REFEREED REFORM: WHY THE NFL’S ARBITRATION CLAUSE SHOULD BE CHANGED TO MEDIATION
Author: Jared Pippen, Senior Editor
Two significant cases between the National Football League (“NFL”) and former coaches have recently involved the NFL Constitution's arbitration provisions.[i] Both cases involve employment agreements that provide that they are to be governed by the NFL Constitution. The NFL’s Constitution provides that the NFL Commissioner has “full, complete, and final jurisdiction and authority to arbitrate” various forms of disputes between coaches and NFL teams.[ii] Due to an imbalance of power between individual players and the NFL Commissioner, in conjunction with arbitration’s limited appeal options, mediation is an alternative that could be fairer for players and provide a more flexible resolution.
Arbitration as an Unconscionable Contract
A major issue litigated in these cases is whether the arbitration provisions in the coaches’ employment contracts are unconscionable. The legal standard for unconscionability involves a dual analysis of procedural and substantive elements.[iii] Procedural unconscionability focuses on contract negotiation and formation circumstances, particularly oppression or surprise due to unequal bargaining power.[iv] Oppression occurs when there is a lack of negotiation and meaningful choice, while surprise is the extent to which the terms are hidden in a tediously lengthy form.[v] Substantive unconscionability pertains to the fairness of the contract’s actual terms.[vi] It assesses whether the terms are overly harsh or one-sided to the extent that they shock the conscience.[vii] A contract term is not considered substantively unconscionable merely because it benefits one side more than the other; it must be excessively one-sided.[viii] One example could be if one party is forced to arbitrate all claims relevant to the contract while the other party may seek remedies in court. This lack of mutuality can cause substantive unconscionability.
Both procedural and substantive unconscionability must be present for a contract or clause to be deemed unconscionable, but they do not need to be present to the same degree. Courts use a sliding scale approach, meaning that a higher degree of one type of unconscionability can compensate for a lower degree of the other. This analysis has come to the fore in recent cases against the NFL.
I. Gruden v. Nat’l Football League
Gruden is a prime example of a court analyzing the unconscionability in the arbitration provisions of coaches’ contracts.[ix] Jon Gruden is a former coach of the Las Vegas Raiders who resigned in 2021 after the New York Times released a series of racially inflammatory emails he allegedly wrote.[x] A short time after this, Gruden and the Raiders reached a settlement agreement.[xi] After this settlement agreement was reached, Gruden filed a lawsuit in Nevada state court alleging that Roger Goodell, the commissioner of the NFL, released the emails that forced his resignation.[xii] Goodell and the NFL moved to compel arbitration under the NFL’s Constitution that supposedly governed his employment agreement with the Raiders.
Gruden argued that his employment agreement was procedurally unconscionable as a “contract of adhesion,” referring to his lack of bargaining power in drafting the agreement’s terms.[xiii] A contract of adhesion is a standardized contract form prepared by one party, typically the party with superior bargaining power, and presented to the other party, usually a consumer, on a “take it or leave it” basis.[xiv] The consumer has little or no opportunity to negotiate the contract terms and must either accept the contract as is or forego the product or service altogether.[xv]
Additionally, Gruden argued that the agreement was substantively unconscionable because Goodell is not a neutral, independent factfinder; it lacked mutuality because only Gruden was bound by the arbitration provisions; it was illusory because Goodell had total discretion to determine the nature of the conduct prevented by his employment agreement.[xvi] The Court concluded that the contract was procedurally and substantively unconscionable, mainly due to Goodell's sole and exclusive authority to rule on any dispute.[xvii]
On appeal, the Nevada Supreme Court concluded that Gruden did not meet his burden of proof that the arbitration clause in his employment agreement was procedurally and substantively unconscionable.[xviii] However, the Court came to its decision while noting that Gruden made strong arguments on substantive unconscionability based on Goodell’s influence on the outcome of an arbitration decision that could affect himself.[xix] Additionally, Justice Linda Marie Bell concluded in her dissenting opinion that the NFL’s arbitration clause should be unenforceable due to its substantive unconscionability.[xx]
II. Flores v. Nat’l Football League
Flores is another example of a court analyzing the unconscionability of arbitration provisions in NFL coaches’ employment contracts.[xxi] Brian Flores is a former head coach of the Miami Dolphins who filed a lawsuit against the NFL and various teams for race discrimination.[xxii] Flores’ employment agreement was substantially like Gruden’s regarding the arbitration provisions since it also provided that any dispute would be referred to Roger Goodell for arbitration.[xxiii] Therefore, just like in Gruden, the NFL moved to compel arbitration.[xxiv]
The Court rejected Flores’ challenge on Goodell’s ability to be the arbitrator, stating that the parties were bound by their bargain.[xxv] The Court relied on a U.S. Court of Appeals decision that rejected the same contention made by Tom Brady in the “Deflategate” controversy.[xxvi] The Court rejected Flores’ motion for reconsideration, which claimed that Goodell would be biased as an arbitrator.[xxvii] The judge noted concerns over the fairness of the process but that she could not presume that Goodell would act as a biased arbiter and could only make necessary examinations of his actions after the arbitration.
