Tuesday, February 23, 2016
Following is a guest post from by J. Scott Colesanti and Madeline Rasmussen. Scott is a former contributing editor to this Blog, and I am happy to share the post post below. This is sports and labor law post, to be sure, but employment issues, especially big time sports-related ones, are business law, too.
Why NFL Players Might Want the NFL to Win Its Appeal of Brady v. NFL
by J. Scott Colesanti and Madeline Rasmussen
It feels like weeks since we saw a meaningful NFL contest (well, actually it has been a little over a week). But it is nonetheless still weeks until the Brady appeal before the Second Circuit in March. Should the vacatur of the superstar’s 4-game suspension in “Deflategate” be upheld, alternative means of both implementing and reviewing NFL punishment seem likely, alternatives none too comforting for future disciplined football players.
Article 46 of the most recent NFL collective bargaining agreement (“CBA”) presently reposes vast disciplinary discretion with the NFL Commissioner, Roger Goodell. Appeals are then heard by an arbitrator selected by Goodell.
Utilizing his singular authority, Goodell has proven to be a strict disciplinarian. In 2012, the New Orleans Saints were found to have paid players to deliver serious, sometimes season-ending, injuries to opposing players. Upon discovery, Goodell suspended the coach, former defensive coordinator, and the general manager. The Saints also lost their second-round picks in the next two drafts, and were fined $500,000. At the time, these were considered to be the most severe penalties in “the modern history of the NFL.” Sam Farmer, NFL hits Saints with severe sanctions for bounty program, LA Times (Mar. 21, 2012), http://articles.latimes.com/2012/mar/21/sports/la-sp-nfl-payton-bounty-20120322.
Goodell furthered his disciplinary reach in 2014, in the process making “the NFL and domestic violence” a popular search term. On February 15, 2014, while riding in a hotel elevator, Ray Rice had a physical altercation with his wife. An initial surveillance video showed Rice dragging his unconscious wife out of the elevator. After speaking with Rice and reviewing this footage, Goodell issued Rice a two-game suspension.
A longer surveillance video emerged in September 2014. The new footage seemed to show Rice punching his wife, causing her unconsciousness. Upon this video’s release, Goodell suspended Rice indefinitely; Rice appealed this second round of discipline.
Former U.S. District Judge Barbara S. Jones was appointed as an independent arbitrator in the matter, and she found that Goodell had knowledge of the extent of Mr. Rice’s violence toward his wife in the elevator after watching the first surveillance video and interviewing him. Judge Jones thus vacated the second penalty imposed on Rice, stating, “Because Rice did not mislead the Commissioner and because there were no new facts on which the Commissioner could base his increased suspension, I find that the imposition of the indefinite suspension was arbitrary.” In re Ray Rice (Jones, Arb., Nov. 28, 2014), available at http://espn.go.com/pdf/2014/1128/141128_rice-summary.pdf.
Separately, Goodell rendered strong punishment to Minnesota Viking running back Adrian Peterson. In September 2014, Peterson was indicted by a Texas grand jury on felony charges of injuring a child for his disciplining of his 4-year old son with a tree branch. At that time, Goodell/the NFL placed the running back on the league’s “exempt list” (i.e., allowing him to be paid but not play). After Peterson settled the Texas charges in November 2014 by pleading no contest to misdemeanor reckless assault, the NFL suspended him for the remainder of the 2014 season and fined him six weeks pay. Pursuant to the CBA, that NFL suspension was upheld by an arbitrator (not Goodell) in late 2014.
Peterson subsequently brought an action in federal court to vacate his suspension. National Football League Players Association v. National Football League, 88 F. Supp. 3d 1084 (Dist. Minn. 2015). District Judge David Doty questioned Goodell’s use of the CBA, and, in vacating the NFL suspension, found that the arbitration award failed to reflect the “spirit of the agreement.” 88 F. Supp. 3d at 1090. Further legal wrangling was largely mooted by Peterson’s reinstatement as an eligible NFL player in April 2015, although, as late as August 2015, the federal judge commented that “I’m not sure that the commissioner understands that there is a CBA.” See http://www.cbssports.com/nfl/eye-on-football/25281587/federal-judge-im-not-sure-roger-goodell-understands-theres-a-cba.
