No. 06-123 In the SUPREME COURT OF THE UNITED STATES OF AMERICA MAJOR LEAGUE SOCCER PLAYERS ASSOCIATION, Petitioner, v. DAVID HAMMER, Respondent. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTEENTH CIRCUIT COMPETITION PROBLEM PACKET FOR THE TULANE INTERNATIONAL MARDI GRAS SPORTS LAW COMPETITION, 2007
QUESTIONS PRESENTED I. WHETHER THE COURT OF APPEALS ERRED IN REVERSING THE DISTRICT COURT S DECISION THAT MLSPA AGENT CERTIFICATION QUALIFIES AS AN ASSET THAT IS WITHIN THE JURISIDCTION OF A BANKRUPTCY COURT JUDGE. II. WHETHER THE COURT OF APPEALS CORRECTLY HELD THAT MANDATORY ARBITRATION CLAUSES IN CONTRACTS SHOULD BE UPHELD, EXCEPT IN CIRCUMSTANCES WHERE THE HEAVY BURDEN OF EVIDENT PARTIALITY CAN BE MET. STANDARD OF REVIEW For purposes of this hypothetical, the Supreme Court will review all matters de novo.
UNITED STATES COURT OF APPEALS FOR THE FOURTEENTH CIRCUIT IN THE MATTER OF: MAJOR LEAGUE SOCCER PLAYERS ASSOCIATION, PLAINTIFF-APPELLEE versus DAVID HAMMER, DEFENDANT-APPELLANT Plaintiff, Major League Soccer Players Association appeals from the district court s grant of summary judgment in favor of defendant, David Hammer. The district court held that the bankruptcy court was correct in finding defendant s certification to be a bankruptcy asset. Additionally, the district court found that evident partiality existed on the part of the arbitrator chosen by the plaintiff-union. Thus, the district court upheld the bankruptcy court s injunction and barred the union from proceeding with suspension of the defendant s certification. The district court s denial of the MSLPA s motion for summary judgment is reviewed de novo. We conclude that as a matter of law the defendant s certification is an executory contract that terminates when a union-established rule is violated; in this case we find that the defendant s actions have violated MLSPA-established rules. Since the certification is terminated, we conclude that it is not an asset that can be part of a bankrupt estate. We also conclude that the defendant s challenge that the union-appointed arbitrator was partial is not a valid defense and thus he is bound by the decision of said arbitrator and the process provided for him by the agent regulations. For the reasons set forth below, we reverse the judgment of the District Court.
I. DISTRICT COURT FINDINGS OF FACT Plaintiff, Major League Soccer Players Association ( MLSPA ) is the exclusive collective bargaining representative of Major League Soccer ( MLS ) players pursuant to 9(a) of the National Labor Relations Act, 29 U.S.C. 159(a) (1959). The MLSPA permits individual agents, or contract advisors, to represent individual players in negotiations with MLS clubs, including employment contract negotiations. The MLSPA certifies contract advisors pursuant to a set of regulations and through its Disciplinary Committee, has the power to enforce compliance of these regulations. It should be noted that the MLSPA agent regulations are strictly based on the current National Football League Players Association agent regulations. Defendant, David Hammer, became a certified soccer player agent with the MLSPA in January 2005. Prior to this certification, Poston served as Major League Baseball s General Counsel from 1984-1996 and as Executive Director of the Major League Baseball s Player Relations Committee from 1996-2000, representing the interests of the owners in dealing with the Major League Baseball Players Association. From 1985-1988 while Hammer served as General Counsel, baseball owners were found to have participated in acts of collusion to eliminate bidding for free agents and to suppress player salaries. Since 2000, Hammer has also received certification from the National Football League Players Association and the National Basketball Players Association and has garnered several clients in both areas. On February 12, 2005, the New York Times printed a series of articles about the business of baseball, featuring an exposé on the development of free agency. Included were recently discovered internal documents from meetings of the Players Relations Committee that showed direct evidence of collusion in an attempt to hinder free agency. Upon reading these articles, soccer player Ronald Lush of the Tulania Green Devils, filed a grievance with the MLSPA against Hammer under 3(b)(14) of the MLSPA agent regulations, which prohibits [e]ngaging in unlawful conduct and/or conduct involving dishonesty, fraud, deceit, misrepresentation, or other activity which reflects adversely on his/her fitness as a Contract Advisor or jeopardizes his/her effective representation of MLS players. In his grievance, Lush stated that Hammer s obvious participation in dealing a major blow to player s rights diminishes his ability to serve in a fiduciary capacity on behalf of Major League Soccer players, especially considering the recent attempts by soccer players to develop their own free agency system. On March 11, 2005, Hammer received a letter from the MLSPA notifying him of the grievance complaint filed by Lush, stating violations of the MLSPA rules relating to his fitness as a contract advisor. The letter revealed that the Committee on Agent Regulation and Discipline ( CARD ) approved the filing of the complaint in accordance with 6(b) of the MLSPA agent regulations. On March 29, 2005, Hammer, through counsel, filed an answer to the complaint. Hammer s attorneys were then notified that CARD scheduled a meeting for discussion of this matter on April 22, 2006, and that counsel would be invited to participate by telephone. Hammer s attorneys requested, via
