Federal Court Tackles Issue of Arbitrability in NFL Race Discrimination Suit, with Split Results
Last year, we wrote about former National Football League coach Brian Flores and his lawsuit in February 2022 alleging racial discrimination against the NFL and several of its teams. In his lawsuit, Flores claimed that the NFL’s “Rooney Rule,” which requires teams to interview at least two racial minority candidates for open coaching and leadership positions, is essentially a sham, as evidenced by a misdirected congratulatory post from Hall of Fame Patriots coach Bill Belicheck to a white candidate before Flores’s interview. Former Arizona Cardinals head coach Steve Wilks and former Tennessee Titans defensive coordinator Ray Horton later joined in Flores’s lawsuit. On March 1, 2023, the U.S. District Court of the Southern District of New York ruled that Flores may litigate his claims against the NFL, the Houston Texans, the New York Giants, and the Denver Broncos in federal court, while the rest of the claims—including Flores’s claim against the Dolphins and all claims by Wilks and Horton—must go to arbitration.
This decision raises difficult questions about the contours and limits of arbitration agreements. The split ruling emphasizes that arbitration is a creature of contract law and that courts, while still largely deferential to arbitration, will only compel arbitration where there is a clear and unambiguous enforceable agreement to arbitrate the claims at issue.
Background of case
As we previously reported, Flores’s lawsuit highlighted an apparent disconnect between the NFL’s professed commitment to diversity as embodied in the Rooney Rule and other League pronouncements and NFL teams’ actual employment practices. The Rooney Rule, initiated in 2003 aimed to increase the diversity of the hiring pool for head coaching and senior leadership positions. Flores and the other plaintiffs, however, alleged that Black candidates were being interviewed for positions that NFL teams had already decided would be filled by a white candidate, that Black coaches were being treated more harshly than similarly situated white coaches, and that at the time of the lawsuit’s filing, there was only one Black head coach despite the fact that the majority of players were Black. Flores and Horton alleged that they were subjected to sham interviews so that teams could claim they were complying with the Rooney Rule. The NFL and its teams moved to compel arbitration for all claims, which according to contract would be overseen by the NFL Commissioner—a provision that the plaintiffs argued was potentially rife with bias.
The plaintiffs claimed that the arbitration agreements in their contracts with their respective NFL teams were invalid, did not encompass their claims, or were unenforceable. According to the Federal Arbitration Act, a court must determine first whether an arbitration agreement exists, as determined by state contract law, and next whether the dispute between parties falls within the scope of arbitration. Federal policy gives broad discretion to arbitration agreements and their terms. However, an agreement to arbitrate the issue of arbitrability is deemed as an additional agreement, which must make “clearly and unmistakably” evident that the parties intended for the issue of arbitrability to be decided by the arbitrator.
Claims subject to arbitration
The federal court found that the majority of the coaches’ claims against their former teams must be submitted to arbitration because these claims were covered by valid arbitration agreements, largely rejecting the plaintiffs’ claims that arbitrator bias rendered the agreements unenforceable.
- Claims arising from performance of contractual duties—including post-termination disputes—are subject to arbitration. In keeping with the wide latitude typically given by courts to arbitration agreements, the federal court stated that arbitration agreements govern disputes arising after the termination of a contract that does not explicitly exclude post-termination disputes. The court found that Flores’s retaliation claim against the Dolphins regarding his firing is subject to arbitration because it clearly arises from his employment with the club.
- Possible arbitrator bias does not void an arbitration agreement if parties “clearly and unmistakably” delegate power to arbitrator. The court found that when parties agree that the arbitrator will decide issues regarding whether the arbitration agreement is “void or voidable,” the parties have “clearly and unmistakably” delegated to the arbitrator the power to determine whether their dispute—including the issue of arbitrability itself—is subject to arbitration. Wilks signed a contract with the Cardinals that stated their agreement to arbitrate “all disputes, claims or controversies that exist or that may arise between them,” including “any claim that all or any part [of the contract] is void or voidable.” Wilks argued that allowing the NFL Commissioner to decide the threshold issue of arbitrability would be unconscionable due to bias, thus voiding the contract. However, the court found that possible arbitrator bias does not necessarily invalidate an arbitration agreement itself, and that courts should avoid presuming that an arbitrator will be biased if the plaintiff agreed to a particular alternative dispute resolution process, including the selection of a specific arbitrator, in their contract.
