EDITOR’S NOTE: Appellate Spotlight is a new publication of Constangy, Brooks, Smith & Prophete. Each month, we’ll take an in-depth look at an appellate court decision and provide practical insights for practitioners and clients.
Tom Brady and the New England Patriots—love them or hate them—have brought a certain glamour to the relatively dry, but highly important, topic of challenging adverse arbitral decisions. In some fields of law, most notably labor relations, “final and binding” arbitration is typically the method by which contractual disputes are resolved. Arbitral awards, however, are not wholly immune from legal challenge, and they are “final and binding” only if accepted by the parties or enforced or confirmed by a proper court.
For every winner there is a loser, and given the somewhat freewheeling nature of arbitration, it perhaps is not surprising that many parties find themselves reading an arbitrator’s decision that appears to bear no relation to reality or generally accepted legal principles.
So, how does one actually overturn an arbitral award? With “Deflategate” as the background, this article explores that question.
Tom Brady’s four-game suspension
Tom Brady was suspended for his role in causing game footballs to be deflated below the level mandated by the National Football League to an air pressure level more to his liking. NFL Commissioner Roger Goodell issued Mr. Brady a four-game suspension pursuant to Article 46 of the collective bargaining agreement between the NFL Management Council and the NFL Players Association for “conduct detrimental to the integrity and public confidence in the game of professional football.” In doing so, the Commissioner relied on the Wells Report, prepared by a respected law firm that independently investigated allegations that the Patriots’ footballs were intentionally deflated before the 2015 American Football Conference championship game between the Patriots and the Indianapolis Colts. The Wells Report had concluded that two equipment managers intentionally deflated the game balls and that it was “more probable than not” that Mr. Brady was “at least generally aware” of their actions and gave his tacit approval and consent. The Wells Report further concluded that Mr. Brady had failed to cooperate in the investigation and had refused to produce relevant electronic evidence.
The NFL Players Association, on Mr. Brady’s behalf, appealed and requested a hearing. Article 46 of the CBA provided that the appeal would be to the Commissioner and that the Commissioner could, in his discretion, serve as the “hearing officer” of any such appeal. In Mr. Brady’s case, Commissioner Goodell chose to serve as the hearing officer, effectively placing himself in the role of arbitrator reviewing his own decision. After an extensive hearing involving nearly 10 hours of testimony and approximately 300 exhibits, Commissioner Goodell issued a final decision affirming the suspension.
Anticipating that the Players Association would seek to have the decision vacated by a federal district court in Minnesota—where the Players Association had previously received favorable rulings—the NFL Management Council immediately filed an action in federal court in the Southern District of New York seeking to have the Commissioner’s decision confirmed. The Players Association filed suit in Minnesota anyway, but that action was transferred to the New York court and consolidated with the Management Council’s action. The federal district court in New York ruled in Mr. Brady’s favor and vacated the award. The Management Council then appealed to the United States Court of Appeals for the Second Circuit, which hears appeals from federal courts in Connecticut, New York, and Vermont. On April 25, the Second Circuit reversed 2-1, reinstating Mr. Brady’s suspension.
Because the federal courts accord great deference to arbitral awards, such awards are rarely overturned. As the Supreme Court has noted, “The courts are not authorized to reconsider the merits of an award even though the parties may allege that the award rests on errors of fact or misinterpretation of the contract.” Thus, merely arguing that the arbitrator got it wrong is a non-starter. The courts, however, have identified certain grounds that will warrant vacating an arbitral award. In general, these grounds fall into the following categories: (1) The arbitrator exceeded his authority under the collective bargaining agreement, exceeded the scope of the parties’ submission, or failed to do the job with which he was charged; (2) the award fails to “draw its essence” from the agreement or represents the arbitrator’s “own brand of industrial justice”; (3) the complaining party was denied due process or a fundamentally fair hearing; or (4) the award violates clearly established public policy. Mr. Brady made a number of arguments that he said supported his position that the arbitration decision should be overturned.
