A New Approach
Part one of this series, which appeared in Vol. 11, Iss. 23 of Sports Litigation Alert, on California’s workers compensation system examined how claims were invariably processed in favor of retired professional athletes, and how the system imposed jurisdiction on non-Californian teams based on a single game or practice in California. It also demonstrated how tens of millions of dollars that went to retired professional athletes came from every business in California, paid for the “CIGA” surcharge imposed on all workers compensation policies sold in California. This installment will look at how the system began to finally change.
In response to the growing pile of California claims, the non-Californian NFL clubs began to insert both choice of law and choice of forum clauses into player contracts. The players also agreed that any workers compensation claims would be filed solely in the state where that specific team was based. Notwithstanding the foregoing, workers compensation courts in California have been ignoring such contractual language for years.
The courts did so even though California has long had a worker’s compensation reciprocity statute. Cal. Labor Code. §36005 provides a clear-cut path for non-Californian clubs to avoid litigating workers compensation cases in California. Specifically, if the employee was hired outside of California, and (1) was only working temporarily in California; (2) the employer furnished workers compensation insurance coverage under the workers compensation or similar laws of another state; (3) that the other state’s workers compensation laws cover the worker while temporarily in California; and (4) the other state recognizes California’s extraterritorial provisions so that California employers and employees would be exempt from applying the laws of the other state (Dailey v. Dallas Carriers Corp., 43 Cal. App. 4th 720, 727, (1996)). Regardless, the non-Californian clubs never got the courts to apply the reciprocity statute, and as a result, the clubs were forced to find another approach. All-Pro lineman Bruce Matthews provided the opportunity.
Matthews played for the Houston Oilers/Tennessee Titans for 19 years. He retired in 2002, and worked for the club in another capacity. He filed a California worker’s compensation claim in 2008. Matthews’ contracts stated that all workers compensation claims would be decided under Tennessee law. The laundry list also included “jurisdiction” and “all issues of law, issues of facts, and matters related to workers compensation benefits, should be exclusively determined by and exclusively decided in accordance with the internal laws of the State of Tennessee without resort to choice of law rules” (Matthews v. NFL Management Council, 688 F.3d 1107, 1110, (9th Cir. 2012)). In response to Matthews’ California workers compensation claim, the Titans filed a grievance against Matthews, alleging that such a filing was a breach of his contract (Id.).
The arbitrator ruled that although Matthews could bring a workers compensation case in California, it had to be decided under Tennessee law. Furthermore, if California refused to apply Tennessee law, then Matthews would have to withdraw the California claim (Matthew v NFLMC, Case No. cv- 01671-JLS-WMC, Order, 1-5-11, (S.D. Cal. 2011)). Matthews sued in the United States District Court for the Southern District of California to set aside the arbitrator’s award, and the Titans and NFL Management Council moved to confirm the award. The court affirmed (Id., at 11). After all, “review is limited and deferential” (Id., at 3).
Matthews appealed to the Ninth Circuit. The court stated the obvious: judicial review of arbitration awards is very narrow (Matthews, 688 F.3d at 1111). It found that California law did not guarantee a universal right to seek California workers compensation benefits irrespective of the applicant’s actual contacts with California (Id., at 1111). Matthews had alleged a CT claim, but there were no allegations of a specific injury in California that required medical treatment. Consequently, the Court could find no nexus to California that required judicial intervention to set aside the employment contract.
The court in Matthews acknowledged prior cases stated that federal labor policy strongly favors the resolution of labor disputes through arbitration, and that ordinarily arbitration awards are upheld so long as they represent a plausible interpretation of the contract (Matthews 688 F3d at 1111).
The judges surely knew what happened when the court previously overturned an arbitrator’s decision in a sports case. In 2001, the Ninth Circuit overturned the arbitrator in MLB Players Association v. Garvey, and the Supreme Court reversed it (532 U.S. 504 (2001)). The Supreme Court stated that: “even silly fact-finding does not provide a basis for a reviewing court to refuse to enforce the award” (Id., at 509). California law is in accord. Arbitrators do not exceed their powers “merely by rendering an erroneous decision on a legal or factual issue, so long as the issue was within the scope of the controversy submitted to the arbitrators” (Moshonov v. Walsh, 22 Cal. 4th, 771 775-776 (2000)).
