Legal Research Paper

__________________________________________________________

MLB’S FIRST-YEAR-PLAYER DRAFT AND FREE-MARKET

RESTRICTIONS IMPOSED ON AMATEUR PLAYERS

CURTAILING SPORTS AGENTS FROM

SHOWING AMATEUR PLAYERS THE MONEY.

__________________________________________________________

By: Kevin Swords

Professor Champion

Law 802: Independent Research I

August 7, 2015

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TABLE OF CONTENTS

Abstract …………………………………………………………..……………………….. 1

Introduction .………………………………………………................................................. 3

Background ……………………………………………………………………………….. 3

A. Red Sox sign international phenom Yoan Moncada; Giants sign

Lucius Fox after being declared a free agent by MLB …………………………. 3

B. Ben Wetzler found in violation of NCAA’s “No Agent Rule” ………………… 5

C. Business is booming for MLB teams; players deserve a higher

revenue share and a higher league minimum salary;

minor league players are extremely poor ……………………………………… 6

Federal Antitrust Exemption and Reserve Clause …...………………………..…………… 7

International Free Agency/Prospect Signings ………...…………………………………… 10

A. Background ……………………………………………………………………. 10

B. Amateur players eligible to sign as international free agents …………………. 11

C. International bonus pools and penalties for exceeding

bonus pool allotment ………………………………………………………….. 12

The Rule 4 Draft or First-Year-Player Draft ……………….……………………………... 13

A. Background …………………………………………………………………… 13

B. Amateur players eligible for the draft ………………………………………… 15

C. Bonus pool system ……………………………………………………………. 16

D. Penalties for exceeding bonus pool …………………………………………… 17

E. MLBPA collectively bargains amateur players’ rights away in

collective bargaining negotiations with MLB owners ………………………… 19

F. NCAA’s unconscionable “No Agent Rule” …………………………………… 20

G. Conflict of interest among agents representing multiple clients

in the draft ……………………………………………………………………... 24

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Free Agency ………………………………………………...…………………….……….. 25

MLB and Team Revenue at All-Time High ……………………….……….……………… 28

A. Team revenues are rising disproportionately to player salaries ……………….. 28

B. While MLB revenues are at an all-time high minor league players

fight poverty while pursuing a career in MLB ………………………………… 29

Conclusion ……………………………………………………………………………......... 31

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INDEX OF AUTHORITIES

Cases

Federal Baseball Club of Baltimore, Inc. v. National League .......................................... 10, 11

Federal Baseball Club v. National League, 259 U.S. 200 (1922).

Flood v. Kuhn ……………………………………………………………………………... 10, 11

Flood v. Kuhn, 407 U.S. 258 (U.S. 1972).

Toolson v. New York Yankees, Inc. ….…………………………...…………………….... 10

Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953).

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MLB’S FIRST-YEAR-PLAYER DRAFT AND FREE-MARKET RESTRICTIONS

IMPOSED ON AMATEUR PLAYERS CURTAILING SPORTS AGENTS FROM

SHOWING AMATEUR PLAYERS THE MONEY.

Abstract:

Athletes are the only group of professionals that have artificial caps on earning potential

based on their talent. 1 This analysis examines several of the significant financial burdens that

are bestowed upon American-born amateur players (“amateur players”) by Major League

Baseball (“MLB”) and the National Collegiate Athletic Association (“NCAA”) while pursuing a

career in professional baseball. Strict limitations are placed on amateur players’ financial

earning capacity due to the Rule 4 Draft or MLB First-Year Player Draft (“the draft”) and the

bargained for bonus pool system, MLB’s exemption from antitrust laws, and the lack of free-

market entry into professional baseball—preventing amateur players from seeking and obtaining

market-based compensation for their services (among other things).

Not only do amateur players face a steep suppression of earning potential by being

unilaterally (by MLB) subjected to the draft but the NCAA imposes enhanced restrictions on

high school and college-aged players by restricting the player’s right to competent legal counsel

through one of the most complex and difficult decisions of the young player’s lifetime—

NCAA’s “No Agent Rule.” Agents are restricted by the NCAA from negotiating directly with

team officials—leaving the inexperienced amateur player one on one in negotiating the most

important decision of the player’s lifetime—without the presence or immediate guidance of an

attorney (or sports agent). On the other end of the negotiations, teams employ high-priced

attorneys and sophisticated business professionals—well seasoned in complex negotiations and

containing an elaborate arsenal of negotiation tactics—to exclusively negotiate signing bonuses

and contractual terms directly with the young athletes.

