Saturday, July 30, 2011

Senate cancels debt bill vote, progress ensues

This might be the first glimmer of real hope we've seen for weeks. From The New York Times:
After a tense day of Congressional floor fights and angry exchanges, Senator Harry Reid, the majority leader, called off a planned showdown vote set for after midnight, but said he would convene the Senate at noon on Sunday for a vote an hour later. He said he wanted to give the new negotiations a chance to produce a plan to raise the federal debt limit in exchange for spending cuts and the creation of a new Congressional committee that would try to assemble a long-range deficit-cutting proposal.

“There are many elements to be finalized and there is still a distance to go before an arrangement can be completed,” said Mr. Reid, who just a few hours earlier had played down talk of any agreement. “But I believe we should give everyone as much room as possible to do their work.”

Mr. Reid’s announcement set off an almost audible sigh of relief on Capitol Hill, where lawmakers and their aides had been bracing for an overnight clash over the debt following a day that had seen a heated House vote and lawmakers trudging from office to office in search of an answer to the impasse.

The first indication off a softening of the hard lines that have marked weeks of partisan wrangling over the debt limit came in the afternoon when the two leading Congressional Republicans announced that they had reopened fiscal talks with the White House and expected their last-ditch drive to produce a compromise.

Following the House’s sharp rejection of a proposal by Mr. Reid to raise the debt limit and cut spending, Senator Mitch McConnell of Kentucky, the Republican leader and a linchpin in efforts to reach a deal, said he and Speaker John A. Boehner were “now fully engaged” in efforts with the White House to find a resolution that would tie an increase in the debt limit to spending cuts and other conditions.

“I’m confident and optimistic that we’re going to get an agreement in the very near future and resolve this crisis in the best interests of the American people,” said Mr. McConnell, who noted he was personally talking to both Mr. Obama and Vice President Joseph R. Biden Jr., a favorite partner in past negotiations.
Despite today's theatrics, a final debt deal is (apparently) in the works. ABC News has learned the details of a "tentative deal" reached by Republicans and the White House. It would be structured as follows: (1) $2.8 trillion in a debt ceiling increase (through 2012); (2) immediate cuts of $1 trillion; (3) vote on the Balanced Budget Amendment; (4) a committee to recommend (roughly) $1.8 trillion in further cuts to match (dollar for dollar) the debt increase; and (5) a trigger mechanism to enact "across-the-board cuts," including cuts to Defense and Medicare. Let's be cautiously optimistic.

Friday, July 29, 2011

Pres. Obama must now use 14th Amendment

You read that correctly. Even though roughly three days remain before a first ever U.S. default, President Obama must now unilaterally invoke the 14th Amendment to raise the debt ceiling on his own--and without Congressional approval. The idea of using the 14th Amendment is not new. Others, including former President Bill Clinton, have advocated this approach. The argument is two-fold. Textually, the Clause 4 of the 14th Amendment says that "the validity of the public debt … shall not be questioned." Practically, as law Profs. Posner and Vermeule point out, "[t]he president has the power during crises to take actions that are necessary to protect the country."

Under either argument, one central truth remains: the current self-inflicted crisis will be averted. However, we are now only days away from a catastrophe that has significantly decreased the confidence of global investors in our economy and governing ability. For that reason, President Obama has the obligation to act alone. If President Obama bypasses Congress on this issue, he will provide a signal to investors and other nations that, regardless of future spending fights, the United States has a fail-safe mechanism to ensure that it meets its bills on time: the Constitution.

There will, of course, be external risks associated with this approach--i.e., the courts could get involved, and reject the administration's arguments. However, as many legal commentators opine, the judiciary is unlikely to inject itself into this hyper-political battle. I find it hard to believe that a judge would want the threat of a national default hanging on his or her personal interpretation of the Constitution. Restoring confidence is absolutely imperative in light of the way this crisis has played out. The only way to do that now is to provide the world with an indication that the United States will never default on its obligations.

Monday, July 25, 2011

The NFL Lockout Is Over!

The New York Times -- via the AP -- is reporting that the players have approved a deal to end the NFL lockout. The players' vote comes a few days after the owners', and basically wraps things up. The players have unanimously recommended that the named plaintiffs in Brady v. NFL accept the deal, and that the union be re-constituted. All of this will happen by August 4th.

So there we have it, after 4 1/2 months. If it's this hard to get a $9 billion deal done just for football, what does that say about the $14.3 trillion deal we need to reach on the debt ceiling...?

Friday, July 22, 2011

What's the Hold Up?

As you probably know by now, the NFL owners approved a new collective bargaining agreement that would bring an end to the lockout. Initial reports were that the players would vote this morning. That seems not to be the case; the players want more time to digest exactly what's in the new agreement. It still seems like the players will vote today. But the main takeaway here is that the process is going to take time.

