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By George H. Friedman*

Just yesterday, I blogged “Deflategate” – the Court has Ruled – Now What? where I offered my views on the federal court’s ruling on “Deflategate.” To review, the court reversed National Football League Commissioner Roger Goodell’s arbitration decision upholding New England Patriots quarterback Tom Brady’s four-game suspension.  Having spent the holiday weekend reading, viewing, and hearing various news accounts describing – in my view incorrectly – the decision and its impact, and since it’s back to school time, and because I have taught arbitration at Fordham Law School for the last 20 years, as a public service I thought I would circle back to cover some arbitration basics.  Also, I think my beloved wife Ellen hopes this new blog post will cause me to stop muttering to myself every time I see an incorrect description of the case.

Update

The NFL has already announced that it will appeal Judge Berman’s ruling.  Since the league has also announced that it will not seek a stay of the court’s decision pending its appeal, Tom Brady will be able to play in the Patriots’ opener next Thursday.

What the Federal District Court Decision does NOT Mean

The media have widely reported that Judge Berman has “exonerated” Tom Brady, and has overruled the NFL’s finding that Brady and the Patriots tampered with the footballs, substituting his judgment for that of Arbitrator-Commissioner Goodell.  That is not the case.  The court has not effectively said “Tom, your evidence was more persuasive.  You win.  No suspension.”  Far from it.  Instead, the court has ruled that the Commissioner’s decision is stricken due to procedural errors, and presumably (but not expressly stated) Brady’s appeal has to be reheard.

A reviewing court’s options are pretty much binary:  enforce the award or vacate it.  Indeed, it is hornbook arbitration law that a reviewing court cannot substitute its judgment for the arbitrator’s.  This holds true for business and labor arbitrations. Says who?  The United States Supreme Court.  See, for example, BG Group, PLC v. Republic of Argentina, 134 S.Ct. 1198 (2014), and Steelworkers v. Warrior & Gulf Co., 363 U.S. 574 (1960).  This Texas Court of Appeals case sums it up very well: “We may not substitute our judgment for that of the arbitrators merely because we would have reached a different decision” (see Humitech Development. Corp. v. Perlman, 424 S.W.3d 782 (Tex. App. 2014)).

 What the Federal District Court Decision does mean

The Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (“FAA”), provides that an arbitration decision – called an award – may be enforced in court.  An arbitration decision may also be challenged on very limited grounds set forth in section 10.  The NFL went to court to enforce the Commissioner’s decision, and the Players’ Association sought to vacate it. The Deflategate court vacated the Commissioner’s arbitration award based on arbitrator misconduct (Federal Arbitration Act, 9 U.S.C§ 10(a)(3)). This section states that an award can be vacated where “the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy…” Specifically, the court held that the Commissioner-Arbitrator improperly denied Brady: 1) “the opportunity to examine designated co-lead investigator Jeff Pash;” and 2)”equal access to investigative files.”

So?  So, what does this all mean?

Commissioner Goodell’s award is for now a nullity.  But that’s not the end of it.  When an arbitration award is vacated, it typically means that the parties start over with a new arbitration (unless they settle – not likely here).  As I wrote yesterday, the court did not address the Commissioner’s ability to serve as a neutral arbitrator, which the Court notes was “central” and “at the very heart” of Brady’s challenge. The FAA provides that an arbitration decision may be challenged under section 10(a)(2) for “evident partiality” of the arbitrator.  And some courts have held that the Commissioner cannot serve as neutral arbitrator (see my blog post on the subject).  There may yet be another arbitration, but the since court’s decision does not address who will serve as arbitrator, the question still remains: who gets to be the arbitrator, the Commissioner or someone else?  The court’s decision was silent on this question.

Summing up

Here are the likely scenarios, barring a settlement or further appeals:

NFL loses its appeal: Judge Berman’s ruling stands.  The Commissioner’s decision remains tossed, and the parties have a new arbitration (but again, before whom?)

NFL wins its appeal: Judge Berman’s ruling is reversed, and the Commissioner’s decision is reinstated.  Tom Brady has to serve his four-game suspension.

A split decision: It’s possible the Court of Appeals will issue a mixed decision saying the judge was correct about some things and wrong about others.  Here’s a tough one: “No, you were wrong about the procedural errors.  So, the arbitration decision was sound in that regard.  Now go back and decide whether the Commissioner could serve as an impartial, unbiased arbitrator.”

Of course, my premise about no appeals may be wrong, in which case as I said yesterday, like the Bill Murray movie “Groundhog Day,” Brady, the union, and the NFL may find themselves reliving this process again and again.


 

*George H. Friedman, an ADR consultant and Chairman of the Board of Directors of Arbitration Resolution Services, Inc., retired in 2013 as FINRA’s Executive Vice President and Director of Arbitration, a position he held from 1998. In his extensive career, he previously held a variety of positions of responsibility at the American Arbitration Association, most recently as Senior Vice President from 1994 to 1998. He is an Adjunct Professor of Law at Fordham Law School. Mr. Friedman serves on the Board of Editors of the Securities Arbitration Commentator. He is also a member of the AAA’s national roster of arbitrators. He holds a B.A. from Queens College, a J.D. from Rutgers Law School, and is a Certified Regulatory and Compliance Professional (Wharton-FINRA Institute).

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