What the MLBPA’s Grievance Means
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.
I miss the time when baseball was just a game played by 9 people
seems like forever ago…
It was however long ago that you became aware that it wasn’t, because it hasn’t been that since at least the 1860s.
4 on 5 was never really fair.
4 on 5? As far as I know baseball has always been a 9 vs 1 sport.
That’s 10 though.
I find it very impressive that a centenarian such as yourself is so knowledgeable about how to use the internet. Do you have a great-great-grandchild helping you?
I understand the A’s haven’t spent much, but they’ve tried – Duesing reportedly took less to sign with the Cubs, Austin Jackson passed, last season Encarcion said nah, etc. Can’t sign free agents when they don’t want to play on your team, so the focus is youth. And the A’s have young, cost-control guys across the diamond or waiting in the wings. They could arguably add a veteran pitcher or catcher, but why bother when it the upgrade in wins wld be marginal at best? As the article suggests, spending to improve on-field product can occur in ways other than MLB payroll.
Oakland is always ‘in the middle of a youth movement’, until they fix that reputation no veteran is going to want to sign with them.
I don’t actually have any numbers, but how has Oakland actually fared in the FA market compared to Pittsburgh and Tampa, both of whom are known to be active in signing low-end/reclamation free agents?
As Sheryl points out here, the Lew Wolff era ending complicates this a bit. The A’s really had terrible, lousy ownership during that period. They didn’t spend much money. They also had the worst facilities in MLB (and a reputation for trading away anyone). Now the ownership is a little different, but the lousy facilities and reputation remains. It’s hard to tell what the actual causes are here, but things might change, especially if they get a new stadium.
I think also that Billy Beane is right not to splurge right now, since they have a bunch of near-majors talent and cost-controlled guys, but they’ve also got almost no shot to win the division and are very unlikely to even compete for a wild card spot. But in 2020 or so, they better be ready to go for it.
What kind of disclosure can MLBPA get here? It looks to me like Appendix B provides the only rule on that front:
“The Parties may offer such evidence as they desire and shall produce
such additional evidence as the Panel Chair may deem necessary
to an understanding and determination of the dispute. The Panel Chair
shall be the judge of the relevancy and materiality of the evidence
offered and conformity to legal rules of evidence shall not be necessary.”
Is there anything else I’m missing? if this is it, I imagine there is going to be one big ol’ fight when MLBPA asks for disclosure of the teams’ financial accounting and I imagine that fight itself might lead to a settlement.
As for your last point, the MLBPA already can get team financial information under the CBA, including audited financial statements and various other financial information that’s submitted for the purpose of the revenue sharing plan. It’s on pages 145-146 of the CBA.
There’s something of a common myth that just because team financial information isn’t public that means that the MLBPA doesn’t have access to team financial information. That’s not at all the case, because of this provision of the CBA.
Is it possible that the MLBPA included Tampa and Pittsburgh as part of their strategy? They have, in a way, set the terms of the debate by providing a comparative exercise for the arbitration panel. It is no longer a yes/no question (is this particular team in violation?) but a question of magnitude (here are four teams – which is worse?).
The MLBPA strategy is also risky. Had they taken only Miami and/or Oakland, the panel’s decision might be very specific, leaving wiggle room for future grievances. With four teams, it is likely the decision will set a strong precedent to be followed moving forward.
This.
At risk of falling afoul of Godwin’s Law, this is a well-known strategy at War Crimes trials, Mob trials with multiple defendants etc. The term, I believe, is ‘Mercy Bait’. You trump up some charges against some not-so-guilty parties so that the Most Guilty parties get it good and hard.
It seems like MLBPA’s case depends on the arbitrator accepting some assumptions about how MLB teams are obligated to spend their money in the absence of shared revenues. Otherwise, even the Marlins could just respond by saying they’re spending more on payroll than they received in revenue sharing. MLBPA’s argument seems to depend on the arbitrator accepting that there’s some substantial amount of baseline “performance on the field” spending that MLB teams are obligated to make before counting the revenue-sharing funds.
That seems to be the implied intent of the CBA provision you quoted. But is this a case where the arbitrator is likely to look at either team-specific or league-wide spending and set that baseline? Or will the arbitrator just point out that the MLBPA didn’t negotiate for a salary floor in the CBA, so there’s no basis to assume a minimum amount of spending now?
Agreed…money is fungible and there are, as far as I know, no restrictions on how clubs use the money they generate themselves. So do you go about proving that revenue sharing dollars are being used for unauthorized purposes?
