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September 23, 2008

Future Shock

The Alvarez Standoff, Resolved

by Kevin Goldstein

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Late Sunday night, the Pedro Alvarez drama took a turn towards a surprising conclusion when the second overall pick in this year's draft agreed to terms on a major league deal that could pay him as much as nearly $8 million over the next four years.

There is still much to be done here. Alvarez has yet to actually sign a contract. There is still a physical that needs to happen, and there are still items to be worked out, including the salary guarantee provisions and injury protections that agent Scott Boras routinely addends to the deals that he negotiates. In addition, the union and Major League Baseball have to agree to additional settlements around the grievance in order to put this all to bed. As a result, this week's grievance hearings will not take place, but for now, the grievance is officially on hold, as opposed to dropped. All indications are that this will all be taken care of over the next week or so, and all sides are working diligently to end this. This conclusion will also release Royals first-round pick Eric Hosmer from his "pending active" purgatory.

Conversations with multiple sources indicate that the Pirates and the Alvarez camp re-opened discussions on or around the first day of the hearing two weeks ago. These discussions took place with the knowledge and bilateral agreement of the union and Major League Baseball, and arbitrator Shyam Das also approved of the talks.

Sources indicate that the first day of testimony, which featured Commissioner Bud Selig and Dan Halem, MLB's number two labor attorney, did not go well in any way for major league baseball. The feeling among many is that MLB informed the Pirates to work out the best deal possible, as some worst-case scenarios were suddenly looking very possible, primarily the one that included the initial deal being voided and the Pirates being punished by losing their compensation pick for not signing him.

From a previous article on possible outcomes, this is most related to the second scenario I suggested, in which an additional negotiating window was provided. In theory, this provided Alvarez with a normalized negotiating arena, one that he did not have once the extensions were granted. As discussed in that piece, such an allowance would create some understandably hard feelings among other draftees and agents who feel that this arrangement allowed both the Pirates and Pedro Alvarez with more negotiating time, as well as more knowledge than either they or their clients received in their own negotiations. In order to avoid this from becoming an issue, both sides will hold their noses and work together to insist that this is no longer a draft contract. If you look at the details of the new deal, one aspect of it is very important with regards to this subject: the bonus has not changed. It remains $6 million, so that both sides can say that this is the draft deal initially agreed to, and that all of the things on top of it (the major league deal and all of its advantages, the guaranteed salaries, etc.) represent the settlement in this case.

As for the settlement of the grievance, there are still details to be worked out, and most of them revolve around the undocumented reporting process. The current system shuts the union out, as communications are solely between teams and MLB's offices. That helped create confusion as to the precise timing of the Alvarez and Hosmer situations, and some believe this might be addressed by no longer requiring an agreement of terms, but rather an executed contract by the deadline, with of course, no more extensions granted. This would eliminate much of the gray area, and many teams hope that it would also end Major League Baseball's ongoing practice of delaying the acceptance and announcements of many over-slot bonuses until the last week before the draft, a policy that delays teams from getting their highly-paid players on the field.

Let's make no mistake here-Scott Boras won this one. It's not a massive, blowout victory, but it's a win; he got his player more money and benefits. That wasn't necessarily the ultimate goal, but it counts for something. Beyond that, Boras ensured that this situation will not happen again, and on a grander scale, Pirates president Frank Coonelly took him on directly, and looks foolish for his troubles. As one front-office staffer with another team assessed the Pirates performance, "they went into a gun fight with a water pistol and ran away before shots were fired."

Make no mistakes either that the Pirates lost this one. Yes, they got their player, a potential middle-of-the-order run producer who instantly becomes the top prospect in the system, but at the same time, the negative image hit both externally and within baseball is massive. Polls taken by local media had most fans blaming the Pirates for this situation. Coonelly looks like a paper tiger after making a strongly-worded statement at the beginning of this situation, only to fold up like a cheap suit in the end and give Boras and Alvarez that extra negotiating window-the concept that he was so against in the first place.

Now we can start looking forward to next year's draft. Going into 2008, the Pirates' new administration was under considerable pressure to take a potential superstar, no matter the cost, and avoid the cheap tactics that had the previous administration selecting Daniel Moskos over Matt Wieters in 2007. If the season ended today, the Pirates would select fourth overall in the draft behind the Mariners, Nationals, and Padres. As usual, many of the top talents in the draft are being advised by Boras. This year's actions simply replace the pressure on next year's draft, as the Pirates once again could be placed in the position of being forced to select a Boras player or be once again accused of playing it cheap for a team that hasn't had a winning year since George W. Bush's father was president.

When the Pirates first had a press conference to announce the initial signing of Alvarez in August, owner Bob Nutting called the new administration, led by Coonelly and general manager Neal Huntington, "the single best management team in all of baseball, maybe all of sports." Much like Coonelly's opening statement which begun this battle, so far, that's all talk.

