Escrow system still problematic; Kessler shelved?

NEW YORK — He is a close-talker and a loud-talker whose voice can be the verbal equivalent of fingernails on a chalkboard. David Stern has called his behavior “routinely despicable,” and on more than one occasion he has commandeered the post-meeting news briefings to incessantly spew vitriol at the NBA owners with whom he has been butting heads.

He is Jeffrey Kessler, the lead outside counsel for what used to be known as the National Basketball Players Association, and he is reportedly out of the picture now that talks between the players and owners have resumed with an eye toward reaching a settlement that would allow for the NBA season to begin on Christmas Day, Dec. 25.

Unless this is all a setup.

The NBA lockout took one of its strangest turns yet Wednesday with the news that secret negotiations between the sides had resumed on Tuesday and will continue on Friday after a day off for the Thanksgiving holiday being celebrated today in America. If a settlement can be reached by the end of the weekend, the union can be re-formed, a ratification vote can be taken, and everyone will having something other than presents under the tree to look forward to on Christmas.

But first they have to get to the finish line, and the past month has demonstrated that it is no easy task to do so.

A source tells SheridanHoops.com that the most significant impediment to a deal remains the owners insistence on an escrow withholding system that would ensure that the revenue split for each season ends up being 50-50. Players have offered to have 10 percent of salaries withheld, but a problem has continually arisen when the sides have discussed what mechanism would make up for the shortfall if the 10 percent withholding did not get the players’ share down to 50 percent. Would the shortfall carry over into the next season? Or would the players have to make up the difference in some other way to balance the books at the end of each season to provide for a fresh start at the onset of the next season?

Of all the system issues that remain in dispute, that is the most contentious one that could loom as a deal-killer.

So take your turkey with a grain of salt today, folks, and don’t get overly comfortable when the tryptophan kicks in and you lay down for that afternoon nap. There are still a lot of moving parts here, along with a level of mystery that is a new, added twist to this 147-day trip down misery lane.

Some giblets from around the Web:

Howard Beck, New York Times: “Derek Fisher, who was the union’s president until it dissolved, has not been involved yet but is expected to rejoin the fray on Friday. There is also a new face at the table: Jim Quinn, the union’s former chief outside counsel, who is now playing a pivotal role in this desperate final push. Quinn worked with the union on labor deals for 20 years and has strong relationships with Stern and Hunter. Quinn’s involvement was first reported Tuesday by CBS.Sports.com, which characterized his role as a neutral “facilitator.” In fact, Quinn was recently hired by Hunter to help complete the deal, according to a person who has spoken with Quinn. It appears that Quinn may have supplanted Jeff Kessler, the union’s pugnacious outside counsel, as the players’ lead negotiator.

Adrian Wojnarowski, Yahoo Sports: “There’s a push within the league office and from Players Association executive director Billy Hunter to have Fisher in the room, league sources said. Nevertheless, Fisher hasn’t committed to attending the meeting, perhaps because of legal concerns about how a judge in the federal suit could view his participation. There’s still a sense the owners could be setting up a trap for the Players Association, perhaps leading them on in talks now only to pull the plug and make a case to the judge that Hunter’s and Fisher’s involvement in the meetings shows they’re still acting as a union – and that the disclaimer of interest and subsequent lawsuits were nothing more than negotiating tactics.”

Ken Berger, CBSSports.com: “As we well know, expedience has not been a hallmark of these negotiations. But the time to deal, sacrifice and show all your cards is now if either side wants to have a season instead of costly, lengthy antitrust litigation with a very uncertain outcome for both sides. And the remaining issues to be agreed upon — principally restrictions on sign-and-trades and mid-level signings that the league is trying to place on high-spending teams — are relatively minor compared to the big-ticket item of a 50-50 split of revenues that owners and players already have negotiated. When the players rejected the owners’ latest ultimatum on Nov. 14, they also were concerned about accelerated tax rates the league was proposing for teams that stay above the luxury tax line for multiple years and the interpretation for when a team is considered to be above the tax threshold for the purposes of using exceptions.”

Marc Stein, ESPN.com: “There were sources on both sides late Wednesday preaching caution, noting that the talks have collapsed several times when a deal appeared to be within reach. Sources identified Miami, Orlando, Phoenix, Boston and the Los Angeles Lakers as the teams pushing hardest behind the scenes for a deal in principle by the end of the weekend to ensure that a “representative” season can be staged. And at least three teams that requested anonymity, according to interviews conducted Wednesday by ESPN.com, are highly optimistic that the framework of a deal can be struck by Monday. But one source close to talks, referring to those aforementioned collapses when a deal seemed imminent at various points during the past two months, said Wednesday night: “Are the parties talking again? Yes. Have they done anything [significant]? No.”