Presumably by separating the bit that’s applied to on-field performance (including trainers, analytics, etc) from the part that isn’t. I don’t think this is too difficult. It might take some sort of rolling average over previous years, but still, it’s not too difficult.
Take the Rays as an example. Yes, they’ve spent $13.3 million on players who (whatever the projections for those players are) can be said to be an on-field improvement. At least in the sense of a good-faith effort. And maybe they’ve beefed up the trainers and the analytics and whatever. But that doesn’t really justify them hauling off $45 million (which I estimate to be roughly 50% of their total allotted salary cost), because the other $30+ million is, as you say, “fungible.”
The salary dump is particularly interesting, because there’s no sensible way to represent this as “improving on-field performance.” Yes, you trade one giant money pit, which I suppose you can represent as “he played below replacement level.” But in return you gain another giant money pit, and nobody is going to claim that Denard Span is part of “an improvement in on-field performance.” Frankly, my belief is that any team in receipt of competitive balance money should not be allowed to do this — if for no other reason than that some part of previous competitive balance payments was allotted to improving previous “on-field performance,” ie that giant money pit you just got rid of. This is basically double-accounting, and does not deserve financial reward.
That said, it’s a hugely difficult thing to adjudicate over, and if I look at it from the Commissioner’s Office, I can quite see that it’s a huge can of worms I’d rather not go into.
Small correction, well, a large one, really. Obviously Longoria didn’t “play below replacement level.” But equally obviously his projected worth is beyond what the Rays could pay — even with money from the balance pool. My apologies to Evan Longoria and to Rays fans.
On the other hand, I would argue that this makes the transaction even less likely to fit the ideal of “on-field performance.” I note that the Rays actually took on salary with this trade.
Put another way, if the standard is improving performance, my next question is “improving compared to what?” Unless the CBA has other provisions to set that baseline, my initial thinking is that the MLBPA has to prove that an enforceable baseline exists and can be calculated before it can even get to the point of looking into team finances.
I know very little about arbitration and labor law, so Sheryl, I’d be grateful for your thoughts on how the arbitrator might view that question.
Thanks for the question, Stranger!
The lesson I’ve learned from way-too-many arbitrations and administrative hearings is that courts are simply better (although that’s just the litigator in me talking). There are many reasons for that (and it’s why organizations like NACA fight so hard against arbitration clauses), but the one which sticks out the most for our purposes is that so much depends on what arbitrator you get.
I provided links in the article that explain this in greater detail, but basically baseball arbitrations have developed their own precedents and stare decisis. Things like deference to team decisions in player grievances aren’t in the CBA, but it’s how arbitrators have tended to view those cases anyway, and so now it’s become fairly entrenched.
So a *lot* is going to depend on what arbitrator the MLBPA gets, how experienced that person is, and what standard s/he expects them to meet. Money is fungible, certainly. But if you have a situation like the 2014 A’s where they turned a sizable profit off of the revenue sharing money, I think then you’d have a pretty good case. A lot will depend on what evidence the MLBPA has, which so far isn’t public.
Hi Sheryl, the 2014 A’s came off a 96-win season in 2013 and followed that up with an 88-win campaign in 2014. That’s why they were 7th in MLB in profitability and why their payroll spiked with the likes of Billy Butler’s $11M (yuck!). Certainly the revenue sharing helped since they, to my knowledge, don’t have a big local TV deal. Except for the top 8 or 10 teams that have big TV deals and perennially draw 2.5M plus, baseball teams are barely, if at all, profitable unless they make the playoffs (certainly true for the bottom 12 or 15 markets). They do appreciate in value quite a lot, but more so because they are trophy assets. Thus, I don’t think the MLBPA has much of a case against the A’s either.
I didn’t know that teams had to petition the league for revenue-sharing, I thought that was remitted to them automatically. Thanks for letting me know.
Finally, I’m glad businesses have insisted on arbitration as a way of settling disagreements in contracts with suppliers and customers. It prevents a lot of abuse and shakedowns from trial attorneys.
“I’m glad businesses have insisted on arbitration as a way of settling disagreements in contracts with suppliers and customers. It prevents a lot of abuse and shakedowns from trial attorneys.”
lol
There’s an obvious absolute minimum floor in that MLB salaries can’t reasonably go below league minimum times 25 (roughly 13 million IIRC). If you’re also including scouting and player development on the “expense” side of the ledger, then that minimum goes up quite a bit. So, “we’re spending more on the team than we get in revenue sharing” sounds like a losing argument to me. There’s some minimum, probably well north of 20 million a year, that you should be spending prior to getting a penny of revenue sharing.