a letter dated April 3, 2006, the opportunity for Hammer to appear before CARD in person; however, Hammer received no response to this letter and was not permitted to attend the meeting in person even though he was in the area at the time. After a fortyfive minute conference call, Hammer was advised that the committee would render a decision after further investigation. On May 5, 2005, CARD stated that after reviewing the facts and the discussion that took place during the conference call, the committee decided to impose an indefinite suspension of Hammer s certification. Hammer was given twenty days to appeal the committee s action under the agent regulations, to arbitrator Mark Woods, current General Counsel for the MLSPA. Woods also serves as an arbitrator in proceedings involving other leagues, such as the NBA and MLB. It should be noted that arbitrator Woods did not participate in the deliberations of CARD. Hammer filed a notice of appeal, attaching a request for a detached and neutral arbitrator, who was not Woods. The MLSPA refused his request and Hammer provided notice that he was reserving all rights and remedies to bring future suits, and formally announcing that his compliance with the arbitration process was under protest. Lush s grievance was submitted to an arbitration proceeding pursuant to 5 of the MLSPA agent regulations. Under 5(d), [t]he MLSPA shall select a skilled and experienced person to serve as the outside impartial arbitrator for all cases arising hereunder. During the arbitration proceeding, the MLSPA recommended that Hammer s certification be suspended indefinitely. Arbitrator Woods agreed with CARD s recommendation, and on July 8, 2005, the MLSPA formally suspended Hammer s certification. Following his indefinite suspension, Hammer was ousted from his sports agency with former partner Walter Steinberger, leaving him with substantial personal debt. Hammer then filed for Chapter 11 bankruptcy, which halted all administrative actions against him. Furthermore, the bankruptcy court judge enjoined the MLSPA from imposing the suspension, construing Hammer s agent certification as a bankruptcy asset. The MLSPA filed suit against David Hammer on January 16, 2006, in the United States District Court of Tulania, to obtain a declaratory judgment that the MLSPA has the authority under federal labor law to impose the suspension, and the bankruptcy court was incorrect in enjoining the MLSPA from doing so. Hammer counterclaimed, claiming evident partiality on the part of the arbitrator selected by the MLSPA in accordance with 9 U.S.C. 10 (2002). After an expedited discovery, both parties moved for summary judgment. II. OPINION BELOW A. Bankruptcy Proceeding The lower court examined whether an MLSPA certification to become a player contract advisor is an asset that is subject to the discretion of a bankruptcy judge in a
bankruptcy proceeding. The district court ultimately found that Hammer s agent certification is not an executory contract, but a privilege to pursue a profession. The court found that a debtor s privilege to pursue a profession is property of the bankruptcy estate, which the MLSPA cannot control. Furthermore, the court found that allowing the MLSPA s suspension of Hammer would result in unjustly preventing him from earning a living in the profession of his choice. The United States Bankruptcy Code automatically stays any judicial, administrative, or other action or proceeding against the debtor. 11 U.S.C. 362(a)(1) (2005). The lower court followed the precedent set in In re Island Club Marina, Ltd., which stated [t]he broad protection of the stay was intended to reach all proceedings, including license revocations. 38 B.R. 847, 853 (Bankr. N.D. Ill. Mar. 27, 1984) (emphasis added). While the MLSPA argued that bankruptcy proceedings should not be allowed to interfere with the regulatory authority of the union, the lower court held that congressional intent behind the bankruptcy provisions showed otherwise. Furthermore, the district court found that precedent supports Hammer s argument that his certification was not an executory contract. In In re Robert L. Helms Construction & Development Co., the Ninth Circuit held that [a] contract is executory if the obligations of both parties are so unperformed that the failure of either party to complete performance would constitute a material breach and thus excuse the performance of the other. 