Negotiation Becomes a High-Resolution Art
For Peter Carfagna '79, negotiation is a professional sport--and he's been in the zone
Arnold Palmer and Tiger Woods have both spun their mastery of golf into millions of dollars in endorsements.
But Palmer, who negotiated his early deals over informal lunches and sealed them with a handshake, might be perplexed by the sheer weight of a Tiger Woods contract. In fact, he could use a caddy just to lift one.
Peter Carfagna '79 has represented both legends over the course of a career in sports law spanning 25 years, much of it as general counsel at Cleveland-based International Management Group, one of the nation's leading sports marketing and representation firms.
In that time, Carfagna has witnessed the transformation of sports negotiation from a fledgling field marked by simple agreements and modest sums into a sophisticated specialty involving highly detailed contracts worth hundreds of millions of dollars, with clauses covering every imaginable contingency.
"When I came out of law school, sports law was mainly just a small part of labor law," Carfagna said. "Now it's an increasingly competitive set of specialties, and it's morphing fast into new areas."
The term "sports law," once a rubric for rather straightforward employment contracts between professional athletes and teams, now encompasses an expanding variety of negotiated agreements. According to Professor Paul Weiler LL.M. '65, who supervised Carfagna's third-year paper in 1979, it covers sports marketing deals, contracts between players' unions and leagues, deals between leagues and television or radio networks for broadcast rights, representation agreements between athletes and agents, endorsement agreements, licensing agreements with makers of sports gear and memorabilia, amateur eligibility rules, antitrust issues, insurance policies spreading the risks of player injuries and other eventualities, franchise relocation agreements and stadium subsidies--in sum, contracts for every aspect of the commerce of sports.
Over the past several decades, as the dollar values of sports contracts have busted through one ceiling after another, the stakes have become especially huge for team franchises and corporate sponsors whose investments in athletes are increasingly vulnerable to career-ending injuries or image-tarnishing personal problems.
"When I started out, it was all boilerplate," Carfagna said. "But the bigger the money, the more heavily negotiated the deal becomes. And I think that's because the companies have lost huge sums paying promising athletes who then dropped off the face of the earth, whether it be due to physical or psychological problems."
As risks have multiplied, so have the contingencies that must be anticipated and negotiated. Lawyers like Carfagna try to design contracts that answer every "what if" question under the sun. "Assume the worst," he said. "Assume, God forbid, a terrorist attack--must the players keep playing? When do their contracts kick in and when do they release them from the obligation to perform?" Carfagna has tackled such questions in his practice, and he also bats them around with students at Case Western Reserve University School of Law, where he is a distinguished visiting practitioner.
A recent trend, Carfagna says, is an almost obsessive attention now paid to morals clauses in sports contracts, especially in the aftermath of the O.J. Simpson and Kobe Bryant criminal cases. "Morals clauses are now the most heavily negotiated terms," he said. "And the steroid scandal in Major League Baseball is putting even more pressure on sponsors to negotiate escape clauses in contracts with athletes who test positive for illegal performance-enhancing drugs."
Lawyers hash out as much as they can foresee before a contract is finalized, says Michael McCann LL.M. '05, who, together with Greg Skidmore '05, maintains a popular sports law blog, sports-law.blogspot.com. Must an athlete be convicted of a crime before a company will be released from an endorsement contract? If so, must it be a felony? Is a mere allegation or charge sufficient to void a contract? Does a single positive test for steroids give Nike an out? What about gambling, domestic violence, an admitted extramarital affair or anything in an athlete's private life that does reputational harm--will an allegation or admission release a company from continuing to honor a contract?
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