Plus about $10M in benefits [included in the luxury tax calcs, so why not here]?
And the very minimum to fill out the rest of the 40-man would be another $600k . And then probably looking at around $2M for the other ~110 minor leaguers.
Per a detailed comment that I made below, the language in the CBA shifts the burden of proof from the MLBPA to the team if team payroll (calculated under the same formula as for luxury tax: 40-man payroll, AAV’s on multi-year contracts, includes benefits) drops below 125% of that team’s revenue sharing receipts. For example, for the Marlins that would imply a payroll of at least $75 million if the Marlins in fact receive the estimate $60 million of revenue sharing money.
To be clear, that level is neither a specific floor, nor a specific safe harbor, but it is a quantitative metric that’s spelled out for what you correctly point out is otherwise vague and ambiguous language.
From a baseball angle, couldn’t the Marlins trade Realmuto for future talent and then replace his salary with a free agent, to correct the possible bad optics.
What’s the point of that? Get worse and spend the same amount?
The point is to improve for the future (they’re obviously not competing now), while signing an unsigned free agent. It would be getting better in the future while not spending more or less.
They could also take on a bad contract with realmuto to sweeten the pot. Im afraid they go the other way and try to attach Chen or another deal to realmuto.
Btw I think for now we need to accept the Marlins are rebuilding and also need to save money due to Loria.
However I want to know how long it will take. If could live with them running a low payroll for 3-5 years while rebuilding their system if that means they can than keep their core together longer than the last time.
But if the inherited debts mean they have to consolidate for 10-15 years now that would be very hard to accept. I read about 400m so if they save 40 m per year it would take 10 years. People hope for the new tv deal but even with inflation how good will it be in tank mode?
I want to hear a plan how this ever resolves.
Realistically- they move, club’s valuation improves with the better market and the sweetheart deal the municipality gives the club, the club then borrows against that increased valuation (plus sweet deals) and dramatically improves cash flow.
Or they trade him away and that’s it. Why waste money when they’re likely doing what the CBA allows? Just because the MLBPA is sad this offseason wasn’t good for them doesn’t make team behavior all of a sudden bad.
“Add to that the fact that Oakland is MLB’s seventh-largest market…”
This is blatantly misleading. The A’s are clearly the second team in baseball’s smallest two team market, and easily have the worst stadium situation in baseball.
The Bay Area is both huge and rich, and the A’s could have a nice, new, revenue-generating stadium anytime they want to write a check to build one.
See, that’s the problem. They’ve said on multiple occasions that they’re willing to privately finance a new stadium, just not at the Coliseum site. But every time they attempt to find a new site, either the city or the Giants shoot them down.
They’re completely hamstrung by the whole “territorial rights” fiasco. Which, by the way, don’t exist in any other two team market (Yanks/Mets, Dodgers/Angels, Cubs/Sox).
That’s exactly right, they’ve tried multiple times and the Giants keep throwing their weight around and blocking them. It’s really frustrating.
Was going to agree with you but then you threw in the falsities about blaming the Giants for territorial rights blocking.
The A’s GAVE the Giants San Jose in 1990, when the Giants were beginning to look to move. The A’s caused this themselves, and since teams in other two-team markets haven’t been trying to move for decades, it hasn’t happened since.
The A’s created “territorial rights” out of thin air to help the Giants stay in the Bay Area (as opposed to moving to St. Pete). They never existed before 1990-ish.
And the Giants have repaid said generosity by using them to beat the A’s down ever since. Thanks, assholes.
Obviously they need a new stadium. Yes, the territorial rights thing is screwed up.
As an A’s fan, however, I don’t buy the idea that Oakland or its coliseum can’t support a thriving team. In the late 80s/early 90s, the A’s were very popular and good (remember, the Giants were talking about moving!).
The Golden State Warriors have done pretty well playing right next to the coliseum. Maybe it has to do with ownership?
Remember, the White Sox were also trying to leverage St. Pete into a new stadium around the same time, and the Cubs did nothing to help them.
It sort of exists in the “Chesapeake Area” market, where the Orioles have been in dispute with the Nationals for quite a long time.
Bit of a nit-pick, really, but I thought I’d mention it.
“Add to that the fact that Oakland is MLB’s seventh-largest market…”
http://bleacherreport.com/articles/961412-mlb-power-rankings-all-30-mlb-teams-by-market-size
It’s amazing how much the Oakland market must have grown since 2012 I guess.
