iOne important feature of professional sports is the interdependence between the player, the team and the league. This interdependence helps make professional team sports wildly successful, but also creates a number of unique legal issues.
One that has come up multiple times in recent years is the extent to which these interdependent entities must police and preserve each other's documents and information. This issue is not academic. To the contrary, the question of who legally controls which document has become increasingly important for various reasons.
The first is the sheer amount of information created every day in this electronic age. Complicating that is the ongoing expansion of the rules governing legal discovery and information. And lastly is the fact that courts are demonstrating an increasing willingness to police these laws and punish, with monetary and other sanctions, the destruction or failure to preserve and produce information -- even if such destruction is unintentional.
The League and Its Teams
There may be situations where the sports league, in exercising its power to enforce league rules, becomes responsible for preserving and producing information it receives from its teams or players.
In 2007, for example, the New England Patriots and team head coach Bill Belichick were caught violating league rules by videotaping the defensive plays of the New York Jets and other teams. As part of the NFL's internal investigation into what has become known as "Spygate," the NFL demanded, reviewed, and then destroyed all copies of the Patriots' tapes, including from years the Patriots won Super Bowls.
The NFL's decision to first demand and then destroy the videotapes raised the possibility of severe consequences for both the Patriots and the NFL. The "duty to preserve attache[s] at the time that litigation [is] reasonably anticipated," later ruled a court. Here, it is hard to argue that the NFL did not "reasonably anticipate" some kind of litigation.
Indeed, less than two weeks after the NFL destroyed the tapes, a putative class action lawsuit was filed against Belichick and the New England Patriots on behalf of all New York Jets season ticket holders requesting at least $184 million in damages. In Mayer v. Belichick, the plaintiffs included a direct contract claim against the NFL for destroying the videotapes. Luckily for the NFL, the court dismissed all claims, holding that Jets ticket holders suffered no injury. Even if the quality or "honesty" of the games were less than anticipated, ticket holders were still able to watch them, ruled the court.
Had the claims not been dismissed and the case went to discovery and trial, the NFL would likely have been placed in an unwinnable situation. In demanding that the Patriots turn over the tapes, the NFL assumed responsibility for those tapes, including the duty to preserve evidence responsive to anticipated litigation. Because the NFL destroyed all copies of the tapes, and the tapes were so fundamental to any Spygate-related lawsuit, a judge would have little choice but to sanction all the defendants for the "spoliation" of evidence, particularly if NFL Commissioner Roger Goodell's decision to destroy the tapes violated the NFL's written record retention policies or past practices.
The Team and Its Owners
Just as an agent is a fiduciary to its clients, the owners of a team may well have fiduciary duties to the team itself, including the duty to produce personal emails involving team issues. In a case resulting from the relocation of the NBA's Seattle SuperSonics from Seattle to Oklahoma City, the city of Seattle alleged that it had the right to compel the Sonics to remain in Seattle during the term of its lease. As part of the litigation, Seattle officials issued requests for electronic discovery directed at both the team and six of its eight-member ownership group Professional Basketball Club, LLC (PBC).
When the Sonics refused to produce emails from the individual owners, the court ordered the additional production "because a [member] is an agent...PBC has the legal right to obtain documents upon demand from its members. Accordingly [Seattle] has met its burden in establishing that PBC has possession, custody, or control over the at-issue documents."
Any actual or prospective team owner or significant shareholder should be aware that, depending on the state's statutes, his or her ownership responsibility may well include personally preserving and producing individual emails and information as part of team discovery.
The Player and His Agent
A sports agent owes a fiduciary duty of undivided loyalty to the player it represents. Put simply, the agent must step into the shoes (or sneakers or cleats) of the player, and place the player's interests above its own. What an agent or player may not realize is the agent's fiduciary duty extends to the documents and information retained on behalf of its clients, and probably requires an agent to preserve documents related to potential or existing litigation involving both present and former clients.
The duty to preserve and produce information, including electronically stored information, during a legal dispute is wide-ranging. If you are a party to litigation, it does not matter if you do not actually possess a requested document, or do not legally own the document. All that is required is for you to have "possession, custody or control" of the requested information. If you do, you are required to preserve that information, and then produce it upon request. It is established that, where a principal/agent relationship exists, the principal (here, the player) "controls" any of his information in the physical possession of his or her agent. Thus, if the agent destroys that information, a court or arbitrator may choose to sanction the player. In turn, the player may thereafter contend that the agent, by not controlling and preserving the information on the player's behalf, breached its duty of undivided loyalty to the player -- a tort/malpractice claim that includes the possibility of punitive damages.
An agent cannot waive its fiduciary duty, but it can lessen its exposure and help protect its clients. First, both the agent and the player should be aware that relevant documents and information in the agent's possession are potentially discoverable in any litigation involving the player. Thus, it is prudent that a player include his or her agents and/or former agents in any litigation hold. And, even if the player neglects to do so, an agent should proactively impose a litigation hold once it becomes aware of a litigation or potential litigation involving the player.
Second, a best practice would be for the agent to proactively inform its clients in writing that the client's preservation duty may extend to information in the agent's possession, and provide clients with the agents' usual and customary document preservation and destruction policy. For example, if the agent's policy is to destroy all information older than two years, except for tax return information, it should so inform its clients, so there are no misunderstandings later. Of course, the agent should strictly adhere to its policy in the absence of a litigation hold.
By informing clients in advance, the agent fulfills its fiduciary duty and protects itself in the event a player neglects to inform the agent in a timely manner of a legal dispute involving information in the agent's possession. Equally, it is only once he or she has been specifically informed of the agent's policy that a player is in the best position to ensure that any documents or information in the agent's possession are preserved for legal discovery.
The Need for Protection
Whether a player, agent, team or league, the duty to preserve and produce extends to all documents and electronically stored information under your control, including the control of your employees, agents and similar entities. You are likely to face monetary and non-monetary penalties if you fail to take steps to hold and preserve those documents and information for production.
Beyond judicial sanctions, the failure to preserve documents may harm you and your business in other ways, including follow-on lawsuits and/or the triggering of possible state or federal investigations. For example, former Senator Arlen Specter, a long-time Philadelphia Eagles fan, threatened the NFL with Congressional hearings and the potential loss of its antitrust exemption because it destroyed the Spygate tapes. Given the substantial time and effort professional athletes, agents and leagues spend developing their respective businesses and brands, it would be unfortunate to watch them harmed through the uninformed and unintentional destruction of information.
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Yoav M. Griver, Esq. is a litigation partner in the New York office of Zeichner Ellman & Krause LLP. He is also an adjunct professor at NYU, where he teaches a course on sports law.
Daniel B. Garrie, Esq. is a managing member of FSRDG LLC, a legal risk management consulting group.
The research assistance of Elan Raffel, a law student at Cardozo Law School, is gratefully acknowledged by the authors.
