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Peter Nowak loses arbitration case against Philadelphia Union

Updated on Wednesday, July 22 with details of Nowak's appeal against the arbitrator's decision; and again on Thursday, July 23 with publication of the arbitrator's protective order which keeps the details of the decision secret.

I have also created a new sub-section of this blog which includes all my coverage of Nowak's various lawsuits over the years.

Three years and one day after former Philadelphia Union manager Peter Nowak sued the team for wrongful termination - and nearly two years after a court sent the matter to arbitration - there's finally word that the arbitrator ruled against Nowak and in favor of the team.

The news came out in the wake of the dismissal of Nowak's lawsuit against Major League Soccer, which claimed that the league office caused his firing from the Philadelphia Union. Essentially, the court ruled that it lacked proper jurisdiction to hear the case.

Nowak's attorney, Clifford Haines, told me that as a result of the dismissal, the case will be re-filed in state court in Delaware County.

You may recall that at the same time that Nowak sued MLS, he also sued the MLS Players Union. That case was dismissed this past February. The same judge, Mary McLaughlin, presided over both cases, as well as Nowak's suit against the Philadelphia Union.

It appears that the first official word of the team winning the arbitration dispute came into the public domain on May 15. On that date, Haines wrote a filing to counter an April 20 motion by MLS to dismiss Nowak's lawsuit against the league. That filing said:

In the Team Action [Nowak's lawsuit against the Philadelphia Union], the AAA arbitrator entered an award for the team on April 21, 2015.

I plead guilty to having missed that exchange of filings as I was getting ready to cover the Women's World Cup, and I don't get any kind of automatic updates when there's movement in the case.

Was it just coincidence that only a day before the arbitrator's official award, MLS moved to dismiss Nowak's lawsuit against it? I have no idea. Remember that we are talking about two separate case dockets here, and theoretically as many as three separate suits.

There were no filings in Nowak's suit against the club from February 24, 2014 until June 26 of this year, and that 2014 filing was just to serve notice of a new attorney working on the case.

Prior to that, the previous filing was a closing of the case for statistical purposes (though not fully official purposes) on September 11, 2013. That was the day on which the case was officially sent to arbitration. The last filing before that was on September 26, 2012.

Anyway, back to the arbitration decision. Arbitrator Margaret Brogan issued a confidentiality order that kept the decision out of the public domain. However, Major League Soccer used a form of subpoena to request a copy of the arbitration decision from the court.

In order to get the document, MLS had to get the consent of both parties in the case. The club was fine with releasing the decision, but could not do so because it was under that confidentiality order. So the club had to request consent of Haines to agree to the release.

(I did not go to law school, so I never took a Civil Procedure class. I'm trying my best to explain this in plain English.)

As of the date of the dismissal of Nowak's lawsuit against MLS (July 20), Haines had not responded to a request which was made on June 15.

Because Nowak's lawsuit against MLS was dismissed, judge McLaughlin also dismissed the subpoena request. This was expected from a legal perspective, but from a public perspective, for the time being the rest of us don't get to know what was in the arbitration decision.

We might soon, though, because Nowak will appeal the arbitration decision. In a July 10 response to a court order asking why the case should not be dismissed, Haines argued that the arbitrator "erred in her application of the law and ignored indisputable evidence that was critical and directly contrary to her findings."

In addition, Haines wrote: "The award demonstrates her bias in favor of the defendants, not only in these specific erroneous acts but also in her failure at every turn to accept any aspect of Nowak's case to include matters that were not in material dispute."

(That July 10 filing also notes that the arbitration hearings were held on May 28, 29 and 30 of 2014. It took nearly a year for the arbitrator to enter the award.)

On July 21, Nowak and Haines submitted an appeal of the arbitrator's decision. In the appeal, Haines offered the first specific explanation yet seen of the training exercises that led players to complain to MLS and the players' union. Those complaints resulted in a report which Nowak claimed was an illegal factor in his dismissal. Here's an excerpt from the appeal, with the training exercise clause in bold:

2. The agreement provided that Nowak was to be terminated "for cause" only, and that whether his termination was "for cause" was to be "determined in good faith."

3. The contract also provided that prior to terminating Nowak, the Team would specify the basis for potential termination and give Nowak the opportunity to cure the defect.

4. After over two years of serving as Team Manager, due to his exemplary performance in December of 2011, the Team extended Nowak's existing contract until December 31, 2015.

