Biogenesis Rumors


Looking At Everth Cabrera's Suspension

Earlier today, Padres shortstop Everth Cabrera was one of 12 players to accept a 50-game suspension for his involvement with the Biogenesis PED investigation. The Padres have exactly 50 games remaining this season, so they will lose their 26-year-old shortstop for the remainder of the 2013 campaign. The Padres issued the following statement on the Biogenesis suspensions:

“The Padres fully support Major League Baseball's policy and its efforts to eliminate performance-enhancing drugs from our game. The club will continue to stand behind the Commissioner’s Office to ensure the integrity of baseball.”

Cabrera is in the midst of the finest season of his career, hitting .283/.355/.381 with four homers and an NL-best 37 stolen bases. That stolen base lead comes in spite of a trip to the 15-day DL earlier this season and comes on the heels of his league-leading 44 swipes in 2012 (despite playing just 115 games). 

How does the suspension impact Cabrera's future, though? The Nicaragua native is earning $1.275MM this season after his first venture into arbitration in the 2012-13 offseason. As such, the financial penalty for Cabrera isn't nearly as steep as it is for other players. He'll lose roughly $383K in salary this year as a result of his suspension.

Because he's still going year-to-year through arbitration, however, Cabrera's suspension carries major financial implications for his future. The arbitration process heavily rewards counting statistics, and Cabrera will lose nearly one-third of his opportunities to accumulate those precious stats because of this discipline. MLBTR contributor Matt Swartz now projects Cabrera to earn $2.2MM in 2014. Swartz had originally projected Cabrera to earn $2.9MM next season, assuming he would have lived up to his ZiPS rest-of-season projection and finished with a .276 average, five homers, 42 RBIs and 50 stolen bases. All in all, this suspension figures to cost Cabrera roughly $1.083MM in salary from 2013-14 -- no small sum for a player who has earned less than $2MM to date throughout his big league career.

The financial implications may not stop there, either. Cabrera entered the season with two years, 144 days of service time. Numerous shortstops -- some of whom are solid comparables for Cabrera -- have inked long-term deals at this point in their careers. As MLBTR's Extension Tracker shows, Elvis Andrus (three years, $14.4MM) and Alcides Escobar (four years, $10.5MM) signed long-term deals with between two and three years of service time. When I asked Padres GM Josh Byrnes how this disciplinary measure would impact the club's thoughts regarding a long-term deal for Cabrera on a conference call this afternoon, he offered the following response:

"Well, a lot of players over time have been disciplined. I think we'll know a few more facts as we go. You know, we control him for a few more years through the arbitration process. I think we'll sort of evaluate as we go, but I wouldn't foresee a long-term deal until we know more."

It will be interesting to see how the Padres handle Cabrera going forward. It's also worth noting that Cabrera isn't the only young Padres player to serve a suspension in the past year. Yasmani Grandal was suspended for 50 games following the 2012 season and later connected to the Biogenesis clinic. He missed the first 50 games of 2013 but was not disciplined further, as MLB ruled that he had already served his punishment with that previous suspension. Fautino De Los Santos, however, was also one of the 12 players earlier today who accepted a 50-game suspension.



MLB Officially Announces Biogenesis Suspensions

After months of speculation, we have some finality for a dozen of the players implicated in the Biogenesis scandal.  Major League Baseball has officially announced 50-game suspensions for Nelson Cruz, Jhonny Peralta, Everth Cabrera, Antonio Bastardo, Jesus Montero, Francisco Cervelli, Jordany Valdespin, Fautino De Los Santos, Jordan Norberto, Cesar Puello, Fernando Martinez and Sergio Escalona.

All of those players will accept their suspensions, while Alex Rodriguez, who was suspended for 211 games (effective Aug. 8), will appeal his suspension and be eligible to play until that process is complete.

The suspensions carry particular weight for the Rangers and Tigers. The Rangers, who are 2.5 games back of the A's in the AL West and just a half-game behind the Indians for a Wild Card berth, will lose their starting right-fielder and club home run leader in Cruz for the remainder of the regular season.

The Tigers will lose Peralta, their starting shortstop, for the remainder of the season as they look to fend off surging Cleveland and Kansas City clubs and win the American League Central division. Detroit safeguarded itself somewhat against the loss of Perata by acquiring Jose Iglesias in a three-team deal with the White Sox and Red Sox prior to the trade deadline.

