By Jeff Birren, Senior Writer
Bruce Allen, president of the NFL’s Washington team, used company email to correspond with ESPN-NFL analyst Jon Gruden. Years later the NFL and Congress investigated the team due to complaints about the team’s culture under owner Daniel Snyder. The emails surfaced during their investigations. The New York Times and Wall Street Journal published some of the material in October 2021. Gruden, again head coach of the NFL’s Las Vegas team, resigned. He sued the NFL in Nevada District Court, alleging the leaks cost him salary, lost endorsements, and sponsorship deals. The NFL filed an unsuccessful motion to compel arbitration. A panel of the Nevada State Supreme Court recently reversed (The National Football League and Roger Goodell, Appellants v. Jon Gruden, Respondent, Case No. 85527 (5-14-24)).
Gruden’s Prior NFL History
Gruden was a long-time NFL coach. In 1990 he was a “special assistant” at the 49ers. He returned to the NFL in 1992 for two years as a Packers assistant coach, and then three years with the Eagles. In 1997 he became Oakland’s head coach. The next stop was Tampa Bay in 2002 as head coach until he was fired after the 2008 season. After years at ESPN, Gruden was hired in Las Vegas as head coach, signing a ten-year contract. His record there was 22-26.
All NFL coaches are required to sign contracts that must be approved by the Commissioner, contain an arbitration clause, and incorporate by reference “Article VIII § 8.3 of the NFL Constitution, which states: ‘The Commissioner shall have full, complete, and final jurisdiction to arbitrate: … (E) Any dispute involving a member or members in the League or any players or employees of the member of the League or any combination thereof that in the opinion of the Commissioner constitutes conduct detrimental to the best interest of the League or professional football.’” By 2021, Gruden had 20 years of NFL-team employment with that clause in every contract.
Snyder and the Email Trail
In July 2020 the Washington Post published an article that was highly critical of the Commanders’ workplace environment. That set off investigations by the NFL and the U.S. House of Representatives Oversight Committee. The Committee issued its report on December 8, 2022, and included references to how the Allen-Gruden emails became public. It stated that “on the eve of Mr. Allen’s deposition, lawyers for Mr. Snyder sent the Committee a batch of internal emails containing inappropriate content from Mr. Allen’s Commanders email account so ‘that Mr. Allen will have an opportunity to review them prior to his deposition.’” The emails included those leaked to the Journal and Times. “Mr. Allen testified that around April 2021, he notified NFL’s counsel that Mr. Snyder had used emails from his Commanders email account in a federal court action” (Report at 8).
The published emails contained “misogynistic, racist, and other inappropriate content” from Allen and “included exchanges between Allen and Gruden” (Report at 12). Snyder made “presentations” to the NFL regarding Allen’s role, including identifying for the NFL “specific inappropriate Bruce Allen emails.” Four months later, Allen learned that “many of the ’inappropriate’ emails obtained by Mr. Snyder… had been leaked to the Wall Street Journal” (Report at 42.) When Allen contacted the NFL counsel “to complain, she indicated that the Commanders were responsible for the leak, stating: ‘We didn’t do it at the league office. It came out of their side’” (Report at 43). The Minority Report labeled the emails “racist, misogynistic, homophobic, or otherwise incredibly offensive emails” that were “sent to and from Allen’s work account” (Minority Report at 2).
“Offensive” Emails
There is little reason to repeat much of it when snippets will suffice. ESPN New Services reported that Gruden wrote that Goodell “shouldn’t have pressured the Rams to draft ‘queers’” and noted the Times “reported that Gruden criticized Goodell and the NFL for trying to reduce concussions” (10-11-21). ESPN’s Andrew Bucholtz stated that Gruden had referred to NFL Players’ Association head DeMaurice Smith as “Dumboriss Smith” who “has the lips the size of michellin (sic) tires” (10-11-21). For a deeper dive into the morass, see “Jon Gruden emails, explained: Raiders coach resigns following release of damning messages”, Zac-Al-Khateech, The Sporting News (10-17-21).
Fall Out
Gruden resigned and “subsequently entered a confidential settlement” with the team. The following month he sued the NFL and Goodell, “alleging they purposely leaked his emails to the media and forced his resignation.” The defendants unsuccessfully moved to compel arbitration pursuant to the terms of Gruden’s contract. The NFL appealed. A Supreme Court panel granted a motion to stay the proceedings during the appeal (1-23-23).
