Everyone Has a Tequila Story

Practical Law Article w-003-8444 (Approx. 10 pages)

Everyone Has a Tequila Story

by Practical Law Labor & Employment

The Full Back Story

The US Soccer Federation, Inc. and the US National Soccer Team Players Association are parties to a CBA effective from January 1, 2011 through December 31, 2018. The Federation and Players Association have negotiated four CBAs since 1997 and enjoyed relative labor relations peace. Among other things, the CBA sets out amounts the Federation pays for various types of soccer matches into pools of funds the Players Association maintains for its members.

The CBA incorporates a uniform player agreement (UPA) that binds the Players Association and all of its members, including the US Men's National Soccer Team. The UPA also includes compensation terms and, among other things, sets out additional terms on:

Players' duties and responsibilities.
Endorsements, sponsors, licenses and marketing.
Uses of players' likenesses.

The CBA in Play

The Defensive Terms

The current CBA and UPA are constrained by:

A zipper clause, the labor relations equivalent of an integration clause. (For more information on integration or zipper clauses, see Standard Clauses, Collective Bargaining Agreement: Zipper Clause (Complete Agreement Clause) and General Contract Clauses: Entire Agreement).
A no-modification clause.
A non-waiver provision.

The integration and no-modification clauses:

Deem the CBA and UPA "the complete agreement between the parties."
Provide that "no understanding contained in this Agreement shall be modified, altered or amended, except by a writing signed by the party against whom enforcement is sought."

The non-waiver provision states that:

"[F]ailure of either party to insist, in any one or more instances, on the performance of any terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted [by the CBA and UPA] or of the future performance of any such term or condition, and the obligations of the non-performing party with respect thereto shall continue in full force and effect."

The Referee Terms

The CBA also includes grievance and arbitration procedures that cover disputes about interpretations and applications of the CBA and UPA. The scope of the arbitrator's authority is expressly limited as follows:

"The decision of the Impartial Arbitrator will constitute full, final and complete disposition of the grievance, as the case may be, and will be binding upon the Player(s) involved and the parties to this Agreement; provided, however, that the Impartial Arbitrator will not have the jurisdiction or authority to add to, subtract from, or alter in any way the provisions of this Agreement or any Uniform Player Agreement. Furthermore, the Impartial Arbitrator will not have the jurisdiction or authority to add to, subtract from, or alter in any way the provisions of any exhibit to this Agreement or any exhibit to the Uniform Player Agreement unless there is a conflict or inconsistency between the provisions of the exhibit and this Agreement or any Uniform Player Agreement, in which case the Impartial Arbitrator may conform the exhibit to this Agreement or the Uniform Player Agreement. In resolving grievances, the Impartial Arbitrator has the authority to interpret, apply and determine compliance with any provision of this Agreement, or Uniform Player Agreement or exhibit thereto and to award monetary damages and/or declaratory or injunctive relief."

(Emphasis added.) For model CBA grievance and arbitration provisions, see Standard Clauses, Collective Bargaining Agreement: Grievance Procedure Clause and Collective Bargaining Agreement: Arbitration Clause.

A Coachable Moment

For a detailed analysis of the Federation and Players Association CBA, its exhibit, and the UPA see What's Market, United States Soccer Federation, Inc. and United States National Soccer Team Players Association collective bargaining agreement. To see how these agreements compare to other CBAs, explore the What's Market Collective Bargaining Agreement Database. To quickly generate a report comparing any of the 60 points Practical Law has analyzed in any of the CBAs in the What's Market Collective Bargaining Agreements Database:

Select CBAs to compare.
Click the "Compare" button.
Check the box next to any of the points of analysis available for every CBA in the database.
Click the "Compare" button.
If desired, change:
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For more information on the database, see Practice Note, What's Market Collective Bargaining Agreements Database: Overview.

The Dispute Kicks Off

From approximately 2001 until early 2013, before authorizing sponsors to use the likenesses of groups of six or more players, the Federation submitted print creatives to the Players Association for review. In 2013, the Players Association disapproved a proposed print creative submitted by the US Soccer Federation. The print creative was a proposed poster advertisement for el Jimador tequila.

The Soccer Federation initially filed a grievance and demanded arbitration under the CBA and UPA, but withdrew that grievance and demand. However, the Federation later wrote to the Players Association to declare that the Federation had no contractual obligation to submit print or digital creative pieces containing the likeness of six or more national team players to the Players Association for its advance approval and no longer would.