The Chicago Bears followed the Titans’ lead, and filed grievances against a number of retired players who filed California workers compensation claims in violation of their contracts. Arbitrator Rosemary Townley ruled that Matthews was now “law of the shop,” and was to be given preclusive effect. She also ruled that the players had indeed breached their contracts in filing claims in California (Chicago Bears v. Michael Haynes, Joe Odom, and Cameron Worrell, 816 F. Supp. 2d 534, 536 (N.D. Ill. 2011)). The District Court upheld the award, and stated that it was the policy of Illinois that mattered far more than the policy of California (Id., at 538).
The pattern continued. Players sought workers compensation benefits in California, the clubs filed grievances, won the grievances, and the Federal Court would uphold the arbitrators (Atlanta Falcons Football Club LLC v. NFL Players Association, 2012 WL 5392185 (N.D. Ga. Nov, 5, 2012); Kansas City Chiefs Football Club, Inc. v. Allen, 2013 WL 1339820 (W.D. Mo. Mar. 30, 2013); New Orleans Saints v. Cleeland, No. 11-cv-02093-KDE-ALC, ECF No. 55, slip opinion. (E.D. La. July 12, 2012).
Traditional roles were reversed. No longer were the players in a system that bent over backwards to rule for them. Therein laid the brilliance of the plan. The arguments were removed from a forum that was utterly hostile to clubs — the California workers compensation system — and cases went to arbitration where an educated arbitrator/lawyer could read and pronounce the meaning of the contract, and then move to federal courts wherein review was so narrow that the players now faced a Herculean task in efforts to set aside the arbitration ruling. Thus arbitrators and the federal courts began to close access to California’s gold fields.
The California Workers Compensation System Reads Matthews, Carefully
The New “Subject Matter Jurisdiction”
Workers compensation cases are tried to a workers compensation administrative law judge, (WCJ). After a decision by a WCJ, either party may seek “Reconsideration” from the Workers Compensation Appeals Board, (WCAB). The WCAB has five members, and three members serve as the appeals panel for each case. Their decisions are binding on all WCJs. The WCAB can sit also en banc with all five members, and en banc decisions are binding precedent on all Appeals panels as well as all WCJs. Review may then be sought in the California Court of Appeal.
The WCAB sat en banc to decide Dennis McKinley v. Arizona Cardinals (W.C.A.B. No. ADJ7460656, 78 Cal. Compensation. Cases 23 (2013)). McKinley’s contract with the Cardinals stated that workers compensation claims would be filed in Arizona, however, McKinley filed in California because he played seven games and practiced for five days in California as a member of the Cardinals (Id., At 25, 29). As a result, the WCAB ruled that California had personal jurisdiction over the Cardinals. (Id., at 25).
The WCAB was well aware of the trend of the federal courts, and cited Matthews, and Haynes, among various decisions (Id., at 26). The WCAB noted that its earlier cases had not involved a forum selection clause (Id). The WCAB affirmed the WCJ’s “ruling that the Cardinals had not proven the reciprocity requirements of Cal. Labor Code §3600.5 (Id., at 29). However, consistent with the trend that it saw from the federal court decisions, the WCAB stated: “a forum selection clause is now presumed to be legal” (Id., at 32). Moreover, party challenging the validity of a mandatory forum selection clause shall bear the burden of showing that the clause is “unreasonable” (Id., at 25). For McKinley, that was an impossible burden to carry.
The WCAB also found that despite seven games and five practice days, there “is limited connection with California with regard to the employment and claimed cumulative trauma” (Id., at 29,30). It also found that the forum selection clause was enforceable, as the contracts were not made in California (Id., at 32). It also held that a forum selection clause is now presumed to be valid (Id). The WCAB then stated that the contract was not the product of fraud or overreaching (Id., at 33,34); that the parties reasonably selected Arizona as the workers compensation forum (Id., at 35,36); that it is a convenient forum (Id., at 36); and that the forum selection clause was not contrary to any fundamental California public policy (Id., at 36,37).
