ARTICLE XIII:
CIRCUMVENTION
INDEX
Section 1. General Prohibitions
Section 2. No Unauthorized Agreements
Section 3. Penalties
Section 4. Production of Tax
Materials
Section 5. Transactions With
Retired Players
Section
1. General Prohibitions.
(a) It is the intention of the parties that the provisions
agreed to herein, including, without limitation, those
relating to the Salary Cap, the Exceptions to the Salary
Cap, the scope of Basketball Related Income, the Escrow
System, the Rookie Scale, the Right of First Refusal,
the Maximum Player Salary, and free agency, be interpreted
so as to preserve the essential benefits achieved by
both parties to this Agreement. Neither the Players
Association, the NBA, nor any Team (or Team Affiliate)
or player (or person or entity acting with authority
on behalf of such player), shall enter into any agreement,
including, without limitation, any Player Contract (including
any Renegotiation, Extension, or amendment of a Player
Contract), or undertake any action or transaction, including,
without limitation, the assignment or termination of
a Player Contract, which is, or which includes any term
that is, designed to serve the purpose of defeating
or circumventing the intention of the parties as reflected
by all of the provisions of this Agreement.
(b) It shall constitute a violation of Section 1(a)
above for a Team (or Team Affiliate) to enter into an
agreement or understanding with any sponsor or business
partner or third-party under which such sponsor, business
partner or third-party pays or agrees to pay compensation
for basketball services (even if such compensation is
ostensibly designated as being for non-basketball services)
to a player under Contract to the Team. Such an agreement
with a sponsor or business partner or third-party may
be inferred where: (i) such compensation from the sponsor
or business partner or third-party is substantially
in excess of the fair market value of any services to
be rendered by the player for such sponsor or business
partner or third-party; and (ii) the Compensation in
the Player Contract between the player and the Team
is substantially below the fair market value of such
Contract.
(c) It shall constitute a violation of Section 1(a)
above for a Team (or Team Affiliate) to have a financial
arrangement with or offer a financial inducement to
any player (not including retired players) not signed
to a current Player Contract, except as permitted by
this Agreement.
(d) Nothing contained in Section 1(c) above shall interfere
with a Team’s obligation to pay a player Deferred
Compensation earned under a prior Player Contract.
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Section 2. No Unauthorized
Agreements.
(a) At no time shall there be any agreements or transactions
of any kind (whether disclosed or undisclosed to the
NBA), express or implied, oral or written, or promises,
undertakings, representations, commitments, inducements,
assurances of intent, or understandings of any kind
(whether disclosed or undisclosed to the NBA), between
a player (or any person or entity controlled by, related
to, or acting with authority on behalf of, such player)
and any Team (or Team Affiliate):
(i) concerning any future Renegotiation, Extension,
or amendment of an existing Player Contract, or entry
into a new Player Contract;
(ii) except as permitted by this Agreement or as set
forth in a Uniform Player Contract (provided that
the Team has not intentionally delayed submitting
such Uniform Player Contract for approval by the NBA),
involving compensation or consideration of any kind
to be paid, furnished or made available to the player,
or any person or entity controlled by, related to,
or acting with authority on behalf of the player;
or
(iii) involving an investment or business opportunity
to be furnished or made available to the player, or
any person or entity controlled by, related to, or
acting with authority on behalf of the player.
(b) In addition to the foregoing, it shall be a violation
of this Section 2 for any Team (or Team Affiliate) or
any player (or any person or entity controlled by, related
to, or acting with authority on behalf of, such player)
to attempt to enter into or to intentionally solicit
any agreement, transaction, promise, undertaking, representation,
commitment, inducement, assurance of intent or understanding
that would be prohibited by Section 2(a) above.
(c) A violation of Section 2(a) above may be proven
by direct or circumstantial evidence, including, but
not limited to, evidence that a Player Contract or any
term or provision thereof cannot rationally be explained
in the absence of conduct violative of Section 2(a).
(d) In any proceeding brought before the System Arbitrator
pursuant to this Section 2, no adverse inference shall
be drawn against the party initiating such proceeding
because that party, when it first suspected or believed
that a violation of Section 2 may have occurred, deferred
the initiation of such proceeding until it had further
reason to believe that such a violation had occurred.
(e) A player will not be found to have committed a violation
of Section 2(a)(ii) above if the violation is the Team’s
intentional delay in submitting a Uniform Player Contract
to the NBA and this was done without the player’s
knowledge.
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Section 3. Penalties.
(a) Upon a finding of a violation of Section 1 above
by the System Arbitrator, but only following the conclusion
of any appeal to the Appeals Panel, the Commissioner
shall be authorized to:
(i) impose a fine of up to $2,500,000 (50% of which
shall be payable to the NBA, and 50% of which shall
be payable to the NBPA-Selected Charitable Organization
(as defined in Article VI, Section 6(a))) on any Team
found to have committed such violation for the first
time;
(ii) impose a fine of up to $3,000,000 (50% of which
shall be payable to the NBA, and 50% of which shall
be payable to the NBPA-Selected Charitable Organization
on any Team found to have committed such violation
for at least the second time;
(iii) direct the forfeiture of one first round draft
pick;
(iv) void any Player Contract, or any Renegotiation,
Extension, or amendment of a Player Contract, between
any player and any Team when both the player (or any
person or entity acting with authority on behalf of
such player) and the Team (or Team Affiliate) are
found to have committed such violation; and/or
(v) void any other transaction or agreement found
to have violated Section 1 above.
