In 2020, the Washington Football Team (the Washington Commanders since 2022) began an internal investigation into reports of sexual harassment and verbal abuse within the organization. The NFL took over the investigation, which concluded in 2021. During the investigation, the NFL obtained emails between John Gruden (“Gruden”) and Bruce Allen, then-president and general manager of the Washington Football Team. The emails were sent during Gruden’s time at ESPN, and included sexist, racist, transphobic, and homophobic comments. The NFL never publicly released the results of its investigation into the Washington Football Team, but several of Gruden’s emails recovered during the investigation were given to and published by media outlets. Gruden resigned as head football coach of the Las Vegas Raiders after the New York Times published details of his emails. Gruden and the Raiders resolved any outstanding issues between them in a confidential settlement.
Gruden sued NFL Commissioner Roger Goodell (“Commissioner”) and the NFL (collectively the “NFL Parties”) alleging his emails were leaked to force him to step down as head football coach of the Raiders. He sought damages for tortious interference with his contract with the Raiders, negligence, and civil conspiracy. The NFL Parties moved to compel arbitration based on two arbitration clauses – the NFL Constitution and Gruden’s employment agreement with the Raiders. The district court denied the NFL Parties’ motion to compel arbitration and this appeal followed.
A. NFL Constitution arbitration provision does not apply to Gruden.
The NFL Constitution was incorporated into Gruden’s coaching contract with the Raiders by reference. Article VIII of the NFL Constitution defines the Commissioner’s powers as arbitrator.
8.3 The Commissioner shall have full, complete, and final jurisdiction and authority to arbitrate: . . .
(E) Any dispute involving a member or members in the League or any players or employees of the members of the League or any combination thereof that in the opinion of the Commissioner constitutes conduct detrimental to the best interests of the League or professional football.
In review of the arbitration provision in the NFL Constitution, the Nevada Supreme Court concluded that the NFL Constitution’s arbitration clause does not apply to Gruden as a former employee and is unconscionable. The NFL argued that the arbitration clause applies to former employees, but the Nevada Supreme Court indicated the language of the provision does not support such an argument. The relevant provision states the Commissioner may arbitrate disputes “involving a member or members in the League or any players or employees of the members of the League.” The Constitution defines “members” as “the thirty-two (32) member clubs.” The Nevada Supreme Court concluded that this language unambiguously restricts the Commissioner’s power to arbitrate to current members of the league and their employees or players.
B. The NFL Constitution arbitration provision is unconscionable.
The Nevada Supreme Court also concluded that the arbitration provision in the NFL Constitution is unconscionable. The terms of the NFL Constitution state teams “shall include in every contract between any member club and its employees, including coaches[,] . . . a clause wherein the parties to such contract agree to be bound by the Constitution and Bylaws of the League.” Gruden had no opportunity nor ability to negotiate the contents of the NFL Constitution or its incorporation into his coaching contract.
Gruden had a seven-page employment contract with the Raiders, which he could freely negotiate. The contract incorporates the 447-page NFL Constitution by reference. In essence, Gruden had a 454-page contract, only seven pages of which he could actually negotiate. Although Gruden is considered a sophisticated party, he still had no opportunity to negotiate away the provisions of the NFL Constitution or its incorporation into his employment contract. Therefore, the Nevada Supreme Court concluded “at least some procedural unconscionability was present”.
The Nevada Supreme Court also concluded that the NFL Constitution’s arbitration clause is substantively unconscionable for two reasons. First, the NFL Constitution would allow the Commissioner to arbitrate disputes about his own conduct—exactly what is at issue in the present case. The ability of the stronger party to select a biased arbitrator is unconscionable, even if the stronger party may ultimately choose a neutral arbitrator. Second, the NFL has the power to amend the NFL Constitution, including the arbitration clause, at any time, and without notice. The NFL Parties’ control over the NFL Constitution also rendered the NFL Constitution’s arbitration clause substantively unconscionable.
C. The Raiders employment agreement’s arbitration clause does not apply to the NFL.
The NFL Parties also sought to compel arbitration based on the independent arbitration clause in Gruden’s employment agreement with the Raiders. The NFL Parties are not signatories to the coaching contract and sought to compel arbitration based on equitable estoppel. Equitable estoppel allows a non-signatory to a contract to enforce an arbitration clause in that contract when the signatory’s claims are “dependent upon, or founded in and inextricably intertwined with, the underlying contractual obligations of the agreement containing the arbitration clause.” The Nevada Supreme Court concluded that Gruden’s claims here are not intertwined with his contract. He did not argue any breach of a contractual duty. Instead, Gruden’s complaint is the NFL Parties’ alleged actions external to the contract—the unauthorized release of his emails. While Gruden relies on his coaching contract as evidence of damages, the claims themselves do not arise out of any contractual relationship between Gruden and the Raiders and, therefore, the Nevada Supreme Court concluded that equitable estoppel does not apply to the claims asserted.
For any questions, feel free to contact Christian Dennie at cdennie@denniefirm.com.