Steve Aschburner, NBA.com: “Back-channel talks of various forms have been taking place “for a while now,” though the parties have tried to keep that quiet, another source said. Peter Holt, chairman of the NBA’s labor relations committee that oversaw CBA negotiations with the now-former-union, was in New York on Tuesday. David Boies, the antitrust litigator heading the players’ case against the lockout — or “group boycott,” as alleged in the suit — told reporters Monday that there had been no contact between the parties. But he said after the news conference that “it couldn’t hurt for me to call [NBA legal counsel Jeffrey Mishkin]. Ask me that Wednesday.”

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  1. Michael says

    I’ve never understood why the players and owners agreed upon just 10% for the escrow system. You think about, player salaries last year were 57%, but if you’re going to have the players share of BRI drop to 50%, that’s about an across the board cut of 12-13% for player salaries. However, the league isn’t asking for roll backs in salaries. So if you have a 10% escrow system, that isn’t going to guarantee a 50-50 split.

    As someone who has sided with the players for this whole process, it does seem like the players are trying to pull a fast one on the owners. Agree to a 50-50 split, but not put in place measure to enforce it.

    • DanH says

      An excellent point Michael – the escrow system is especially important these first two years when the salary cap will remain at 58 million, while the BRI split will immediately drop to 50%.

      • Dan R. says

        You both did a great job clearing up all of the confusion for me. I was screwing the numbers up in my head.

        Maybe this is one of the reasons the players are “open” to the 50-50 split, because for at least a couple years it won’t really be 50-50. They are paying for it in other areas though and surely the owners will find a way to work in a mechanism to ensure that it gets back to 50%.

        Unfortunately, the amount of ground they concede now sets a dangerous precedent. They are conceding an awful lot and when this CBA expires the owners will try to squeeze even more out of them. The only way they can truly make a stand is to go through with the legal process. Then all of the owners’ earnings would be discovered and everything would be on the table. Unfortunately, these guys can’t afford to go through with a 3-5 year (and maybe more) lawsuit and the owners know that. At the end of the day the owners have all the leverage that matters.

  2. KG says

    If these guys can’t get it together after months of negotiating I’m not optimistic about the prospect that 3 days of negotiating, with lawyers in the lead and a lawsuit to resolve first, will get anything done. That said, Christmas money talks, may the longstanding goal of the businessman, making money now, trump their resolve to make more money later. May their greed collapse on top of itself. Happy friggin holidays.

    • Keith says

      How much worse would this lockout be for Knicks fans if we didn’t have Carmelo Anthony secured on the roster already?

  3. Dan R. says

    Happy Thanksgiving!

    Jim, I think that might have been a condition of decertification of the union. Since there was only a disclaimer of interest, I believe that left them the option of re-forming at any time. I might be wrong about that though.

    I am a little confused as to why the owners think that 10% of salary is not enough for the escrow system? If that is their worry does that mean they anticipate a significant dip in interest? Obviously the NBA’s economists have worked the numbers but I don’t see a scenario, given the meteoric rise the NBA has been on, where 10% will not be enough.

    Can anyone clarify?

    • illyb says

      I thought escrow was concerned with overpaying the players(handing out too high of salaries cumulatively so players end up getting more than 50% of BRI).

      Could be wrong but this would basically cover the owners up to 55% of BRI (the full 10% of salaries in escrow would be returned and the players would get the allotted 50% of BRI). Basically it is another protection the owners would like.

      • DanH says

        Actually, the players are happy to give them that protection to 55% (10% escrow). But not a penny more. And that is where the issue is. If the owners underspend by any amount, they pay out extra checks to the players to make the split exactly 50-50. But if the owners overspend beyond that 55% guarantee, the players get to keep the excess. Logically, the owners don’t think this is fair. As such, they are seeking a way to recoup those losses if that 55% is exceeded – in their proposal, they would take the excess first from the 1% benefits package, and then any more excess through a mechanism yet to be defined. But it is clear they want absolute cost certainty.

        • Dan R. says

          I must be missing something with the 55% number you guys are using. The way I understand it is that the salaries players are paid yearly are really just a starting point. And what they actually get depends on the total BRI at the end of the year. If they get more or less than their salary number depends on how much money the NBA rakes in for that season.

          I guess what I was wondering originally is that the only reason the owners would want that extra protection is if they have a low grossing season money-wise, right? So low that 90% of total player salaries would be a higher number than 50% of BRI. Maybe I’m understanding this wrong and if so please correct me.

          I am interested to learn more about the 55% number you guys used as well as the 1% benefits package? Care to explain further?

          • DanH says

            The 1% benefits package is the portion of the players’ 50% that goes towards a retired players fund (effectively a pension plan). So 50% goes to the owners to cover expenses, 49% goes to player salaries, and 1% goes into a pension.

            If 90% of player salaries are exactly 49% of BRI, then 100% of player salaries (plus the 1% pension) would be 55.4% of BRI. I estimated it at 55. Anyway, that is the threshold for whether the 10% escrow withheld would be enough to keep the player salaries at 50% BRI.