The pirates and marlins might be cheap but the rays and As have “shithole” stadiums (using the words of our president) that nobody visits and nobody watches them on tv either. I’m not as optimistic about a new rays stadium either. If might be a better location but while it is a hip location 20-30 year old artists, intellectuals and hipsters aren’t exactly the main target group of baseball. Maybe 300 more hipsters will come to the new stadium but I don’t see it having a huge effect. The new stadium effect is usually short lived and the rays and As didn’t really draw that well when they won either.
Imo a new stadium helps a little but what really should happen is a relocation out of Oakland for the As and probably completely out of Florida for the rays. Those markets just dont work, I don’t think the owners can be blamed for that.
Unfortunately the giants are blocking a move of the As.
I don’t know about the Coliseum, but the Trop isn’t half as bad as anyone says. Beats the summer heat, humidity and thunderstorms. The Trop’s actual problem is location.
And on the TV situation, the Rays get surprisingly good ratings. They were top 5 in tv ratings shares for a few years. Think that has declined some in the past couple years. More importantly, news just broke that the Rays are finally negotiating their next TV deal, to take effect in 2019.
As to your final point, what the heck are you talking about with regards to the Rays’ proposed new stadium location? Have you ever been to Ybor? Or Tampa at all?
The Rays will be much better off in Tampa, far closer to the region’s commercial and population center, not isolated across the bay in St. Pete.
As a Florida resident, I can tell you that Thrasius is exactly right.
almost everything you said was incorrect.
I really really really hope the Fish get walloped here, and have to pay a lot of money to some players or the MLBPA. What they’re doing certainly feels unethical, if not illegal.
The fact that Manfred allowed this sale knowing the amount of debt involved reflects very badly on the Commissioner and the owners.
Different commissioner, but not not unprecedented.
In 2004, Bud Selig approved the sale of the Dodgers from News Corp to Frank McCourt, knowing full well that almost all of the sale price would be debt, in the form of Fox frontloading their newly negotiated TV deal.
What the Marlins are doing with their wholesale cuts in payroll are responsible by comparison. McCourt was able to fool everyone until 2010, when his cashflow issues were exposed and it was revealed that he was literally unable to meet the team’s monthly payroll obligations. The sad thing is, he may still be running the franchise into the ground had his wife not filed for divorce, opening his financial books to public scrutiny, as he was in the process of negotiating yet another frontloaded TV deal with Fox to keep his shell game going.
On the other hand, the Los Angeles TV market would be able to watch all 162 games of a miserable season had that scenario played out.
The Marlins are doing everything they should be allowed to do – trade off a previous owners’ financial mistakes (expensive players combined with hundreds of millions in debt) and gather future talent/current money for future team performance.
I would rater see teams competing and trying to win, but the Marlins are well-within their CBA rights. I’m not sure if you know what unethical or illegal mean if you think the Marlins are near either.
How do you feel about what the Astros did in ~2014-15? Unethical? Illegal?
The acquisition debt associated with the purchase of the Marlins is something of a red herring issue, at least based on what we’ve seen them do so far. Debt financing is simply how of MLB teams are bought these days. Four of the last five team purchases prior to the Marlins (Cubs, Dodgers, Astros, Rangers) also all reportedly involved significant debt financing. The one exception was the Padres.
The core of what’s different with the Marlins is what tb.25 references: a team that was in a bad spot from both a baseball and business perspective due to a mix of payroll commitments (including back-loaded contracts) that didn’t match up with the team’s low revenue, a mediocre major league team, and an awful farm system.
Sheryl, Nice job. I learned some things and realized how little I know of the CBA pertaining to revenue sharing rules. I don’t even understand how luxury tax relates to revenue sharing and competitive balance intentions. Thanks for your work- it also seems as though its generating thoughtful discussion.
Thank you!
The problem with having revenue sharing money allocatable to only certain categories is that it can be gamed.
This situation is not too dissimilar to when New York state introduced the lottery. They got the lottery law passed by promising that all lottery profits will go to funding schools. Upon implementation, what they did was decrease school funds from the general budget to zero and replace it with funds from the lottery. Schools did not see any additional funds. The state simply gave them the same amount of money but said that it comes from lottery revenue and that, technically, they have kept their promise.
Now, it might be more difficult to pull this off regarding revenue sharing money since the requirement is to use the money to ‘improve’ performance and not just fund existing performance. So, maybe the team can’t take a dollar-for-dollar benefit from revenue sharing, but I bet they could arrange things so that something like half of the disbursement ends up in the owner’s pocket. Technically, this would meet the criteria established in the CBA.
It’s going to be quite difficult for the MLBPA to prove their case.
