Employment & Labor Insider

Last week, the Supreme Court of Nevada and the U.S. Court of Appeals for the Second Circuit delivered a one-two punch to NFL Commissioner Roger Goodell’s authority to arbitrate disputes involving personnel in National Football League clubs. 

Specifically, the courts ruled that the NFL arbitration process, which permitted Commissioner Goodell to preside over legal challenges brought by coaches Brian Flores and Jon Gruden, was unenforceable. In so doing, the courts largely cast aside a century of deference to the Commissioner role as guardian of the league. 

Commissioner authority

Deference to the role of Commissioners began in 1921, with the appointment of Judge Kennesaw Mountain Landis as the first Commissioner of major league baseball. Judge Landis was appointed after the “Black Sox” scandal, in which several members of the Chicago White Sox were accused of intentionally losing the 1919 World Series in exchange for bribes from mobsters. Judge Landis banned eight players for life.

For many years afterward, Commissioner authority was most frequently challenged – and upheld – in the context of major league baseball. In 1931, a federal court in Illinois dismissed a suit from the then-minor league Milwaukee Brewers challenging Judge Landis’ rejection of an optional player contract between the St. Louis Browns and the Brewers, holding that “the commissioner acted clearly within his authority.” The authority of the baseball commissioner was upheld in several decisions issued in the late 1970s and through the 1980s.

The more recent challenges to Commissioner authority have come from players and against the NFL. In 2016, the Second Circuit reversed a district court decision and affirmed Commissioner Goodell’s authority to impose a four-game suspension on Patriots’ quarterback Tom Brady for his alleged involvement in a scheme to deflate footballs to his liking. The Second Circuit recognized the Commissioner’s “broad authority to deal with conduct he believes might undermine the integrity of the game.” In 2016 and 2017, courts also upheld Commissioner Goodell’s authority to impose sanctions on players for alleged domestic abuse.

In June 2024, a federal judge in New York rejected efforts by the New York Knicks to avoid having Adam Silver, Commissioner of the National Basketball Association, oversee a dispute between the Knicks and Toronto Raptors concerning a former employee alleged to have stolen confidential information and data.

The Flores case

In February 2022, current Minnesota Vikings defensive coordinator Brian Flores filed a race discrimination lawsuit after he was terminated as the head coach of the Miami Dolphins and was not hired for the same position with the New York Giants, Denver Broncos, or Houston Texans. Mr. Flores seeks to represent a class of Black coaches and executives he contends were similarly discriminated against and has been joined in his action by two other Black coaches, Steve Wilks and Ray Horton, who are asserting similar claims against their former employers, the Arizona Cardinals and Tennessee Titans.

In March 2023, the Southern District of New York issued a decision largely granting the NFL’s motion to compel arbitration. The court determined that the coaches’ claims related to their respective employment with the Dolphins, Cardinals, and Titans must be arbitrated pursuant to the arbitration provisions in the coaches’ contracts with those clubs. The court also ruled that the arbitration agreements cover the coaches’ related claims against the NFL.

On the other hand, the court ruled that the arbitration provisions did not cover the claims against the Broncos, Giants, and Texans and related claims against the NFL because the coaches had no contracts with those clubs.

The court rejected Mr. Flores’ claims that the arbitration provisions in his contract were unenforceable because they provided Commissioner Goodell the authority to hear the dispute pursuant to the NFL Constitution. The court said that it would not prejudge the fairness of the proceedings agreed to by Mr. Flores in his contract. Indeed, a different judge from the same court reached the same conclusion in the Knicks case concerning alleged bias of NBA Commissioner Silver.

In a decision issued 11 days ago, the Second Circuit affirmed the lower court’s rulings.  Nevertheless, the Court generally rejected the NFL’s arbitration process as applied to Mr. Flores because because Mr. Flores had to submit his claims to Commissioner Goodell, the NFL’s principal executive. Although recognizing that courts generally defer to arbitration, the court found that the NFL arbitration process “fails to bear even a passing resemblance to traditional arbitral practice,” “is unworthy even of the name of arbitration,” and therefore is deserving of no protection.

The court was unmoved that Commissioner Goodell had appointed former New Jersey attorney general Peter Harvey as the arbitrator in the matter, given that Mr. Harvey is a member of the NFL’s Diversity Advisory Committee. 

Finally, the Second Circuit stated that there was no conflict with its prior decision in the Tom Brady case because that arbitration mechanism was pursuant to a collective bargaining agreement between the NFL and NFL Players Association.

The Flores case will now proceed on the merits, split between federal court and an unclear arbitral forum. Barring settlement, any resolution is still years away.

The Gruden case

In October 2021, Las Vegas Raiders head coach Jon Gruden was forced to resign after the revelation of emails in which he engaged in what the NFL described in a legal brief as “racist tropes and misogynistic and homophobic slurs.” At the time, Mr. Gruden was in the fourth year of a 10-year, $100 million contract, the largest contract ever for an NFL coach.

Mr. Gruden and the Raiders quickly reached a confidential settlement concerning Mr. Gruden’s departure. But in November 2021, Mr. Gruden sued the NFL and Commissioner Goodell in Nevada state court, alleging principally that the defendants had intentionally and tortiously interfered with Mr. Gruden’s contract with the Raiders by leaking the emails.

In May 2022, without much explanation, the court denied the NFL’s motion to compel arbitration.

Then, in an order issued in May 2024, two judges on a three-judge panel of the Nevada Supreme Court reversed, finding that Mr. Gruden was bound by his agreement to arbitrate. The panel majority expressed some concern that Commissioner Goodell, a defendant in the case, could theoretically also serve as the arbitrator. However, the majority noted that it was not clear that Commissioner Goodell would do so and, in the event that he did, issues of bias could be raised as a ground for seeking to vacate the arbitration decision.

After the panel decision was issued, the full Supreme Court agreed to hear the case. On August 11, the Court undid the May 2024 ruling by a 5-2 majority, holding that requiring Mr. Gruden to arbitrate his claims before Commissioner Goodell would be unconscionable because the process “would allow Goodell, as Commissioner, to arbitrate disputes about his own conduct.”

The dissent rejected this concern, declaring it “unlikely that Goodell would serve as the arbitrator over a dispute that names him as a defendant, but if he did, Gruden would be entitled to post-arbitration relief for arbitrator bias.”

Mr. Gruden can now pursue his claims against the NFL and Commissioner Goodell in a Nevada state court. Once again, barring settlement, resolution of his claims is years away.