Bob Nightengale of USA Today was the first to tweet that Cruz would accept his suspension. Ken Rosenthal of FOX Sports first tweeted that Peralta, Cabrera, Bastardo and Valdespin would also accept 50-game bans. Jeff Passan of Yahoo Sports added Escalona to the list (Twitter link), and Rosenthal reported that Cervelli, Montero, Puello, De Los Santos, Martinez and Norberto would do the same (on Twitter).



Nelson Cruz Leaves ACES; Hires Wasserman Media Group

10:08am: Cruz has hired Adam Katz of Wasserman Media Group, according to Jeff Passan of Yahoo Sports (on Twitter). Katz is the agent for notable players such as Yoenis Cespedes and Bartolo Colon, the latter of whom was suspended for PEDs in 2012.

9:57am: Nelson Cruz has fired agents Seth and Sam Levinson of ACES, according to Jon Heyman of CBS Sports (on Twitter). Cruz is one of 13 players expected to accept a 50-game suspension for his connection to the Biogenesis PED investigation today, Heyman adds.

ACES came under fire this past offseason and was investigated by Major League Baseball after another client, Melky Cabrera, was suspended 50 games for PED use. Cabrera and ACES employee Juan Carlos Nunez reportedly tried to cover up the scandal by purchasing Spanish-language web sites to advertise a fictitious product which Cabrera claimed he took, unbeknownst to the fact that it contained synthetic testosterone.

In addition to Cruz and Cabrera, ACES also represents Biogenesis-connected names such as Jhonny Peralta, Jesus Montero, Fautino de los Santos, Cesar Puello and Gio Gonzalez, though the substances purchased by Gonzalez were reportedly legal and he is not believed to be facing a suspension.

Cruz, 33, is hitting .269/.330/.511 with 27 homers this season for the Rangers as they fight to keep pace with division-leading Athletics. Both decisions -- parting ways with ACES and accepting a suspension -- will impact Cruz's free agency this offseason.



A-Rod, 12 Others To Be Suspended Monday

Alex Rodriguez and 12 other players will be suspended for their involvement with Biogenesis, according to Jon Heyman of CBSSports.com. Earlier today, we learned Rodriguez is to be suspended through the 2014 season and Heyman names Tigers shortstop Jhonny Peralta, Rangers outfielder Nelson Cruz, Mariners catcher Jesus Montero, Padres shortstop Everth Cabrera, and Yankees catcher Francisco Cervelli among the Major League players also expected to be suspended, as well as minor leaguers Fernando Martinez, Jordan Norberto, Fautino de los Santos, and Cesar Puello. Heyman adds there are also three players on the suspension list whose names have yet to become public.

Heyman writes Blue Jays outfielder Melky Cabrera, A's right-hander Bartolo Colon, and Padres catcher Yasmani Grandal will not be suspended in connection with Biogenesis, as they have served 50-game penalties already. 

All or almost all of the other 12 players are expected to accept 50-game suspensions, though there could be an additional holdout or two for appeal beyond Rodriguez, reports Heyman. All the players have the option to appeal, but it is believed close to all of them have made agreements for 50-game bans with MLB, Heyman adds. Players who appeal are eligible to keep playing until their case is heard.

Cruz told reporters, including MLB.com's T.R. Sullivan, "I haven't decided what I'm going to do about anything. It's not just about myself, it's also about the team." Today is the 112th game played by the Rangers, so Cruz would be eligible to return for the playoffs (assuming Texas reaches the post-season), if he serves a 50-game suspension beginning Monday. Sullivan surmises the Rangers will recall an outfielder from the minors adding Manny Ramirez is not an option and manager Ron Washington is reluctant to use Jurickson Profar in the outfield. Regardless of what the Rangers end up doing, assistant GM Thad Levine acknowledges, "At this stage of the season, that's a difficult bat to replace."



A-Rod Will Be Suspended Through 2014 Season

Alex Rodriguez will be suspended through at least the 2014 season in an announcement Monday by Major League Baseball, but the Yankees third baseman plans to file an appeal, which will enable him to play tomorrow night against the White Sox in Chicago, two people with direct knowledge of the plan told Bob Nightengale of the USA Today. The appeal would be heard by arbitrator Fredric Horowitz in the next three weeks, according to Nightengale. Ken Davidoff of the New York Post tweets the announcement of the Biogenesis suspensions will take place around 11am CT.