Sheryl: Just wanted to say I really have been enjoying these legal posts. I’m sure I’m far from the only bored lawyer reading Fangraphs at my desk, so you’ve got a tough crowd, but so far you’ve met the challenge and then some.
Thank you Mookie! I really do appreciate that. 🙂
RE: The Marlins.
Directly pocketing the $50-$60 mill revenue sharing check is against the CBA… But spending it to cover payroll isn’t… So this is pure logistics, correct? Instead of spend $50-$60 mill and pocket $50-$60 mill, they spend nothing and pocket nothing.
I feel like the MLBPA is barking up the wrong tree. IMO, its the large market teams that are purposefully not spending (PHI and CHW to name 2) that are a bigger issue for their concerns. The Bucs are spending just as much as MIL is this year (and more in previous years), despite the current view of who is doing the right thing. The comment about INTL spending is misguided as the Bucs have signed over 30 players this period and traded for more pool money to spend more than many other teams. They have just chosen to spread the wealth rather than target the big ticket kids, which is not an invalid strategy.
The Marlins still have a payroll over $100 million and with TB and OAK’s stadium issues its easy to see why they are working on the cheap. If the MLBPA wants to point a finger for the slow FA period it would seem more appropriate to point at teams that can spend that wont.
Except that by claiming that the Phillies and White Sox should be spending money this year, you’re saying something along the lines of “you know you have no chance to win, but you should still throw many tens of millions of dollars away for the hell of it”. And on top of that, your point doesn’t even really hold for the Phillies who signed one of the top free agents available as well as overspent (at least in hindsight) for several middle relievers.
The thing is that the mandate to spend for on-field improvement, just as it allows for investment in amateur players, doesn’t specify that the team has to improve in the current year. And if I’m a White Sox or Phillies fan, I know my window to be competitive is going to open very soon (like, next year), and I would greatly prefer my team to spend money then (when it matters) than today, when that cash has a high likelihood of essentially being wasted.
There’s merit to that argument as a practical matter, but as a legal matter there’s no CBA requirement for a team to decide on a particular spending/business strategy other than this section on clubs that receive revenue sharing.
The Phillies and the White Sox definitely don’t receive revenue sharing, because they are both market disqualified and therefore not eligible even if there revenue level would otherwise dictate that they receive revenue sharing under the formula.
*** obviously “their” and not “there”.
Yeah, Pirates Hurdles is correct that the refusal to pay for a competitive team is absolutely blatant in Philly and Chicago, but they’re not doing anything legally wrong (as far as I know) per the CBA.
This could just be one step out the door for each of those 4 franchises.
It is very unlikely that the MLBPA will prevail on any aspect of this grievance- revenue sharing is too small compared to overall spend, so each team will be able to show that the amount spent towards being competitive now or in the future exceeds the revenue sharing amount.
At best this seems a partial accounting that teams will easily meet.
IMO the more likely impact of such a process is that the wheels for moving Miami, Tampa, Oakland & Pittsburgh will spin with more traction, Miami in particular.
PIT shouldn’t even be in this discussion, its just the MLBPA trying to capitalize on the mostly irrational fan reaction to Cutch/Cole. Pirates payroll increased from $50 million to $100 million over the last 5 years, this year’s dip is only to $85 million and is justified by team direction.
There is essentially zero chance that the Marlins move because of the terms of their stadium deal.
Look at the various documents here – http://www.miamidade.gov/govaction/legistarfiles/MinMatters/Y2009/091009min.pdf . There’s a non-relocation agreement (pages 336 on) that’s tied to the term of the stadium operating agreement. The latter term is 35 years from when Marlins Stadium was completed.
There’s a covenant not to move (nor even enter into any negotiations regarding moving) from the team, with the right for the city and county to seek specific performance (i.e., an injunction precluding the team from moving).
If for whatever reason the city and county don’t get specific performance, the liquidated damages amount owed by the Marlins are very large: the remaining principal and interest on city and county bonds, any unamortized infrastructure costs tied to the stadium (amortized straight line over 30 years), and the NPV of some expected parking revenue. I’m pretty sure that’s not a cap, and that the county and city could pursue additional actual damages over and above that amount. There’s language in the agreement talking about things like the “unique value” of having the team play in the stadium due to factors like economic development, jobs, and tourism, so it sets the table for a large claim of additional actual damages.
The Pirates are reportedly tied to staying in Pittsburgh through 2031 as part of the deal for PNC Park. I haven’t read the details, but I assume that they’re in a similar position to the Marlins.