Lack of notice
Mr. Brady’s primary contention, which the district court accepted, was that he lacked notice that he could be suspended for the conduct cited by the Commissioner. This contention contained a number of separate strands. First, Mr. Brady argued that the Commissioner should have applied certain player policies involving uniform and equipment violations, which called for fines, rather than the more general Article 46 language regarding conduct detrimental to the game. Although this contention was couched as a due process/fairness (notice) issue, at its core it was a complaint that the Commissioner misinterpreted the agreement by relying on Article 46 rather than the player policies (which were actually part of a separate handbook). Perhaps recognizing this problem, Mr. Brady argued that by failing to discuss the applicability of the player policies, the Commissioner failed to do his job and his decision did not draw its essence from the CBA. The Second Circuit, however, had “little difficulty” rejecting this contention. An arbitrator need not discuss in his decision every argument by a party, the court said, and Mr. Goodell’s decision to rely on Article 46 was within his authority and “plausibly grounded in the parties’ agreement.”
Mr. Brady also argued that Commissioner Goodell drew an inapt analogy by comparing Mr. Brady’s conduct to steroid use, for which the typical penalty was a four-game suspension. In the Commissioner’s view, both offenses involved attempts to gain a competitive advantage, and so it was appropriate to compare the two offenses when assessing the appropriate penalty. Again, however, Mr. Brady’s argument appeared to be nothing more than a complaint that the Commissioner made a bad decision, and the Second Circuit rejected it, observing, “While [Mr. Brady] may have been entitled to notice of his range of punishment, it does not follow that he was entitled to advance notice of the analogies the arbitrator might find persuasive in selecting a punishment within that range.”
Another strand of Mr. Brady’s argument was that Commissioner Goodell improperly relied on new evidence introduced at the hearing to find that Mr. Brady “participated in a scheme to tamper with game balls” and “willfully obstructed the investigation by . . . arranging for destruction of his cellphone.” In rejecting this contention, the Second Circuit noted that Article 46 did not limit the arbitrator’s authority to reassess the factual basis for discipline and “it would be incoherent to both authorize a hearing and at the same time insist that no new findings or conclusions could be based on a record expanded as a consequence of a hearing.” Further, “any reasonable litigant would understand that the destruction of evidence, revealed just days before the start of arbitration proceedings, would be an important issue.”
Exclusion of testimony and denial of access to investigative files
Mr. Brady and the Players Association also challenged two procedural rulings by the Commissioner, which they asserted denied them a fair hearing. First, they complained that the Commissioner had refused to permit the NFL General Counsel to testify regarding his role in the preparation of the Wells Report. Second, they challenged the Commissioner’s refusal to provide them with access to the interview notes of the Wells investigative team. The district court accepted these contentions, but again, the Second Circuit reversed.
Challenges to an arbitrator’s procedural or evidentiary rulings are severely circumscribed. In general, an arbitrator’s procedural ruling may not be overturned unless it was rendered in “bad faith” or was so “gross as to amount to affirmative misconduct.” However, the parties may, if they choose, “set the procedural rules for arbitrators to follow.” If they do so, a party is entitled to have its case heard in accordance with those rules, and the bad faith/misconduct standard does not apply. Instead, the court simply determines whether there was compliance with those procedures.
In Mr. Brady’s case, the CBA did not prescribe any procedural or evidentiary procedures or requirements. Thus, the court of appeals had no objective standard against which to measure Commissioner Goodell’s rulings. In the court’s view, the evidence sought by Mr. Brady was merely peripheral to the material factual issues and there was no showing of bad faith or affirmative misconduct. Thus, the court concluded that the Commissioner’s evidentiary and procedural rulings were well within his discretion.
Finally, the Second Circuit addressed Mr. Brady’s contention that it was fundamentally unfair for Commissioner Goodell not to have appointed someone else to serve as hearing officer. It may seem odd to an outside observer that the Commissioner could serve as arbitrator to hear an appeal from his own decision. Be that as it may, the parties are always the master of their agreement, and they may agree to whatever procedures they deem appropriate to resolve their disputes. As the Second Circuit observed, “the parties to an arbitration can ask for no more impartiality than inheres in the method they have chosen.” In Mr. Brady’s case, the parties voluntarily agreed that “the Commissioner would have a stake both in the underlying discipline and in every arbitration” that challenged such discipline. Having agreed to this method, the Players Association could not be heard to complain that the process was unfair. The remedy was to negotiate different procedures, not to ask a court to judge the wisdom or fairness of the procedures provided for in the parties’ agreement.
