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September 6, 2008

Future Shock

All Pedro, All of the Time--Can I Have My Law Degree Now?

by Kevin Goldstein

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The hearing for Grievance No. 2008-11 (August 15 deadline) begins on Wednesday, and to an outsider, it looks like an open and shut case. The grievance, as filed by the union against MLB, accuses the Commissioner's Office of providing extensions to the signing deadline, thus changing collectively bargained rules without informing the union. In statements about the case, Major League Baseball has already admitted to providing such extensions. So while it looks like an easy win for the union, the more complicated issue concerns the award. As detailed yesterday, the grievance is not filed on behalf of Pedro Alvarez, Eric Hosmer, or their advisor, Scott Boras, nor is it filed against the Kansas City Royals or the Pittsburgh Pirates. It's only the MLBPA versus MLB, which complicates any kind of relief, as any determination for relief will have a significant effect on individuals as opposed to their organizations as a whole. Here's a look at many of the potential scenarios being ventured, both in order of explosiveness, and also (unfortunately for those who love drama) in inverse order of likelihood.

1. Contracts for those players who signed late are voided.
Pedro Alvarez and Eric Hosmer are either (a) free agents, or (b) subject to the following year's draft.

This certainly would be explosive, but it's just not going to happen. On a purely logical, black-and-white level, it does make some sense; the deadline for contracts is midnight, Alvarez and Hosmer's contracts came after midnight, therefore the contracts are void. That certainly seems right on the surface, but the deadline extensions given to teams by Major League Baseball crush the theory because of the legal doctrine of promissory estoppel, or a related term known as detrimental reliance. This doctrine states that, "promissory estoppel prevents one party from withdrawing a promise made to a second party if the latter has reasonably relied on that promise and acted upon it to his detriment." By giving teams extensions to the deadline, and having those extensions communicated to the players and/or their advisor(s), one of the negotiating parties (the team) made a promise that the rule now allowed for negotiations and signings past midnight.

To void these contracts now would go against the doctrine of promissory estoppel; by initially not meeting the deadline after having promised an extension to the players, and now saying that the contracts are void, would be to admit that the players acted to their detriment by not meeting the initial deadline. Again, this is a grievance hearing and not a legal proceeding, and the arbitrator can rule however he sees fit, but the chances of this happening are about the same as you and I sitting down at a blackjack table and being dealt 21... 21 times in a row.

  • Who would be mad about this: Pretty much everyone, except for Pedro Alvarez and possibly Eric Hosmer. In an open bidding war the two players would make significantly more money. As far as re-entering the 2009 draft goes, people can talk all they want about how this situation hurts the players value because of the shenanigans and time off and makeup questions, but we have precedent here. The same was said about Luke Hochevar after the strangeness surrounding his dealings with the Dodgers in 2005. He re-entered the draft and ended up being the first overall pick, while also signing for a larger bonus than the one he had agreed on from the Dodgers before deciding not to sign the contract.
  • Who this would be unfair to: Pretty much everyone. Both the Pirates and the Royals had reason to believe that they were acting in good faith by asking for the extended windows in which to sign the two players, and both certainly would have acted differently had those extensions not been available. In counter-balance to that, both of the players may also have acted differently had it been clearer that the deadline was not the truly the deadline.

2. Void the contracts for those players who signed late, but re-open a window of negotiation.

According to the Pirates, this is one of Scott Boras' desires. As explained in their public statement on the issue, "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."

That might sound like pure greed, but this option might make a bit of sense. The rules for draft negotiations have been mutually agreed upon by Major League Baseball and the Players Association, and fair or not, they in an accepted state of balance that has been worked out by both sides. To grant an extension to the signing deadline, and to make those extensions available only to teams without the union's knowledge, tips the scales by providing an additional leveraging point to teams. Don't like where things are or the way they're going? Extend the deadline. We can be sure that the player's side would like to have the same opportunity, but it was never given to them-the second that an extension was granted to the team, the negotiation became unfair. Following this logic, the negotiations became unfair at some point before the actual deadline, and theoretically, one could freeze the negotiations at that time and re-open them in a small window, perhaps even a matter of minutes as defined by midnight minus the time when the extension was granted.

