Nevada Supreme Court Ruling On Jon Gruden, NFL Case
Nevada Supreme Court Ruling On Jon Gruden, NFL Case
Nevada Supreme Court Ruling On Jon Gruden, NFL Case
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arbitration provision and incorporated the NFL Constitution and its
arbitration provisions by reference.
In October 2021, the Wall Street Journal and New York Times
published articles detailing controversial emails Gruden reportedly sent
between 2011 and 2018 while working for ESPN. Shortly thereafter,
Gruden resigned from the Raiders and lost his other endorsements and
sponsorships. Gruden and the Raiders subsequently entered a confidential
settlement agreement. Gruden then sued Goodell and the NFL ("the NFL
Parties"), alleging they purposely leaked his emails to the media and forced
his resignation. The NFL Parties moved to cornpel arbitration, and the
district court denied the motion.
The NFL Parties appeal. Principally at issue is whether the
arbitration clause contained in the NFL Constitution is binding under the
facts of this case and California law. We review de novo the district court's
denial of' the motion to compel arbitration, Uber Techs., Inc. v. Royz, 138
Nev., Adv. Op. 66, 517 P.3d 905, 908 (2022), but defer to the district court's
findings of fact unless they are clearly erroneous or not based on substantial
evidence, May v. Anderson, 121 Nev. 668, 672-73, 119 P.3d 1254, 1257
(2005). For the reasons below, we hold that the district court erred by
denying the NFL Parties' motion to compel arbitration.
Gruden did not show the settlement terminated the arbitration clauses
Relying on counsel's statements, the district court found that
the settlement agreement between Gruden and the Raiders terminated the
employment agreement and, by extension, the incorporated-by-reference
NFL Constitution and related arbitration clauses. In the context of a
motion to compel arbitration, factual assertions rnust be supported by
citations to the record, including documents, affidavits or declarations,
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admissions, or other materials. NRCP 56(c)(1)(A); Cal. Civ. Proc. Code §
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437c(c); see also Hansen v. LMB Mortg. Servs., Inc., 1 F.4th 667, 670 (9th
Cir. 2021) (motions to compel arbitration are treated similarly to motions
for summary judgment). Arguments of counsel are not evidence and, unless
stipulated to, do not establish facts. Jain v. McFarland, 109 Nev. 465, 475-
76, 851 P.2d 450, 457 (1993). The settlement agreement is not in the record,
and the district court improperly relied on counsel's statements about it
over the NFL Parties' objection. Because Gruden did not disclose the
settlement agreement or offer any evidence as to its contents, he failed to
establish that it rescinded the employment agreement and its arbitration
obligations, and the district court's finding to the contrary was not based on
substantial evidence.
The employment agreement incorporated the NFL Constitution by reference
The district court found that the NFL Constitution was not
incorporated by reference into Gruden's employment agreement with the
Raiders because Gruden was not given a copy of the NFL Constitution when
he signed the agreement. When a document is incorporated into a contract
by reference, it is as though its terms are set forth in the contract and both
are interpreted as a single document. 11 Williston on Contracts § 30:25 (4th
ed. 2012); see Poublon v. C.H. Robinson Co., 846 F.3d 1251, 1269 (9th Cir.