Davidoff also reports MLB is leaning towards only suspending Rodriguez for violating the Joint Drug Agreement, and not the Basic Agreement, allowing for an appeal. A person close to the situation told Davidoff that Commissioner Bud Selig does not want give Rodriguez the sympathy points which would come with suspending him via the "best interests of baseball" clause of the Basic Agreement. Joel Sherman, Davidoff's colleague at the Post, added Selig does not want a court fight with the union, wants to avoid the perception of not allowing Rodriguez due process, and wants to avoid outside noise so people can concentrate on what MLB says is the heart of its case: A-Rod used PEDs for years, lied to MLB serially, and tried in myriad ways to thwart the investigation (all Twitter links). ESPN's Buster Olney tweets this strategy gives Selig the high ground to go to the union and ask for tougher rules. 

Rodriguez is one of about ten Major League players to be suspended tomorrow, but he is the only one who will be banned beyond this season, writes Nightengale. MLB officials have informed Rodriguez's attorneys and the MLBPA of the decision to suspend the players, and told Rodriguez he is no longer able to discuss a settlement, reports Nightengale, who attributes two people unauthorized to speak publicly before the scheduled announcement. Joel Sherman of the New York Post tweeted he was told by a person updated on the Biogenesis inquiry that Rodriguez and MLB never were close to a settlement. 

"I'll have an opportunity, when the time is right, to tell my full story," Rodriguez told reporters, including Rob Maaddi of the Associated Press (via Philly.com), last night after a four-walk performance for Double-A Trenton. "I'm excited to play Monday. I can't wait to see my teammates. I feel like I can help them win."

Manager Joe Girardi says Rodriguez, if he is in Chicago, will be in the lineup at third base tomorrow night, tweets Scott Miller of CBSSports.com.

"I think all of us are curious what's going to happen, and is Alex going to be a player for us tomorrow, and what's going to happen with the other guys that are involved in this. Because in my mind I have him penciled in here tomorrow," Girardi said (as quoted by Nightengale). "I don't suspect it'll be awkward. Most of the guys know him as a teammate and have laughed a lot with Alex and been around Alex a lot. I think it'll be business as usual. I'm sure there will be more media there obviously tomorrow but I think that's more for Alex to deal with than the rest of the guys. I don't think it'll be a big deal."

Rodriguez's suspension of at least 214 games would be the longest handed out by baseball to a player or manager since Pete Rose agreed to a lifetime ban in 1988 for gambling. Rodriguez, sidelined by various injuries, has been on a minor league rehab assignment where he has posted a pedestrain slash line of .214/.333/.452 with three home runs and ten RBIs in 51 plate appearances across four levels of the Yankees' system.



Biogenesis Suspensions Likely To Be Announced Monday

SATURDAY, 10:44pm: Jeff Passan of Yahoo Sports tweets that sources say there's a chance MLB will reach a compromise with A-Rod's camp prior to a 6 p.m. Sunday deadline, though one source judged the possibility to be "next to nil."

9:11pm: Sources tell Jeff Passan of Yahoo Sports that A-Rod expects MLB to impose his suspension using the collective bargaining and drug agreements, meaning that he will not play for the Yankees on Monday against the White Sox.

7:57pm: A-Rod will be suspended Monday, sources tell T.J. Quinn and Andrew Marchand of ESPN. The suspension will likely run through the end of the 2014 season. Tense discussions reportedly "broke down completely" today after MLB Commissioner Bud Selig informed officials he would no longer negotiate with Rodriguez's camp.

7:41pm: Around 20 players altogether may be punished, T.J. Quinn of ESPN reports via Twitter. That total includes around 12 players who will be punished as major leaguers. However, several minor league players are also expected to receive punishment, Quinn adds.

4:03pm: Barring a dramatic change in the eleventh hour, MLB plans to just institute their suspension of A-Rod without further negotiations, tweets Joel Sherman of the New York Post.  Rodriguez's camp also called the Yankees to try and work out a deal on the remainder of his hefty contract, but they were rebuffed (link).

FRIDAY, 8:05pm: There is no 6pm deadline for players to accept suspensions, according to a report from Teri Thompson, Bill Madden, and Michael O'Keefe of the New York Daily News. The trio explains that 50-game suspensions are likely (as expected) for all involved players except for Rodriguez. As for A-Rod, with negotiations apparently stalled, the Daily News reporters say that MLB appears to be leaning away from a lifetime ban. Echoing this morning's reports, the league reportedly believes that a suspension in the 200-game vicinity would be "more palatable to an arbitrator."

