Chapman Law Review
RETHINKING DAMAGES FOR LOST EARNING CAPACITY IN A PROFESSIONAL SPORTS CAREER: HOW TO TRANSLATE TODAY’S ATHLETIC POTENTIAL INTO TOMORROW’S DOLLARS
Copyright (c) 2010 Chapman Law Review; Richard T. Karcher
There are many who “want to be like Mike,” but very few people possess the skills or potential to actually be like Mike. So how do we know when somebody actually possesses the extraordinary athletic skill or potential to be able to earn money in a professional sports career? We know that those who are currently earning money possess such skill and–assuming they stay healthy–will probably continue to do so. But how do we know when somebody has the potential to one day become a professional athlete?
Suppose for a moment that the real life Michael Jordan was injured by the tortious conduct of a third party when he was a senior in high school, leaving him unable to play basketball for the rest of his life. While the entire world would have missed the opportunity to witness arguably the best basketball player of all time, Jordan himself would have missed the opportunity to earn millions in employment compensation and endorsement income as a professional athlete.
Now suppose that the injury did not prevent him from playing basketball for the rest of his life, but kept him from playing during his freshman year at the University of North Carolina. Although he may not have lost the chance at a professional career, that chance may have been diminished. The challenge would be to determine how much that chance has been diminished and to quantify that diminished chance in lost future earnings. Having the luxury of hindsight today, it is easy to say that when Jordan was a senior in high school and a freshman in college he had the potential of becoming the best basketball player of all time. But having to assess his potential at the time of the injury prospectively would provide much less certainty.
Though claims involving lost earning capacity damages are open to the critique of being based on mere “speculation and conjecture,” there is a level of speculation in any estimate of damages due to the uncertain nature of the future. In lost earning capacity damages, as in awards for pain and suffering, the law provides recovery where damages can be proved with reasonable certainty. Courts addressing these issues in the context of athlete-plaintiffs, for the most part, have failed to delineate any standards for distinguishing those particular plaintiffs who possess the requisite level of athletic skill and potential to be allowed recovery for lost future earnings in a professional sports career. Implicit in their holdings is what this Article refers to as a “two-step burden of proof.” Step one entails proving that the defendant’s conduct did in fact cause the plaintiff’s chance to earn money in the future as an athlete to be lost or diminished (the factual cause link). Step two entails proving the amount of the lost or diminished chance with reasonable certainty.
This Article provides a theoretical and practical perspective on damages for lost earning capacity in a professional sports career. Part I addresses how an athlete’s earning potential can be assessed and the various factors that go into the assessment. In this context, the Article proposes that earning potential be considered in terms of a range that defines low, middle, and high categories of athletic potential. Part II discusses the athlete’s burden of proof in the form of a two-step process. This part addresses the complexities of the causation analysis and explains how the loss-of-chance doctrine and the traditional but-for test can be applied to establish the factual cause link. This part also explains how evidence and expert witness testimony can be used to meet both burdens of proof and satisfy the admissibility standard under Federal Rule of Evidence 702. Part III discusses the methodology, data compilations, and calculations the author used as an expert witness to estimate Andy Oliver’s future lost earnings in his lawsuit against the NCAA. This part highlights the complexities involved in proving lost earning capacity damages of top draft prospect amateur athletes, but nevertheless offers a useful roadmap for similar cases.
I. Assessing Earning Potential
A. What is Lost Earning Capacity?
Victims of tortious conduct are generally entitled to recover damages for past or prospective loss or impairment of earning capacity. This recovery often arises in connection with personal injury caused by intentional torts, negligence, and strict liability. However, recovery is not limited to personal injury actions involving physical harm that prevents the plaintiff from working as he or she would like. Recovery may also be had where the defendant’s conduct does not result in physical injury, but nevertheless impairs the plaintiff’s ability to earn money. This is evident in cases involving defamation, tortious interference with an existing or prospective business or business transaction, employment discrimination, and wrongful termination or discharge from employment.
Lost earning capacity damages compensate the plaintiff for an impairment of the ability to earn money in the future that would not exist but for the defendant’s wrongful conduct. The standard measure of damages for lost earning capacity can therefore be stated in general terms as the difference between what the plaintiff was capable of earning before the defendant’s conduct and what the plaintiff is capable of earning thereafter. It is the impairment or diminution in the ability to earn money in the future that is being measured today, not the difference in actual earnings before and after the impairment causing event. Therefore, although evidence of actual earnings is relevant and may assist the fact finder in establishing the plaintiff’s earning ability, recovery for lost earning capacity damages is not jeopardized if the plaintiff was not gainfully employed at the time, or even if the plaintiff had no prior history of wages earned. Moreover, lost earning capacity is not necessarily limited in scope to the power to earn money in the particular line of work engaged in by the plaintiff at the time of the impairment-causing event. Indeed, the fact-finder may determine that the plaintiff was capable of earning more than she was actually earning at the time of the wrongful conduct and may consider what the plaintiff was capable of earning in any particular line of work for which the plaintiff was suited prior to the impairment-causing event.
If the plaintiff has special knowledge, ability, or skill, the impairment in earning power is much greater than that of a person of ordinary knowledge, ability, or skill. In situations in which the plaintiff is engaged in or pursuing a professional career that requires extensive education or training, establishing lost earning capacity damages becomes more problematic in that the value of a person’s earnings in professional pursuits varies greatly depending upon the extent of an individual’s exertions. This certainly applies in the context of professional athletes. As a result, it is difficult to accurately assess lost earning capacity based entirely upon what members of the plaintiff’s profession generally are capable of earning. Relevant and meaningful factors to consider include the quality and level of the plaintiff’s performance in the education or training already received and the initiative or motivation displayed by the plaintiff in pursuing the career goal to be realized through the education or training.
Lost earning capacity damages should be viewed as compensating the plaintiff today in an amount that will not be determined with absolute certainty until some point in the future. Without a crystal ball, some level of uncertainty is inherent in any determination of lost earning capacity, including that of an athlete. In this respect, lost earning capacity damages are no different than compensatory damages for future pain and suffering in personal injury cases. In such cases, the fact finder determines an amount today that attempts to accurately reflect unknown future harm (i.e., the level of pain and suffering the plaintiff will incur), but which is based upon facts and circumstances known today (i.e., the plaintiff’s age, the extent of the injury, the medical treatments incurred, etc.). Uncertainty in and of itself should not be a concern, provided there is a sufficient level of confidence in the precise method being employed to accurately assess the loss.
An accurate assessment of lost earning capacity damages must consider the plaintiff’s wage-earning potential, which is based upon existing facts and circumstances, and only a part of which is evidence of actual earnings. For example, a high school or college student with no history of wages earned may have significant potential today to earn substantial wages in the future based upon certain accomplishments, level of education, and other factors. Conversely, a middle-aged adult with a well-established wage history may have already reached his or her highest earning potential. Thus, in order to accurately assess the plaintiff’s lost earning capacity today, the fact finder must determine the plaintiff’s wage-earning potential, taking into account wage history and other existing facts and circumstances.
Another layer of complexity is added to the assessment of earning potential where the plaintiff possesses a rare or special native talent, such as an artist, musician, actor, or athlete. While there exists a certain level of uncertainty regarding the earning potential of a person who is engaged in academic study leading to a career in a typical occupation or profession, there is a much greater degree of uncertainty as to the earning potential of one pursuing an artistic or athletic career in which future success depends not only on training but also primarily on native talent. In recognizing a distinction between persons who largely exploit native talents and those who exploit intensive training, the court in Grayson v. Irvmar Realty Corp. reduced a jury award of damages for lost earning capacity to a young woman studying music toward the development of a career as an opera singer:
It is notable that those who exploit rare and special talents may achieve exceedingly high financial rewards, but that the probability of selection for the great rewards is relatively low. On the other hand, those who, provided they have the intelligence and opportunities, train for the more skilled occupations and professions, not so heavily dependent upon unusual native gifts, will more likely achieve their objectives.
The would-be operatic singer, or the would-be violin virtuoso, or the would-be actor, are not assured of achieving their objectives merely because they have some gifts and complete the customary periods of training. Their future is a highly speculative one, namely, whether they will ever receive recognition or the financial perquisites that result from such recognition. Nevertheless, the opportunities exist and those opportunities have an economic value which can be assessed, although, obviously, without any precision. But a jury may not assume that a young student of the opera who has certain gifts will earn the income of an operatic singer, even in the median group.
Although the Grayson court allowed recovery for lost earning capacity damages, the court significantly reduced the jury’s award because “except from her teachers, she had not achieved any spectacular or extraordinary recognition for her talents.”
B. The Athlete’s Earning Potential Range (EPR)
Spectacular or extraordinary recognition for talent goes hand-in-hand with earning potential. With regard to athletically talented individuals with professional prospects and aspirations, there exists a wide earning potential range, which this article will refer to as the “EPR.” Lowest on the EPR are unknown high school athletes who have never earned any compensation for their athletic ability. Highest on the EPR are well-known, high-profile professional athletes with an established record of employment earnings or endorsement income. Between these opposite ends of the EPR, there are numerous categories of athletes who have achieved varying levels of recognition for their athletic skill and possess varying levels of wage-earning potential.
For example, toward the lower end of the EPR, there are amateur athletes, known as “prospects,” who have the potential to become professional athletes. However, among these prospects, there are high-profile college football and basketball players who have achieved spectacular recognition for their athletic skills at the most competitive collegiate programs. These prospects are likely to reach the professional ranks much sooner than some younger, unknown high-school prospects who may need more time to mature and develop their skills against better competition in college or the minor-league farm system. Moreover, players drafted in early rounds have achieved greater recognition and are generally considered to be better prospects than players drafted in later rounds. Thus, a first-round draft pick typically has greater earning potential–and is therefore higher on the EPR–than a fifth-round draft pick. Likewise, a high school athlete who will become eligible to be drafted at a future date and is currently “projectable” as a first round draft pick is viewed as a better prospect than a college athlete projectable as a fifth round pick, and thus has greater earning potential. The better the prospect, the greater the earning potential, and the higher the athlete is on the EPR.
Toward the higher end of the EPR are the star veteran players at the top of the wage scale in their respective sports, as well as the “journeyman” veteran players making the league minimum salary. Likewise, Olympic athletes such as Michael Phelps and Shaun White, who have achieved celebrity status and have a history of endorsement earnings, would be high on the EPR. The high end of the EPR also includes young professional players who have performed well early in their careers and who, though currently making the league minimum salary, will likely earn a substantial salary that more accurately reflects their market value in the coming years. Moreover, there are professional baseball players at various levels in the minor-league farm system, with players in the Triple-A leagues generally considered to be closer to advancing to the major league level than players in the Double-A, Single-A and Rookie leagues. However, this does not necessarily mean that all players in Triple-A have greater earning potential than those in the leagues beneath them, because there are players in the Rookie and Single-A leagues who are considered to be better prospects than many players at the higher levels, and who therefore have greater earning potential.