            If the player salaries throughout the year are, for example, 60% of BRI, then the 10% of that withheld is equivalent to 6% of BRI, meaning the players would actually get 55% that year (60-6=54, +1 pension = 55). Their first clause would take back all of the pension funds, making the overpayment 4% of BRI. The owners are trying to put in mechanisms to be able to take back that extra 4%, to make the split 50-50 after the fact.

            As for why they might need this? Not so much based on projections, but based on the crappy cap system they have. With so many cap exceptions, spending will almost always exceed the BRI split, because they reduce the ability of the cap to restrain spending. Over the past two CBA’s, a combined 12 years of basketball, only once (last year) have the owners spent less than the percentage owed to the players. Of course, a hard cap would eliminate the need for it, but that’s a “blood issue.”

  4. Andrea (Italy) says

    Good to see Kessler is out of the picture now.

    And the new mediator is the same one who helped struck a deal back in 1999.

    Hey, maybe there’s still hope after all.

  5. Jim says

    Happy Thanksgiving everyone!

    Wasn’t one of the follow-ups of the union’s dissolving that that a new union can’t be formed for 18 months?

Trackbacks

  1. [...] Chris Sheridan of Sheridan Hoops explains a new hang up. A source tells SheridanHoops.com that a many poignant snag to a understanding stays a owners’ insistence on an escrow self-denial complement that would safeguard that a income separate for any deteriorate ends adult being 50-50. Players have offering to have 10 percent of salaries withheld, though a problem has ceaselessly arisen when a sides have discussed what resource would make adult for a shortfall if a 10 percent self-denial did not get a players’ share down to 50 percent. [...]

  2. [...] Chris Sheridan of Sheridan Hoops explains the new hang up. A source tells SheridanHoops.com that the most significant impediment to a deal remains the owners’ insistence on an escrow withholding system that would ensure that the revenue split for each season ends up being 50-50. Players have offered to have 10 percent of salaries withheld, but a problem has continually arisen when the sides have discussed what mechanism would make up for the shortfall if the 10 percent withholding did not get the players’ share down to 50 percent. [...]

  3. [...] Chris Sheridan of Sheridan Hoops explains a new hang up. A source tells SheridanHoops.com that a many poignant snag to a understanding stays a owners’ insistence on an escrow self-denial complement that would safeguard that a income separate for any deteriorate ends adult being 50-50. Players have offering to have 10 percent of salaries withheld, though a problem has ceaselessly arisen when a sides have discussed what resource would make adult for a shortfall if a 10 percent self-denial did not get a players’ share down to 50 percent. [...]

  4. [...] Chris Sheridan of Sheridan Hoops explains a new hang up. A source tells SheridanHoops.com that a many poignant snag to a understanding stays a owners’ insistence on an escrow self-denial complement that would safeguard that a income separate for any deteriorate ends adult being 50-50. Players have offering to have 10 percent of salaries withheld, though a problem has ceaselessly arisen when a sides have discussed what resource would make adult for a shortfall if a 10 percent self-denial did not get a players’ share down to 50 percent. [...]

  5. [...] Chris Sheridan of Sheridan Hoops explains a new hang up. A source tells SheridanHoops.com that a many poignant snag to a understanding stays a owners’ insistence on an escrow self-denial complement that would safeguard that a income separate for any deteriorate ends adult being 50-50. Players have offering to have 10 percent of salaries withheld, though a problem has ceaselessly arisen when a sides have discussed what resource would make adult for a shortfall if a 10 percent self-denial did not get a players’ share down to 50 percent. [...]

  6. [...] Chris Sheridan of Sheridan Hoops explains a new hang up. A source tells SheridanHoops.com that a many poignant snag to a understanding stays a owners’ insistence on an escrow self-denial complement that would safeguard that a income separate for any deteriorate ends adult being 50-50. Players have offering to have 10 percent of salaries withheld, though a problem has ceaselessly arisen when a sides have discussed what resource would make adult for a shortfall if a 10 percent self-denial did not get a players’ share down to 50 percent. [...]

  7. [...] A source tells SheridanHoops.com that the most significant impediment to a deal remains the owners i… Players have offered to have 10 percent of salaries withheld, but a problem has continually arisen when the sides have discussed what mechanism would make up for the shortfall if the 10 percent withholding did not get the players’ share down to 50 percent. Would the shortfall carry over into the next season? Or would the players have to make up the difference in some other way to balance the books at the end of each season to provide for a fresh start at the onset of the next season? Jeffrey Kessler [...]

  8. [...] Chris Sheridan of Sheridan Hoops explains the new hang up. A source tells SheridanHoops.com that the most significant impediment to a deal remains the owners’ insistence on an escrow withholding system that would ensure that the revenue split for each season ends up being 50-50. Players have offered to have 10 percent of salaries withheld, but a problem has continually arisen when the sides have discussed what mechanism would make up for the shortfall if the 10 percent withholding did not get the players’ share down to 50 percent. [...]

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