2017). Under California law, an external document is incorporated into a
contract where "the reference is clear and unequivocal," "the reference is
called to the attention of the other party and he consents thereto," and "the
terms of the incorporated document are known or easily available to the
contracting parties." B.D. v. Blizzard Ent., Inc., 292 Cal. Rptr. 3d 47, 65
(Ct. App. 2022). Gruden's employment agreement with the Raiders meets
these criteria. In it, Gruden agrees to "abide by and be legally bound by the
Constitution, Bylaws, and rules and regulations of the NFL in their present
form and as amended from time to time hereafter. .. which are hereby
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As to the conduct-detrimental requirement, while it is true that
Goodell made no formal finding that Gruden's conduct (or the NFL Parties'
conduct) was detrimental to the League's best interests, the NFL
dispute involves "facts and occurrences that arose before expiration." Litton
Fin. Printing Div., a Div. of Litton Bus. Sys., Inc. v. NLRB, 501 U.S. 190,
205-06 (1991). Though employment arbitration clauses are not binding
indefinitely, courts have enforced them as to claims that are created by or
arise during and from the course and scope of employment. See, e.g., id.;
Nolde Bros. v. Loc. No. 358, Bakery & Confectionery Workers Union, AFL-
CIO, 430 U.S. 243, 252 (1977) (compelling a former employer to arbitrate
per an employment agreement); Zolezzi v. Dean Witter Reynolds, Inc., 789
F.2d 1447, 1449-51 (9th Cir. 1986) (same); Hansber u. Ulta Beauty Cosms.,
LLC, 640 F. Supp. 3d 947, 955 (E.D. Cal. 2022) (same). Gruden's claims,
that the NFL Parties tortiously leaked his emails and interfered with his
employment agreement, arose during and out of his employment with the
Raiders; the damages he seeks include the money the Raiders would have
paid him had the NFL Parties not forced his resignation three years into
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the ten-year contract term. Gruden's status as a former employee does not
negate the presumption in favor of post-termination arbitration.
Finally, as to the scope of section 8.3(E) more generally, Gruden
does not deny that the NFL Parties have rights under that clause, he does
not argue that the clause does not apply to claims brought by a current
employee against the Commissioner or the NFL, and at oral argument he
conceded that this dispute would be "within the scope of that clause" if the
predicate finding of conduct-detrimental was made. Gruden instead argues
that the NFL Parties' reading gives the NFL Commissioner "unlimited
scope" over disputes involving all current or past employees. Our analysis
begins with the FAA presumption in favor of arbitration. Had the NFL
acted under its Constitution to discipline Gruden by ousting him, section
8.3(E) would have clearly applied. But the pleaded facts also bring the
dispute under the clause. By its plain terms, section 8.3(E) applies to any
dispute "involving" teams or team employees so long as the dispute
‘`constitutes" conduct detrimental to the NFL. Gruden alleges that while he
was employed by the Raiders, the NFL Parties conducted a "malicious and
orchestrated campaign" to destroy his career which included the leaking of
offensive emails attributed to him to the national press, pressuring the
Raiders to terminate him, and ultimately causing Gruden to resign.
Whether judged from the perspective of Gruden's emails becoming public or
the NFL Parties' alleged leaking of those emails, the conduct-detrimental
to the NFL or professional football requirement appears satisfied.
Gruden agreed to the terms of the NFL Constitution arbitration
clause, he concedes that the clause is a valid agreement to arbitrate
disputes between him and the NFL Parties, and the presumption in favor
of arbitration puts this dispute within the scope of that clause. Public policy
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favors enforcement of a valid arbitration clause and we cannot say with
positive assurance that the NFL Constitution arbitration clause is not
susceptible to the NFL Parties' interpretation. We therefore conclude that
Gruden must submit to arbitration under the NFL Constitution arbitration
clause. Because the NFL Parties may compel arbitration, we need not reach
whether the NFL Parties can enforce the employment agreement
arbitration clause on a theory of equitable estoppel.
The district court erred in concluding the employment agreement was
unenforceable due to unconscionability
The district court concluded that even if the NFL Constitution
contains a valid arbitration clause, it is unenforceable because it is
unconscionable. Unconscionability may invalidate an agreement to
arbitrate, but an arbitration agreement will not be invalidated "by defenses
that apply only to arbitration or that derive their meaning from the fact
that an agreement to arbitrate is at issue." AT&T Mobility LLC
Concepcion, 563 U.S. 333, 339 (2011) (citing Doctor's Assocs., Inc, v.
Casarotto, 517 U.S. 681, 687 (1996)). California law requires both
procedural and substantive unconscionability, Arrnendariz v. Found.