  • Who would be mad about this: Pretty much everyone except for the camps of the two players. Both the Royals and the Pirates have no desire to re-open the talks, and both would be well within their rights; it might even be suggested that they simply say to the player that the offer you agreed to is the final offer, take it or leave it. Still, this provides something that was not given to other teams in their negotiations.
  • Who this would be fair to: Unfortunately, only to the aggrieved parties. Nearly any player drafted this year would have the right to be upset about such a ruling, because no matter how one slices it, this would give Hosmer and Alvarez additional knowledge (of all of the other deals out there) and more time to negotiate a deal. In other words, the result would be that the case of unfair extensions was solved by providing another unfair extension. Players who signed at the midnight deadline with no extension, such as Yonder Alonso and Justin Smoak, might wonder how they could get additional time in an attempt to broker better deals for themselves.

3. Award monetary damages.

Like most of these scenarios, this one is tricky as well, because while MLB has broken the rules, it would be very difficult for the union itself to prove tangible monetary damages to their organization. This would most likely be a punitive situation, and that is not what arbitration is generally for. Arbitration is not about punishment, it's about finding equity, and such a ruling would meet head-on with the fact that not all of the grieving parties on either side of the table are being represented in this case.

4. The option scenario.

Could an arbitrator simply rule in favor of the union, and then tell Alvarez he has the option of either accepting the $6 million deal that he initially agreed upon, or going back into the draft next year? Many people within the industry have wondered if such a ruling is possible. It makes sense on paper, but according to Frank Zotto of the American Arbitration Association, such a ruling is all but unheard of. "I've never seen parties even wish to have such a decision," explained Zotto. "The choices are why we are here to negotiate and mediate in the first place-parties get to this point [grievance hearings] because they can't agree on things in the first place."

5. Lack of jurisdiction.

This remains the most likely outcome, and it is based on the precedent of the 1997 case of J.D. Drew. In that instance, the arbitrator ruled in favor of Drew, albeit for different reasons, but then stated that he could not provide a remedy, as Drew was not a member of the union that had brought the case on his behalf. This would be another hollow victory for Boras, though he would have the right to continue pursuing the matter through the standard courts, a process that would take far too much time to be worthwhile for his clients. In Drew's case, a panel from MLB ruled that Drew could only re-enter the draft, and not pursue free agency. Whether such a panel would rule that Alvarez's contract would stick, be voided, or be allowed re-negotiation, is something that we'll have to revisit should the decision come down in this manner.

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

Related Content:  Contract Extensions,  The Who,  Extensions,  Deadline

29 comments have been left for this article. (Click to hide comments)

BP Comment Quick Links

gluckschmerz

Thanks for the insights. Its really great having you here at BP! If you were the arbitrator how would you rule on the matter?

Sep 06, 2008 10:34 AM
rating: 0
 
battlekow

"Promissory estoppel prevents one party from withdrawing a promise made to a second party if the latter has reasonably relied on that promise and acted upon it to his detriment."

What is the scope of that detriment? Because if the detriment is that the contracts are voided, the two outcomes of that can be pretty clearly shown to NOT be a detriment; free agency = tons more money, and going back into the draft = at least arguably more money, see Hochevar.

Sep 06, 2008 10:39 AM
rating: 1
 
xnumberoneson

My understanding is that the players acted to their own detriment by signing beyond the deadline. They potentially could have made more money by adhering to the deadline and either a)going back into the draft next year or b) forcing the team to make a last-second panic offer.

Sep 06, 2008 10:51 AM
rating: 1
 
Ben Solow

I think the argument isn't that primary estoppel applies to anything in regards to the players' decisionmaking, but applies to the teams. Both teams were promised an extended negotiating window by MLB, and likely assumed that MLB followed the collective bargaining rules with regards to consulting the union. Therefore, the teams relied on the promise of the (illegitimate) extended window, then acted to their detriment by not signing their draft picks before the deadline.