Earlier, I wrote that this is an unusual situation in which the employer wants a union but the employees don't. Expect that same issue to crop up again. The owners want the NFLPA to immediately reconstitute as a union, with e-mail signatures from players so that the process could be over in minutes. The players say that the process must be thorough and deliberate; they want owners to reopen team facilities so that players can sign union cards there. This all goes to one of the initial issues in the case: whether the union's disclaimer was a "sham" or not. If the NFLPA is a "union" that pops in and out of existence almost on a whim, you can expect that, ten years from now, the owners will point to that fact to argue that any future decertification is also a "sham". For that same reason, the players want to act deliberately.

And of course various minor issues, like player conduct, safety, etc., will be collectively bargained after the new CBA is in place. These should not hold up a deal. There is also the outside chance that some of the lead plaintiffs in Brady v. NFL will get some special consideration, though I think that's unlikely at this point.

All in all, I think we are in good position to wrap this up in the next couple of days. I think the players grumbling about the process is more posturing than anything else; they don't want to be seen as rolling over immediately after the owners' vote. I would guess that we have a deal very soon.

Thursday, July 21, 2011

Why Isn't the NFL Lockout Over Yet?

(Update, 7pm EDT: The owners have approved the CBA and the players are set to have a conference call at 8am tomorrow morning. Substantive details about the CBA below.)

Over the last few weeks, we've been told repeatedly that a deal to resolve the NFL lockout is just around the corner. For a while, we were looking forward to July 4th. Last week, I had a source tell me that a deal would be approved on Wednesday, or Sunday at the latest. Then we thought the players would vote to approve a deal yesterday, and that the owners would do so today. As of now (1:30 pm EDT) the owners have not yet voted. So what are the major stumbling blocks here?

1) There is a lawsuit out there! The players and owners might agree to a new collective bargaining agreement, but Brady v. NFL still looms. There aren't any court dates in the immediate future, but the lawsuit has to be resolved somehow. Recently, we're hearing reports that Logan Mankins and Vincent Jackson (two other named plaintiffs in the class action) want payouts of $10 million each to drop their claims. I think such a bonanza is unlikely. But regardless of any "bonus" for the two of them, the lawsuit needs to be settled, separate and apart from the CBA.

2) What happens to the NFLPA? Remember, NFLPA has been operating as a trade association, not a union, since March. And, if you believe Gene Upshaw, the former head of the NFLPA, the NFLPA only existed as a "union" after the last lawsuit because the owners insisted on it. They players would prefer to remain a "trade association" so that they can have the leverage of a future antitrust lawsuit against the owners. (Remember, they lost on appeal because they had been a union.) For similar reasons, the owners will want to force the players to reconstitute the union. I suspect the union will re-form, but that there will be language that allows them to "decertify" or "disclaim interest" in a future labor fight.

3) Voting is messy. 24 of 32 owners and 50%+1 of the the 1900-or-so players will need to approve the deal. Keeping the owners in line should be fairly easy. Keeping tabs on almost 2000 players, dispersed around the country, is going to be harder. There is nothing to suggest that there will be a mass defection from among the players' ranks, but we have seen before that things don't go as planned.

4) Dotting is and crossing ts. There are still details to work out, such as the specifics of the franchise tag, the particulars of how the players' union will re-form, the looming lawsuit regarding TV revenues, whether the settlement of the lawsuits would be by "consent decree" -- meaning that the courts have continued oversight of the case -- and so on. These details are not, in and of themselves, major, but my guess is that the two sides will try to score minor points with these last few issues.

I think we're closer to a deal than we've been in a long time. I'm particularly glad that the Eighth Circuit's ruling seems not to have derailed talks. But there is definitely work left to get done.


UPDATE: As noted above, the owners approved the CBA. The vote was 31-0, with the Oakland Raiders abstaining. (Really?) Here are some key provisions of the new CBA, as reported by ESPN:

• This would be a ten-year deal, running through the end of the 2020 season. The current league year would begin next week, although I've seen reports that team facilities would be open as early as Saturday. (Note, the owners' vote is contingent on the union re-forming and approving the deal.)

• You might recall that the split of total revenues was an issue. The players are now going to get a smaller percentage (48% in early years, as opposed to the mid-50s), but the owners will not get a cut off the top for expenses. (Last year they took $1bn of the $9bn to cover expenses, and divided the rest.)

• The salary cap will start at $120 million with a minimum of $106.8M

• Veterans earn free agency after fourth season

• Rookie contracts will start lower, be subject to a cap, and will last for four years (with a team option for the fifth year).

• Training camp and OTAs are scaled back.

As to the franchise tag, the issue for players like Manning was that they had been franchised once already. The players wanted a rule that a player could be franchised only once in his career. It doesn't look like that's part of the final deal.

By the way, in fairness, I should say that Logan Mankin's agent has said that he is not holding up a deal and that reports to the contrary are incorrect. Vincent Jackson, too, is denying such reports. I'm not sure where those rumors got started, but I'm happy to set the record straight.