139 F.3d 702, 705 (9th Cir. 1998). In the current case, the facts do not provide evidence that Hammer s obligations would have been incomplete if he merely decided not to practice, as is the case for lawyers and accountants. Courts have also rejected the idea that professional licenses are contracts. See U.S. Ecology Inc. v. California, 111 Cal. Rptr. 2d 689, 702 (Cal. Ct. App. 2001). The lower court found that professional licenses are merely permission by an authority, to do something that without permission would be unlawful. San Gabriel Trib. v. Superior Court, 192 Cal. Rptr. 415, 425 (Cal. Ct. App. 1983). As noted by the United States Supreme Court, the only difference between a license and a certification is that a certification is generally issued by a professional association, while a license is generally issued by a governmental authority. Peel v. Att y Registration & Disciplinary Comm n of Ill., 496 U.S. 91, 104 (1990). The lower court found that the MLSPA did not provide sufficient case law to support the assertion that Hammer s certification is really a contract rather than a privilege to pursue a profession. Therefore, the district court found that Hammer s certification is indeed an asset that is within the jurisdiction of a bankruptcy proceeding, and the bankruptcy judge was correct in enjoining the MLSPA from indefinitely suspending Hammer s agent certification. B. Mandatory Arbitration Proceeding Next, the district court considered the defendant s arbitration claim under the MLSPA regulations and the Federal Arbitration Act ( FAA ). The court first established that the MLSPA regulations incorporate and recite the provisions of the Collective Bargaining Agreement, Art. VI, Sec. I, which states that the MLSPA agrees that it shall
not delete any agent from its list unless that agent has had the opportunity to appeal to a neutral arbitrator pursuant to its agent regulation system (emphasis added). Hammer asserted that the unilateral selection by the MLSPA of its general counsel as the arbitrator for his appeal denies him a hearing by a neutral arbitrator, which should be determined by a neutral selection process. Hammer argued that a neutral arbitrator normally refers to an arbitrator selected by a neutral arbitration process, as opposed to a party-appointed arbitrator. See Tulania Civ. P. Code 1030-B. Here, the MLSPA regulations provide for a single arbitrator, which is to be selected unilaterally by the MLSPA. The district court noted that there is a common acceptance in jurisdictions that party-designated arbitrators cannot be neutral. See Feingberg v. Katz, No. 01 Civ. 2739, 2003 U.S. Dist. LEXIS 1677, at *16 (S.D.N.Y. Feb. 3, 2003), quoting Metropolitan Prop. and Casualty Ins. Co. v. JC Penney Casualty Ins. Co., 780 F. Supp. 885 (D.Conn. 1991), citing Astoria Med. Group v. Health Ins. Plan of Greater N. Y., 182 N.E.2d 85 (N.Y. 1962). As authority for his claim, Hammer turns to Section 10 of the FAA, which empowers the federal court to vacate an arbitration in limited and specialized circumstances, one of which is evident partiality, or corruption of the arbitrator. In proving evident partiality, the district court placed a heavy burden on Hammer to demonstrate that a reasonable person would have to conclude that [the] arbitrator is partial to the other party to the arbitration. Poston v. NFLPA, No. 02-871-A, 2002 U.S. Dist. LEXIS 23085, at*8 (E.D. Va. Aug. 26, 2002), citing ANR Coal Co. v. Cogentrix of N. C., Inc., 173 F.3d 493, 500-01 (4th Cir. 1999), cert. denied 528 U.S. 877 (1999). In considering whether Hammer met this burden, the district court applied a four-part test weighing: (1) the extent and character of the personal interest, pecuniary or otherwise, of the arbitrator in the proceeding; (2) the directness of the relationship between the arbitrator and the party he is alleged to favor; (3) the connection of that relationship to the arbitration; and (4) the proximity in time between the relationship and the arbitration proceeding. Id. at *9. After reviewing the facts of the case, the district court found that Hammer established evident partiality on the part of arbitrator Woods. The court specifically pointed to the fact that Woods was not only a paid employee of the union, but also provided services for Major League Baseball, where Hammer s past involvements were well known. While the MLSPA argues that Woods interests in the case are no different than those of any arbitrator working for a professional association, the arbitrator here not only has a pecuniary interest in keeping his job, but also works firsthand with the union which felt slighted by Hammer s former clients. Next, the MLSPA contended that its right to unilateral selection of the arbitrator was agreed to in 6(f) of the MLSPA regulations. However, Hammer argued that the