Sep 07, 2008 22:53 PM
rating: 0
 
sanott

maybe i've missed something. presumably, boras knows the rules inside and out. if he knows the deadline is solid, why would he even agree to hosmer's contract after the deadline. whether he knows if mlb has illegally extended the window of negotiation or not, wouldn't he just hang up the phone at midnight knowing that his client did not get what he wanted and go to plan B. by agreeing with hosmer's contract after deadline, isn't he admitting that the sides were close and that re-entering draft was not what he wanted? could that be seen as trying to salvage a botched negotiation...i.e. the royals blinked late and wanted the 6 million? will the arbiter take that into consideration? how does it reflect on boras legally to continue negotiating, then rescind it after agreeing to it?

Sep 06, 2008 10:59 AM
rating: 1
 
gdhailey

Boras may know the rules (to the extent the rules aren't ambiguous), but Boras has NO interest in playing by the rules if he can get more for his clients by doing otherwise.

You are absolutely correct -- he could have hung up the phone at midnight. He shouldn't be allowed to have it both ways.

Sep 06, 2008 13:06 PM
rating: 0
 
Evan
(47)

He knows the rules, but the rules don't really govern him. The draft rules are part of the CBA, an agreement between MLB and the MLBPA. While the Pirates and Royals with whom he's negotiating are part of MLB, neither Boras nor his drafted clients are part of the MLBPA.

So Boras knows the rules, but he isn't bound to play by them. The rules still,ostensibly, govern the negotiation because MLB is required to follow them, but if Boras thinks he can wrest some advantage by convincing MLB to break those rules he's well within his rights to do so.

The reason this all went to hell is because Boras was successful. As soon as MLB broke the rules to which it had agreed, it opened up a huge can of worms because the MLBPA (like any good union) vigorously defends each and every benefit it has ever wrested from MLB through collective bargaining.

Boras did nothing wrong here. Alvarez and Hosmer did nothing wrong here. The MLBPA has done nothing wrong here. The rules were broken, and they were broken by MLB. If there's going to be any finding with a material consequence, it will be MLB who pays that price.

Sep 07, 2008 11:55 AM
rating: 2
 
sanott

he does hold some responsibility. did he not notify the pirates that pedro would not be signing the contract before the union got involved? it seems that way. was his intention to get his players signed? if so he should be happy with the 6 mill. he didn't send a letter to the royals complaining of the extension, did he? no, hosmer showed up and started playing. boras could have taken the 6 million and not raised a fuss. maybe the union still would have made a stink, but by the looks of it boras was not satisfied with how pedro's family got involved etc.

Sep 07, 2008 12:51 PM
rating: 0
 
gdhailey

Wow.

So a "good union" files grievances even when that does nothing to benefit its own members?

And Boras can break the rules because he isn't a signatory to the CBA -- but wasn't he a party to the Alvarez-Pirates contract? Shouldn't he be bound by his own agreement with the Pirates? He can agree with them to do something "illegal," then walk away from it if he decides to and cite the illegality?

Sort of like killing your parents and asking the judge for mercy on the grounds you're an poor orphan . . .

Oct 03, 2008 20:33 PM
rating: 0
 
marjinwalker

Hey Kevin... Thanks for all this. As former grievance officer and member of the bargaining team, I find this situation and your explanation of it *very* illuminating. The question I have though is about the last option you mention-- the lack of jurisdiction option. Doesn't the fact that the grievant here is MLBPA and specifically *not* Alvarez-- i.e. a chapter grievance-- preclude that outcome.

Secondly, what do you think is the likelihood that MLBPA, due to the fact that their grievance is so ambiguously worded when it comes to remedy, really would like to negotiate with MLB on a solution prior to the arbitration ruling? Seems almost like the scenarios could be something akin to a "poison pill" that we see so often in CBAs for professional sports.

