Why Reported $10 Million Settlement Makes Sense for Colin Kaepernick, Eric Reid and NFL

The dollar figure in the Wall Street Journal’s report on the collusion grievance settlement is far lower than previous rumored amounts. Even so, all parties can see it as a win. Analyzing the legal points in the latest news.
By Michael McCann ,

Thirty million dollars. $60 million. $80 million. More than $100 million.

When the NFL and attorneys for Colin Kaepernick and Eric Reid announced a grievance settlement last month, there was no shortage of rumors as to how much the NFL had agreed to pay. Many of the rumors pegged the dollar figure in the dozens of millions. Some insinuated the NFL and commissioner Roger Goodell had cut a massive deal out of fear. League officials, commentators surmised, were worried that arbitrator Stephen Burbank would find NFL owners had engaged in illegal collusion.

From the start, these rumors were iffy—at best.

For one, everyone who knew the truth had contractually agreed to keep quiet. Persons involved in the grievance became bound by a confidentiality agreement, meaning any substantive content from the grievance process was, and still is, forbidden from public disclosure. If proven, a breach in a confidentiality agreement can require the breaching party to pay substantial monetary damages. Further, attorneys who betray confidentiality agreements face potential sanction by state bars to which they are admitted to practice law. Put more bluntly, those who knew the settlement figure were barred from talking about it. They also risked adverse legal consequences if they disregarded their obligation.

Second, rumored settlement figures varied considerably, in some cases by tens of millions of dollars. This wide variance could be interpreted in several ways. A relatively favorable interpretation is that one of the dollar figures proved correct and all of the others were wrong. A less favorable interpretation is that all of the dollar figures were made up out of thin air. If those figures were invented, they may have been chosen to shape or mislead public opinion. A higher dollar figure reflects more favorably on Kaepernick while a lower dollar figure is reputationally (not to mention financially) advantageous to the NFL.

The latest rumored dollar figure

On Thursday, a new settlement rumor surfaced: according to The Wall Street Journal’s Andrew Beaton, Kaepernick and Reid will receive less than $10 million from the NFL as a settlement figure. Beaton attributes “people briefed on the deal” as his sources.

How should we interpret this latest report?

As a starting point, it’s worth acknowledging that the Journal is a highly credible news organization and that Beaton cites multiple people (rather than just one person) as his sources. Those are factors that help to corroborate the dollar figure. That said, the less than $10 million figure is not “official.” The official amount is subject to the confidentiality agreement, and neither the NFL nor the players are authorized to reveal it. The same is true of all of the attorneys who were involved in the proceedings. Likewise, and as expected, the NFL and attorneys for Kaepernick and Reid have all declined to substantiate or refute the Journal’s reporting.

As noted above, any “leaker” who had a fiduciary duty to refrain from disclosing the settlement figure could be sued for breach of contract. The persons who shared this figure with the Journal might not have not been bound by the confidentiality agreement. It’s possible that a person bound by the agreement shared it with them, and they in turn shared it with the Journal.

Regardless, if the Journal’s report is true, then someone breached the confidentiality agreement or gained unauthorized access to it. The Journal, however, is not obligated to identify its sources. Further, as private parties, the NFL, Kaepernick and Reid have no legal capacity or subpoena power to force the Journal to reveal its sources. This dynamic could make it difficult for parties to the settlement agreement to identify the leaker. This assumes, of course, the latest rumor isn’t the product of wannabe leakers’ imaginations.

Also, the Journal reports that Kaepernick and Reid will “receive” less than $10 million in the settlement. This presumably refers to a pre-tax figure since non-personal injury settlements are generally taxed as income after they are received. However, if the settlement amount is post-tax, then the pre-tax settlement figure for Kaepernick and Reid would be considerably higher: the federal income tax rate for income in excess of $510,300 is 37%.

Why the Journal’s report is logical

It would not be surprising if the dollar amount of “less than $10 million” is correct or at least ballpark accurate.

First, there’s a good chance Kaepernick and Reid would have lost their grievances and they knew that. That is not a comment on the facts of the case. It’s on the applicable legal burden for proving collusion under Article 17 of the collective bargaining agreement. The two players’ attorneys, Mark Geragos and Ben Meiselas, had to convince Burbank of a “clear preponderance of the evidence” that 1) collusion occurred, and 2) such collusion financially harmed the players.

Collusion doesn’t mean that one team’s GM refused to sign Kaepernick because of his kneeling or because that team’s owner or coach disagreed with Kaepernick politics. Even if Kaepernick had unquestionably proven any one of those things, he would not have proven collusion. Collusion requires sufficient proof that two or more teams, or the league and at least one team, conspired to keep him out of the league. Kaepernick, then, needed to show that a multi-team conspiracy or a league-team conspiracy had deprived him of the chance to play in the NFL. Such evidence could have been in the form of admissions by owners or executives while testifying under oath. Another potential source of damning evidence: unwitting revelations in emails or texts that were then obtained by Kaepernick’s attorneys in the arbitration discovery process.

