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Analytics Magazine

Sports law analytics

May/June 2011

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Sports law analytics

Analytics are proving to be dispositive in high-stakes sports industry litigation.

 Ryan M. Rodenberg  Anastasios Kaburakis

By Ryan M. Rodenberg (left) and Anastasios Kaburakis (Right)

As highlighted by James C. Cochran in the January/February 2010 issue of Analytics and a forthcoming special issue of Interfaces co-edited by Michael J. Fry and Jeffrey W. Ohlman, the sports industry has firmly embraced the use of analytics in the decision-making process. Such methods have similarly been adopted in sports law, a corollary field inextricably intertwined with the dynamic sports business. As a prime example, Shaun Assael of ESPN [1] recently described the ongoing litigation involving the National Collegiate Athletic Association’s (NCAA) licensing of former student-athletes’ names and likenesses in video games (a now-consolidated case [2] that started with the filing of two separate actions — Keller v. NCAA, et al and O’Bannon v. NCAA, et al) as one of “five lawsuits that will change sports,” giving credence to the relevancy and importance of how analytics can and will be used in furthering specific arguments arising in the lawsuit. The purpose of this article is to provide an overview of sports law analytics and discuss the role of analytics in sports law cases moving forward, with a pointed discussion of the aforementioned consolidated Keller and O’Bannon case and the U.S. Supreme Court’s recent decision in American Needle v. NFL, et al [3].

Overview of Sports Law Analytics

The interdisciplinary methods employed in sports law analytics are derived from statistics, management science, operations research, economics, psychology and sociology. However, the practice parameters of sports law analytics are set by evidentiary rules and relevant case law precedent. The consolidated case encompassing both Keller and O’Bannon implicates important intellectual property principles such as publicity rights and consent. Similarly, American Needle revolves around antitrust law and the complex competition-centered analysis that goes along with it.

Daubert v. Merrell Dow Pharmaceuticals [4] was a U.S. Supreme Court opinion that addressed the admissibility of expert testimony within the context of a dr

ug-related birth defect case. Since being decided in 1993, Daubert has been the seminal case on the issue of whether expert testimony should be admitted or excluded. As binding precedent on every federal trial court in the United States, an understanding of the Daubert standard is a prerequisite to applying sports law analytics in pending litigation. Daubert requires courts to adopt a standard that determines whether the proffered evidence “both rests on a reliable foundation and is relevant to the task at hand” (597). In addition, the judge must consider “whether the reasoning or methodology underlying the testimony is scientifically valid” (592-93). The case has had the effect of limiting the use of the so-called “hired gun” expert.

Daubert requires the trial court judge to act as a gatekeeper to protect against unreliable expert testimony being admitted into evidence (592-94). As summarized in Nelson v. Tennessee Gas Pipeline [5], the Daubert case set forth several factors to be considered:

…(1) whether a “theory or technique…can be (and has been) tested”; (2) whether the theory “has been subjected to peer review and publication”; (3) whether there is a high “known or potential rate of error” and whether there are “standards controlling the technique’s operation”; and (4) whether the theory or technique enjoys “general acceptance” within the scientific community (251).

The U.S. Supreme Court, in cases such as Castaneda v. Partida [6], has offered guidance on the admissibility standards for quantitative evidence. As outlined by Winston [7], the nation’s highest court has “accepted the 5 percent level of significance or two standard deviation rule as the level of evidence needed to shift the burden of proof from plaintiff to defendant or vice versa” (96).

Kentucky Speedway v. NASCAR, et al [8], a December 2009 case out of the U.S. Court of Appeals for the Sixth Circuit, illustrates the power and pitfalls of sports law analytics in litigation. The plaintiff alleged that NASCAR and an affiliate violated federal antitrust laws when the plaintiff’s application for an elite-level sanction was not granted and the plaintiff’s attempts to purchase pre-sanctioned races proved unsuccessful. The case also evidences how Daubert is applied in sports industry legal disputes. In Kentucky Speedway, NASCAR and its co-defendants prevailed after the court of appeals upheld the district court’s determination that the plaintiff’s primary expert witness was unreliable. Specifically, the expert retained by the plaintiffs was deemed to have applied his own (incorrect) analytical test when testifying. Pointedly, the Kentucky Speedway court found that the expert’s “own version” of the well-accepted analytic pertaining to consumer substitution in the marketplace “has not been tested, has not been subjected to peer review and publication; there are no standards controlling it, and there is no showing that it enjoys general acceptance within the scientific community…[f]urther, it was produced solely for this litigation” (918).

Federal Rule of Evidence 702 [9] is the primary rule that guides the admissibility of evidence in the federal court system and was revised after the U.S. Supreme Court decided Daubert. In relevant part, the rule provides:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

Federal Rule of Evidence 702, coupled with Daubert, form the parameters of sports law analytics in the courtroom regardless of whether the dispute pertains to intellectual property law (Keller and O’Bannon), antitrust law (American Needle) or otherwise.

Analytics in Intellectual Property Litigation

Quantitative-based analysis is playing a major part in the outcomes of virtually all contemporary intellectual property litigation that reaches trial. In fact, the absence of such analytics has been held as a shortcoming in the context of some intellectual property litigation. Commercial publicity rights have been represented by a number of malleable concepts on which there is no uniformity of acceptance, no dispositive codified law, and jurisdictions across the U.S. have been split. The student-athletes in the Keller/O’Bannon class action video game case are alleging, among other things, that the NCAA impermissibly licensed their name and likeness, a violation of their right of publicity.