And yes, I think you deserve that law degree now.
:)

Sep 06, 2008 11:11 AM
rating: 1
 
littleball
(675)

Just took the bar exam last month, and thus - as many members of the bar will tell you - I have the elements of promissory estoppel (and other areas of black letter law) more deeply embedded in my brain than most lawyers who have been out practicing for decades.

Promissory estoppel requires REASONABLE reliance to one's detriment. Not all arbitrators will hold that it was reasonable for the player's agents (were these agents attorneys?) to believe MLB when it said that it had the authority to grant this "window." There's a collective bargaining agreement out there, which all agents are familiar with, or should be.

In fact, if the players are forced to sit out another year, and if the players' agents are attorneys, then the players have a colorable argument against their attorneys for malpractice.

Sep 06, 2008 11:13 AM
rating: 1
 
sanott

i think you are reinforcing my point- i would think an arbitrator would presume that boras is well versed in the CBA et al...so if hosmer's contract was truly extended, why did he not fight that one if he knew it would'nt hold up.

Sep 06, 2008 11:19 AM
rating: 0
 
Evan
(47)

The agent can't reasonably be expected to know whether MLB has informed the MLBPA of the extension, or gotten MLBPA's permission. Either is possible, and even required for MLB to offer the extension in the first place.

Sep 07, 2008 11:58 AM
rating: 1
 
fielding99


A few points:

1) MLB baseball has conceded that it unilaterally gave extensions for additional negotiation, but it hasn't conceded that this is material. MLB can argue that the additional time is not a material violation. It is hard to show how a few extra hours is material.

2) Hochevar made more money by waiting a year, but he could also have made far less. It is a risk. Alvarez and Hosmer both wanted to get paid this year, and it is hard to argue that they would not be harmed by having to wait another year.

3) The arbitrator could (and in my opinion, should) ask MLB to pay damages to the union, and then either uphold the contracts or rule them void (forcing the players into next year's draft). The players are not party to the grievance, and the arbitrator lacks jurisdiction to award them damages.

4) Are these the only two contracts at issue? I assume, out of ignorance, that there are others.

5) The fact that Boras continued to negotiate should estop him from claiming that his clients have been harmed.

6) As Sheehan has made abundantly clear, the draft system is overwhelmingly favorable to MLB. MLB really ought to get it's act together.


Sep 06, 2008 11:38 AM
rating: 0
 
gdhailey

1) Possibly correct -- I'm not sure how firmly deadlines in labor contracts are usually applied. (In a commercial contract, you might state "time is of the essence" to rebut the argument that a short delay wasn't material.

3) I don't think $$$ is usually awarded in such a case. If the government found an unfair labor practice, maybe there would be a fine -- there should be no damages here because the union can not prove any harm. If the arbitrator lacks jurisdiction to award the players damages, how does he have jurisdiction to rule their contracts void?

5) Absolutely correct -- that should keep him out of court, but it probably won't.

Remember - the players could have simply refused to sign after the deadline. The teams couldn't unilaterally extend the deadline to the players' detriment -- they could have walked away. How can you let them walk away now? Both the players and the teams negotiated after the deadline -- you can't punish one side and reward the other.

Sep 06, 2008 13:03 PM
rating: 0
 
akellogg

Boras used to be a lawyer, I wonder if he still is? Someone should file a bar grievance against him, he definitely has a conflict of interest in representing both Hosmer and Alvarez. His arguments on behalf of one client may very well be to the detriment of another.

Sep 08, 2008 10:31 AM
rating: 0
 
gdhailey

Interesting point -- I'm a lawyer, but don't really know if this could be a conflict.

A lawyer may take inconsistent positions in different cases. If he wins the case where he argues A, that could create a precedent that hurts the client who argue B down the road -- I don't think that would create a conflict, but I'm not 100% sure.

Oct 03, 2008 20:36 PM
rating: 0
 
Glasscock

Not to dispute your fine analysis, but to broach the problem as a purely practical matter; after all it is an arbitration (not a trial) and not defined and confined by legal doctrines. It concerns the (practical) functioning of major league baseball duopoly, and an agreed "deadline." The parties drew a line, but how dark ("dead") was the line?

