NFL Shuts Down After Players Sue Owners on How to Split $9 Billion Income

The National Football League, the most-watched and richest sport in the U.S., shut down after players rejected management’s proposal to split $9 billion in annual income.

The National Football League Players Association, behind Super Bowl-winning quarterbacks Tom Brady and Peyton Manning and incoming rookies such as linebacker Von Miller of Texas A&M University, filed suit yesterday in U.S. District Court in Minneapolis. They accused the league and its teams of a “patently unlawful group boycott” by fixing wages or restricting free-agent movement.

“The NFL has a long history of violating federal antitrust law in an effort to minimize its labor costs,” according to the players’ complaint. “The owners’ collective purpose in imposing the ‘lockout’ is to force the non-unionized NFL players to agree to the massive wage reductions and anticompetitive restrictions, which the NFL defendants are seeking from the players.”

The league declared a lockout after the old collective bargaining agreement expired at midnight. It came less than five weeks after the NFL’s Super Bowl championship game produced the biggest audience in U.S. television history.

“The union’s abandonment of bargaining has forced the clubs to take action they very much wanted to avoid,” the NFL said in a news release today. “At the recommendation of the Management Council Executive Committee under the authority it has been delegated by the clubs, the league has informed the union that it is taking the difficult but necessary step of exercising its right under federal labor law to impose a lockout of the union.”

Paychecks Stop

The league’s declaration means the NFL’s offseason is on hold. Players won’t be paid. Teams can’t practice, sign new players or make trades. The league’s draft of college players is still scheduled to begin April 28.

The players’ lawsuit was filed after negotiations overseen by the Federal Mediation and Conciliation Service in Washington failed to yield an agreement. The union said owners refused to show financial records to support their position, and the lawsuit said management “conspired to deny plaintiffs the ability to provide and/or market their services in the major league market for professional football services.”

NFL management said players never wanted to reach a negotiated settlement.

‘Take It, Leave It’

“The union’s position has been take it or leave it, and has had the same position since last September,” New York Giants co-owner John Mara said. “We made an offer today to split the difference between the two sides. They came back and said it was insufficient. Their objective was to go the litigation route.”

NFL owners voted in 2008 to end the league’s collective bargaining agreement with players on March 3, saying it didn’t account for costs such as building stadiums. That deadline was extended until yesterday as owners and players met with the mediator.

Areas of dispute also include expansion of the season to 18 games from 16, a rookie salary cap and health care for players.

Owners want to double the amount set aside from the league’s $9 billion in revenue -- the most for any sports league -- for expenses before paying players, according to the players association. Under the old agreement, about $1 billion was deducted before player payrolls are calculated, for costs related to stadiums, marketing, NFL.com and the NFL Network, according to DeMaurice Smith, the association’s executive director.

Financial Data

Smith said yesterday before the association announced its action that any further extension of talks would have to be accompanied by the owners turning over 10 years of audited financial records.

George H. Cohen, head of the federal mediation service, said in a prepared statement that the players and management retained “strongly held, competing views that separated them on core issues.”

“No useful purpose would be served by requesting the parties to continue the mediation process at this time,” he said. Cohen said his office was ready to step back into the talks at any time.

NFL Commissioner Roger Goodell said the quickest way to a resolution is through discussions, not litigation.

“We do believe that mediation is the fairest and fastest way to reach an agreement,” Goodell said in Washington. “We believe that ultimately this is going to be negotiated at the negotiation table. We will be prepared to negotiate again.”

Split Difference

The NFL said in a statement that its offer split the difference between the sides’ stands on financial issues and would have no adverse monetary impact on veteran players in the early years and meet their demands for the latter years.

Jim Quinn, outside counsel for the players’ association, said the owners offered a proposal that effectively would have rolled back salaries to 2007 levels.

“They wanted the players over the course of the next few years to give them a $5 billion gift,” Quinn told reporters at union headquarters in Washington. “They have forced us into a situation where we could not agree to a $5 billion giveback.”

The union decertified two years after a 1987 strike that was broken by replacement players. The move triggered about 20 lawsuits, including one that helped create free agency in 1993.

The players association will continue to assist members in financing, litigation and other activities, without participating in collective bargaining, according to a fact sheet on the union’s website.

The case is Brady v. NFL, 0:11-639, U.S. District Court, District of Minnesota Minneapolis).

To contact the reporters on this story: Aaron Kuriloff in New York at akuriloff@bloomberg.net; Curtis Eichelberger in Washington at ceichelberge@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net

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