Monday, February 13th, 2012...7:00 pm

Tulane Baseball Arbitration: A Primer

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This is the first of a series of posts about MLB Arbitration and the Tulane National Baseball Arbitration Competition.

As you may know from our past post, William & Mary’s Alternative Dispute Resolution team sent a team of three individuals to Tulane’s National Baseball Arbitration this past weekend. The competition simulates MLB’s arbitration process by giving the competing teams the cases of three arbitration eligible players. This year the players were Andrew Bailey, Nelson Cruz and Jordan Zimmerman. All three players ended up signing contracts with their teams and avoiding arbitration, but for the purposes of the competition, those deals were ignored. (The competition gave a stop date of January 13. Anything subsequent was not allowed in the hearing). We will discuss these players’ cases in detail in a subsequent post.

The arbitration process is governed by the Major League Baseball Collective Bargaining Agreement (CBA). The CBA states that any player with three years of service time, and some with two plus years (known as super-twos) are eligible for salary arbitration. This is the first time that a player gets a true raise in compensation. For his first three years of service time, the player is paid close to the league minimum. Arbitration eligibility continues until the player has logged six years of major league service time. At that point, he becomes a free agent and signs with a big market club much to the chagrin of “competitive balance” advocates. (That of course is a generalization, but it shows why teams have become obsessed, rightfully so, with players under club control. Salaries begin to inflate in the arbitration years, increasing substantially in free agency).

The CBA further states that the criteria for determining player’s compensation is as follows:

“The criteria will be the quality of the Player’s contribution to his Club during the past season (including but not limited to his overall performance, special qualities of leadership and public appeal), the length and consistency of his career contribution, the record of the Player’s past compensation, comparative baseball salaries, the existence of any physical or mental defects on the part of the Player, and the recent performance record of the Club including but not limited to its League standing and attendance as an indication of public acceptance.”

A full statement of the criteria and other information about the arbitration process is available on Tulane’s website here.

The most important factors of arbitration, both in reality and through our experience this week, are comparisons to other players, injuries, and the player’s performance in their “platform” year, the year immediately preceding the hearing. How much any of these factors are weighed is for the arbitrator to decide, and the advocates to debate within their arguments. The advocates are expected to bring evidence to support their positions, most of which are charts and graphs showing a player’s statistical performance in various circumstances. (What stats were used and in what capacity will be featured prominently in tomorrow’s post). Each side is given a set period to advocate their position, in which the arbitrator can ask any questions to counsel. Each side is then also given a short rebuttal period to engage opposing counsel’s argument. At the end of the hearing, the arbitrator chooses the figure of one side or the other. The key figure then, is not either of the two numbers offered by the parties, but rather the midpoint between the club’s figure and the player’s figure. If the arbitrator finds that the player is worth $1 dollar more than the midpoint, the player will win and get the number he has offered.

In terms of the competition, there were three rounds, for which each of the 36 teams divided into sub-groups. Among the sub-groups, half the teams were given 1 player and 2 teams, while the other half were given 2 players and 1 team. The competition tracked the record of the individual teams, as well as point differential. The top ranked team in each of the four groups advanced to the semi-finals. Unfortunately we did not advance to the semi-finals. This year’s competition was won by Thomas Jefferson Law School, who prevailed over the University of Virginia in the finals. Harvard and Wisconsin were the other two semi-finalists. The competition closed with a symposium featuring many of the arbitrators, all of whom are either in the baseball industry or have extensive experience in the industry.

Tomorrow, I will return with a review of each of our three cases, as well as some overall impressions of both the competition and the MLB arbitration process in general, as the competition is an effective approximation of the actual process (at least as far as we can tell from the outside looking in).

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