Who Blinks First: Tom Brady or the NFL?

Anybody who’s interested in negotiation strategy should be following the lawsuit between Tom Brady and the National Football League—even if they don’t care about the sport itself. 

Here’s some quick background. The NFL suspended and fined the star quarterback of the New England Patriots for allegedly using under-inflated footballs. Brady and the players’ union challenged the league’s action in federal court, and the trial began several weeks ago. Judge Richard Berman has publicly admonished the parties to settle the case. He has ordered them to return to the courthouse again for further talks Monday, August 31. If they don’t reach agreement, Berman will issue his decision later that week. 

So here’s the question. More than 95% of lawsuits filed in the United States are resolved out of court. Why has negotiation failed thus far in this particular case? 

Years ago my colleague Bob Mnookin coined the phrase “bargaining in the shadow of the law” to describe the dynamics of lawsuit settlement. It remains a powerful analytic tool today. In a nutshell, it involves weighing the bird-in-the-hand of a settlement offer against taking the chance of doing either better or worse in court. Having a solid legal argument strengthens a litigant’s bargaining hand, of course, but that advantage can be dampened if he or she is risk-averse. Transaction costs come into play, as well. In short, being in the right legally doesn’t always equal power at the bargaining table. 

There’s also gamesmanship. Each side must reckon the resolve of the other. Parties may wait until the last minute to make a reasonable offer in hopes that the other side blinks first. Of course, if people miscalculate and nobody budges, they put their fate in the hands of the court. 

This may be the story in Brady v. National Football League. One or both sides may be bluffing. With the deadline looming, a deal could be imminent. It seems just as likely, though, that the parties are truly at an impasse. The best offer that each is willing to make simply may be unacceptable to the other. Each may believe that losing in trial court is better than compromising. 

Specifically, the NFL may feel it must defend its authority to discipline its players and teams. Roger Goodell, the league commissioner, has taken heat for mishandling recent cases of brain injuries, domestic violence, and substance abuse. Backing down in this instance could be hard for him personally. Moreover, he reports to the 32 team owners, 31 of whom likely have no love lost for Brady or the Patriots. Goodell can’t be wildly out of step with them. 

Brady seems to be in a somewhat different position. One issue apparently is non-negotiable for him: the charge that he is a cheater must be dropped. His image has already been badly tarnished. Were he to accept some punishment (a shorter suspension; a lesser fine), the press and the public could see it as an admission of guilt. But there’s a wrinkle. It’s been reported that Brady would consider reduced penalties provided they are solely based on his failure to cooperate with the league’s investigation. Supposedly he insists that the tampering charge disappears. 

I’m just speculating, but we may be seeing the flip side of Bob Mnookin’s bargaining in the shadow of the law. Yes, expectations about what a judge will decide shape the bargaining range when people negotiate. But here Brady’s team may be negotiating not to reach a deal, but rather to influence how Judge Berman will decide the case. 

Judges rarely push parties to settle as aggressively as Berman has done. It’s even more unusual for a judge to do so publicly. It is clear that he doesn’t want to decide the case.

I’m no mind-reader, but it’s not a stretch to imagine that Berman is conflicted. On the one hand, he may read the collective bargaining agreement between the NFL and the union as giving the league broad discretion to discipline its players. But on the other hand, he may feel that Brady has been unfairly treated. It’s not an easy case for splitting the difference. Either the league has the power to do what it did, or it does not. 

Berman may be struggling with whether to decide with his head or with his heart. If so, then the leaked news about Brady’s willingness to compromise may have been meant to make Brady seem more reasonable than the NFL in the judge’s eyes. If so, the league may have hurt itself by refusing to reciprocate, at least so far. 

The punchline? The pivotal negotiation right now may not be between Brady and the NFL. Instead it may be between Brady and Judge Berman. 

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Professor Michael Wheeler teaches at the Harvard Business School. Version 1.2 of his Negotiation360 self-assessment/best-practices iOS app is now available.

Photo: New England Patriots quarterback Tom Brady leaves federal court after appealing the NFL's decision to suspend him for four games of the 2015 season on Aug 12 in New York City. (Photo by Andrew Burton/Getty Images)