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Tuesday, January 28, 2020

Dustin Pedroia and the Pricey Guarantees of MLB Contracts

Jumping ahead to the core aspects:

in contract law, when one side can’t perform his or her obligations, the deal is usually considered breached. The side that is performing can then terminate the contract.

Baseball’s economic system recognizes this dynamic. The Uniform Player Contract (UPC), which is the required template for MLB player contracts and can only be modified in limited ways, imposes a number of requirements on players. Pedroia might not be able to satisfy some of these requirements, which could in theory evidence a breach.

For instance, under the UPC section for “Employment”, the player “agrees to render, skilled services as a baseball player” during the term of the deal. Pedroia does not appear able to render these services. Under the UPC section for “Payment,” the club agrees to pay an amount of money “for performances of the player’s services.” Here, again, Pedroia doesn’t appear able to perform services. Also, under the UPC heading “Ability”, the player “represents and agrees that he has exceptional and unique skill and ability as a baseball player.” Can a player credibly make such a representation if he can no longer play?

A club can also terminate a guaranteed contract if the player commits a prohibited act as described in the UPC section titled “Termination.” For instance, a club can void a contract if the player fails to “keep himself in first-class physical condition” or fails “to exhibit sufficient skill or competitive ability.” Pedroia’s knee woes would seem inconsistent with maintaining “first-class physical condition” and if he can’t play, he can’t “exhibit” the necessary skill.

As before, I lack any sort of training to offer viable intellectual commentary on this- any thoughts from those of us among us that do?

 

 

QLE Posted: January 28, 2020 at 12:36 AM | 37 comment(s) Login to Bookmark
  Tags: contracts, dustin pedroia, injuries

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   1. The Yankee Clapper Posted: January 28, 2020 at 02:23 AM (#5919817)
This guy must get paid by the word. He wastes ~ 30 paragraphs setting up the possibility that the Red Sox could avoid paying Pedroia, before eventually acknowledging that injured players are not in breach of their contracts.
   2. Mayor Blomberg Posted: January 28, 2020 at 02:32 AM (#5919818)
If it were a possibility, the Yankees would have gone that route with Ellsbury, who's played fewer games over the past three years.
   3. Do Not Touch Fancy Pants Socially Distanced Handle Posted: January 28, 2020 at 05:18 AM (#5919821)
What a dumb article. There is zero chance the Red Sox can successfully void Pedroia's contract. A player has an obligation to take reasonable steps to get into playing condition, nothing more. If he can't get there, he can't get there. And the club is SOL.

Seriously, if there were anyway to void a contract for injuries, some team would have done it already. There have been enough albatross contracts, that somebody would have found a way.
   4. Rally Posted: January 28, 2020 at 07:35 AM (#5919826)
Pedroia deserves every penny left in his deal even if he never plays another game. Even beyond the first 6 years of cheap wages, he signed extensions that were well below his market value at the time he signed. Red Sox got a great deal when you look at his career in total.
   5. Nasty Nate Posted: January 28, 2020 at 08:01 AM (#5919831)
Why didn't the author choose to write about Ellsbury? There actually is a rare occurence of a team disputing a guaranteed contract, so a hypothetical situation seems unnecessary.
   6. Scott Ross Posted: January 28, 2020 at 09:17 AM (#5919842)
Red Sox got a great deal when you look at his career in total.


They got fair market value just on his current contract. He's posted 13.4 bWAR since signing and the total contract is worth $110 million -- works out to $8.2 million per WAR, which is perfectly reasonable. Looks pretty good, actually, when you compare it to the $121 million they've paid David Price thus far for 10.8 WAR, which works out to $11.2/WAR -- and that cost average has almost zero hope of getting better.
   7. base ball chick Posted: January 28, 2020 at 11:49 AM (#5919887)
getting hurt on the job has never been allowed as an excuse to void a MLB contract as long as the player continues rehab and doesn't refuse team doctor recommended whatevs

and mo alou tore his knee in the offseason of, i think, 99, on a treadmill and his contract wasn't voided even though he couldn't play all year

