Today, we will continue to explore the possibility raised by ESPN’s Buster Olney that baseball clubs could seek to take creative legal action against players involved in the Biogenesis scandal. You can find Part I of the series here. This installment will go a little deeper into the actual legal doctrines at play. (Be forewarned, it is lengthy.) As with the first time around, I welcome any comments or criticisms and will do my best to respond to them in the discussion section. Click below to read on.
Before we begin, a few disclaimers are in order. First, and most importantly, all discussions of hypothetical facts and claims are just that: hypothetical. Of course, I have no knowledge of any facts (actual or alleged) beyond what has been publicly reported. Second, while I have endeavored to flesh out the considerations to the extent possible, I have not performed anything close to complete legal research and analysis. What follows is merely a suggestive starting point, and certainly does not constitute legal advice.
Off we go …
Part II: Claims, Remedies, and Defenses
Barriers to Entry
Before we reach individual claims, it is necessary to address a potentially preclusive barrier to any lawsuit. Baseball, like most things in life, is governed by contract. The paper is the place to start. In the MLB context, that would include the Basic Agreement (commonly referred to as the CBA). The CBA incorporates by reference the Uniform Player Contract (UPC), which in turn incorporates by reference both the CBA and the Joint Drug Prevention and Treatment Program (often called the JDA). As it turns out, as with most contracts these days, the CBA provides for an arbitration process (what it terms the Grievance Procedure) for dealing with disputes between team and player.
Baseball’s Grievance Procedure is distinct from its better-known salary arbitration process. Arbitration, for our purposes here, refers to the system of resolving disputes outside of the court system. (Generally, arbitration is intended to provide a cheaper and more time-efficient means of doing so.) While a full treatment of the topic would consume MLBTR’s pages, suffice to say that there is a strong policy of courts enforcing arbitration clauses broadly. Typically, then, any disputes between player and team will run through the MLB grievance process rather than a court.
That being said, it is worth taking a closer look at baseball’s arbitration provisions. Contract disputes plainly fall within their ambit. There seems to be room to argue, however, that tort claims –- which may relate to a contract but do not rely upon its terms as a vehicle for recovery –- do not. If that were the case, teams would be free to assert those claims in a traditional court. Since I could not find any sources staking a position on this topic, and lack the resources to pull off a fully researched and vetted treatment, we’ll have to settle for a sketch of the possible argument.
A contract's arbitration clause delineates the disputes that fall within it. As the United States Supreme Court reasoned in Granite Rock Co. v. International Brotherhood of Teamsters, 130 S. Ct. 2847 (2010), “a court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute.” Article XI of the CBA holds that only “certain grievances and complaints” must be arbitrated, with “Grievance” defined as “a complaint which involves the existence or interpretation of, or compliance with, any agreement, or any provision of any agreement … between a Player and a Club.” While any dispute between team and player arguably “involves the existence” of their agreement in its most literal sense, that phrase seems intended to cover a potential dispute over whether player and team ever actually entered a contract.
Importantly, moreover, another provision of Article XI seems to limit the arbitration panel’s powers and clarify the meaning of the phrase “involves the existence.” While there is a strong presumption in favor of reading arbitration clauses broadly, in Granite Rock the Supreme Court looked at other portions of the arbitration agreement in interpreting the core arbitration clause itself. Here, Subsection B of Article XI sets forth the arbitration panel’s powers, providing that “the Arbitration Panel shall have jurisdiction and authority only to determine the existence of or compliance with, or to interpret or apply agreements or provisions of agreements … between individual Players and Clubs” (emphasis added).
While it would take a fully developed contract argument to stake out a clear position, that sounds like a promising starting point to keep tort claims out of arbitration. Ultimately, an arbitrator or a judge (that’s yet another open question) would decide whether some or all tort claims would be heard by an arbitration panel or a court. Either way, any contract claims would certainly need to be arbitrated. (Yes, that means that the claims could be split into two forums. See KPMG LLC v. Cocchi, 132 S. Ct. 23 (2011).) And either way, a team could in theory vindicate its legal rights; that's why we allow arbitration in the first place.
