Padres prospect Francisco Mejia has dropped his lawsuit against the prospect investment firm known as Big League Advance, as ESPN.com’s Jerry Crasnick recently reported. He had filed suit in April seeking to be released from his contractual relationship with BLA.
Mejia, who is considered a top-flight prospect, was dealt from the Indians to the Padres over the summer. He has seen only brief MLB time, and hasn’t yet cracked the big leagues with the Friars, but has turned in a strong .293/.338/.471 hitting performance at the Triple-A level this season.
Accordingly, Mejia still hasn’t earned much money in the majors but could well turn into a high-dollar player. With the end of this litigation, Big League Advance stands to receive a ten-percent cut of Mejia’s MLB earnings — the amount that the sides had evidently agreed upon in a series of contracts. To achieve that interest in Mejia’s future, BLA provided him a total of $360K while he was playing in the low minors.
Whatever one thinks of the business model, former MLB hurler and BLA CEO Michael Schwimer undeniably comes away from this episode with a clear win. Mejia not only disclaimed his prior accusations in his statement, but apologized to and even issued a glowing endorsement of Big League Advance.
Had this lawsuit been meritorious, it might have posed some problems for BLA’s burgeoning business. Instead, the outfit will not only continue to draw a piece of the salary of contracted players who are already in the majors, but will perhaps increasingly factor in the ever-evolving transactional landscape.
As ever, most minor-leaguers play on meager incomes. While some achieve major bonuses at the outset of their careers, the majority get by without the benefit of significant up-front cash. Though early-career extensions increasingly represent a potential source of relatively early-in-time income, that’s a route that’s only available to the highest-regarded talent and that also means sacrificing earning upside.
Given those factors, it is not difficult to see how BLA might occupy some of the space here. Indeed, so long as the business is fairly operated, it may function in effect to spread the benefits of MLB earnings to many young players, only some of whom will achieve the full and final promise of millions in salary, without capping any individual player’s future earning capacity. (Needless to say, a sizeable chunk of change will also be expected to flow to BLA and its investors.)
There are many ways in which this approach could impact the broader market, too, if BLA (and, potentially, competitors) increasingly provide up-front money to pre-MLB players. It’s also a somewhat murky and potentially complicated contractual situation to introduce, particularly if a player’s interests ultimately fall out of alignment with the financial priorities of BLA. Needless to say, it’s a fascinating new realm to keep an eye on.
These contracts are just absolutely terrible deals for minor league players.
Not for the ones that bust…
Yup! Was thinking the same thing
It’s really not even that great if they bust. They have spent a large part of the couple hundred grand on living expenses in the minors. Further, they are taxed on the payment, which diminishes the payout significantly. So they still end up with basically nothing when they are done.
I’m pretty sure 360K can provide a lot
About 223k post federal tax. Not including agent fees (4-5%), state and local taxes.
He’s probably mad that a half year major leagues minimum bought out 10% of his future earnings. I’d be kicking myself too.
Reminds me of a pay day loan or personal injury loan. Depending on the state, they are heavily regulated and sometimes illegal. What is considered business in one locale is predatory practices in another. Kind of wish the suit went forward to expose the industry.
Especially when he would’ve been in the majors most of this season if he didn’t pretty much refuse to play the field instead of insisting on catching. He should be mad at himself and/or whoever has been giving him the poor advice.
Fyi.. they are not taxed on the payment..it is a loan against future income.. the same way a home equity loan is not taxed or a reverse mortgage payment.
What your describing is as different as buying a new car worth $30,000 and naking payments or winning it in a raffle.. and in that case it’s income and taxed.
No one is forcing you to sign it. You can call it predatory if you want to but Big League Advance is also assuming risk. If I’m a broke minor leaguer, I could maybe use that advanced money for hiring a chef/nutritionist to eat better and healthier and an off-season trainer/conditioning coach. I may also not want to work a normal job to focus solely on baseball.
