Daily Archives: April 16, 2011

Electronic Discovery in Pro Sports

One 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.

U.S. Supreme Court Expands Right To Claim Retaliation

The U.S. Supreme Court recently expanded an employee’s ability to meaningfully litigate retaliation claims against employers in two (2) significant opinions.  First, on January 24, 2011, the Court unanimously held that the anti-retaliation provisions of Title VII of the Civil Rights Act of 1964 (“Title VII”) protects third parties.  Thompson v. North American Stainless, LP, 131 S.Ct. 863 (2011) (terminated employee may bring retaliation claim arising out of his fiancée’s prior complaint of gender discrimination to the Equal Employment Opportunity Commission (“EEOC”)).  This landmark decision opened the floodgates to potential retaliation claims by third–parties under Title VII by failing to provide employers with a bright-line rule regarding the types of relationships and factual scenarios which are protected under Title VII’s anti-retaliation provision.

In that case, Eric Thompson and his fiancée, Miriam Regalado, were both employed by North American Stainless (“NAS”).  Thompson and Regalado met at NAS, began dating and ultimately became engaged to marry.  Their relationship was known to the company.  In February, 2003, the EEOC provided notice to NAS that Regalado had filed a charge of gender discrimination against NAS.  Approximately three weeks later, NAS dismissed Thompson.  Thereafter, Thompson filed a charge with the EEOC alleging that he was terminated in retaliation for his fiancée’s prior charge of gender discrimination.

The district court ruled in favor of NAS on the grounds that Title VII does not permit third-party retaliation claims.  Thompson appealed.  The Sixth Circuit Court of Appeals affirmed, holding that Thompson did not engage in any activity protected by Title VII and, therefore, he was not within the class of persons who had standing to bring a retaliation claim under Title VII.  The Supreme Court unanimously disagreed, reasoning that Thompson was not an “accidental victim of the retaliation-collateral damage” and concluded that Thompson’s interests were well within the “zone of interests” that Title VII is intended to protect.  The Court did not articulate a basis for determining when a potential third-party claimant’s interests qualified for Title VII protection.  Rather, the Court declined “to identify a fixed class of relationships for which third-party reprisals are unlawful.”

The Supreme Court issued a second decision in 2011 that expanded the ability of a claimant to bring a retaliation claim.  The Fair Labor Standards Act (“FLSA”) provides that it shall be unlawful “to discharge or in any other manner discriminate against any employee because such employee has filed any complaint . . . . under or related to this chapter . . . .” (emphasis added)  In Kasten v. Saint-Gobain Performance Plastics Corp., 2011 WL 977061 (2011), the Court held that the anti-retaliation provisions of the FLSA protect both oral and written complaints pertaining to alleged violations of the FLSA.  Similar to the decision in Thompson, the Kasten holding expands legal protections to employees asserting retaliation claims and puts employers in a quandary by not defining precisely what types of oral statements constitute the filing of a complaint that later may support a retaliation claim.

Kevin Kasten, a former factory worker in a Saint-Gobain plant, filed an action against his employer alleging that he was terminated after making an oral complaint to company officials pertaining to the location of the time clocks in the factory.  The trial court granted summary judgment to Saint-Gobain, and the Seventh Circuit Court of Appeals affirmed, holding that the FLSA’s anti-retaliation provisions did not protect (or extend to) oral complaints.  The U.S. Supreme Court, however, concluded that FLSA retaliation claims could be premised upon oral complaints and dealt a significant blow to employers when it held that if a “reasonable, objective person would have understood the employee to have put the employer on notice that the employee is asserting statutory rights under the Act,” then the oral comment is deemed to be a “complaint” that is “filed” and, therefore, protected activity under the FLSA.  Significantly, and similar to its holding in Thompson v. North American Stainless,  the Supreme Court again failed to provide any definitive parameters pertaining to the manner in which oral complaints should be “filed” or with whom they must be “filed.”