So why does this potentially matter? Some of the reasons will become clear as we look at the possible actual claims that could be raised.
While I will spare you the painful details to the extent possible, it is important to look at the actual causes of action that might be trotted out. Generally, to win a lawsuit as a plaintiff, you bear the burden of proving a series of elements –- factual propositions –- that add up to entitle you to some action by the court.
Olney references the Lance Armstrong litigation as a potential model, and I am more than happy to piggyback on the Justice Department’s reliably thorough work. There, are, however, several important distinctions to be made. The Armstrong case originated as a qui tam action (brought by the inimitable Floyd Landis) and was joined by the government. In turn, the government’s complaint against Armstrong et al. included False Claims Act counts along with claims of breach of contract, fraud, and unjust enrichment. Claims under the False Claims Act were only available there because the contractual relationship was with the government (the U.S. Postal Service).
The other three types of causes of action present in the Armstrong case, however, largely cover the gamut of standard claims in this arena. Unjust enrichment and fraud, in this context, constitute alternative methods (to breach of contract) to avoid past or present contract obligations, and to seek other recovery. We’ll look at each of those theories, along with one other claim that occurred to me as a possibility.
As Michael McCann recently explained in a piece for SI.com, Section 7(b) of the UPC generally forms the basis for MLB team efforts to void future contract obligations. That clause permits clubs to terminate a contract if a player should fail to “conform his personal conduct to the standards of good citizenship” or “render his services hereunder or in any other manner materially breach this contract.” As McCann explored in depth in an earlier piece, however, teams have struggled to apply these clauses successfully in MLB’s arbitration system.
Generally, the best a club can do is to work out a settlement to recoup some relatively small portion of past or future salary obligations. Remember, barring some major shift in the law, any action by a team to void a player contract based on a breach is definitely going to go through the arbitration process, not a court. While our primary focus here is not on this more traditional approach, we'll use the opportunity to take a brief look.
Let’s first consider the possibility of voiding the contract going forward. (In Part I, we discussed this in terms of the legal remedy of a declaratory judgment.) Violation of the JDA has its strengths and weaknesses as a basis for a traditional contract claim. On the one hand, it seems to go to the heart of a player’s contract, which hires him “to render … skilled services as a baseball player.” By signing the UPC, the player represents (Section 4(a)) that his skills are “exceptional and unique” and that his services as a ballplayer have a “special, unusual and extraordinary character.” Arguably, a team should not have to pay the rest of the salary owed a player whose purported abilities were procured in part through the use of substances clearly prohibited by the JDA.
Of course, there are some problems here as well. For one, the JDA provides for suspensions without pay; if nothing else, that pay could not be recovered twice. And the JDA also contains a clause (Section 7(M)) holding that “[n]o club may take any disciplinary or adverse action against a Player (including … any adverse action pursuant to a Uniform Player’s Contract) because of a Player’s violation of the Program.” While this clause would surely present a hurdle, I think there are ways around it. It could be argued that the kind of “adverse action” contemplated is disciplinary or punitive action for the violation, not the protection of a team's other legal rights. A team could contend that it is not pursuing litigation “because of a Player’s violation of the Program,” but rather because of the underlying action that happened to lead to a violation of the JDA. The JDA deals with a variety of drug types and situations. Some of them, it would be argued, also constitute material breaches of the entire contract or violate other aspects of the contract, including those noted by McCann.
Further, while it is highly fact-dependent, PED use could play a role in a violation of the medical provisions of the UPC. The player must warrant (Section 4(b)) that he “has no physical or mental defects known to him and unknown to the appropriate representative of the Club which would prevent or impair performance of his services.” Some (or, perhaps arguably, all) PED use surely involves hiding or masking such impairment from the club. Even more directly, pursuant to Article XIII (G) of the CBA and Paragraph 6(b)(1) of the UPC, a player must authorize the disclosure of medical and health information, as well as provide advance notice of most medical treatment. And clubs take a Medical History Questionnaire from all incoming players (Attachment 6 to the CBA), which asks players to identify whether they are “taking medicine or pills” and to list treatments for injury or illness. Ultimately, if a team was bold enough to pursue it, there are plenty of arguments to be made that PED use constitutes a material breach and supports voiding a contract.