federal court may step in to preempt agreed-upon arbitration proceedings and appoint a neutral arbitrator. Third Nat l Bank in Nashville v. WEDGE Group, Inc., 749 F. Supp. 851 (M.D. Tenn. 1990). Hammer maintains that the regulations cannot undo the neutrality guaranteed within Art. VI, Sec. I of the CBA by which he is bound. The district court found that other jurisdictions, when confronting similar clauses permitting one party to unilaterally select the arbitrator, viewed the clauses with hostility and struck them down. See Walker v. Ryan s Family Steak Houses, Inc., 400 F.3d 370, 385-86 (6th Cir. 2005); see also Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 938-39 (4th Cir. 1999). The district court highlighted the proposition put forth in Aviall, Inc. v. Ryder System, Inc., that an arbitration agreement will not be enforced when it would be invalid under general contract principles. 110 F.3d 892, 895-96 (2d Cir. 1997). Also, the district court found the facts put forth were very similar to those in Erving v. Virginia Squires Basketball Club, in which basketball player Julius Erving entered into a contract which provided for arbitration by the Commissioner of the American Basketball Association. 349 F. Supp. 716, 719 (E.D.N.Y. 1972). However, the new Commissioner presiding over Erving s dispute was a former partner of the firm representing the defendant. Id. The district court in that case substituted a neutral arbitrator. Id. The district court found in this case that the resolution should be the same. The MLSPA argues that Hammer was fully aware of and agreed to the arbitration agreement contained in the regulations. See Black v. NFLPA, 87 F. Supp. 2d 1, 6 (D.D.C. 2000). However, the district court pointed out that the MLSPA also freely agreed to neutral arbitration, which they did not provide. Also, Hammer explicitly requested the appointment of an unbiased arbitrator and was denied. Therefore, the district court found evident partiality to exist in the arbitration proceeding provided by the MLSPA, and the award to be vacated. The court also ordered the designation of the American Arbitration Association to appoint a neutral arbitrator. III. DISCUSSION A. Bankruptcy Proceeding This Court finds that a bankruptcy judge cannot simply force a union to reinstate a suspended contract advisor because the certification that was bestowed upon him by the union is a bankruptcy asset subject to the whim of a bankruptcy judge. Unions should have the unilaterally imposed power to decide who they allow to become players agents and representatives of the league. This Court also finds that it is unreasonable for Mr. Hammer, and the bankruptcy judge on his behalf, to request that the judiciary place itself at the forefront of MLSPA affairs by enjoining the union from exercising the right to redeem agents of their certification. As stated by the court in Gurton v. Arons, [c]ourts have no special expertise in the operation of unions which would justify a broad power to interfere. 339
F.2d 371, 375 (2d Cir. 1964). The Gurton court also noted that a union s internal operations should be left to the officials chosen by the members to manage those operations. Id. If this court imposed itself into the MLSPA s discipline process, then the union s exclusive authority to appoint its agents would be void. In accordance with well-established federal law, MLSPA player agents are only permitted to negotiate player contracts because the MLSPA has delegated a portion of its exclusive authority to them. See Collins v. NBPA, 850 F. Supp. 1468, 1475 (D. Colo. 1991); see also Poston v. NFLPA, No. 02-871-A, 2002 U.S. Dist. LEXIS 23085, at *3 (E.D. Va. Aug. 26, 2002). Allowing the bankruptcy court to proceed with an injunction would ultimately reverse established case law that supports the statutory authority held by the MLSPA pursuant to Section 9(a) of the National Labor Relations Act. In this case, the certification bestowed upon Hammer was an executory contract subject to material performance obligations due from both parties. When the MLSPA accepted Hammer s application to be certified as an agent, the two parties entered into a legally binding contract based on their mutual assent to be bound. It is a rudimentary principle of contract law that a contract requires offer, acceptance, and valid consideration. See Aisenman v. City and County of San Francisco, No. C 03-4557, 2005 WL 43497, at *3 (N.D. Cal. Jan. 6, 2005). Clearly, offer and acceptance is visible in the application for certification and issuance of the certification by the MLSPA. Valid consideration was present in Hammer s benefit of being allowed to represent MLS players in contract negotiations. Precedent supports the view that principle-agent contracts are considered to be executory contracts. See In re Clay, 241 B.R. 534, 537 (Bankr. N.D. Tex. Dec. 6, 1999); see also In re Cirillo, 121 B.R. 5, 6-7 (Bankr. D.N.J. Oct. 25, 1990). Also, the agent regulations support the view that the MLSPA and Hammer are both subject to continuing obligations. Accordingly, this Court finds that Hammer s agent certification constitutes an executory contract within the meaning of Bankruptcy Code 365, and it is not within the purview of a bankruptcy court. B. Mandatory Arbitration Proceeding The district court granted the defendant s motion for summary judgment, holding that evident partiality existed in the arbitration proceeding. In so holding, the court found the arbitration agreement within the MLSPA agent regulations non-binding on the defendant. We disagree and review the district court s evaluation of the neutrality of the arbitration. We reject the lower court s determination that Hammer fulfilled the heavy burden required to show that the arbitrator was partial to the MLSPA in the arbitration. We fully agree with the balancing test provided by the district court; however, the court s selection of facts used in making its conclusion does not provide the full factual scenario at hand. While Mr. Hammer notes that the grievance against him arose from his dealings with the MLBPA and arbitrator Woods has dealings with the MLBPA, he certainly is not a
