The State Is Where Disputes Gain Immortality

The State Is Where Disputes Gain Immortality
April 30, 2011 by S.M. Oliva

Having spent much of the past week reporting on the litigation battles between the National Football League and its players, it's never been more clear that the state needs to go. The NFL "lockout" is Exhibit A in the case against government as the "final arbiter" of private disputes.

Let's briefly review the chronology. On Monday, Judge Susan Nelson issued a preliminary injunction, ordering the NFL to suspend its "lockout" pending resolution of the antitrust complaint brought by a number of players. By Wednesday, the NFL had appealed Nelson's decision to the 8th Circuit Court of Appeals, asking that court to "stay" Nelson's injunction while it decided whether to overturn it altogether. Today, more than three days later, the 8th Circuit has yet to decide whether to stay the injunction pending appeal, but last night it issued a "temporary stay," putting Nelson's injunction on hold until the 8th Circuit decides whether to issue a full stay. It will be several more weeks before the 8th Circuit decides whether to affirm or reverse the injunction itself. Confused yet?

When Nelson issued her injunction, the press jumped on the chance to declare the NFL evil antitrust violators, even though Nelson expressly said she was not ruling on the merits of the antitrust claims. But as more that one press member has told me this week, facts and process don't matter. They want a return to football normalcy, and they'll cling to any hope they can find. Several columnists insisted that if the NFL did not return to 100% operations immediately after the injunction, they were surely guilty of contempt of court (and possibly crimes against humanity!).

The problem, the NFL maintains, is that they don't know how to resume business without exposing themselves to additional antitrust liability. The whole point of the present litigation is that certain NFL rules allegedly violate the Sherman Act. But no judge has come out and said whether they do or they don't. The press would have you believe antitrust is cut-and-dry. But no business can ever have confidence that its actions don't run afoul of antitrust.

I'm reminded here of the FTC's long-running crusade against physicians: The FTC actually issued rules telling physicians how they could construct their business practices to avoid antitrust liability. And the minute physicians started following those rules, they found themselves targets of FTC investigators who insisted, "Oh, that's not what we meant." Antitrust puts the regulator (or judge) in charge, and there are no fixed principles to protect you.

What makes this especially problematic for the NFL is the Players' antitrust lawsuit is a sham. They are challenging business practices that, for the most part, they don't really care about the antitrust "legality" of. For example, the lawsuit challenges the salary cap and player draft as Sherman Act violations. Yet the Players' accepted both of these policies for nearly two decades under the prior antitrust settlement and collective bargaining agreements. And there's little evidence to suggest most players want to abolish either practice. But by saying they're violations of antitrust law, the players can use the courts to gain leverage in future negotiations with the NFL over the subjects they really do care about.

As for the media's puffery, while Judge Nelson's injunction led to a rash of columns about how the NFL is some renegade cartel, in reality the 8th Circuit could easily wipe away Nelson's injunction and allow the league to resume its "lockout" under "legal" protection. Will we see a similar rash of columns extolling the virtues of government law then? I doubt it.

But the question people seemed to have stopped asking is: How does any of this litigation actually resolve the underlying contractual and business dispute between the NFL and the Players? Right now, both sides have ceded control to their respective attorneys, who are more concerned with winning litigation battles over tactical minutiae. Nobody believes the NFL and Players want to litigate this case to its logical conclusion. At some point the settlement talks were resume in one form or another. So why haven't they?

The short answer is that both sides have misplaced their faith in the state. The Players think that if the 8th Circuit affirms Judge Nelson's injunction, the NFL will have no choice but to negotiate on terms favorable to the Players. The NFL believes just the opposite. And on a broader scale, the NFL believes the best course of action is to force the players to reform as a government-sanctioned labor union, while the players believe they should continue as a class action in an antitrust lawsuit. The courts are left to sort out which should control: Labor law or antitrust law?

Both, of course, are state fabrications. They are attempts to impose external standards on what would otherwise be private matters. But by imposing these external standards, the state also creates the demand for arbiters to interpret and apply those standards. Hence the need for so-called final arbiters who are purported to be above the very process that necessitated them. Per Bylund discussed this problem in a 2008 essay criticizing minarchism:

Nothing disturbs me as much as the minarchist argument that there is a need for a final arbiter and that this arbiter must be external to the market. Without a final arbiter there will be biases and problems of unjust rulings, and therefore there must be a State, goes the argument.

As the NFL's example demonstrates, there are at least two problems with this argument. First there's the fact that state-made law always creates more problems than it solves. The crux of the current NFL-players dispute over Judge Nelson's injunction isn't the merits of the party's underlying contractual disagreement; it's whether or not federal labor law "allows" the players to "decertify" their union in the manner they did, a prerequisite for the players to file the antitrust complaint that gave Nelson the jurisdiction to issue the injunction in the first place. So the two parties have spent weeks arguing, not over how to best settle their dispute, but what part of the state should be called in to possibly settle the dispute. Inefficiency at its finest.

The second problem is that the courts don't look at this as a purely private dispute. There are "public interest" considerations. Judge Nelson noted in her injunction order that there's a public interest in seeing the Sherman Act enforced properly. Now I doubt you'll find 10 NFL fans who give a damn about the Sherman Act; they just want football to resume in September. But state courts must maintain the fiction of the state's laws and their infinite wisdom. The longer the courts remain involved in this dispute, the more they will feel compelled to twist the final outcome to rationalize the inherent inconsistencies between the Sherman Act, labor law, and free-market principles.

As Per Bylund explained, the belief in the "final arbiter" extends from the claim that justice can only be obtained from a neutral party "external to the market." Yet in the NFL's situation, perhaps a more biased and in-market arbiter is required. The current problem is that neither side has any incentive to promptly identify a solution; they're content to waste time and money on lawyers engaged in pointless jurisdictional arguments, in the vain hope that somehow one side will obtain this mythical "leverage" to club its opponent with. Logically, the fastest way to a solution is for another party with a strong interest in seeing the dispute resolved to step in.

There is an obvious candidate: The television networks ­ CBS, NBC, Fox, and ESPN ­ which pay billions for the rights to broadcast NFL games. The broadcasters have a financial self-interest in seeing the "lockout" resolved immediately, yet they are relatively unbiased with respect to the specific issues at dispute. If the networks banded together and approached the two parties ­ say, to demand the entire matter be submitted to binding arbitration before a neutral person designated by the broadcasters ­ each side would have to listen. Otherwise, the choice is to continue down the current path, which means potentially years of antitrust litigation and haggling over non-economic procedural issues.