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Fantasy football frenzy has roots here

By

Football fever is running high in Minnesota these days.

At the professional level, the Minnesota Vikings have returned to play-off contending status, hosting the archrival Green Bay Packers Sunday at TCF Bank Stadium on the University of Minnesota campus, as the two teams battle for dominance in their NFC North Division of the National Football League. The Minnesota Gophers, suffering through a disappointing season, along with the abrupt retirement of their coach, Jerry Kill, for health reasons, finishes the season with a pair of home games at their campus stadium, still striving for a return to a post- season bowl game under newly appointed coach Tracy Claeys, elevated from Kill’s staff to succeed him. High school fans are recovering from last week’s annual two-day, seven-game Prep Bowl championship feast at the same facility.

But this heightened attention to gridiron feats pales in comparison to the ardor for another genre of the game: fantasy football.

The activity seems ubiquitous these days in the press, on television, the radio and social media, almost as much as ads for male sex enhancement pills and other devices. Innumerable media importune participants to win riches by indulging in the practice on a daily basis like the SuperAmerica operator from Blaine, Gene Schaum, who this fall won $1 million on a $25 fantasy football parlay.

But the insatiable taste for fantasy has become spiced recently with acidic activities. Competing organizations have feuded over their respective roles in the fantasy hierarchy. State regulators have stepped in — in light of revelations of improper activities by employees — akin to insider trading and other mischief, and have initiated efforts to ban residents of their states from engaging in the practice online, deeming it to be illegal gambling.

The concern has even reached the presidential stage when one of the Republican candidates, Jeb Bush, was asked at a televised candidate debate whether government oversight is needed. His qualified affirmation triggered a dismissive response from one competitor, New Jersey Gov. Chris Christie, who deemed the injection of “fantasy” into the Republicans campaigning to be unworthy of their lofty contemplation.

Nevertheless, the high-flying fantasy football and even lesser versions for other pastimes, particularly baseball, are gaining in popularity as they hold out the lure of largesse to their participants. The prevalence of fantasy football and other sports owes much to Minnesota, where the courts in this jurisdiction, both federal and state levels, have spawned the practice and helped perpetuate it.

Along the way, the current frenzy has undergone a metamorphosis. It was initially challenged by both professional athletes and their organization, before those efforts dissolved, followed by institutional attempts to co-opt the practice, which wilted as a result of today’s technology, leading to the unrestrained boom in the business.

The Minnesota courts have played a prominent role in the evolution of fantasy sporting, which has shown a Darwinian tendency to survive and multiply. Its status as a multibillion-dollar enterprise has grown from modest roots in this state.

Publicity proclaimed

Today’s fantasy football frenzy dates back more than 40 years to a ruling by the Federal District Court in Minnesota dealing with a different sport. In Uhlaender v. Hendricksen, 316 F. Supp. 1277 (D. Minn. 1970), U.S. District Court Judge Phillip Neville in Minneapolis adjudicated a dispute between the nascent Major League Baseball Players Association, seeking to protect the pecuniary value of its members in their identities and statistics, against a table board manufacturer who was using both in its game. The lawsuit was brought in the name of Ted Uhlaender, a former center fielder for the Minnesota Twins, who asserted that the use of the identities and statistics of ballplayers constituted tortious violation of their rights. The cause of action was termed “right of publicity,” an incipient legal tenet providing protection for pecuniary interests of celebrities from impermissible commercial exploration.

While the doctrine had been developing over the years, it was an issue of first impression in Minnesota jurisprudence. Judge Neville found that the right existed, reasoning that because the players have a “legitimate proprietary interest” in their publicly reported productivity, their names and statistics constitute “property subject to legal protection from unauthorized use.” Therefore, the identities of the players and their statistics could not be used for commercial purposes without compensation for the value of their “right of publicity.”

The decision ushered in later Minnesota court rulings upholding the “right of publicity” for celebrities to protect their names, identities, and other features from unauthorized commercial exploitation. In McFarland v. E&K Corp., 1991 WL 13728 (D. Minn. 1991) (unpublished) a former child movie star of the Depression era was entitled, more than 50 years later, to injunctive relief and damages from a St. Paul bar and night club known as “Spanky’s Saloon” that used his name and visage without authorization. Picking up where Judge Neville left off four decades earlier, Judge James Rosenbaum upheld the “right of publicity,” for the “cherubic” former star of the “Our Gang” movie shorts of the 1930s, which were widely distributed a generation later on television in the 1950s under the “Little Rascals” appellation.