Surely, the CBA could have commanded an absolute deadline with the most mandatory language, but practicality was an underlying touchstone of their intents and informal waivers according to circumstance presumed would adapt to a particular signing negotiation -with changing the general rule; hence, the enters of "Slack." Of course, for every "Slack" there must be a countervailing "Gotcha" - an the Union must express a grievance to confine "Slack" from eroding the CBA.

What's the harm to the union members and the particular players; and, if any, and what's the remedy? And, legal doctrine aside, what's the role of the of "Slack" and "Gotcha" in the scheme - and the functioning of the collective agreement in the business of the baseball duopoly.

Certainly, the parties contemplated that the deadline would be flexible in real time - if negotiations were on going and proceeding to final agreement (as indeed they were). Too, if the "deadline" were construed as absolute, it could work counter to the purpose of the CBA and foreclose negotiations if an agreement could not be final before the "deadline." Or, as here create a "loophole" ("Boras-hole"?) for a "good faith" charade.

And, as regards estoppel and reliance, let's not forget that they arose from centuries of common law adjudication of real business disputes - and express a practical solution to advance rather than retard commerce and contracts and preclude ("estoppe") pettifogging gambits.

The instant purely "black-and-white" analysis - always yields to the "collective unconscious" of human transactions that is the product of the analog human conduct of business.

Outcome? (I'd guess that) the arbiter will give the Union a sop by holding a technical violation - and requiring that the Owners advise the Union negotiations that are allowed to continue past the erstwhile "deadline." The player signing should stand as agreed.



Sep 06, 2008 12:01 PM
rating: 0
 
gdhailey

Kevin, your previous articles have been very good -- this is a crazy situation, and proves once again that truth is stranger than fiction -- but I don't think you've earned that law degree quite yet. I have to flunk you on your discussion of promissory estoppel -- not to mention your statement that the purpose of arbitration is to provide equity. (The purpose of arbitration here is to interpret and apply a contract, regardless of whether the contract is equitable.)

Your discussion of promissory estoppel (assuming it even applies here) is a mess -- I can't be sure what parties you are talking about at times. (Are you distinguishing MLB and the individual teams as different parties? The Pirates and Royals may have relied on MLB, but aren't they really the same entity here?) It seems to me that both the teams and the players should be estopped from walking away from the contracts -- Boras can't have his cake and eat it, too. (If he agreed to negotiate after deadlne, the only issue should be did they agree to a deal or not.)

I can see Boras demanding free agency for Alvarez but insisting that Hosmer's contract be honored -- he wouldn't let a little intellectual dishonesty/inconsistency worry him. It seems to me that if both players agreed to terms after the deadline, you either honor both deals or void both deals.

The strange thing about this whole affair is the union is complaining about something that has no impact on its members. (I think it's crazy that the rights of non-union members can be the subject of the CBA, but it was in the interest of MLB to negotiate provisions governing the amateur draft in the CBA -- that gives antitrust immunity to the amateur draft.)

And that's why it is difficult to imagine a remedy. Boras and the teams/MLB both have unclean hands. The union has a grievance because the issue is covered (for no good reason) in the CBA, but the union and its members haven't been harmed --why do they deserve anything?

What does the union want here? None of their members was disciplined, or fired, or denied pay or other benefits. This isn't the kind of action where you would expect a cease and desist order -- i.e., an order directing MLB not to violate the provision in the future. But maybe the arbitrator will direct MLB not to do this in the future without bargaining on the issue or something like that.

I don't think "lack of jurisdiction" is what you mean. I think you mean there is no appropriate remedy here -- the real parties in interest are the teams and the players, not MLB and the MLBPA. The Drew case isn't relevant because Alvarez didn't file this grievance -- the MLBPA did. I think what you mean is that there may be no meaningful remedy for the union's claim -- because the union or a union member wasn't harmed.

Based on only partial information, my ruling is that MLB violated the contract, but it would be inappropriate for me to do anything affecting the contracts -- the players and teams are bound by them.

