The opinion of the court was delivered by: CARTER
The Nature of the Proceedings
Because the parties at times seem to misconceive what this proceeding involves, it should be emphasized at the outset that all claims in Robertson v. NBA, 72 F.R.D. 64 (S.D.N.Y.1976) (Carter, J.), Aff'd, 556 F.2d 682 (2d Cir. 1977), were dismissed with prejudice pursuant to a Stipulation and Settlement Agreement ("Agreement") entered into by the parties and approved by the court and that none of those claims are implicated in the instant adjudication. The sole issue before the court concerns the meaning and effect of paragraph 2C of the Agreement.
Paragraph 2C of the Agreement provides for the continuation until the end of 1980-81 National Basketball Association ("NBA") playing season of "the compensation rule currently applicable in the NBA" when a veteran free agent signs a player contract with an NBA team other than the team for which he had previously played. Under the compensation rule the two teams in question seek to reach agreement as to what compensation the club signing the player will pay the old team for the loss of the player's services. If they are unable to agree, the Commissioner of the NBA is then empowered to take jurisdiction of the dispute and is authorized to dispose of it by either making no award to the old team or by awarding compensation in the form of assignment of a player contract or contracts, and/or assignment of a college draft choice or choices, and/or cash. Paragraph 2C(1) states that the purpose of the compensation rule is to make whole the team losing the veteran free agent and not to penalize the exercise of the player's right.
A Special Master is accorded exclusive jurisdiction to enforce the terms of the Agreement, subject to review by the court. The instant proceeding is a petition, brought pursuant to paragraph 8(e) of the Agreement, by the National Basketball Players Association ("NBPA" or "players") and the New York Basketball Club ("New York") to review the decision of the Special Master refusing to set aside an award made by Commissioner Lawrence O'Brien to the Seattle Basketball Club ("Seattle") in a dispute over the amount of compensation Seattle should receive from New York as compensation for the latter's signing of Marvin Webster.
The Background Facts in the Dispute
Marvin Webster, who had fulfilled all obligations under his contract with Seattle, became a veteran free agent at the close of the 1977-78 NBA basketball season. As indicated, Webster was entitled to negotiate with any team in the NBA. However, on signing with any club other than Seattle, the compensation rule and procedures set out above would become operative. On August 23, 1978, Seattle offered Webster a 5 year no-cut contract at $ 400,000 per year and indicated a willingness to match any confirmed offer made by any other NBA team. When informed that New York had offered a 5 year no-cut contract at $ 600,000 per year, Seattle agreed to meet those terms. Negotiations, however, broke down over some subsidiary issue, and Webster signed a contract with New York. Seattle and New York unsuccessfully attempted to resolve the issue of compensation, and on September 15, 1978, Commissioner O'Brien assumed jurisdiction of the dispute.
The parties made various written submissions to the Commissioner outlining their positions and agreed to have the Commissioner determine the matter on these submissions without a hearing. As had been his practice in the past, the Commissioner appointed an impartial expert Joseph Axelson, President and General Manager of Kansas City Basketball Club and asked Axelson to rate Webster on basic playing skills (shooting, rebounding, ball handling, defense, passing, quickness, etc.) and to make similar ratings of other players on the New York team: James Cleamons, Glen Gondrezick, Spencer Haywood, Toby Knight, Bob McAdoo, James McWilliams, Lonnie Shelton and Ray Williams.
Axelson performed the assigned task and filed a report with the Commissioner on September 22, 1978 (see Ex. 17, Comp. P.
). Under Axelson's rating each skill measured was given a numerical value of 1-10 or 1-5, for a overall maximum total value of 75. Shooting, rebounding, ball handling and defense were regarded by Axelson as the most important skills and were given a weighted value double that of the other skills. Based on these ratings, Axelson gave Webster a score of 50 in basic skills (shooting 6, rebounding 8, speed 4, quickness 3, play without the ball 3, team player 4, agility 3, take charge 4, defense 7, passing 3, ball handling 5). Ibid. The ratings were based upon play in the 1977-78 season. Of 58 NBA players whom Axelson classified as centers, Webster was ranked behind 6 players including Abdul Jabbar, Walton, Lanier, Gilmore, McAdoo and Cowens, alongside Paultz, Issel, Parish and Nater and ahead of 16 named and 31 unnamed other players.
The Axelson ratings were immediately served on both parties, affording them the opportunity to comment prior to the Commissioner's ruling. Seattle disputed the ratings. New York, however, was in substantial agreement with them, except New York argued that Webster may have been overrated because Axelson's evaluations were based on only one playing season 1977-1978 and did not take into account Webster's medical problems.