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

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

BP Comment Quick Links

mattseward

Hi Kevin, forgive me if i'm wrong but reading Dejan's details of the contract it seems to me the big issue is that it entitles Alvarez to an early FA if I read it rightly.

"The Pirates retain the right to tender Alvarez a contract worth $1.63 million in the fifth year if he is in the majors. But the player can void that if he is arbitration-eligible, which happens after three full seasons in the majors, and pursue what surely would be a much bigger salary."

Surely the chance to be a FA after 4 years would be the real prize putting Alvarez on the market in his mid 20's could put him in line for a 10 year deal if he lives up to expectations but I see little focus on this in the coverage. I was wondering what you thought

Sep 23, 2008 12:53 PM
rating: 0
 
Brian Kopec

Seems to me that Alvarez can void the $1.63 mill contract and opt for arbitration, not free agency. That would have been his right anyway.

Sep 23, 2008 13:19 PM
rating: 0
 
BP staff member Kevin Goldstein
BP staff

Matt,

Don't confuse arbitration eligibility with free agency. Brian has it correct here.

Sep 23, 2008 13:34 PM
 
Cardinals645

At the end of the article you say that the boast that the Pirates have the best management team in baseball is all talk, and undoubtedly a statement like that will always be debatable, but is there a way they could have handled this better?

It seems to me that there was never really a better outcome available to them. Perhaps they could have had the contract agreed to before the official deadline, but it sounds like the extensions had happened before and weren't unheard of.

Am I wrong in thinking that once they got the extension and 'signed' Alvarez to the original deal, their fate was sealed?

Sep 23, 2008 14:11 PM
rating: 0
 
BP staff member Kevin Goldstein
BP staff

In the sense that they made their own bed here, yes. I think the Pirates should be happy, all things considering. This almost turned into a disaster for them, and now they got their guy for not a whole lot more money.

Sep 23, 2008 16:13 PM
 
eastern84

I am unclear on re-opening the negotiations. Did the parties get permission from MLB and the MLBPA to do this? Is there any chance that the Nationals with Crow or another team might get the same opportunity?

Also, what does this mean for Eric Hosmer and the Royals?

Thanks

Sep 23, 2008 14:17 PM
rating: 0
 
BP staff member Kevin Goldstein
BP staff

The negotiations took place with the bi-lateral agreement of the union and MLB -- the arbitrator also approved.

That's the big difference here. The extensions did NOT happen with bi-lateral agreement, that was one-sided, thus the issue.

My understanding is that once the contract is finalized and the grievance is officially setting, Hosmer's status will change from 'pending active' (basically, contract submitted but not yet approved) to active.

Sep 23, 2008 16:15 PM
 
wtmiller

"Polls taken by local media had most fans blaming the Pirates for this situation."

I'd be interested to see these polls. If the comments at the various blogs frequented by Pirate fans are any indication, I'd say at least 80-90% blame Boras.

Sep 23, 2008 15:20 PM
rating: 0
 
BP staff member Kevin Goldstein
BP staff

This was a web poll for a radio show that asked who was to blame. 65% or so blamed the Pirates.

Sep 23, 2008 16:16 PM
 
wtmiller

That sort of thing can depend heavily on whose radio show it is.

Sep 24, 2008 05:25 AM
rating: 0
 
mattseward

Ok my bad I just misread the piece. Thanks for clearing it up Kevin and Brian :-)

Sep 23, 2008 15:24 PM
rating: 0
 
clobberthesaurus

Kevin can you explain the terms of the contract? This what I think I've gleaned from the article you cited a while back:

Bonus:
$3M year one
$3M year two

Salary:
$88,750 for every year in the minors
Once in the majors
$400K year one
$500K year two
$550K year three
$700K year four
(all in addition to base salary—I’m not sure if those are actually right if it’s year one or it’s based on the actual year 2010 = $500K, 2011=$550K, etc.)

So theoretically the maximum Alvarez could make over the next four years (if he skipped the minors entirely) would be $8.15M. The bare minimum he can make is $6.355.

Sep 23, 2008 17:22 PM
rating: 2
 
ofMontreal

I don't know how this is so bad for the Pirates. Boras found the current loophole in the system and exploited it. And as an added bonus, Coonley was there to twist. The draft system is a bit unfair to the players regardless, and as much as I dislike Boras, he is the only person keeping it somewhat fair. I'm a Cubs fan and I'd give Alvarez the money in a heartbeat. The issue to focus on seems to be creating a viable window that speeds negotiation, rather than delay it. Most of the angst here has to do with lost development time, remove that leverage somehow and we'd be good. The NBA model works so well, there must a version that everyone can agree on.

