A federal judge from the Southern District of Florida has affirmed an arbitral award rendered by the Court of Arbitration for Sport, which required an international soccer star to reimburse an English soccer team nearly €20 million after the player tested positive for cocaine and was banned by FIFA.
In so ruling, the judge wrote that defendant Adrian Mutu, “failed to show that enforcement would violate the most basic notions of morality and justice,” a prerequisite for over turning such decisions.
The plaintiff in the case was Chelsea Football Club Limited. In August 2003, Chelsea sought Mutu, who was playing for the Italian AC Parma Club. To secure his rights,
it paid AC Parma a transfer fee of £22.5 million. Chelsea entered into a contract with Mutu that was to last five years and pay Mutu £2.35 million annually. He would also incrementally receive a £330,000 signing-bonus and his agent would be paid €500,000 incrementally. The employment contract started on August 11, 2003 and was to expire on June 30, 2008. But on October 1, 2004 Mutu tested positive for cocaine. Chelsea terminated Mutu’s contract, and Mutu was temporarily banned from play worldwide by FIFA.
Mutu appealed Chelsea’s decision. First, he appealed with the Board of Directors of the English Premier League. The Board assigned the matter to its Appeals Committee. In April of 2005, the Committee decided that Mutu breached his contract without just cause. Mutu filed an appeal with the Court of Arbitration for Sport. It dismissed the appeal.
In May of 2006, Chelsea applied to FIFA for an award of compensation. Initially, FIFA’s Dispute Resolution Chamber decided it did not have jurisdiction. Chelsea filed action to annul the FIFA decision with the Court of Arbitration for Sport. That court upheld the appeal and sent the matter back to the DRC in May of 2007. Chelsea resubmitted a claim, Mutu submitted a brief, and in May 2008, the DRC issued a decision awarding Chelsea €17,173,990 plus 5 percent interest per annum. The amount corresponded with the unamortized portions of the transfer fee, the signing bonus and the agent’s fee.
In 2008, Mutu appealed the DRC award to CAS. His appeal was denied. Chelsea then filed a petition seeking recognition and enforcement of the CAS award, pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention).
The New York Convention empowers a federal district court to recognize and enforce an action falling under the Convention, unless a respondent can successfully assert one of seven defenses against enforcement. See Imperial Ethiopian Gov’t v. Baruch-Foster Corp., 535 F.2d 334, 335-36 (5th. Cir.1976). The defense relevant to this matter states that “recognition or enforcement of the award would be contrary to the public policy” of the United States. New York Convention, art. 5(2)(b).
“In this case it is uncontested that the award includes the unamortized portions of the acquisition fee, the signing bonus and the agent’s fee,” wrote the court. “Though cast as penal by Mutu, the unamortized costs are reasonably related to the actual damages caused by Mutu’s breach of contract. Here, the Court for Arbitration of Sports reasonably relates the arbitral award to the actual damages, providing its rationale that ‘a club that paid a substantial fee to former club to secure the services of a player may suffer severe financial consequences if that player unilaterally breaches his contract.’”
Mutu’s first argument “focuses on proportionality of the transfer fee Chelsea paid without addressing that fee’s reasonable relation to actual damages suffered by Chelsea. The vast difference between the transfer fee paid to AC Parma and the salary or bonus paid Mutu does not represent a penalty when those figures are used to establish actual damages. The Court for Arbitration’s award calculation is related to damages caused by Mutu’s breach of contract. This does not violate public policy.
“Mutu’s challenge to recognition of the arbitral award fails on another front. Mutu argues the arbitral award is based on a penalty clause within the Article 22 of the FIFA regulations and such a clause is unenforceable. The award was simultaneously formed under English law pursuant to the choice-of-law provision in the contract between Mutu and Chelsea. Mutu provides no argument against the award’s determination under English law. The Court for Arbitration of Sport states ‘that the determination of the amount of compensation that a player breaching an employment has to pay can be based on the unamortised acquisition costs, and that such operation is fully consistent . . . with English law.’ Even if this Court were to find Article 22 to be a penalty clause, it is uncontested that the arbitration award was independently and properly decided pursuant to English law.”
Chelsea Football Club Limited v. Adrian Mutu; S.D. Fla.; Case Number: 10-24028-CIV-MORENO, 2012 U.S. Dist. LEXIS 17364; 2/13/12
Attorneys of Record: (for plaintiff) Clement Ryan Reetz, LEAD ATTORNEY, DLA Piper LLP (US), Miami, FL; Raul B. Manon, LEAD ATTORNEY, Squire Sanders (US) LLP, Miami, FL; Stephen P. Anway, PRO HAC VICE, Squire, Sanders & Dempsey (US), LLP, New York, NY. (for defendant) Michael Ross Tein, LEAD ATTORNEY, Lewis Tein, Coconut Grove, FL.