Within one week, the Players Association filed a grievance and demanded arbitration under the CBA and UPA, claiming that the Federation's declaration was an anticipatory breach of the CBA and UPA.

In September 2014, an arbitrator ruled that:

The CBA and UPA are silent and therefore ambiguous regarding:
- whether the Federation must submit print creatives of six or more players to the Players Association; and
- the procedure for the approval of print creatives submitted by Federation sponsors.
The arbitrator had authority to resolve the ambiguity by considering the parties' past practices.
The Federation's past practice of submitting print creatives to the Players Association for its approval was an implied term of the CBA and UPA.
The Federation's declaration that it would no longer abide by its past practice was an anticipatory breach of the CBA and UPA.

The Federation petitioned the US District Court for Northern District of Illinois under the Labor Management Relations Act (LMRA) to vacate the arbitrator's award and the Players Association cross-petitioned to enforce the award (see 29 U.S.C. §185). For more information about the LMRA, see Practice Note, Labor Law: Beyond the NLRA and RLA: Labor Management Rights Act of 1947).

On September 29, 2015, the Northern District of Illinois confirmed the arbitrator's award and granted summary judgment for the Players Association to enforce the award. The court:

Noted its authority to review the arbitration award was extremely limited.
Held that the arbitrator might have:
- "too cavalierly" invoked notions of silence and ambiguity; and
- applied unsound reasoning.
Could not conclude that the arbitrator exceeded his authority under the CBA and UPA by relying on the parties' past practices when interpreting and applying the CBA's and UPA's terms.
(United States Soccer Fed'n, Inc. v. United States Nat'l Soccer Team Players Ass'n, 140 F. Supp.3d 738, 747-50 ( N.D. Ill. 2015).)

The Federation appealed to the Seventh Circuit.

Seventh Circuit Reverses the Field

The Seventh Circuit:

Held that the arbitrator exceeded the scope of his authority under the LMRA and the terms of the CBA by impermissibly adding a term to the UPA based on the parties' past practice.
Reversed summary judgment for the Players Association.
Remanded the case to the Northern District of Illinois with instructions to:
- vacate the arbitration award; and
- enter judgment for the Federation.

(United States Soccer Fed'n, Inc. v. United States Nat'l Soccer Team Players Ass'n, (7th Cir. Sep. 22, 2016).)

The Laws of the Game

The Seventh Circuit noted the parameters for its review of the arbitration award:

If an arbitrator's award draws its essence from the CBA, the award is legitimate (United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 36 (1987) quoting United Steelworkers v. Enter. Wheel & Car Corp., 363 U.S. 593, 597 (1960)).
Judicial deference to arbitration is broad but not unlimited. "[A]n arbitrator is confined to interpretation and application of the collective bargaining agreement; he does not sit to dispense his own brand of industrial justice." (Enter. Wheel & Car Corp., 363 U.S. at 597.)
A court may vacate an arbitrator's award if "the arbitrator had exceeded the powers delegated to him by the parties" (Enter. Wheel & Car Corp., 363 U.S. at 597).
If "there is no possible interpretive route to the award," then a "noncontractual basis can be inferred and the award set aside" (Chicago Typographical Union No. 16 v. Chicago Sun-Times, Inc., 935 F.2d 1501, 1505–06 (7th Cir. 1991)).

The Federation Cut Down the Angles

The Seventh Circuit noted that:

Ambiguity in a CBA is "something that makes it possible to interpret a document reasonably in more than one way" (Rossetto v. Pabst Brewing Co., 217 F.3d 539, 542 (7th Cir. 2000)).
Courts must enforce a CBA's terms when those terms are unambiguous, and when the language of the agreement lends itself to only one reasonable interpretation, it is not ambiguous (Young v. N. Drury Lane Prods., Inc., 80 F.3d 203, 205 (7th Cir. 1996)).
Extrinsic evidence should not be used to add terms to a contract that is plausibly complete without them (Bidlack v. Wheelabrator Corp., 993 F.2d 603, 608 (7th Cir. 1993)).