Sep 23, 2008 18:01 PM
rating: 0
 
Ryan A.

All of this now makes it clear, the loser in this draft was the Nationals for NOT signing Aaron Crow.

Sep 23, 2008 18:29 PM
rating: 1
 
ojuans
Other readers have rated this comment below the viewing threshold. Click here to view anyway.

The whole this has served as the tipping point for me insofar a following MLB and perhaps the high profile professional sports in total. The greed involved here in the midst of the worst economic crisis since the great depression make me sick to my stomach.

Folks are losing their life savings, homes, jobs and health care at alarming rates and those who are lucky enough to be working (like me) are for good reason scared witless about it happening to them. The greed on wall street has already destroyed my meager retirement savings; I'm just waiting for the next shoe to drop.

Take your money Boris and Pedro et al. I won't be there anymore to read about Boris's next "victory" or listen to his clients whine about being short-changed. I'm done.

I stopped watching the NBA when Patrick Ewing said during the strike several years ago that " We're were fighting to feed our families". Boris and his ilk have killed my interest in MLB as well.

Sep 24, 2008 04:01 AM
rating: -4
 
krissbeth

That's your choice, of course. I don't really see your logic in siding with management, when their franchises are worth hundreds of millions, and against an A student from Washington Heights because of his "greed" to get justly compensated for his skills. Do you also refuse to use computer programs when its developers ask for a raise to reflect the value of their skills and future productivity?

I understand your anger. But given what you've revealed, shouldn't you be angry at the powerful that destroyed your life saving, rather than a kid who's the embodiment of the American dream? Or the agent who's trying to make sure that his bosses don't take advantage of him?

Sep 24, 2008 06:31 AM
rating: 5
 
sanott

"resolved" is one way to put it...

boras claims he stopped negotiating a midnight due to the CBA...
alvarez or someone other than boras "agrees" to a contract after deadline...then he renegs or whatever
so the union files a grievance for a non-union member...
and in the end, alvarez and boras agree on a conract that is worthmore than the original agreement...

how does this resolve anything? boras gets bailed out of letting his client go unsigned at the deadline, which is basically what happened. the union stands up for a player with no professional experience, yet doesn't even see things through to close a loophole.

what a disappointing way to find closure...

Sep 24, 2008 07:44 AM
rating: 0
 
ostrowj1

It wasn't a loophole, it was a blatant disregard for the rules. One would think after the fuss generated this year that MLB will be better at following agreements (although they are pretty dense...). If you think that the current draft system should still exist can you think of a better resolution? It may not be sexy, but it seems like this is the best possible situation for everybody involved (the Pirates got their man for a few more dollars, Pedro can now play ball, Hosmer can now play ball, and this rule will be followed next year).

Sep 24, 2008 10:30 AM
rating: 0
 
yadenr

Can Crow re-open talks with the Nats, assuming MLB and MLBPA agree to allow it? If they don't, on what grounds can they deny that negotiation after this precedent was set?

Sep 24, 2008 09:55 AM
rating: 0
 
scoutingu

This has dropped the Pirates front office to a new level - third division... the entire industry is laughing at them.

They can't keep quality development staff, they can't sign quality players without problems, they are losing amateur scouts left and right, and they can't even hire an AGM.

At the rate they are going, all their pro scouts will have to fill the ranks in the field leaving all the 'roid fallouts and scabs to fill in for field staff.

What a mess that franchise is.

Sep 24, 2008 12:59 PM
rating: 0
 
PeterBNYC

Let me try to figure this out. Is Boras a winner? Yes, in all the senses you have covered, but also with his strategy of refusing to negotiate anything until the End Times arrive, and then using the deadline as leverage. As I read it, no changes will occur which would prevent or discourage Boras from doing this again? So that's a win for him. If I'm wrong on this, please correct me.

Alvarez a winner? Absolutely, he is the beneficiary of what sounds to me like the most generous contract a draftee has ever received. I thought that the worst disservice Boras had done his client was creating a circus in which Alvarez got nothing this year of the minor league exposure he needs, and I guess he's not eligible yet (he isn't under contract!) for the AFL, so his development has halted until spring training 2009; and also that his arb/FA eligibility had therefore been pushed out an additional year he will never get back; but I guess both those effects remain to be seen.

I'm not sure Pittsburgh is a loser- they got Alvarez, didn't they? He may turn out to be a bargain. He may not. That's baseball. I for one think Coonelly had guts taking on Boras's tactics, and trying to use his MLB cred (for lack of a better term) to neutralize Boras's tactics- but it didn't (as I learned to say about both my marriages) work out. Doesn't mean he's a bad guy.

Sep 24, 2008 15:16 PM
rating: 0
 
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