Meanwhile, in February of 2015, the NFL suspended New England Patriots quarterback, Tom Brady, for four games based a finding that he was “generally aware” of a plan by Patriots personnel to under-inflate footballs in a playoff game. Pursuant to the CBA, Brady appealed; also pursuant to the CBA, Goodell named himself as the arbitrator to hear the appeal. After a hearing on June 23, 2015, perhaps unsurprisingly, the suspension was upheld. In his written decision, Goodell noted that 7 witnesses (including Brady) testified at the hearing. Although security footage was reviewed during the hearing, the two Patriots personnel suspected of deflating the subject footballs did not testify, prompting Goodell to comment that “Neither the NFL nor any NFL member club has subpoena power or other means to compel production of relevant materials or testimony.” NFL Management Council v. NFL Players Association, 15 CIV 5916, 5982 (Sept. 3, 2015) at 17.
Goodell ultimately found conduct detrimental to professional football in Brady’s 1) participation “in a scheme to tamper with the game balls,” and 2) willful obstruction of the NFL’s ensuing investigation by arranging for the destruction of his cellphone. Goodell’s decision justified the 4-game suspension with the policy for first violations of the league’s steroid policy, calling such protocol “the closest parallel of which I am aware.”
The Patriots accepted the penalty of a $1 million fine and loss of two draft picks. Yet, the Brady litigation continued in federal court, with Brady petitioning for vacatur of his suspension pursuant to section 301 of the Labor Management Relations Act, and the NFL seeking confirmation of the same via the Federal Arbitration Act.
In early September 2015, Judge Berman of the SDNY vacated the NFL discipline, completing a trifecta of defeats for Goodell’s unfettered use of CBA authority. That court intervention was premised upon labor law where it found that the NFL’s steroid policy could not serve as adequate notice to Brady that equipment tampering could result in suspension. The decision was also premised upon arbitration law where it applied FAA section 10(a)(3)(re. refusal to hear pertinent evidence) in determining that Goodell should have produced an additional witness and early drafts of the damning “Wells Report” on the incident. Judge Berman’s decision expressly refused to consider Brady’s claims of (1) Goodell’s evident partiality (prohibited by FAA section 10(a)(2)) and (2) Goodell’s overreaching in meting out disciplined on appeal of an initial NFL disciplinary decision (in light of Judge Doty’s findings in the Adrian Peterson case).
Noting that the NFL investigation reportedly cost in excess of $3 million, the decision cautiously steered clear of FAA section 10(a)(4) (i.e., arbitrators’ “exceeding authority”) and its notorious extra-statutory complement, the “Manifest Disregard of the Law” doctrine, the latter proving to be a very difficult standard to meet in the Second Circuit. See, e.g., Goldman Sachs Execution & Clearing v. Creditors Committee of Bayou Group (2d Cir. 2012)(upholding the District Court’s judgment for the plaintiff of over $20 million, 491 Fed. Appx. 201 (2010)).
On September 18, 2015, the NFL filed its appeal of the Brady decision with the Second Circuit; that appeal has been scheduled for early March 2016. To be sure, the NFL played a large part in sealing its fate in the Brady matter, choosing both the manner of finalizing the matter (a confirmation of an arbitration award), as well as the forum of the final resolution (the Southern District of New York). But what if the NFL had simply waited to be sued by Brady under due process principles, or if altogether different standards had been utilized? To be sure, there are a host of other ways to evaluate NFL discipline.
I. “MDOL” AS A MEANS OF VACATUR
Manifest disregard of the law (“MDOL”) is a common law doctrine that exists apart from the four statutory means of vacatur outlined in the FAA. MDOL originated in Wilko v. Swan, 346 U.S. 427 (1953). In that case, Justice Reed opined that the only time a decision could be reviewed is when an arbitrator manifestly disregards the law when rendering a decision. Wilko, 346 U.S. at 436-47. Since Wilko, many courts have found Justice Reed’s decision as establishing a common law vacatur function separate from those already established under section 10 of the FAA.
The present manifest disregard standard (as stated in the aforementioned Goldman Sachs case) asks two questions: (1) Whether the governing law alleged to have been ignored by the arbitrators was well defined, explicit, and clearly applicable; and (2) Whether the arbitrator knew about the existence of a clearly governing legal principle but decided to ignore it or pay no attention to it.
In 2008, the Supreme Court addressed the issue of whether MDOL existed as a separate vacatur function or a common law term that encompassed section 10 of the FAA as a whole. In Hall Street Associates L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), the Court found the latter, stating that Justice Reed’s interpretation was too vague to extract an extra vacatur function. The Second Circuit weighed in two months later. Specifically, Stolt-Nielsen SA v. AnimalFeeds Intern, Corp., 548 F.3d 85 (2d Cir. 2008), found MDOL to be a “judicial gloss” that was recognized as a valid and separate vacatur function, albeit one with a high standard of proof. On appeal, the Supreme Court held, inter alia, that it would not deciding whether MDOL had continued validity as a judicial gloss, thus lead to further Second Circuit case law applying the doctrine.