The Commissioner's Opinion and Award
On September 29, 1978, the Commissioner filed his opinion and award assigning Lonnie Shelton's contract and New York's first round 1979 college draft pick to Seattle
and in addition ordering New York to pay Seattle $ 450,000 in cash. The Commissioner stated that "the clearest evidence of Webster's abilities, and his value to Seattle, is his performance throughout the 1977-78 season. . . ." (Commissioner's Op. & Award, p. 18). While conceding that NBA statistics "may not place Webster" in a superstar category, he characterized Webster's 1977-78 statistics as "impressive and demonstrate that Webster possesses superior skills, particularly in the areas of rebounds and blocked shots." Id. at 19. Moreover, apparently accepting the concept of the center as the dominant force in NBA competition, the Commissioner reasoned that "especially in the case of a center," statistics are not the sole measure of a player's value, and a superior center imparts "a special quality and force that rarely attaches to having extraordinary talent at the other positions." Ibid. Webster's value was also held to be confirmed by the magnitude of the salary offers both teams made to him, and his final contract insured Webster a salary "in excess of that received by all but a handful of other" NBA players. Id. at 20.
In making the award, the Commissioner refused to take into account Seattle's claim that Webster's loss would result in diminished ticket sales, nor did he regard New York's wealth as an appropriate yardstick. Seattle had indicated that Shelton was the only player on the New York team aside from McAdoo whose playing skills would fit in or contribute to Seattle's style of play. The Commissioner considered assignment of Bob McAdoo to Seattle excessive compensation, and discounted New York's suggestion that Webster's role could be adequately filled by Shelton alone. Moreover, the Axelson ratings were held not to support a comparison between Webster and Shelton because Axelson's rating system was not designed to compare players at different positions and only measured basic skills without reference to other factors which might bear on a player's value to a team.
The Commissioner did not consider Shelton and New York's 1979 first round college draft choice sufficient compensation for Webster's loss. For these reasons, the Commissioner concluded that the assignment of Shelton's contract, New York's first round 1979 draft pick and $ 450,000 in cash would amount to adequate compensation. The Commissioner did not discuss in his opinion the value he placed on the first round draft choice, nor did he explain how he arrived at the cash aspect of the award.
Proceedings Before the Special Master
The NBPA, which had refused to take part in the proceedings before the Commissioner, filed a petition with the Special Master pursuant to paragraph 8(a) of the Agreement seeking to have the award set aside as a penalty within the meaning of paragraph 2C(1) of the Agreement.
The Special Master held four days of hearings. New York was allowed to participate in this proceeding as a party challenging the Commissioner's award over the strenuous objections of the NBA. The Special Master's stated rationale for the conclusion that New York as well as Seattle should be allowed to intervene in the proceeding was based on the view that where an award is a penalty, it damages both the interests of the players and the team required to pay the award and vacature of an award damages the team to whom the award was made. (Report of Special Master, p. 8).
The Special Master characterized the NBPA's refusal to participate in the compensation proceedings before the Commissioner as "incomprehensible." Id. at 10. He could not read paragraph 2C(1) of the Agreement "as envisaging that the party most interested in implementing the anti-penalty clause was expected to remain aloof from the very proceedings in which the Commissioner is exercising his discretion and then resort to a subsequent De novo hearing to attack the award as a penalty. Such a procedure is wasteful of time and money . . . ." Id. at 10-11. While not suggesting an obligation of NBPA to participate in proceedings before the Commissioner or holding that its right to attack a compensation award would be waived by a failure to participate in the compensation proceedings, the Special Master indicated that any evidence which could have been (but was not) presented to the Commissioner would be excluded in future proceedings before him.
He rejected the NBA's contention that his review was limited to the record before the Commissioner, and he regarded consideration of past awards by the Commissioner as an appropriate basis for evaluating whether the instant award fell within or without the acceptable parameters established by the Agreement.
The Special Master made thorough and comprehensive findings of fact and filed a thoughtful report on the merits of the controversy. He summarized the negotiations between Webster and Seattle, and between the two clubs, their arguments before the Commissioner, the Axelson ratings, the testimony adduced at the hearing before him and the Commissioner's analysis and award.
In summarizing the testimony in the proceedings before the Commissioner and before him, the Special Master found the record not supportive of the Commissioner's conclusion that Webster's statistics were impressive. He concluded that the Commissioner gave more weight to the dominant center theory than it deserves; that insofar as Webster may be classified as a dominant center, his dominance was limited to defensive skills. He conceded, however, that Webster's full value to Seattle was substantially higher than the statistics indicated and that Webster had contributed a great deal to the success of Seattle in his ...