Health Psychcare Servs., Inc., 6 P.3d 669, 690 (Cal. 2000); see also 1 Thomas
H. Oehmke & Joan M. Brovins, Commercial Arbitration § 10:1, at 10-3
(2023), which it applies on a sliding scale, such that lelxcessive procedural
or substantive unconscionability may compensate for lesser
unconscionability in the other prong," Chavarria v. Ralphs Grocery Co., 733
F.3d 916, 926 (9th Cir. 2013); see also Oehmke & Brovins, supra, § 10:6, at
10-9. Nevertheless, no matter how significant or obvious a contract's
substantive unconscionability, California courts will not find it
unenforceable without at least a nominal showing of procedural
unconscionability. See, e.g., Arrnendariz, 6 P.3d at 690. Because Gruden's
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employment agreement incorporated the NFL Constitution by reference, we
read them together as a single document. Poublon, 846 F.3d at 1269.
235, 250-51 (Ct. App. 2015), as rnodified on denial of reh'g (Feb. 9, 2015).
The test for adhesion is not whether parts of a contract are non-negotiable,
but whether the whole contract at issue is a "take it or leave it" proposition,
offered by a party with superior bargaining power. Id.
As discussed above, Gruden expressly acknowledged in the
employment agreement that he had read the NFL Constitution and
understood its terms. He therefore cannot now claim surprise at its
contents. As a former Super Bowl Champion coach and long-time media
personahty signing the most lucrative NFL coaching contract in history,
while being represented by an elite agent, Gruden was the very definition
of a sophisticated party. Though Gruden could not negotiate with the
Raiders as to the terms of the NFL Constitution, he had the ability to
negotiate the employment contract as a whole—such as for more pay, a
longer contract, added control over team decisions, or its other terms.
Because we cannot say Gruden and the Raiders had unequal bargaining
power or that the employment agreement as a whole was a "take it or leave
it" offer, we conclude oppression is not present here. The district court
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therefore erred in finding Gruden's employment agreement was
procedurally unconscionable.
Gruden makes strong arguments as to substantive
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a replacement or for the court to order one. See 9 U.S.C. § 5; Cal. Civ. Proc.
Code § 1281.6 ("if the agreed method [of appointing an arbitrator] fails or
for any reason cannot be followed . . . the court, on petition of a party to the
arbitration agreement, shall appoint the arbitrator"); NRS 38.226(1)
(Nevada Uniform Arbitration Act (UAA) provision analogous to Missouri
UAA provision M.S. 435.360, relied on in Hewitt, 461 S.W.3d at 813, in
appointing third-party arbitrator in NFL dispute). Finally, issues of
arbitrator bias are reviewable post-arbitration, as a basis for invalidating
the arbitrator's award. See NRS 38.241(1)(b)(1) (the court "shall vacate" an
arbitration award if there was "[e]vident partiality by an arbitrator
appointed as a neutral arbitrator"); 9 U.S.C. § 10(a)(3) (the court may vacate
an award "where there was evident partiality or corruption in the
arbitrators"). For these reasons, and based on Gruden's failure to establish
procedural unconscionability under California law, we reject his
unconscionability defense to the NFL parties' motion to compel arbitration
under section 8.3(E).
The NFL Constitution arbitration clause is neither circular nor illusory
The district court declined to enforce the NFL Constitution
arbitration clause on the additional grounds that it was circular and
illusory. Gruden argues that the NFL can unilaterally modify the
arbitration clause without notice and that this renders that clause illusory
and unenforceable. We note that the district court only considered the
illusory argument within the scope of unconscionability, and this is
unavailing because there is no showing of procedural unconscionability.
Nevertheless, we address the construction Gruden presents here because it
was raised broadly and sufficiently at district court.
An illusory promise amounts to a failure of consideration. 17A
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Am. Jur. 2d Contracts § 125 (2024 update). A promise is illusory when a
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Conclusion
Gruden's employment agreement incorporated the NFL
Constitution by reference, and he agreed to arbitrate this claim under the
arbitration clause in Article VIII § 8.3(E) of the NFL Constitution. Gruden
has presented no contract defenses that make that clause unenforceable.