A different panel heard oral argument on January 10, 2024. Gruden’s counsel asserted that the NFL’s argument rested “on the basis there was a buried paragraph in a 450-page document that [Gruden] never saw, couldn’t negotiate and no opportunity to modify while the NFL reserved the unilateral ability to change the NFL constitution” (ESPN (1-10-24)). He further argued that when the contract was signed, he did not have an attorney present, merely his agent.
NFL counsel stated that Gruden’s contract “was the richest coaching contract in NFL history” (Katelyn Newberg, Las Vegas Review-Journal (1-10-24)). As part of Gruden’s departure, his employer “settled out of this case and paid Coach Gruden an undisclosed sum” (Jamison Hensley, ESPN (1-10-24))). (That allowed Gruden to argue that the arbitration clause was invalid because he was no longer a team employee.) The oral argument is at: https://www.youtube.com/watch?v=0EgwS2nca68
The Majority Opinion
“Principally at issue is whether the arbitration clause contained in the NFL Constitution is binding under the facts of this case and California law.” The Court italicized its findings. Gruden did not show the settlement terminated the arbitration clauses. “Arguments of counsel are not evidence.” The settlement was not in the record and the district court “improperly relied on counsel’s statements about it.” Gruden therefore “failed to establish that it rescinded the employment agreement.”
The employment agreement incorporated the NFL Constitution by reference. The contract was “clear and unequivocal,” it was easily available, “the reference is called attention to the other party and he consents thereto.” Gruden agreed to “abide by and be legally bound by the NFL Constitution, Bylaws and rules and regulations of the NFL.” He “further acknowledged that “he has read” all of it and “understands their meaning.” “Gruden cannot now disavow that assent.”
The NFL Constitution entered in evidence was sufficiently shown to be the version at the time of signing. It was attached to a declaration by the NFL’s General Counsel as a “true and correct copy.” It was dated September 14, 2016, and Gruden does not allege “it had been subsequently amended. Since Gruden argued that he never saw a copy of it, he could not assert that it had been changed.” The court below “committed clear error” when it only considered Gruden’s declaration but “not the NFL Parties declaration, which is sufficient to satisfy their burden.”
The NFL Constitution contains a valid arbitration clause covering disputes involving Gruden that arise in the course of his employment with the Raiders. Arbitration “is a matter of contract. GE Energy Power Conversion France SAS Corp. v. Outokumpu Stainless USA, LLC, 140 S. Ct. 1637, 1643-44 (2020)).” The “public policy of federal law, California, and Nevada all favor enforcement of a valid arbitration clause.” Goodell had “made no formal finding” that Gruden’s conduct “was detrimental to the League’s best interest,” but “his motion to compel arbitration” and other filings “sufficiently show” the provision applied. Arbitration “clauses are presumed to survive contract termination when the dispute involves” actions that arose during the contractual period. “Nolde Bros. v. Loc. No, 358, Bakery & Confectionary Workers Union, AFL-CIO, 430 U.S. 243, 252 (1977) (compelling a former employer to arbitrate per an employment agreement.)” Gruden’s claim that the “NFL Parties tortiously leaked his emails … arose during and out of his employment”, and he seeks money that Las Vegas “would have paid him had not the NFL Parties forced his resignation three years into his contract.” Gruden asserted that the arbitration clause gives Goodell “unlimited scope” yet if the NFL acted under its Constitution to oust Gruden, Section 8.3(E) would have clearly applied. Additionally, “the facts as pled applies” to disputes involving teams or team employees as long as it constitutes conduct detrimental. Gruden agreed to these terms when he signed his contract so he “must submit to arbitration.”
The district court erred in concluding the employment agreement was unenforceable due to unconscionability. “Unconscionability may invalidate an agreement to arbitrate,” but an arbitration agreement will not be invalidated “by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue. AT&T Mobility LLC v. Concepcion, 517 U.S. 333, 339. (2011).” California law requires both procedural and substantive unconscionability.” There was no surprise. Gruden had “expressly acknoweldged” that he had read and understood the terms. He signed “the most lucrative NFL coaching contract in history, while being represented by an elite agent” and was therefore “the very definition of a sophisticated party.” (Gruden could afford a lawyer.) He made “strong arguments as to the substantive unconscionability” as the arbitration clause gives Goodell both the “jurisdiction” and “authority” to serve as the arbitrator. However, because Gruden failed to “establish procedural unconscionability, his unconscionability challenge fails.” It “is not clear that Goodell will act as arbitrator … NFL Players Ass’n ex rel. Peterson v. NFL, e.g. 831 F. 3d 985, 998 (8th Cir. 2016))”. If Goodell recuses himself and a third-party arbitrator is not named, the Court can do so. “Finally, issues of arbitrator bias are reviewable post-arbitration as a basis for invalidating the arbitrator’s award.”