In Nat’l Collegiate Athletic Ass’n v. Yeo, Yeo, an amateur Olympic swimmer, claimed that a university’s enforcement of the NCAA’s ineligibility ruling constituted an unconstitutional deprivation of protected liberty and property interests. The trial court recognized the plaintiff’s earning potential based upon the following uncontradicted evidence produced at trial:
(1) Yeo had already established a world-class reputation and her ‘good name, outstanding reputation, high standing in her community, her unblemished integrity and honor are particularly important in the Republic of Singapore and in light of her cultural background’; (2) if NCAA rules did not prohibit athletes from accepting professional compensation while competing in NCAA sanctioned events, Yeo ‘would be immediately eligible to capitalize on her public persona by entering into lucrative endorsement and marketing opportunities as well as being eligible for prize winnings due to her performance as a member of Singapore’s national team’; and (3) ‘UT-Austin represented to [Yeo] at the time she transferred from [Cal-Berkeley] to become a student-athlete at UT-Austin that UT Austin would not jeopardize or compromise [Yeo’s] eligibility to compete on behalf of UT-Austin in NCAA athletic competition.’ . . . Yeo had competed in two Olympic games before attending college and had been named sportswoman of the year and Olympic flag-bearer for her native country, Singapore. At both the temporary restraining order and permanent injunction hearings, Yeo represented that it was this continuing interest in her athletic and professional reputation that UT-Austin had damaged by its actions.
Although the Supreme Court of Texas rejected the lower court’s determination that Yeo’s claimed interest in future financial opportunities was entitled to due process protection, the trial court’s discussion regarding Yeo’s earning potential would be relevant to an assessment of lost earning capacity damages of an amateur athlete who successfully establishes a legal claim other than a constitutionally-based claim. It appears the trial court viewed Yeo fairly high on the EPR even though she was an amateur and had never earned any compensation as a professional swimmer.
A variety of factors come into play in the assessment of extraordinary athletic skill and thereby impact an athlete’s future earning potential. On a macro level, an athlete’s ability to earn money is based upon his or her value to an employer (i.e., a team or sporting event) and value as an endorser of products and services. This value is generally based upon the athlete’s performance, reputation, and marketability. With regard to a professional boxer’s earning power, one court essentially found that earnings fall directly on the heels of winning:
As in most money-making callings, a boxer’s earning capacity is related to his reputation and his reputation is dependent upon his success. In the sports world the interested public follows the detailed records of individual athletes and teams with avidity. It flocks to watch the athletes with winning records; and the earnings of those athletes are related directly to the number of paying spectators they can attract. Spiritually, a professional boxer may emerge greater in defeat than in victory. Materially, however, his prestige and the purses he can command are lowered. Any action which affects his record so prejudicially of necessity impairs economic rights and interests sufficiently to give the petitioner legal standing to sue.
An athlete’s potential to earn money in the future is based upon an assessment of their future capability to achieve success as an athlete. This is determined by thoroughly evaluating evidence of past athletic performance, recognition and training already received, and the amount of training and opportunities the athlete is likely to receive and realize in the future. Further, an athlete’s earning potential must take into account the athlete’s present physical attributes and skills, as well as an assessment of what those attributes and skills will look like in the future.
In their assessment of future athletic ability and performance, professional scouts look at an athlete’s individualized native talents, referred to as “tangibles,” as well as makeup and character, referred to as “intangibles.” Tangibles consist of things like an athlete’s physical size, strength, power, speed, and athleticism, as well as possession of sport-specific skills (or “tools”) such as ability to throw, catch, hit, shoot, field, and so on. Intangibles are made up of attitude, personality, leadership skills, motivation and drive, priorities, philosophies, intelligence, temperament, ability to handle pressure situations both on and off the field, performance in important games, prior incidents of team or league discipline for misconduct, criminal records, academic performance, performance on psychological exams, and virtually anything else that may positively or negatively impact an athlete’s image. According to Terry Bradway, the New York Jets’ senior personnel director, character is divided into personal character and football character–“Football character is in terms of work ethic and spending time, preparation, study, doing all those extra things that you want to do to become a player . . . . Then from the personal standpoint, it’s the off-the-field stuff.” Gary Hughes, special assistant to the general manager of the Chicago Cubs, said:
A player’s mental makeup can influence his physical skills. Instincts is a tremendous tool, to say that instincts is not a tool is foolish . . . . Makeup is a tool, too, but it is tougher to recognize. You see a guy get upset at a play that goes bad, and you might say, ‘I love that. The guy is [a] fiery player.’ But the other scout might say, ‘He’s a hothead.’
An athlete’s tangibles tend to entail more of an objective assessment influenced by performance statistics, radar guns, and stop watches. An athlete’s intangibles are more subjectively determined, but they certainly have an impact upon professional scouts’ evaluations of the athlete, including where the athlete is ultimately selected in the annual amateur draft.
In summary, lost earning capacity damages in cases involving a plaintiff who possesses extraordinary athletic skill are based upon an assessment of the plaintiff’s earning potential as an athlete that exists today. The next section will discuss how the athlete-plaintiff can prove (1) a causal connection between the defendant’s actions and a lost or reduced chance or opportunity to earn money in the future as an athlete, and (2) the amount of that loss to a reasonable degree of certainty. The EPR can be helpful to plaintiff and defense counsel, as well as their expert witnesses, in addressing both burdens of proof.
II. The Athlete’s Two-Step Burden of Proof
Compensatory damages for harm to earning capacity are not recoverable without proof of pecuniary loss. A prerequisite to recovering for lost earnings or loss of earning capacity is that the plaintiff must offer evidence establishing “that a significant amount of earnings has been lost, or that his earning capacity has been significantly harmed.” The plaintiff must establish “by proof the extent of the harm and the amount of money representing adequate compensation with as much certainty as the nature of the tort and the circumstances permit.” However, the desirable level of certainty to be reached in determining adequate compensation is one of reasonable certainty, not one of complete or definite certainty. Thus, recovery is permissible even in cases where there is no real equivalence between the harm and compensation in money (i.e., claims involving emotional harm) or where the nature of the harm is extremely difficult to approximate or quantify with a sufficient level of accuracy (i.e., claims involving lost business profits).
Comment d to section 912 of the Restatement (Second) of Torts describes a situation in which the defendant has tortiously interfered with the plaintiff’s entering into or continuing a business enterprise or business transaction, which entails both the likelihood of profit and, conversely, a possibility for loss. In order for a plaintiff to recover lost profits, she must prove that the enterprise or transaction “was or was likely to be profitable and that the chance of profits has been interfered with.” To illustrate, the Restatement provides an example of a business transaction in a sports context involving tortious interference with a contract to promote a boxing match:
A has a contract with B by the terms of which A is to arrange for a boxing match between B and C. D tortiously causes B to break his contract before A has incurred any expenses with reference to it. A is entitled to compensatory damages from D only if he proves that it is more probable than not that the match would have been made by him and would have been a financial success, and if his proof offers a reasonable basis for estimating the profits.
The above illustration saliently demonstrates the complexity inherent in proving economic damages for lost future earnings or lost earning capacity: First, A must prove that D’s wrongful conduct did in fact cause A a loss of the chance or opportunity to earn money. Second, A must prove the amount of that loss to a reasonable degree of certainty. There must be a reasonable probability, not just speculation, that the plaintiff suffered damages from the defendant’s actions, and there must be evidence, not just speculation, that provides a reasonable estimate of the amount of damages. Depending upon where the plaintiff falls on the EPR, meeting this “two-step burden of proof” can be a daunting, possibly even insurmountable task for plaintiffs seeking lost earning capacity damages.
Any evidence or expert testimony proffered to meet the athlete-plaintiff’s burdens of proof must satisfy the admissibility standard under Rule 702 of the Federal Rules of Evidence: “If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise . . . .” As the Supreme Court articulated in Daubert v. Merrell Dow Pharmaceuticals, Inc., the determination of admissibility requires the judge to make a two-pronged “preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning or methodology properly can be applied to the facts in issue.” In order for the proffered testimony to meet the first prong–the “scientific knowledge” prong–the Court in Daubert explained that science “implies a grounding in the methods and procedures of science” and that knowledge means something “more than subjective belief or unsupported speculation” and refers to “any body of known facts or to any body of ideas inferred from such facts or accepted as truths on good grounds.” “In short, the requirement that an expert’s testimony pertain to ‘scientific knowledge’ establishes a standard of evidentiary reliability.” The second prong of Rule 702, the “helpfulness” requirement, according to the Court, is essentially a standard of relevance and, more specifically, a question of “fit,” because if the proposed scientific evidence does not bear a “valid scientific connection” to the inquiry of the case, it will not be helpful to the jury and therefore is not relevant under Rule 702.
The “gatekeeping” obligation of trial judges under Daubert, however, extends to all expert testimony, not merely testimony that is scientific. Under Daubert and its progeny, “expert testimony is admissible if the expert is qualified to testify on the topic at issue, the testimony will assist the trier of fact, and the expert’s methodology is sufficiently reliable.” A merger of Rule 702’s two-prong test with the two-step burden of proof means that non-scientific evidence or expert testimony concerning an athlete’s lost earning capacity damages must (a) be sufficiently reliable, and (b) assist the trier of fact in (i) making a determination whether the defendant’s conduct caused a loss or reduction of the athlete’s chance to earn money in a prospective professional career, and if so, (ii) making a determination of the present value of that lost or reduced chance.
A. Step One: Proving that the Defendant’s Conduct in Fact Caused a Lost or Reduced Chance to Earn Money as an Athlete
1. The Loss of Chance/Opportunity Doctrine
Damages for lost earning capacity essentially compensate the plaintiff for a loss of chance or opportunity to earn future profits, and thus lost earning capacity is conceptually analogous to the loss of chance doctrine. The loss of chance doctrine, also known as the lost opportunity doctrine, allows a plaintiff to recover for the impairment (i.e., “loss”) of the plaintiff’s ability (i.e., “chance” or “opportunity”) to achieve a more favorable outcome or result because of the defendant’s actions. Thus, the plaintiff’s real injury in a lawsuit seeking damages for lost earning capacity consists of the diminished chance of achieving a favorable outcome. The loss of chance doctrine seeks to give the plaintiff a recovery equal to the extent that the defendant’s conduct caused a reduction in the chance to profit, which makes it distinct from a lost profits claim.
