NFL Mgmt. Council v. NFL Players Ass’n, 2015 U.S. Dist. LEXIS 117662 (S.D.N.Y. Sept. 3, 2015)
“Arbitration has been proven to be an effective way to resolve disputes fairly, privately, promptly and economically.” So provides the preamble to the Construction Industry Rules of the American Arbitration Association. A large part of the advantage of arbitration is the finality of the result, stemming from the lack of a meaningful appeal rights on legal issues, contractual interpretation, factual determinations, or the dispute resolution process itself. Indeed, the Federal Arbitration Act, 9 U.S.C. §10, provides that an arbitration award is to be confirmed as a judgment unless one of four specific and narrow conditions for vacatur is met.
Probably the most notorious instance of an appeal of an arbitration award (and certainly the one most likely to come up in cocktail party conversation) was decided in September 2015 by Judge Richard M. Berman of the United States District Court for the Southern District of New York – the successful appeal by All-Pro Quarterback Tom Brady and the NFL Players Association of Brady’s four game suspension based on accusations of complicity in a scheme to gain an unfair competitive advantage in an NFL playoff game. NFL Mgmt. Council v. NFLPA, No. 15-Civ.-5916 (RMB) (S.D.N.Y. Sept. 03, 2015) There, the Southern District applied the Federal Arbitration Act standard to its review of Brady’s suspension, the same standard of review usually applied to an arbitration award arising from a claim under a construction contract with an arbitration clause. [1] But Brady, unlike the vast majority of parties disappointed with arbitration awards, succeeded in having his suspension vacated. The NFL Management Council has appealed the Southern District’s decision, and the matter is currently on an expedited appeal track, with argument before the Second Circuit scheduled for March 1, 2016.
The Court of Appeals proceedings will be closely watched as the lower court opinion and the appeal briefs present fascinating issues that cut across not only labor disputes, but also commercial and construction arbitrations. This article examines whether members of the construction industry contemplating review of arbitration awards can draw any lessons from the Brady matter.
THE “DEFLATEGATE” PROCEEDINGS
On January 18, 2015, the New England Patriots played the Indianapolis Colts in the Championship game of the American Football Conference. At stake was a berth in Superbowl XLIX. Although the result was a blowout win for the Patriots, the game was marred by allegations that the footballs used by the Patriots on offense were underinflated, in violation of the 2014 NFL Official Playing Rules. After an investigation, prominent attorney Theodore V. Wells, Jr. and the New York law firm of Paul, Weiss, Rivkin, Wharton & Garrison published a report determining that New England Patriots personnel participated in deflating footballs to a pressure below that required by NFL playing rules, in violation of the Competitive Integrity Policy of the NFL. The Wells Report concluded that it was more probable than not that the Patriots’ sideline employees deliberately deflated footballs, and that it was more probable than not that Tom Brady was generally aware of the inappropriate activities of the Patriots’ equipment staff, who would not have deflated the balls without Brady’s knowledge and approval.
The NFL took swift action based on the Wells Report. On May 11, 2015, NFL Executive Vice President Troy Vincent sent letters imposing various penalties on the clubhouse attendants responsible for the footballs, the Patriots as a franchise, and Tom Brady, who was assessed a suspension without pay for the first four games of the 2016 season. While the Patriots organization accepted the sanctions levied against it (a large fine and forfeiture of two draft choices), Brady, through the NFL Players Association, challenged the suspension and noticed an appeal under the NFL’s Collective Bargaining Agreement (CBA) with the union and its players.
Under the CBA, Commissioner Roger Goodell was specifically designated to hear disciplinary appeals, unless he exercised his discretion to appoint another hearing officer. While he routinely appointed others to hear such appeals in the past, Goodell chose to hear Brady’s appeal personally.
Brady and the NFLPA initially sought to compel Goodell to recuse himself from arbitrating Brady’s appeal asserting four separate grounds. First, the NFLPA contended that Goodell impermissibly delegated his disciplinary powers to Vincent, and that Goodell could not lawfully arbitrate the issue of whether his delegation was permissible under the CBA. Second, the NFLPA contended that Goodell was involved in the investigation and initial disciplinary action, and therefore, he was a central witness in the arbitration. Third, the NFLPA argued that Goodell had prejudged the issues by publicly praising the thoroughness of the Wells report. And fourth, the NFLPA contended that Goodell could not arbitrate a matter involving the competence and credibility of the NFL staff, which he ultimately supervised. Commissioner Goodell denied the motion for recusal, finding that specific language in the CBA gave him discretion to hear the appeal. He rejected the argument that he had inappropriately delegated authority to Vincent, emphasizing that the discipline issued Brady under review was issued by Goodell himself, and found that he was neither an appropriate witness, nor had he prejudged the Wells Report.
Before Commissioner Goodell as the arbitrator, Brady made two discovery motions of note. First, he sought to compel the testimony of Ted Wells and NFL Executive Vice President and General Counsel Jeff Pash, who had allegedly participated in the investigation and development of the Wells Report. Brady also sought to compel the production of interview notes and other documents generated by Paul, Weiss in connection with preparation of the Wells Report. Commissioner Goodell compelled Wells to testify, but he denied access to Pash and denied the motion for documentary production, finding that Pash’s testimony would be cumulative, and finding that the CBA required only the exchange of exhibits to be relied upon at the hearing and specifically proscribed further discovery. His order left open the possibility that he would consider requiring Pash to appear if circumstances changed.
At an arbitration appeal hearing at which Paul Weiss acted as counsel to the NFL, testimony was taken, subject to cross-examination. Goodell issued a final award, finding that Brady knew about, approved of, consented to and provided inducements and rewards in support of the scheme to deflate footballs. In addition to the statements and conclusions in the Wells Report, in support of his conclusion, Goodell relied on new evidence revealed during the arbitration hearing: Brady’s instructions to his assistant to destroy the cell phone that he had been using during the time period covering the AFC Championship Game and the subsequent investigation.
Having determined that Brady’s “conduct [was] detrimental to the integrity” of the game, Goodell next had to determine whether the penalty issued to Brady was appropriate and permissible under the CBA. And while Goodell had broad authority under the CBA to act in disciplinary matters related to the integrity of the game, he nevertheless reviewed certain bargained-for penalties for specific infractions included in the CBA in order to inform his decision about the severity of the penalty issued to Brady. Citing by analogy the collectively bargained remedy of a four game suspension for first time steroid use, which increases to a six game suspension if a masking agent is employed (i.e., an attempt to gain a competitive advantage and to conceal that attempt), Goodell upheld as permissible Brady’s four game suspension, as opposed to a fine, a lesser suspension, or some other remedy.
The NFL immediately petitioned to confirm the award and the NFLPA and Brady cross-petitioned to vacate. After receiving written submissions from the parties and hearing oral argument, Judge Berman ultimately vacated the four game suspension one week before the start of the NFL’s 2015-2016 regular season. In his opinion, Judge Berman acknowledged the stringent standards for legal review of arbitration awards under the FAA, including the immunity of an arbitrator’s factual findings from judicial challenge, and the required deference to the arbitrator’s construction of the contract, rulings on evidentiary and discovery disputes, and conduct of the hearing. Nonetheless, he vacated the award, citing three reasons why the award was unlawful.
First, the court found that Brady had inadequate notice of the alleged misconduct and the potential discipline. According to the court, an arbitration award must “draw its essence from the parties’ agreement” and must be interpreted and implied in accordance with the “industrial common law of the shop.” Citing precedent from other arbitrations involving NFL players and coaches, Judge Berman found that prior notice of prohibited conduct and the corresponding potential sanctions was required.
The...