It is also possible that a team could focus on the broader harms of PED use. Such an approach would draw on Olney’s suggestion that teams could look beyond the aspects of a contract that relate to showing up and playing baseball. To be sure, this is not the Armstrong case, which involved a sponsorship agreement where marketing and public relations were the predominant, and perhaps the exclusive, purposes. But a MLB player’s compensation (UPC Section 2) is tied to other promises beyond playing, including the requirement (UPC Section 3(b)) that the player “participate in any and all reasonable promotional activities.” And some individual players’ contracts expand upon the standard provisions through performance or milestone bonuses.
Ultimately, however, there are limits to the recovery that might be anticipated from such a claim based purely on the contract. The player may well have been violating his contract while using PEDs, but what is the measure of the harm to the team? There has been no suggestion that a team (or player) will forfeit past wins, statistics, or awards. More contentiously, it could be argued that past PED use even benefitted the team so long as it went undiscovered. And of course, any knowledge on the part of the team would be explored in discovery and potentially quite problematic. This makes past salary a difficult target. While a team could conceivably argue that it should recover at least the portion of the contract that was allocable to marketing, promotional, and branding purposes, that would be challenging to quantify and would have obvious limits in scale. Finally, it is generally much more difficult to obtain recovery for harm beyond the four corners of the contract on a contract theory (as explored further below).
Given the historical limits of the MLB arbitration setting and legal and practical limits to breach of contract, then, a truly substantial recovery might require pursuit of non-contractual legal theories. Let’s turn to those.
Of the two alternative approaches suggested by the Armstrong case, fraudulent inducement is more difficult to allege and to prove, but also offers more in potential remedies. While it is often possible to get past the motion to dismiss stage and into discovery by doing little more than restating the elements of a claim, fraud counts require specific allegations. And fraud must generally be proven to a higher standard than other civil claims.
For the reasons given above, there is at least a possibility of avoiding arbitration on a fraudulent inducement action if a team decides it prefers the forum of a court. But it will certainly be tricky to do so, as the claim would relate directly to the formation of the contract but not to the validity of the arbitration clause itself. (I never said there were going to be any clean answers!)
In this situation, you’d be looking for actual misrepresentations made by a player to a team around the time that a contract was agreed upon. A team could allege that, in agreeing to a contract, it relied to its detriment on a player's assurances that he had not used, was not using, or would not use PEDs. As a general matter, to be actionable, a misrepresentation must be one of present fact; thus, the lie that “I am not using banned substances” is more likely to support a claim than the lie that “I do not intend to use banned substances in the future.” The latter is generally categorized as a mere promise, although there can be some wiggle room for arguing that it constitutes a knowing misstatement of present fact. (E.g., a player was in the midst of placing an order for PEDs on the very day he said he had no intention to use them in the future.)
Proving a representation (as well as its falsity) can also be a challenge. Teams could point to recorded media interviews, emails, or even non-recorded verbal statements. (If a player made a verbal misrepresentation to a club official, would that official's testimony on the statement be admissible in evidence? Quite possibly: the statement could be deemed a “verbal act” that does not constitute hearsay.)
Fraud in the inducement is appealing, in spite of its difficulty, because it reaches back to the beginning of the contract and opens the possibility for different kinds of remedies, including potentially more advantageous measures of damages. As a general matter, contract damages seek to put the plaintiff in the position it would have been if the contract was performed appropriately, while damages for fraud –- a species of tort law -– attempt the somewhat more expansive and expandable purpose of returning the plaintiff to its pre-transactional state (and to deter future malfeasance). Hence, consequential damages (compensation for harms that the violating party knows are likely to flow from its actions) are easier to come by on a tort claim such as fraud. Some have put the distinction this way: contract remedies are preferable when seeking to make a good bargain better, while tort remedies are best for ameliorating a bad bargain.