- Contract does not need the word “arbitration” to be a valid arbitration agreement as long as it manifests parties’ intent. Horton argued that his employment contract with the Titans did not contain a valid arbitration agreement. The clause at issue states that “all matters in dispute between [Horton] and Titans shall be referred to the Commissioner.” Even though the clause did not use the word “arbitration,” the court found that it was sufficient to constitute an arbitration agreement because, “bare bones though it may be,” the clause manifested the parties’ intent to submit disputes to a specified third party whose decision would be binding.
- Valid arbitration agreements are enforceable against all joint employers who are jointly engaged in disputed actions. The court found that arbitration agreements are enforceable against joint employers who are jointly engaged in the disputed actions (see our previous post on the background of the NLRB joint employer standard). The plaintiffs argued that their arbitration agreements with their hiring teams did not apply to their disputes with the NFL, who was not a party to their contracts. However, the court determined that because the plaintiffs alleged both that the NFL was a joint employer with their hiring teams and that the racial discrimination was a product of collusion among NFL teams and the NFL, the plaintiffs could not also claim that the two entities were distinct in order to avoid arbitration.
Claims not subject to arbitration
The court determined, however, that Flores may litigate his claims against the Broncos, Giants, and Texans in court because these claims were not covered by valid arbitration agreements.
- Arbitration agreement not enforceable if one party retains sole discretion to modify terms without notice. The court rejected the argument by the NFL and its teams that the arbitration clause in the NFL Constitution, which was incorporated by reference into the coaches’ employment agreements, applied to Flores’ claims against the teams that refused to hire him. The court held that the Constitution did not create a binding agreement to arbitrate because the NFL was not required to provide notice of any changes that it may make to the Constitution. Citing state law that the unilateral discretion to alter terms of an arbitration provision without notice renders the agreement illusory and enforceable, the court determined that Flores was thus permitted to litigate his claims against the Broncos and the NFL in federal court.
- Claims arising from disputes outside the effective dates of an arbitration agreement generally not subject to arbitration. The NFL and its teams also argued that the general arbitration agreement in the NFL Constitution, as incorporated into Flores’s contract with the Miami Dolphins, retroactively applied to Flores’s claims against the Broncos that arose before he became the Dolphins’ head coach. The court noted, however, that courts generally refuse to compel arbitration of claims arising from disputes outside the effective dates of an arbitration agreement unless the agreement expressly includes pre-contract claims. (This rationale does not include claims that directly “arise from” the performance of contractual duties, as noted above.)
- No arbitration agreement if the agreement requires a signature—and there’s no signature. Similarly, the NFL and its teams argued that the arbitration clause in Flores’s contract with another (non-party) NFL team, the Pittsburgh Steelers, applied retroactively to any claims against the NFL or member teams, including the Giants and Texans. The court noted that even if the defendants were correct, the contract with the Steelers was not a valid arbitration agreement because the Commissioner never signed it, which the contract required in order to be binding on the parties. The court thus found that the defendants failed to prove that a valid arbitration agreement with the Steelers existed at all when Flores was being considered for hire by the defendant teams.
While the federal court decision raises many unique questions about the procedural nuances of arbitration, and the laws governing contracts vary by state, the ruling offers excellent reminders to draft arbitration clauses and agreements carefully—if one intends to arbitrate at all. Key points to keep in mind include wording requirements to effectuate an arbitration clause, specification of effective dates in the agreement, “clear and unmistakable” delegation of authority to a designated arbitrator, and—last but not least—the importance of signing a contract if a signature is required.
Please consult with a Franczek attorney if you have any questions.
*Also authored by Jenny Lee, a third-year law student at Loyola University Chicago School of Law, currently a law clerk at Franczek P.C.