The WCAB finished by noting that forum selection decisions impact the delivery of justice in the state:
Our concern about court congestion and the overburdening of already strained judicial resources is not based upon abstract speculation. The NFL consists of 32 teams playing in 23 states and occasionally in foreign countries. Each clubs is allowed a maximum of 53 players on their roster. Because three NFL teams are domiciled in California, players from all of the 29 other teams could potentially claim that they incurred some portion of a cumulative industrial injury in California merely because they played one or more games in the state. In fact, numerous claims have been filed in California by professional football players and other professional athletes, and those claims impose a substantial burden on the WCAB’s “limited resources” (Id., at 39).
McKinley argued that there was jurisdiction because the statute of limitations has run in Arizona, and thus he could not file a claim there (Id., at 27). The WCAB responded that this was an invitation to create a loophole that would defeat a forum selection simply by sitting on one’s rights until the statute ran out in the proper forum (Id., at 28).
McKinley also claimed that because he had paid income tax in California, that fact alone meant that there was jurisdiction, yet workers compensation is strictly a statutory scheme. The WCAB noted that there was nothing in the statute that mentioned withholding taxes as a basis for jurisdiction, citing Cal. Labor Code §§ 3600 et seq; 5300 and 5301 (Id., at 30). The WCAB knew that there were circumstances where an employee who was injured while temporarily in California could nevertheless be denied California jurisdiction under certain circumstances, and cited Cal. Labor Code § 3600.5(b), the so-called reciprocity statute (Id., at 29). The WCAB also noted that there was no authority that supported this proposition, and that tax codes have a very different purpose than workers compensation codes (Id.).
The Reciprocity Defense Finally Prevails
Five months after the en banc decision in McKinley, the WCAB issued another en banc decision in Wesley Carroll v. Cincinnati Bengals, Case No. ADJ229533 (2013). By a 4-1 vote, the WCAB upheld the Bengals’ position that the claim was not subject to California jurisdiction as they had met the showing of California’s reciprocity statute (Cal. Labor Code § 3600.5). The Bengals had been making the argument for years without success. They finally prevailed in Carroll, satisfying the WCAB that all of the elements of 36005 were present.
The Carroll decision was good news for teams in Maryland, Michigan, Washington, and Washington, D.C.; all of whom have had reciprocity statutes that were historically of no use in California. Whether or not, in any case, the club can make the requisite evidentiary showing that would trigger the reciprocity statute is a different matter.
Other clubs and states had been watching this effort with great interest, and several states passed statutes that would recognize California’s law to the extent that it would require all workers compensation claims to be filed in their state, and not California. Florida took action in 2011. It passed its own reciprocity statute, CS/HB 723. The bill amended Section 440.09(1)(d), and was designed to require all employees of Florida professional sports teams to file workers compensation claims solely in Florida. It was signed into law on June 11, 2011, and applies to all claims filed on or after July 1, 2011. It passed without a single dissenting vote in the State Senate and House of Representatives.
Arizona passed its own reciprocity statute, SB 1148, in 2013. It added a new section, 23-904, to the workers compensation statute. Governor Brewer signed AB 1148 on April 3, 2013. Both statutes were drafted to scrupulously comply with California’s reciprocity statute, though at the time, even though no one yet knew if California would ever honor such reciprocity statutes in cases involving professional athletes. Tennessee passed a similar statute, SB 04321/HB 0864, Public Chapter 367, which went into effect on May 13, 2013.
To be continued…
Birren worked for the LA/Oakland Raiders for 34 seasons and was general counsel for much of that time. During that time he worked closely with owner Al Davis and Amy Trask, the NFL’s first female Club Chief Executive. He has an MA in History from USC and a JD from Southwestern. He can be reached at jebirren@comcast.net