The Minnesota state courts, however, did not get around to recognizing that right, a form of privacy law, or any other privacy rights for that matter, for nearly 40 years after the Uhlaender ruling, and nearly a decade after the McFarlandcase. In 1998, the state Supreme Court, in a landmark ruling, proclaimed a “right of privacy” for Minnesotans in Lake v. Wal-Mart Stores, Inc.,587 N.W.2d 23 (1998). Writing for the Court, Chief Justice Kathleen Blatz declared that individual privacy constitutes “an integral part of our humanity, which may be protected and preserved by common law tort rights.”

The right of privacy enunciated in the Lakecase, which incidentally later resulted in a defense verdict at trial in Clay County District Court, consisted of three prongs: right to seclusion against trespass type intrusions; right against revelation of truthful but offensive or embarrassing facts; and the “publicity” component designation as commercial “misappropriation,” previously recognized in Uhlaender and progeny.

Tide turns

By the time that common law privacy rights began flowing from Lake, the fantasy sports practice had developed. Starting out as a cottage industry, primarily involving major league baseball and, to a lesser extent professional football, the arrangement consisted of participants wagering small amounts on the productivity of particular players or teams. Aided by technological advances, it expanded from small-time stakes among friends and colleagues to a more robust commercial practice, utilizing the Internet as its core instrumentality.

As those commercial features grew, along with revenues, organized professional sports stepped in to the fray. Rather than the players, this time it was the teams, and their leagues, that sought to prevent the practice by third parties and cash in on it themselves. They claimed that the fantasy arrangements constituted a violation of the “right of publicity” and sought to enjoin private parties from exploiting it for their own pecuniary gain.

Their challenge reached a zenith in the 8th Circuit Court of Appeals in a case out of Missouri. The tide turned against “publicity” proponents in CBC Distributing & Marketing v.Major League Baseball, 505 F.3d 1818 (8th Cir. 2007), cert denied (June 2, 2008). As the appellate court ruled against the effort to prevent private fantasy activities in a case brought by Major League Baseball, joined by the player’s association, the same organization that backed Uhlaender in the Minnesota case nearly four decades earlier. Their effort to prevent commercial use of names and stats of players for fantasy commercial games was aimed at barring exploitation of that data by private entrepreneurs, allowing the league and players to earn and keep revenues from fantasy sports activities or, at a minimum, receive licensing or royalty fees from others for allowing them to do so. The NFL, not surprisingly, filed an amicus supporting organized baseball’s position that their “right of publicity” bars unauthorized use of names and statistics of players by private fantasy organizations.

The trial court found that “no right of publicity” exists, paving the way for an easy victory by the fantasy promoter. The 8th Circuit affirmed, although on different grounds. While recognizing the right, it deemed the First Amendment right of freedom of expression to supersede the player’s right of publicity. It held that the First Amendment entitles fantasy merchants and participants to use information freely available to everyone, namely the identities and statistics of professional athletes. The decision effectively sacked the professional leagues and opened up the fantasy sports world to private entrepreneurs without legal restrictions or any compensation to the players or leagues, whose names, identities and statistics they gleefully — and profitably — used.

The ruling crippled the desire and interest of professional sports organizations to sponsor and promote their own in-house fantasy activities online as they were attempting to do at the time while giving a free pass to private entrepreneurs to continue to expand their practice. Before long, professional football, rather than baseball, became the dominant focus for privately sponsored fantasy practices.

But not without a fight. Pierre Garcon, a veteran wide receiver now with the Washington team in the NFL, has revived the “right of publicity” claim in a class-action lawsuit filed late last month against one of the two major fantasy football organizations, seeking compensation. His lawsuit, Garcon v. FanDuel, Inc.,(D.Md, Oct. 30, 2015) claims that the fantasy promoter wrongfully exploits the popularity and performance of players while unjustly refusing to cut them in for a share of the proceeds.

The class action, which draws its roots from the Uhlaenderdecision 45 years ago in Minnesota, is brought against the fantasy promoter that has a license with 15 of the 30 NFL teams, although not with the players themselves. Another large fantasy football organization which has a licensing arrangement with the NFL Players Association is not named in Garcon’s suit. These licensing arrangements with the league raise unanswered issues regarding the rights of the players to personally control their own identities and performance data.

