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A Layman’s review of a Pending Concussion-related Lawsuit against the NFL – Part I – The Potential Economic Impact on the NFL and its Team Owners

FULL DISCLOSURE: I AM NOT AN ATTORNEY, NOR DO I PURPORT TO OFFER ANY LEGAL OPINION ON ANY MATTER CONTAINED HEREIN.

I am however an ardent fan of professional football, solely and most emphatically of the Pittsburgh Steelers. As such, I have a heightened interest in the ongoing development of the legal cases now confronting the NFL in as much as the resolution could/will have a profound and material effect on the game as we currently know and love it, and in particular, on the team I have followed passionately for the past 42 years.

This Part I will focus on a rough (very) calculation of the potential damages being faced by the 32 Owners of NFL franchises. Part II will be, as the titles state, a Layman’s summary of an actual case. Part III will be written as if I was on the jury, and what questions from Part II arise in my mind regarding the issues raised by both sides (explicitly and implicitly).

Based on the case to be discussed in Part II, each plaintiff is asking for an amount “…reasonably anticipated to exceed the jurisdictional minimum of $25,000.”

By my research on Justia.com, there are 68 cases currently on court dockets throughout the country with over 2.300 individuals named as plaintiffs, including wives and family members of most of the football players involved.

The Plaintiffs assert for each charge that, as a result of the personal injuries Plaintiffs are entitled to damages, as alleged or allowed by law from the Defendants in an amount reasonably anticipated exceeding the jurisdictional minimum of $25,000. If you extrapolate the case in Part II to cover just the 1,500 purported current and former NFL players being reported in the media as involved in concussion related lawsuits (which is what the effort to have this issue re-defined as a class action lawsuit is about), and assume the NFL is found guilty of just one of the charges levied against it, at $25,000 per player, the bare minimum the NFL faces would be $37.5 million; if all 5 charges against the NFL (the 4 others are against Riddell, et al) are found true, for all 1,500 plaintiffs, at the minimum $25,000 each, that would equate to $187.5 million. If even the bare minimum is awarded to all 2,300 plaintiffs, that $37.5 million quickly jumps to $57.5 million

However, given that the 1,500 current or former players involved in these concussion suits against the NFL can readily identify the NFL as a $9 Billion a year business, it would not be unreasonable to expect them to want more than the bare minimum. Also, the Plaintiffs’ attorneys, if they receive a guilty verdict, will claim that the injuries prevented their clients from achieving their economic potential in their post-football careers, thus increasing the dollar amounts they will ask for, in terms of compensatory and punitive damages, as well as loss of consortium for the spouses.

Assuming $100,000 for each of the 1,500 plaintiffs per charge based on this case, potentially the penalty could be $750 million; assuming $250,000 per plaintiff, per charge, the penalty could be $1.875 Billion. Again, if you assume equal awards for all 2,300 current plaintiffs, this number could quickly reach $1.15 Billion or $2.875 Billion, respectively.

Remember, the $9 Billion number being bantered about is revenue, not profit. Of that revenue, the current players, per the new CBA, receive 48% or $4.32 Billion. This would leave the NFL and the owners, $4.68 Billion in revenue. Since the NFLPA is not named in this suit, one might surmise that any jury awards would not come out of the current players share (a shaky assumption, given the poor relations between the NFLPA and the retired football players).

If so, then that possible $750 million penalty would represent 16% of the total revenue going to the NFL and owners; the $1.15 Billion penalty 23.8% and the $2.875 Billion 61.3% of the total revenue going to the NFL and owners.

However, again we’re talking revenue, not profit. On average, each team gets approximately $281 million from that $9 Billion revenue stream. The players’ total salaries make up 48% of that, or $138 million, leaving each team, on average, $146 million in operating revenue with which to pay its employees, pay its bills, and profit for the owner. Thus, the owner’s would face losing $23.4 million to $89.8 million each, out of that $146 million annual operating revenue.

Regardless of where you stand on the social-economic fairness of having any empathy for the NFL owners, imagine having to run your own business or household with 16% to 61% less money now than you did a month ago; such a reduction would have a major impact on your current and future plans.

As to the NFL organization itself, it is listed as a non-profit entity, taking as its “revenue”, membership dues and assessments from each of the 32 teams. In the article “The NFL is Still Technically a Non Profit Organization” by Business Insider on March 5, 2012, the author states that the NFL organization lost money in 2009 (the last year the author was able to secure a tax return for the organization) on revenues of $192 million.

And lest we overlook it, any monetary damages as a result of any guilty verdict will have substantive ripple effects across the game of football. Teams and equipment manufacturers will find their insurance premiums skyrocket, if they are able to retain insurance at all. And most likely, as a pre-condition to securing insurance, the NFL and the equipment manufacturers will most likely have to make major modifications to the game itself; major rule changes, flow –of-game process changes, changes in the types of equipment, the mandatory use of equipment, on, and on, and on.

So any judgment coming from this or any other lawsuit will fall squarely on the shoulders of the individual team owners, including the Rooney family, thus directly impacting the very nature of the game itself, and our Steelers.

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