5:05pm: Players facing Biogenesis-related suspensions, including Rodriguez, will have until 6pm EST to settle their cases, tweets Ken Davidoff of the New York Post. Otherwise, the league will (as previously reported) move forward with suspensions, with an announcement coming Monday. 

12:57pm: Heyman tweets that players have been informed the suspensions will be announced on Monday.

12:04pm: While there has been speculation that suspensions for players involved in the Biogenesis investigation would be announced today, Joel Sherman of the New York Post reports that it's looking more likely that they'll be delayed until Sunday. Major League Baseball is prioritizing the suspensions for players other than Alex Rodriguez, because there is still no indication that A-Rod is willing to cut a deal (Twitter links). Jon Heyman of CBS Sports, meanwhile, tweets that the suspensions should come out Sunday or Monday.

Sunday would be a last-minute deadline, as some teams (the Rangers, for example) will have exactly 50 games remaining after that point. The Tigers, who stand to potentially lose Jhonny Peralta, will only have played 109 games at that point and therefore aren't in as much danger.

As USA Today's Bob Nightengale wrote, MLB is said to be willing to suspend Rodriguez through the 2014 season -- a ban of roughly 217 games that would cost the three-time MVP more than $34MM in salary. However, contrary to other reports that say Rodriguez refuses to discuss a deal, Heyman reports that there are indications that Rodriguez may be open to discussing a slightly lesser penalty. Heyman lists a 150-game suspension as a compromise possibility but adds that it isn't clear how many games MLB is willing to shave off the 217-game proposal, or if they're even willing to come down at all. Rodriguez is scheduled to play in rehab games for Double-A Trenton this weekend, beginning tonight.



Could MLB Teams Sue PED Offenders? Part III

This is the final part of a series of three posts discussing ESPN’s Buster Olney’s suggestion that teams could consider pursuing litigation options against players facing suspensions arising out of the Biogenesis scandal. I recommend reading Part I and Part II for necessary background on some of the terms and concepts referenced in this segment. This time around, I will attempt to take a preliminary look at whether and how teams might view hypothetical legal action against the players who have been or appear likely to be suspended.

A few more disclaimers before jumping in. While we are expected to learn of suspensions in short order, it is important to remember that among the players mentioned below, only one (Ryan Braun) has been disciplined to date. Even if suspensions are levied, they could be challenged through MLB's grivance process. Accordingly, I do not intend in any way to comment upon the actual truth of any allegations. Likewise, none of the analysis should be mistaken for a suggestion that any particular team is actually considering any litigation against one of its players.

Part III: Potential Litigation Targets

Potential Targets

Needless to say, high-stakes litigation is extremely risky and costly. And it is far from guaranteed to result in a real monetary return. For those reasons, as well as others noted below, it seems likely that a team would only pursue a suit against a big-money player.

While other names could always surface, a look at the latest list of possible suspension targets reveals relatively little to gain outside of two players: Alex Rodriguez (ten years, $275MM) and Ryan Braun (13 years, $150MM over two contracts). Clearly, Rodriguez and Braun represent real money.

Next on the list is Jhonny Peralta, who is playing on a $6MM option year on the same deal that paid him $5.5MM last year and $5.25MM in 2011 (for a total of $16.75MM). Nelson Cruz is on a two-year, $16MM deal that expires after this year. Not one of the remaining players currently earns more than $1.275MM this year or is guaranteed any salary after 2013. I think you can safely scratch off everyone on the list beneath Peralta and Cruz.

Looking at those two players, it remains difficult to see how litigation would be worth pursuing, even before you get to the non-economic risks. Peralta and Cruz were paid relatively modest sums on their current deals and are owed nothing beyond the time period that they are expected to be suspended for (the rest of this season). If suspended, then, they would already stand to lose the remaining value of their contracts. Neither player is among its team’s most marketable assets. From a common sense perspective, the stats are in the books and the games have been won and lost; there has been no discussion of retrospective forfeits due to the use of ineligible players. In sum, there is far too little to gain to make a lawsuit against these players a realistic consideration.

Let’s turn, then, to the two players whose prominence and contract size make a lawsuit at least a hypothetical possibility.

