Williams Loses Arbitration, But May Win Free Agency: An arbitrator has ruled that former Dolphins running back Ricky Williams breached his contract when he suddenly quit the team before training camp this summer. As a result, Williams must repay the team $8.6 million in bonus money he was paid under his contract.



But there is an interesting twist to this story. According to the Miami Herald, if Williams were to file bankruptcy, he could not only avoid paying the Dolphins most of the money he owes, but would also become a free agent in the process. The only risk is that he would lose most of his assets other than his primary home, but there are indications that he would have to sell these assets anyway to pay the team. See below for more, but basically, the bankruptcy proceeding would result in all claims between Williams and the team being settled, including the remaining three years on Williams' contract, allowing him to sign with another team.



The NFL, obviously, is concerned, but the law may not be on their side in this case:

NFL Management Council attorney Dennis Curran declined to comment Thursday, but another source said "the NFL would obviously fight such an attempt," and it would be terrified of other players filing bankruptcy to get out of contracts. [Miami attorney Jim] Fierberg, who has worked on bankruptcy filings involving former NFL cornerback Dale Carter and former Dolphins receiver Tony Martin, said the league likely would lose.



Fierberg noted the 1990 bankruptcy filing of singer James Taylor, who had a contract with Polygram Records dissolved by the court. Although a bankruptcy court can disallow a filing if it's not in "good faith," NFL contract rules would not supersede bankruptcy law. "Bankruptcy law and the Constitution predates the NFL and even the Green Bay Packers," he said.

I will keep a close eye on this matter, as it could have incredible implications on sports contracts.



Update: A further clarification of this strategy from someone knowledgeable about bankruptcy:

Bankruptcy allows the rejection of contracts in many cases including executory contracts, personal services contracts and leases. The idea is that frequently burdensome contracts keep people or a business from gaining a “fresh start” and this is one of the key policy ideas behind bankruptcy. He will have to pay some damages for breaking the contract. A twist to all this is that a Third Circuit case just came down that says you can’t file bankruptcy strictly to take advantage of certain provisions in the bankruptcy code unless you are experiencing some financial distress. My guess is his owing all this money will get him through the financial distress hurdle but otherwise he would run into a good faith problem as a good faith filing is a requirement of bankruptcy protection.

And since this case would arise out of either Florida (11th Circuit -- where the team is) or New York (2nd Circuit -- where the league is headquartered), it is unlikely that 3rd Circuit precedent would have an impact on the case.

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