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Arbitration on Trial

Scales of Justice

Will justice or technicalities prevail?

by Sheilla Dingus

June 8, 2016

“Fair process before a fair tribunal cannot be an aspiration;
it is an unwaivable, inviolable necessity.” – Kenneth Feinberg
As the Deflategate saga rages on, lines are being drawn in the sand with the matter of fair and impartial arbitration the key issue at stake.  On April 25, the U.S. Court of Appeals for the Second Circuit, in a split-decision, overturned the District Court opinion of Judge Richard Berman, citing broad language in the NFL/NFLPA Collective Bargaining Agreement as the defining factor.
“We hold that the Commissioner properly exercised his broad discretion under the collective bargaining agreement and that his procedural rulings were properly grounded in that agreement and did not deprive Brady of fundamental fairness.  Accordingly, we REVERSE the judgment of the district court and REMAND with instructions to confirm the award. . . Here the parties contracted in the CBA to specifically allow the Commissioner to sit as the arbitrator in all disputes brought pursuant to Article 46, Section 1(a).  They did so knowing full well that the Commissioner had the sole power of determining what constitutes “conduct detrimental,” and thus knowing that the Commissioner would have a stake both in the underlying discipline and in every arbitration brought pursuant to Section 1(a). Had the parties wished to restrict the Commissioner’s authority, they could have fashioned a different agreement.”
For all practical purposes this ruling negates the assumption that arbitration must be fair and impartial because it is not implicitly stated in the CBA.  Should the very purpose of justice via arbitration be discarded because of a party’s shortcomings in contractual negotiation?  If this ruling stands, not only athletes, but other workers in various trades could be adversely affected by poorly negotiated CBA provisions.
Here is the language of “Article 46,” the provision ruled upon by the Second Circuit:
“All disputes involving a fine or suspension imposed upon a player for conduct on the playing field (other than as described in Subsection (b) below) or involving action taken against a player by the Commissioner for conduct detrimental to the integrity of, or public confidence in, the game of professional football, will be processed exclusively as follows: the Commissioner will promptly send written notice of his action to the player, with a copy to the NFLPA. Within three (3) business days following such written notification, the player affected thereby, or the NFLPA with the player’s approval, may appeal in writing to the Commissioner.”
As pointed out by NFLPA counsel, Jeffrey Kessler, the Commissioner’s right to sit as arbitrator has been in place for the entirety of the NFL’s existence, and until 2012 this was not an issue – that is until Goodell began to push the limits of his authority.  Since then at least half a dozen of his disciplinary decisions have been overturned in various courtrooms. In light of this, The Courtside Lawyer presents a very relevant question, “. . .do we view these as the isolated results of one man’s overreaching that don’t signal the process itself is broken? Or the advent of a new antagonistic attitude toward player relations that warrants negotiating a change to the CBA?”
All in all, Article 46 is a two-and-a-half page provision in a 301 page document, and has only in recent years come under scrutiny.  Because of this, I decided to look at the CBAs of other sports leagues for a comparison of Commissioner discipline and the arbitration process negotiated.  What I found was astounding.
The CBA for Major League Baseball devotes 13 pages to grievance procedure and discipline; the NBA/ NBAPA CBA, 30 pages to Player Conduct and Grievance and Arbitration procedure, twenty of which are devoted to the latter, and the NHL/NHLPA CBA contains sixteen pages devoted to player discipline and arbitration.  All leagues outside the NFL have carefully detailed provisions to protect and ensure neutral arbitration.  In one respect, it’s no wonder Judges Parker and Chin shook their heads and told the NFLPA that they’re getting what they bargained for, but on the other hand, should a sloppily bargained CBA defeat the purpose for which it was intended – that of fairness to all parties?  Chief Judge Katzmann sums up the result of this line of reason in the closing statements of his opinion of dissent:
“I end where I began.  The Article 46 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.
I respectfully dissent.”
Higher courts have typically upheld arbitration rulings in their opinions, but the “law of the shop” has traditionally been followed in the proceedings, meaning that the arbitrator ruled in a position of assumed neutrality.  When courts uphold arbitration, even when that assumption is breached, that’s when the entire process begins to crumble.