It’s unknown if Kaepernick (and Reid) had acquired sufficient evidence of collusion. It is known that Kaepernick possessed enough evidence to persuade Burbank to advance his grievance. Last August, Burbank denied the NFL’s request for summary judgment in Kaepernick’s grievance. This meant that Burbank saw enough evidence to find a genuine issue of material fact as to whether collusion occurred. The nature of such evidence is unknown and remains subject to the confidentiality agreement.

Burbank ruling against the NFL on summary judgment last August by no means ensured that Burbank would have ruled against the NFL on the grievance itself. To prevail in the grievance, Kaepernick and Reid had to prove collusion by a “clear preponderance of the evidence.” The standard of “clear preponderance” isn’t quantified in law, but it is a more demanding standard than the ordinary “preponderance of the evidence” standard used in civil litigation. The ordinary standard refers to more probable than not (that is, certainty above 50.0%). The insertion of the word “clear” prior to “preponderance” signals a level of certainty that is significantly higher.

If Kaepernick and Reid believed that Burbank, a law professor at the University of Pennsylvania, would probably have found insufficient evidence of collusion, they were faced with the worrisome prospect of losing the grievance. If they lost, both players would have netted $0. And if they had paid their attorneys on an hourly basis, they might have already spent hundreds of thousands or millions of dollars in legal fees. Also, while a seven-figure settlement isn’t worth $60 million to $80 million (as some settlement rumors suggested) or $100 million (a possible damages figure had the players won their grievances), it is still a lot of money. Don’t underestimate the role of common sense in settlement decisions.

Probably more important than financial implications, Kaepernick and Reid knew that losing would have led them to face sharp criticism or outright ridicule by their media critics and social media decriers. Along those lines, Kaepernick’s value to Nike, which pays him several million dollars a year and uses him as the primary face of its 30th anniversary “Just Do It” campaign, might have diminished had he lost. A settlement prevented this “worst-case” scenario and guaranteed both players a considerable amount of money. Also, by inducing the NFL to offer a settlement agreement, Kaepernick and Reid accomplished what Tom Brady, Adrian Peterson and Ezekiel Elliott had failed to achieve: get the NFL to offer a resolution to a labor controversy that the applicable players found acceptable.

The NFL also perceived value in a settlement. Even if the league concluded it probably would have won the grievance, the win might have become a Pyrrhic victory. This is because Burbank’s decision would have produced a written record. He would have authored a detailed decision to explain his “award” (the term for a ruling in an arbitration). Such a decision would likely have quoted, or paraphrased, comments made by NFL owners and executives while they faced cross-examination by Geragos and Meiselas. If any comments were racially insensitive or otherwise inappropriate, the public might have found out about them.

Even if Burbank’s decision had not been released to the public, the decision could have become public as part of any resulting litigation. Indeed, if Kaepernick and Reid had lost the grievance, they almost certainly would have petitioned a federal district judge to vacate Burbank’s award. This type of legal effort would have faced long odds given longstanding judicial deference to arbitration awards, but that’s not really the point. A lawsuit would have turned a private arbitration matter into a public dispute, with documents uploaded on Pacer and likely accessible to the public.

The NFL, then, likely paid for silence. Meanwhile, Kaepernick and Reid saw value in avoiding a loss and picking up (at least) several million dollars.

It’s unknown how Kaepernick and Reid divided the proceeds from their settlement, which as O’Connor Davies sports tax expert Robert Raiola has explained, is probably taxable under federal law. Likewise, it’s unknown if Kaepernick and Reid’s attorneys represented them on an hourly basis, a contingency fee basis (guaranteeing them as much as a third of proceeds from a win or settlement) or a mixture of the two. It’s safe to say that no matter the billing method, the players’ attorneys received a considerable sum of money through the grievance settlement. They took on a case that many scoffed at and will walk away from it most likely with millions of dollars.

Michael McCann is SI’s legal analyst. He is also Associate Dean of the University of New Hampshire School of Law and editor and co-author of The Oxford Handbook of American Sports Law and Court Justice: The Inside Story of My Battle Against the NCAA.

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Kaepernick, Reid settle with NFL: What does it all mean?

Both Colin Kaepernick and the NFL had incentives to settle the collusion grievance. After losing on summary judgment, the NFL offered a settlement, instead of risking the p.r. disaster. Kaepernick accepted the settlement instead of risking potential scorn from his critics. Also, why this settlement brings new light to the report that Kaepernick requested $20 million to play in the AAF.