On Tuesday, the Major League Baseball Players Association filed a grievance against four major-league teams: Miami, Oakland, Pittsburgh, and Tampa Bay. Specifically, the MLBPA contends that these four teams are violating the collective bargaining agreement by misusing their revenue-sharing money.
To understand the implications of the union’s grievance, we have to begin with the language of the CBA itself. Article XXIV(A) of the CBA states that “[a]ny Club seeking a distribution from the Commissioner’s Discretionary Fund [that is, the revenue-sharing money] shall submit a request in writing to the Commissioner. The written request must include, but need not be limited to: (i) the amount requested; (ii) the use(s) to which the Club intends to put the requested distribution; and (iii) an explanation of how, in the Club’s view, the requested distribution should improve the Club’s performance on the field” (emphasis mine).
Later on, the CBA is even more explicit:
[E]ach Club shall use its revenue sharing receipts (including any distributions from the Commissioner’s Discretionary Fund) in an effort to improve its performance on the field. The following uses of revenue sharing receipts are not consistent with a Club’s obligation . . . to improve its performance on the field: payments to service acquisition debt or any other debt that is unrelated to past or future efforts to improve performance on the field; payments to individuals other than on-field personnel or personnel related to player development; payments to entities that do not have a direct role in improving on-field performance; and distributions to ownership that are not intended to offset tax obligations resulting from Club operations.
It’s that language on which the MLBPA is hanging its hat.
Now the MLBPA’s grievance will go before an arbitration panel, not a court. The rules of private arbitrations like this are generally set by the parties themselves. That can lead to some interesting quirks, like the fact that the commissioner himself serves as arbitrator in certain proceedings that are appeals from his own decisions (the interest-of-the-game clause and the like). In this case, the grievance hearing will be conducted in accordance with the Rules of Procedure laid out in Appendix B of the CBA.
Those Rules are pretty lengthy, so here are the pertinent bits: the legal rules of evidence don’t apply, the arbitration panel sets its own standard of proof (in other words, how much evidence one side needs to present to win), and it’s possible to avoid a hearing altogether just by both sides agreeing to submit legal briefs. Also, there are three arbitrators: one selected by the MLBPA, one selected by MLB, and a neutral third party who is usually a lawyer with some experience in conflict resolution and who serves as the panel chair. That means that, as a practical matter, it’s the panel chair who decides these cases.
It’s also really important to win the arbitration, because suing to overturn the result is really hard. The U.S. Supreme Court held in 2001 in a case called Major League Baseball Assn. v. Garvey that an arbitrator’s decision will be upheld so long as it isn’t the result of fraud, even if it is “silly.”
So those are the rules by which each side must abide. With that considered, let’s look at the MLBPA’s case.
As the party filing the grievance, it’s the MLBPA’s burden to prove to the satisfaction of the arbitration panel that these four teams violated the CBA. Miami, Oakland, Pittsburgh, and Tampa Bay are all revenue-sharing recipients, and each has cut payroll significantly this offseason: the Pirates and Rays by about $23 million each; the Athletics by about $32 million; and the Marlins by over $65 million.
Nor is this a case simply of failing to replace players lost to free agency. Three of the four teams named in the grievance have traded notable pieces this offseason. The Pirates dealt Gerrit Cole and Andrew McCutchen; the Rays have traded Corey Dickerson, Evan Longoria, Jake Odorizzi, and Steven Souza; and Miami dealt the most valuable pieces on its roster. None of the clubs have spent much money this offseason. Of course, that’s not the only way to fulfill the terms of the CBA. Remember: an organization needn’t sign a bunch of free agents. Prospects and draft picks and player-development personnel are all viable uses of those funds, as well.
So while much of the initial response to this has been to dump on the Rays, I’m not so sure that they’re the team that should be most worried here. Jeff Sullivan has already explained that Tampa Bay didn’t fare so poorly from its offseason moves, and they’re projected right now to win only two fewer games in 2018 than 2017. Plus, they picked up highly regarded prospects in Anthony Banda, Nick Solak, and (if you believe in the bat) Christian Arroyo, all of whom can plausibly be said to improve the product on the field. After all, player development and future improvement are both cited in the CBA as permissible uses of revenue-sharing monies, so the mere fact that Tampa Bay sold off some of their more expensive assets for younger ones doesn’t necessarily mean they’re in violation of the CBA.
While the optics of such deals might look bad in light of the $45 million received by the club in revenue-sharing per year, the Rays have also brought aboard outfielder Carlos Gomez at $4 million and pitcher Daniel Hudson at $5.5 million, plus they took on $13 million owed to Denard Span. They also gave a $3.8 million bonus last year to Dominican shortstop Wander Franco. So it’s not entirely true to say the Rays haven’t spent at all, and they can likely (and plausibly) argue that trading present value for future value isn’t a CBA violation, it’s the market.