member or an employee of said union. The standard of evident partiality which would justify vacating an arbitration award is not made out by the mere appearance of bias. Poston, 2002 WL 31190142, at *10. As noted in Black v. NFLPA, arbitrators may have an incentive to appease their employer, but [t]he parties to an arbitration choose their method of dispute resolution, and can ask no more impartiality than inheres in the method they have chosen. 87 F. Supp. 2d 1, 6 (D.D.C. 2000), quoting Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d 673, 679 (7th Cir. 1983). Mr. Hammer has not provided any concrete evidence of evident partiality on the part of arbitrator Woods. Arbitrator Woods is a widely respected sports arbitrator, whose services have been used by the MLB and MLS. Furthermore, federal law does not support the argument that Mr. Woods is partial merely because he was selected unilaterally by one of the parties to the arbitration. See Aviall, Inc. v. Ryder System, Inc., 110 F.3d 892, 895 (2d Cir. 1997); see also, Poston, 2002 WL 31190142, at *9. Similar to the facts of Black, here, Mr. Hammer admits that he freely agreed to the arbitration terms contained in the regulations at the time that he was certified by the MLSPA. 87. F. Supp. 2d at 6. Hammer s contract with the MLSPA, which incorporates the agent regulations, contains an arbitration clause that makes any and all disputes related to any of Mr. Hammer s activities as an MLSPA agent subject to mandatory arbitration. MLSPA Agent Regulations 5(A). The arbitration procedure is also named as the exclusive method for resolving such disputes in the MLSPA agent contract, which Mr. Hammer signed. Precedent holds that arbitration clauses in contracts should be given deference by courts. United Paperworkers Int l Union v. Misco, Inc., 484 U.S. 29, 40 (1987). In a contract where a party expressly and unambiguously agrees to be bound by an arbitration agreement, the courts are cautious to undo the parties original intent to be bound. The limitations on the power of federal courts to obstruct arbitration judgments are even more pronounced when the parties have agreed to a specified method of selection that will predictably lead to arbitration by individuals with ties to a party in the arbitration. NHLPA v. Bettman, No. 93 Civ. 5769, 1994 U.S. Dist. LEXIS 21715, at *39-40 (S.D.N.Y. Nov. 9, 1994). While Mr. Hammer argues that he only agreed to a neutral arbitrator, he has failed to produce evidence of evident partiality. We also find the arbitration agreement was part of a valid contract negotiation. We agree with the federal policy in favor of arbitration. Moses H. Cone Mem l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). The Supreme Court has consistently held that limited judicial review is necessary to encourage the use of arbitration as an alternative to litigation. See Southland Corp. v. Keating, 465 U.S. 1, 10 (1984); see also, Shearson/Am. Express Inc. v. McMahon, 482 U.S. 220, 226 (1987). In light of the foregoing, Mr. Hammer s challenge to the neutrality of the MLSPA arbitrator must be rejected, and the MLSPA must be allowed to continue with the suspension of Hammer s license.
IV. CONCLUSION For the reasons above, we AFFIRM the plaintiff s arbitration and bankruptcy claims. Therefore, we REVERSE the judgment of the district court. SO ORDERED The Honorable Judge Mike Dicta
APPENDIX A: Tulania Civ. P. Code 1030-B Neutral arbitrator means (1) an arbitrator who is selected jointly by the parties or by the arbitrators selected by the parties, or (2) appointed by the court when the parties or the arbitrators selected by the parties fail to select an arbitrator who was to be selected jointly by them. 3(b)(14) of the MLSPA Agent Regulations: Prohibited Conduct Contract Advisors are prohibited from: Engaging in unlawful conduct and/or conduct involving dishonesty, fraud, deceit, misrepresentation, or other activity which reflects adversely on his/her fitness as a Contract Advisor or jeopardizes his/her effective representation of MLS players; A Contract Advisor who engages in any prohibited conduct as defined above shall be subject to discipline in accordance with the procedures of Section 6 of these Regulations. 5(d) of the MLSPA Agent Regulations: Arbitrator The MLSPA shall select a skilled and experienced person to serve as the outside impartial Arbitrator for all cases arising hereunder.