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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

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