Friday, February 17th, 2012...12:45 pm

Tulane Baseball Arbitration: The Players

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We are back with the second installment of our Tulane Baseball Arbitration series. Today I wanted to talk about the three cases and the impressions we got from going through the process of preparing and arguing our cases.

Let me begin by saying this was an absolute pleasure. It’s not always possible to say that about things we do in law school, but this competition had the perfect mix of intellectual challenge and interesting subject. As I alluded to in my previous post, our three players were Andrew Bailey (Relief Pitcher, formerly of the Oakland A’s), Nelson Cruz (Outfielder, Texas Rangers) and Jordan Zimmerman (Starting Pitcher, Washington Nationals).

The arbitration process puts great emphasis on comparable players to determine the salaries of eligible players each year, so in a lot of ways, we were searching for legal precedent. In that respect, the process was fairly similar to typical legal research. The first step was to identify the player, his service time, and his statistics. The great thing about baseball, of course, is that statistical information is readily available at any of dozens of awesome websites. We spend most of our time combing through Baseball-Reference because it is user-friendly, and also relied heavily on Cot’s Baseball Contracts, formerly an independent site, but now under the direction of Baseball Prospectus.

From there, it is necessary to find other players who fit the same profile; that is, they had a similar level of years service time (YST) and signed a one-year contract that offseason. Obviously the more recent, the better because of inflation, both in the dollar and in big league salaries in general. The reason that one-year contracts are important, is because it is difficult to value multi-year deals. For an excellent example, let’s look at Nelson Cruz. For the purposes of the competition, the competitors had to ignore what actually happened to Cruz’s case, and precede based on the case given by the organizers. In our case, Cruz submitted a salary figure of $5.3 million, and the club submitted a figure of $4.7 million (he had 4+ years of YST, so was second-year arbitration eligible). But in reality, Cruz signed a 2 year deal worth $16 million to avoid arbitration. If were to use Cruz as a comparison in a future case, we could not accurately say that his salary after his second-year of arbitration eligibility would be $8 million, because the deal covered his third year of eligibility as well, in which he almost certainly would make significantly more. For valuation reasons, then, one-year deals are far superior, because it makes the comparison far easier for the two sides, and most importantly, for the arbitrator.

In preparation for a case then, again using Cruz as our example, you start to compile a list of players at the same position with similar service time. We started with just corner outfielders in the past two years (2009, 2010 seasons) and found a fairly long list of potentially comparable players: Luke Scott, Carlos Quentin, Ryan Ludwick, Josh Willingham, Delmon Young, Corey Hart, Jeff Francoer, etc. Then we had to look at how those players compared, and the effect on our case.

We represented the team, so we wanted our comparable players to have salaries lower than the midpoint of the two submitted figures ($5.0 million here). The problem for us was there were not many of those players. Quentin, Ludwick, Young and Francoer all made $5.0+ the year following arbitration. And a strong case could be made that Cruz was equal to or superior to each of those players. Willingham was a good comparison for us, because he made $4.6, and the players were similar in age, level of experience, batting average and total value statistics like WAR and OPS+. Cruz hit for more power, but Willingham had a higher OBP, and so on and so on. So we had our first comparable player, but we needed more. We then expanded the search and came up with BJ Upton, a centerfielder who made $4.8 million. This worked for us, because he was below the midpoint, and we could make the case that he was more valuable because of his position. But you have to be careful with the different position argument. It would make no sense to compare Cruz to an infielder for instance (which is why in my opinion, pitchers are the easier cases to handle).

So at that point, Willingham and Upton were our two most comparable players, but we also had to account for all the other similar players who made more than $5 million. As you can probably tell, this is very similar to analyzing legal precedent: find the cases that help you, and analogize; find the cases that don’t and distinguish. For this reason, we devoted time in both our brief and our oral argument to address a few of the other players, most notably Carlos Quentin, knowing that the opposition would bring those players up in their argument.

The final preparation step for us, and every other group in the competition, was to create exhibits, highlighting the statistical attributes and flaws of our player and his comparables. We made a number of charts and figures for each player. Unfortunately, it seems like this is where a lot of hearings were won and lost. For instance, we lost the Bailey case by 1 point, and the arbitrator specifically mentioned that he was persuaded with opposing counsel’s evidence. They had a number of statistical tables, but also bar graphs and color coded arrows indicating increasing or decreasing performance.

The actual arbitration hearing itself was a simple oral argument. Each side was given 15 minutes of oral argument and 7.5 minutes of rebuttal. The judges were permitted to ask questions at any point, but generally let each side present their case with limited interruption. The rebuttal time was dedicated to countering the opposing side’s argument, a challenge in that the time constrained how much you could critique of their argument. Here is a brief summary of our arguments for each of the three players:

  1. Andrew Bailey – For the competition, we had to assume Bailey was still a part of the Oakland A’s, despite the fact he had already been traded to the Red Sox. We represented Bailey against the A’s. The big sell for us was that Bailey was an established closer, with an excellent ratio of saves converted to save opportunities, who had a solid career ERA and opponents batting average. The two big factors going against us were his injury history and a regression in some stats, like ERA, in 2011. The other side hammered both those points, focusing on the fact he missed big chunks of time in both 2010 and 2011. We felt we still had an excellent case though, because closers are almost always rewarded just for being closers in arbitration. (Ah, the dreaded save stat, but that’s another whole post.) Also in terms of more reliable statistical indicators like WHIP, opponents BA, FIP it was clear Bailey was an above average closer. Other closers who had been compensated well in arbitration included Jonathon Papelbon, Brian Wilson and Houston Street. The other side used comparables like Carlos Marmol and Leo Nunez, less established players.
  2. Nelson Cruz – We represented the Rangers in the Cruz case, which was tricky because he is a very talented player, who has performed very well when healthy and made national headlines in the 2010 and 2011 Postseason by hitting a ton of homeruns. For Cruz, our strongest arguments were that he was oft-injured (never played more than 128 games in a season) and that he had a very low on-base percentage, and that his total offensive production is not as good as the homeruns would seem to indicate. Then we also had to deal with the comparable players earning a higher salary, as mentioned above. Opposing counsel had several players from which to make comparisons, and noted that Cruz has a unique blend of power and speed, and was also an excellent defensive player. We won this case, but truth be told, the other side probably had the stronger argument. They erred by giving too much on the injury front.
  3. Jordan Zimmerman – We represented the Washington Nationals for Zimmerman. The big issue for Zimmerman was the fact that he had Tommy John surgery and missed a whole year. Last season, in his return from the injury, he was very productive (though his innings were limited by the Nationals as a result of the injury). There were a long list of comparable starting pitchers first year eligible, so we focused on those who had suffered a Tommy John surgery and found that the injury had depressed the salaries of all right-handers entering arbitration. We also heavily used the stat ERA+, which adjusts a pitchers ERA for ballpark, opponent and era, allowing a reliable comparison among pitchers from different seasons, leagues and ballparks.¬† Because of the long list of comparable players, it was easy to come up with an ERA+ range of pitchers who had suffered Tommy John surgery, and show that the team’s offer was reasonable in comparison to other players.

Since this post ended up a bit longer than I intended (I’m not into that whole brevity thing), I will finish the series with a final post on my global impressions of baseball’s arbitration system and salary structure. Until then, make use of the comment section.

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