Discerning what precise damages would potentially be available is complicated, fact dependent, and variable by jurisdiction. But fraud puts more on the table. Stated generally, it is easier to imagine creative arguments for damages based upon a successful claim that a player connived to sell a team damaged and unmarketable goods than it is for a claim that a player merely failed to comply with one aspect of their contract while otherwise performing.
It is also worth noting that there is one potentially game-changing factor at play in any hypothetical fraud claim. A player’s legal team would surely explore through the discovery process whether there was prior knowledge of and acquiescence to PED use by the team (and/or the league). Evidence of such knowledge would likely kill the fraud claim, and presents a massive public relations risk. Surely, a team would need to be very confident in its internal affairs before wading into these waters.
Unjust enrichment, on the other hand, is a bit of an odd fit to the MLB situation. Armstrong was entitled to a hefty promotional bonus for winning the Tour de France, which he did several times. The argument, so far as I can surmise, is that he essentially faked his way to a title that he was later forced to forfeit, so as to render his performance valueless to his sponsor. Hence, when the Postal Service paid him, Armstrong received a contractual benefit that exceeded the value of the services he provided. It could be that this cause of action was asserted there because the contract argument posed some difficulties.
For our purposes, a baseball contract with statistical or team performance bonuses could be somewhat analogous. But lacking even an asterisk, let alone the vacation of any records or titles, the theory seems less promising in the MLB context.
A team could hypothetically assert another variety of fraud claim: fraudulent misrepresentation based on statements made during the performance of the contract. All of the difficulties that apply to fraudulent inducement are present here as well. Of the claims we have considered, however, this one is the most likely to dodge arbitration and make it into a courthouse.
To take a straightforward example, assume that a team is considering whether and how to market a high-profile player. The team asks the player or his representatives specific questions about PED use to determine whether to commit money and reputation to marketing featuring that player. Perhaps the team even advises him of what is at stake (damage to the brand, etc.) if he lies. The player steadfastly denies any PED use to a team official (and/or the media), and the team goes on to feature that player prominently in its promotional materials. It could be alleged that the player stood to benefit from the fraud by inducing the team's promotional efforts and hiding the PED use, which functioned to avoid discipline, enhance the player's brand and image, and attract private sponsorship opportunities. A fact situation like this could potentially provide the basis for a fraudulent misrepresentation claim, though of course things are rarely so cut and dry in the real world.
Why pursue this claim? Once more, the idea would be to open additional avenues to creative damages options. The team could in theory allege monetary harm ranging from actual funds expended, devaluation of its brand, lost ticket sales, and/or expenses incurred in public relations efforts required to deal with the PED controversy. The gist of the claim, and its potential for enhancing recovery, might be best understood in simple terms: What about all the baseball cards, jerseys, and programs the team printed — sold and unsold — featuring a PED user’s name or likeness alongside the team name and logo?
Of course, it remains a very difficult task both to value these harms (damages must generally be proven to a reasonable certainty) and to connect them to the actions of the player. Once more, it is not really possible to handicap the likelihood and magnitude of success, even if we did have a firm grasp on the competing facts.
As we might have expected, it turns out that there are a wide range of risks and barriers to a team pursuing any kind of legal action against a player. Indeed, just getting outside of the MLB arbitration system and its historical limits to recovery (assuming that is the purpose) would be a significant challenge. On the other hand, there are somewhat plausible avenues to a real recovery, depending upon the actual facts. Accordingly, in the next segment, we will take a closer look at the actual player contracts involved to see whether there is enough meat on the bone to entice a team to pursue this somewhat radical approach.
Part I of the series provided an overview of the litigation process and its potential costs, risks, and benefits to a team. Part III will follow by applying these considerations to the individual players potentially involved.