Ryan Braun

At this point in time, Braun is not only the best player involved in the Biogenesis scandal but is also probably most important to his team’s brand and market. He also signed a big extension (five years, $105MM) in April of 2011, which does not kick in until 2016. In addition to pursuing direct contract remedies through an MLB arbitration forum, the team could potentially go to court in an effort to avoid that extension and/or recover for broader harms arising out of Braun’s conduct.

At the time of Braun’s extension, agent Nez Balelo of CAA Sports acknowledged that “the commitment on the club’s part is huge.” Balelo also characterized the deal in an interesting manner: “we basically view it as a partnership between Ryan and the organization moving forward.” Brewers GM Doug Melvin, meanwhile, explained that Braun had “already reached extraordinary milestones that are comparable to many of the great players in baseball history” and had “shown a tremendous commitment to the Milwaukee market.”

While obviously intended only as a positive reflection on a mutually-agreeable extension, such statements could come up in litigation. Balelo’s statements lend fodder to the concept that contracts of this magnitude include salary considerations for far more than just on-field performance. They also potentially speak to the reasonableness of the team’s reliance on any assurances on PED non-use it may have received. Finally, the statements could help to prove the foreseeability of consequential damages (because the player was aware of the nature of the commitment that was being made) and support damages arguments regarding the degree of harm sustained (certainly, a “partnership” implies a great deal of mutual reliance and mutual risk). This also points to an avenue for investigation during the discovery process: was anything said or done in private to assure the team it was safe to make such a major, distant commitment?

Two other aspects of Braun’s situation are also worth addressing. First, he tested positive for a prohibited substance not long after inking his big extension. The positive test that led to his suspension occurred on October 1, 2011 –- after he had already inked his deal. Of course, he ultimately challenged that suspension through MLB’s grievance process, resulting in the suspension being overturned. He reportedly testified that he had never used PEDs in the course of that proceeding. Braun later told the press that “this substance never entered my body at any point” and said that he had told the player’s association that “I have not done anything that could have possibly led to this test result.” Braun also made many statements regarding his upright personal character and gave assurances of his pure intentions as a ballplayer. Arguably, Braun’s actions in the wake of the suspension led the team to double down on its star attraction.

There is much we don’t know. What has Braun said to the Brewers’ brass (including owner Mark Attanasio, with whom he is reportedly close), or others that could be called upon to testify? Is there any evidence that his early-career successes were procured by illicit drug use, and supported by his protestations of innocence, leading the Brewers to rely on an essentially falsified performance history in signing his new deal? Such hypothetical facts are among the kinds of evidence that would be needed to support a claim that Braun fraudulently induced the Brewers to ink him to a long-term extension that kicks in well down the road. Standing alone, Braun’s statements could aid a potential claim for fraudulent misrepresentation during the performance of his original extension, which might seek recovery for damage to the team’s brand, wasted marketing expenditures, or other harms.

Second, let’s turn to Braun’s more recent suspension, which took quite a different path. After reportedly being presented with “overwhelming” evidence, Braun apparently agreed to accept an immediate 65-game suspension rather than challenging a potentially lengthier ban. Reports also indicate that the evidence against Braun demonstrated that he had “used ‘a sophisticated drug regimen’ for an extended period of time.” The timeline of PED use, which is not publicly known, would (as noted above) be critical in assessing any fraudulent inducement claim. Looking forward, of course, his admission and suspension (along with whatever more detailed information is ultimately culled) could be utilized in a fraudulent misrepresentation claim.

One key piece of information that remains unreported is the actual agreement (if any) that was entered between Braun and the league (and/or the Brewers). We know that Braun is accepting his suspension and foregoing a direct challenge through the grievance procedure, but did the parties negotiate any other terms, such as disclaimers of legal claims? It is certainly possible that Braun’s representatives sought (or will seek) to limit his exposure by getting the team or league to bargain away any rights to pursue contract or tort remedies. Of course, it could be forced to make concessions on future salary obligations as a price for doing so.

At present, Brewers owner Mark Attanasio has expressed that the team’s “full expectation is to keep” Braun in the team’s fold. He also noted, however, that he has yet to learn the full details of the allegations that Braun was faced with. While it seems far more likely that a final resolution will be accomplished without resort to the courts, that possibility could at least be something of a bargaining chip in the team’s pocket.

