By Scott White[1]
There are limits to the arbitration processes frequently used in sports, and these limits were put on display in the Third Circuit’s recent decision in France v. Bernstein.[2] Arbitration offers advantages for both parties – it reduces the cost of potential litigation, it shields documents from the presumption of public access, and, most importantly, it provides stability in conflict resolution through decisions that are binding on both parties. In other words, the biggest advantage of arbitration proceedings is that they keep the parties out of the courtroom. The implications of the Bernstein decision are noteworthy for any organization or individual who participates in arbitration, and the facts of this case show the competitive, cut-throat nature of the sports agent business.
France v. Bernstein was heard on appeal from the U.S. District Court and involved a set of circumstances that were “like something out of the film Jerry Maguire.”[3] The two parties, Todd France and Jason Bernstein, were both NFLPA-certified athlete-agents competing over the same client: Lions wide receiver, Kenny Golladay. Bernstein was Golladay’s agent from his rookie season until January 2019. During this time, Golladay emerged as a primary threat in Detroit’s high-flying offense, and according to the Third Circuit Court’s opinion, another agent, Todd France of CAA, made overtures to represent Golladay at the end of the 2018 season. Golladay abruptly terminated his relationship with Bernstein at the end of January 2019. Bernstein alleged that France organized an paid autograph signing appearance for Golladay while Golladay was still under a representation contract with Bernstein. Bernstein had only learned about the autograph appearance after seeing two promoters post about it on social media. If the allegations that France helped organize the signing were true, then he likely violated two provisions of NFLPA regulations, which prohibit agents from communicating with or providing benefits to players who are under contract with other agents.[4]
Bernstein filed a written grievance with the NFLPA, alleging that he suffered $2.1 million in pecuniary losses.[5] NFLPA regulations require grievances to be handled in arbitration, and both parties produced discovery requests in advance of the arbitration hearing. In his discovery request, Bernstein specifically requested information on the January 21, 2019 event, and France responded that he possessed no documents that were responsive to these requests.[6] The court noted that France interpreted his obligations under the discovery request narrowly, claiming that he was not responsible for producing documents that were “not physically in his possession,” even if he had control over them. Bernstein took issue with France’s narrow interpretation of his discovery obligations and issued subpoenas to France, Golladay, and other parties. Bernstein did not seek judicial enforcement of the subpoena in federal court prior to the arbitration date, and, as a result, entered arbitration with only the evidence that was voluntarily produced by France.
In arbitration, France argued that the timing of the autograph signing event was purely coincidental and, absent evidence to the contrary, the arbitrator ruled in favor of France and denied Bernstein’s grievance. However, more evidence emerged after the conclusion of the arbitration proceeding. The Third Circuit stated that, in light of this additional evidence, “it became perfectly clear that France was involved in arranging the signing event.”[7] Unfortunately for Bernstein, the arbitration decision was finalized prior to discovery of the new evidence.
Bernstein filed an action seeking to vacate the arbitration award in U.S. District Court after the new evidence emerged. The district court upheld the award, noting that Bernstein did not seek judicial enforcement of the subpoenas and would not be given a “second bite of the apple”[8] when he could have potentially gained access to evidence prior to the arbitration hearing. Bernstein appealed to the Third Circuit, which overturned the district court’s ruling.
In its analysis, the Third Circuit noted that “It’s a steep climb to vacate an arbitration award.”[9] However, Section 10 of the Federal Arbitration Act permits a court to vacate an award “procured by corruption, fraud, or undue means[.]”[10] The appellate court held that “it is plain that France both lied under oath and withheld important documents demanded in discovery,” and that these actions constituted fraud. The court also explained that the district court’s holding that the fraud was discoverable through due diligence was a legal error. The court explained “[r]easonable diligence does not require parties to assume the other side is lying,” and Bernstein took “substantial measures towards uncovering France’s perjury.” Accordingly, Bernstein’s actions were reasonable under the circumstances, even if they were not perfect.
The Third Circuit remanded the case for entry of an order vacating the arbitration award, and France’s request for a rehearing en banc was denied.[11] The Third Circuit’s decision shows that arbitration awards may still lead to future litigation, and lawyers, agents, and clients should take notice of the circumstances that may lead a court to invalidate an award secured through the arbitration process.
[1] J.D., University of Tennessee College of Law 2017. Scott is currently a PhD student in Sport Management at Florida State University.
[2] France v. Bernstein, No. 20-3425, (3rd Cir. Aug. 9, 2022). Full text available at: https://www2.ca3.uscourts.gov/opinarch/203425p.pdf
[3] Id. at 2. For more on the District Court Opinion, see Gary Chester’s coverage for Sports Litigation Alert: https://sportslitigationalert.com/france-v-bernstein-illustrates-the-competitive-nature-of-sports-agency-and-the-limits-of-arbitration-2/
[4] Id. at 5. Unless otherwise noted, all direct quotations in this article are attributed to the Third Circuit Opinion identified in footnote 2.
[5] Id. at 6.
[6] Id. at 7.
[7] Id. at 13.
[8] France v. Bernstein, No. 1:20-cv-01443 (M.D. Pa. Oct. 30, 2020), at 6. See also Chester, 2022, fn. 2.
[9] Bernstein, No. 20-3425, (3rd Cir. Aug. 9, 2022), at 17.
[10] 9 U.S.C. § 10(a)(1).
[11] See https://www.sportsbusinessjournal.com/Daily/Issues/2022/09/13/Labor-and-Agents/Todd-France-denied-appeal-NFLPA-arbitration-award.aspx
