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August 28, 2008

Future Shock

And in This Corner...

by Kevin Goldstein

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It really was the statement heard 'round the world, as from the time of its release until the end of the day, my phone has been burning in non-stop discussions with teams, agents, players, and other members of the media all looking to talk about the Pedro Alvarez situation. The statement issued by the Pirates is very strong in tone, and tells us quite a bit in only 575 words. We all know that Pittsburgh team president Frank Coonelly has a close relationship with the commissioner's office, and the document almost sounds as if it came straight from New York. Let's take a word by word look at it, and talk about what is actually known, what is merely rumored, and what may eventually happen.

At the Pirates' request, the Office of the Commissioner today placed Pedro Alvarez on Major League Baseball's Restricted List. The Pirates were forced to request that Pedro be placed on the Restricted List because we were informed by his agent, Scott Boras, that Pedro will not sign the contract to which he agreed on August 15. Boras further informed us that Pedro will not report to the Club unless we renegotiate his contract and agree to pay him more than the $6 million signing bonus to which he agreed.

The first sentence simply describes a legal maneuver meant to protect the Pirates' best interests. It's important to note here that Pedro Alvarez has not signed a contract. That's not unique. As we get to the final hours of the deadline, teams are in one place, agents in another, and players are often in a third. All a team has to do is to notify the Commissioner's Office that the terms to a deal have been reached. This is an important point that we'll get back to later on, when we attempt to figure out what Scott Boras is trying to achieve. Having Alvarez put on the restricted list is the way that the Pirates make a claim to their control of the player; it prevents anyone else from talking to him, and also gives them a legal leg to stand on should the Alvarez camp try going the independent-ball route. This is also the first of several mentions that Boras wants to renegotiate the deal, and it's one of the main sticking points here. If one follows the letter of the rule, Alvarez has either signed and is a Pirate, or he hasn't signed and the deadline has passed, which now forces him to wait a year to re-enter the draft. But that's not what Boras is looking for-he's looking for a renegotiation, and believe it or not, these aren't totally uncharted waters.

The Major League Rules provide that a player who refuses to sign a Uniform Player Contract to which he has agreed and report to the signing Club shall, upon a report of the signing Club, be placed on the Restricted List until he signs a contract reflecting the terms to which he has agreed. Such a player may not sign a contract with or play for any other Club. While demanding that we renegotiate his contract and pay Pedro more than the $6 million signing bonus to which Pedro agreed, Mr. Boras has contended that the contract we reached with Pedro was consummated after the August 15 deadline. This claim was not raised on the evening of the 15th when we informed Mr. Boras that Major League Baseball had confirmed that the contract was submitted in a timely fashion. Mr. Boras asserted this claim several days later, after all of the draft signings had become publicized.

Note the term "timely fashion"-how it avoids saying anything about the midnight deadline. We'll come back to that one as well after we really set this candle to burning.

The Pirates are confident that the contract reached with Pedro Alvarez was agreed to and submitted to Major League Baseball in a timely fashion and properly accepted by Major League Baseball. In fact, the contract between the Kansas City Royals and Eric Hosmer, another Boras client, was submitted to the Office of the Commissioner after our contract with Pedro was submitted. Mr. Boras is apparently satisfied with the $6 million bonus that he secured for Mr. Hosmer and has not challenged the validity of that contract. Mr. Boras has been informed that if he pursues a claim that our contract with Pedro was not timely he puts Eric Hosmer's contract with Kansas City in jeopardy.

Wow. This is a huge power play for so early in the process. This is sitting down at the World Series of Poker and going all-in on your first hand before the flop. Hosmer is suddenly hit by shrapnel-at risk of becoming collateral damage in a war that went from skirmish to blitzkrieg in about three seconds flat (or more literally, twelve days). Also a Scott Boras client, Hosmer got his six million and is already playing, going 3-for-6 with a pair of doubles in his first two games for Idaho Falls in the Pioneer League. But once again, we see the term "timely fashion." Not the midnight deadline, simply a timely fashion. According to multiple sources, Hosmer did not come to terms with the Royals until after the midnight deadline. He turned down $5.5 million just minutes before, and agreed to the $6 million offer after midnight. With the deadline approaching, the Royals seemingly contacted major league baseball and asked for some kind of window in which they could finish negotiations, and that request was granted. In multiple discussions with industry insiders, nobody that I spoke with had ever been through such a process themselves, but they universally believed that baseball would likely allow such a thing in some cases, since an extension window would be in the best interests of both sides in the negotiation.

