False Start: A Steelers Fan's Doomed Attempt to Use Litigation to Save His Team

Not every case involving a matter of emergency business litigation is one of dire importance.

On December 29th, 2013, the Kansas City Chiefs played the San Diego Chargers with the fate of two teams on the line. The Chargers would reach the postseason with a win, but if they had lost, the Pittsburgh Steelers, by virtue of a tiebreaker, would gain the final playoff spot in the AFC instead. The game was tied 24-24 with just a few seconds left on the clock when the Chiefs’ kicker missed a field goal wide right that would have won the game.  Instead, the game remained tied at the end of regulation, forcing an overtime period where the Chargers eventually scored the game-winning field goal, ending the Steelers’ season.

The problem was, though, that the Chargers had broken the rules when defending against the Chiefs’ field goal attempt at the end of regulation, as they violated formation rules by placing more than six players on one side of the field, in an attempt to block the field goal by bringing superior numbers to bear on one side of the Chiefs’ offensive line. The penalty for this rule violation is five yards and a replay of down, and so the Chiefs, by rule should have been granted another field goal attempt which, if made, would have ended the game in their favor. The plaintiff contends that the NFL’s ‘challenge system’, which allows coaches to challenge certain rulings, was “fraudulent and negligent” because, due to the vagaries of the rule, coaches cannot make any challenges within the final two minutes of regulation time, and so the Chiefs’ coach was unable to challenge this erroneous ruling.

The plaintiff also called attention to a ruling made in the overtime period, where a member of the Chargers appeared to fumble the ball to the Chiefs, but as his helmet had been stripped from his head before the fumble occurred, the officials enforced a rule that declared the play dead as the result of the ball carrier losing his helmet during the play. The plaintiff contended that this rule, enacted by the NFL Rules Committee only a few years ago, did not comport with the intent of the NFL “Forefathers”, and was, therefore, unconstitutional.

The plaintiff then provided a number of suggestions for solving this crisis, such as replaying the controversial field goal attempt, replaying the entire game, or simply declaring the Chiefs the victors of the game, thereby giving the Steelers the Chargers’ spot in the playoffs.

Unfortunately, this request for a TRO was doomed to failure from the start, as the first factor that a court examines in determining whether to grant such an order is whether there is a likelihood of success on the merits. In this case, there appear to be two major defects, either of them fatal on their own, that prevent a TRO from being issued almost immediately.

First, it is unclear what the cause of action in this case was. The plaintiff appeared to make two claims, first, that the challenge system, as implemented, is fraudulent and negligent because the rules in the last two minutes of the game are different from those in the remainder of the game. That hardly seems to flow logically. The second claim is that the rule regarding helmets is “improper and unconstitutional” because it was not the intent of the NFL “Forefathers”. Obviously, that claim is defective as well.

Second, even if a cause of action could be chiseled out of this complaint, the plaintiff almost assuredly lacks standing to pursue the claim, as the plaintiff has no legally protected interest in this case. Even if the NFL has misapplied its own rules, the plaintiff, as a private citizen, would have suffered no cognizable injury, and in this case, the plaintiff is suing under the argument that it is the NFL’s rulemaking process that is at fault, rather than the actual operation of the rules.

In either case, the court would quickly find that there was no likelihood of success on the merits and, as a result, that the TRO could not be issued, ending the Steelers’ final chance of continuing their 2013 NFL season.

 

 

Shareholder Class Action Proceeds

In a prior post, I discussed the Supreme Court case Merck v. Reynolds, in which the application of the discovery rule in securities fraud cases was at issue. To recap, the Supreme Court granted cert to decide if the two-year statute of limitations ran from the first possible evidence of fraud as argued by Merck or the discovery of scienter as argued by the plaintiffs. 

On April 27, 2010, the Supreme Court handed down its decision and it is a victory for shareholder class actions! The Supreme Court held that the statute of limitations does not run until a plaintiff discovers all of the elements of a claim. The six-judge majority decision, written by Justice Breyer, and a concurrence, written by Justice Scalia, disagree on whether the statute provides for constructive discovery – oddly putting Justice Scalia on the side of allowing more time to file a suit as he reads the statute as requiring actual discovery of scienter. 

A factor in the Court’s reasoning requiring evidence of scienter and not possible evidence of scienter is the heightened pleading standard in securities fraud claims. Under federal securities law, a plaintiff needs to plead specific facts regarding intent to defraud. The limitations statute states that the period begins on the discovery of a violation. As a violation does not occur without the requisite intent to defraud, discovery (or constructive discovery) of scienter, not possible scienter, is necessary for the limitations period to start.  The five-year statute of repose countered Merck’s argument that the discovery requirement will subject defendants to defend litigation after the facts were stale. 

Alas, the opinion likely does not extend beyond the statute in which it arose. It is, however, an opinion that goes against the pro-business leanings of the Court as of late and is especially noteworthy for its unanimity in allowing the suit to proceed.

Injunctive Relief--Use the four-factor test to make your case

A few days after the Court granted the Bank of America’s motion for an ex parte TRO, the Federal Deposit Insurance Corporation (“FDIC”), in its capacity as receiver for Colonial Bank, was substituted as the real party in the case, and moved the court to dissolve the TRO. The FDIC argued that, pursuant to 12 U.S.C. § 1821 (j), the Court lacked subject matter jurisdiction to restrain the FDIC in exercising its powers and functions as a receiver. Because the Court determined that the sale proceeds and loan agreements, which the Bank seeks the return of, are outside the receivership estate, it denied the FDIC’s jurisdiction argument.

Of interest to me today, however, is the fact that the FDIC admitted, in its motion to dissolve the TRO, that the Court properly issued the injunction. While declining to torture the FDIC with this admission, the Court noted that there may have been “public interest considerations contemplated by the injunctive-relief analysis,” in light of Colonial Bank’s collapse and subsequent involvement of the FDIC, but the FDIC’s failed to raise the issue. The FDIC could have strengthen its motion if it demonstrated how the four factor test weighed against the issuance of an injunction, emphasizing the public interest in supporting the FDIC in its role as receiver.