The NFL’s intervention in the Washington Football Team’s ownership battle sheds light on league efforts to direct ownership squabbles to private—and confidential—arbitration overseen by commissioner Roger Goodell.
Last month, the franchise’s three limited partners (Robert Rothman, Dwight Schar and Frederick Smith) sued majority owner Daniel Snyder in a Maryland federal court. The case concerns a disagreement over contract interpretation. The limited partners wish to sell their stakes to an unidentified buyer for approximately $900 million. Under the terms of the franchise’s partnership, Snyder has a right to buy those stakes before they are sold. He intends to buy out the equity of Smith and Rothman, but not that of Schar. The limited partners insist that he must buy out all three or none.
The NFL has intervened to convey a basic message: This dispute shouldn’t be in court, and to the extent it is in court, records should remain sealed.
Judge Peter Messitte of the U.S. District Court for the District of Maryland has approved the NFL and The Washington Post as intervenors. Intervenors are nonparties with a bona fide interest in a litigation. Intervenors can file briefs and advocate for positions linked to both the case and their own fiduciary interests. The intervenor designation accords the NFL and the Post (and their respective attorneys) direct access to Judge Messitte.
The newspaper and the league have intervened for conflicting reasons; The Washington Post seeks access to records, whereas the NFL wants those records sealed.
The NFL’s goals as an intervenor are articulated in a memorandum authored by Benjamin Block, a partner at Covington & Burling in Washington D.C. and longtime counsel to the NFL and other sports organizations. The memorandum, dated Nov. 30, stressed that the three limited partners “committed” to a method of dispute resolution overseen by Goodell “upon acquiring their ownership interests.”
These statements serve as reminders that when one buys equity in an NFL team, the buyer isn’t purchasing an ordinary business. There are strings attached, as is true of any investment in a joint venture and franchise-based entity. One condition is acceptance of the NFL’s constitution and bylaws, a 292-page document that establishes the legal and operational relationship among the league, commissioner, teams and owners.
Article VIII of the constitution details the commissioner’s authority, including the commissioner’s jurisdiction to resolve disputes. Within that scope, the commissioner is conferred “full, complete and final jurisdiction and authority to arbitrate… any dispute involving two or more holders of an ownership interest in a member club.” This language is clearly applicable to Washington’s ownership dispute.
In addition, owners agree to follow the league’s dispute resolution guidelines, which mandate confidentiality in arbitration hearings. The four owners are well aware of these guidelines. The three limited partners initiated an arbitration matter against Snyder in June. On July 14, a Goodell-appointed hearing officer ordered the four parties “to maintain the confidentiality of the arbitration proceeding.”
The role of binding arbitration is crucial to understanding the sequence of the legal process. The NFL, as Block detailed, is armed with a compelling argument that the dispute must first go through arbitration before it could become ripe for judicial review. The Federal Arbitration Act instructs that if parties voluntarily decide to resolve disputes through private arbitration—and thus avoid public litigation—their wishes ought to be honored. There is also extensive case law expressing that judges should enforce arbitration agreements, including with respect to agreed-upon rules and procedures, before agreeing to review a dispute.
Here, Block wrote, the franchise’s four owners “committed [contractually] to binding arbitration by the NFL commissioner” and yet are now in federal court before that arbitration is resolved. This circumstance presents a risk to the NFL: Various documentation concerning confidential league matters, restricted contracts, private emails, trade secrets and other sensitive material could become public. One core reason why the NFL (like other businesses) prefers arbitration is to shield such material from public and media scrutiny. With that in mind, Block asserted that Judge Messitte should “seal the documents submitted in this litigation, which would—and in the NFL’s view should—otherwise proceed via private arbitration.”
Like other media companies, The Washington Post’s interests are to obtain access to material and report on newsworthy findings. In a letter to the court dated Nov. 18, the publication’s attorneys, Thomas Hentoff and Nicholas Gamse of Williams & Connolly, underscored case law affirming the need for access to judicial documents in most types of court proceedings—including those concerning business disputes. They also emphasized legal precedent stemming from the First Amendment and the traditional presumption of open court proceedings.
On Tuesday, Judge Messitte held a hearing regarding court records. The plaintiffs, like the NFL, would prefer the entire record be sealed—in direct opposition to the Post. The parties are directed to send to Judge Messitte proposed redactions, and accompanying legal arguments, by next Monday. He’ll issue a ruling some time thereafter.
(This story has been corrected to reflect that Dan Snyder was sued in a federal court in Maryland, not Virginia, in the second paragraph.)