The district court erred in its denial of the NFL Parties' motion to compel
arbitration under the NFL Constitution. Accordingly, we
REVERSE the district court's order denying the motion to
compel arbitration and REMAND for the district court to grant that motion
consistent with this order.
, C.J.
Cadish
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may survive contract termination. I disagree with their conclusion because
the facts of this case do not support survival of the clause past the end of
Gruden's employment.
The party seeking to compel arbitration bears the burden of
proving the parties have an agreement to arbitrate by a preponderance of
the evidence. Johnson v. Walmart Inc., 57 F.4th 677, 681 (9th Cir. 2023); 4
Ain. Jur. 2d Alternative Dispute Resolution§ 100 (Supp. 2024). The common
law principles of contract interpretation, such as construing ambiguity
against the drafter, apply to arbitration clauses. Mastrobuono v. Shearson
Lehman Hutton, Inc., 514 U.S. 52, 62 63 (1995) ("Hespondents drafted an
ambiguous document, and they cannot now claim the benefit of the doubt").
Agreeing to an arbitration clause does not mean that a party is necessarily
bound to arbitrate with any party and in any capacity. See, e.g., McCarthy
v. Azure, 22 F.3d 351, 355-56 (1st Cir. 1994) (finding that a company could
not compel a former executive to arbitrate claims brought by him as an
individual). If parties have formed a valid agreement to arbitrate, the FAA
provides a presumption in favor of arbitration when analyzing the scope of
that agreement. Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford
Junior Univ., 489 U.S. 468, 476 (1989). But the policy in favor of
arbitrability does not override the principle that the terms of the agreement
are paramount. Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287,
302 (2010). Whether former employees are bound by an arbitration clause
is a question of forrnation, and the presumption in favor of arbitration does
not override the plain terms of the parties' agreement. See Thomas H.
Oehmke & Joan M. Brovins, 1 Commercial Arbitration § 5:12 (Dec. 2023
Update).
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to negotiate the terms of a contract. Stirlen v. Supercuts, Inc., 60 Cal. Rptr.
2d 138, 146 (Ct. App. 1997), as modified (Feb. 10, 1997) (citing Graham v.
Scissor-Tail, Inc., 623 P.2c1 165, 172 (Cal. 1981)). Furthermore, "Mlle
availability of alternative business opportunities does not preclude a finding
of procedural unconscionability under California law." Pokorny v. Quixtar,
Inc., 601 F.3d 987, 997 (9th Cir. 2010). Adhesion is sufficient to establish
at least "a low degree of procedural unconscionability." Davis v. Kozak, 267
Cal. Rptr. 3d 927, 936 (Ct. App. 2020) (citing Serpa v. Cal. Sur.
Investigations, Inc., 155 Cal. Rptr. 3d 506, 512 (Ct. App. 2013), as modified
(Apr. 19, 2013 and Apr. 26, 2013).
Gruden had no bargaining power whatsoever regarding the
take-it-or-leave-it inclusion of the NFL Constitution in his employment
agreement. Gruden's contract is a seven-page employment agreement that
incorporates by reference the 447-page NFL Constitution. That means that
the employment agreement is effectively 454 pages, over 98 per cent of
which Gruden had no power to negotiate in any way. Like every employee
of every NFL team, Gruden would be subject to the adhesive terms no
matter the NFL team for which he might coach because Article 1II § 3.11(D)
of the NFL Constitution mandates that all teams must incorporate the NFL
Constitution into every employment contract. Gruden's sophistication is
meaningless because, though he could negotiate some terms, he had a total
absence of meaningful choice. Because Gruden had unequal bargaining
power and because his employment agreement was take-it-or-leave-it, at
least a nominal amount of procedural unconscionability was present at
formation.
The majority indicates, and I agree, that the employment
agreement is substantively unconscionable because Goodell acting as
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arbitrator is outrageous. Furthermore, the NFL is empowered to
J.
Bell