Doomed to failure
From my perspective, Mr. Brady’s challenge to Commissioner Goodell’s disciplinary decision was doomed to failure. The challenge was dressed in the appropriate garb, but when that garb was stripped away, it became apparent that the complaint was largely with the merits of the decision and the procedure that the parties had mutually agreed to in the CBA. Indeed, had this case arisen in any ordinary setting that did not involve a famous NFL quarterback and a professional football league that “owns a day of the week,” it seems doubtful that it would have resulted in a favorable ruling in the district court or a dissenting opinion on appeal to the Second Circuit.
While perhaps not a perfect analogy, consider a manufacturing facility in which the employer suspends an employee for threatening another employee and failing to cooperate in the investigation. Shortly before the arbitration hearing, the employee destroys his cell phone, which had recorded the disputed events. At arbitration, the union argues that the employee’s conduct was merely “abusive,” but not “threatening,” and that the collective bargaining agreement requires an initial warning for mere “abusive” conduct. The arbitrator considers, but rejects, this argument and finds not only that a threat was uttered, but that the destruction of the cell phone further supported the charge of failure to cooperate. The arbitrator conducts a full hearing, but refuses to require testimony from the company’s president or production of internal notes made during the company’s investigation. The arbitrator denies the union’s grievance. On these facts, it is difficult to see many unions bothering to appeal the decision, much less a court having any hesitation in confirming the award. But of course this was not any ordinary case, and according to news reports, Mr. Brady and the Players Association are considering whether to seek review by the full court of appeals or file a petition for certiorari in the United States Supreme Court.
How to challenge an arbitration award
We certainly can learn from the Brady case what arguments are unlikely to succeed. But how can one actually be successful in vacating an arbitral award? Over the years, we have represented a number of clients who have received what they considered to be bizarre and even incomprehensible arbitral awards. On many occasions, we have concluded that there was no viable basis for challenging the award. Nevertheless, there have been a number of situations in which our analysis led us to conclude that we should attempt to have the award vacated. Our efforts were sometimes successful and other times unsuccessful, but here is the “wisdom” I can dispense from more than 35 years of practice:
- The surest way to success is to negotiate specific procedures and requirements into your collective bargaining agreement. Specify what the hearing will entail, what evidence is permitted, and what constraints there are on the arbitrator’s authority. Specificity, not generality, is required if you want to be able to challenge an arbitral award on fairness or due process grounds.
- If the case is important, have a court reporter present to prepare a transcript. A transcript is essential to any future legal challenge.
- Be specific regarding the issues you want the arbitrator to decide. If the award is adverse, examine the decision to see whether the arbitrator actually decided that issue. Also, look to see whether the arbitrator decided an issue that was not submitted. For example, in a case that is currently pending in the U.S. Court of Appeals for the Fourth Circuit, we are arguing that instead of deciding whether the employee was discharged for “just cause,” the arbitrator actually decided whether the employee was actually discharged, an issue that had not been submitted for decision.
- Challenge the arbitrability of any substantive issues that you believe are not arbitrable. Failure to object may confer authority on the arbitrator. If you object and the arbitrator nevertheless decides the issue, you may have a basis to challenge the award. In one case that we handled, we convinced the U.S. Court of Appeals for the Eighth Circuit that the discharge of a supervisor (rather than return to a position in the bargaining unit), was not an arbitrable issue under the agreement.
- Examine the award to see whether the arbitrator effectively altered the agreement. For example, in a case where we successfully overturned an arbitral award, the arbitrator stated in his opinion that he did not consider the terms of a benefit plan that was incorporated into the CBA because in his view the union had not knowingly agreed to the plan. In other words, he effectively removed the incorporated plan from the agreement. The Fourth Circuit determined that the arbitrator did not do the job with which he was charged, and sent the case back for a new hearing with a different arbitrator.
- Determine whether the arbitrator ignored the plain language of the agreement. It is not sufficient to establish mere “misinterpretation.” What is required is a showing that the arbitrator blatantly ignored the contract to reach a result he or she considered more desirable.
- “Public policy” is almost never a winner. What is required is proof that theaward itself violated a clearly established public policy that can be discerned from some legal authority, most notably a state or federal statute. In a discharge case, the employer must establish that reinstating the employee would violate an explicit public policy. This is a very difficult burden to carry. It is not enough to establish that the employee merely did something contrary to public policy.