5. After several players and the players' union complained to Major League Soccer ("MLS") about their unhappiness with Nowak's coaching methods, on June 12, 2012, MLS published a report, which found Nowak to be in violation of League policy, primarily for making players run 10 miles without water during a hot and "humid" day.

6. On June 12, 2012, Mr. Nowak was notified verbally and in writing that he was being terminated by the Soccer Club "for cause."

7. The termination letter did not state with specificity which allegations relate to which termination clause in the contract.

8. As stated at greater length in the memorandum of law (which is to be filed under seal), the termination was predicated on pretextual, contradictory and false justifications.

9. The termination was fundamentally unfair and contrary to the terms of the contract because it was made: (a) without seeking any input from Piotr Nowak concerning the issues raised by the players' union; (b) without any prior written discipline; (c) without providing Mr. Nowak the opportunity to cure any issues the Team had with him as was required by the contract; and (d) without the good-faith required by the contract.

I would call your attention to clause 8, which notes that subsequent filings are coming under seal. That means they won't be made public. You have a right to be frustrated, but Haines is following the law. We'll see if over time, the seal is lifted.

Since we don't have that memorandum of law to consider, let's take a look back at Nowak's original contract with the team. It states the following:

C) Manager expressly acknowledges that Manager is subject to the jurisdiction of the Commissioner of the League and that the Commissioner (subject to any due process and appeals process provided for in League Rules) and Club {subject to Paragraph XllI) may impose sanctions and other disciplinary measures, including, without limitation, suspending Manager (with or wilhout pay) and imposing fines (which may be deducted from amounts payable to Manager pursuant to Paragraph IV), for violations of this Agreement or for actions (including on-field actions) that materially adversely affect the integrity or reputation of the League or the Team.

Without limiling tho foregoing. Manager expressly acknowledges and agrees that he shall be subject to discipline by the League (subject to any due process and appeals process provided for in League Rules) or Club (subject to Paragraph XIll), including, without limitation, fines. suspension (with or without pay) or termination of this Agreement, if:


(v) he makes a statement or engages in conduct (including, without limilation, criticism of officiating and League disciplinary rulings) that is materially prejudicial to the interests of the League or the Team or materially detrimenlal to the public image and/or reputation of the League, the Club and/or the game of soccer.

The League (subject to any due process and appeals process provided for in League Rules) or Club (subject to Paragraph XIIl), as applicable, shall determine, in good faitha nd its sole discretion, whether Manager has engaged in any of the above-listed behaviors.

Paragraph XIII deals with powers available to the club if it found Nowak to be in breach of contract. There's also a lengthy section dealing with grounds for termination. It includes a list of specific breaches, then states:

Club may also terminate this Agreement upon written notice to Manager for any reason other than as set forth in Paragraph Ill(A) above or for no reason.

You can read the full contract here.

I'll leave you with Judge McLaughlin's explanation of why she dismissed the case. It includes material from an affidavit given by Union CEO Nick Sakiewicz in which he detailed his ownership stake in the team. I have have highlighted it in bold below:

There is no complete diversity [i.e. grounds for a federal court to rule] in this case. The plaintiff, Peter Nowak, is a citizen of Pennsylvania. The defendant, "MLS," is a citizen of Pennsylvania because at least one of it's [sic] members is a citizen of Pennsylvania. Under Third Circuit law, "the citizenship of an LLC is determined by the citizenship of each of its members."


Pennsylvania Professional Soccer, LLC, ("PPS") is the owner-operator that operates the Philadelphia Union MLS team, and is a member of MLS. PPS, itself, is a Delaware Limited Liability Company and has its principal place of business at 2501 Seaport Drive, Switch House Suite 500, Chester, Pennsylvania.

Nick Sakiewicz is a citizen of the Commonwealth of Pennsylvania. Keystone Sports and Entertainment LLC ("Keystone), a Delaware Limited Liability Company, is the sole "Unitholder" of PPS. Mr. Sakiewicz holds 50% of the Class B Units in Keystone. PPS is a citizen of Pennsylvania because Mr. Sakiewicz is a citizen of Pennsylvania. Accordingly, MLS is, itself, a citizen of Pennsylvania.

McLaughlin also cited the famous "Fraser vs. Major League Soccer" case in which the league's single-entity structure was upheld by a federal court.

"The plaintiff disregards the distinct structure of MLS as compared to other professional sports," she wrote.

Don't we know it.