Recognizing that it’s “a steep climb to vacate an arbitration award” and that “[c]ourts will disturb an arbitration award only in limited circumstances,” the Third Circuit Court of Appeals reversed a district court’s order confirming an arbitration award, finding that the award was procured by fraud.
The parties, Todd France and Jason Bernstein, are “agents” registered with the National Football League Players Association (NFLPA). Bernstein’s clients included Kenny Golladay, a well-known NFL wide receiver. Golladay terminated his relationship with Bernstein and his company, Clarity Sports International, on January 29, 2019. Three days before the termination, Golladay participated in an autograph signing event in Chicago that Bernstein did not arrange, even though the event was the type of opportunity that Bernstein and Clarity were hired to do for Golladay. Once Golladay’s agreement with Bernstein was terminated, he signed agreements with France. Bernstein then filed a written grievance against France pursuant to the dispute resolution process set forth in the NFLPA regulations. Bernstein alleged that France arranged the autograph signing event for Golladay and induced him to terminate his relationship with Bernstein. The dispute was referred to arbitration pursuant to the NFLPA regulations.
Bernstein sought discovery from France in the arbitration proceeding. France produced some discovery but denied having any documents responsive to key requests about Golladay’s appearance at the autograph signing event. Bernstein also obtained authorization from the arbitrator to issue subpoenas to nonparties for relevant documents; however, Bernstein received no information in response to the subpoenas and did not enforce the subpoenas in federal court. During the hearing, France repeatedly denied that he had anything to do with the autograph signing event, and the arbitrator ruled in favor of France concluding that Bernstein had not met his burden of proving that France had violated NFLPA regulations. France then filed a petition and motion to confirm the arbitrator’s award in the U.S. District Court for the Eastern District of Virginia. Bernstein cross-moved to vacate the award, arguing that France had procured the arbitration award by fraud, relying on evidence that came to light after the arbitration in another lawsuit showing that France was indeed involved in arranging the autograph signing event.
The matter was transferred to the U.S. District Court for the Middle District of Pennsylvania, which granted France’s motion to confirm the award and denied Bernstein’s motion to vacate it. The district court noted the narrow circumstances in which a court may vacate an arbitration award, and then concluded that Bernstein had not offered a satisfactory reason for why evidence of France’s involvement in the signing event was not discovered before or during the arbitration hearing. The district court specifically noted that Bernstein had not sought judicial enforcement of the discovery subpoenas he had issued pursuant to 9 U.S.C. § 7, which the court saw as a lack of diligence further supporting its decision to deny the motion to vacate the award.
Observing that the case was “like something out of the film Jerry Maguire,” the Third Circuit noted that a party making a claim like Bernstein — i.e., that the arbitration award was procured by fraud because of non-production of responsive documents and false testimony — must make a three-part showing: “first, that there was a fraud in the arbitration, which must be proven with clear and convincing evidence; second, that the fraud was not discoverable through reasonable diligence before or during the arbitration; and third, that the fraud was materially related to an issue in the arbitration.” The court closely examined all three factors and concluded that Bernstein had established that there was fraud in the arbitration that was not discoverable through reasonable diligence and that the fraud was material to the case. The court ruled in favor of Bernstein, reversed the district court’s decision, and remanded the case for entry of an order vacating the arbitration award.
France v. Bernstein, No. 20-3425 (3d Cir. Aug. 9, 2022).
