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"Show me the money": In lucrative sports contracts, an ADR clause makes all the difference




Peter Carfagna, whose firm represents some of the biggest and brightest stars in the world of professional sports, is a self-confessed "recovering" litigator. Gone are the days when he would jump at any chance to go for the proverbial jugular to win in court. The following is a description of his transformation from a "mad dog" litigator to an alternative dispute resolution advocate. Carfagna also provides some hypothetical disputes involving professional athletes and shows how the use of mediation and arbitration could save everyone from the staggering costs, the heartaches, and many sleepless nights usually associated with a lengthy court trial. This article is based on a speech he gave recently at the ADR Day sponsored by the AAA's Cleveland office.

After having spent many years as a "mad dog" litigator at Jones, ,Day, in my current role as chief legal officer/general counsel of IMG for the past seven years, I have come to greatly appreciate the many virtues of alternative dispute resolution.

As much as I loved my many years at the bar, I must confess that I now truly consider myself a "reformed" or "recovering" litigator, as I have begun to take the "12 steps" away from the bar and into the mediation/arbitration arena. As part of my confession, I want to share with you a number of (not so) "hypotheticals" that have convinced me that for virtually any complex commercial dispute, AAA mediation and arbitration constitutes the preferred way of proceeding-- with all due respect to my colleagues who remain on the bench and at the bar.

First, though, let me give you a little bit of personal background. I arrived at Jones, Day fresh out of Harvard Law School, ready to litigate with anybody at any time.

I trained under the "masters," including Tom Mulligan and Pat McCartan who is still the managing partner at Jones, Day. They taught me how to try a case. They taught me how to cross-examine a witness. They taught me how to make an opening and a closing argument. They threw me into the deep end, but left behind numerous "life lines" to help bring me back to shore, whenever I started flailing.

I remember my first case co-chairing a defense trial for a national department store chain. The jury issue turned on the so called "two-inch rule" pursuant to which a deviation in a parking lot pavement cannot be more than two inches, or else the owner of the premises may be found "per se" liable.

My litigation future was in the judge and jury's hands. I was sure that we had thoroughly convinced the jury of the propriety of the national corporation's reasons for deviating from the "two-inch rule." I was sure the jury was in our hip pocket: then, they returned a major plaintiffs verdict, which is still written about in the journals of the Ohio Bar to this day.

That was the first time that I learned this lesson: maybe it would be smarter to switch to arbitration than to fight in litigation.

Similarly, in numerous toxic tort cases at Jones, Day, I was thrown into the breach. In one asbestos exposure/Mesothelioma case, when I was a very young attorney, Tom Mulligan asked me to conduct a videotaped trial deposition of a dying asbestos worker in the living room of his home.

Bob Sweeney conducted the direct exam, and I was the first questioner for the defense team. In my heart, I knew that something was wrong with that litigation picture. There had to be a better way to resolve disputes than this sort of hand-to-- hand combat.

The peak and, ironically, the beginning of the end of my litigating career came when Pat McCartan asked me to try my first jury case in front of Judge John Manos. Everyone who has ever litigated a case before Judge Manos knows what that means: it is very similar to trying a case before God himself.

At the end of my cross-examination of the plaintiff, I knew that I had won the case. I made that special eye contact with the jurors, where we all knew that I had caught the plaintiff in a case-- defeating lie.

After the case, Judge Manos called me into his chambers, which was very similar to being called to the pearly gates by Saint Peter. He complimented me on my cross-examination. He asked me, though, how the case had gone all the way to trial. Why hadn't it settled, prior to trial, despite Judge Manos' best efforts?

I told him that just as I had been taught at Jones, Day, I had saved my best cross-examination for trial. In response, Judge Manos gave me an important message, which I have carried with me ever since. He said: "You will do yourself and your clients a big favor if you don't save it for trial" next time.

Ever since then, I've come around to the view that, if you are in trial, if you are depending upon a judge or a jury to decide your fate, you have not done your job as an effective corporate/commercial litigation attorney and business advisor. Instead, especially in the sports business/industry in which IMG finds itself, you do your clients the greatest service if you can, based on your litigation experience, take a case to mediation and/or arbitration, and resolve it quickly, quietly and confidentially-even though that Jekyll/Hyde in every litigator always wants one last chance to conduct that "perfect" cross-examination.

Let me share with you my experience in coming to the realization that I would rather mediate than fight in the wide world of professional sports. Let me start with a few examples, and you can help me decide which would be the preferred forum for resolving the dispute. Again, in virtually every example, I would submit that a privately controlled mediation/arbitration "alternative dispute resolution" context would best serve your interests.

In each case, I will give you the hypothetical and then ask, as they say in the NFL, that "you make the call."

A Golfer's Dilemma

In this first hypothetical, an up-and-coming golf club manufacturing company is trying to make its first impact on the PGA tour. The company has designed a new type of forged iron club, on which it is seeking a patent. In the meantime, however, it needs a big name a top 50 PGA tour player to endorse and, more importantly, play its clubs on the PGA tour.

Assume that a protracted negotiation with an IMG-represented golfer results and that all deal points have been agreed on, except for the "suitability" clause. According to that clause, the parties must agree to the following point (or not): will the player in question agree always to play the company's clubs or, if the player has enough leverage, can he get a "carve out" which permits him to play another company's clubs, if he does not deem the clubs in question to be "suitable" for use in his professional play.

Now, assume that a dispute has arisen between the player and the golf club manufacturer, after the agreement has been signed with a "suitability" clause in it. Where would you prefer to resolve that dispute? Would you prefer to be in court, or would you prefer to be in a confidential mediation and/or arbitration?

In my professional opinion, during my Jones, Day days, I would have licked my chops and shown my back teeth as we fought through what certainly would have been months of document discovery and depositions, before we ever got to a trial on the merits.

At that point, the result from the judge or jury could have been wildly idiosyncratic. Some "runaway jury" could have found that our player should be "punished" for breaching his obligation to play the clubs in question, whether the clubs were suitable or not. The rules of evidence would, no doubt, have hamstrung us in terms of showing how a PGA tour professional, like a medical surgeon, must, in any event, be able to choose the "tools of his trade," or else he will not be able to earn a living.

Before a Judge Manos-type federal judge, we would have been forced to file motions in limine, many of which probably would have been denied, to try to admit evidence that would have been central to our player's case to try to get out of his "suitability" clause undertaking.

Refreshingly, in mediation/arbitration, we would be able to schedule the timing of the mediation/arbitration to fit the player's tournament schedule. We would be able to have at least some say in how the mediator/arbitrator was selected. We would also be able, if we were smart about it, to limit the amount of discovery so that we would only exchange that documentation which was truly relevant, on terms and conditions which the arbitrator and the parties mutually agreed made sense.

Similarly, with the arbitrator's assistance, we would be able to fix the amount of deposition discovery, as well as the scheduling of same, so as to fit the parties' time schedules and budgets for resolving the dispute.

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