(b) Upon a finding of a violation of Section 2 above
by the System Arbitrator, but only following the conclusion
of any appeal to the Appeals Panel, the Commissioner
shall be authorized to:
(i) impose a fine of up to $5,000,000 on any Team
found to have committed such violation (50% of which
shall be payable to the NBA, and 50% of which shall
be payable to the NBPA-Selected Charitable Organization);
(ii) direct the forfeiture of draft picks;
(iii) when both the player (or any person or entity
acting with authority on behalf of such player) and
the Team (or Team Affiliate) are found to have committed
such violation, (A) void any Player Contract, or any
Renegotiation, Extension, or amendment of a Player
Contract, between such player and such Team, (B) impose
a fine of up to $100,000 on any player (50% of which
shall be payable to the NBA, and 50% of which shall
be payable to the NBPA-Selected Charitable Organization),
and/or (C) prohibit any future Player Contract, or
any Renegotiation, Extension, or amendment of a Player
Contract, between such player and such Team;
(iv) suspend for up to one (1) year any Team personnel
found to have willfully engaged in such violation;
and/or
(v) void any other transaction or agreement found
to have violated Section 2 above.
(c) In any proceeding before the System Arbitrator
in which it is alleged that a player agent or other
person or entity acting with authority on behalf of
a player has violated Section 2 above, the System Arbitrator
shall make a specific determination with respect to
such allegation. If the System Arbitrator finds such
violation and such finding, if appealed, is affirmed
by the Appeals Panel, the System Arbitrator shall refer
such finding to the Players Association, which shall
accept as binding and conclusive the finding(s) of the
System Arbitrator (or, in the case of an appeal, the
Appeals Panel) that a violation of Section 2(a) or 2(b)
has occurred and shall consider such finding(s) as establishing
a violation of the Players Association’s regulations
applicable to such person or entity. The Players Association
represents that it will impose such discipline as is
appropriate under the circumstances on the person or
entity found to have violated Section 2 above, and that
it will promptly notify the NBA of the discipline imposed;
provided, however, that in no event shall the penalty
imposed upon a player agent found to have violated Section
2 above be less than a one-year suspension of that player
agent’s certification by the Players Association.
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Section 4. Production
of Tax Materials.
In any proceeding to enforce Section 1 or 2 above, the
System Arbitrator shall have the authority, upon good
cause shown, to direct any Team, Team Affiliate, or
player to produce any tax returns or other relevant
tax materials disclosing income figures for the player
(non-income figures may be redacted), or disclosing
expense figures by the Team or Team Affiliate (non-expense
figures may be redacted), which materials shall not
be released to the general public or the media and shall
be treated as strictly confidential by all parties.
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Section 5. Transactions
With Retired Players.
(a) If (i) a Team or Team Affiliate enters into a transaction
after the date of this Agreement with a retired player
who played for the Team within the five-year (5) period
preceding such transaction and the terms of such transaction
provide for the retired player to be paid compensation
or consideration in excess of $10,000 or to be provided
with an investment or business opportunity, and, if
(ii) the compensation the retired player received from
the Team when he was a player was substantially below
the then fair market value of such player’s basketball
services under the Salary Cap system, then the NBA may
challenge the transaction, pursuant to the procedures
set forth in Section 5(b) below, on the ground that:
(A) the compensation or consideration to the retired
player substantially exceeds the then fair market value
of the services or other consideration provided by the
retired player in the transaction; or that (B) the amount
of the retired player’s investment or the benefit
conferred upon the retired player as a result of the
investment or business opportunity is not commercially
reasonable, given the relative risks and rewards of
such investment.
(b)
(i) Any challenge under this Section 5 shall be filed
in writing with a business valuation expert jointly
selected by the NBA and the Players Association. In
the event the parties cannot agree on the identity
of a business valuation expert, a business valuation
expert shall be selected in the same manner set forth
in Article XXXI, Section 6 for the selection of a
Grievance Arbitrator in the absence of an agreement
between the parties. The business valuation expert
shall conduct a hearing in which the player or retired
player, the Team and/or Team Affiliate, the Players
Association, and the NBA are afforded the opportunity
to appear and participate. The NBA shall have the
burden of proof in the proceeding. The business valuation
expert may permit discovery of relevant documents
necessary to undertake the valuation, and shall render
a decision within fifteen (15) days following the
conclusion of the hearing. Within ten (10) days of
any decision by the business valuation expert, any
of the parties may file an appeal with the System
Arbitrator, who shall conduct a hearing and render
a decision within twenty (20) days of the filing of
the appeal. In any such proceeding, the System Arbitrator
shall apply an “arbitrary and capricious”
standard of review. There shall be no right of further
appeal to the Appeals Panel.
(ii) If the NBA prevails in its challenge under this
Section 5, the difference between (A) the compensation
or consideration received by the retired player, or
the value of the investment or business opportunity
received by the retired player (net of any contribution
by the retired player), and (B) a reasonable estimate
of the fair market value of the services or other
consideration provided by the retired player, or a
reasonable estimate of the fair market value of the
investment or business opportunity, in each case as
determined by the business valuation expert or the
System Arbitrator, as the case may be, shall be included
in the Team’s Team Salary, subject to the Team’s
Room and other Salary Cap rules, and further subject
to any allocation over time that the business valuation
expert or System Arbitrator determines is appropriate.
In the event that any amount required to be included
in the Team Salary pursuant to this subsection exceeds
the Team’s Room, the challenged transaction
or arrangement shall be rescinded and of no further
force and effect.
(iii) If the NBA prevails in its challenge under this
Section 5, and the retired player and the Team and/or
Team Affiliate renegotiate or terminate the transaction,
any revised terms of the transaction shall be promptly
disclosed to the NBA and the Players Association,
and may, at the request of the NBA, be re-subjected
to the procedures of this Section 5(b).
(c) Any information disclosed to the League Office
and the Players Association pursuant to the procedures
of this Section 5 shall be treated strictly confidential,
and shall not be released to the general public or the
media.
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