Meanwhile a pair of retired Hall of Fame quarterbacks, Dan Marino and Joe Montana, are benefiting from their football successors, hosting the World Fantasy Football Championship, bringing 120 competitors to San Diego next month for a two-day orgy offering a $3 million first prize.

Minnesota matters

While the federal courts have addressed, and often embraced, fantasy sports, as the online presence grew exponentially, Minnesota law trod tepidly.

The contention that fantasy football and other sports constitutes a form of illicit gambling has not been directly addressed in Minnesota. Internet gambling, like its non-technological counterpart, is illegal in this state. Under Minn. Stat. § 609.755(2), participation in excess of $2500 is felonious, while wagering lesser amounts constitutes a gross misdemeanor. However, prosecutions were few and far between, a recognition by state authorities that the strongly held desire to participate in these activities by willing participants makes it somewhat of a “victimless” crime warranting a sparse prosecutorial priority. Moreover, the federal government stepped in when Congress enacted and the second President Bush, Jeb’s brother, signed the Unlawful Internet Gambling Enforcement Act, 31 U.S.C. 15361, et seq., which protects on-line gambling, but contains an exception for sporting games of skill.

The Minnesota Court of Appeals have upheld jurisdiction in this state over off-shore internet gambling Internet sites. In State v. Granite Gate Resorts, Inc., 568 N.W.2d 715 (Minn. App. 1997), the appellate court ruled that sufficient contact exists between those out-of-state entities and Minnesota who participate in the wagering. While that decision rocked the industry for a short time, and has been followed by courts in other jurisdictions, neither it nor the federal law has impeded the growth and subsequent surge of fantasy gaming in this state and elsewhere.

Another Minnesota connection to the fantasy football frenzy is the role played by a Minnesotan, Paul Charchian, a resident of Plymouth and one of the founding fathers of the fantasy football craze, dating back more than two decades ago. He serves as president of the Fantasy Sports Trade Association, a Chicago-based entity that nurtures and protects the growth of the activity online and in other forums.

How big is the professional football fantasy sports industry? Even larger than the game itself and growing rapidly, according to Charchian’s group. Unofficial reports show close to 40 million Americans, playing fantasy sports, spending about $500 per person annually, resulting in revenue in excess of $15 billion. The bulk of it, about $11 billion, is directed to football. At that figure, fantasy football revenue tops the earnings of the NFL, which spawned it, but about $1 billion annually.

Although viewed by many as a form of gambling, fantasy promoters, and even many participants, maintain that their practice is not gambling at all, but a matter of skill, harnessing knowledge and insight into the gridiron game. But regulators in Nevada, the mecca of sports gaming, have deemed fantasy sports to be a form of gambling, which transgresses the regulatory rules in that rather libertine state. The attorney general of New York made a similar gesture earlier this month and authorities in other states are taking a hard look, too.

But not Minnesota. The Department of Public Safety, which oversees lawful gambling in this state, last week announced that no action will be taken here, the legal birthplace of fantasy sports, because the state “follows federal law, which permits fantasy sports.” The Attorney General’s Office has stayed on the sidelines, too, although it says it is monitoring fast-breaking developments in other jurisdictions.

But no steps have been taken in Minnesota to ban, or even limit, participation in fantasy sports or curb its online popularity. That may be fitting, considering that this jurisdiction is ground zero for fantasy sports.

PERSPECTIVES POINTERS

Some important Minnesota football cases

  • Mackey v. NFL (1976): 8th Circuit upholds ruling by Federal Judge Earl Larson allowing “free agency” of professional football players.
  • Alexander v. NFL (2002): Minnesota Court of Appeals allows NFL to arbitrate contract claims by Vikings assistant coaches.
  • Williams v. NFL (2009-2011): 8th Circuit and Minnesota appellate court hold that NFL may discipline Vikings players for use of proscribed performance enhancing substances.
  • NFL Players Association v. NFL (2015): District Court Judge David Doty invalidates discipline against Vikings star running back, Adrian Peterson due to inflicting injuries on his son in Texas while disciplining the youth.

 

As published by Minnesota Lawyer.

http://minnlawyer.com/2015/11/19/perspectives-fantasy-football-frenzy-has-roots-here/