The NFL Constitution arbitration clause is neither circular nor illusory. An illusory promise fails for want of consideration. Although the NFL could unilaterally modify the arbitration clause, California law upholds such terms if “the implied covenant of good faith and fair dealing implicit in every contract” prevents this from frustrating the contract’s purpose. Gruden’s “argument misses the mark.” His contract was with the team, not the NFL and the exchange of promises was between Gruden and the team. “Importantly”, the team “did not have the power to unilaterally modify any part of the employment agreement. The Court acknowledged its ruling differed to some extent from Flores v. NFL, (658 F. Supp. 3d 198 (S.D.N.Y. 2023)), but the “Florida and Massachusetts cases” cited therein “do not consider non-parties or whether the duty of good faith and fair dealing would save those clauses.” The district court found the arbitration clause to be circular because the Commissioner’s “threshold determination of conduct detrimental” would later require a ruling against Gruden. However, “nothing in the NFL Constitution binds the Commissioner” in making the subsequent ruling. The majority reversed the decision and sent the case back in order to enter an order granting the motion.
The Dissent
It did not believe the arbitration provision applied to former employees because it involves disputes “involving … any players or employees of the League,” not former employees. Gruden’s behavior happened before his employment and his lawsuit was filed after his employment. (Note: It did become public during his employment.) Furthermore, the Constitution has another section, Article VIII §8.6 that applies to “conduct detrimental” by a non-employee and that was not invoked. The NFL drafted these provisions so any ambiguity must be construed against it. The provision was “unenforceable due to unconscionability.” Gruden was not free to bargain over this provision. “Gruden’s sophistication is meaningless” because “he had a total absence of meaningful choice.” It was “outrageous” that Goodell could be the arbitrator, and that it was unconscionable that the NFL could unilaterally amend the Constitution, (though that had not occurred.)
Nevada Procedure
The Nevada Supreme Court has seven justices. Three justices from the Supreme Court initially hear appeals. Those dissatisfied with that result may seek review before the full court. These briefs are undoubtedly being prepared as this is written.
Comments
Some of the mistakes below are inexplicable, and the dissent did not defend those errors. The judge has since retired. Gruden’s case presents issues faced in Flores v. NFL. That lawsuit deals with discrimination claims brought by multiple coaches suing the NFL and various teams, including teams that never hired the plaintiffs. Both cases involve the scope of the NFL Constitution’s arbitration clause. For many plaintiffs the arbitration clause was upheld. (See, “NFL Wins More than It Loses in Flores Case Decision,” Christopher Deubert, Sports Litigation Alert, Vol. 20. #5 (3-10-23)). Flores may provide Gruden an arbitration-free path to suing Snyder, but that may miss the point of his complaints.
Gruden’s lawyer argued that he had yet to be able to conduct discovery, apparently complaining to the Court about its Stay (NFL Argues Merits of Jon Gruden’s Lawsuit in Nevada’s Highest Court), A. J. Perez, Front Office Sports (4-16-24)). The Flores plaintiffs have the same problem (“Brian Flores Is Two Years Into His Discrimination Suit Against the NFL and Has Little to Show For It”, Christopher Deubert, Sports Litigation Alert,Vol. 21. #4 (2-23-24)).
It would be “outrageous” if Goodell was the arbitrator but that will not happen. Should the case be arbitrated, Goodell will appoint an outside arbitrator. That recently happened in a dispute between the Cardinals and former employee Terry McDonough. The arbitrator ruled against the Cardinals and awarded McDonough nearly $3M. No matter where the case proceeds, Gruden will have the burden of proof that it was Goodell and/or the NFL that released the emails. This flies in the face of contemporary accounts that placed the blame on Snyder, not the League Office. He will also have to prove that he had an expectation of privacy when sending emails to Daniel Snyder’s company.
Had Gruden, as previously acknowledged by signature, read, and understood the NFL arbitration clause, making a mockery of his legal arguments, or, when he acknowledged in writing that he had read and understood what he was signing, was that not true? Gruden wanted his “offensive emails” kept secret. Why is his settlement secret from the NFL? Tampa dropped Gruden from its Ring of Honor. Las Vegas lost its coach. Gruden lost his job, and the NFL ‘s reputation was besmirched. Whoever decides the case, these parties have already lost.