i don't know where this lawyer is getting ideers from
   8. Bhaakon Posted: January 28, 2020 at 01:34 PM (#5919940)
The only way to void a contract for injury is if the player injured himself doing a proscribed activity. And even then, 9 times out of 10 the team will just eat it or even cover it up.
   9. What did Billy Ripken have against ElRoy Face? Posted: January 28, 2020 at 01:41 PM (#5919942)
They got fair market value just on his current contract. He's posted 13.4 bWAR since signing and the total contract is worth $110 million -- works out to $8.2 million per WAR, which is perfectly reasonable.
Where are you getting that data from? BBRef has his current contract listed as six years, 2016-21, for $85M. He put up 5.8 WAR in 2016, 1.5 in 2017, and -0.6 in 2018-19. So that's 6.7 WAR for $85M, or $12.69M/WAR. Leaving aside the glaring problems with assessing FA contracts on just a basic $/WAR calculation against other FA contracts, that's...not good, especially given that even if you buy the $/WAR concept, it was less in 2016 when the contract was signed than it is now.
   10. Never Give an Inge (Dave) Posted: January 28, 2020 at 01:43 PM (#5919943)
Why didn't the author choose to write about Ellsbury? There actually is a rare occurence of a team disputing a guaranteed contract, so a hypothetical situation seems unnecessary.

Or Cespedes, where the Mets used the threat in order to negotiate a reduced contract. That was for an off-field injury that they claimed involved proscribed activity.
   11. caspian88 Posted: January 28, 2020 at 01:56 PM (#5919950)
While the argument is ultimately pretty dumb and pointless, to take it seriously for a moment, doesn't Pedroia just have to show up and say "I'm here, out me in the lineup?"

As for "exceptional and unique skill and ability as a baseball player," Pedroia without his knees is still a much better baseball player than both lawyers and the judge, so I think it'd be hard to win an argument that he doesn't have "exceptional and unique skill."
   12. Karl from NY Posted: January 28, 2020 at 02:11 PM (#5919956)
This guy must get paid by the word. He wastes ~ 30 paragraphs setting up the possibility

Every column of his on SI is like that. He loves to churn out 30 identical "questions" about a topic and answer them all with "no" one at a time.
   13. The Good Face Posted: January 28, 2020 at 02:35 PM (#5919965)
While the argument is ultimately pretty dumb and pointless, to take it seriously for a moment, doesn't Pedroia just have to show up and say "I'm here, out me in the lineup?"


I suppose that the club could insist Pedroia fulfill his end of the bargain by going out there to stand immobile in the general vicinity of 2B and wave weakly at pitches from the batter's box, but that would make both parties far worse off.
   14. Walt Davis Posted: January 28, 2020 at 03:29 PM (#5919974)
Agree it's dumb ... as to where did the idea come from ... not that it justifies it but the issue is a lack of transparency. I could only find one web link to the actual text of the UPC which is a PDF of a xerox of a 2011 contract that MLB Trade Rumors once managed to get their hands on. This author says the UPC can only be modified in certain limited ways but doesn't tell us what those ways are. Meanwhile I couldn't find any text of an actual FA contract out there.

Re the UPC, this author should have referenced section 7c. That says if the club terminates the contract then Article IX of the basic player agreement applies and this full test is available online. But that article of the BPA only states that the team must pay an injured player for the rest of the season, not the rest of the contract.

So it does seem that a multi-year guaranteed contract must contain language that modifies the UPC or modifies Article IX (which would be easy enough to do in the next CBA). (Or perhaps there's another clause in the UPC or BPA that I missed.) It's still not something to build an article on when you know full well that Pedroia will be paid but it does seem true that us regular folks can't verify how this works.
   15. Walt Davis Posted: January 28, 2020 at 03:34 PM (#5919976)
I suppose that the club could insist Pedroia fulfill his end of the bargain by going out there to stand immobile in the general vicinity of 2B and wave weakly at pitches from the batter's box

Only with a doctor's approval which likely would be challenged by Pedroia. What the team can "insist" on is that Pedroia follow their (medically approved) rehab plan and make a good faith effort to get healthy. In the "famous" Gil Meche case, Meche retired (amicably it seemed), voiding the last year of his contract at $13 M if I recall, because he didn't want to go through another round of pointless rehab.
   16. Jose Is Absurdly Chatty Posted: January 28, 2020 at 03:44 PM (#5919978)
Meh, spent too much time writing my post and it was basically what Walt said.
   17. Jose Is Absurdly Chatty Posted: January 28, 2020 at 03:45 PM (#5919979)
Incidentally is that the first time in BBTF history someone has said “I was too long winded and Walt beat me to the punch.”
   18. Never Give an Inge (Dave) Posted: January 28, 2020 at 04:39 PM (#5920016)
Agree it's dumb ... as to where did the idea come from ... not that it justifies it but the issue is a lack of transparency. I could only find one web link to the actual text of the UPC which is a PDF of a xerox of a 2011 contract that MLB Trade Rumors once managed to get their hands on.