The ramifications of the Thompson and Kasten decisions for employers are far reaching.  Retaliation claims already comprise a significant portion of all federal employment discrimination claims.  The Supreme Court’s 2011 expansion of retaliation claims to allow both oral complaints under the FLSA and complaints by individuals other than the uniquely affected person will undoubtedly tee up years of litigation that will test, on a case-by-case basis, the limits of the expanded protections provided by these recent Supreme Court decisions.

Accordingly, prudent employers must cautiously analyze the relationships between fellow employees in order to recognize the potential ramifications of all dismissal and disciplinary decisions to determine if the employer’s action could spawn a retaliation claim because the disciplined or terminated employee’s relative (or fiancé) previously complained about some protected workplace event that preceded the contemplated discipline or dismissal.  Additionally, in response to Kasten, employers should train supervisors to adequately document and respond to oral complaints and, perhaps more importantly, how to differentiate (assuming that is even possible) between an employee who is simply grousing without intending to make a formal complaint and an employee who is genuinely attempting to lodge a complaint with his or her employer.  Ultimately, the U.S. Supreme Court’s decisions in 2011 remind employers of the age-old advice to “document, document, document” so that employers are prepared to defend their personnel decisions should a claim arise.

EEOC Sues Owner Of 42 McDonald’s Restaurants For Sexual Harassment And Retaliation

Multiple Women, Including Teens, Were Abused at Reedsburg Restaurant; Some Were Fired for Complaining, Federal Agency Charges

MILWAUKEE — The McDonald’s restaurant in Reedsburg, Wis. , owned and operated by Missoula Mac, Inc., violated federal civil rights laws by permitting male employees to create a hostile work environment of sexual harassment against female employees, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit it filed this morning in federal district court in Madison, Wis.

The EEOC filed suit on behalf of a class of women it said were subjected to sexual comments, sexual propositions, or physical touching by co-workers. The suit also alleges that some of the women were fired in retaliation for complaining about the sexually hostile work environment and that the harassment was so intolerable that at least one woman was forced to quit her job to avoid it.

John Rowe, director of EEOC’s Chicago District, which includes Wisconsin, noted that the agency’s administrative investigation, which preceded the lawsuit, revealed that male employees at the Reedsburg McDonald’s made sexual comments about the bodies of female co-workers, propositioned them, and touched them inappropriately. Further, Rowe said, several of the victims were teenaged high school students.

“One of the distressing things is how young some of the victims appear to have been,” said Rowe. “Another is that some of the employees who complained about what was going on were allegedly either fired or ignored. It’s cause for considerable concern, especially at a business which employs so many young and vulnerable women.”

The EEOC’s lawsuit stems from discrimination charges filed by three former employees of the McDonald’s restaurant located at 1500 Main Street in Reedsburg. In total, Missoula Mac owns and operates 42 McDonald’s restaurants in Wisconsin.

The EEOC sued after first trying to reach a voluntary settlement out of court through its conciliation process. The agency seeks lost wages and compensatory and punitive damages for the women who were harassed, retaliated against, or both, and injunctive relief to end the discriminatory practices. The suit, captioned EEOC v. Missoula Mac, Inc., d/b/a McDonald’s Restaurant (Civil Action No. 3:11-cv-00267), was filed in U.S. District Court for the Western District of Wisconsin in Madison. The case will be litigated primarily by attorneys in the EEOC’s Milwaukee Area Office.

John Hendrickson, EEOC regional attorney for the Chicago District said, “McDonald’s is one of the most well-known brands in America and the world, and its image is one of complete reliability, good taste and wholesomeness. What we found was allegedly going on at the McDonald’s in Reedsburg was something completely different and illegal. This litigation is going to put the Reedsburg McDonald’s under a well-deserved microscope, and, if the allegations are borne out, assure that appropriate relief is provided to the victims and that the harassment is brought to a halt.”

The EEOC’s Chicago District Office is responsible for processing charges of discrimination, administrative enforcement, and the conduct of agency litigation in Illinois, Iowa, Minnesota, North Dakota, South Dakota, and Wisconsin with Area Offices in Milwaukee and Minneapolis.