A federal judge on Friday granted the Toronto Raptors’ motion to force the New York Knicks’ trade secrets case into arbitration. The decision means that the dispute will shift from the public forum for dispute resolution to a private dispute resolution process overseen by the NBA.
The 29-page ruling by U.S. District Judge Jessica Clarke was not about the merits of the Knicks’ allegations, but whether the dispute should go to trial at all. Clarke agreed with the Raptors that NBA Commissioner Adam Silver should determine whether the dispute is arbitrable. Silver will almost certainly conclude that the dispute falls within his authority as commissioner.
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Last August, the Knicks filed a lawsuit against the Raptors and their officials alleging that former Knicks analyst Ikechukwu Azotam was a “mole.” The Knicks accuse Azotam of emailing scouting reports and other sensitive materials to Raptors officials during a period in which he was wrapping up his work for the Knicks before taking a new job with Toronto.
A spokesperson for MSG Sports said Sporty disagrees with the ruling.
“We were the victims of the theft of proprietary and confidential files, which is a clear violation of criminal and civil law, and we continue to evaluate our legal options,” the spokesman said in a statement. “We do not believe it is appropriate for the NBA commissioner to rule on a matter that involves his boss, the NBA president, and his team.”
In explaining her decision, Clarke repeatedly emphasized the explicit language of the NBA Constitution, a contract that applies to all NBA teams. The constitution states that the commissioner has “exclusive, full, complete and final jurisdiction over any dispute” involving two or more teams, making his decision “final, binding and conclusive.”
Among other things, the Knicks argued that the Constitution’s arbitration clause is unenforceable because it is so broadly worded. The Knicks noted that the clause, as worded, would apply to disputes unrelated to basketball, such as when a staffer from one team physically assaults the staffer from another team.
Clarke wasn’t convinced, as the Knicks-Raptors dispute is about basketball, namely alleged cheating and undermining fair play. She wrote that the subject in question has “a clear connection to the NBA Constitution” and the alleged theft of “scouting reports, play frequency data, opposition research, opposing play tendencies, lists and diagrams of opponents’ key plays and the preparation book of the Knicks. logically falls under the arbitration provision. The judge further noted that Silver is charged with protecting the integrity and public trust in the game and that the Constitution unequivocally prohibits tampering.
“The Knicks’ suggestion that any reasonable team would not view the current dispute as having any bearing on the NBA Constitution,” Clarke wrote bluntly, “is pie in the sky.”
Clarke also did not find that Azotam’s employment contract changed the legal reasoning. Azotam contractually agreed to the league’s constitution, which includes the arbitration provision and a choice of forum clause. Azotam agreed that contractual disputes would be heard in New York state and federal courts, a point that seemed to strengthen the Knicks’ position. But Clarke emphasized that “the Raptors were not a party” to Azotam’s Knicks contract, which “cannot supersede the arbitration clause in the NBA Constitution with respect to disputes involving the Raptors.”
Silver’s ties to Larry Tanenbaum, a minority owner of the Raptors who is chairman of the NBA’s board of governors, also had no impact on the outcome.
While the Knicks allege Silver is biased given Tanenbaum’s role, Clarke called the portrayal “premature” and likened it to “a complaint about the refereeing before the game even starts.”
The judge also highlighted precedent from the Deflategate lawsuit, in which Tom Brady and the NFLPA argued that NFL Commissioner Roger Goodell failed to fairly arbitrate claims. Clarke pointed out that in that case, as in this one, the parties entered into a contract to arbitrate claims with “full knowledge” that the commissioner might have an interest.
While the Knicks had hoped to have the dispute settled, the team could still prevail in arbitration. If the NBA finds the Raptors guilty of the allegations, the team could face fines or withhold draft picks. The Raptors have flatly denied the allegations, claiming the lawsuit is merely a “publicity stunt.”
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