Good points but, IMO, no chance to get specific performance- has never happened on any sport lease.
Interesting details about the seemingly prohibitive liquidated damages clause. Liquidated damages clauses are tough to enforce if they are extremely stringent, as the harsher they are the easier to argue that they are disfavored penalty clauses. The LD clause could be set aside as a penalty clause with a more typical damage amount calculated by the court (on the theories that the law disfavors penalty clauses and disfavors windfalls). I don’t think it is clear that a historically unique LD clause is particularly certain to stand up- so I think there is some risk that could lead the city to settle the damages.
IMO the Marlins are likely to move.
And moving to Portland or Montreal or Charlotte accomplishes what, exactly? You still have a low revenue baseball franchise. There aren’t any big markets left to move to.
“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).”
I very much disagree that this provision of the CBA is relevant. The Commissioner’s Discretionary Fund is NOT core revenue-sharing money, as this quoted section of the post claims. It is, per immediately prior language in the CBA, “no more than $15 million in Major League Central Fund money that is raised equally from all Clubs for each Revenue Sharing Year” and from which “the Commissioner may make distributions … to a Club or Clubs, in amounts and at times to be determined at the Commissioner’s discretion”.
That’s not the heart of revenue sharing, and I don’t know if any team actually receives any money under this provision right now. If any team does, it’s drop in the bucket (no more than $15 million in aggregate dollars) compared to the amount of money that’s moved around by the revenue sharing formula (based on local market revenue).
The relevant section of the CBA is the part that’s quoted later in the post and discusses all revenue sharing money, not this section that’s specific to the Commissioner’s Discretionary Fund.
This is exactly right, so the players can force management to produce the letters and prove they followed the stated intent.
I know we all tend not to click on links (particularly to pages of horrifying legalese), but I do recommend Sheryl’s link to the Steve Garvey case. I was aware that the case was, um, resolved in a questionable way, but the details are very germane. (As they would be. Supreme Court judgements tend to stick as precedent.)
The relevant term, as used in the Court of Appeals, was not “silly,” btw. As far as I can make out, the key phraseology was:
‘But in the court’s view, the arbitrator’s refusal to credit Smith’s letter was “inexplicable” and “border[ed] on the irrational,” ‘
This, I believe, is legalese for “Wow! That there was some strong acid you just dropped!”
There are some OK points here, but there’s one very big omission in what’s cited from the CBA. Specifically, this post fails to quote the specific CBA language that provides some guidance for a quantitative level of payroll relative to revenue sharing receipts. That’s very important since, as other commenters have pointed out, money is fungible, and talking about specific uses of revenue sharing money is therefore a vague and ambiguous standard.
The relevant language is in the CBA immediately after the language in the block quote in this post:
“The Association has the burden in any proceeding under the Grievance Procedure of demonstrating that the Club’s use of its revenue sharing receipts was in violation of this subparagraph 5(a). In any such Grievance, the Arbitration Panel shall consider, among other things: (i) the Club’s expenditures on scouting, player development, and player payroll; (ii) the Club’s long-term strategy for improving competitiveness; (iii) the uses that the Club has historically made of revenue sharing receipts; and (iv) the overall financial position of the Club. Notwithstanding the above, if a Club’s Actual Club Payroll pursuant to Article XXIII(C) is equal to less than 125% of its revenue sharing receipts in a given Revenue Sharing Year, the Club shall have the burden of establishing in any Grievance that its use of revenue sharing receipts was consistent with this subparagraph 5(a).”
That last sentence is very important. It’s not a full-on safe harbor, but it does set a quantitative threshold at which the burden shifts on the presumption of if a team is using revenue sharing money consistent with the CBA.
“Actual Club Payroll” is defined elsewhere to be the calculation of club payroll that’s used for the luxury tax: a team’s 40-man payroll (with a few adjustments such as the AAV of long-term contracts) plus its share of league-wide benefits costs (currently ~$15 million per team).
The Marlins currently project to be well above this 125% level if the quoted amount of revenue sharing receipts ($50 to $60 million) are accurate, because Cot’s currently estimates the Marlins to end up with a 2018 payroll of $109 million on this basis. I think it would be very tough for them to move enough players with big contracts to flirt with the 125% level in 2017, but they might well do so in 2019 or 2020 as Ziegler, Tazawa, and Volquez’s contracts all expire after 2018 and then Prado and Castro’s contracts both expire after 2019.
A threshold at which the burden shifts, but it reads to this layperson as a shift from “burden on team” to “burden is balanced”. Not as a shift over to the challenger, without further reason.