As for the Pirates, they’re a little more complicated. On the surface, they’re a lot like Tampa Bay. They unloaded Cole and McCutchen, but, like the Rays, they also brought in young talent in Kyle Crick and Colin Moran. Plus, they took Corey Dickerson off of the Rays’ hands. And team president Frank Coonelly, in his response to the grievance, noted that his team is receiving less in revenue-sharing than it used to and emphasized its player-development investments. “Our revenue-sharing receipts are now just a fraction of what we spend on major league payroll,” said Coonelly. “We also have made significant investments in scouting, signing amateur players, our player development system and our baseball facilities.”
If that’s true, I think the MLBPA has an uphill battle where the Pirates are concerned, because those are all permissible uses of revenue-sharing funds. But it’s also worth noting that Coonelly may be overstating his case a bit. Unlike Tampa Bay, Pittsburgh’s one notable international signing during the last signing period represented far less of a splash: Juan Pie for $500,000. On the other hand, there’s also the fact that Pittsburgh shares a division with Chicago, Milwaukee, and St. Louis — all three of which clubs appear to be quite strong this year. Pittsburgh can plausibly say this just wasn’t going to be their year. After all, the Pirates’ payroll eclipsed $100 million just last year.
Miami and Oakland, I think, have much more to be worried about. Oakland has had a relatively quiet offseason. And the A’s have been in trouble before for supposedly pocketing revenue-sharing money and are being phased out of the revenue-sharing program under the terms of the current CBA. In 2014, Oakland’s operating income was reportedly the seventh-highest in the majors, largely because they didn’t reinvest their revenue-sharing money. In that sense, Oakland’s not really doing anything new here.
There are some caveats here, as well, though. Lew Wolff sold his majority stake in the team in 2016, and payrolls briefly spiked thereafter (before declining sharply this offseason). And with full seasons of Matt Chapman and Matt Olson, the club actually projects to improve upon their 75-win season from 2017, so there is that. But if Oakland can’t show that they are using the revenue-sharing money for something related to on-field performance, and instead has reverted simply to turning a large profit, that’s a violation of the CBA. Add to that the fact that Oakland is MLB’s seventh-largest market, and Oakland’s payroll reduction this offseason looks even worse.
And then you have Miami, the only team that seems to be overtly making a conscious effort to get deliberately worse.
Derek Jeter responded to the grievance by pointing out that the Marlins have gone eight years without a winning record and haven’t made the playoffs since 2003. I’m not sure that argument helps here, though, given that last year’s Marlins won 77 games and had arguably the majors’ best outfield. Instead of building, the Fish have reportedly been trying to get their payroll to as low as $55 million and have pursued that goal with great vigor, trading Dee Gordon, Marcell Ozuna, Giancarlo Stanton, Christian Yelich, and others in what is — by one measure, at least — the biggest fire sale ever. The most fascinating aspect of this is that Rob Manfred and MLB may have been aware of the Marlins’ plan before approving the sale of the franchise.
The CBA states explicitly that a club isn’t permitted to use revenue-sharing money to service debt, including debt related to the purchase of a franchise. But unlike with the Rays and Pirates, the Marlins’ ownership seems to have pursued their strategy not because they were dealing present value for future value, but rather because they couldn’t afford the payroll they inherited. It’s also relevant to the union’s grievance because reports have pegged the Marlins’ annual revenue-sharing check at $50 million to $60 million. That’s roughly the same as the Marlins’ entire payroll target. It’s also, according to some sources, how much the Marlins reported losing last year — which would mean the Marlins have basically decided to use their revenue-sharing money to offset their losses. And that would probably be a payment to ownership prohibited by the CBA.
One last note. As of now, despite their trades so far, the Marlins still stand to miss their payroll target by a wide margin, largely due to money still owed to Starlin Castro, Wei-Yin Chen, and Martin Prado. It’s no secret that Castro and catcher J.T. Realmuto are also trade bait in the Marlins’ quest to reduce payroll. And yet… in light of this grievance, it’s possible that the Marlins’ front office will decide not to further dismantle the team given the optics of such a move with a grievance pending.
Sheryl Ring is a litigation attorney and General Counsel at Open Communities, a non-profit legal aid agency in the Chicago suburbs. You can reach her on twitter at @Ring_Sheryl. The opinions expressed here are solely the author's. This post is intended for informational purposes only and is not intended as legal advice.