Friday, July 8, 2011

Five Practical Implications of the NFL Lockout Ruling

As sports fans and legal nerds try to make sense of the Eighth Circuit's ruling earlier today regarding the NFL Lockout, here are a few things to keep in mind:

1) This is a limited decision. The owners raised several arguments in their briefs. The Eighth Circuit only ruled on one, holding that the lower court did not have jurisdiction to lift the lockout as to players under contract. The Appeals Court suggested that the lockout could be invalidated as to rookies and free agents, but the issue was not yet resolved (see #2)

2) Rookies and free agents cannot start signing contracts. They are still locked out. The Eighth Circuit said, in effect, the following: "The lockout might be invalid as to rookies and free agents, but the lower court has to have a full hearing on this issue." So until and unless the lower court holds a hearing and rules that the lockout is invalid, even rookies and free agents are locked out (unless, of course, the owners voluntarily end the lockout).

[By the way, what would it mean if they could sign? The Eighth Circuit has said that players under contract could be locked out. So a team could sign a free agent, and then immediately lock him out! I suppose this might give teams some certainty, knowing they've signed a particular free agent, but it is sort of a crazy outcome.]

3) The players aren't completely out of options. The Eighth Circuit said that the players are not entitled to an injunction, that is, an order lifting the lockout. But they can still go forward with their antitrust lawsuit, which might entitle them to tens or hundreds of millions of dollars in damages. And in theory, they could appeal the Eighth Circuit's ruling, either by way of an "en banc" appeal to the full Eighth Circuit (this decision was made by a three-judge panel) or by an appeal to the U.S. Supreme Court. But that would stretch the litigation onward for months. As to the negotiations...

4) The balance of power has shifted. Over the last week or two, we've been hearing that the League has been meeting with players' representatives and getting close to a deal. The Eighth Circuit's ruling drops a bomb in the middle of those talks. The biggest question I have is whether the owners will try to "claw back" some of the concessions they've made (such as splitting revenue almost 50-50) in light of their legal win today. Still,

5) The best hope for football is a negotiated deal. Yes, the players might take this up to the Supreme Court (and maybe even win). Yes, the owners might have to lift the lockout for rookies only. Yes, the players might win hundreds of millions of dollars in an antitrust suit.

But all of these options take time--lots of time. The best hope for us fans is that the two sides treat today's ruling as if it never happened and keep going with their negotiations. We've heard that they're close. If, instead of pushing across the finish line, they start taking a hard stance in light of the ruling, we will probably be farther from a deal than we've been for about the last three weeks.

BREAKING: Huge win for NFL Owners; lockout continues

The Eighth Circuit has just ruled that the Norris-LaGuardia Act prohibits federal courts of entering injunctions in labor disputes. As I've discussed before, the owners have said that this doctrine means that Judge Nelson's order issuing an injunction against the lockout--holding in effect that the lockout was invalid--should be null and void. Today, the Eighth Circuit agreed with the owners, handing them a huge win.

Some people had suggested that the Court would "stand down" while mediated talks were ongoing, particularly because those talks seemed to be making good progress. (At least at the district court level, Chief Magistrate Judge Boylan, who has been overseeing discussions, has entered orders on the docket that are sealed (i.e., not public), which I assume relate to the status of the confidential talks.) Today's decision means (1) the lockout can continue and (2) the balance of power has shifted dramatically in the negotiations. We'll see whether this is seen as a setback by the players, and if the owners try to "claw back" some of their previous concessions in light of today's ruling.

Updates to follow...

UPDATE 7/8/2011, 11 am: As expected, this decision broke down among 2-1 lines, just like every other Eighth Circuit decision to date. The majority held that the Norris-LaGuardia Act, which generally prohibits injunctions in the context of labor disputes, applied here, and so Judge Nelson did not have jurisdiction to issue an injunction lifting the lockout. The Court notably did not reach the other arguments raised by the NFL. This means, for example, that the League might still be liable for violations of the antitrust laws and be forced to pay money damages. (I can't, however, imagine that this will go on for that long.)

The majority relied on Section 4(a) of the Act, which prohibits injunctions against "remain[ing] in any relation of employment". The Appeals Court ruled that players were in a "relation of employment" with owners, the owners decided not to "remain" in that relationship any longer, and so the Act prohibited an injunction. But the Court also held that this rule does not apply to free agents and rookies. Because free agents and rookies are not currently employed, they cannot "remain" in a state of employment. Thus, the lockout could be potentially invalid regarding free agents and rookies. However, Judge Nelson did not hear from live witnesses on this point (she only took paper submissions), and the Appeals Court sent the matter back for a hearing. In theory, Judge Nelson could rule that the lockout is invalid as to free agents and rookies, and we could have a bizarre situation where veterans are locked out but rookies and free agents are not.

Later today I'll explore some of the practical implications of this decision.