The loss of chance doctrine, which is applied often in personal injury and medical malpractice cases, evolved in response to the perceived unfairness of the “all or nothing” rule of tort recovery. The all or nothing rule provides that the plaintiff may only recover if she can prove that the defendant’s conduct more likely than not caused the unfavorable outcome–if the plaintiff meets this burden, she recovers one hundred percent of her damages, but if she does not meet this burden, she recovers nothing. For example, if a patient has a fifty-one percent chance of survival and a doctor’s negligent failure to diagnose or properly treat caused that chance to drop to zero, the estate would be entitled to one hundred percent of the wrongful death damages, but if a patient has a forty-nine percent chance of survival and the negligence caused that chance to drop to zero, the estate receives nothing. A fundamental problem with the all or nothing approach is that it does not accomplish a fair and adequate allocation of costs and risks in proportion to the extent of the harm. If the plaintiff’s chance of achieving a favorable outcome before the defendant’s wrongful conduct was less than fifty percent, it is logically impossible for the plaintiff to show that the defendant’s conduct was the but for cause of the diminished chance. The loss of chance doctrine attempts to alleviate the flaw that is inherent in the all or nothing rule; the flaw being that it provides a “blanket release from liability” whenever there is less than a fifty percent chance of achieving a favorable outcome, irrespective of the flagrancy of the defendant’s conduct. To illustrate the loss of chance doctrine in monetary terms utilizing a proportional damages method, if the favorable outcome is $100, and the plaintiff’s chance of obtaining it was fifty percent before the defendant’s conduct, and that conduct reduced the plaintiff’s chance to thirty-three percent, then the loss of chance damages would be $17, which represents the seventeen percent reduction ($100 multiplied by seventeen percent).
The landmark British case of Chaplin v. Hicks first recognized loss of chance as an independent recovery of breach of contract damages. In Chaplin, a contestant in a beauty contest was awarded damages based on the value of her loss of chance to actually compete in the contest. The contest involved fifty candidates, from whom twelve would be selected as winners and who would be awarded professional acting contracts–the plaintiff was one of the original fifty contestants. The defendant, a theatrical manager, breached a contractual obligation to notify the plaintiff that she was required to do a personal interview as a condition to participation in the contest. Because the plaintiff did not complete the interview, she was denied the right to participate in the contest and thus lost the chance to be selected as one of the twelve winners. The court found it irrelevant that the plaintiff could not possibly prove that she would have been successful being selected as one of the twelve contest winners, because the plaintiff’s damage or injury consisted of the lost opportunity to compete in the contest. The defendant appealed the jury’s award, asserting that it was unduly speculative and contingent, but the award was affirmed on appeal. The plaintiff’s damages equaled the amount of the value of the acting contract, discounted based on the plaintiff’s probability of being selected for a contract; twenty-five percent, in this case, since the average chance of each competitor winning was one in four (twelve winners selected out of fifty candidates). In essence, Chaplin demonstrates a straight application of the proportional damages method illustrated earlier, which works in a case like Chaplin where both the value of the favorable outcome (the acting contract) and the reduced chance (twelve out of fifty) is relatively easy to determine.
To put this in the context of an athlete’s recovery of damages for lost earning capacity or lost future earnings in a professional sports career, the athlete’s economic harm is the lost or diminished chance to earn an amount of money in the future (the favorable outcome), and the athlete must establish that the defendant’s wrongful conduct was the factual cause of the diminished or lost chance. For example, in Hall v. University of Minnesota, the district court articulated the economic harm that would be bestowed upon a college basketball star if he was wrongly denied application to a degree program, resulting in a declaration of ineligibility:
According to the evidence, if the plaintiff is accorded the opportunity to represent the University of Minnesota in intercollegiate varsity basketball competition during winter quarter of 1982, his senior year, he will have a significant opportunity to be a second round choice in the National Basketball Association draft this year, thereby acquiring a probable guarantee of his first year’s compensation as a player in the National Basketball Association. If the plaintiff is denied the opportunity to participate in intercollegiate basketball competition on behalf of the University of Minnesota during winter quarter 1982, his chances for a professional career in basketball will be impaired; and it will be extremely unlikely that his compensation as a first year player in the National Basketball Association will be guaranteed. The evidence indicates that without an opportunity to play during the winter quarter of 1982, the plaintiff would likely be a sixth round choice in the National Basketball Association draft.
2. The But For Test
Proving the precise reduction in loss of chance in exact percentages, in most cases, is nearly impossible to do. Nevertheless, once breach is established, the plaintiff still must prove the existence of a factual cause link between the defendant’s actions and the lost or diminished chance. In other words, it must be shown that the defendant’s conduct is the but for cause of the loss of chance (i.e., but for the defendant’s conduct, the likelihood of a favorable outcome would not have been reduced or destroyed). In lost profits claims, the plaintiff typically must prove that it is more probable than not the plaintiff would have profited. In loss of chance cases, while some courts have required the plaintiff to prove by a preponderance of the evidence that the defendant’s actions caused the diminished chance, other courts have held the plaintiff to a lower burden of proof than the usual preponderance of evidence standard generally applicable in civil claims. For example, one court held that the plaintiff need merely show that, but for the defendant’s breach, a “real and substantial chance” existed that an opportunity or transaction with a third party would have occurred and led to the plaintiff’s profits; a real and substantial chance defined as something more than a purely speculative or fanciful chance.
As a threshold matter, the underlying cause or causes of action that establish liability in a particular case may impact the athlete’s ability to prove a factual causal link between the defendant’s wrongful conduct and the athlete’s diminished or lost chance of future earnings. There are two cases decided by the Arizona Court of Appeals that illustrate this point; one case involved a college basketball coach’s damages for breach of an employment contract, and the other case involved a personal injury action brought by a minor league baseball player against a physical rehabilitation company.
In the first case, Lindsey v. University of Arizona, the plaintiff, who successfully coached men’s basketball for several years at Grand Canyon College, applied for and accepted a head coaching position at the University of Arizona. The plaintiff was terminated by the university after an unsuccessful first season and filed suit, claiming that the university breached an oral promise to hire him for four years, despite language in a letter from the university president that the contract was only for one year. The Arizona Court of Appeals affirmed a jury’s award of $215,000 for the plaintiff’s lost wages, representing deprivation of employment for three years because sufficient evidence was presented to sustain a finding of breach of contract. However, the Court of Appeals overturned the jury’s award for loss of future earning capacity in the amount of $480,000, to which the plaintiff maintained he was entitled because of the difficulty he would have in obtaining future employment as a coach in view of his premature termination as coach at Arizona. The Lindsey court concluded that this was akin to reputation damage, which, according to the court, as a general rule is not recoverable in a breach of contract action because it “cannot reasonably be presumed to be within the contemplation of the parties when they entered into the contract” and the computation of such damages is “too speculative.” In regard to the effect the plaintiff’s termination would have on his future earning capacity as a basketball coach, the court found that the jury could “do nothing more than engage in speculation and conjecture” because it would depend upon the success or failure of the Arizona basketball team had the plaintiff continued as head basketball coach for an additional three years.
Twenty years later, the same court decided the case of Felder v. Physiotherapy Associates, in which a minor league AAA professional baseball player prevailed at trial on a negligence claim against a physical rehabilitation company relating to a permanent eye injury he sustained while taking batting practice at the company’s facility. Regarding the issue of lost earning capacity, which necessarily involved an assessment of the plaintiff’s chances of making it to the major leagues, the potential length of his major league career, and the potential range of his compensation, the jury awarded $7 million and found that the plaintiff was thirty percent at fault, thus reducing the award to $4.9 million. On appeal, the defendant claimed that the trial court erred as a matter of law by failing to find that the evidence of lost future earnings was “too speculative” and therefore insufficient to support a claim of lost earning capacity. The defendant tried to attack the factual cause link between the defendant’s negligence and a major league career, arguing that the “fact of damage” is damage to the plaintiff’s major league career, and thus the plaintiff must first prove that he would have been promoted to the major leagues. But the Court of Appeals viewed the causation issue in a different light, noting that the evidence clearly showed that the plaintiff’s professional baseball career ended as a direct result of the eye injury, and thus the fact of damage was proven. The court found that reaching the major league level would be an “advancement” in the plaintiff’s professional career and the eye injury “plainly took away his chance to continue and advance as a player,” including the chance of a major league career, thus “the amount of the damages for being deprived of that chance was for the jury to decide.”
The Felder court distinguished Lindsey as involving a “bright-line rule” whereby a reduction in future earning power or capacity is not recoverable in an action for breach of an employment contract, and it concluded that the holding in Lindsey was not applicable to a personal injury case. The court further noted that proving lost profits in breach of contract cases is “more complicated” and the line between the fact of damage and the amount of damage becomes more blurred when lost profits are at issue. According to the Felder court, although many of the lost profits cases discuss the evidentiary hurdle in terms of proving the amount of lost profits, the courts are actually more heavily scrutinizing whether the plaintiff has presented sufficient proof of the fact of lost profits. However, the Felder court did not explain why the factual cause link in breach of contract actions involving damages for lost future earnings or profits requires more skepticism and scrutiny than in personal injury cases. Certainly, the answer does not lie in the fact that one is necessarily more “speculative” than the other. Surely it is just as speculative to suggest that a minor league baseball player who never played an inning in the major leagues would have earned substantial compensation in the future at the major league level as it is to say that a college basketball coach who was wrongfully terminated would have earned substantial compensation in the future as a winning coach.
The most plausible justification for the “bright-line rule” in Lindsey is perhaps the fact that contract remedies seek to accomplish different goals, incentives, and policies. Contract law seeks to award an amount that puts the non-breaching party in the same economic position it would have been had the contract not been breached–also known as general or expectation damages. Under traditional contract law principles, the most that the coach in Lindsey could have expected to earn under the terms of his employment contract, absent the university’s breach, was his annual compensation pursuant to the terms of the agreement for as long as the length of the contract term, which is the amount the coach was awarded by the jury. Indeed, recovery for lost future earnings or lost profits in a breach of contract case, known as special or consequential damages, presents a classic Hadley v. Baxendale scenario that demands special proof and a sufficient level of foreseeability at the time the contract was entered in order to bring such damages within the contemplation of the parties. The requirement of proof of foreseeability is evidence of the courts’ hesitance to allow recovery for special damages when the risk of such losses can sufficiently be allocated between the contracting parties or by procuring insurance before the loss is incurred. Tort law, on the other hand, is aimed at deterrence, compensating the victim and making the injured party whole, and apportioning liability based on fault. Thus, the lost earning capacity factual cause link in a case involving tortious interference with contract does not typically demand the same level of scrutiny as one that involves breach of contract.
