Antitrust Law Daily Wrap Up, ADVERTISING—D. Minn.: Settlement of retired pro-football players’ publicity rights claims against NFL given final approval, (Nov 5, 2013)

By Cheryl Beise, J.D.

The federal district court in Minneapolis has approved the settlement of a publicity rights class action brought by former professional football players against the National Football League in connection with the NFL’s unauthorized promotional use of the players’ names and likenesses (Dryer v. National Football League, November 1, 2013, Magnuson, P.). The court overruled objections to the settlement and granted final approval to a class that was conditionally approved by the court in its April 5, 2013 preliminary approval order.

In August 2009, a group of retired NFL players brought an action alleging that the NFL had earned substantial revenue by making promotional films and selling products featuring the names, images, and likenesses of retired players without the players’ authorization. The complaint alleged that the NFL Films website used the names of more than 450 retired players to advertise and sell videos promoting the NFL and that the NFL Network broadcasts hundreds of hours of these films each year. This conduct violated the former players’ rights of publicity and other state laws. The lawsuit requested the certification of a class of retired NFL players whose names, voices, images, likenesses, or other identities have been used to promote the NFL and its teams; an award of damages; equitable and injunctive relief; and an award of attorney fees and costs.

After months of negotiations, the parties reached a settlement, providing for a fund overseen by a panel of former players that will distribute payments to assist former players and their families and creating a licensing agency to market former players’ publicity rights, “with the blessing (and the use of some trademarks and copyrights) of the NFL.”

Although the litigation has been contentious and the objections have been “especially vociferous” in this matter, the court noted that less than ten percent of the total class of over 25,000 members opted out of the settlement and only one-tenth of one percent objected to the settlement. The court praised the settlement as “a boon to those thousands upon thousands of former NFL players who can now reap the collective benefit of a large financial payout to a fund organized solely for their benefit, overseen by their comrades-in-arms.” Nearly all of the objections, according to the court, boiled down to “the objectors’ very mistaken belief that they could reap significant financial benefits from continuing this case.”

“Fair, Reasonable and Adequate” Settlement Terms

Federal Rule of Civil Procedure 23(e) requires that a class action settlement be “fair, reasonable, and adequate.” Courts routinely analyze four factors in determining whether a settlement is fair, reasonable, and adequate: (1) the merits of the plaintiffs’ case; (2) the defendant’s financial condition; (3) the complexity and expense of further litigation; and (4) the amount of opposition to the settlement. The court considered the factors in reverse order.

Opposition to the settlement. The objectors maintained that a settlement that did not include direct financial benefit to the class was impermissible. “They are wrong,” the court said. The chances that the lawsuit would succeed were “slim at best” because of the many obstacles standing in the way. “But the objectors want a financial payout more than they want to embrace the reality of the limitations of their claims,” the court said.

The objectors also contended that settlement should not be approved because the “Common Good Fund” would dissolve in 10 years, noting that the Settlement Agreement provides that any unspent funds contributed by the NFL will at that time revert to the NFL. First, there was no indication that the Common Good Fund would dissolve in 10 years’ time. According to the court, the Fund would continue to operate with the interest from the NFL’s disbursements and the revenue from the Licensing Agency. And the fact that the Settlement Agreement requires the Common Good Fund to disburse all NFL contributions within 10 years merely ensures that the Fund uses the money and does not hold the money for unspecified future uses. Finally, if there is money left from the NFL’s contributions at the end of the 10-year period, the NFL must use the money for Fund Charitable Uses, as defined in the Settlement Agreement.

Although the settlement differed from the usual resolution of class claims, it was not a cy pres distribution, as some objectors claimed. The settlement represented the best solution for the difficulties of the large, diffuse class of individuals with very different potential damages very different present-day needs, in the court’s view. The objections were therefore overruled, and the amount-of-objections factor weighed in favor of the settlement.

Complexity and expense of further litigation. There was no doubt that further litigation in this matter would be both complex and extraordinarily expensive, the court noted. As an initial matter, the settlement provides that the NFL can deduct up to $13.5 million from its Common Good Fund contribution to pay for expenses related to opt-out claims. If $13.5 million is necessary for the NFL to litigate a small portion of the class’s claims, then the funds necessary to litigate this large class action to a conclusion would be far greater, the court reasoned. Further litigation would also be complex and time-consuming, necessitating inquiries into such issues as the content of the retired player’s contract(s), whether that player ever appeared in an NFL Films production, and the extent of any appearance. This factor favored settlement.

