By Rick Meyer
For 31 consecutive years the number one overall draft pick has agreed to terms on a contract with the Major League Baseball (“MLB”) franchise that drafted him.[6] This streak came to an abrupt end on July 18, 2014, when Brady Aiken, a San Diego high school pitcher failed to reach an agreement with the Houston Astros prior to the signing deadline. Two days after the draft, Aiken and the Astros agreed to a contract with a $6.5 million signing bonus pending a physical. While the bonus would have tied the largest ever given to a high school pitcher,[7] it remained considerably under the slot value for the pick.[8] Negotiations became frustrated when the physical revealed Aiken had an “elbow ligament” issue.[9] Based upon the results of that examination, the Astros reportedly lowered their offer by the maximum amount permissible under the Collective Bargaining Agreement (“CBA”).[10] As a result, negotiations broke down and Aiken went unsigned.
One of the more contentious byproducts of the failed Aiken signing is the story of Jacob Nix. Nix, the Astros’ fifth-round selection, agreed to a deal that included a $1.5 million signing bonus — an amount nearly five times greater than the slot value. However, the deal was contingent upon Aiken’s signing. For the Astros to have enough money to sign Nix, the team had to first officially sign Aiken.[11] Accordingly, once the Astros failed to sign Aiken, the team could not follow through on their “agreement” with Nix.[12] As a result, the Astros were left without two of their top draft picks.
Where does that leave Aiken and Nix now? As many have speculated, the MLBPA has filed a grievance on behalf of Aiken and Nix.[13] Ostensibly, the players are requesting that a neutral arbitrator declare them free agents. This would permit the players to freely negotiate contracts with any team. The salient question is whether an arbitrator would be willing to grant such relief.
Long before Aiken and Nix, there was the case of David Jonathan “J.D.” Drew. In 1997, Drew was selected second overall by the Philadelphia Phillies in what was then known as the “Amateur Draft.” At that time, the draft’s eligibility rules applied only to players who had never signed a professional contract. Upon being drafted, Drew hired renowned agent Scott Boras to be his adviser during negotiations with the Phillies. The negotiations resulted in an impasse, as Drew persistently demanded a contract worth $11 million while the Phillies counter-offered $2.05 million.
Unable to reach an agreement, Drew sought to avoid the confines of the draft by signing a professional contract with an independent team in the Northern League. Practically, this altered Drew’s status from “amateur” to “professional.” However, during his time in the independent league, MLB amended their draft rules to make clear that independent league players remained subject to the draft. This not only angered Drew and Boras, but also the Major League Baseball Players Association (“MLBPA”). Specifically, the MLBPA believed that MLB unilaterally implemented a workplace rule change that could only be made through collective bargaining.
The MLBPA filed a grievance on Drew’s behalf and the matter went to arbitration. Arbitrator Dana Eischen was faced with two issues: (1) whether MLB the rule change required collective bargaining; and (2) whether Drew was subject to the rules of the amateur draft. Arbitrator Eischen agreed with the union and invalidated the unilateral changes made to the major league rules, but declined to make Drew a free agent. In a seven-page opinion, Eischen held that while Drew had a legitimate grievance, he was not yet a member of the MLBPA. Therefore, the arbitrator lacked the requisite jurisdiction to decide the issue. Instead, arbitrator Eischen held the determination of Drew’s status as a free agent to be a matter for initial determination by the executive council. As a result, Drew remained subject to the draft.
The story of Drew provides a cautionary tale.[14] In the realm of professional sports, arbitration is the preferred method of resolution for disputes arising between a team and player. Unlike many other arbitration systems, the world of professional sports is nuanced and particularly conducive to the creation of arbitral precedent. Each sport has its own unique rules which requires issues to be adjudicated under the umbrella of their respective collective bargaining agreements. To that end, CBAs have limitations and gaps organically present themselves — arbitral precedent serves to fill those gaps.
Perhaps most importantly, by mandating arbitration through CBAs, arbitrators are viewed as legitimate producers of law. Much like courts, their decisions create arbitral precedent that guides future arbitrators. By necessity, for the arbitration process to be effective, an arbitrator must produce an award that is enforceable and meaningful. As such, their decisions shape the arguments that may be made in the future.
