On Monday, a federal court of appeals ruled on the latest chapter of the “Deflategate” controversy, issuing a decision that should interest both football fans and employers. The court of appeals reinstated the National Football League’s four-game suspension of Tom Brady for participating in an alleged “scheme to deflate footballs.” In the process, the court issued a reminder about the importance of negotiating for contractual protections when agreeing to arbitrate legal matters.
This case first arose during the 2015 NFL playoffs, when the Indianapolis Colts suspected that the New England Patriots had under-inflated the footballs that they were using on offense. (If this were true, it would have violated NFL rules and given the Patriots a strategic advantage, by making it easier for their offensive players to throw, catch, and hold onto the footballs.) The NFL spent several months investigating the matter, ultimately concluding that Brady had participated in the “scheme” to under-inflate the balls and also destroyed his cell phone in an attempt to obstruct the NFL’s investigation. NFL Commissioner Roger Goodell found that Brady engaged in “conduct detrimental to the [NFL]” and suspended him four games.
Brady’s suspension set off a lengthy appeals process, which kept both sides’ legal teams busy for months. Unfortunately for Brady, the agreement between the NFL and the NFL Players’ Association (i.e., the players’ union) gave Goodell himself the power to arbitrate any appeal over disciplinary matters. In essence, the Players’ Association had agreed to allow Goodell to appoint himself the “fox guarding the henhouse” and arbitrate the question of whether he himself acted properly. Not surprisingly, Goodell held that he did, and affirmed the decision to suspend Brady.
Brady and the Players’ Association then appealed the matter to a federal district court. In doing so, they challenged the steps that Goodell had taken when conducting the “arbitration.” They claimed, for example, that Goodell improperly denied them access to certain evidence. They also asserted that the NFL had not given Brady adequate advanced notice that he could receive a suspension for under-inflating footballs. The federal district court accepted these arguments by Brady and the Players’ Association, finding that Goodell acted improperly and overturning the suspension. Predictably, the NFL and Goodell appealed this decision to a federal court of appeals.
At this stage, the Players’ Association’s unfavorable contract language came back to haunt it and Brady. The court of appeals properly recognized that courts must defer strongly to arbitrators’ decisions. In fact, the court characterized the standard for reviewing arbitrators’ decisions as “among the most deferential in the law.” The court correctly noted that it did not have the authority to decide whether or not Goodell actually made the right decision; rather, it simply could decide whether Goodell even “arguably” acted within his authority under the contract. Ultimately, because the parties’ agreement gave Goodell broad latitude – effectively allowing him to serve as ‘judge, jury, and executioner’ – the court of appeals found it improper to overturn the decision and reinstated Brady’s suspension.
Although this decision will significantly impact the 2017 NFL season, it also carries weight outside the football world. Over the past several years, employers have turned more frequently to arbitration agreements as a way to resolve disputes with employees and third parties. This decision highlights the considerations that employers should assess when deciding whether to use such agreements. On the positive side, the NFL’s arbitration agreement allowed it to resolve this dispute far more efficiently than it otherwise could have. Due to the arbitration agreement, the federal courts had no authority to decide whether or not Brady actually engaged in the alleged misconduct (which would have taken far more time and resources to resolve). Rather, the courts could only decide the narrower and less time-intensive question of whether Goodell “arguably” acted properly.
But the decision also illustrates the ways employers should seek to protect themselves. Because courts afford arbitrators extreme deference, it can be very difficult to challenge an arbitration decision, even if it is flat-out wrong. Accordingly, before agreeing to arbitrate a matter, a party should take steps to reduce the risk of a “rogue” decision. For example, parties can agree to choose only arbitrators who belong to certain reputable organizations, who are much less likely to issue capricious decisions. An experienced attorney also can negotiate other types of protections, such as the ability to “strike” unfavorable arbitrators or procedures dictating what evidentiary procedures the arbitrators must follow. In the Brady case, if the Players’ Association had bargained for language that required a neutral third party to make the final decision (rather than Goodell), the quarterback might have avoided this costly suspension.