Blazers Blowing Smoke Over Miles?

I just noticed that the headline for most of my stories is phrased as a question.  I can assure you, this is completely unintentional.  Is it annoying to you as a reader?  Does anyone else do this?  Why do I do this?  Do I answer my own questions?  Isn’t that one of the signs of insanity?  Why must everything be a question?  I’m sure a shrink could give me an explanation.  Anyway, that’s not the topic of this article; just a random personal observation.  Read on…

Earlier today, Portland Trail Blazers’ President, Larry Miller, sent an email to every NBA team, as well as the League office, stating that if any team signs Darius Miles “for the purpose of adversely impacting the Portland Trail Blazers Salary Cap and tax positions” they may face a lawsuit from the Trail Blazers for violating their fiduciary duty to other teams in the League.  I won’t go too deep into the background, as ESPN has a good overview of the situation. Essentially, League approved doctors determined that Miles’ knee injury was so severe that it was career ending.  Following such finding that Miles would be “medically retired, the team released him and, according to League rules, was able remove his $18m salary from their salary cap and luxury tax calculations.  However, Miles has made a comeback and while he is certainly not the dramatic player he once was, he is more than likely capable of playing at some level in the NBA.  This has the Blazers concerned.  If Miles does sign with another team and play in at least two (2) more games this season, the Blazers will have to include Miles’ salary in their salary cap and luxury tax calculations.  According to ESPN, this would result in the Blazers exceeding the salary cap by $7.9m.  For those that aren’t familiar with the NBA luxury tax, it is a dollar-for-dollar tax.  That is, for every dollar a team is over the salary cap, they must pay a dollar to the League.  The League has some discretion to divide this tax revenue equally between all of the teams or use some for it’s own purposes.

So what does all this mean?  Well, for one, it means that Portland has 7.9m reasons to see that Miles doesn’t play in the NBA this season.  The fact is, the medical personnel were incorrect and Miles may in fact be able to make a comeback.  However, it’s in Portland’s best financial interest to see that that doesn’t happen.  Thus, it’s my best guess that their threat to sue a team for hiring Miles is really just a bit of puffing.  If they can scare the other teams in the League into not hiring Miles, then they can avoid the $7.9m luxury tax penalty.  In order for Portland to succeed in such a lawsuit they would have several hurdles to overcome.  Even worse, the tactic could backfire in their face depending on how Miles and the League handle the issue.  This is the United States and, at least in theory, one of our top priority is individual liberties.  Our Constitution has long prohibited anyone from taking away a person’s ability to earn a living without a strong public policy reason for doing so.  If push comes to shove, I can’t imagine that Miles would sit back and let Portland’s threat prevent him from signing with an NBA team.  For that matter, I can’t imagine the League allowing it to happen either.  To allow one team to dictate hiring decisions of others could open the League up to liability as well.

Let’s assume that Miles signs with another team and Portland wants to pursue a claim.  What would be their basis for filing a claim?  From Miller’s email it appears that the primary claim would be a breach of fiduciary duty on the part of the team hiring Miles.  Presumably, their argument would be that since each NBA team is an investor in the League, they each owe a duty of care to the other teams, as they are joint venturers.  There is likely some substance to this logic, as it is traditionally true that each partner, shareholder, member, etc. in an organization owes a duty to each of the other partners, shareholders or members of the organization.  This duty would include the obligation to not take any action with the intent to harm other investors.  If a team did in fact hire Miles for the purpose of harming the Blazers, there could be some liability.

Here’s where the Blazers will likely run into a problem.  How would they prove it? (man, I can’t get away from those questions…)  Afterall, no team is going to admit that they hired Miles in order to screw the Blazers.  They’re all going to say that they made the hire because he’s a solid player that fits a role on their team.  His knee may be swiss cheese, and so what if he only plays two minutes a night?  That’s their prerogative.  Every team has guys that don’t play many minutes, yet continue to stay employed.  Absent some sort of smoking gun, the Blazers would have a Mt. Rainier sized mountain to climb.  …In addition they may have to deal with a sea of League attorneys if they’re not careful.

This will be an interesting story to watch.  I’ll try to keep you updated as it progresses.

Agree, disagree, or think my writing stinks? Let me hear about it.

Matt Breeden (SportsLawGuru.com) is an internationally respected business advisor and attorney based in Indianapolis, IN. His practice is focused on Sports & Entertainment, Intellectual Property, Commercial and Corporate Law. He represents Sports & Entertainment properties, as well as many other businesses, in a variety of matters, including: Broadcast & Digital Media Agreements, Licensing Agreements, Sponsorship Agreements, Commercial Agreements, Athlete/Driver Contracts, Insurance & Risk Management, Employment Agreements, Litigation Management, Mergers & Acquisitions, Business Formation and Corporate Governance.