The news today alerts us to a federal judge’s decision in the “Deflategate” controversy involving Tom Brady and the NFL. According to headlines earlier today the story is that Tom Brady wins, and his four-game suspension at the start of this upcoming football season has been vacated. More recent headlines tell that the NFL will appeal the decision, so this story may not be over. But I’m more interested in discussing this case from legal perspective on arbitration. And in that regard, this deflategate case isn’t really all that much different than other arbitration cases, including those involving Wall Street (for securities industry arbitration cases).
What may not be obvious from the news surrounding this story, is that the decision handed down by the NFL Commissioner that imposed discipline on Brady is that the decision is actually treated as an arbitration award, and is subject to the Federal Arbitration Act. In that regard, it is similar to arbitration cases between businesses, between investors and brokerage houses, and other cases to be resolved in an arbitration forum and outside of the courts. Following the rendering of the Commissioner’s decision (the award), both sides in the case went to court with the league seeking to affirm the arbitration award, and Brady (whose case was apparently handled by the NFLPA), seeking to vacate it (to throw it out). In Judge Berman’s ruling today, he affirmed that pursuant to the Federal Arbitration Act, “the validity of an award is subject to attack only on those grounds listed in [9 U.S.C.][Section] 10 and that “the policy of the FAA requires that an award be enforced unless one of those grounds is affirmatively shown to exist.” In discussing the limited review of arbitration decisions and the legal standard for same, Judge Berman cited to several court cases involving judicial review of securities industry arbitration cases.
Arriving at his decision to vacate the Commissioner’s decision, Judge Berman wrote, “The Court is fully aware of the deference afforded to arbitral decisions, but nonetheless, concludes that the Award should be vacated. The Award is premised upon several significant legal deficiencies, including (A) inadequate notice to Brady of both his potential discipline (four-game suspension) and his alleged misconduct; (B) denial of the opportunity for Brady to examiner one of two lead investigators, namely NFL Executive Vice President and General Counsel Jeff Pash; and (C) denial of equal access to investigative files, including witness interview notes.” (slip op. at 20-21). As such, the Judge did not primarily rule on whether the evidence in the underlying case before the Commissioner tended to show any misconduct by Brady or anyone else; rather, the decision was vacated because of the Judge found that these legal deficiencies he cited provided for the arbitration award to be vacated under the Federal Arbitration Act.
The lesson for those involved in arbitration matters is this: judicial overview of arbitration cases is very limited, deference is given to an arbitrator, and under the FAA, an attack on an arbitration award requires the award to be enforced unless one of the grounds for overturning it, as set forth in federal law, is shown to exist. The bottom line is that the vast majority of arbitration awards will not be entitled to any meaningful judicial review or chance at appeal. As such, before selecting binding arbitration as a means to resolve disputes (in your business contracts or other situations) carefully consider whether such a system is appropriate or if it would be more favorable to preserve your ability to go to court if needed. Of course in some situations, like securities industry matters for example, there isn’t an option of opting out of the arbitration system – at least for now.
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