The Seventh Circuit held that the CBA and UPA's express terms foreclosed the arbitrator from injecting an implied term (the Federation's past practice of seeking approval for sponsor use of print creatives) for several reasons, including that:

The CBA and UPA are not silent on the approval procedure for sponsor use of likenesses of six or more players in print creatives. The agreements provide that, for sponsor use of print creatives with player likenesses for six or more players, the Federation "will request, but not require, the [sponsor] to make a contribution … to the applicable Player Pool(s)."
There is no other reasonable interpretation for the contractual language other than providing a right without Players Association approval for sponsors to use player likenesses in these circumstances.
There is no basis in the CBA to require Players Association approval.
There is no void in the CBA's terms or basis for labeling them ambiguous.
It is clear that the parties contemplated sponsors would use likenesses of six or more players in both spot and non-spot mediums and decided Player Association approval would be required only for spot advertising.

The Federation's Past Practice Was Not an Own Goal

The Seventh Circuit acknowledged that arbitrators may rely on the "law of the shop" (the body of the parties' past practices) to interpret ambiguous CBA provisions or to supply terms absent from the CBA. In some circumstances, practices against one party's interest may become implied CBA terms or unexercised contractual rights may be waived.

However, the law of the shop cannot be relied on to modify clear and unambiguous provisions (Tootsie Roll Indus., Inc. v. Local Union No. 1, 832 F.2d 81 (7th Cir.1987)). Also, if a CBA is clear and unambiguous regarding whether the CBA represents the parties' entire agreement, whether or in what limited circumstances the CBA can be modified, the scope of the arbitrator's authority, and the substantive provision at issue, the arbitrator may not look towards past practices as a source of new or modified CBA terms (Anheuser-Busch, Inc. v. Beer Workers Local Union, 744, 280 F.3d 1133 (7th Cir. 2002)).

In this case, the CBA expressly:

Prohibits the arbitrator from adding to, subtracting from, or altering the CBA.
Renders any understandings between the parties beyond the terms expressed in it void.
Does not permit modification of the CBA's express terms except in a writing signed by the party against whom the modified CBA term is to be enforced.
Precludes the arbitrator from finding the Federation waived a right to permit a sponsor to use player likenesses as specified, without the Players Association's approval, simply because it previously sought the Players Association's approval.

In this way, the Federation's past actions did not disadvantage its express contractual rights.

The Labor Arbitrator May Not Move the Goal Posts by Simply Finding an Ambiguity

The Seventh Circuit distinguished this case from United Food & Commercial Workers, Local 1546 v. Illinois American Water Co. (569 F.3d 750 (7th Cir. 2009)). In that case, the court enforced an arbitration award noting that it did not matter whether the court found the CBA ambiguous as to a situation not expressly contemplated by the parties, if the arbitrator found an ambiguity. Here the arbitrator acknowledged the express language demonstrating the parties contemplated the current situation and ignored the CBA's terms, when concluding the CBA was silent.

The court also distinguished this case from one in which the court enforced an arbitration award based on an arbitrator's misunderstanding of the CBA (Int'l Union of Operating Eng'rs, Local 139 v. J.H. Findorff & Son, Inc., 393 F.3d 742 (7th Cir. 2004)). The arbitrator in this case deemed the CBA silent on an issue that he separately acknowledged addressed the disputed issue. That is ignoring contractual language, not misunderstanding it.

The Take Away

Labor arbitration may provide quick and inexpensive resolutions to disputes when compared to litigation. However, parties must understand that:

Judicial review of upsetting arbitration awards is limited and neither quick nor inexpensive.
Courts defer greatly to arbitrator's contractual interpretations, sometimes even when the arbitrator's interpretations are erroneous.
A party petitioning to vacate a labor arbitration award should:
- primarily aim to prove the arbitrator exceeded his delegated authority;
- secondarily, target proving that the arbitrator ignored (rather than misinterpreted) express contractual terms regarding parties' rights or obligations, or limits on the arbitrator's authority; and
- consider passing on claims based solely only on perceived arbitrator misunderstandings or misinterpretations. These claims are low percentage shots, often cleared summarily in unpublished orders.
Parties should express their intentions about their respective rights and obligations and an arbitrator's authority clearly and unambiguously in CBAs; otherwise they are effectively creating space for arbitrators to consider extrinsic evidence, such as of past practices, to:
- clarify ambiguous CBA terms; or
- supply terms for situations not contemplated by the parties.
If petitioning to enforce a labor arbitration award, the best offense is arbitration deference.

For more information on the law regarding labor arbitration, see Practice Note, Labor Arbitration.

Everyone Has a Tequila Story | Practical Law