The Washington Redskins and Dallas Cowboys have made it official -- the two teams have filed a grievance against the NFL, the NFL Management Council, and the NFL Players Association for the severe salary cap reduction penalties they incurred earlier this month. The Redskins were docked $36 million in cap space to be spread over two seasons for the restructure of contracts given to two disappointing veteran defenders -- defensive tackle Albert Haynesworth and cornerback DeAngelo Hall during the NFL's uncapped year of 2010. The Cowboys were hit with a $10 million cap reduction, also to be spread over two years, for the restructure of receiver Miles Austin's contract.
Per the new collective bargaining agreement, the grievance will be heard by an arbitration panel, most likely led by Special Master Stephen Burbank, who has heard several NFL grievance cases over the years. In this case, the Cowboys and Redskins have a pretty decent legal foothold. While the NFL cited threats to competitive balance and 2010 and beyond in handing out the penalties, the league also approved those restructured contracts at the time. In addition, there was no written agreement between all 32 clubs that teams would restrict contract restructuring during the uncapped year.
As we wrote when the penalties were installed, the NFL had two choices if the idea was to maintain competitive balance in that fashion: Extend the league year through the lockout (which the owners didn't want to do, because they'd be legally beholden to give players salary and benefits during that time), or write up an agreement stating that teams were not allowed to re-do contracts beyond a certain standard during the uncapped year (which would have been an open-and-shut collusion case). Instead, the NFL management council retroactively punished two teams mightily for alleged violations of a rule that didn't technically exist. The New Orleans Saints and Oakland Raiders were docked smaller amounts for unspecified violations, but neither team is part of the complaint at this time. The Saints have bigger fish to fry right now, and the Raiders are probably just happy to be on the NFL's bad side again.
Here's where it gets complicated for the league. The chairman of the NFL Management Council is John Mara, part of the group that owns the New York Giants. When Jerry Jones and Dan Snyder walk into that room to air their grievances, they can first point to the statement made by Mara on Sunday to ESPN.com's Calvin Watkins, in which the owner of a division rival gratuitously states that the two teams are lucky their punishments weren't worse.
"I thought the penalties imposed were proper. What they did was in violation of the spirit of the salary cap. They attempted to take advantage of a one-year loophole, and quite frankly, I think they're lucky they didn't lose draft picks."
Well, there are a few problems with Mara's statement. First, he establishes a serious conflict of interest case against the Management Council -- it could very easily be argued that existing owners should either step down from the Council, or that the council should not have the ability to rule against its competitors. That's antitrust at the very least. Second, the "spirit of the salary cap" statement is just plain silly -- if you want something that really goes against the spirit of the salary cap, try the expiration of a collective bargaining agreement in which it was agreed by both sides that such an expiration would make an uncapped year possible. The salary cap had no spirit at that point in time, because it was dead in all possible ways.
J.I. Halsell, a noted salary cap expert who used to work in the Redskins' front office, explained exactly what the Redskins did in this 2010 article for Football Outsiders:
In his infamous $100 million contract of 2009, Haynesworth had a $21-million option bonus. As part of the deal, the Redskins reserved the right to convert that option bonus to a signing bonus, and that's exactly what they did. But they converted it with a slight twist. Not only did they convert the option bonus to a $21-million signing bonus, but they also added a voidable provision. In the provision, if Haynesworth pays back $26 million of his signing bonuses, then the 2011-2014 contract years void away. From a team salary accounting standpoint -- because the voidable is solely in the player's control -- the proration of the signing bonus does not go into 2011-2014. That means all of the $21 million signing bonus counts in the uncapped year of 2010. As a result, Haynesworth's team salary number in 2010 went from $8.8 million to a whopping $25.6 million. His subsequent team salary numbers are $6.4 million, $8.2 million, $10 million, $10.8 million, and $12.8 million, respectively.
Similarly, Hall had a $15 million option bonus in his contract 2009 contract. The Redskins converted this $15 million to a signing bonus and provided Hall with the voidable clause, whereby the entire $15 million, from a team salary accounting standpoint, stays in 2010. As a result of this maneuver, Hall's team salary number went from $6.8 million to $18.3 million in 2010. His subsequent manageable team salary numbers are $5.3 million, $6.8 million, $8.3 million, and $9.5 million, respectively.
Every single aspect of those restructures was legal at that time, based on the contract language, and the unique circumstances of the uncapped year.
Now, if the NFL wishes to retroactively argue that the deals were unethical, or violated some "Gentleman's Agreement" in which all 32 owners promised to play nice ... that's something best done in a discussion forum, such as the NFL's owners meetings, which start on Monday. Instead, the grievance brought by Jones and Snyder will be a primary topic of conversation, because Mara and his cohorts chose to break away from their supposed tie to the ownership cabal and act as a higher authority.
"The Management Council Executive Committee determined that the contract practices of a small number of clubs during the 2010 league year created an unacceptable risk to future competitive balance, particularly in light of the relatively modest salary cap growth projected for the new agreement's early years," the league said in a the statement explaining the penalties. "To remedy these effects and preserve competitive balance throughout the league, the parties to the CBA agreed to adjustments to team salary for the 2012 and 2013 seasons.
"These agreed-upon adjustments were structured in a manner that will not affect the salary cap or player spending on a league-wide basis."
Again, a major logic problem here. The supposed verbal agreement between owners not to use the uncapped year as a hammer was based on projections, not real numbers. None of those numbers were locked in until a new CBA was signed. The uncapped year was just that -- not a quasi or semi-uncapped year, or an uncapped year whenever a certain privileged few chose to avail themselves of its benefits. The league and the Management Council chose to close up shop and leave this hanging in the air, when it could have been a cinch to extend the league year, because they didn't want to pay the players. Perhaps Mara will be forced to explain how he also benefitted from that little exercise.
If the Management Council is smart, or if Roger Goodell is smart enough to advise them strongly, there will be a settlement that favors both sides in this case. Not only could Jones and Snyder take this to an appeals panel if they don't like what they hear, but if an original negative ruling is overturned, the NFL can then, in effect, sue itself if it so chooses.
In addition, while the NFLPA agreed to the penalties because it facilitated a higher cap number for 2012, the collusion cases that were settled in batch processing form at the signing of the new CBA could be re-filed. And it's possible that the current power structure of the NFL Management Council could be seen to violate antitrust law.The Federal Trade Commission defines monopolization as follows:
The antitrust laws prohibit conduct by a single firm that unreasonably restrains competition by creating or maintaining monopoly power. Most Section 2 claims involve the conduct of a firm with a leading market position, although Section 2 of the Sherman Act also bans attempts to monopolize and conspiracies to monopolize. As a first step, courts ask if the firm has "monopoly power" in any market ... Then courts ask if that leading position was gained or maintained through improper conduct—that is, something other than merely having a better product, superior management or historic accident. Here courts evaluate the anticompetitive effects of the conduct and its procompetitive justifications.
Mara was given leading position by appointment, but that doesn't absolve him, or any member of the Management Council, from acting to achieve these punishments "by exclusionary or predatory acts," as the FTC puts it.
The NFL could argue business justification as a defense, but without a written agreement, that's a pretty tough sell. To say that the Cowboys and Redskins acted in bad faith is like saying that those who steal in a society without written laws are acting in bad faith -- easy to say in a general sense, but where's the actual violation? Not the ethical violation, but the legal violation. The NFL is arguing ethics, but the Cowboys and Redskins have the law on their side, and this case could be an enormously far-reaching embarrassment for the league if it's pursued to its illogical end.
To whatever degree Roger Goodell is responsible for protecting the NFL against itself, he'd better step up ... and he'd better do it soon.