Although the MDOL doctrine lives on, to date, no arbitration decisions have been so vacated in the Second Circuit. See Tully Const. Co. v. Canam Steel Corp., 2015 U.S. Dist. LEXIS 25690 (2d Cir. 2015); Pasha v. Janseshki, 597 Fed. Appx. 25 (2d Cir. 2015); Goldman Sachs v. Bayou Group LLC, 491 Fed.Appx. 201 (2d Cir. 2012); Agility Pub. Warehousing Co. K.S.C. v. Supreme Foodservice GmbH, 495 Fed. Appx. 149 (2d Cir. 2012); Schwartz v. Merrill Lynch & Co., Inc., 665 F.3d 444 (2d Cir. 2011).
Under the MDOL test, the NFL possibly fares better than under section 10 of the FAA. Brady would have to prove: (1) There was a well defined, explicit and clearly applicable law; and (2) Goodell knew about this legal principle and deliberately ignored it. Brady would have a difficult time satisfying this two-prong test, for the NFL at all times relied upon the CBA, warts and all. Indeed, the very CBA vagaries decried by Brady (e.g., the lack of a suspension policy tied to equipment alterations) would serve to highlight the fact that Goodell did pay strict attention to the applicable standard (i.e., by fashioning a penalty tied to the CBA’s steroid policy).
II. THE HARDING RULE FOR PRIVATE DISCIPLINARY DECISIONS
The FAA provides a statutory means of vacating arbitral decisions, while MDOL rests upon clear case law. But a discipline protocol tied to common law interpretations of private discipline has been cited since the 1990s. Reshaping NFL discipline to exclude an arbitral appeal and thus invoke the common law standard would bode equally poorly for penalized players.
The private discipline test hales from a case that lingers on from decade to decade. In Harding v. USFSA, 851 F. Supp. 1476 (D. Ore. 1994), a figure skater under criminal investigation objected to her suspension from the U.S. Olympic team. The athlete prevailed by showing that the defendant association had violated its own rules by scheduling a disciplinary hearing on just 3 days notice. The District Court noted that court intervention, which should be rare and limited to correcting the breach of the governing rules, is triggered by 3-part findings that (1) an association had breached its own rules, (2) that the petitioner had exhausted her internal remedies, and (3) that irreparable harm would result from court restraint. This “Harding Test” has thus stood as a federal common law standard for years.
Applying the Harding Test, the NFL would seem to readily prevail. As part of the NFL players union, Brady bargained for the CBA, which the NFL adhered to in imposing and reviewing its Deflategate discipline. Although Brady did exhaust his internal remedies, he would have a difficult time proving that a 4-game suspension would cause him irreparable harm. Since Brady could only satisfy one of the three test prongs, a court would abstain, and Goodell’s decision would stand.
III. ADMINISTRATIVE LAW DUE PROCESS
The resulting Harding Test was re-affirmed a generation later in Armstrong v. Tygart, 886 F. Supp. 2d 572 (W.D. Tx. 2012). In that case, the champion cyclist Lance Armstrong challenged the authority of the U. S. Anti-Doping Agency to discipline him and others over allegations of prohibited substances and methods, commencing in 1998. In dismissing Armstrong’s sundry claims, the Texas District Court noted that the Supreme Court, in Gilmer v. Interstate/Johnson Lane Corp., 500 US 20 (1991), had previously rejected due process challenges to arbitration based upon “speculation of bias,” and the narrow discovery available (which the court framed as “applicable to criminal matters”). Conversely, Judge Berman’s decision in Brady, while citing to section 10(a)(3) of the FAA, found fatal error in Commissioner Goodell (a non-judge) narrowing discovery, essentially calling for more due process than is required in an administrative hearing.
Further, in summing up similar precedents, the Armstrong decision reiterated that “courts should rightly hesitate before intervening in disciplinary hearings held by private associations” (citing Slaney v. The Int’l Amateur Athletic Fed’n, 244 F.3d 580 (7th Cir. 2001)). In short, Armstrong firmly stands for the proposition that criticisms of non-judicial decisions imposing athlete discipline shall be accorded deference – the very outcome ultimately desired by the NFL.
IV. THE FUNDAMENTAL FAIRNESS ARGUMENT
Judge Berman’s decision against the NFL in Brady is a decided blow for “fundamental fairness” of arbitration decisions, particularly in regard to the admissibility of multiple forms of evidence. But it may serve as the proverbial lone voice in the wilderness. To wit, the search for a universal standard of “fairness” within arbitrations has persisted for years. See, e.g., Maureen Weston, The Clash: Mandatory Arbitration and Administrative Agency and Representative Access, 89 S. Cal. L. Rev. (2015)(examining the impact of private arbitration on rights to access agency regulatory processes).