The Lindsey and Felder courts did not discuss the causation issue in terms of the traditional but for analysis applied in loss of chance cases. However, it seems that the Felder court was implicitly suggesting that but for the plaintiff’s eye injury (due to the defendant’s negligence) the plaintiff would not have lost the chance at a major league career, not that the plaintiff would have in fact reached the major leagues. In other words, it is not debatable that a permanent eye injury ending the plaintiff’s ability to play professional baseball at the minor league level also ended any chance of eventually playing in the major leagues, which chance existed before the injury, and it was then up to the jury to assess an amount of his damages for being deprived of that chance. If the plaintiff had been precluded from proving lost earning capacity damages, he would have fallen victim to the “all or nothing” rule discussed earlier. The “bright-line rule” for lost earning capacity in breach of contract cases, as in Lindsey, could alternatively be viewed as an application of the all or nothing rule with an implicit assumption that the plaintiff should recover nothing because he cannot prove that the defendant’s breach more likely than not caused an unfavorable future outcome. Moreover, the inherent unfairness of the all or nothing rule in tort cases is usually absent in breach of contract cases essentially for the reasons that justify application of the bright-line rule in most contract cases. However, Chaplin highlights the exception to the bright-line rule and demonstrates that there may be contract cases that especially warrant recovery of damages for lost future earnings. The causal link was fairly compelling in Chaplin because (1) the loss of a chance to compete in the beauty contest and be one of the twelve finalists who would receive an acting contract was within the “contemplation of the parties at the time the contract was entered,” and (2) we can confidently say that, but for the defendant’s failure to notify the plaintiff about the condition to participating in the beauty contest, the plaintiff would not have lost the chance (albeit a twenty-five percent chance) to be one of the twelve finalists and receive an acting contract.
Nevertheless, the pertinent question left unanswered in Felder was the extent of the plaintiff’s chance, before the eye injury was inflicted, of earning future compensation in a major league career–the court determined that the plaintiff lost that chance without addressing what the plaintiff’s chance was prior to the eye injury. A more precise application of the loss of chance doctrine, then, would be based on the proportional damages method applied in Chaplin, which would only give the plaintiff a recovery in an amount that reflected the extent to which the defendant’s conduct caused a reduction in the chance of a major league career, which would necessarily require an assessment of the plaintiff’s chance both before and after the injury (but which may have been nearly impossible to determine in Felder). For example, suppose it could be shown that the plaintiff only had a twenty percent chance of making the major leagues before the eye injury and, because the injury ended the plaintiff’s professional career, the injury reduced that chance to zero. Presumably, then, the plaintiff would only be entitled to twenty percent of the amount he could expect to have earned in a future major league career absent the injury. But even if it could somehow be shown that he had a twenty percent chance, the amount he could reasonably expect to have earned in a future major league career would also need to be determined, which of course would be more uncertain than the known value of one of the twelve acting contracts to be awarded in the beauty contest.
Determining the reduction in chance is further complicated when the defendant’s tortious conduct does not result in a personal injury or death that permanently ends an athlete’s career, as in Felder, but instead hinders the athlete’s ability to reach their full athletic potential or to earn an increased level of compensation as an athlete. In these situations, an additional calculation must be made regarding the plaintiff’s percentage chance following the injury, which would obviously be some percentage greater than zero if the injury does not end the plaintiff’s career (and then the difference between the two would equal the lost chance in a percentage amount). The proportional damages method, in which percentages are assigned based on probabilities, may lend itself well in cases where estimates can be made based on data obtained and analyzed scientifically and accepted by the relevant community, such as the use of statistical survival rates in medical malpractice cases to determine the chance that a patient would survive a certain medical condition or treatment. However, such percentage determinations are usually not very conducive to assessing an athlete’s lost earning capacity in a professional career, which probably explains why the Felder court did not venture down that path. Courts that impose a lower burden of proof or require less precision for causation purposes can demand a higher level of scrutiny when the plaintiff must prove the damage amount with a reasonable degree of certainty.
The higher the plaintiff is on the EPR, the greater the degree of confidence with which it can be estimated that the plaintiff did in fact have a real and substantial chance of future earnings in a professional career. Albrecht v. Industrial Commission presents such a case, in which a former professional football player for the Chicago Bears, whose football career as an offensive lineman ended after five years when he sustained a back injury, appealed the Commission’s decision denying him wage-loss differential workers’ compensation benefits (the purpose of which is to compensate injured employees for reduced earning capacity). Based on evidence that Albrecht was a first-round draft choice and started every game from his first season in 1977 up to the time of his injury in 1982, in addition to evidence that there were offensive linemen in the NFL, and specifically with the Bears, who played longer than the ten-year average career length for an NFL offensive lineman, the court was able to conclude that “but for claimant’s injury, he would have been in the full performance of his duties as a Bears offensive lineman after 1983.” The court rejected arguments that Albrecht “cannot prove how long he could have continued playing professional football or how much he would have earned without engaging in speculation” and that “the competitive nature and physical demands of the sport dictated that [his] employment as a Bear was of a temporary nature in that it was dependent on [his] ability to excel over other players competing for his job.” It similarly discounted testimony from the general manager for the Bears that Albrecht signed contracts year to year that “were contingent on [his] success in making the football team” and that “not every player is guaranteed to make the team on any given year.”
3. Personal Injury Cases Involving Amateur Athletes
When the athlete is an amateur, the causal connection does not necessarily become more tenuous, but remains a very fact intensive inquiry as to whether the plaintiff had a chance at a professional sports career that was reduced or lost as a result of the defendant’s actions. Personal injury cases involving athletes in many respects resemble any bodily injury case in that (1) the victim is no longer able to perform the type of work he had performed before the injury, which is typically established through medical testimony, and (2) if severe enough, the injury is usually permanent in nature such that the loss of earning capacity extends for the plaintiff’s entire work life, and the permanence of the injury is also typically established by medical testimony to evidence that the plaintiff has reached maximum recovery. Personal injury cases involving athletes also resemble employment discrimination cases that require the plaintiff to demonstrate that they are qualified to do the work, just as an athlete is required to demonstrate that he is qualified to earn future compensation as a professional athlete. There are a number of personal injury cases in which amateur athletes, for the most part college students or graduates, have sought recovery of damages for loss of earnings or earning capacity for having been deprived of the chance for a professional sports career.
In the cases in which amateur athletes were awarded recovery, the courts tended to generalize the standard for meeting the factual cause link, but the causal connection was nevertheless established in these cases based on a theory that the plaintiff had previously demonstrated considerable promise as an amateur athlete. For example, in Horton v. McCrary, the court affirmed an award of $100,000 to a nineteen-year-old college baseball player who was involved in a car accident and incurred a broken leg requiring surgery. Damages were awarded for loss of the opportunity for a professional baseball career based on expert testimony from a person who had a degree in physical education with an emphasis on coaching, coached baseball, taught baseball techniques, played semi-professional baseball, and observed the plaintiff play college baseball. He opined that the plaintiff would have been drafted to play professional baseball, that the plaintiff “had better skills than many of the other college baseball players who became professionals” and that if the plaintiff “had continued on the pace that he was going through his freshman year there was no doubt in . . . [his] mind that Tim would have been picked up by a professional ball club.” The court approved of the trial judge’s admission into evidence of a scrapbook consisting of newspaper articles, photographs, and awards documenting the plaintiff’s athletic accomplishments during high school and college, all of which tended to show his “desire and fervor for athletics” and helped to quantify the loss he suffered because of his inability to continue participation in athletics at the same level he had prior to the accident.
In Stafford v. Unsell, the court affirmed a jury’s award of $35,000 to the plaintiff, an amateur motorcycle racer, who suffered a broken nose and a broken foot in an auto accident. At age fifteen, the plaintiff was one of the top ranked amateur motorcycle racers in the country, and he anticipated turning professional at age sixteen and signing a contract with a major motorcycle manufacturer/sponsor. A calcium deposit formed on the plaintiff’s foot as it was healing, which allegedly caused severe pain when he engaged in strenuous physical activity and kept him from properly training as a racer. Testimony at trial indicated that racers must be superbly conditioned athletes, which causes many to burn out by the age of twenty-four, and the plaintiff claimed that because the injury prevented him from maintaining a conditioning program, his racing performance had been so poor that he was unable to get a contract. In answer to the defendant’s appeal, the plaintiff asserted that his loss of future earnings was much higher than the jury awarded–in the neighborhood of $400,000. The court disagreed with the plaintiff and, from a causation standpoint, found that even though the plaintiff had a chance at a professional racing career, it was only a slight chance due to facts and circumstances unrelated to the injury from the accident–for example, the fact that the “hazards of racing can end a promising career abruptly” and the fact that the plaintiff had various other physical ailments that the jury could have reasonably believed contributed to or solely caused his loss of racing skills. In essence, the court’s holding suggests that it viewed the $35,000 award as reasonably proportionate to the extent to which the accident diminished the plaintiff’s already slim chance of making money as a professional racer.
In Washington v. American Community Stores Corp., the court upheld a jury verdict that the plaintiff, who sought to recover for back injuries that were undisputedly permanent, had suffered a permanent impairment of his earning capacity in a career as a professional wrestler or wrestling coach based on evidence which showed that he had received numerous accolades as a wrestler, including college football and wrestling scholarships, compiled a collegiate wrestling record of 103 wins and only four losses, won a national varsity wrestling championship during his sophomore and senior years in college, and intended to compete in the Olympic trials. There was also expert testimony that, before his injury, he was a prime candidate for the U.S. Olympic team and had the qualifications to become a great international wrestler and win an Olympic medal, and that those who compete in the Olympics and win a medal have a much better opportunity to secure employment in the coaching or professional wrestling fields. In conclusive fashion, the court found “that the evidence strongly supports the inference . . . that the plaintiff, besides his bodily disability, had suffered a permanent impairment of his earning capacity in a professional or coaching career in the wrestling sport.”
In Clinchfield Rail Road Co. v. Forbes, the court affirmed a $75,000 award to a twenty-five year-old football player who suffered permanently disabling injuries and held that the trial judge did not commit error in permitting evidence of a professional football contract the plaintiff had signed with the Cleveland Browns on the issue of lost earning capacity. The defendant argued that the contract was not evidence of the plaintiff’s earning ability because it was contingent on his making the team and, since there was no evidence that the plaintiff possessed the necessary skill and ability to play professional football, the contract had no probative value and was speculative at best. However, the court noted that evidence had been presented to show that the plaintiff was an outstanding football player in college, including testimony from one of his coaches and other witnesses familiar with the game of football and the plaintiff’s playing ability that they considered him an outstanding athlete, as well as evidence showing that many professional football teams were interested in his services prior to his signing the contract with the Browns.
Finally, in Connolly v. Pre-Mixed Concrete Co., as a result of an accident in which considerable muscle tissue in the plaintiff’s leg was destroyed, the court held that a jury award of $95,000 for lost earning capacity damages to a twenty year-old woman who was a champion amateur tennis player with aspirations of becoming a professional tennis player was not excessive. The plaintiff had “planned to go on a three-months’ professional tennis tour, for which she had been offered a percentage of the receipts, with a guarantee of $30,000.” In addition, there was expert testimony that: (1) the plaintiff had not yet reached her peak, (2) she could have, but for the accident, earned considerably greater amounts as a professional tennis player, (3) she would have received additional sums from endorsements of sporting goods and other articles, (4) her earnings during her first year as a professional alone would have been at least $75,000, and (5) she could have expected at least seven or eight years of participation as a professional.