Larger picture, your comments here have been excellent, and I hope Sheryl Ring can follow up.
The 1st sentence of his quote shows that the burden is on the MLBPA- save only for the circumstance mentioned in the last sentence.
The party bringing suit generally always has the initial burden to make a showing.
Oakland (especially) and Tampa might be real close to falling below that threshold at ~$55 and ~$75 million respectively per Cots.
Pittsburgh and Miami seem fine.
I don’t think that the Rays are all that close. Those appear to be 25-man Opening Day numbers, and the Actual Club Payroll used for this calculation (and the luxury tax) is higher in each case, principally due to player benefits.
The relevant Cot’s estimate for the Rays for 2018 is $96 million. If their revenue sharing is similar to the estimate for the Marlins – which would be reasonable – then the Rays are well above 125% of that.
The A’s are estimated at a very low payroll under that calc – only $78 million for 2018 – but they also probably don’t receive nearly as much revenue sharing money as the Marlins or Rays. They are gradually being phased out of being eligible for any revenue-sharing as a market disqualified team by 2020 so they received 75% of their otherwise calculated revenue sharing in 2017 and will receive 50% in 2018.
Heh, thanks for that, very good points.
Dave, I agree, great comments.
You are correct about the 125% standard. (I didn’t include it because as you said, it’s a burden-shifting provision, not a safe harbor, and I didn’t want to get all technical explaining what burden-shifting is in an already lengthy article). As I read it, all the 125% figure does is force the team to prove it was using the revenue sharing properly, instead of having the MLBPA prove it was using the revenue sharing improperly. Where I disagree with you is that it’s *not* a presumption of valid use – just a burden-shifter. If it was a presumption, it would say something like “if a Club’s Actual Club Payroll pursuant to Article XXIII(C) is greater than 125% of its revenue sharing receipts in a given Revenue Sharing Year, it shall be presumed that the Club’s use of revenue sharing receipts was consistent with this subparagraph 5(a).” But that’s not what it says.
So the fact that it isn’t conclusive is why I think Miami still potentially has a problem. If they (a) bought the team knowing they couldn’t afford the salaries on the books, (b) set a public goal of getting the payroll below their revenue sharing check, (c) sold off a bunch of players for unimpressive packages (especially Stanton), and (d) intend to reach that $55 million payroll goal eventually while still receiving revenue sharing money, that plan itself could violate the CBA. Remember also that the new ownership fired a bunch of scouts to cut costs (scouting expenditures are a factor). And what, specifically, is the Marlins’ long-term plan for competitiveness? Both Miami and Oakland have been accused in the past of pocketing revenue sharing monies, and that’s a factor too.
This is still pretty subjective, even with the 125% figure, and I still think a lot depends on the arbitrator. But I also think the MLBPA has something we don’t, or they wouldn’t have filed the grievance. Even against Tampa Bay – look at Chris Archer’s comments today.
Thanks for the reply.
Regarding one of your points: is there sourcing indicating that the Marlins firing people in scouting has equated to a reduction in scouting expenditures?
It’s not uncommon for teams to turn over personnel – including scouts – as part of front office changes. Gary Denbo was brought in by the Marlins in October 2017 as the new VP of Scouting and Player Development, hired away from the Yankees where he’d been VP of Player Development. It’s not surprising to me that new ownership of a team that had a minor league system ranked as very likely the worst in the majors brought in a new head of that operation with the plan of turning over a lot of the scouting and player development personnel. Firing a lot of scouts need not at all equate to cost-cutting, however. It can just mean clearing out personnel and hiring different people, with the result that spending on scouting could be up, flat, or down.
I don’t definitively know the answer to that, but if I had to hazard a guess it would be that the Marlins’ total scouting and player development expenditures are headed up because (1) the prior scouting expenditures were probably pretty low due to the general lack of competence of the Loria regime and (2) a highly-respected executive such as Denbo isn’t likely to move from the Yankees to the Marlins if he’s going to be operating on a shoe-string budget.
Sheryl is correct. The fact the standards are in the CBA put the onus of proof on the clubs. They’ll have to open their books. It’s good language.
“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.”
I very much disagree with that interpretation. To claim that the revenue sharing language in the CBA implies any obligation for a team to incur and fund operating losses is somewhere on the spectrum between “extremely aggressive” (at best) and “ludicrous because that language clearly isn’t in the CBA”. The case against Ring’s claim here becomes even stronger if a team is operating with Actual Club Payroll above 125% of its revenue sharing receipts (per my prior detailed comment on important language from the CBA that isn’t referenced in this post).