Alex Rodriguez

Finally, let’s turn to the pink elephant in the room: Alex Rodriguez, who re-signed with the Yankees as a free agent on December 13, 2007. While Braun is the better player at this point and is more central to his team’s brand, Rodriguez is the highest-paid player of all-time and plays for baseball’s most valuable and marketable franchise.

Rodriguez’s current deal includes the remainder of this year’s $28MM salary, as well as $86MM in obligations over 2014-17. The contract also provides for a $30MM marketing agreement, with a series of $6MM bonuses for various home run milestones. (Rodriguez is just 13 long balls away from triggering the first of those, for 660 homers.)

Immediately after signing that contract, Rodriguez was interviewed by Katie Couric of CBS News. When queried for his reaction to the just-released Mitchell Report on the use of PEDs in baseball, Rodriguez said he was “disappointed” and called it a “huge black eye” on the game. Rodriguez directly and unequivocally denied that he had “ever used steroids, human growth hormone, or any other performance enhancing substance.” Of course, just over a year later, he went on to admit to ESPN’s Peter Gammons that he had used a banned substance while playing with the Rangers over 2001-2003. Since joining the Yankees in 2004, he said, he had “been clean.”

While we do not know what (if any) assurances Rodriguez gave to the Yankees before signing his extension, the timing of his statements to Couric certainly places his denial right at the time that the deal was reached. It is not outside the realm of possibility, then, that a fraudulent inducement claim could be made out. Of course, unlike Braun, Rodriguez has already performed for much of the duration of that contract, which would make it more complicated to parse out damages relating to salary.

Another interesting facet of the Rodriguez situation relates to the fact that, as noted above, he admitted in 2009 that he had previously used PEDs. On the one hand, his insistence that he had not used since that time (again, potentially accompanied by any currently non-public information) could support a claim that Rodriguez made fraudulent misrepresentations that led the Yankees to continue to market him and associate him with their brand.

On the other, that prior admission could function (in a somewhat perverse way) to limit any argument that a (still-unannounced) suspension caused additional harm. For one, there may be statute of limitations issues, which bar claims after a certain amount of time elapses. (There is far too much we don’t know to assess that possibility at this point.) It could also be argued that, having already identified himself as a player who had relied on PEDs, any new PED revelations have a more limited impact. Rodriguez could claim that the Yankees chose to market him in spite of the known badge of PED use, choosing to associate themselves with an already-tarnished brand. This could go to several ends: for instance, disproving that the Yankees reasonably relied on any assurances Rodriguez may have given regarding continued PED use, disrupting the connection between a suspension and damages, or driving down the damages in a potential award.

Finally, let’s turn to the unique marketing aspect of Rodriguez’s deal. Unlike most baseball contracts, the $30MM in marketing incentives are somewhat analogous to the Lance Armstrong situation discussed in Part II. This clause helps to substantiate an argument that Rodriguez was paid for services beyond simply showing up to the ballpark, and reflects Rodriguez’s unique status as the game’s biggest name at the time he signed his extension.

Further, the clause itself could be subject to attack, either on an unjust enrichment theory (as in the Armstrong case) or other basis. Rodriguez has already acknowledged that at least some of his earlier home run tallies were tainted, and a suspension could discredit future long balls. Of course, it remains to be seen whether Rodriguez will even have the chance to notch the various milestones. And unlike Armstrong’s vacated titles, A-Rod’s past and future home runs will presumably stay in the Yanks’ scorebooks.  While the team’s ability to market those milestones has undoubtedly been greatly impaired, finally, the overall value at play here seems likely to be relatively limited as a practical matter. Still, if the team chose to go after him at all, I’d expect a claim along these lines to show up.

Conclusion

We’ve covered a lot of ground, but this preliminary look at a team’s creative legal option serves primarily to highlight the vast complications, costs, and risks involved. By pursuing litigation, even if successful, teams would risk further damage to their (and the league’s) brand through the discovery process, to say nothing of runaway legal costs, labor issues, adverse legal rulings, or even government intervention. Those concerns very likely outweigh the potential benefits, after discounting any potential returns based upon the likelihood of success. If claims along these lines come up at all, it will likely be in private negotiations rather than a public forum.