Walt, the most recent UPC is available here as Appendix A to the CBA. It starts on page 337 (page 351 of the PDF).
   19. What did Billy Ripken have against ElRoy Face? Posted: January 28, 2020 at 04:41 PM (#5920021)
Incidentally is that the first time in BBTF history someone has said “I was too long winded and Walt beat me to the punch.”
Twice, no less. That is indeed absurdly chatty.
   20. The Good Face Posted: January 28, 2020 at 04:45 PM (#5920026)
Only with a doctor's approval which likely would be challenged by Pedroia.


Finding a doctor to go along isn't much of an issue. Of course it's hard to imagine any team being crazy enough to try forcing an injured player to take the field. Even when there are suspicions of malingering (Carl Pavano's buttocks say Hi), teams seem willing to just take the loss rather than have that fight with the player.
   21. Never Give an Inge (Dave) Posted: January 28, 2020 at 04:51 PM (#5920028)

I haven't read TFA, but we discussed some of these questions in the Ellsbury thread here. I think a team-approved doctor would have to say the player can perform. Then the player would be able to request a second opinion if he disagreed with that assessment. If the second doctor said the same thing, the player could seek approval to consult an oustide doctor. If that request were denied, or if the team disregarded the outside doctor's diagnosis, then the player would probably file a grievance. I can't imagine a situation getting to that point, however.
   22. Barry`s_Lazy_Boy Posted: January 28, 2020 at 04:54 PM (#5920032)
The author is looking for a job with the Astros.
   23. Walt Davis Posted: January 28, 2020 at 07:45 PM (#5920076)
Incidentally is that the first time in BBTF history someone has said “I was too long winded and Walt beat me to the punch.”

Even Hank Aaron eventually hit a decline phase, I suppose this is mine.
   24. Walt Davis Posted: January 28, 2020 at 08:16 PM (#5920078)
Thanks #18 ... that was actually the same PDF I looked at for article IX, didn't notice the UPC was there too. I think the text is the same as the earlier version I found.

Anyway it still seems unclear to me. The UPC can clearly be written to cover several years. 7(b)2 does say the club may terminate if the club decides the player is not longer sufficiently skillful. 7(c) says if the club terminates then Article IX of the BPA applies. Article IX says that termination due to injury must be paid out through the rest of the year when it could say rest of the contract. 7(d) does make it clear that if another team claims the contract then the contract is still in force but, if not claimed, just requires the team to notify the player of the contract termination.

It gets more confusing to me. In "Regulations" #2 on p 363 of the BPA (emph added): Disability directly resulting from injury sustained in the course and within the scope of his employment under this contract shall not impair the right of the Player to receive his full salary for the period of such disability or for the season in which the injury was sustained (whichever period is shorter) Note it goes on to explicitly state that the club is still responsible to provide reasonable medical care for 2 years or the contract term, whichever is longer, so it's not that they didn't consider the difference.

The closest I come is the end of Reg #2. The above refers to "Disability directly resulting from injury sustained in the course and within the scope of his employment under this contract" and then this reg ends with "Any other disability may be ground for suspending or terminating this contract." That sorta implies that the first type of disability is not grounds for termination ... but 7(b)2 and Article IX seem to say that it is.

Again, obviously this is all worked out somewhere, we're not the first people to actually read the CBA. If we are, then I want a 10% cut of all the money MLB teams save terminating contracts before the next strike. I'm just curious where it's worked out or if our legal nerds want to find the spot in all this where the guarantee is made clear.
   25. Greg Pope Posted: January 28, 2020 at 08:38 PM (#5920082)
I'm just curious where it's worked out or if our legal nerds want to find the spot in all this where the guarantee is made clear.

Right. We hear all the time about how baseball contracts are guaranteed, while, for example, NFL contracts are not. It's not possible that every contract negotiation contains a request for a guarantee and every time the team just grants it. So it must be written somewhere.
   26. snapper (history's 42nd greatest monster) Posted: January 28, 2020 at 10:19 PM (#5920096)
Right. We hear all the time about how baseball contracts are guaranteed, while, for example, NFL contracts are not. It's not possible that every contract negotiation contains a request for a guarantee and every time the team just grants it. So it must be written somewhere.

