Will Bill Belichick Really Pay a $500,000 Fine?
posted by Dave Hoffman
The NFL has annouced its verdict in the New England Patriots taping scandal: Coach Bill Belichick is being fined $500,000 and the Patriots $200,000 plus one or two draft picks. Here’s my question: is Bill worried about bouncing tomorrow’s rent check? Notably, if he were a corporate CEO, the answer would almost certainly be not: he wouldn’t pay a dime out of his own pocket.
Under ordinary agency principles, the fine would seem to be for conduct within the scope of employment and therefore subject to indemnification as a matter of right. (The conduct isn’t illegal, just prohibited by a very vague league rule.) Thus, the default should be that Belichick will get reimbursed by the Pats. But something is wrong with this analysis, as the actual, distinctly administered, fine would otherwise be quite deceptive.* So we’ve got to assume that Belichick’s contract contains a clause saying something like: “All league fines are your responsibility, and you agree not to seek indemnification against us.”
If that is true, then the question becomes: can NFL coaches buy insurance against potential losses like this? On one view of the behavior, the answer is no, because you generally can’t insure against acts in your control. But maybe Belichick didn’t personally order this behavior, he just permitted it – he’s negligent. If that were so, he certainly could have puchased some kind of policy that would have reimbursed him. Whether he did or not is of course unknown, though given his reputation for strategic genius, I wouldn’t be terribly surprised.
(Image Source: Wikicommons)
*I’m assuming that the NFL isn’t so cynical as to think that a separate fine might quiet the public uproar even if it really is just a $700,000 tax on the organization.
September 13, 2007 at 11:04 pm
Posted in: Corporate Law, Employment Law
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Responses (2)
James Grimmelmann - September 14, 2007 at 7:35 am
The other wrinkle is that it’s Belichick’s contract itself that gives the NFL the power to fine him. The NFL couldn’t just go out and fine you or me, for example. I wonder whether there are penalty-clause limits on the NFL’s fining power. In any event, as you say, it all turns on what the contract says.
Fraud Guy - September 14, 2007 at 9:50 am
It definitely depends on the contract. From my experience with credit cards, for example, if a merchant accepting cards is responsible for a breach, it technically is their processor who is fined, not them. However, the processing agreement will clearly state that the merchant is responsible for all fines assessed to the processor due to the merchant’s violations of card association processing rules (even if the majority of such rules are not disclosed to the merchant directly).
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