In a case that could act as a jumping off point for discussion regarding the pros and cons of mandatory arbitration in employment cases, the U.S. District Court for the Eastern District of Pennsylvania ultimately upheld an arbitrator’s decision that a soccer coach’s firing did not violate his employment agreement. Nowak v. Penna. Professional Soccer, et al., EDPA, No. 12-416 (January 11, 2016). In its published opinion, the court provided its own view of binding arbitration as a problem resolution mechanism – and the language is not supportive of that form of ADR.

Basic background of the case:

Piotr Nowak, a soccer coach employed via a contract with the Philadelphia Union professional soccer team (“the team”), was fired for behavior deemed by the team to be violative of his contract.

Nowak filed a lawsuit, to which the team responded by asking the court to move the case to mandatory arbitration, spelled out in a provision of the employment agreement. The case was sent to arbitration, and the parties agreed upon an arbitrator who ultimately found against Nowak and determined that his firing was appropriate under the terms of his contract. The arbitrator entered a Final Award, also directing Nowak pay the defendants’ attorneys’ fees and costs.

Nowak appealed, asking the court to vacate the award; the team asked the court to uphold it.

A court’s standard of review of an arbitrator’s award:

A federal court reviewing the decision of an arbitrator selected by the parties gives extreme deference to that arbitrator’s findings. Parties to arbitration should recognize – before participating – that federal courts do not second-guess an arbitrator’s award, but instead presume the reasoned award is enforceable. A court cannot vacate an arbitration award simply because it disagrees with the arbitrator’s findings on the merits or because it believes that the arbitrator made a factual or legal error.

The court began its review by citing the Federal Arbitration Act’s list of the narrow circumstances under which a court may vacate an arbitration award. Under that Act, awards may be vacated where: “(1) procured by corruption, fraud, or undue means; (2) the arbitrator demonstrated evident partiality or corruption; (3) the arbitrator was guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, in refusing to hear evidence pertinent and material to the controversy, or of any other misbehavior by which the rights of any party have been prejudiced; or (4) the arbitrator exceeded her powers or so imperfectly executed them that a final and definite award upon the subject matter submitted was not made.”

Because none of those circumstances was found to apply in Nowak’s case, the court upheld the arbitrator’s decision.

The court’s comments regarding binding arbitration:

In its “Conclusion” however, the court did not mask its concern about the use of binding arbitration as a problem-solving mechanism in employment issues:

To our continuing surprise, intelligent and worldly parties often sign agreements to arbitrate future disputes and limit their fulsome due process citizen rights to a federal court believing they will obtain a quicker answer with less costs. . . . Federal courts continue to resolve matters . . . more expeditiously than in many private arbitrations. As confirmed in this case, the lawyer and arbitrator fees and costs in private arbitrations are often equal or exceed the fees in a taxpayer-funded and Article III Court from which there are meaningful rights to appeal. Lastly, as the parties learned in this case, once they seek judicial scrutiny or confirmation in the public courthouse, they may lose secrecy.

We favor alternative dispute resolution especially between parties of equal bargaining power motivated to finally resolve their dispute in private and with no appeal right. Parties can always seek the aid of this Court or, if necessary, an experienced private mediator, including men and women who formerly served this Court with distinction, in reaching a confidential settlement. While we encourage private settlements, this case, and many like it, should remind parties and counsel of the risks in cavalierly agreeing to mandatory arbitration when they should know, from experience, of a need to often ask a judicial officer to vacate findings from a private forum and the judge’s deference to the private forum.

While the court raised valid and arguable points in its analysis, those comments stand alone in the opinion, without an opposing voice. It will be interesting to see whether the case is appealed to the Third Circuit and, if so, whether that court will take the opportunity to either add to or disagree with the comments and the district court’s clear concern regarding binding arbitration in the employment arena.



Soccer flick-up still taken by permission from “22 Flick Up Advanced Soccer Tricks”