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Your Guide to the Alex Rodriguez Appeal

Breaking news:  An arbitrator for Major League Baseball (MLB) has issued a final decision determining that New York Yankee third baseman Alex Rodriguez should be suspended for 162 games – the complete 2014 MLB season – plus any and all postseason games.  This decision reduces the suspension initially imposed by MLB (211 games), and, because it will be without pay, costs A-Rod $25 million.  (Perversely, the suspension benefits the Yankees, who will not only be freed from their payroll obligations to A-Rod for 2014, but relieved of certain luxury tax obligations as well under MLB rules.)

Via a statement released earlier today, A-Rod says that he and his lawyers are headed to federal court.  What awaits him there?  To understand that, we need to understand the legal landscape that applies to major league baseball players.

The relationship between Alex Rodriguez, the New York Yankees, and MLB is governed by the Basic Agreement, a contract that was negotiated in 2012 between the existing MLB teams and the players’ union, called the Major League Baseball Players Association (“MLBPA”).  The current Basic Agreement runs until 2016, at which point the union and MLB will sit down and collectively bargain for a new one.

Under the Basic Agreement, disputes between a player and his team are governed by Article XI (the “Grievance Procedure”).  Id. at 38.  Those disputes, in turn, are ultimately settled by arbitration pursuant to XI.B.  Id. at 44.  The Basic Agreement provides that the “decision of the Arbitration Panel shall constitute full, final and complete disposition of the Grievance appealed to it.”  Id.

That’s where we are now; A-Rod has followed the Grievance procedures and has now obtained a “full, final and complete disposition” of his Grievance, reducing his suspension from 211 to 162 games.  How does he get from there into federal court?

The answers are two-fold:  first, because the Basic Agreement is a product of private collective bargaining, it is subject to the federal Labor-Management Relations Act, which in turn provides for federal jurisdiction over disputes regarding rights created by or substantially dependent upon a collective bargaining agreement (such as the Basic Agreement).  29 U.S.C. § 185(a); see also Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987).  So that means A-Rod can file suit in federal court based on federal law, regardless of what the Basic Agreement or any state laws happen to say.

But what does that federal law say?  As it turns out, this is a topic we’ve discussed frequently here at Suits by Suits; the same law that governs virtually all individual arbitration clauses contained in employment agreements also governs here:  the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq.  The FAA, in turn, provides four ways in which a litigant can vacate an arbitration award:

(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

9 U.S.C. § 10(a).  If you want to skip to the punch line, our own Jason Knott summarized it perfectly a few months ago:  “When a federal court confirms an arbitration award, it isn’t newsworthy, because that’s what everyone expects will happen.  But when a court tosses an arbitrator’s decision, it creates headlines.”  So why exactly does A-Rod face such an uphill scenario?

The biggest reason isn't what the FAA says; it's what it doesn't say.  Note that those four statutory grounds for reversing an arbitration award do not include “mistake of law” or even “gross mistake of law.”  They don’t include incompetence, stupidity, or carelessness.  As the U.S. Supreme Court has noted, when a collective bargaining agreement specifies that an arbitrator’s award is “final,” a court may not evaluate whether the arbitrator applied “correct principles of law” or not.  United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 598-99 (1960).  Thus, even if the arbitrator had no basis for imposing a 162-game suspension on A-Rod, that fact standing alone would not be sufficient to permit a federal court to overturn the arbitration award under the FAA.

Summarizing this (and other) holdings, we lawyers typically describe the FAA’s standards for vacating an arbitration award as procedural rather than substantive; that means that a successful challenge must show that there was something wrong with the way in which the arbitration was conducted, and not just the result the arbitrator reached.  This is the dual-edged nature of binding arbitration; like it or not, you’re usually stuck with even an egregiously wrong outcome.  (For this reason, we told you how some employers are reconsidering whether mandatory arbitration clauses with their executives are good business policy.)

We do not yet know what transpired during A-Rod’s arbitration.  But what we do know is that, if Rodriguez is going to prevail in federal court, he’s almost certainly going to need to show that the process itself was unfair in some way.  Maybe he can do this; perhaps there were key pieces of evidence that the arbitrator refused to admit (9 U.S.C. § 10(a)(3)).  So far, however, A-Rod’s allegation is that the arbitrator “blatantly disregarded the law and the facts.”  That allegation – even if true – is probably not enough for him to succeed in overturning the arbitration award.

As more details are forthcoming – and if Alex Rodriguez and/or his lawyers detail allegations that fit more closely within the four grounds set forth for vacatur under the FAA – we’ll continue to update and evaluate.

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