Why the Court’s Decisions are Inadequate
If these cases were decided the other way, it would take away some of Roger Goodell’s broad authority to oversee employment disputes in the league. Coaches and players could take these disputes to state or federal courts to be decided by factfinders who were not involved in the dispute rather than be controlled by the head of the entities they are in a dispute with. Instead, coaches and the players’ associations in professional sports leagues are held to an esteemed standard.[xxviii] They are expected to be able to enter into the agreements that they make correctly.[xxix] This implies that the employment agreements between coaches or players and their respective teams and leagues are not adhesion contracts that would indicate procedural unconscionability. Even though courts have acknowledged that these agreements have shown some substantive unconscionability, it has not been enough to move the sliding scale to compensate for the lack of procedural unconscionability.[xxx]
As a multi-billion-dollar enterprise, the NFL has much leverage over its coaches.[xxxi] Large revenues will likely allow the NFL to offer lucrative contracts to its coaches while leaving them with little room to negotiate. Coaches also lack a collective bargaining agreement like those of NFL players. Yet, the players are afforded the added protection of legal representation provided by the National Football League Players Association.[xxxii] This leaves NFL coaches vulnerable since they do not have a union to negotiate on their behalf.
Mediation as a Proposed Solution
Mediation could be a helpful resolution to address these concerns. Mediation offers several benefits over arbitration, primarily due to its informal, flexible, and non-binding nature.[xxxiii] One key advantage of mediation is that the mediator facilitates communication and negotiation, helping the parties reach a voluntary agreement without imposing a decision.[xxxiv] This process would allow both parties to dictate their fate rather than having an arbitrator decide. Since the NFL has designated Goodell as the arbitrator in these disputes, mediation could level the playing field rather than having a potentially interested party decide the outcome.
Conclusion
Recent case outcomes allow the NFL to retain control over its ability to arbitrate disputes with coaches and players.[xxxv] It has proven extremely difficult for coaches and players to meet their burden of proof when arguing that the arbitration provisions in their employment agreements are unconscionable because courts have determined that these contracts are made at arms-length rather than as adhesion contracts. The coaches and players have successfully argued substantive unconscionability but have yet to overcome the obstacle of proving procedural unconscionability. They will continue to be forced into arbitration with the “king” of their respective leagues deciding their fate rather than having a process like mediation, which could arguably be fairer and more effective.
[i] Mark C. Travis, Arbitration Between Coaches and the NFL, A.B.A. (August 24, 2022), https://www.americanbar.org/groups/labor_law/publications/labor_employment_law_news/summer-2022/arbitration-between-coaches-and-nfl/.
[ii] Id.
[iii] Beltran v. AuPairCare, Inc., 907 F.3d 1240, 1252 (10th Cir. 2018).
[iv] Id.
[v] Id.
[vi] Id.
[vii] Id.
[viii] Id.
[ix] Gruden v. Nat’l Football League, 2022 WL 22853201 (Nev. Dist. Ct. October 12, 2022).
[x] Travis, supra note i.
[xi] Id.
[xii] Id.
[xiii] Gruden, 2022 WL 22853201.
[xiv] Junkermier, Clark, Campanella, Stevens, P.C. v. Alborn, Uithoven, Riekenberg, P.C., 380 P.3d 747, 756 (Mont. 2016).
[xv] Id.
[xvi] Gruden, 2022 WL 22853201.
[xvii] Id.
[xviii] Elaine Briseño, NFL Antitrust Verdict, WWE Chair Woes Define 2024’s 1st Half, LAW360 (July 19, 2024, 9:15 PM), https://plus.lexis.com/newsstand/law360/article/1853549/?location=most-read&crid=d85b9b25-0a39-407a-8883-546ef8e9ba94&cbc=0,0.
[xix] Id.
[xx] Gruden, 2022 WL 22853201.
[xxi] Flores v. The Nat’l Football League, 658 F. Supp. 3d 198 (S.D.N.Y. 2023).
[xxii] Travis, supra note i.
[xxiii] Id.
[xxiv] Id.
[xxv] Christopher Deubert, NFL Wins More Than It Loses in Flores Arbitration Decision, CONSTANGY, BROOKS, SMITH & PROPHETE, LLP (Mar. 14, 2023), https://www.constangy.com/employment-labor-insider/nfl-wins-more-than-it-loses-in-flores-arbitration-decision.
[xxvi] Id.
[xxvii] Christopher Deubert, Two Years into His Bias Suit Against NFL, Brian Flores Has Little to Show for It, JD SUPRA (Jan. 23, 2024), https://www.jdsupra.com/legalnews/two-years-into-his-bias-suit-against-8697770/.
[xxviii] Collective Bargaining Agreements in Sports Leagues & Their Legal Scope, JUSTIA (July 2024), https://www.justia.com/sports-law/collective-bargaining-agreements-in-sports-leagues/.
[xxix] Id.
[xxx] Gruden, 2022 WL 22853201; Flores, 658 F. Supp. 3d 198.
[xxxi] R. Matthew Hedges and David Hughes, Restructuring NFL Ownership, A New Way Forward, THE SPORT J. (Apr. 28, 2023), https://thesportjournal.org/article/restructuring-nfl-ownership-a-new-way-forward/.
[xxxii] How the NFLPA Works, NFLPA, https://nflpa.com/about.
[xxxiii] Advantages of Mediation, U.S. Office of Special Counsel, https://osc.gov/Services/Pages/ADR-Advantages.aspx.
[xxxiv] Harrell's, Ltd. Liab. Co. v. Agrium Advanced (U.S.) Techs., Inc., 795 F. Supp. 2d 1321, 1327 (M.D. Fla. 2011).
[xxxv] Gruden, 2022 WL 22853201; Flores, 658 F. Supp. 3d 198.