« The Bubble According to Todd | Main | Challenge to CFPB Authority »

Baseball Contract Liabilities: A-Rod?

posted by Adam Levitin

It's with a bit of Schadenfreude that a White Sox fan like me reads about the NY Yankees being straddled with A-Rod's bloated contract. (Remember, A-Rod was one of the largest unsecured creditors of the Texas Rangers.) But I can't help but wonder if there isn't a legal out for the Yankees. 

Let me state up front that I have no idea of the kinds of representations and covenants in MLB player contracts or what might be layered on through understandings between MLB and the player's union. I really don't know how those contracts work.  

Yet absent some unusual provisions in the contracts or CBA, I would think the Yankees would have a possible case for terminating their contract with A-Rod and possibly even trying to claw back some money. Let's assume that the Yankees contracted with A-Rod on the belief that he was a "clean" player--that his on-field performance was based on his natural abilities alone and not on the juice and that the issue of his drug use wouldn't subject them to negative publicity. I would think that alone might be grounds for contract rescission due to unilateral mistake or fraud. Maybe there's a misrepresentation issue too. Of course, the Yankees might have suspected or known that A-Rod was juicing and just didn't care, which would be a different case altogether.

Again, there are lots of possible twists here that would impede the Yankees' ability to take action against A-Rod. But the possibility of a suit might give the Yankees some of leverage to negotiate an early retirement.

And going forward, I wonder if professional sports contracts will start to include "no doping" representations that enable the team to terminate the contract upon a positive drug test. 

Comments

The MLB collective bargaining agreement, including the standard player's contract is available here: http://mlb.mlb.com/pa/pdf/cba_english.pdf. As you suspected, it does include provisions that would reach this conduct. Unless A-Rod's contract had unusual provisions, my non-expert opinion is that the only thing standing in the Yankees's way is a dispute over the facts.

Not an attorney and haven't read through the whole CBA, but I'm going to go ahead and wade out of my element here anyway. According to Craig Calcaterra, former attorney who blogs about baseball for NBC:

"The Joint Drug Agreement (“JDA”) provides one means and one means only for suspensions: positive drug tests. Now, those drug tests can be scheduled or random. Or they can be instituted based on “reasonable cause.” From page 12 of the JDA:

In the event that either Party has information that gives it reasonable cause
to believe that a Player has, in the previous 12-month period, engaged in the use,
possession, sale or distribution of a Performance Enhancing Substance (including
hGH) or Stimulant, the Party shall provide the other Party, either orally or in
writing, with a description of its information (“Reasonable Cause Notification”),
and the Player will be subject to an immediate urine and/or blood specimen
collection, or a program of testing, as determined by the IPA, to commence no
later than 48 hours after the Reasonable Cause Notification was provided.

Nowhere in the JDA does it provide for suspensions or any other kind of discipline based purely on non-testing evidence like reports, tips or the like. What’s more, there is an appeal process involved where the player subject to reasonable cause testing can dispute whether there was, in fact, reasonable cause."

There's more here:

http://hardballtalk.nbcsports.com/2013/01/29/the-new-ped-evidence-is-sexy-but-they-cant-void-a-rods-contract-and-probably-cant-even-suspend-him/

He goes on to mention that a player can be suspended by the commissioner for "just cause" although it's not entirely clear what constitutes that.

Not saying they won't attempt to void the contract, but it seems like that would touch off quite the firestorm of litigation.

Not to mention if the Yankees lose, they get stuck with a guy who they attempted to sue through 2017, or they cut him and owe him the $114m.

Academic question. First team that crosses this line will be summarily 'sploded. Won't happen due to Don't Ask Don't Tell complicity during the steroid era. Remember the Yankee's suit to recover salary paid to Jason Giambi? Me neither.

Isn't there a law against clawing back the compensation of rich people? I've never seen it done in any sphere of life, so it must be illegal.

This includes Delaware corporate law which at least in principle provides adequate redress for breaches of the duty of loyalty by CEO types.

Interestingly, if A-Rod is too injured to play this season, he gets paid in full, and the team gets reimbursed through their insurance policy. Win-win for everyone.

The comments to this entry are closed.

Contributors

Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed

Categories

Bankr-L

  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

OTHER STUFF