August 13, 2020 - This Week at the Ninth

This Week at the Ninth: Sports, Drugs, and Pensions

This week, we take a look at two Ninth Circuit decisions concerning the employer-employee relationship.  In the first, the Court let the lawsuit against the NFL for its negligent handling of drug distribution to its injured players live to see another day.  In the second, the panel divided over the proper application of the substantial evidence standard of review to a decision of the NLRB.

DENT v. NATIONAL FOOTBALL LEAGUE
The Court affirmed in part and reversed in part the district court’s dismissal of former NFL players’ negligence claims against the NFL related to the organization’s handling of controlled-substance distribution to injured players.

Panel: Judges Tallman, Bybee, and Smith, with Judge Tallman writing the opinion.

Key Highlight: “What is most striking about the [Third Amended Complaint] . . . is the painstaking recitation of injuries sustained by Plaintiffs and the medications they recall receiving during their tenure with the NFL. . . . The named Plaintiffs’ wide-ranging internal organ and muscuskeletal injuries, and substances distributed to manage those injuries (if true), are shocking, even to a reader familiar with the physically demanding nature of professional football and the resulting injuries from playing the game.”

Background: Plaintiffs, former National Football League (NFL) players, sued the NFL on behalf of a putative class of NFL athletes for negligently facilitating the hand-out of controlled substances to dull players’ pain and return them to the game after injuries in order to maximize profit.  On a prior appeal, the Ninth Circuit held that plaintiffs’ claims were not preempted by the Labor Management Relations Act (LMRA), as long as they relate to the actions of the NFL itself and not its member Clubs.  On remand, the district court nonetheless concluded that plaintiffs failed to state a viable negligence claim against the NFL.

Result: The Ninth Circuit affirmed in part and reversed in part.  The Ninth Circuit affirmed the district court’s determination that plaintiffs failed to state a negligence claim based on theories of negligence per se and special relationship.  As to negligence per se, the Ninth Circuit held that the complaint did not sufficiently connect plaintiffs’ allegations of violations of federal and state controlled-substance laws or the plaintiffs’ injuries to actions of the NFL itself, as opposed to actions of the Clubs.  Plaintiffs’ theory of negligence based on a special relationship between themselves and the NFL failed because they had not pleaded it in their complaint.

The Ninth Circuit reversed, however, with respect to plaintiffs’ voluntary undertaking theory of negligence.  The plaintiffs adequately alleged this theory of negligence because they alleged that the NFL voluntarily undertook a duty to ensure the proper recordkeeping, administration, and distribution of medications, but then ultimately failed to protect players due to its business culture in which everyone’s financial interest depended on supplying medications to keep players in the game.  In particular, the complaint alleges that the NFL required teams to report to the NFL regarding medication administration and mandated procedures to control drug distribution, but then turned a blind eye to violations of these standards to maximize its revenues.  The complaint also adequately alleged that the NFL’s carelessness increased the risk of physical harm to the players, including by referencing a medical report the NFL received stating that the organization’s policies regarding drug distribution created short and long term risks of pain medication use and abuse.

The Court remanded for the district court to consider whether this remaining theory of negligence—which had not been considered in plaintiffs’ earlier appeal, is preempted by the LMRA—which bars state-law claims “founded directly on rights created by [Collective Bargaining Agreements], and also claims substantially dependent on analysis of a [Collective Bargaining Agreement].”

DELTA SANDBLASTING v. NLRB
The Court denies a petition for review of an NLRB order that appeared to reject an ALJ’s key factual finding. 

Panel:  Judges Wardlaw, M. Smith, and Bumatay, with Judge M. Smith writing for the majority and Judge Bumatay dissenting.

Key highlight:  “We recognize that our substantial evidence standard is more ‘searching’ in instances where the Board’s findings or conclusions are contrary to those of the ALJ.  But even under this more searching form of review, we still ultimately apply the substantial evidence standard when reviewing the Board’s factual findings.”

Background:  Delta, which provides painting and sandblasting services for boats, has between 5 and 16 employees represented by a union.  In 2008, Delta and the union entered a collective bargaining agreement (CBA), which included a provision for pension payments at a rate of $1.95 per hour.  The CBA was renegotiated in 2014.  According to the union, Delta at that point agreed to incorporate a schedule containing substantially higher pension payments—between $8 and $10 per hour.  Delta did pay those higher rates for a period of time.  But subsequently, Delta again reduced its monthly contribution rate to $1.95 per hour. 

The union responded by filing a charge against Delta in the NLRB.  Delta argued that the NRLA requires that any pension payment be made pursuant to a “written agreement,” and that no agreement other than the original 2008 CBA existed.  The ALJ appeared to accept this argument, stating that the CBA provides “for a base rate of $1.95 per hour.”  But the ALJ concluded that, regardless, Delta’s unilateral decrease of its contribution rates was an unfair labor practice.  The Board agreed with the ALJ’s ultimate conclusion, but on different grounds.  It determined that, in 2014, the parties had incorporated the revised pension rates into the CBA, and thus Delta was required to continue paying at those rates.  Delta petitioned for review.

Result:  The Ninth Circuit denied the petition.  Emphasizing the deferential standard of review, the Court concluded that substantial evidence supported the Board’s conclusion that the 2014 agreement had incorporated the revised schedule governing pension payments.  The Court highlighted testimony from the union’s negotiator—who asserted that the schedule had been included in the contract materials—along with Delta’s own adherence to that schedule over the subsequent years. 

As for the ALJ’s apparent contrary conclusion, the Court first reasoned that in stating that the CBA provides “for a base rate of $1.95 per hour,” the ALJ may have simply been referring to the CBA as of 2008.  Regardless, the Court continued, it would still uphold the Board’s decision.  Although review is “more searching” when the Board reaches a conclusion contrary to that of the ALJ, the Court concluded that the Board’s finding was supported by substantial evidence even under that heightened standard.  And because this revised schedule was in writing and incorporated into the 2014 version of the CBA, Delta had committed an unfair labor practice in departing from it.

Judge Bumatay dissented. Although he noted his general skepticism of the Board’s ultimate conclusion that “an undated, unsigned, standalone document with contested origins” was “enforceable against Delta,” he acknowledged the deference owed the Board and “its ability to make this determination.”  But, he continued, the Board had departed from the ALJ’s contrary findings without providing any reasoned explanation for doing so.  Indeed, Judge Bumatay observed, the Board had addressed the key question of incorporation only in a footnote, and that “footnote didn’t acknowledge that it was rejecting the ALJ’s conclusion regarding the base pension rate.”  For that reason, he would remand so that the Board might “reassess its conclusion in light of the ALJ’s express finding.”