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Neutral arbitrators in sports: What makes it fair?

Bob Wallace, Jr. August 10, 2015

"Neutrality has been defined as a state of mind, a certain distance that the arbitrator establishes vis-a-vis his or her legal, political and religious background.” It is not a concept that it necessarily grounded in arbitration laws or rules. “Impartiality,” on the other hand, “has been defined as the aptitude of the arbitrator to be free of bias, predisposition or affinities interfering with the conduct of his mission” (“The Arbitrator As A Neutral Third Party,” by Caroline Verbruggen).

I began thinking of these definitions because recently, at the annual Sports Lawyers Association meeting in Baltimore, there was a panel discussion on the grievance and arbitration systems employed by Major League Baseball, the National Football League and the National Hockey League and the role of the arbitrator within all those systems.

In particular, the discussion revolved around NFL Commissioner Roger Goodell’s role as an arbitrator and whether he or one of his designees should hear disciplinary matters. (Full disclosure: I have served as one of his designees for conduct and substance cases.) Can a commissioner really be a fair and neutral arbitrator of these types of disputes? At the core of this issue is the fact that commissioners are hired and employed by team owners and therefore, in the minds of critics, are predisposed to rule in the interest of an owner and against the interest of the player (or other employee who by reason of contract has agreed to let the commissioner be the arbiter of certain disputes).

Although Goodell’s role is the one getting most of the attention, he is not the only and clearly not the first commissioner to have the power to decide disputes or dole out discipline to players and owners. The most famous, if not the first, was Judge Kenesaw Mountain Landis, who after serving for 15 years as a federal judge, was made commissioner of baseball in 1920 by the owners. He served as the autonomous head of all of baseball and was imbued with vast powers, which he unquestionably exercised when he suspended the White Sox players for gambling on baseball despite their acquittal in a court of law.

Pete Rozelle, the longtime commissioner of the NFL during the '60s, '70s and '80s, used one of his first acts as commissioner to suspended Detroit’s Alex Karras and Green Bay’s Paul Hornug for gambling on football games. The NBA’s David Stern and MLB’s Bud Selig have as well exercised disciplinary powers against players and owners in their respective sports.

Their power to do so has been codified in the collective bargaining agreements, constitutions and bylaws, and individual contracts between the clubs and employees. The NFL, NHL, NBA and MLB also employ third-party arbitrators for disputes — attorneys and mediators who are jointly agreed upon by the players association and their respective leagues. But each commissioner has retained the broadest power to “act in the best interest of the game.”

The NFL system has come under the most severe criticism because of the perception that Goodell acts as judge and jury on personal conduct matters, and, until recently, on drug cases. They also charge that he is responsible for hearing any appeal from the discipline he issues. However, Goodell does have the power to, and has, designated hearing officers to consider appeals if the aggrieved employee wants to challenge his decision.

Missouri Supreme Court decision

Goodell’s power to decide disputes involving the interest of a team and a nonplayer has also recently been challenged — not by the union, but by lawyers representing team employees. The case, Hewitt v. Kerr, stemmed from the St. Louis Rams moving to compel arbitration when Todd Hewitt, the team’s equipment manager, filed suit against the team for his firing. In a decision issued in April 2015, the Missouri Supreme Court decided the arbitration provision of Hewitt’s employment contract, which he had executed for almost all of his 40 years of employment, was unconscionable and therefore, unenforceable.

In a highly fractured decision featuring three concurrences and four dissents, the court found that arbitration was a reasonable and preferred method for resolving industry disputes, but that the NFL commissioner, as the sole arbitrator with unfettered discretion and as an employee of the team owners, was not sufficiently “neutral” enough to protect Hewitt’s right to have a fair hearing. The high court directed the trial court to issue a new order compelling arbitration with a neutral arbitrator, not the commissioner.

While the Missouri Supreme Court’s decision will presumably be limited to employment disputes involving Missouri-based teams (the Rams and the Kansas City Chiefs), it’s certainly worth monitoring for future ramifications. Those within the NFL have also viewed the decision with a good amount of surprise and skepticism. Nonplayer employees of the NFL have been subject to the arbitration provisions of the NFL for decades without many major problems, and all contracts filed with the league must include that provision. In fact, historically, NFL commissioners, including Goodell, were known to be very employee-friendly; an aggrieved nonplayer employee more often than not came out on the plus side in those types of disputes.

Alternatives to the Commissioner?

Still, if the argument stands that a commissioner and his or her designee cannot be neutral and impartial, then what are the alternatives for sports leagues? The baseball industry argues that its procedures offer a more fair system. Under its dispute resolution process, an arbitrator is selected by both the league and the union; the arbitrator is therefore not beholden to any one side, and can be replaced by either side.

Yet some observers of the MLB system have disagreed with this conclusion. They point to the MLB replacing arbitrator Shyam Das after he overturned the suspension of Brewers star Ryan Braun in February 2012 for alleged testosterone use. Patrick Rishe, a professor at Webster University in St. Louis and contributor to Forbes Magazine, wrote when analyzing MLB arbitration in the Braun matter:

But the biggest joke of all is that the arbitration process is anything but neutral, especially in light of Ryan Braun’s suspension. Shyam Das, the MLB arbitrator who lifted Braun’s suspension in early 2012 was fired by Major League Baseball shortly thereafter. Coincidence? Don’t think so.

Rishe further argued that Das’ replacement Frederic Horowitz, who upheld the majority of Alex Rodriquez’s suspension (reduced from 211 games to 162 games) did so because “after all he wants to keep his job, too,” which makes it “nearly impossible to accept that Mr. Horowitz’s ruling is truly impartial.”

The essence of all of these criticisms is that arbitrators will act in their own best interests. Lawyers suspect this, too. It is one of the reasons why arbitration lawyers frequently study the arbitrator’s most recent decision — the arbitrator may be very mindful of his last decision when rendering her next one. Consequently, critics argue, there may be fewer differences in the perceived impartiality of Goddell and an arbitrator who is hired by both sides but can be fired by either side.

The real issue is not really who selects the arbitrator or who pays him, but whether the arbitrator can view the facts of the case, and apply the rules that govern the case consistently and fairly. As the MLB arbitrator Das said in an interview with Newsday’s Steve Marcus, he “considers everything” when reaching his decisions because in “most cases, there aren’t any law books to run to. The law is what’s in the contract.”

Nevertheless, the perception of neutrality or impartiality will continue to be debated in these arbitration cases so long as there is a winner or loser and the arbitrator can be replaced if one of the parties does not like his decision. Perhaps the solution is to provide the arbitrator with a term agreement that does not allow replacement but for a defined cause of termination. This might provide some limited security and remove the necessity of protecting one’s self interest — keeping the job. Furthermore, arbitrators are often charged with issuing written opinions, a requirement that forces an arbitrator to articulate the rationale of his decision and gives some basis to evaluate if a decision is arbitrary and capricious. These safeguards may be helpful, but the efficacy of arbitration rests primarily on the integrity of the decision-maker — not who hires him.

This article originally appeared on Law360.

Bob Wallace is a partner in Thompson Coburn's St. Louis office and chair of the firm's sports law group. He previously spent 16 years with the St. Louis Rams, serving as the NFL team's executive vice president and general counsel.