In the personal injury cases in which recovery of lost earning capacity damages was denied, involving amateur athletes claiming deprivation of a prospective professional sports career, the factual cause link was found wanting. But here, again, the courts did not provide a definitive standard or explanation regarding the factual cause link.
For example, in Tanuvasa v. City and County of Honolulu, the court held it was prejudicial error for the trial judge to have given a jury instruction allowing a damages award to a college student for loss of the opportunity to play professional football, where (1) the evidence showed that, although the plaintiff had a brilliant career as a high-school football player, he played football in college largely as a substitute due to a series of problems arising in part from injuries he sustained while playing, (2) expert testimony demonstrated that the plaintiff stood a chance of playing professional football in the bottom twenty-five percent of the National Football League (NFL) or in the World or Canadian Leagues only if he were in shape and motivated, (3) no evidence was presented indicating that any NFL team that might have picked the plaintiff in the NFL draft did not do so because of the injury inflicted by the defendant, and (4) the plaintiff did not testify specifically that he did not attempt to try out as a free agent in any professional football league because of the injuries he incurred in the incident. Although the plaintiff stated he was experiencing frequent headaches, dizziness, and trouble concentrating, the court found there was no evidence that as a direct and proximate result of the occurrence in question he was prevented from pursuing a professional football career. Interestingly, the court flatly rejected a claim that, even if the plaintiff was not actually “prevented” from pursuing such a career, he lost the chance to try to pursue it. Although the court acknowledged that “there is some evidence that [plaintiff’s] chances for pursuing a football career were diminished,” the jury instruction, “as worded, is equally susceptible of the construction that what was being claimed was the loss of a career.”
In Emoakemeh v. Southern University, the court held that the trial court did not abuse its discretion in denying an award of damages for lost earning capacity to a Nigerian national who was on a tennis scholarship and was injured by a gunshot wound to his thigh during an altercation in a dormitory. The plaintiff “sought to prove that he had the potential to play world class tennis that would have garnered him a top-notch teaching job at a prestigious racquet club.” One witness who testified regarding the plaintiff’s potential to play professional tennis, and who played tennis against the plaintiff once and witnessed the plaintiff play during sporadic trips to Nigeria, admitted that questions regarding the plaintiff’s potential as a future tennis star were very difficult to answer, but that, because of his ability and the fact that he played in previous ATP tennis tournaments, one could “deduct that he has the potential of perhaps furthering his career in the professional field of tennis.” However, nobody who had played tennis with the plaintiff, or had coached him, testified on his behalf regarding his alleged talent in the sport. Further, although the plaintiff had been ranked 826th in the world when he was sixteen years of age, he was subsequently stripped of his ranking because he lost in the qualifying rounds of certain tournaments. Therefore, noting that the plaintiff had the burden of proving loss of future earning capacity with reasonable certainty, the court found no error in the trial court’s conclusion that the totality of the evidence regarding the plaintiff’s tennis abilities was far “too speculative” to support such an award.
Lastly, Clement v. Griffin was an action brought by members of a college baseball team involved in a collision while riding in the school van. The court found no error in the trial judge’s admission of evidence that one of the plaintiffs had the “dream” of pursuing a professional baseball career with a restriction that such evidence could only be used to establish the psychological impact that the loss of the opportunity to pursue that dream had on the plaintiff, including mental suffering and loss of enjoyment of life. Further, the trial judge instructed the jury that no evidence had been presented that the plaintiff would have become a professional baseball player.
B. Step Two: Proving the Amount of the Loss to a Reasonable Degree of Certainty
Recall the Restatement’s illustration involving D’s tortious interference causing B to break his contract with A to promote a boxing match between B and C. The pertinent question regarding the amount of A’s lost future profits is, what would A have earned from the promotion of the boxing match absent D’s tortious interference? It would be impossible to establish with complete certainty A’s lost profits from a boxing match that A was unable to promote due to D’s interference. Indeed, because it involves interference with an intangible right–a business opportunity or transaction–the amount of the lost profits may be difficult to prove with any degree of certainty. However, the law only demands that lost profits be proven with reasonable certainty, which can be evidenced by books of account, records of previous transactions, tax returns, or profit history of similar businesses. Similar to proving the value of a tangible item, if the market value of the business or enterprise interfered with could be approximated, then the value before and after the loss could be shown. Alternatively, if market value could not be approximated, then the income before and after the loss could be shown. In cases involving a lost business opportunity, a reasonable approximation of the value of the loss will often suffice even if a claim for lost profits would be speculative.
1. The Calculations and Data
The fundamental question in any case in which an athlete is claiming lost earning capacity in a professional sports career is, what would the plaintiff have earned as a professional athlete absent the defendant’s conduct? The answer to that question can generally be thought of in terms of three basic calculations:
(1) First, calculate an amount that the plaintiff could reasonably have expected to earn in a prospective professional career immediately preceding the defendant’s actions, taking into account not only the plaintiff’s unique athletic skills and physical and intangible attributes, but also any risks and contingencies that would otherwise exist to impact the plaintiff’s ability to earn those dollars in the future.
(2) Then, calculate an amount that the plaintiff can reasonably expect to earn in a professional career now as a result of the defendant’s actions.
(3) Then, subtract the amount in step 2 from the amount in step 1.
In a case where the diminished chance based on a percentage can be determined with a reasonable degree of confidence, thus making the proportional damages method more palatable, step 2 would entail a calculation of the plaintiff’s percentage chance both before and after the breach and in step 3 the difference in percentage would be multiplied by the amount calculated in step 1.
The more established the athlete is as a professional with a history of earnings, i.e., at the higher end of the EPR, the greater the degree of certainty with which the athlete’s lost earning capacity can be determined, because a salary record provides a benchmark at which to calculate future earnings with more precision. Such an example can be seen in former Miami Dolphins wide receiver O.J. McDuffie’s recent malpractice lawsuit against former team physician John Uribe for the handling of an injury McDuffie incurred to his big toe in the tenth game of the 1999 season, which ultimately led to the end of his career. McDuffie was cut before the 2002 off-season with three years left on his contract following a successful career in the NFL. In May of 2010, a jury awarded McDuffie $10 million in lost earnings.
However, salaries of professional athletes are hardly stagnant, and there are extreme variances in compensation among athletes based upon varying levels of individual performance as well as external factors such as league rules that artificially restrict a player’s salary for a period of years or allow a player to earn a salary at market value via free agency or salary arbitration. As such, the common methodologies used by forensic economists to determine lost earning capacity in most occupations are not very conducive to determining an expectable future earnings stream for an athlete in a professional sports career. In short, there is no single method, measure or formula that applies uniformly to all cases for calculating lost future earnings in a professional sports career because athletes are unique and fall in different places along the EPR. Further, the extent of the lost opportunity can vary depending upon the flagrancy of the defendant’s conduct and the resulting injury or damage, thus making the calculation a very fact-intensive inquiry. The key to any calculation is the reliability of the evidence upon which it is based, and, to satisfy the admissibility standard under Rule 702, the evidence must assist the trier of fact and the expert’s methodology must be sufficiently reliable.
2. Using Comparable Players: The Appraisal Method
A future earnings assessment of an athlete in a professional career in some respects resembles an appraisal because a professional athlete, although legally characterized as an employee for a professional club, is an asset or an investment that yields a certain return over time. An appraisal of an asset or a business seeks to determine the fair market value of the asset or business if it were sold, and there are a variety of methods that may be utilized. Under the sales comparison approach, an estimate of a property’s fair market value is based on a comparison of the subject property to similar properties that were recently sold or that are currently pending for sale. The more accurate the comparables, the more confidence we have that previous sales and pending purchase agreements reflect the appraised asset’s fair market value. The sales comparison approach is appealing for its reliance on the market itself, but its reliability is heavily dependent on the reliability of the available information in the marketplace. The cost approach is based upon the cost to develop a property comparable to the subject property as it currently exists, and is premised on the theory that “[a]ll things being equal, no one will pay more for an existing property than it would cost to develop a similar property to one’s own specifications.” Just as there is no single method that uniformly applies to the calculation of lost earnings in all cases, there is no single method that applies to the appraisal of assets.
Athletes possess unique skills and can be likened to a unique business for appraisal purposes, in which sales of comparable businesses are often used to assess value. For example, in affirming the trial court’s determination of the net asset value of the 1976 New England Patriots for purposes of ascertaining the fair value of its stock in an appraisal proceeding, the Supreme Court of Massachusetts in Sarrouf v. New England Patriots Football Club, Inc. highlighted the uniqueness of a professional sports team from other businesses in that it is “not only a business venture, but, as the judge pointed out, a sportsman’s endeavor.” According to the court, an owner of a professional team is a “celebrity” and a “member of an exclusive club” who, through the use of his wealth and capital, becomes an “armchair athlete” in the “public spectacle of professional sports.” The business’ uniqueness is further evident in the prices these extremely wealthy individuals are willing to pay to own an NFL team outright, which are largely independent of earning potential. As such, the court held that the trial judge was entitled to use evidence of prices paid for new franchises as a starting point in his valuation of the net assets of the New England Patriots Football Club. The trial judge also evaluated several factors that made the club even more valuable, including evidence that (1) the club enjoyed a monopoly over the entire New England area, (2) over the previous two years, the club’s operating revenue rose seventeen percent and its operating income rose twenty-five percent, (3) the stadium lease was a valuable additional asset, and (4) television broadcasts were profitable to networks and it was reasonable to believe that the new television contract would enhance team revenues.
An athlete’s value in professional team sports is essentially the compensation a team is willing to pay and that the athlete is willing to accept, for the athlete’s services pursuant to a player contract, subject to any league rules that would restrict the ability of a team and player to freely negotiate a wage at market rates. Similar to an appraisal sales comparison approach, evaluating past and current earnings of comparable players can assist teams and player agents in determining a player’s fair market value in the context of contract negotiations or salary arbitration. So, in these respects, the sales comparison method for determining the value of an asset in an appraisal resembles the method used to assess an athlete’s value. However, an appraisal values an asset as if it were being sold today; lost earning capacity calculations determine an athlete’s value (or future earnings) over a period of years in the future, increased for inflation and reduced to present value.
A calculation of future lost earnings of an athlete in a professional sports career should take into account, to the extent available and reliable, all of the following data:
(1) The athlete’s established history of professional earnings, if any;
Because each player is unique, identifying the specific players who are most similarly situated or comparable to the plaintiff from whom a calculation of the plaintiff’s lost future earnings may be based is critical. Any evidence, including expert testimony, regarding similarly situated or comparable players and the methodology used to calculate lost future earnings must of course satisfy Rule 702.