Therefore, similar to a court of law, unless the MLBPA can distinguish Aiken and Nix from Drew, the arbitrator would heavily rely upon the precedent established by arbitrator Eischen and claim lack of jurisdiction in their cases. Distinguishing the cases would be a difficult proposition. Pursuant to the terms of the CBA, draft picks sign minor league contracts, which means they are not yet members of the union. As illuminated in the Drew decision, if a player is not yet a member of the union, issues pertaining to that player fall outside of an arbitrator’s jurisdiction. Pursuant to Drew, the issue is clear: the aggrieved player is either a member of the union and the arbitrator maintains jurisdiction, or the player is not a member of the union and the arbitrator lacks jurisdiction.
Accordingly, should Aiken and Nix seek to be declared free agents, an arbitrator would likely have to look no further than Eischen’s decision regarding J.D. drew to determine it is beyond their jurisdiction to adjudicate the claim. As such, the arbitrator would defer the matter to the discretion of the Executive Council, which would presumably present the players with the same options presented to Drew: sit out the current season and reenter the draft next year or attend college and reenter the draft in three years when eligible. But, the council would likely fall short of declaring them free agents.
Ironically, after choosing to file grievances, Aiken and Nix, two pitchers, would have preferred if J.D. Drew hit a home run nearly 20 years ago.
[6] Tim Belcher and the Minnesota Twins failed to reach an agreement in 1983.
[7] Jameson Taillon received a $6.5 million bonus from the Pittsburgh Pirates in 2010. Clint Longeneker, Highest Draft Bonuses Of All Time, Baseball America (July 20, 2014), http://www.baseballamerica.com/draft/highest-draft-bonuses-time/
[8] The 2012-2016 MLB Collective Bargaining Agreement brought about significant changes to the Rule 4 draft. Among those changes was the implementation of a soft cap in the form of a signing bonus pool. See Maury Brown, Inside the 2012-16 CBA: The Luxury Tax Meets the Draft, Baseball Prospectus (May 29, 2012) http://www.baseballprospectus.com/article.php?articleid=17169 (detailing the nuanced and intricate draft changes).
[9] The Astros allege Aiken has a “smaller than normal UCL,” which they believe increases the likelihood that Aiken will at some point require Tommy John Surgery. Aiken’s agent, Casey Close, has gone on record stating Aiken is completely healthy and has never experienced any issues with his elbow. Mike Petriello, Everyone Looks Bad in the Brady Aiken Mess, Fangraphs (Jul. 16, 2014) http://www.fangraphs.com/blogs/everyone-looks-bad-in-the-brady-aiken-mess/.
[10] If a team offers a player a contract below 40% of the slot value, the player can become a free agent. See 2012-2016 Basic Agreement, http://mlbplayers.mlb.com/pa/info/cba.jsp.
[11] This concept was not foreign to the Astros. In 2013, the Astros drafted shortstop Carlos Correa number one overall and immediately signed him to a contract well-below the assigned slot value. The Astros then used those savings to sign later picks to above-slot contracts. Aaron Gleeman, Astros Sign No. 41 Pick Lance McCullers for Double Slot Value at $2.5 Million, HardballTalk (Jun. 18, 2012) http://hardballtalk.nbcsports.com/2012/06/18/astros-sign-no-41-pick-lance-mccullers-for-double-slot-value-at-2-5-million/.
[12] Pursuant to the CBA, the Astros were left with the difficult choice of not signing two of their top 5 draft picks this year or signing only Nix and losing their first two selections in next year’s Rule 4 amateur player draft. See J.J. Cooper & Jim Callis, New CBA Will Bring Sweeping Changes To Talent Acquisition, Baseball America (Dec. 20, 2011), http://www.baseballamerica.com/today/draft/news/2012/2612723.html. (analyzing the complexities of the draft structure contained within the CBA).
[13] D.J. Short, MLBPA Files Grievance Against Astros in Regard to Draft Pick Situation, HardballTalk (Jul. 24, 2014) http://hardballtalk.nbcsports.com/2014/07/24/mlbpa-files-grievance-against-astros-in-regard-to-draft-pick-situation/related/.
[14] Presumably, Aiken would allege the Astros failed to negotiate in good faith, while Nix would allege a breach of a verbal contract.