Would the guarantee need to be spelled out, or the lack thereof? I assume most contracts aren't unilaterally cancellable, unless they say so.
   27. cookiedabookie Posted: January 28, 2020 at 10:44 PM (#5920105)
Right. We hear all the time about how baseball contracts are guaranteed, while, for example, NFL contracts are not. It's not possible that every contract negotiation contains a request for a guarantee and every time the team just grants it. So it must be written somewhere.

I assume the NFL has the language in their collective bargaining agreement which allows them to nullify contracts.
   28. Walt Davis Posted: January 28, 2020 at 11:10 PM (#5920109)
(Spoiler: skip to the bolded section where I think I finally sorta found the answer)

I think it might be in Section 6 which deals with "assignments."

6.(c) The amount stated in paragraph 2 and in special covenants hereof which is payable to the Player for the period stated in paragraph 1 hereof shall not be diminished by any such assignment, except for
failure to report as provided in the next subparagraph (d).


Assignment here is obviously primarily about trades, options, waiver claims. I'm not sure unconditional release is an "assignment" but, as part of the process for unconditional release, the player is eligible for assignment to another club ... maybe it's the assignment, not the contract, that is terminated. In short, maybe the "termination" is "you are no longer required to provide services to our club" not "your payments are terminated."

Also the section on calculating team payroll for tax purposes states: "If a Club terminates a multi-year Uniform Player’s Contract while it remains obligated to pay Salary under either this
Agreement or a Special Covenant to the Contract ..." which raises the reality of "special covenants" to the UPC. There is also this in the compensation section (p. 15): "cash, lump sum, payments made in accordance with
agreed upon special covenants to compensate for trading a Player, releasing a Player, etc." so I suppose there may be a standard special covenant along the lines of "if released, the player continues to receive any remaining salary under Para 2 for the period stated in Para 1 on the payment schedule specified in ..." added to all multi-year contracts.

Which might make some sense. Contracts of course contain option years, etc. which are also special covenants not covered in a UPC. As such any multi-year contract with options would have to designate which time period is guaranteed and which not.

Article IX(c) only covers "in-season" termination but does state: "A Player whose Contract is terminated by a Club during the championship season under paragraph 7(b)(2) of the Uniform Player’s Contract for failure to exhibit sufficient skill or competitive ability shall be entitled to receive termination pay from the Club in an amount equal to the unpaid balance of the full salary stipulated in paragraph 2 of his Contract for that season." Para 2 is where the TOTAL salary is specified (Para 1 has the time period) but "for that season" is unclear in that bit.) But also given there are separate sub-sections for off-season and spring training releases...

There's also a section on "non-duplication" which seems to be the bit about when released while under a multi-year contract, any amount you earn from a new club gets subtracted from what your old club still owes you. Also reading that section (if I understand it), if you are released and are then offered a "reasonable" contract from another team but refuse it, that amount is deducted from what your old team owes you.

Also in Article XXIII on the tax (p 106) they define "guaranteed year": any championship season included in a Uniform Player’s Contract for which more than 50% of the Player’s Base Salary is guaranteed by the Contract in the event of termination under paragraph 7(b)(2).

And I think finally there we have it. I take that as meaning that guaranteed years are a special contract provision written into each multi-year contract that specifies what happens in the event of termination under 7(b)(2).
   29. Walt Davis Posted: January 28, 2020 at 11:13 PM (#5920110)
Weird stuff I noticed along the way:

You can only include a special covenant about donations to a team charity in a multi-year contract.

The team must provide the player with a minimum of two uniforms. Shoes are up to the player unless the team requires specific shoes. Uniforms must be returned at the end of the year.

Teams can require a player to personally attend one but only one contract negotiating session. This does not apply to conference calls. If they require personal attendance, first class at team's expense.
   30. Walt Davis Posted: January 28, 2020 at 11:30 PM (#5920111)
My point about option years is basically this. Nothing stopped the Red Sox from offering a 1-year guaranteed contract with 6 team option years with each option year vesting if Pedroia was not on the DL at the completion of the previous year (or similar). Of course Pedroia never would have signed that contract but it seems allowable under the rules. The Red Sox chose to guarantee those years and therefore it may be necessary to specify in each individual contract which are guaranteed and which aren't. I'm sure there are lots of other ways to handle that -- change the wording of Para 2 or have separate "uniform" contracts for multi-year, single-year, split, etc.

For all I know there are also legal (labor law) reasons why MLB wants to keep the UPC wording as if the contract lasts for just one year and/or the wording around 7(b)(2) and Article IX from being changed to recognize the existence of multi-year contracts.