If the contract is open ended, such should be illegal or at least fireable with an interest clause at the max rate to convert it to a loan. Sometimes the government actually can do good with regulations.
That’s probably Meija’s angle and BLA probably has an ironclad signed contract. I agree with you. This reminds me of the cash advanced checks I used to get in the mail regularly from the predatory Credit One many, many years ago. If I cashed the check, they would increase my card spending limit. In super fine print, cashing it would trigger some ridiculous APR rate. It’s still being done today. For the less informed, it’s like “hey, free cash to spend!”. Appalling.
From a business standpoint, this is an ingenious model. Low risk, high reward. They can offer that deal to many minor leaguers and only need a few to succeed in order to turn a profit.
From an ethical standpoint it’s disgusting. They’re taking advantage of minor leaguers living off low wages and then cashing in on any form of success, hindering the player’s future income.
This wouldn’t be a problem if minor leaguers were paid more.
Ethics in pro sports…. good one. Lol
It seems like it’s hard to ask for ethics in anything anymore.
So why blame the business model instead of the players association who CONTINUE to refuse to negotiate anything regarding MiLB conditions time after time when the CBA expires? Players prefer nonsense, such as how many chef’s are in the clubhouse for various types of foods to prepare. It’s not the owner’s fault any longer, everything has to be bargained for. You think the players will give up anything out of generosity? HAHAHA. the fact minor league kids are starving proves that point.
The problem here is that there are too many prospects that bust. And the talent pool is neverending. The pedigree minor leaguers with large signing bonuses are already *protected* and have agents looking out for their best interests. It’s these players that need to raise their voices. BUT why would they?
“ . . . blame the . . . players association who CONTINUE to refuse to negotiate anything regarding MiLB conditions . . . “
Psst. The MLBPA does not represent minor leaguers, as indicated by the “M” in its name. They do not have the legal authority to negotiate squat on behalf of minor leaguers. Blaming the union for not doing something it is incapable of doing is kinda biased.
Player’s association sure didn’t mind bargaining with the IFA slotting system, so don’t give me that. They could get the underpaid MiLB kids a major pay raise any CBA period, but it’s ALL a negotiation now and who knows what it might cost?? Some of those charter air flights… 1 of those precious specialty chef’s..
Saying they don’t have the legal authority to negotiate for them, while technically correct, completely overlooks the parameters the MLBPA has negotiated that significantly impact Minor Leaguers – IFA rules, Draft pools, service time rules to name a few. Saying they are incapable of doing something is a flat out lie, the whole system exists because that’s what they’ve agreed to, and continue to agree to.
The MLB and MLBPA have been negotiating away the rights of people they don’t represent, for years. It’s a broken system.
For example – service time. It directly affects the promotion of a Minor League player, to the Majors. The parameters were negotiated and agreed upon by the MLBPA and MLB. Minor League players got zero say in it because they don’t have a seat at the table – they aren’t represented by the MLBPA. So, to make an actual difference and get the rules changed, they have to get promoted to the MLB, which is the root of the problem in the first place!
If rules were put in place by a Governer that ensured you don’t even earn a living wage day to day, and at the same time you weren’t allowed to vote in the elections to decide who the Governer is in the first place, because you don’t earn enough money to have a vote, you’d be filthy. There would be riots in the streets.
More than one person or group can be guilty of exploiting others in the same situation.
The owners are more responsible for the exploitation of MiLB players than the MLB players, IMO, but whichever side you take in that debate, it doesn’t invalidate the critique of Schwimmer for being the baseball equivalent of a predatory payday lender.
If a drunk driver hits me and knocks me unconscious as I walk down the street, that doesn’t mean that a bystander can steal my wallet and then excuse his behavior by saying, “But what about the drunk driver?”
Agreed they used to be, but not now when everything is a negotiation.
I can tell u that in 1978 a A Ball guy made 400$ each month during the season, or think was the amount remember one of my friends told me back then and he also had to fight the Red sox to get a portion of his signing bonus.
