May 01, 2016

Arbitration Deflated

So are we to think that the rightful power of arbitrators has been vindicated as a matter of principle by the US Second Circuit Court of Appeals’ 2-1 panel decision reinstating Tom Brady’s four-game suspension? This commentator says no, and if you think this is mainly because my tailgate party for the Buffalo Bills at New England Patriots game on October 2 will be a less lustrous event with #12 maybe off the premises*, you would be only half right. (Come to the party anyway. We start about 11 am).

On the question of whether the four-game suspension was discipline the contract permits (the “contract” being the collective bargaining agreement between the NFL and the players’ union) there are two legal principles in play. The first straddles labor and commercial arbitration: the arbitrator to act within her powers must at least arguably be construing the contract; she cannot simply impose her “own brand of industrial justice.” (You remember this refrain from Stolt-Nielsen). Stated in another fashionable phrase, the arbitrator’s award should “draw its essence from the agreement.” The second principle is more or less unique to labor arbitration: a collective bargaining  agreement is to be interpreted according to the “law of the shop,” and where that “law” establishes that the employer’s discipline of an employee must be within a range of punishments that the employee had notice would potentially be imposed for the infraction committed, a punishment not inside that range doesn’t draw its essence from the agreement.

To understand how these principles operate in the Brady/NFL case of course one needs to accept that the employer and the arbitrator are the same person: the NFL Commissioner (whose father was a Bills fan). In the arbitration, the aggrieved player is the Claimant and the Respondent is, well, the arbitrator. That’s what the contract says, so forget about independence and impartiality. They have been collectively-bargained out the picture.

Whether the two above-mentioned principles were respected or offended by the NFL Commissioner’s four-game suspension of #12 depends on how one reads the fine print in the collective bargaining agreement, notably Article 46 entitled “Commissioner Discipline.” Your Commentator thinks the Commish dispensed his own brand of “industrial” justice**, and that Article 46 cannot be arguably construed to provide notice to players that they risk suspension for conspiring to under-inflate footballs for competitive advantage.

But the Second Circuit having taken a position on that issue has no real impact on arbitration law. The decision, as it relates to the Commissioner’s power to impose the four-game suspension, does not move the doctrinal needle about arbitral power and discretion even a millimeter. The same issue, had it involved a lower profile sports league and a non-celebrity athlete would not merit the attention this case has received in arbitration circles.

Two procedural rulings by the Respondent-Arbitrator were also at issue on this appeal. The first was to deny Brady the right to call the NFL General Counsel as a witness. The second was to deny Brady access to the interview notes of the law firm that the Commissioner hired to investigate. The Second Circuit majority holds that these rulings were not fundamentally unfair, and the dissenter dissents but without discussion.

Well-settled law about judicial deference to arbitral procedural rulings is easily applied when arbitrators are actually independent and impartial. To apply that law in a formulaic way to the procedural rulings of the Respondent-Arbitrator NFL Commissioner whose impartiality versus a player he has disciplined had been waived by contract is a different matter. But this is what the Second Circuit has done in the Brady/NFL case. For the proceedings of the Respondent-Arbitrator to be seen to be fair in this very public setting, something akin to full transparency of the Commissioner’s actions as a Respondent ought to be the rule — that is to say, full transparency of the initial decision to impose discipline. Here the Commissioner insists there was such full transparency because, according to the Commissioner, his General Counsel did not participate in drafting the investigative report that formed the basis for Brady’s suspension. But does this not determine a material fact by sealing off from challenge the Respondent’s assertion about the fact? There is no vindication of arbitrators or arbitration here, but instead some rather unfortunate application of settled principles with inadequate attention to context.

Besides, it would be a better tailgate party, and a sweeter victory over the Patriots, if #12 takes the field on October 2.

Go Bills!

* At this writing, #12 has just added former US Solicitor General Theodore Olson to his legal dream team. So a few things could happen between now and October … A rehearing en banc in the Second Circuit, or a petition for certiorari to the short-staffed Supreme Court of the United States which still has only one presumptive Patriots fan (Breyer, J.). The latter might be coupled with an application to stay the mandate of the Second Circuit’s judgment.

**  The phrase “own brand of industrial justice” dates from a time in the early 1960s when America had manufacturing industries, notably steel mills, and hundreds of thousands of steelworkers. The phrase was coined in a labor arbitration decision to which the United Steelworkers Union was a party. That decision and two companion cases are known in arbitration law and legend as the Steelworkers Trilogy and are the original source of many of the core principles of modern American arbitration law.

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