Sep 06, 2008 12:55 PM
rating: 4
 
concuss

Or "lack of standing" rather than lack of jurisdiction?

Sep 06, 2008 16:27 PM
rating: 1
 
pro341
Other readers have rated this comment below the viewing threshold. Click here to view anyway.

All I want to know is what exactly does all this have to do with BASEBALL? Last I checked the game is played on a diamond shaped field, not a stuffy brown courtroom... BP, please take this conversation somewhere else.

Thanks!

Sep 06, 2008 14:56 PM
rating: -27
 
cdoyle31

You can't be serious.

Sep 08, 2008 16:29 PM
rating: 0
 
OCDSS1

The player who seems to have the biggest grievance to me is Aaron Crow. Were the Nat's granted an extension to negotiate with him? Most of the reports I've heard stated that he and the Nats would've come to an agreement if they had a bit more time.

I find it strange that he would be left out of any discussion about restitution or otherwise correcting the situation.

Sep 07, 2008 07:08 AM
rating: 1
 
JLindholmJr

It's interesting to compare this case with the 1996 debacle when several players were granted free agency after they were not tendered contracts w/in 15 days of the draft. While the facts are a little more complicated this time around, it boggles the mind to think that MLB and the teams are willing to gamble that no one (i.e. Boras) will object when the rules are not followed.

Sep 08, 2008 07:34 AM
rating: 0
 
akellogg

Would Hosmer have any claim against the Royals for breech? He is a party to a contract who wishes to have it remain in force, the other party the Royals (presumably at the behest of the MLB following a ruling) would be the ones breaching. Considering he isn't a member of the MLBPA and wouldn't be a party to the arbitration, it probably wouldn't be binding on him even if it is on the Royals. I don't remember the extent to which a CBA can bind a non union employee

Sep 08, 2008 10:00 AM
rating: 0
 
Ira

I have a couple of issues here, First, a question? Has Alvarez actually signed his contract? I know Hosner had, since he'd already been assigned within the Pirate organization.


Regardless, if I'm the Arbiter, I would find as follows: I would find that the two contracts are valid, and send Hosner back to the minors. If Alvarez had signed his, I'd send him to the Royals. If not, then I would give him 24 hours to sign the deal AS WRITTEN or prepare for next years draft. But, I would also fine MLB $1 for each minute of extensions, and include a stern warning NOT to extend any deadlines in the future. Deadlines in Baseball are supposed to be absolute, though with this being a new one, its unwise to "uncork the bottle" by voiding the two contracts.

Boras is a draft-buster, and the union, knowing that the draft is untouchable because it falls under Baseball's exemption from the Anti-Trust laws, likes it and encourages him to bust up the draft. I'm sure that they would want the draft to be voluntary, allowing the top talent to bargain for initial bonuses and salary as free agents, while still allowing teams to sign players. But, in the long run, I believe that that is not in the "best interests of baseball"

Sep 08, 2008 11:11 AM
rating: 0
 
OCDSS1

Alvarez has not signed his contract AFAIK. IIRC it became conspicuous that he hadn't actually signed and had a press conference and then the Pirates went public (with Cooley's statement) and asked for PA to be put on the restricted list that blew it wide open.

Hosmer has signed his contract, and was pulled off the field by MLB pending a resolution.

Sep 09, 2008 15:40 PM
rating: 0
 
drawbb

All the people who rushed to judgment about Boras having unclean hands ignored a perfectly reasonable and obvious point: MLB and/or the clubs may have told Boras that the MLBPA knew about the time extension when it did not. In other words, MLB and/or the clubs may have lied.

If so, Boras is not at all precluded from notifying the MLBPA and trying to have these two contracts voided. Under that scenario, his conduct is not tainted by the doctrine of unclean hands.

For that matter, those arguing that the MLBPA and its members are not harmed are further ignoring the quoted provision which covered "prospective union members."

Sep 16, 2008 16:43 PM
rating: 0
 
drawbb

The exact language is "individuals who may become Major League Players."

Sep 16, 2008 16:53 PM
rating: 0
 
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