in exchange for a 10% interest in his future income, which includes the value of his football contracts, corporate sponsorships and other business-related revenues.
Federal Appeals Court Deals New Jersey a Losing Hand
As previously reported in a prior edition, New Jersey sought to legalize wagering on professional and collegiate sports (other than games involving New Jersey colleges or college games played in New Jersey) at New Jersey racetracks and Atlantic City casinos. Sports organizations, including the NCAA, NFL, NBA, NHL and MLB, along with the United States government, argued that the state law would undermine the integrity of professional sports. The opponents further argued that the state law was barred under the Professional and Amateur Sports Protection Act of 1992 (“PASPA”), a federal law that gives just four states (Nevada, Delaware, Montana and Oregon) the right to engage in sports wagering.
A U.S. District Court issued a permanent injunction blocking New Jersey’s effort to legalize sports betting. In issuing the permanent injunction, the court ruled that to the extent New Jersey disagreed with PASPA, its remedy is not through the passage of a state law or through the judiciary, but rather through the repeal or amendment of PASPA in Congress. The State of New Jersey appealed the U.S. District Court decision to the U.S. Third Circuit Court of Appeals.
On appeal, the U.S. Third Circuit Court of Appeals upheld the lower court decision. The appeals court sided with the reasoning of the lower court that to the extent New Jersey disagreed with PASPA, its remedy is not through the passage of a state law or through the judiciary, but rather through the repeal or amendment of PASPA in Congress. To date, the State of New Jersey has not determined whether to seek a rehearing en banc before all of the judges of the U.S. Third Circuit Court of Appeals or file petition for certiorari with the U.S. Supreme Court.
NCAA v. Gov. of State of NJ, No. 13-1713 (U.S. 3d Cir. Ct. of App., Sept. 17, 2013)
Alabama Crimson Tide Pursues Trademark Infringement Claim in Black and White
Paul “Bear” Bryant, the legendary head football coach of the Alabama Crimson Tide, was easily recognized on the sidelines by his signature houndstooth fedora. The University of Alabama board of trustees has filed a federal trademark infringement and unfair competition claim against Houndstooth Mafia Enterprises, LLC (“HME”), claiming HME’s use of a houndstooth pattern on its merchandise infringes with the University of Alabama’s merchandise. The lawsuit also seeks to overturn a ruling by the U.S. Patent and Trademark Office Trademark Trial and Appeal Board (the “Board”) this past July that permitted HME’s 2007 trademark registration application to be recognized for caps and t-shirts. The lawsuit further seeks to block a trademark application filed by HME this past July covering stickers (bumper and otherwise) and transfers.
The Board in its ruling this past July found that the evidence did not establish that the University of Alabama enjoyed substantially exclusive use of the houndstooth pattern either in the State of Alabama or in its markings. In particular, the Board stated in its ruling that there was no evidence that the hats worn by Coach Bryant were one-of-a-kind, custom-designed, or anything other than commercially available men’s fedora hats. The Board further stated that the mere fact that Coach Bryant was recognized for wearing patterned fedoras at football games does not endow either Coach Bryant (or his estate) or the University of Alabama with trademark rights in the houndstooth pattern.
Just Saying . . .
On June 20, 2013, Herrick, Feinstein LLP welcomed over 100 members of the sports business and digital media communities to our offices for Herrick’s Digital Media Sports Conference. One of the key “take-aways” from the conference was that “TV Everywhere” would become an important fixture on the digital media sports landscape. At a sports media event held in New York City on October 28, 2013, NBA Commissioner David Stern was quoted as saying that TV Everywhere will “eventually become the norm.”
Our Summer 2013 edition stated that in order for the Oakland A’s to relocate to San Jose, either the consent of the San Francisco Giants or approval by at least 75% of the MLB Clubs was required. This statement should not have referenced the consent of the San Francisco Giants.
For more information on this or other sports matters, please contact:
Irwin A. Kishner at [email protected] or +1 212 592 1435
Daniel A. Etna at [email protected] or +1 212 592 1557
© 2013 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.
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