Arbitrators Have The Right To Be Wrong: The Second Circuit Speaks About “Deflategate” (And What’s Next)

footballWhen we last wrote about “Deflategate”, Tom Brady, the National Football League Players Association [“NFLPA”] and New England Patriots fans were basking in the glory of the reversal of NFL Commissioner Roger Goodell’s unprecedented four game suspension of Brady related to his alleged role in the alleged deflation of footballs before the 2014 AFC Championship game. However, a divided Second Circuit of the U.S. Court of Appeals has now overturned U.S. District Court Judge Richard Berman’s decision and effectively reinstated Brady’s suspension.  How did we get here, what does it all mean, where do we go from here, and are there any universal lessons from this saga?

WHAT HAPPENED?

Notwithstanding Commissioner Goodell’s victory lap proclamation that this ruling supports his factual conclusions, the Second Circuit decision expressly noted: “Our role is not to determine for ourselves whether Brady participated in a scheme to deflate footballs or whether the suspension imposed by the Commissioner should have been for three games or five games or none at all.” NFL Mgmt. Council v. NFLPA, 2016 WL 1619883, at *1 (2d Cir. Apr. 25, 2016).

The Second Circuit stated that courts are not authorized to review an arbitrator’s decision (such as Goodell’s) on the merits despite allegations that the decision rests on factual errors or misinterprets the collective bargaining agreement, but can only inquire as to whether the “arbitrator acted within the scope of his authority as defined by the collective bargaining agreement.” 2016 WL 1619883, at *6.  The Second Circuit further noted that it “is the arbitrator’s construction of the contract and assessment of the facts that are dispositive, ‘however good, bad, or ugly’” and it is not a court’s task to decide how it would have conducted the arbitration proceedings.  Rather, an arbitration award will be upheld as long as it “draws its essence from the collective bargaining agreement and is not merely the arbitrator’s ‘own brand of industrial justice’”.

The Second Circuit then rejected wholesale District Court Judge Berman’s reasoning rejecting Commissioner Goodell’s decision, and found that regardless of whether or not some of Goodell’s findings (e.g., not considering the applicability of the NFL’s equipment policy and whether it authorized only fines but not suspensions, but instead relying upon the NFL’s steroid policy and its provision of a four game suspension as an appropriate comparison to underinflated footballs) were “imperfect” or “inapt,” his interpretations were at least “barely colorable”, and thus sufficient to withstand judicial scrutiny. The Second Circuit noted that it would not second guess Goodell’s decision as long as that decision is “plausibly grounded” in the collective bargaining agreement.

The Second Circuit rejected Judge Berman’s ruling that no NFL policy or precedent provided notice that a player could be subject to discipline for “general awareness” of someone’s misconduct, finding that Commissioner Goodell was free on the appeal to the District Court to disregard the conclusions of the investigation by Attorney Ted Wells (which led to the initial imposition of discipline), and that nothing in the collective bargaining agreement bars the Commissioner from concluding that Brady’s conduct was more serious than initially believed or described in Wells’ report. The Second Circuit further ruled that Brady’s destruction of his cell phone could be used to draw an adverse inference that the phone contained damaging information and supported a finding that Brady failed to cooperate with the NFL’s investigation (notwithstanding investigator Wells’ failure to warn Brady of such consequences).  The Second Circuit also held that the Commissioner’s procedural rulings that precluded the testimony of the NFL’s General Counsel and denied access to the NFL’s investigative files were within his discretion.  Finally, the Second Circuit rejected claims by the NFLPA that were not initially addressed by Judge Berman, including a claim that Goodell as an arbitrator was “evidently partial,” noting that the parties “got the arbitrator that they contracted for.”  Indeed, the Second Circuit stated:

In their collective bargaining agreement, the players and the League mutually decided many years ago that the Commissioner should investigate possible rule violations, should impose appropriate sanctions, and may preside at arbitrations challenging his discipline. Although this tripartite regime may appear somewhat unorthodox, it is the regime bargained for and agreed upon by the parties, which we can only presume they determined was mutually satisfactory.

2016 WL 1619883, at *1.

In his dissenting opinion, Second Circuit Chief Judge Robert Katzmann noted that notwithstanding the deference courts must give to arbitration awards, Commissioner Goodell’s decision failed to “draw its essence from the collective bargaining agreement” because his decision on an “appeal” of the original suspension by the NFLPA was based upon misconduct different than for which Brady was originally charged and suspended. Judge Katzmann noted that the differences between Wells’ investigative report (which led to the initial suspension) and Goodell’s decision were material and thus Brady did not have adequate notice of the charges.  Judge Katzmann also found that Goodell improperly “dispensed his own brand of industrial justice” by imposing unprecedented punishment without considering the similarities of Brady’s alleged conduct with the most closely analogous rule violation (using “stickum” to better grip footballs), which only provides for a fine.  Judge Katzmann concluded:

The … appeals process is designed to provide a check against the Commissioner’s otherwise unfettered authority to impose discipline for “conduct detrimental.” But the Commissioner’s murky explanation of Brady’s discipline undercuts the protections for which the NFLPA bargained on Brady’s, and others’, behalf. It is ironic that a process designed to ensure fairness to all players has been used unfairly against one player.

2016 WL 1619883, at *22.

WHAT’S NEXT?

With appellate legend Ted Olson now on their legal team, Brady and the NFLPA have asked that the entire panel of judges from the Second Circuit (as opposed to the three judges who decided the case) rehear the case. In their petition for rehearing, Brady and the NFLPA assert, among other things, that since the hearing before Goodell was supposed to be an “appeal”, Goodell exceeded his authority by disciplining Brady for alleged misconduct different than that for which Brady was originally charged and suspended.  The Second Circuit rarely grants requests for rehearing.  If the Second Circuit should decline to rehear the case, Brady and the NFLPA could  then seek review by the U.S. Supreme Court.  As I have stated, the best (if not only) hope for Brady may come from the pending decision in the Eighth Circuit of the U.S. Court of Appeals involving the overturned suspension of Minnesota Vikings Running Back Adrian Peterson.  While the Brady and Peterson cases are not exact mirrors of each other, there are similar issues (e.g., the role of the “law of the shop” in arbitrations, the need for players to have adequate notice of policies and rule violations).  If the Eighth Circuit were to rule in favor of the NFLPA in the Peterson case, then there would be a conflict between two circuits of the U.S. Court of Appeals, which is the type of situation that draws the interest of the U.S. Supreme Court.  Perhaps the NFLPA will creatively argue that the normal standard of deference to arbitration should not be afforded to the NFL’s unorthodox regime (where an arbitrator is also in charge of the underlying investigation and imposition of discipline under review).

LESSONS?

Simply disagreeing with an arbitrator’s decision is not a basis for overturning it. All parties in the unionized setting should be wary of what they have bargained for.  Pesky legalese in collective bargaining agreements concerning the resolutions of employee grievances and arbitration basically may decide the outcome.  As many have argued, the investigation and discipline of Brady by the NFL may have been deeply flawed.  However, in the eyes of the Second Circuit (so far), these possible flaws did not matter, since the arbitrator in this case (especially) had the right to be wrong.  The underlying theme of the Second Circuit’s decision in the Brady case was basically: “NFLPA, by agreeing to give incredible authority to the Commissioner, you have made your bed and you must sleep in it.”