The Ross Effect: What a Fiduciary Requirement Would do to Professional Sports

Among the claims in Brian Flores’ bombshell lawsuit filed yesterday was a startling revelation that he was allegedly enticed (with $100,000 per loss) to lose games by Dolphins’ Owner Stephen Ross. I won’t address the validity of Brain Flores’ claims of racial bias in the NFL’s hiring process here (Not to minimize them, I just do not believe I am the person at Conduct Detrimental to provide the proper legal analysis of those claims. Dan Lust, Dan Wallach, and Mike Lawson addressed those claims on yesterday’s Conduct Detrimental Podcast). This bribery accusation, if true, could be fatal to Stephen Ross’ NFL Ownership, and could have major ramifications for the NFL and its owners. But I believe this accusation should go beyond that and prompt a re-examination on what the responsibilities of ownership of a professional sports enterprise should be.

Tanking in the NFL, or professional sports in general, is not a new concept. We have seen plenty of teams employ tanking strategies to secure high draft picks over the past two decades across American sports. As this strategy has evolved, we’ve also seen teams operate without ever fulfilling that promise of future competitiveness, where it seems more and more like a ruse that is designed purely to keep the money faucet flowing for owners who don’t really have any interest in winning. I wouldn’t say this is necessarily the case with Ross (although the Dolphins’ resume since 2000 would beg to differ), but it is for plenty of franchises. It’s more common in smaller media markets, where profit margins are comparatively slim. The owners of those teams often prioritize meeting their earnings quotas over the performance of the team, which includes offloading any talented players with upcoming paydays to avoid expensive, top-of-the-market contracts.

This situation is most visible in baseball, where the sheer number of players, number of games (and thus reduced profits per game), early separation of playoff contenders, unpredictability of scouting, and amount of luck required to tank successfully makes this business model more common. To some extent, the owners of these franchises, while they flounder hopelessly in mediocrity, are relying on being able to maintain the emotional attachment their fans have to the team to keep the money coming in. Their fanbases are sold the idea that they will one day compete so they will continue to spend money to support ownership groups who need those funds so they can continue to not care. It’s unfortunate, if due to genealogy, geography, or nostalgia borne of adolescence you are part of one of those fanbases, but there isn’t much you can do besides not buying tickets or t-shirts. In light of these claims against Stephen Ross, however, I believe it’s time to look at some sort of legally binding way to avoid this problem.

What I’m suggesting is a fiduciary clause in the purchasing/franchising documents of a professional sports league that would require the owner of that franchise to act in the best interest of the team, the players, the fanbase, and the league by always attempting to field a competitive team. Professional leagues know that these under-performing franchises are bad for business, the NFL admitted as much on an Owners’ Call before this past season.[1] This fiduciary clause, the same type required by lawyers and financial advisors, would be enforceable through the same sort of arbitration process that eligible MLB players and teams go through to settle contractual disputes. After a prolonged period of failure (or exposure of the type of allegations made against Stephen Ross), these owners could be remanded to arbitration to present their case to an independent party, have that case argued against by the league, and ultimately have a target for competitiveness in the following season or seasons set by an independent arbitrator. If they fail to meet that target after the specified period, the franchise would be re-possessed and sold at public auction to the highest bidder, and the corresponding fanbase would be freed from the yoke of an ownership group more interested in profits than performance.

The concept of competitive incentive already exists in major professional sports. European Soccer maintains this incentive through relegation, but there are ways to flirt with relegation while making enough money to balance the excel sheet. Especially in America, in the age of nationwide TV contracts and mega-sponsorship deals (not to mention the windfall of money coming from sports gambling) there is no longer an excuse for a franchise to be an abject failure over decades purely due to where they play, yet all of that money means there is less and less of an incentive to compete as long as the coffers stay full for owners who don’t share the same spirit of competition that the players and fans do.

Of course, no existing league would even remotely entertain this. That would require the current owners to expose themselves to losing their money cows through what they would consider forces beyond their control, and rich people don’t stay rich doing that. But these mega-billionaires affect too many lives to not be forced (or at least prodded more than they are) to handle these businesses in a genuinely competitive manner. The tanking strategies of these teams affect the future earnings and health of their players and affect the businesses and lives of millions of people within their communities. A system like this would ensure that these owners steward their teams in a way that isn’t painting a hopeful façade on a failure and asking you to buy another jersey to put black ink on their balance sheet.

Michael DiLiello is an Army Officer transitioning to the Sports Law field and will enroll as a 1L in the Fall of 2022. His opinions are purely his own and do not reflect the opinions of the United States Army, the Department of Defense, or any other external agency.

Twitter: @Mike_DiLiello

LinkedIn: http://linkedin.com/in/michael-diliello-1057b439

1Fischer, Ben. 2021. NFL sent pointed message to underperforming clubs. October 25. Accessed February 1, 2022. https://www.sportsbusinessjournal.com/Journal/Issues/2021/10/25/Upfront/NFL-tickets.aspx.