Not enough information here to draw your conclusions. If this was so lucrative then there would be other competitors giving better deals. If I was Francisco’s lawyer I would have asked for a maximum payment clause added. The money was there for him when he needed it. A top movie star was asked a while back how it felt to be desired by almost every woman he meets. His answer was “Where were they when I needed them ?”
There probably was a max payment clause option and he didn’t take it. No one brings to the negotiations table with a singular contract option.
Maybe I just haven’t kept up on all the details.. but how is this all that different from insurance? Or a startup company selling equity? Think of homeowner’s insurance.. the company collects money from many but pays out on a relatively low number of claims that come through. The company takes a calculated risk and is compensated with a profit. I would not define that as “disgusting” because it is taking advantage of financially disadvantaged home owners that could not afford to rebuild their house in the event of a disaster. They are providing a service and taking risk – and deserve a profit. A startup company sells equity so it can use that cash to finance and grow their business. To me, I don’t really see much of a difference.
Of course, maybe this company does have bad business practices or terrible deals.. just saying that the business model itself doesn’t seem evil.
Maybe I just haven’t kept up on all the details.. but how is this all that different from insurance? To me, I don’t really see much of a difference.
————-
The main difference is that insurance is, in principle, a win-win deal. Not in every instance, obviously, but the general concept is. Usually, insurance helps both parties. This clearly doesn’t, this company is taking advantage of short sighted decision making by young players who lack the life experience to know better.
I would like to preface this next sentence with the fact that, economically, I’m a libertarian, so I don’t want the government dictating morality. With that out of the way: this business model is based on finding unsuspecting kids to hand out exploitative contracts to. It’s immoral and malevolent.
Again, I don’t think that, per se, malice or immorality is a good enough reason to not enforce a contract. But there is a practical consequence to a policy of enforcing all contracts, no matter how blatantly exploitative and counter-productive to the welfare of one of the parties: you’re gonna get the courts flooded with lawsuits…because people are generally unlikely to abide by contracts they sign, but later realize are unfair.
So that shouldn’t happen. It can’t happen, because there aren’t enough resources to sustain it. There has to be a line, if only for practical reasons. And this nonsense falls pretty far on the wrong side of that line. There’s no redeeming quality to this business model, and the judge should (and probably will) tell them that the American justice system wants no part of this racket, so stop wasting the Court’s time and go find an honest way to make a living.
How do you define a “win-win” in insurance contracts?.. unless the insurance company is doing a terrible job, it is collecting more money than it is paying out, right? If not, they would go out of business. This means the average person pays more in insurance premiums than they receive in insurance payouts. So, the average person ‘loses’.. but if they happen to be struck by tragedy/misfortune, they are protected. This is simply pooling and mitigating risk.
Same deal here. The player is getting a cash payout. If they happen to be struck by tragedy or misfortune (injury, poor performance, etc.), they win. If they go on to be a huge Megastar, they lose. It is simply pooling an mitigating risk.
This has been mentioned elsewhere, but the player could use that money to actually increase their earning potential as well. Let’s say they put that money towards a trainer, strength/conditioning coach, or just living expenses so they can focus more on baseball. If that gets them to the majors a year or two earlier – that could pay huge dividends. Getting to FA status at 26 instead of 28 could bring a player tens of millions of dollars in future earnings.
Just another example.. Amazon’s IPO shares sold at $20/each.. according to a recent article on Investopedia, one of those shares today would be worth roughly $25k (which includes splits). Same concept, Amazon sold a stake in future (astonomical) earnings for cash they needed now. How is the business model any different? (Again, perhaps the execution and tactics may be sleazy but I don’t think we have any way of knowing that). The only difference I see is that it is a person/athlete selling their shares/equity instead of a company.
If you purchase an insurance product or a share of stock.. you are engaged in similar activity. It’s all pretty much the same.