Attahcment 42 is this lovely confusing letter from MLB to MLBPA:

This will confirm our agreement that Clubs and Players are prohibited from including as a Special Covenant to a Uniform Player’s Contract (“UPC”) a provision that gives the Club the right to void a guaranteed year of the contract based on the occurrence or non-occurrence of certain events.

Nothing herein is intended to preclude Clubs and Players from agreeing to include as a Special Covenant to a UPC an option to extend the term of a guaranteed contract, including an option that vests as a result of the occurrence or non-occurrence of certain events. Moreover, the Parties reserve their legal positions regarding the enforceability of any other Special Covenants to a UPC, including but not limited to Special Covenants that limit the extent of a guarantee or otherwise permit the Club to convert the UPC into a non-guaranteed contract.


I'm not sure how the last sentence doesn't contradict the first sentence unless it's just the difference between "void" and "convert to non-guaranteed." And it seems the player would prefer the contract be voided (then they're an FA) rather than non-guaranteed (team option basically).
   31. Tulo's Fishy Mullet (mrams) Posted: January 28, 2020 at 11:52 PM (#5920116)
"A Player whose Contract is terminated by a Club during the championship season


There it is. I always get a kick out of Uecker when he begins the season on the air talking about the XXXX Championship Season, and used to think, that's a peculiar way to describe the baseball season, and I guess this is where this term of art appears, at least once, likely several times. I never drew a connection while hearing his annual utterance.
   32. Walt Davis Posted: January 29, 2020 at 02:15 AM (#5920122)
Yep, it's in there several times. I assume that phrasing is to distinguish it from spring training, other exhibitions (like the old Cubs-Sox charity game), the playoffs, etc.
   33. Scott Ross Posted: January 29, 2020 at 07:20 AM (#5920128)
Where are you getting that data from?


Sportrac lists his current deal as 8 year / $110,000,000 starting with the 2014 season, BRef has him with 13.4 WAR from 2014 to 2019. Yes, dollars/WAR is not the be all end all, but it's a fair enough jumping off point. Cano signed that same off-season for 10/$240, and while he was (is) clearly a better player, he's wasn't worth 75% more than Pedroia. Heck, Pedroia's AAV was less than Ian Kinsler was making at the time and the reaction in the Boston press was that it was a great deal for the team.

https://www.spotrac.com/mlb/boston-red-sox/dustin-pedroia-102/
   34. Jose Is Absurdly Chatty Posted: January 29, 2020 at 10:02 AM (#5920143)
There is something about the term “championship season” that I’ve always liked. It’s just a nice archaic term.
   35. Walt Davis Posted: January 29, 2020 at 04:20 PM (#5920282)
#33: This gets into minutiae of "extensions" that replace existing contracts and how those are reported. The Red Sox already had him signed through 2014 (with an option for 2015). The 8/$110 deal replaced that remaining year and option on the contract. He had 4.7 WAR in 2014 which the Sox would have gotten either way. The Sox options with 20/20 hindsight:

1/$10.5 for 4.7 WAR (original deal)
2/$21 for 6.7 WAR (original deal with option)
8/$110 for 13.4 WAR

In hindsight you take one of the first two ... and you can then view the extension bit as 6/$89 for 6.7 WAR (about $14/WAR). Technically I prefer this latter view -- i.e. the "extension" was 6/$89, that's what the Sox were buying -- but there are reasons to report it as 8/$110 (it is a new contract and such deals usually increase the salary in the replaced years, signing bonuses, etc.). And since it's reported as 8/$110 and I'm certainly too lazy to distinguish extensions from "replacements" in every case, I'm fine with viewing it as 8/$110.

Those replaced years are usually a source of leverage for the team. "We already have you for 2/$21 but we'll sweeten that pot if you'll give us a break on the added years" seems to work pretty well. So Pedroia ended up getting $26 in those first 2 years under the new contract and, getting it up front reduces the incentive to gamble and overplay your hand on the back end.

EDIT: I'm pretty sure I considered it a steal for the Red Sox too.
   36. Ron J Posted: January 30, 2020 at 10:07 AM (#5920431)
#3 LaMarr Hoyt is my go to. He got paid even though he was in prison.

And yes, the Padres did try to void the contract.
   37. McCoy Posted: January 30, 2020 at 02:40 PM (#5920561)
Was this written by Dershowitz?

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