The scope of comparable players was a point of contention in the Felder case. The expert testimony proffered at trial to establish the lost earning capacity of a AAA minor league player in the Brewers’ organization, who had no record of any earnings at the major league level, consisted of two experts. Al Goldis, who was the special assistant to the general manager of the New York Mets and had twenty-seven years experience in drafting, scouting, and developing players for major league baseball teams, testified about Felder’s prospects for playing in the major leagues and the expected length of his career. In Goldis’ opinion, not only would Felder have made it to the major leagues, but he would have been the type of player expected to hit home runs and who other teams would pitch around. To support his opinion, Goldis reviewed the Brewers’ pre-draft scouting reports and minor league coaching reports on Felder. He compared Felder to major league players who hit fifteen home runs or more per season from 1981-1990 and he testified that Felder had more power than Frank Thomas, whom Goldis had drafted. Based upon the fact that Thomas had been playing for approximately seventeen years, “Goldis testified that Felder’s career would have lasted between twelve and fifteen years.”
The other expert witness for Felder was player agent Slade Mead, who provided trial testimony regarding economic damages and the range of player salaries. Mead testified that “he knew who Felder was even though he was not Felder’s agent, because as a first-round draft choice, Felder was a ‘very high-profile baseball player back when . . . he was being drafted and coming out of [Florida State University].”’ In support of his calculation of Felder’s expected future earnings, Mead selected two “comparable minor league players” who had moved on to the major leagues: Jeremy Burnitz and Geoff Jenkins. Similar to Felder, Burnitz and Jenkins “were college outfielders, first-round draft picks, power hitters, and played for the Brewers.” However, Burnitz and Jenkins had established themselves as successful major league players. Based on these two comparables, Mead estimated a seven year career for Felder and calculated his lost earnings to be $27,790,440.
In addressing what constitutes “reasonable certainty,” the Arizona Court of Appeals stated that the amount “must be supported by the best evidence available and the essential consideration is that ‘the jury must be guided by some rational standard.”’ The Court of Appeals further explained:
For damage to a sports career, the evidence reasonably available will generally be what was presented at trial in this case–qualified expert testimony concerning the athlete’s prospects, statistics showing past performance, and comparative data concerning other athletes. We need not detail all of the evidence concerning Felder’s career. Suffice it to say that the jury learned in detail about his batting averages, fielding performances, and injuries between 1992 and 1998. The jury was provided with evaluations from minor league coaches and opinions from several experts with major league player development experience. The jury also heard about the economics of baseball compensation, including how long a professional’s career might be and what similar players were being paid.
According to Professor Roger Abrams, the court’s decision to uphold the jury’s verdict and damage calculation is “not surprising” under this “permissive standard” and there was “no basis in the evidence” for the jury to select a $7 million figure for Felder’s lost future earnings. Abrams further notes that the record is devoid of any explanation of the basis for Goldis’ estimate, that the court’s opinion fails to indicate the precise data Mead relied upon, and whether there were other comparable players in addition to Burnitz and Jenkins who, like Felder, were first round draft choices with college experience.
Nevertheless, both Goldis and Mead possessed knowledge and experience beyond that of the average juror and were certainly qualified to be expert witnesses. Further, their testimony, including the data and methodology they used, should have relatively easily satisfied both prongs of Rule 702 as their opinions were derived by reliable methodologies and assisted the trier of fact in making an assessment of Felder’s lost earning capacity damages. Once the requirements of Rule 702 are satisfied, it is up to the fact finder to weigh the credibility of the witnesses’ testimony and the accuracy and reliability of the data and methods upon which the calculations are based. Given that Mead’s estimate of Felder’s lost future earnings was just under $28 million, it appears that the jury was skeptical of the comparables used by Goldis and Mead because it awarded Felder only one-fourth of that amount ($7 million), and reduced it by thirty percent to account for Felder’s comparative fault. Perhaps the jury believed that a AAA minor league player who was a former first round draft pick was higher on the EPR than most minor leaguers, but was also lower on the EPR than the two established and successful major leaguers being used as comparables. The jury may also have been persuaded by the testimony of the defendant’s experts, who both testified that Felder did not have “a bright future in baseball” and that “Felder’s chances of making the major leagues were slim.”
To rebut the testimony of Goldis and Mead regarding Felder’s baseball career and earnings, defendant’s expert Steve Phillips compiled data from 1993-2004 of more than four hundred “outrighted” players who were cut from a team’s major league forty-man roster, and which evidenced that “only 21.3% of outrighted players advance to the major leagues and only 3.4% of outrighted players remained in the major leagues for more than three years.” In other words, because Felder had been previously outrighted, the defendant chose to compare Felder to other outrighted players and believed them to be the most similarly situated players. Felder objected to this evidence on relevance grounds, arguing that it was a “statistical analysis which talks about odds” and a general manager “does not draft or refuse to draft a player based on the odds.” Felder also argued that the players were not comparable to Felder because they did not have the same skill sets, they did not play the same position, all were not first-round draft picks, and some of them played in college, some in high school, and some neither. The trial court excluded the outright data comparison, expressing concern that Felder would not have had a chance to review and analyze the underlying data supporting the data compilation due to the timing of the defendant’s motion to admit the evidence shortly before the trial began. Even though the trial court excluded the data compilation, the trial court permitted Phillips to testify about “the significance of being dropped from the 40-man roster and that few outrighted players have ever advanced to the major leagues.” As such, and given that the outright data comparison included players from different positions and sixty-three percent of the players on the chart were pitchers, the court concluded that the trial court did not abuse its discretion in excluding the data compilation.
However, the trial court’s questioning of the relevance of the data essentially because it presented the “odds” of an outrighted player advancing to the major leagues is rather curious. In cases involving lost earning capacity damages, expert economists frequently use published data on labor participation rates by age, gender, education, and race to show the probability or odds that the plaintiff “will be alive, in the labor market, and actually employed at any future age.” Indeed, all data used as a basis for an estimate of an athlete’s future earnings, including player comparables, in essence presents the “odds” that the plaintiff will eventually have a successful career as a professional athlete. Moreover, comparing a minor league baseball player to specific players who have had successful careers at the major league level might actually be less reliable in answering that question than evidence of a percentage chance or odds. The more pertinent question concerns the reliability of the data; data showing all outrighted players and the percentage of those players who advanced to the major leagues, and then the percentage of those who stayed in the majors longer than three years, is certainly relevant, but the data would be more reliable if it was limited to outrighted players who shared substantially similar attributes and skills as Felder (i.e., were outfielders, power hitters, former first round draft picks, and played the same number of years in the minor leagues). Nevertheless, these are matters of weight, not admissibility, and can be fully explored in cross-examination.
For a comparable player grouping to be reliable, it must not be too broad or too narrow and the fact finder must feel comfortable that the plaintiff is in the same “galaxy” as the comparable players. A very narrow scope of comparable players, for example the two players chosen by Felder’s experts, does not give the fact finder much flexibility in formulating an assessment of damages. Conversely, if the scope of player comparables is too broad, for example the entire list of players who were outrighted over an eleven-year period, the fact finder can be left with too much leeway and nothing more than “a shot in the dark” at the plaintiff’s lost future earnings. Lastly, depending on the particular case, data of individual comparable players may not even be the best available evidence to support an estimate of lost future earnings with reasonable certainty, as will be seen in the discussion of the calculation of Oliver’s damages in the next section.
If nothing else, Felder demonstrates how vital it is for experts to be thorough and precise in the specific data being used, the compilation of that data, and the methodology employed to calculate an athlete’s lost earning capacity. Further, to the extent the expert uses and relies on comparable or similarly situated players to support an estimate of future earnings, the specific players chosen by the expert can make or break the jury’s willingness to accept that expert’s estimate. It is also helpful to a jury if the expert estimates a low and high end range of future lost earnings with a detailed explanation of how both ends of the range were calculated, as opposed to providing one specific lump sum estimate, given that such a very small percentage of highly talented athletes even end up establishing careers as elite professional athletes and the wide disparities in compensation earned by those few individuals.
III. Calculating Lost Earning Capacity in Oliver v. NCAA
This Section explains the data compilation and methodology I used to calculate Andy Oliver’s lost earning capacity as a result of his wrongfully being declared ineligible to play college baseball for Oklahoma State University (OSU) because he had a lawyer represent him in negotiations with the professional club that drafted him out of high school two years earlier. I was retained as an expert witness to opine at trial on the legality of the no agent rule, including the legality of its application to Oliver, and to opine on the lost earning capacity damages incurred by Oliver as a result of having been declared ineligible to compete. The lawsuit began almost an entire year in advance of the 2009 Major League Baseball amateur draft for which Oliver would have been draft-eligible as a junior. The judge held a bench trial six months prior to the draft, during the week of January 5, 2009, to decide on both: (1) Oliver’s request for declaratory judgment that the no agent rule is invalid on its face or that the rule’s application to Oliver was arbitrary and capricious or a breach of the obligation of good faith and fair dealing owed to him, and (2) Oliver’s request for injunctive relief to reinstate his eligibility.
From a lost earnings standpoint, Oliver’s situation is distinguishable from that of Felder’s in two very important respects. First, Oliver was a college baseball player without any professional playing experience whatsoever. Second, Oliver’s claim involved a diminished opportunity to earn as a professional whereas Felder’s claim presented a lost opportunity (because his eye injury prevented him from ever playing again). As was the case in Felder, the damages analysis did not require an economist, accountant, or income/wages expert; it required somebody possessing knowledge about valuing the marketability of a baseball player for the draft and the factors that go into scouts’ evaluations of baseball players–just as a valuation or appraisal of a house does not require an economist or accountant, but rather somebody with knowledge about determining the market value of homes and the various tangible and intangible factors that would affect its marketability if it were sold (i.e., location, décor, lots of kids in the neighborhood, swimming pool, landscaping, etc.). Determining Oliver’s damages was akin to an asset valuation or appraisal based upon a reasonable estimate of the market value of the asset if it were sold, and in Oliver’s situation, if he were drafted.
The two-step burden of proof discussed in Part III presented the two overarching issues I had to address from a lost future earnings standpoint: (1) determining whether the suspension in fact caused a reduction of Oliver’s opportunity to earn money as a professional baseball player, and, if so, (2) determining the present value of that reduced chance with reasonable certainty.
A. Proving the Factual Cause Link
Oliver was suspended indefinitely by OSU at the end of his sophomore season in the spring of 2008 for a violation of the NCAA’s no agent rule that occurred in 2006 when he was originally drafted out of high school; he was suspended from competing in the post-season that year. In October of 2008, OSU requested reinstatement of Oliver’s eligibility, and in December the NCAA rendered its reinstatement decision whereby it suspended him from competition for the entire 2009 baseball season and charged him with a year of eligibility. This “sit a year/charge a year” penalty meant that Oliver would have had only one year of eligibility remaining after the 2009 season, which would have effectively made him what is known as a “senior sign” for the 2010 draft, thus substantially reducing his value for that draft because drafted seniors do not have the leverage that a drafted junior has of being able to go back to school for his senior year. The suspension of Oliver for an entire season during his draft-eligible year and the charging of him with a year of eligibility solely on the basis that his lawyer was present with members of Oliver’s family at a meeting in 2006 with personnel of the club that drafted him to discuss the prospects of signing a contract, was unprecedented.