Five amicus, or “friend of the court,” briefs have been submitted following the Brady legal team’s petition for rehearing in the Second Circuit.  All of these briefs follow and enhance the arguments put forth by Theodore Olson, Brady’s newly added lead counsel, but none are more powerful than the one entered by Kenneth Feinberg.
Feinberg is highly respected attorney with over 35 years of arbitration experience, including as special master of the 9/11 Victim Compensation Fund.  His arbitrations include valuing the Zapruder film and Holocaust Slave Labor attorneys’ fees as well as presiding over funds distribution for victims of numerous disasters.
He stated when asked his reason for filing,
“I feel that arbitration must be scrupulously fair, with no bias, and procedural due process for all parties. … The commissioner, I feel, did not afford Brady a full and fair opportunity to present evidence, to respond to evidence, and to present a comprehensive defense. I feel that the perceived conflict of interest between the commissioner and Brady and the league prevented Brady from receiving a fair arbitration. And the case is so visible that, in my opinion, it does not place arbitration … in a very good light. That’s why I filed the brief.”
In his amicus brief, Feinberg explains the reasons the Second Circuit ruling is so dangerous.  His entire brief is a powerful and persuasive statement, which you can read here; his scything opening statement is cited below:
” Mr. Feinberg comes before this court not to support the unfettered aggrandizement of arbitral powers for he and his fellow arbitrators—but to caution against it. If the restrictions on arbitrators acting outside the scope of their authority, imposing their own industrial justice, or acting with bias are weakened so greatly as to permit the enforcement of the Commissioner’s award, it will fundamentally erode the public’s trust and confidence in arbitration.”
If perhaps the most prominent arbitrator in the U.S. is willing to speak out against the process, perhaps it is time that the courts take notice. Arbitration should be evaluated in light of the purpose for which it exists and not on technicalities of language that may favor one party over another.
Major points of unfairness and lack of due process were addressed in Feinberg’s brief; among them, modification of the contract though judiciary ruling:
“If the NFL sought to add a new violation for failure to report wrongdoing, increase the penalty for equipment violations, or begin suspending players for obstruction, it would be within its rights to do so. But these changes must come through the bargaining process—not the arbitration process. The arbitrator, whose authority is derivative of the contract, cannot modify the contract.”
It is relatively common for parties to select a non-neutral arbitrator, but this does not vitiate the arbitrator’s obligation to act without bias. . .The Commissioner used the guise of arbitration to dramatically alter many of the long-standing features of the parties’ course of dealing.”
A less than forthcoming discovery process was also noted by Feinberg:
“So too the procedures the Commissioner utilized were not an exercise in arbitral discretion, but instead so one-sided as to reflect a clear intent to advantage one side. He appointed his own in- house counsel as co-lead investigator, then ruled that individuals that did not cooperate with or obstructed his investigation could be sanctioned. . .Indeed, Brady’s refusal to cooperate was cited as a major factor in the four-game suspension. . . Although the NFL had full access to the results of the investigation, Brady’s team was denied access to the materials. . .In sum, Commissioner Goodell utilized his purported procedural authority to grant unilateral discovery to one side (accompanied by a threat of sanction), while affirmatively denying the other side’s request to the same materials. The notion that only one side would be entitled to the materials of the independent investigator is so egregious that it cannot be the result of good faith mistake—there is no provision in the CBA that could be construed to even contemplate this type of one-sided access. It is instead yet another clear indicia of the bias that permeated this proceeding.”
“. . .the Commissioner’s decision here lacked even the basic hallmarks of due process —a fair process, before a fair tribunal. Decisions such as this have no credibility. That lack of credibility is only heightened here, where the non-neutral arbitrator’s key decisions consistently advantaged his own organization over the opposing party.”
In dissent Judge Katzmann stated:
“Judicial review of an arbitration award can be boiled down to a two-step process.  Both inquiries follow from the fundamental premise that ‘arbitration is a matter of contract.’. . .In the first step, the reviewing court asks whether the arbitrator acted within the scope of his authority under the relevant collective bargaining agreement. . . If the arbitrator acted within the scope of his authority, the his decision is entitled to substantial deference.  The award will be upheld so long as the reviewing court finds, at the second step, that the arbitral award ‘draws its essence from the agreement’ and does not reflect ‘merely an example of the arbitrator’s own brand of justice.’. . .In my opinion, the Commissioner’s decision fails as to both steps.”
Relative to the first step, Katzmann explains that the Commissioner does indeed have the authority to “impose discipline for ‘conduct detrimental,’” but there is a check upon that power through the players right to appeal.  In turn, the arbitrator “may decide whether the misconduct charged actually occurred, whether it was actually ‘detrimental’ to the League, and whether the penalty imposed is permissible under the CBA.”  He further explains that the arbitrator has “no authority to base his decision on misconduct different from that originally charged.”  In other words, if the Commissioner is to sit as arbitrator, he must remove the “commissioner’s hat” and replace it with one of a genuine arbitrator.  He cannot wear both hats simultaneously.
Katzmann also asserts failure at the second step because the unprecedented punishment did not “draw its essence from the CBA.”  Collectively bargained penalties for equipment violations are a part of the agreement.  These penalties should have been considered by the Commissioner, even if ultimately rejected.  Goodell’s failure to provide insight regarding his unwillingness to even consider these penalties leads Katzmann to conclude that he exceeded his authority in the “novel” punishment imposed upon Brady.
“The lack of any meaningful explanation in the Commissioner’s final written decision convinces me that the Commissioner was doling out his own brand of industrial justice. . .If an arbitrator’s decision can be inferred from the facts of the case, the award should be confirmed. . .In this regard, it bears noting that the Schedule of Fines provides that a player caught violating the prohibition on stickum a second time is to be fined $16,537.  Thus, even where aggravating circumstances exist, the Schedule of Fines does not provide for the extreme increase in penalty that the Commissioner found appropriate here.”
Both Chief Judge Katzmann, and District Court Judge Berman, whose decision was overturned agree that Commissioner Goodell took it upon himself to legislate from the bench in regard to the provisions of the CBA based upon his “broad authority.” Goodell claims that he will not hand off the “integrity of the game” to others, but true integrity dictates that he must do this because not only is the integrity of the game of football at stake, but now, the integrity of the arbitration process itself.
Kenneth Feinberg puts it this way:
“The Commissioner impermissibly exceeded the scope of his authority in this matter. But more troubling, he used the vehicle of arbitration as a mechanism to rewrite the underlying bargain between the parties, to the sole advantage of his organization as against Brady and the Players Association. If this type of bias or capricious notions of industrial justice are upheld, the public should—and will— lose faith in the systems of arbitration and private dispute resolution that have become a parallel component of our justice system.”
“Until now, contracting parties have been assured that the court will ensure a baseline level of process: an opportunity to present evidence to an unbiased tribunal. . . The panel’s decision functionally eviscerates these protections. If it is permitted to stand, parties will and should question the risk posed by arbitration. Having witnessed the tremendous benefits arbitration and private dispute resolution have shown in myriad types of conflict, this would be a tremendous loss to our justice system. While arbitrators’ approaches may vary, the Commissioner’s actions were simply beyond the bounds. They must be recognized as such to preserve the public’s faith in the arbitration process.”
Arbitration is a preferred means of settlement not only in collectively bargained union agreements, but also in consumer affairs and many other venues; in fact outside the scope of status, family law and criminal charges, most types of disputes may land before an arbitrator or arbitral tribunal. Considering the broad spectrum of issues that may be subject to this process, potentially any individual could at some point be faced with sitting before an arbitrator.  Since the American justice system was designed to give equal standing to all parties in presenting their petitions, if seems more important than ever to ensure that fair and unbiased arbitration is not precluded through court precedent based on which party was the more skilled negotiator.
Therefore, I too, “end where I began.”
“Fair process before a fair tribunal cannot be an aspiration; it is an unwaivable, inviolable necessity.” – Kenneth Feinberg

Note: all emphasis in quoted text is mine.