This creates a number of open questions. First, is the deadline real or not? Hosmer and the Royals clearly received an extension, and there have been industry rumors concerning an extension for the Nationals and Aaron Crow as well-an extension that did not result in a deal. Not insisting that the deadline really means The Deadline only further breaks this broken process. The second question involves whether or not the Pirates were also granted an extension to complete negotiations with Alvarez. If they did, they could be in a bit of a pickle, as either the deadline was the deadline and Alvarez is unsigned because he came in late, or he's signed a deal for which Boras has found another loophole.

The Players Association has now stepped into the fray and filed a grievance, issuing a statement that says the action "was not filed on behalf of any particular player." Their statement further confirms the information regarding extensions being granted, saying in part, "Within hours after this year's August 15 midnight deadline passed, the Players Association learned from several sources that the Commissioner's Office had extended the deadline for negotiating and reporting signings with drafted players. This was done without notice or consultation with the Players Association, despite a firm deadline having been established though collective bargaining."

The statement does not define what kind of relief they will seek from the grievance-that would come from an arbitration panel-but this could take us to the most aggressive of all legal arguments that could be made in Alvarez' favor, as one could legally claim that the rules of the process were not followed in Alvarez' case, therefore making Alvarez completely exempt from the process, and thus a free agent. It should be noted that, at least initially, this is not what Boras is looking for; the Pirates' statement seems to solely indicate a desire for a new negotiating window. However, as with most issues of this nature, the further down the line it goes, the more both parties can become entrenched.

Now, back to Hosmer for a moment. If Alvarez' deal is ruled illegal on the basis of timing alone, then logic would dictate that Hosmer's deal could meet the same fate. It's important to note that Boras has not in any way contested the Hosmer contract, but the agent's tactics with his other client have put this one within the blast zone of the action. Which again takes us back to the legality of a window extension, and whether or not the Pirates received one. As an additional note, Hosmer has already signed an actual contract, has already played, and has likely already received a significant amount of money. There is no way he'd have NCAA eligibility should his deal be voided.

The Pirates made several attempts to commence negotiations immediately following the draft and were willing and ready to agree to pay Pedro a $6 million signing bonus from the very outset. Predictably, however, Mr. Boras refused to engage in any negotiations at all until shortly before the August 15 deadline and even then an agreement was reached only after Pedro took control of the negotiations.

This paragraph really comes to the core of the Boras problem, which in many ways appears to be an ego thing. Boras did not agree to Pittsburgh's offer, but Alvarez did. Six million dollars is a lot of money for a kid from modest upbringings whose father drives a taxi as the main bread-winner for a family living in New York's tough Washington Heights neighborhood.

Regrettably, we are not surprised that Mr. Boras would attempt to raise a meritless legal claim in an effort to compel us to renegotiate Pedro's contract to one more to his liking. We are, however, disappointed that Pedro would allow his agent to pursue this claim on his behalf. Pedro showed tremendous fortitude and independent thinking when he agreed to his contract on August 15.

Indications all along were that Alvarez wanted to play; that eventually he seemed to have had enough of the protracted negotiations and agreed to a very rich deal. However, Boras thought he could get him more, and has obviously convinced Alvarez of just that in the past two weeks. Another factor is that Boras did not technically 'win' this draft; CAA did when then got $6.2 million for their client, Buster Posey. Don't discount this measly $200,000 as possibly playing a huge role in this maneuver-Boras' ego is sizable, and he does not like to be bruised with also-ran laurels. Boras has always owned the draft, and now someone has done a better job for their client, and he's not going to take that quietly.

The Office of the Commissioner has assured us that we have a valid contract with Pedro and that it will vigorously defend any claim to the contrary. Despite our disappointment, we continue to believe in Pedro Alvarez the person and the baseball player and remain excited to add Pedro to our system. We will sit down with Pedro and his family as soon as Mr. Boras' claim is rejected to chart a new and much more productive start to Pedro's career with the Pittsburgh Pirates.

The Pirates wrap up with a carefully constructed ending and a fine PR move. The Pirates believe that in the end Alvarez will begin his career with the organization, and they want him to come up as the young exciting superstar, not as public enemy number one.

So where do we do from here? The battle between the MLBPA and the Commissioner's Office will begin as early as September 10, and the statement from the MLBPA made references to 'inaccuracies' in the statement released by Coonelly and the Pirates, without going into specifics. Looking at the statement itself, there are certainly some half-truths here, especially in terms of the "timely fashion" in which the contract was submitted. MLB broke the rules in granting extension windows for later negotiations. They did so with the best intentions of both the team and the player at the time, but they didn't see the bigger picture, and now they just might have to pay a large price.

Coming Saturday: A look at the Boras factor throughout the years, and what we can learn from its history as we try to figure out the various directions in which this situation might develop.

Kevin Goldstein is an author of Baseball Prospectus. 
Click here to see Kevin's other articles. You can contact Kevin by clicking here

1 comment has been left for this article.

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