The NCAA’s reinstatement decision presented an interesting hypothetical: Assuming that the no agent rule was found to be invalid and/or invalidly applied to Oliver, what impact, if any, would a wrongful suspension in which Oliver was and would be unable to compete cause a reduction in Oliver’s value in the upcoming draft? The hypothetical posed here also presented an interesting factual cause issue at the time of trial. At first glance it may seem counterintuitive to be inquiring about whether Oliver would lose any value in a draft that had yet to occur, not knowing where he would be drafted, but it is essentially no different than determining unknown future pain and suffering, future medical expenses or future lost wages in a personal injury case where the injury has already occurred and liability has been established.
The question at the time of trial was whether and to what extent Oliver had been and would be damaged as a result of wrongfully being declared ineligible, which could be determined based upon an estimation of both (1) where Oliver would have been drafted absent the wrongful suspension, and (2) the suspension’s effect on his “draft stock” (i.e., the number of draft slots affected). Interestingly, the answer to that question is the same both before and after the draft and does not vary depending upon where Oliver would ultimately be drafted. In other words, knowing where Oliver would ultimately be drafted provides little assistance because, regardless of where he would ultimately be drafted, the factual dispute is the same–the dispute centers around where Oliver would have been drafted absent the suspension and how many slots lower he was drafted because of the suspension. So even if, at the time of trial, we could determine the precise round and slot where Oliver would be drafted and whether he would ultimately sign a professional contract and for how much, it still would not answer the questions of whether the suspension diminished his chance of being drafted higher and how much that diminished chance is worth.
In the days, weeks, months, and years leading up to each annual draft, scouts from all thirty MLB clubs evaluate all of the draft-eligible prospects throughout the United States, Canada, and Puerto Rico. As part of that evaluation process, scouts assess and heavily scrutinize prospective draft candidates’ “tools” as well as their makeup and character (i.e., “intangibles”). With so much competition for the few slots at the top of the draft, scouts look for any reason they can to draft one player over another, and a player’s intangible values impact those decisions. The better the draft prospect (i.e., the higher the player is on the EPR), the more important the intangibles become to the clubs. It is true that every player’s draft stock can be and is affected by any number of future contingencies and factors, both tangible and intangible, that may or may not occur (for example, injuries, improvement or diminishment of skills, good or bad performance, false allegations of criminal activity, etc.). However, those contingencies and factors have no bearing whatsoever on any damage attributed to being declared ineligible due to a wrongful suspension. The task was to isolate the impact of the suspension on Oliver’s draft stock, all other things being equal. If a suspension of a top draft prospect during his draft-eligible year in fact causes some harm to a player’s draft stock, the amount of the harm would certainly vary depending upon the length of the suspension.
Although Oliver was an amateur college baseball pitcher, as a top draft prospect he was fairly high on the EPR at the time of trial. Oliver was drafted out of high school and was heavily recruited by the top college baseball programs. As a six-foot three-inch left-handed pitcher who throws consistently in the low- to mid-ninety miles per hour range, Oliver was undoubtedly considered a top prospect by professional scouts for the 2009 draft. Three weeks before the draft, he was highlighted on MLB.com as one of the top two left-handed college pitchers available for selection. In his freshman season in 2007, Oliver had a 6-1 win-loss record and a 5.52 ERA. The following summer he pitched in the prestigious Cape Cod League where he had a 1.41 ERA and fifty-four strikeouts in forty-five innings and was named the tenth-best professional prospect in the league by Baseball America, the most widely-recognized and reputable amateur baseball publication. In his sophomore season in 2008, he was one of the nation’s top college pitchers when he earned first-team All-Big 12 honors, was named a second-team All-American by Rivals.com, ranked third in the Big 12 and sixteenth nationally with a 2.20 ERA, and led Oklahoma State (and ranked third in the Big 12) with ninety-six strikeouts. The following summer he pitched for Team USA and had a 2-0 record with a 0.93 ERA in four starts, recorded twenty-four strikeouts in 19.1 innings, and helped lead the United States to a 24-0 record and a gold medal at the world championships. Baseball America’s college player ranking for the 2009 draft, as of September 19, 2008, had him ranked eighth out of all college players. Taking into account high school players, it would be reasonable to assume that, as of that point in time, he would be ranked fourteenth, fifteenth, or sixteenth among college and high school draft eligible players combined.
Given all of this evidence, it was reasonable to conclude that Oliver’s intangibles value would be reduced as a result of being declared ineligible by the NCAA for violating the no agent rule. Oliver was suspended from competing in the 2008 college post-season and lost the opportunity to perform for scouts in an intense, competitive, and high-pressured post-season environment. Scouts were left wondering how he would have compared against other players whom they had the opportunity to see compete in that environment and what exactly Oliver did wrong such that the NCAA would take the drastic measure of declaring him ineligible and suspending him in his draft-eligible junior season. Moreover, associating with sports agents has a negative connotation and Oliver was disciplined by the national collegiate sports governing body because of it, and it received national media attention. Such attention causes an athlete’s stock to drop in the eyes of potential employers. An amount that would compensate Oliver for his reduced intangibles value would reflect the difference between his 2009 draft status with and without the reduction.
As far as an evidentiary basis for estimating Oliver’s draft value, I determined that the use of comparables would not be a practical or reliable basis for estimating an amateur baseball player’s draft value. Performance statistics of amateur baseball players are not very predictive of future performance or success as a professional and cannot be compared to the performance statistics of professional players in any meaningful way. Also, each draft year is different, with a different pool of draft-eligible players, which includes both high school and college players of all positions, and some draft years have a much stronger talent pool than others. Moreover, because baseball has a minor league system in which drafted players typically spend a few years developing their skills, clubs do not tend to select players in the draft based upon current needs on their major league rosters; they select the next best available player regardless of position. Thus, attempting to draw any meaningful comparisons between a top college pitching prospect and players drafted in previous years or current professional players tends to be an exercise in futility.
I relied on Baseball America’s most recent rankings of college and high school baseball prospects for the 2009 draft, which are based upon the editors’ evaluations of players as well as input from professional scouts and college coaches. For the purpose of computing damages in this case, the rankings data served as a substitute for individual scouting reports on Oliver and was actually a more reliable source because Baseball America compiles numerous scouting reports on all of the top prospects eligible for the draft, and the rankings are a culmination of all of those scouting reports. The rankings provide the most objective source for evaluating what is otherwise a highly subjective draft selection process. Thus, the rankings provide a reasonable basis and quite possibly “the best evidence available” to estimate where Oliver would be drafted absent any suspension, assuming all other things being equal and that Oliver continued to perform as he had been. In both its September and November rankings, Baseball America had Oliver projected to be drafted in the middle of the first round.
B. Proving the Amount of the Lost Future Earnings with Reasonable Certainty
1. Lost Signing Bonus
I calculated the damages based upon an estimation that Oliver’s reduced intangibles value would lower his draft status by a range of a quarter of a round (approximately seven slots) to three-quarters of a round (approximately twenty-two slots). I deemed this to be a conservative estimate, as there are fifty rounds in the draft. Also, with such a huge pool of draft-eligible players to choose from, which includes high school seniors and junior college players, a player’s intangibles are often the key factor that separates one player from another on a club’s draft board, especially when it comes to players at the top of the draft board. Using Baseball America’s ranking of the middle of the first round as a starting point, which would be the fifteenth slot, and reducing it by a range of seven to twenty-two slots, Oliver’s adjusted draft status would place him in the range of the twenty-second slot to the thirty-seventh slot (in the supplemental first round) for the 2009 draft.
To determine a range of compensation that would compensate Oliver for his reduced intangibles value in the 2009 draft, I used the signing bonuses from the 2008 draft and adjusted them by ten percent for inflation. Ten percent was used because over the previous three drafts, first round signing bonuses had increased by an average of ten percent annually. The fifteenth pick in the 2008 draft received a signing bonus of $1,730,000, which, adjusted for inflation, would be equivalent to a signing bonus of $1,903,000 for the 2009 draft. The twenty-second pick in the 2008 draft received a signing bonus of $1,419,000, which, adjusted for inflation, would be $1,560,900 in the 2009 draft. The thirty-seventh pick in the 2008 draft received a signing bonus of $970,000, which, adjusted for inflation, would be $1,067,000 in the 2009 draft. Therefore, I estimated Oliver’s lost signing bonus to be in the range of $342,100 ($1,903,000 minus $1,560,900) and $836,000 ($1,903,000 minus $1,067,000).
2. Lost Wages
Because it was unknown whether Oliver would prevail on his request for injunctive relief to restore his eligibility for the 2009 season, a calculation needed to be made to reflect Oliver’s damages in the event he only prevailed on the declaratory action and lost on his claim for injunctive relief, which then would not have reinstated Oliver’s eligibility. Based upon all of the evidence that Oliver was considered to be a top draft prospect, I opined that it was more likely than not that Oliver’s sitting out from competition during the entire season of his draft-eligible year would have a substantial detrimental impact on his draft status that would cause him to slip in the draft beyond the first round. In that event, the available data evidences that Oliver’s opportunity of reaching the major leagues would become substantially reduced, such that it would no longer be probable. Data compiled by Baseball America in 2002 of all players drafted from 1965 to 1995 shows that a majority–64.9%–of players drafted in the first round played in the major leagues. However, the percentage chances of playing in the major leagues significantly drops to 41.6% in the second round, 31.1% in the third round, 23.8% in the fourth round, 23.1% in the fifth round, 15.5% in the sixth through tenth rounds, and 8.6% in the eleventh through fifteenth rounds. Therefore, an estimate of Oliver’s damages in the event he remained suspended for the season had to reflect not only the loss in draft signing bonus but also the loss of wages over the course of a major league career.
If Oliver did not compete during his entire draft-eligible season, there was a high probability that he would have been drafted lower than the second round. Based upon the statistics showing that it was no longer probable that Oliver would make it to the major leagues, an estimate of Oliver’s future lost wages would approximate his future lost salary income for each year of lost service time in the major leagues. For purposes of determining this amount, a few reasonable assumptions had to be made: (1) Oliver would have at least average skill as a pitcher over the course of his career, (2) Oliver would receive at least an average salary for a pitcher for each year of service time in the major leagues, and (3) Oliver would serve at least the average number of years of service time in the major leagues for a pitcher.
