On June 20, 2014, the U.S. Court of Appeals for the Eighth Circuit reversed a district court’s dismissal of a request by the NFL Players’ Association and several NFL players (collectively, the “Association”) to set aside and reopen an earlier Stipulation and Settlement Agreement with the National Football League (“NFL”). The decision –Reggie White v. NFL Players Association, No. 13-1251 (8th Cir. June 21, 2014), illustrates that settlements and stipulations of dismissal in a class action context may be vulnerable to later attack under Rule 60 of the Federal Rules of Civil Procedure.

Background

In 1992, Reggie White and four other players sued the NFL on behalf of all other NFL players. They asserted that the NFL’s free agency system, college draft system, practice of using standard-form contracts, and several other NFL rules violated antitrust laws. Subsequently, the district court certified a class of current and former NFL players. While this lawsuit was pending, the NFL and the players began to negotiate a deal that they hoped would end the labor issues that had plagued their relationship. On February 26, 1993, these negotiations culminated in the signing of  the Stipulation and Settlement Agreement (“SSA”). Although styled as a settlement, it functionally operated as a collective bargaining agreement. The SSA awarded monetary relief to each class member to compensate them for the NFL’s alleged antitrust violations. The SSA also set forth rules regarding numerous labor-related issues.

Although the SSA was set to expire in 1996, the NFL and players agree to extend it four times – in 1996, 2000, 2002, and 2006.  In 2008, the NFL declined to extend the SSA.  The final year of the SSA became 2010.  For this final year, there was no salary cap.  The players expected the absence of a cap to yield a significant increase in player salaries.  When it did not, the players suspected that the NFL teams were colluding to avoid bidding wars over free agents.  As a result, players filed a complaint alleging that the NFL was colluding to suppress competition for free agents during the 2010 season.

In August 2011, the NFL and the Association agreed to terms on a new collection bargaining agreement. As part of this agreement, the two sides settled the various lawsuits between them. The NFL and Association settled the lawsuit over the alleged secret salary cap by signing a Dismissal under Federal Rule of Civil Procedure 41(a)(1)(A)(ii). In the Dismissal the Association agreed to dismiss with prejudice “all claims, known and unknown, whether pending or not, regarding the Stipulation and Settlement Agreement . . . including but not limited to claims asserting . . . collusion with respect to the 2010 League Year.”

After the dismissal was signed, several NFL owners made public statements about the NFL’s alleged collusion in 2010. The player’s association interpreted these statements as admissions that the NFL had colluded during the 2010 season to institute a secrete salary cap in violation of the SSA. On May 2012, the player’s association petitioned the district court to reopen and enforce the SSA so that it could pursue its collusion claim against the NFL with the new evidence.

When the NFL asserted that the Association had settled this claim in the Dismissal, the Association countered that the Dismissal was invalid because the district court had never approved the class action settlement as required by Rule  23(a).  After the district court denied the Association’s petition, the Association moved under Rule 60(b) to set aside the Dismissal on the ground that the NFL had procured the Dismissal by fraud, misrepresentation, or misconduct. The district court denied the motion.

The Eighth Circuit Opinion

On appeal, the Eight Circuit rejected Plaintiffs’ argument that the settlement was subject to Rule 23. The Eighth Circuit held that the stipulation to class certification from the 1993 SSA was unrelated to the allegations of alleged collusion. The two cases were linked peripherally by the SSA, but that was where the connection ended.

The Eighth Circuit reasoned that the SSA was not a true class settlement; instead, it was a “comprehensive collective bargaining agreement that set[] the terms of employment between the League and its players.” Id. at 11. Thus, The SSA was a “normal contract,” not a class settlement. Id. at 12. This was exemplified by the fact that, over the life of the SSA, neither party ever invoked Rule 23 for the numerous complaints that were filed for its alleged violation. The only time the parties did invoke Rule 23 was when they agreed to extend the SSA itself, and even then the parties did not actually follow Rule 23 because they did not provide notice to the same class members, but an entirely different group of players.

Next, the Eighth Circuit addressed whether, even though the Dismissal was valid, the district court erred in prohibiting the player’s association from seeking relief from the Dismissal under Rule 60(b). The Eighth Circuit found that a stipulated dismissal constituted a “judgment” under Rule 60(b). It reasoned that “[i]n nearly all relevant respects, an accepted offer of judgment [under Rule 68] is identical to a stipulated dismissal under Rule 41(a)(1)(A)(ii).” Id. at 16. Despite the fact that an offer of judgment shifts some of the potential costs of litigation to the plaintiff, the Eighth Circuit found that the “the two means of settlement are functionally equivalent.” Id. at 17. Therefore, it ruled that the Association could seek Rule 60(b) relief from the Dismissal. Id. at 18.

Implications For Employers

Although this is not an employment-related case, it has important implications for employers regarding the effect of a settlement and stipulated dismissal. This case illustrates that a stipulated dismissal may now be considered a “judgment” and therefore can potentially be revisited by a motion made pursuant to Rule 60(b) of the Federal Rules of Civil Procedure. The burden that a plaintiff must meet in order to prove that such a stipulation was fraudulent, remains high. But, the fact that a plaintiff may now more easily seek to attack a settlement and dismissal after it has been finalized makes this case significant.