Litigation (along with the underlying legal relationships that it addresses) is far more uncertain and variable, I think, than many people realize. My purpose here, then, was to take a somewhat real-world (but admittedly non-expert) look at the suggestion that litigation was a potential option, and to provide MLBTR readers with a sketch of how an attorney might approach the investigation and research of such a proposition. While I certainly do not claim to have been correct or exhaustive in all accounts -- and heartily discourage anyone from relying in any way on what I've written! -- I hope it has at least been an interesting thought experiment. I look forward to addressing any criticisms or observations in the comments.


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Could MLB Teams Sue PED Offenders? Part II

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.

Possible Claims

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.

Contract Claims

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.

Fraudulent Inducement

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

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.

Fraudulent Misrepresentation 

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.

Summary

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.


Full Story |  Comments (0) | Categories: Biogenesis

Could MLB Teams Sue PED Offenders? Part I

In his Monday morning column, ESPN’s Buster Olney presented the possibility that MLB teams could look to use the traditional legal system -- rather than processes under the CBA -- to recoup salary paid (or owed to) players that are suspended for their involvement in the Biogenesis scandal. With the trade deadline over and Biogenesis squarely atop the agenda, it is worth taking a closer look at this suggestion.

Should any teams wish to pursue such an option, the first step would likely be to engage legal counsel for an evaluation of the possible claims that could be made, the risks and benefits involved, and a breakdown of how a hypothetical lawsuit might play out. I will sketch out some of these issues in three segments over the next few days. Click below to read the first part, an overview of the general considerations facing a team and its advisers in this situation.

Part I: Overview

Benefits

Given the high level of publicity and scrutiny that would surely accompany any suit against an MLB player, legal action will likely not be undertaken absent a real possibility for a substantial return.

First and foremost is the pure economic return that might be expected. A hypothetical suit would surely aim to recover salary paid to a player and/or to avoid future salary obligations. Obviously, any potential recouping or avoidance of salary would boost a team's bottom line and potentially increase payroll flexibility.

There are two basic legal remedies that could accomplish this. Depending upon the player’s contract status and the timing of the lawsuit, a team would likely seek a judgment for damages related to paid salary (i.e., an entitlement to recover money from the defendant player) and/or a declaratory judgment voiding future salary obligations (i.e., relief from paying some or all of the remainder of the player’s contract). It is also possible that a team could assert theories of recovery that would allow it to seek damages that are not tied to salary, though there would likely be more barriers to such claims. (The range of possible claims will be discussed in more detail in Part II of the series.)

Secondly, there are some non-monetary benefits that a team could hope to gain. Beneficial legal rulings could help set the stage to help win (or avoid) future conflicts of this nature, although the precedential value of any rulings could easily be marginalized depending upon a variety of factors. Certainly, there are potential deterrent and public relations benefits as well.

Generally, these purposes would seem to flow more to the league as a whole than to a particular team. In the aggregate, I doubt that they would move the needle far enough to warrant a suit that was not economically justified (particularly given the risks discussed next), unless the league was somehow frustrated in utilizing its own internal processes.

Risks

Putting aside the cost of a suit (see below), any initiation of legal action brings risks along with it. Of course, there is a serious PR risk involved in losing the suit, either at an early stage or after a trial.

Less obviously, bringing suit always carries the possibility of instigating your opponent to raise a counterclaim that might otherwise have lain dormant. Here, for instance, a suspended player that had been content not challenging their punishment could bring their own claims against the team (or the league as a whole) in response to the lawsuit. The player could potentially attempt to recover pay lost to suspension or challenge the legality of the suspension itself (by arguing it was somehow unjustified procedurally or in substance), seek legal fees for action taken outside of the parameters of the CBA and its arbitration processes, or dream up other creative ways to go on the offensive.

The counterclaims and defenses that might be anticipated highlight another concern. Any lawsuit that goes to the relationship of player and league carries the possibility of stirring up labor relations and antitrust issues that the league would surely prefer not to litigate unless absolutely necessary.

Another form of blowback is perhaps even more concerning –- and more certain to occur. There is little doubt that the attorneys of any player sued would seek to utilize the discovery process aggressively. Discovery allows for each party to acquire information from its opposition (and third parties) through methods such as requests for documents and depositions. This process can be highly invasive, as MLB itself demonstrated in utilizing the court system to get access to the very documents it is now using to support these potential suspensions.