The USA Today Baseball Salaries Database contains year-by-year data of salaries for all major league baseball players on opening day rosters and disabled lists. Using the data from the 2008 season, I calculated the average salary for a pitcher based upon number of years of service in the major leagues, which is set forth in the chart below. For the first three years of service, I omitted players signed from Japan, as many of them have signed multi-million dollar major league contracts far beyond the wages paid pursuant to the league’s minimum salary rules that bind players during their first three seasons under what is known as the “reserve system.”
Research shows that the average number of years of total service time for a major league player is 5.6 years. In accordance with the assumption that Oliver would serve the average number of years in the major leagues for a pitcher, an amount representing his future lost wages would be the sum total of the average annual salaries for a major league pitcher for the first five years of service time. Further, I made an assumption that the plaintiff would spend three years in the minor leagues and thus would not have started his major league career until four years later (in the year 2012). Therefore, Oliver’s future lost wages would be the total of the annual salaries he would receive in each of years 2012, 2013, 2014, 2015, and 2016.
Research also showed that major league salaries had increased each year for the previous four years, and the average increase over the previous four seasons was 5.75% annually. Using the 2008 average salary figures in the chart above and compounding those figures at an annual rate of 5.75% to account for inflation, I estimated Oliver’s salary for his first five years of major league service to be as follows:
The total future lost wages were then reduced to present value based upon a conservative low-risk investment rate of return. As of December 5, 2008, the five-year U.S. government bond yield was 1.67%. The future lost wages, reduced to present value based upon a 1.69% yield and compounded each year, was as follows:
Therefore, I estimated Oliver’s total future lost wages, increased for inflation and reduced to present value, at $7,842,247.
A fair criticism of this estimate of future lost major league wages would be that it assumes a player with more than a fifty percent chance of making the major leagues (those drafted in the first round) will make the major leagues and a player with less than a fifty percent chance (those drafted in the second round or lower) will not. This estimate also awards the full amount of the estimated future lost wages and thus does not accurately reflect the extent to which the suspension caused a reduction in Oliver’s chances of making the major leagues. In some respects, this resembles the “all or nothing” rule. My estimation of Oliver’s lost future wages, from a causation standpoint, is the result of a straight application of the traditional but for test. In other words, but for the wrongful suspension, Oliver would not have lost the chance at a major league career, which seems to be the standard that was utilized in Felder.
However, a more precise application of loss of chance principles would calculate Oliver’s lost future wages to reflect the reduced chance of making the major leagues that resulted from the suspension. As discussed in this Article, assessing diminished chance in terms of a percentage with any degree of precision is usually extremely difficult, if not impossible, to do. But here, the available data particularly lends itself to a reasonable approximation of a loss of chance percentage using a proportional damages method as follows:
(1) Calculate the total wages Oliver could reasonably have expected to earn before the suspension, which equals the total future lost wages, increased for inflation and reduced to present value, of $7,842,247 (as determined above).
(2) Calculate the reduced chance percentage. Before the suspension, Oliver’s percentage chance of making the average major league salary was 64.9% (as a projected first round pick). After the suspension, based upon an estimate of being drafted lower than the first round, his percentage chance of making the average major league salary dropped to anywhere from 41.6% to 8.6% depending upon the round. The difference results in a diminished chance in the range of 23.3% to 56.3%.
C. The Settlement Entered After the Draft
On February 12, 2009, the trial court granted Oliver’s request for declaratory and injunctive relief, invalidating the no agent rule and immediately restoring Oliver’s eligibility for the 2009 season. The judge thereafter scheduled a trial to determine damages for mid-October, four months after the 2009 June draft.
Oliver was drafted in the second round with the fifty-eighth pick by the Detroit Tigers. While it is very typical for top college draft prospects to progressively improve their performance each year in college, Oliver’s performance in 2009 was much worse than in 2007 and 2008. In 2009, Oliver posted a 5-6 record with a 5.30 ERA and opponents batted .274 against him. A worse performance during the season of any player’s draft-eligible year than in previous years can cause a player to be drafted lower than he otherwise would have been drafted, and how much lower would depend upon the extent of the worse performance. A player’s statistics can influence a scout’s evaluation of a player’s potential to play in the major leagues. Oliver’s uncharacteristically poor performance could explain why he was drafted much lower than projected at the start of the season, and even lower than the lowest pick I estimated he would have been drafted taking into account the reduced intangibles value (the thirty-seventh slot). Thus, Oliver’s reduced intangibles value, combined with a worse than expected performance during his draft-eligible season, caused him to drop from a projected middle of the first round pick at the start of the season to the fifty-eighth pick in the 2009 draft.
Oliver signed with the Tigers and received a $1,495,000 signing bonus. Oliver and the NCAA reached a settlement one week before the scheduled damages trial, whereby Oliver was paid $750,000 and the trial court’s order invalidating the no agent rule was vacated. Thus, we will never know whether a jury would have decided that the NCAA’s wrongful suspension in fact caused Oliver a diminished chance of being drafted higher or what value the jury would have placed on that loss of chance. Nevertheless, it provides a unique case study for discussing the computation of lost earning capacity damages of an amateur player fairly high on the EPR. In the end, Oliver’s gross compensation equaled what he would have received had he been drafted as originally projected because his signing bonus and settlement amount, combined, equates roughly to the signing bonus a player drafted in the middle of the first round can reasonably expect to receive. Oliver was called up by the Tigers and had his first start in the major leagues just one year after being drafted, which, if nothing else, proves that all the scouting reports on him were accurate.
Athletes claiming damages for lost earning capacity in a professional sports career have a steep burden to overcome–which I have delineated in this Article as a two-step burden. Demonstrating that they possess substantial prospects as a professional athlete in the court room as opposed to on the court is a whole different ball game. Claims for lost future earnings in a professional sports career involve making predictions about a future career that only a small fraction of the population is able to attain. However, the athlete need not prove that he would attain it, but only that he once had the chance to attain it and that chance was either lost or reduced. Courts have struggled with articulating any definitive standard for determining when the defendant’s actions in fact caused a loss, but their holdings seem to suggest an application of the traditional but for analysis. As discussed in this Article, the athlete’s claim can be viewed with more precision within the constructs of the loss of chance doctrine, assessing the athlete’s chances before and after the breach, which can also accomplish a more fair and adequate allocation of fault in proportion to the extent of the harm.
Determining the amount of lost future earnings, by definition, is “speculative” and simply cannot be proven with complete certainty. Recognizing this, the law imposes a lesser, but nebulous, standard of “reasonable certainty.” As the cases referenced in this Article demonstrate, it is an extremely fact-intensive inquiry whereby the devil is in the details: the reliability of the evidence, the knowledge of the experts, the methodology, procedures, and calculations used by the experts, and the data compilations upon which they are based. In some cases, the athlete may be so high on the earning potential range (EPR) with an established earnings history that it can be relatively easy to meet both burdens or, conversely, the athlete may be so low on the EPR that doing so is nearly impossible. While a future earnings assessment of an athlete in a professional sports career is, in many respects, akin to an appraisal process, and thus the use of player comparables is a viable methodology in some cases, the Oliver case demonstrates the complexities inherent in calculating lost future earnings for top draft prospect amateur athletes who are shown to be fairly high on the EPR.
a mix of discipline, attitude, confidence, seriousness and stage presence that allows players under the spotlight in a technically difficult sport like baseball to adjust to tougher and tougher competition. Makeup leads the chosen to the top. Its absence chops down the insanely talented athletes they’re up against. Scouts say signing players who have it is a smart way to play the odds.
John W. Miller, Baryshnikov in Baseball Cleats, Wall St. J. (Aug. 19, 2009, 6:14 AM), http://online.wsj.com/article_ email/SB10001424052970204683204574356811579058-lMyQjAxMDA5MDEwODExNDgyWj.html (discussing an $800,000 signing bonus paid by the Minnesota Twins to a sixteen year-old from Berlin whose parents are former Berlin ballet stars).
[S]couting is often less about projecting and more about digging up dirt. “It’s not just an evaluation job,” says Falcons GM Thomas Dimitroff. “It’s a research job.” Every year, there are prospects who’d benefit from a little extra intel. This year, Oklahoma tight end Jermaine Gresham needs GMs to know he’s not a loose cannon; USC defensive end Everson Griffen is battling rumors he’s inconsistent; and Michigan cornerback Donovan Warren must reverse a rep for blowing assignments.
Each prospect is assigned a magnetic card, which details his height, weight, Wonderlic score, overall grade and position within the team’s system. The card also features stickers that designate intangibles, coded differently by each team. The Patriots, for example, use lowercase and capital letters: “C” stands for circumstance–if, say, a receiver’s stats are down because he played with a lousy quarterback; “c” represents a character concern.
Seth Wickersham, You Have Terrible Taste in Prospects, ESPN Mag., Apr. 19, 2010, at 79, 80, 82, available at http://sports.espn.go.com/nfl/draft10/news/story?id=5115152.
The study of the phases of the moon, for example, may provide valid scientific ‘knowledge’ about whether a certain night was dark, and if darkness is a fact in issue, the knowledge will assist the trier of fact. However (absent creditable grounds supporting such a link), evidence that the moon was full on a certain night will not assist the trier of fact in determining whether an individual was unusually likely to have behaved irrationally on that night.
on the difference between the ‘average amount’ the employee would be able to earn in the full performance of his duties in the occupation in which he was engaged at the time of injury and the ‘average amount’ he is earning or is able to earn in some suitable employment after his injury.
Albrecht, 648 N.E.2d at 925-26 (quoting Gen. Elec. Co. v. Indus. Comm’n, 495 N.E.2d 68, 73 (Ill. App. Ct. 1986)).
where a competitor in a sporting or athletic event, because of his superior ability in that field, has an opportunity of being awarded, with reasonable certainty or probability, a substantial benefit to him which may be of value to him in the future, and that he is deprived of this opportunity by another, through the other’s negligence, then the person so deprived thereof, may recover such damages which the evidence shows with reasonable certainty that he has suffered therefrom.
Id. at 290.
he would suffer a permanent disability the remainder of his life…[that] would prevent him from playing football and…that if the plaintiff pursued a football coaching career, his permanent disability would affect his bodily movements and he would be unable to do the stooping, bending and other necessary physical movements a coach normally would do in their field.
Id. at 217.
Oliver got a lot of attention when he was suspended by the NCAA for being represented by an agent, then got the suspension overturned in court. He’s had an up-and-down junior season performance-wise, but scouts love his fastball-changeup mix. He can crank the heater up to 98 mph and the change is a plus pitch as well. More than anything, his fastball command is what makes him so intriguing, and it’s his bread-and-butter, making up for the lack of a breaking ball. Lefties who throw that hard and command the ball that well aren’t common, so he should go quickly on Draft day.
2009 Draft Reports, MLB.com (Apr. 24, 2009), http://mlb.mlb.com/mlb/events/draft/y2009/reports.jsp?content=oliver.