I’m not sure I see anything ethically out of place whatsoever, assuming that the players who agree to these deals are fully aware of what it is they are agreeing to. As the article above relates, it’s largely a similar practice to minor league players signing early lucrative contracts that provide security while limiting future earning potential. It’s merely a choice on the part of the player; one that will benefit players who don’t make the show and minorly hinder the ones that actually do. It’s a conservative move for the player, and aggressive one for the organization. Again, as long as those terms are clear, I don’t see any compromised ethics.
Great business model. They’ll make a ton this way. It’s too bad they have to take advantage of naive kids to do it. If he makes more than 3.6 million in the majors they come out on top. Even mediocre players can eclipse that easily.
Most prospects never even make the majors. So most of these contracts result in a straight up loss. The guys that do make the bigs would have to average $10M+ in earnings, and actually pay them what the contract says, without lawyers involved, for this scheme to make them any money.
I don’t see that happening. The fact that they would have to sue to get the money out of players who land big pay days is pretty much a given. Players would be nuts to give in without a fight. And even after that, I’d put their chances of a definitive ruling in their favor pretty low. Judges don’t really like to encourage these types of far fetched schemes, especially if there’s someone this young on the unsavory end of the bargain.
“Great business model. They’ll make a ton this way. It’s too bad they have to take advantage of naive kids to do it.”
This comment tells us much of what we need to know about the dangers of an uncritical embrace of capitalism.
And your comment is a perfect example of the danger of ignorant people who think socialism will work on the ten thousandth try
I don’t get it. What did Mejia sue for? Preemptively? He didn’t need to sue.
Just let things be, pay them ten percent of your league minimum salary each year, even pay them 10% while the arbitration salary is low, and then, when you land the first big $5M+ pay day (doesn’t matter if it’s in arbitration or free agency), just stop paying them.
That way, you will have paid back the money you actually borrowed, with a reasonable interest, but they have to sue to try and get any more. I bet they would agree to a nice and quiet settlement, for a fraction of that 10%, once that happens, because it would be very tough (and very costly, both in lawyer fees and bad publicity) to enforce that contract.
It doesn’t work like this in the real world. Once a judge signs off that you’re liable for contract term payouts, the agency has a legal right to garnish wages from your bank accounts and/or seize your assets. You can’t simply not pay.
Yeah, okay. You think judges “sign off on contracts”, but I don’t know about real life.
To clarify: Once a judge/arbiter rules on a civil contract dispute lawsuit…
You don’t know about real life. You are an idiot. “Just don’t pay what you owe” is not a viable option in the real world. You sound like a teenager who maxed out his first credit card and thinks if he just stops answering the phone when they call it will all go away
So your plan is to just not honor a contract you signed. Try that with your mortgage and let us all know how it goes.
Question for the forum, what’s the (standard) percentage MLB agents out of their clients salaries? Is just negotiate between the parties or is it a established percentage that major leaguers have to adhere?
It’s typically 5%. And I’m willing to bet that agents have been already making similar backroom deals with players for years.
There is no standard percentage, but it’s usually less than 5%. I believe the Boras Corporation charges 3% just for representation, and that can go up to 5% for auxiliary services.
The lowest commission is by Proformance Baseball, which only charges one and a half percent.
Also, veteran players can negotiate and lower the commission. I doubt any of the big free agents pay more than 3%.
Is the timing related to Mejia being called up to the Padres today?
Not really. This has came to light in the media over the past few months.
I meant that he dropped the suit and this news dropped before Mejia got recalled to the big leagues like an hour after this story showed up. Possibly just an interesting coincidence.
Good deal for the minor leaguer getting a sizeable check up front at a young age., especially if he’s married and/or has kids. BA could never recover one cent. So long as both parties agree, what’s the problem?
I love this business model. It exists bc minor leaguers have been taken advantage of by the system.
College players often take out insurance policies in case they get hurt. I don’t see this as being that different.
Instead of feeling sorry for the top prospects who are likely to make it, I’d like to know how many of BLA’s clients never make it.