Given the nature of the hypothetical suit being considered here, it is entirely possible that both the team and the league would ultimately be required to turn over large amounts of sensitive, internal information and make top officials available to be brow-beaten under oath in depositions. It can be quite difficult, moreover, to overcome doctrines favoring open access to the court system and prevent such information from being disclosed publicly.   

Costs

Particularly given that it is hard to imagine any MLB club utilizing cut-rate legal services, the cost of a potential lawsuit would certainly weigh heavily in the decision. Merely investigating and filing a lawsuit of this complicated and sensitive nature could well run up to the hundreds of thousands of dollars, and litigation would likely cost well into the millions.

Discovery, as noted above, is time-consuming and expensive. High-priced experts could be required on subjects ranging from the CBA, baseball performance and contract value, MLB marketing and economics, and PEDs. (Remember, the possible claims and counterclaims could relate to the suspensions themselves as well as the extent to which contracts go beyond simply playing baseball.) Then, there is motions practice, which would demand gobs of legal research, briefing, and argument at various stages. (This is especially true in this context, where layers of contracts, collective bargaining, state and federal law, and legal doctrines regarding arbitration and jurisdiction could create a multitude of complex issues.)

All said, these aspects of litigation could eat up thousands of hours of attorneys’ and their consultants’ billable time. And all that takes place even before the trial itself, which could easily double the bill. 

Keep an eye out for Part II, which will look at possible legal claims and remedies that could be pursued. Part III will follow by applying these considerations to the individual players potentially involved.


Full Story |  Comments (0) | Categories: Biogenesis

MLB Prepared To Suspend Alex Rodriguez For Life

THURSDAY, 7:46pm: There's a wide gap between the suspension Rodriguez is willing to accept and the one MLB would like to issue, two sources familiar with the talks told T.J. Quinn and Andrew Marchand of ESPN.com.  Negotiations between A-Rod and MLB appear to be stuck on the 38-year-old's desire to make sure he can cash in on at least some of the remaining $100MM owed to him.

Meanwhile, Joel Sherman of the New York Post (on Twitter) hears that A-Rod's camp doesn't plan to settle, but instead will fight any suspension through an appeals process.

The Yanks announced that Rodriguez will join Double-A Trenton on Friday to play in a rehab assignment game.  If he is not suspended and prevented from playing pending an appeal, A-Rod could rejoin the varsity squad as early as Sunday or Monday. 

WEDNESDAY, 7:38pm: Rodriguez is negotiating with MLB on the terms of a suspension, reports ESPN's T.J. Quinn. (Links to Twitter.) Quinn says that MLB is holding out the possibility of a lifetime ban while also preferring to avoid an appeal process, with Rodriguez coming to the negotiating table after learning of the extent of the evidence against him. Most of the players facing suspensions appear prepared to accept 50-game bans, Quinn further tweets.

6:15pm: MLB is prepared to ban Alex Rodriguez for the remainder of his playing career, reports Bob Nightengale of USA Today. An announcement will likely come tomorrow or Friday, according to Nightengale's sources. Rodriguez's attorney, David Cornwell, says that the Yankee third baseman will appeal any suspension he receives. According to the report, MLB will base its action not only on Rodriguez's use of PEDs, but on the fact that he purportedly "lied to MLB officials while attempting to sabotage their investigation."

12:06pm: There is some potential Nelson Cruz might appeal a suspension, tweets Joel Sherman of the New York Post.

8:04am: MLB informed the players' union yesterday which players will be suspended this week, writes Bob Nightengale of USA Today.  Settlements talks could push an announcement to Friday, reports the Associated Press.

6:16am: MLB's Biogenesis suspensions could be issued as early as Thursday, according to Ken Davidoff and Joel Sherman of the New York Post.  Davidoff and Sherman confirm what Yahoo's Jeff Passan wrote yesterday:  most players involved are leaning toward a plea in the case, aside from Alex Rodriguez, who intends to fight any suspension.  

It's been rumored commissioner Bud Selig could sidestep the joint drug agreement by suspending A-Rod under his "integrity of the game" clause while also serving as the sole arbitrator of an appeal.  However, Davidoff and Sherman note that "the union could jump through some legal hoops to get the case to an arbitrator."  They also point out that upon striking the latest collective bargaining agreement, Selig assured MLBPA head Michael Weiner he wouldn't use the clause to negate players' rights.  In my opinion, denying Rodriguez a chance to present his case to an independent arbitrator would be doing just that.   









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