The ideals thus far successfully grasped by Brady’s attorneys would, ironically, set the NFL processes on a course reserved for governmental agencies. The NFL could ultimately choose to subject its disciplinary processes to the statutory provisions for hearings under the Administrative Procedure Act, 5 U.S.C. §§551-558. Ironically, if the NFL had modeled its CBA after these provisions, it is likely that a reviewing court would have found the higher standards met in the Brady case.
Specifically, a major focus of Judge Berman’s decision is the lack of “fairness” afforded to Brady in terms of notice that he could be suspended and in terms of the breadth of evidence admitted at his hearing. The APA sets minimal standards for fair hearings, allowing agencies to add more standards at its own discretion. First, the individual being investigated must be notified of the impending charges, and given the opportunity to respond. §554(b). Second, there must be a separation of powers in the sense that the individual investigating and prosecuting the offense may not be the same individual presiding over the hearing. §554(d). Of course, parties are afforded broad subpoena power under the APA. Moreover, emphasis is placed upon the investigated individual has the right to have counsel present. §555(b). Additionally, the moving party’s standard of proof has been determined by courts to be at a low level (i.e., a preponderance of evidence). See Steadman v. SEC, 450 U.S. 91 (1981); Herman & MacLean v. Huddleston, 459 U.S. 375 (1983).
Brady had counsel, notice of the cause for investigation, and a hearing presided over by someone other than his accuser. To the extent he would have removed that hearing officer for bias, such objection is very difficult to prove (and subsumed within Judge Berman’s refusal to find “evident partiality” on the part of Goodell). Simply put, Brady knew beforehand why he was being questioned, was afforded the same right to counsel and a record as the accused in an administrative hearing, and could not meet the heavy burden of decision-maker bias called for by the APA.
On this last point, it bears noting that, in an administrative adjudication, the burden is on the party submitted before the proceeding to overcome a presumption of honesty and integrity in those serving as adjudicators. Withrow v. Larkin, 421 U.S. at 47. Further, a preponderance of evidence standard requires that the trier of fact simply believe that a certain fact’s existence is more probable than its nonexistence. Scott-Sheppard v. Secretary of Health and Human Services, 2000 WL 1772472 (citing In re Winship, 397 U.S. 358, 371 (1970)). Under this standard of proof, the NFL would be likely to prevail. The findings of its investigation, combined with Brady’s convenient destruction of his cell phone, would likely convince the trier of fact that Brady’s involvement and knowledge of the deflation of game footballs was more likely than not. Further, a reviewing court would need find “arbitrary and capricious” decision-making to unsettle that finding. See, e.g., Greater Yellowstone Coalition v. Lewis, 628 F.3d 1143, 1148 (9th Cir. 2010)(stating that reversal can only take place in the Ninth Circuit where the agency relies on factors that Congress has not intended, failed to fully consider a conflict, offered an explanation unsupported by evidence, or is “implausible”).
It remains to be seen how the chosen avenues of labor law and arbitration law shall fare at the Second Circuit appeal (set for March 3rd). If once again handed a setback, the NFL shall undoubtedly alter its course, likely in drafting a new disciplinary protocol in the next CBA. Specifically, if the NFL wishes to remain the strict taskmaster, perhaps its next preemptive move should seek to eradicate the role of an arbitrator altogether, to ensure that any review of its discipline falls into a Harding Test analysis. Or the NFL could embrace “fundamental fairness” and mimic the dictates of the APA, providing for a few more formalities but simultaneously ensuring the attendance of key witnesses. Either course results in more deference to NFL discipline, and thus more strong penalties for controversial players.
Such a rush to codify procedural rights would seem to favor NFL lawyers, who would gladly temper Commissioner discretion for such favorable standards as the Harding Test, the preponderance of evidence rule, or subpoena power. At the present time, a Commissioner perhaps too quick to exercise sole control may have done an admirable job of utilizing a rulebook that did not foretell of bold non-cooperation from a player and locker room staff. It is doubtful that, if Brady escapes discipline (particularly when his team did not), that said rulebook will remain unaltered. And the resulting changes would undoubtedly be linked to Deflategate, providing another reason for NFL players to resent the dreaded New England Patriots.
Scott Colesanti is a Professor of Legal Writing at the Hofstra University Maurice A. Deane School of Law, where he has taught business law courses since 2002. Madeline Rasmussen, Hofstra Law class of 2017, serves as a Teaching Assistant.