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Cornwell Memo to Agents -- NFLPA

Cornwell Memo to Agents -- NFLPA

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Published by Robert Lee
This is a copy of the 11-page memo that attorney and agent David Cornwell sent out to agents regarding DeMaurice Smith's performance as Executive Director of the NFLPA before, during and after the negotiation of the 10-year Collective Bargaining Agreement (CBA) of 2011.
This is a copy of the 11-page memo that attorney and agent David Cornwell sent out to agents regarding DeMaurice Smith's performance as Executive Director of the NFLPA before, during and after the negotiation of the 10-year Collective Bargaining Agreement (CBA) of 2011.

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Published by: Robert Lee on Feb 01, 2012
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Wm. David Cornwell, Sr.
 Admitted in CA, GA and NY 
3399 PEACHTREE ROADSUITE 400 ATLANTA, GA 30326 404.601.2860 (office)
770.969.2381 (fax)dczemail@msn.com 
January 30, 2012
One of the most exciting and successful NFL seasons is coming to an end. Given thelockout and the uncertainty surrounding this off-season, the fact that there was a season,the quality of play, and the number of teams that remained in contention near the end of the regular season is a tribute to the men who play the game. Unfortunately, players'excellence was not matched by the quality of their leadership in the NFLPA.As the renewal of DeMaurice
Smith’s contract is being considered, the men he represents
are entitled to accurate information and truthful answers. I am mindful that expressingmy concerns and observations can be dismissed by some as
sour grapes.
This would bea diversionary tactic. My role in our business has not changed and my responsibility toprotect the interests of the men who play professional sports applies whether thoseinterests are threatened from the outside or from within. De is not required to answer tome. But, he is required to answer to you and your clients.I believe that certain matters warrant your consideration and should be discussed with
your clients as they assess De’s performance. De should be required to explain important
decisions he made that will affect the lives of over two generations of NFL players overthe next 10 years. Just as they did in 2008, the players will decide who leads them in2012. I offer this memorandum to aid in that decision.
- 2 -My observations about the new Collective Bargaining Agreement and other matters areprovided below.
The topic on which players are entitled to the most information is the new CBA.Revenue SharingAs players were being asked to vote on the new CBA, they were advised that the newCBA paid players 47% of "All Revenues." They were not told that the new CBA definesthe revenues that are shared with play
ers as “All Revenues,” but not all revenues
areshared with players.All Revenues are defined in the CBA as every revenue source, except for roughly 16categories of excluded revenues, taxes, credits, etc., and an annual 1.5% stadium credit.
Consequently, “All Revenues”
in the new CBA is analogous to net revenues in the priorCBA
s during the salary cap era (e.g., Defined Gross Revenues from 1993-2006 andTotal Revenues from 2006 -2011). Players were not advised of this distinction andNFLPA-sponsored communications improperly compared the 47% of 
net revenues
thatplayers will receive in the new CBA with the 50% of 
gross revenues
that players hadreceived in the expired CBA.By comparing the apple of gross revenues and with the orange of net revenues, playerswere given the misimpression that the revenue sharing roll back in the new CBA wasonly 3% and not 12%. The appropriate apples to apples comparison reveals that playersreceived 59% of net revenues in the prior CBA and will receive 47% of net revenues inthe new CBA."True up" is defined in the new CBA as a credit or reduction against the salary cap whenactual AR is greater or less than projected AR. The difference will be deducted or addedto the salary cap in the following league year. This process is the same as the accountingprocedures in the prior CBA
s. T
he use of the term “True up” is misleading.
In March2011,
True up
applied to the pegged cap system that was being discussed and was themechanism by which players would have closed the gap if the pegged cap was smallerthan an agreed upon percentage of net revenues. Using the term True up in the new CBAcreates the illusion that the NFLPA prevailed on an issue that caused it to walk awayfrom bargaining in March 2011. But, the True up at issue in March 2011 applied to thepegged capped system and the True up in the new CBA is a traditional accountingmethod. This illusion is exposed by the fact that though there is a pegged cap in 2011,there is no True up in 2011.Revenue Buckets
- 3 -The NFLPA has highlighted that the new CBA grants players 55% of television revenue,45% of NFL Ventures, 40% of local team revenues. The media and others havemistakenly concluded that players will receive "55% of every dollar" from television.This is inaccurate. Players get 55% of every dollar from television
up to a 10 yearaverage of 47% of net revenues
. By comparison, under the 2006-2011 CBA, playersgot 100% of television, 100% of NFL Ventures, and 100% of local revenues
up to 59%of net revenues
. The revenue buckets are a red herring.This labor dispute arose out of the NFL
s inability to resolve internally the challengescreated by the disparity between high and low revenue teams. The reduction to 47% of net revenues coupled with limiting individual team cash spending guarantees to anaverage of 89% of the cap over the last 8 years of the CBA (broken down into two 4 yearsegments) means that players sacrificed significant revenue to solve an internal disputeamong team owners.Nonetheless, the overall league wide actual cash spending requirement of an average of 95% of the cap over the last 8 years of the CBA (broken down into two 4 year segments)could be a win for players. Players
should have a clear understanding of future revenueexpectations legitimate revenue expectations. You and your clients should be providedwith the revenue projections upon which the NFLPA relied in accepting the revenuesharing structure in the new CBA.Rookie Cap
As early as the 1960’s
, players have fought through strikes and litigation to removerestrictions on free agency. One restriction that was targeted for decades was the optionclause that added an extra year to the length of every NFL contract. In 1993, the NFLPAfinally won and the option clause was removed from the NFL Player Contract. The newCBA reversed this hard fought gain and provided NFL teams with a 5
year option forrookies selected in the first round.The NFL claimed it needed a new rookie wage scale to avoid the JaMarcus Russellproblem. Leaving aside whether all players should have provided all teams withinsurance against a few potential mistakes by scouts, the new rookie compensation ruleswent much further than solving the JaMarcus Russell problem. It also a strips newrookies of the opportunity that players from Drew Bledsoe to Sam Bradford had to adjusttheir rookie contracts to match their actual contributions on the field. Under the newCBA, there will be no more busts, but there also will be no more deals with escalators,voids, buy backs, option bonuses, etc., that enable players who outperform their rookiedeals to be compensated for their performance. The CBA provides that the rookie cap isintended to
set an absolute maximum limit on the total amount of compensation
paid torookies over the entire term of their rookie contracts.The NFLPA claimed that there is no
rookie wage scale
in the new CBA, but withsalary escalators removed from the system, the rookie cap depresses rookie salaries and

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