Defendant’s financial condition. As there was no issue with the NFL’s financial condition, the court considered this factor to be neutral. The objector’ contention that the court did not have full access to the NFL’s finances and that the NFL’s information was not filed with the court was without merit. Chief Magistrate Judge Boylan required the NFL to submit sufficient information to allow the plaintiffs to evaluate settlement options, the court said. Moreover, the NFL’s information was appropriately subject to protective orders to ensure that all parties engaged in full and frank settlement discussion.

Merits of case vs. settlement terms. This was most important factor when analyzing the fairness, reasonableness, and adequacy of a class-action settlement and it weighed “heavily in favor of the settlement,” the court determined.

The court explained that there were many substantial issues affecting the ultimate success of plaintiffs’ claims. First, the statute of limitations would bar the claims of many class members. The longest statute of limitations was six years; thus, no plaintiff would be entitled to compensation for any unauthorized use of his image before 2003. It was probable that the majority of class members’ images have not been used in NFL Films at all since 2003, if they were ever used, the court observed.

In addition, ultimate class certification in this case would be “highly problematic, if not unlikely” because the likelihood of a conflict between the various applicable state laws was very high, given the different ways state laws treated publicity rights claims. The court explained that it would be required to engage in an “exceedingly complex” choice-of-law analysis, including evaluating five factors individualized to each class member to determine which state’s law to apply. “Given that the class is composed of nearly 25,000 individuals, the choice-of-law inquiry is extremely complex and weighs heavily against ultimate certification of the class,” the court determined.

Each plaintiff also would be entitled to claim very different damages and there were likely to be significant differences in the way each plaintiff’s contract or contracts with his team(s) dealt with publicity rights, the court added. Even more fundamentally, the apportionment of publicity-rights damages among various individuals featured in any given image or appearing in a game clip would be “a Herculean task.”

Benefits of the settlement. The benefits of the settlement were “numerous and far-reaching,” according to the court. The settlement benefitted all class members, including those who were well-known by providing an avenue, through the Licensing Agency, for class members to receive payments directly commensurate with the value of their publicity rights. “For the first time, entities will be allowed to license individual players’ publicity rights, or the rights of groups of players, in conjunction with the NFL’s copyrights and trademarks,” the court said. Seventy-five percent of the fees generated from such licenses will be paid directly to the players whose publicity rights are licensed, thus providing a direct benefit closely aligned with the value of that players’ claims and 25 percent of the fees will be paid to the Common Good Fund for the benefit of the class as a whole. The Fund is overseen by a Board made up of class member and will disburse the funds in accordance with the Fund Charitable Uses set forth in the Settlement Agreement. These Uses are directly beneficial to class members.

“In short, the settlement provides benefits to the class far beyond direct economic benefits arising out of the alleged infringement of players’ publicity rights, which for the vast majority of class members could be meager, at best,” the court said.

Settlement Class

The court granted final approval to the following class, finding that that the requirements of Rule 23 were satisfied:

All individuals who, prior to or as of the date of this Order, were or are on the roster of any Member Club and who, as of the date of this Order, (a) have retired, formally or informally, from playing professional football with the NFL or any Member Club, or (b) were formerly on any roster of any Member Club and are no longer under contract to a Member Club and are not seeking active employment as an NFL player with any Member Club (collectively, “Retired Players”); and for Retired Players who are deceased, all of their respective heirs, executors, administrators, beneficiaries, successors, and assigns who own or control their Publicity Rights.

The court also confirmed the appointment Daniel E. Gustafson of the law firm Gustafson Gluek PLLC as the plaintiffs’ leads counsel for the class, noting his admirable performance in the case. The court referred the award of attorneys’ fees and expenses to Chief Magistrate Judge Arthur J. Boylan. The court rejected the plaintiffs’ request to extend the preliminary order’s injunction against duplicative litigation until final judgment and through the pendency of any appeals. The injunction is set to expire the earlier of 30 days after the time for taking an appeal has run, or 30 days after the matter is appealed.

With regard to three named plaintiffs who chose to opt out of the settlement—John Frederick Dryer, Elvin Lamont Bethea, and Edward Alvin White—the court ordered expedited consideration of their claims.

The case is No. 09-2182 (PAM/AJB).

Attorneys: Aaron R. Fahrenkrog (Robins Kaplan Miller & Ciresi LLP) for John Frederick Dryer. Michael Schaper (Debevoise & Plimpton LLP) for National Football League.

Companies: National Football League

Cases: Advertising MinnesotaNews