Section 46 of the Restatement (Third) of Unfair Competition [10] sets the burden of proof for establishing a violation of a right of publicity as: (i) use of the plaintiff’s identity; (ii) identity has commercial value; (iii) appropriation of commercial value for purposes of trade; (iv) lack of consent; and (v) resulting commercial injury. The aforementioned fourth prong will likely be at issue in the video game litigation, as the NCAA’s defense will probably include a claim that the student-athletes depicted in the interactive games provided de facto consent to such licensing via their scholarship agreement, letter of intent or other related document. Moreover, the second prong has been traditionally decided after consideration of marketing research surveys and several analytical tools attempting to establish whether there is indeed commercial value; e.g. whether consumers can sufficiently identify the plaintiff and, in turn, make the clear connection between the plaintiff and the digital expression in a video game.

Sports law analytics will almost certainly play an integral part in the resolution of the consolidated class action containing both Keller and O’Bannon if the case goes to trial. A bevy of expert witnesses will testify. Analytics-driven evidence will be proffered by both sides. Both Keller and O’Bannon were seeded in the use of former players’ images in college sports video games, for which the NCAA, Collegiate Licensing Company (CLC) and NCAA member schools had contracted with Electronic Arts (EA), a leading video game manufacturer. Per NCAA policies on amateurism, student-athletes are not permitted to use their athletic skill to endorse commercial products or services.

Similarly, the NCAA has taken the position that former student-athletes depicted in video games years after their collegiate careers have ended are not entitled to receive compensation in exchange for the licensing of the name and likeness. Keller filed his complaint in May 2009 and, among other things, alleged that the NCAA, CLC and EA violated his rights of publicity under Indiana and California law. O’Bannon and several co-plaintiffs, all former college basketball and football players, filed a related lawsuit two months later. Analytics presented on the twin issues of the right of publicity and the presence of consent will be influential, if not dispositive, in the case’s resolution.

Analytics in Antitrust Litigation

The importance of sports law analytics will also be realized in American Needle if the dispute reaches trial following remand by the U.S. Supreme Court on May 24, 2010. The American Needle case involved an antitrust challenge by a Chicago-area headwear manufacturer against the NFL following the league’s decision to enter into an exclusive arrangement with Reebok for the manufacture of officially licensed headwear. The Supreme Court unanimously reversed a lower court summary judgment motion in favor of the NFL, concluding that the league is not immune from antitrust scrutiny in connection with its intellectual property licensing activities. Barring settlement, the now-remanded case will go to trial. There, plaintiff American Needle will have the opportunity to present evidence showing that the NFL-Reebok agreement stifled competition in the marketplace, damaged the company’s book of business and adversely impacted consumers.

Analytics will play a role on two levels. First, macro-level experts for both sides will testify about economics-heavy antitrust principles, gauging whether the pro-competitive effects of the exclusive arrangement are outweighed by the anti-competitive impact of the NFL-Reebok exclusivity. Second, a narrow investigation will be undertaken to ascertain the impact on consumers. American Needle’s micro-level analytics will be aimed at showing how a purported decreased level of competition has affected customers. Such analytics will likely focus on costs at the retail level before and after the NFL granted Reebok an exclusive license. In response, the NFL will likely retain experts capable of testifying about how consumers are benefitted by the economies of scale resulting from an all-encompassing agreement in the form of greater selection, uniformity and quality control, for example. Finally, American Needle will need to demonstrate the extent of its lost profits following the NFL-Reebok licensing pact.

Conclusion

High-stakes litigation in the sports industry often turns on analytics. The consolidated class action containing Keller/O’Bannon and the American Needle v. NFL case are current examples. While this article explained the federal evidentiary rules and U.S. Supreme Court opinions that set the parameters for the admissibility of statistical evidence and expert testimony in sports-related trials, such parameters can be generalized to non-sports contexts, as the legal rules are equally applicable. Experts with analytical acumen and some baseline level of sport-specific institutional knowledge frequently provide expert witness and consulting services, as the underlying legal disputes are often nuanced and technical, making them ripe for analytics.

Ryan M. Rodenberg (rrodenberg@fsu.edu) is an assistant professor at Florida State University. He earned a Ph.D. from Indiana University-Bloomington and a JD from the University of Washington-Seattle. Anastasios Kaburakis (kaburakis@slu.edu) is an assistant professor at Saint Louis University. He earned a Ph.D. from Indiana University-Bloomington and a law degree from Aristotle University in Thessaloniki, Greece.

REFERENCES

  1. Shaun Assael, “Five Lawsuits That Will Change Sports,” ESPN.com, Nov. 8, 2010.
  2. In Re Student Athlete Name and Likeness Licensing Litigation, C 09-01967 CW (N.D. Cal. 2010).
  3. American Needle v. NFL, et al, 130 S.Ct. 2201 (2010).
  4. Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993).
  5. Nelson v. Tennessee Gas Pipeline, 243 F.3d 244 (6th Cir. 2001).
  6. Castaneda v. Partida, 430 U.S. 482 (1977).
  7. Wayne L. Winston, 2009, “Mathletics,” Princeton, N.J.
  8. Kentucky Speedway v. NASCAR, et al, 588 F.3d 908 (6th Cir. 2009).
  9. Federal Rule of Evidence 702 (2011).
  10. Restatement (Third) of Unfair Competition §46 (1995).

 

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