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Monday, May 11, 2015

Bill Simmons and the Duty of Loyalty

ESPN rather publicly announced that it would not be renewing its contract with Bill Simmons, editor-in-chief of its sports and entertainment site Grantland, as well as writer, author, and co-producer of the "30 for 30" sports documentary series.  A lot has been written about the inside details, as well as the larger ramifications for Simmons, Grantland, and sports and entertainment media more generally.  There's also some interesting IP issues -- could ESPN really appoint another host for the "B.S. Report"?  But I'd like to talk about the next four months, in which Simmons is still with ESPN but is essentially a lame duck.  What does employment law say about this awkward interim period?

Having been publicly cut off at the knees by his current company, Simmons will want to focus on his next gig.  But the law may restrict his ability to do so.  Most jurisdictions have recognized that employees owe employers a duty of loyalty.  The contours of this duty are somewhat vague.  At the very least, the duty would prevent Simmons from working for a competitor while he is still under contract with ESPN.  But let's say he agrees to start working for, say, Fox Sports beginning the day after his ESPN contract ends.  Can he tweet out his new employer?  Can he use his ESPN column or podcast to mention his new gig or even promote it?  Can he ask Grantland employees to join him at his new place?  

The duty of loyalty has been generally recognized as prohibiting an employee from using her current employment to solicit for her  future employer.  Employees are also prohibited from disclosing trade secrets to their future employers.  On the other hand, employees are generally allowed to "prepare" to compete by talking with other employers and agreeing to future employment.  The murkiest area involves one's current fellow employees.  Can Simmons solicit Grantland employees for his new venture?  Some courts have found it disloyal for current employees to persuade other employees to break their contracts with the employer.  It doesn't help that Simmons is editor-in-chief, as courts have held supervisory employees to a higher standard.  However, courts have also focused on surprise as particularly problematic, as when a large group of employees suddenly up and leaves with no notice.  ESPN has plenty of notice that Simmons is leaving and may want to take some of his hires with him.  And although not officially a legal factor, the fact that Simmons is being fired (in some sense) will make his efforts to rebound more sympathetic.

Simmons's last days at ESPN could resemble the tenure of another media celebrity in the wake of a high-profile move.  In 2004, Howard Stern announced his upcoming move from CBS Radio to Sirius Radio with great fanfare.  He used his CBS show to make the announcement.  And he proceeded to use the show to bash CBS for its efforts to censor him, and to promote his Sirius move.  In 2006, CBS Radio sued Stern over his promotion efforts for his new show.  CBS claimed that Stern has used his airtime at CBS to promote Sirius and had engaged in other promotional efforts off the job but while still employed.  It asked for $218 million in damages -- the stock compensation Stern received from Sirius based on the huge jump in Sirius subscriptions in the wake of Stern's announcement.  This request for the disgorgement of the compensation Stern received from Sirius is a traditional remedy for the violation of the duty of loyalty.  The disloyal agent is expected to disgorge back to the principal any ill-gotten gains received in the course of the agency relationship.  Reviewing the claims, Stephen Bainbridge concluded that Stern had likely violated the duty of loyalty with his on-the-job solicitations for Sirius.  Ultimately, CBS and Stern settled the suit for an undisclosed amount.

Conan O'Brien's relationship with his employers at NBC was similarly contentious at the end.  When told NBC was moving the Tonight Show to midnight, O'Brien balked, arguing that the Tonight Show could only start at 11:35 after the local news.  He then spent two weeks trashing his employers on the NBC airwaves.  He even had a running segment where he frittered away NBC's money on expensive cars and licensing rights.  The big difference -- O'Brien was tussling with NBC over his contractual rights, and ultimately the two sides settled with Conan's departure.  He had no future show o promote while still at NBC, and in fact his settlement forced him off the air and into radio silence for six months.

Simmons may be tempted to spend his last few months settling the family business -- trashing ESPN, raiding Grantland of its best writers, and setting up shop at his new home.  And legally, he would have a decent case for doing all these things -- although not one without risk.  What seems clear, however, is that he cannot use ESPN properties to promote his new media home while still an employee.  I would expect instead that word of the new location gets out through the media, coming from everywhere but Simmons himself.  

One final note -- I'm assuming that Simmons's contract does not speak specifically to these matters.  He may have a non-compete that kicks in after the contract's expiration, although that seems unlikely.  And if he starts trashing ESPN or the NFL commissioner, ESPN may end up suspending him again or simply firing him before his contract expires.

Posted by Matt Bodie on May 11, 2015 at 12:27 PM in Current Affairs, Sports, Workplace Law | Permalink

Comments

I wonder about the other side - what can ESPN do to limit Simmons's exposure over the end of the contract? Can they cut his podcast, or cut down the number of hours? Run less of his columns? Bury Grantland in a less prominent place on the ESPN website? My guess is the contract speaks to some of these things, but I think it is equally likely ESPN will seek retribution for insubordination, or at least want to limit his opportunities to go after ESPN partners like the NFL Commissioner.

Posted by: AnotherAnon | May 12, 2015 7:58:49 AM

Interesting post. I'm a fan of Grantland, less so of Simmons.

Posted by: Eric J. Miller | May 13, 2015 6:12:34 PM

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