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Case Study Analysis Part A: Case 3, “Power Play for Howard”

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Travis Lekas

on 2 May 2014

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Transcript of Case Study Analysis Part A: Case 3, “Power Play for Howard”

Tangible and Intangible
Any Question?
Presented by Team A
Evaluate the Benefits
Risk
$1.25
Thursday, March 31, 2014
Vol XCIII, No. 311
Summary
Juwan Howard In Negotiation as Free Agent
Cost
Case Study Analysis Part A: Case 3, “Power Play for Howard”
Juwan Howard, 23- year-old, negotiation case dealt with a basketball player bargaining between two teams (Washington Bullets and Miami Heat) struggle of team allegiances and negotiation of contract. Howard was drafted in 1994 by the Washington Bullets, a junior from University of Michigan with an 11-year salary for $37.5 million with an option of becoming a free agent after two years. He signed but thought the contract amount was less than what he was valued. Juwan loved playing in Washington D.C; he established himself and valuable in the National Basketball Association (NBA) commodity becoming a team favorite by all fans, and active in the community.
The summer of July 11, 1996, Juwan Howard became the club’s all-star free agent represented by David Falk owner of Falk Associates Management Enterprises (FAME) arrived at his office to bargain for $100 million contract to Washington Bullet offer from the National Basketball Association (NBA) team executives. Washington Bullets General Manager, Wes Unseld sat down and made an offer of seven-year for $78.4 million dollar, in which would have amounted to $136,000 per game from 2002 to 2003. Howard became tearful and very disappointed remembering the team managers promised they would do whatever they could to keep him on the team.
Pat Riley coach of the Miami Heat offered Howard $91 million and $3.5 million in bonuses. The Bullets countered offered Howard $84 million. Miami Heat executives and Pat Riley after hearing about the amount Washington offered Howard became interested offering a seven-year guaranteed $100.8 million, which was the biggest in the team history with perks of luxury hotels and limousine service. The Bullets then offered Howard $94.5 million, Falk rejected the offer and the next day the Bullets canceled Howard’s existing contract saying they would part ways and look at other free agents. After 30 days of back and forth of negotiations, Howard decided to sign with the Heats.
However to much surprise to the Heats and Howard the NBA stepped in and stated that the agreement was illegal due to cap rules set by the NBA. After possibly loosing in arbitration and the welcome of the Bird clause Unseld was able to offer Howard $100 million with the understanding that Howard would not receive special perks such as limo and suites on road trips.

Travis Lekas, Mary Margaret, Jason Hanson
Lewicki, R. J., Saunders, D. M., & Barry, B. (2007). Negotiation: Readings, exercises, and cases (5th ed.). Boston, MA: McGraw Hill
Bullets offer Juwan 78.4m, 7 year deal which is below his market value
Heat off Juwan 100.8m, 7 year plus perks- Largest deal in sport history
Free agent bidding begins
Juwan buys new Ferrari and house after Bullets offer him deal
Juwan is a very valuable NBA commodity.
-Rookie year stats of 19.8ppg, 8.3rpg, and 3.6apg
-Positive attitude and strong work ethic
Juwan and agents have to wait to negotiate
New collective bargaining agreement in process
Juwan wants 15-20 million a year for 7 years
Juwan requested same coaching staff and adding more talent to Bullets
Howard visits Heat, reviews offer- Refused offer
Heat offer Juwan 95.2 million
Bullets refuse to match Heat’s deal
Juwan fly’s to Miami and signs with Heat
Arbitration begins- Heat deal s voided
Juwan then signs with Bullets.


Tangible and Intangible benefits
Bullets offer Juwan 78.4m, 7 year deal which is below his market value
Heat off Juwan 100.8m, 7 year plus perks- Largest deal in sport history
Free agent bidding begins
Juwan buys new Ferrari and house after Bullets offer him deal
Juwan is a very valuable NBA commodity.
-Rookie year stats of 19.8ppg, 8.3rpg, and 3.6apg
-Positive attitude and strong work ethic
Juwan and agents have to wait to negotiate
New collective bargaining agreement in process
Juwan wants 15-20 million a year for 7 years
Juwan requested same coaching staff and adding more talent to Bullets
Howard visits Heat, reviews offer- Refused offer
Heat offer Juwan 95.2 million
Bullets refuse to match Heat’s deal
Juwan fly’s to Miami and signs with Heat
Arbitration begins- Heat deal s voided
Juwan then signs with Bullets.

Tangible and intangible benefits
Pat Riley is Heats president and coach
-Riley impresses Howard with his past success
Alonzo Mourning recruits Howard to Heat
Heat rate Juwan as fourth most desirable NBA free agent
Heat’s first job was to get Mourning signed
-Alonzo refused to sign one year deal of $30m
Riley told Mourning he would sign him after Howard was acquired
The CBA requires teams to report all contracts to league
Heat offer Howard $84m, 7 year- Then $91m plus perks
Juwan declines Bullets offer and returns to heat to sign for $100.8m
-Juwan requested limos, hotel suites, and more perks
No contract was signed or turned into NBA
NBA investigates Howard’s and Mourning’s contracts
-Heat didn’t follow rules and arbitration begins
-Deal with Howard is voided by league
Heat then signed Mourning and two additional players
Full transcript