DID DEFLATEGATE TAKE THE AIR OUT OF BINDING ARBITRATION?
On 2 September 2015, Federal District Judge Richard Berman overturned the National Football League’s four-game suspension of quarterback Tom Brady over his role in ‘Deflategate’. Judge Berman’s order vacated NFL Commissioner Roger Goodell’s binding arbitration ruling. The NFL has now had its last four appealed arbitration decisions overturned. With the publicity surrounding these decisions, one might assume that the NFL’s losing record on appeal is typical. It is not.
Roughly 40 percent of all contracts include a clause requiring that the parties submit disputes to binding arbitration. Businesses principally include arbitration provisions in their contracts because arbitrations are generally less expensive than trials and arbitrations resolve faster than trials. But if arbitration awards can be successfully appealed to federal district courts, then these advantages are lost. If a court is going to hear the parties’ dispute anyway, the money and time spent on arbitration is wasted. For this reason, the appealability of arbitration decisions should be a paramount concern for all businesses.
While recent appeals from NFL arbitrations have received significant publicity, these are anomalies. In 2011, University of Illinois Professor of Law Michael H. LeRoy published a thorough analysis regarding the appealability of arbitration awards. He found that federal district courts uphold over 90 percent of arbitration awards and state courts uphold roughly 80 percent of arbitration awards. In comparison, appeals from trial court judgments (instead of arbitration awards), are upheld only 64 percent of the time. On appeal, the appellant always has an uphill climb, but – as the statistics demonstrate – the appellant’s climb is significantly steeper when appealing an arbitration award.
Oct-Dec 2015 issue
Kercsmar & Feltus PLLC