With the A’s stadium situation and the Giants determination to drive the A’s out of the Bay Area, it’s understandable that the A’s are running a lower payroll. They have the most unstable situation of any team, especially with them being phased out of revenue sharing. Long term commitments are not wise for players or management. With their young players coming up and the lackluster and overpriced FAs, can you actually blame them?
The problem here is with the current CBA, teams no longer have a practical option of increasing spending on player development. This is why MLBPA gave in on limiting bonuses to draft picks and IFA’s, and allow MLB to pay below minimum wages to minor league players, and even limited increases to MLB minimum salaries.
With increasing MLB revenues and presumably increasing revenue sharing receipts these teams should be seeing increasing openinh day payrolls over the least 5 years. Thats not the case for all teams and teams like Marlins who did bump salary have now reversed course despite being only 2 SPers from being competitive
The Rays who are soon to negotiate a new RSN and seek tax payer assistance for a new stadium hurt their case by not spending.
A’s also looking for a new stadium and MArlins will soon be looking to negotiate a new RSN
The other consideration down the road for a grievance is the possibility that these 4 teams under direction from Manfred who is responsible for enforcing the CBA among the teams have engaged in collusion to dump players on the FA market at low prices (prospects) to suppress FA prices, in return for continuing high revenue sharing receipts. I’m not at all impressed with the collective return from Stanton,Gordon, Ozuna, Longoria, Odorizzi, Yellich, Cole,Mclutchen, Souza, Dickerson
In any event, as financial data is hard to come by any analysis on the chances of this grievance is not going to be worth much. I’d really like to see how revenue sharing dollars are being received over time, total revenue, total payroll, etc. its not one year deciding this case. The Rays for example have had their opening day payroll basically flatlined since 2009 despite what one must assume has been a significant bump in revenue sharing dollars and overall revenue, not including the BamTech sale
>the possibility that these 4 teams under direction from Manfred who is responsible for enforcing the CBA among the teams have engaged in collusion to dump players on the FA market
The A’s had no players enter Free Agency this offseason.
None.
Zero.
And then they signed Petit for 2/10 and extended Jed Lowrie.
What the MLBPA is *actually* doing is trying to punish teams who have payroll space for not taking that money and wasting it by overpaying for mediocre players. Players that teams like the A’s, with a very young team and strong farm, DON’T NEED.
The thing with Oak as long as they are reinvesting in player development. I dont see a lot of holes in the roster, and they didnt unload any payroll this offseason. Since they dont have much in the way of holes, if Lucroy turned down an offer they just dont have many places to spend money right now. The team traded for and signed players to deals this offseason, it just so happens that most of there dead money went away finally. They save money not paying the likes of Billy Butler.
Good article and even better discussion. Alas, we’re all guessing (albeit in an educated manner) when we discuss teams’ financial situations. I think these sorts of complaints are likely to increase in the future. Hopefully we can get a (relatively narrow band) salary floor and cap with radically improved revenue sharing in the future. With the caps on IFA, etc. and analytics becoming increasingly commiditized, it’s hard to be a casual fan of a small or mid-market team because you must accept that the routes to outsmart big market teams have closed off to a great degree. I’m as much a fan of timing and optimizing your position on a win curve as anyone, but it sure would be a lot more fun if I knew my team (Cincy, btw) could compete every year!
The Pirates have the problem of having based their team construction strategy on their prospects. The team’s payroll will always be low and the FO will nearly always trade veterans for prospects before the latter reach FA.
The Cole trade by the team’s inability to trade MuCutchen for a package the FO could accept between the 2016-17 seasons.
The Pirates are trying to win. They are trying to win efficiently. I would be surprised to learn that the team has abused the Revenue Sharing system.
That said, I would not be surprised to find that the Nutting Partnership takes profits from the team every season. The Nutting family is in for the money.
Nice piece, thank you for a great explanation of the case. I think the players have an opportunity here to force the issue of underpaid minor league players as a result of this grievance. It’s a good grievance as the players are enforcing their agreement and can use the process to gather information and strengthen their bargaining position. If they don’t use this process to shine a light on current inequities I think they will be strongly rebuked by fans and rightly so.
I have one nit to pick and I only mention this because of context. You say legal rules of evidence don’t apply. They do apply, it’s just not the same set of rules many attorneys might be familiar with in a superior court or civil proceeding for example. I’m just saying there are legal standards applied. Arbitrators are just like judges with their own sets of bias and it can be a dice game. Sometimes filing a case in any system has a strategic component outside what goes down in the court room.