2

While many agents get around the No Agent Rule by serving as an “advisor” to the

amateur player, the agent’s role is still reduced to exclusively communicating with the player and

the player’s family. If the NCAA discovers that an amateur player or the player’s representative

has violated the No Agent Rule, the player will likely lose scholarships and forfeit his NCAA

eligibility—forcing the player to lose leverage and a viable fallback option while negotiating a

professional baseball contract to cover the next five to six years (or more) of the player’s life.

Further complicating the negotiation process for amateur players is the desire of agents to

represent multiple top-of-the-draft caliber players, at times creating an internal conflict of

interest (between the player and agent) by placing the player’s fiduciary (the agent) in a position

to directly negotiate potential earnings to another player(s)—further restricting earning potential.

Once an amateur player signs—at a significantly below-market rate—and is assigned to

one of the signing team’s minor league affiliates, life as a minor league player begins to take

place. Minor league players are paid below poverty-level compensation for their services—

aggrandizing the significance of equitable, market-based signing bonuses for draft eligible

players. The vast majority of drafted players never make it to the major leagues and spend at

least five or six seasons in the minors. The most advanced and elite prospects spend two to three

years (or more) in the minor leagues—exclusively relying on below market-rate signing bonuses

for income.

MLB needs to level the playing field for amateur players by granting draft eligible

players the ability to sign with any team for market-based bonuses and reasonably compensating

the players throughout the minor leagues—overturning MLB’s outdated exemption from

antitrust laws and eliminating unilaterally bargained for contractual terms affecting amateur and

minor league players.

3

Introduction:

Baseball has been the national pastime for over one-hundred and fifty years and enjoys a

unique place in our American heritage. 2 Baseball is so pervasive in the national culture that it

suffices to say that baseball is everyone’s business. 3 Through wars and disasters alike, the

game survives. 4 It is amusement to cure the lull of a summer day and salvation in times of

sorrow. 5 Major league professional baseball is avidly followed by millions of fans, looked

upon with fervor and pride, and provides a special source of inspiration and competitive team

spirit especially for the young. 6

As a child, many dream of playing professional baseball—lavishing in the glamour,

fame, and fortune that coincides with becoming a professional athlete. Professional athletes,

baseball players in particular, live the good life—guaranteed contracts, a $507,500 league

minimum salary, no salary cap, and an industry flush with extremely lucrative regional television

deals (and no practical avenue for ownership to spend the newly acquired revenue) all add to the

allure of becoming a professional baseball player.

Background:

In order to gain a proper perspective, this analysis will explore circumstances

surrounding several current professional baseball players. Each one of the following examples

exemplifies a significant legal issue within MLB—pertaining to the rights of amateur and Minor

League Baseball (“MiLB”) players.

A. Red Sox sign international phenom Yoan Moncada; Giants sign Lucius Fox after

being declared a free agent by MLB:

On March 12, 2015, the Boston Red Sox Baseball Club LP (“Red Sox”) officially signed

switch-hitting Cuban infielder Yoan Moncada (“Moncada”) to a minor league contract. 7

Moncada received a $31.5MM signing bonus—a record for an amateur player (American or

4

international). 8 Moncada received a record bonus for a number of reasons, first and foremost

because he is a nineteen-year-old potential superstar. 9 Another large contributor to Moncada’s

record signing bonus is the fact that Moncada is not an American-born amateur player and was

not subjected to the draft and the corresponding earning restrictions imposed on draft eligible

players by MLB. Consequently, Moncada was available on the open market, enabling Moncada

to negotiate directly with all thirty MLB teams—greatly increasing Moncada’s leverage and

bonus demands in contract negotiations. 10

Domestically, the largest commitment in the history of the draft went to Stephen

Strasburg, who was selected first overall in 2009 and received a total guarantee of $15.1

million—less than half of what Moncada received. 11 Strasburg’s deal came before the current

Collective Bargaining Agreement (“CBA”) which imposed bonus pool requirements for the draft

and international signings—severely penalizing teams for exceeding their bonus pools.

The effect of the bonus pool system has greatly reduced bonuses for all draft eligible

players—the highest bonus to date under the current CBA has gone to Kris Bryant ($6,708,400),

drafted second overall in 2013. 12 Meanwhile, international signees still experience a significant

advantage over draft eligible players. International players are free to negotiate directly with all

thirty MLB teams and the market for international players is not hampered by the penalties

imposed on teams for exceeding international bonus pools (since MLB teams are willing to

exceed international bonus pools—unlike in the draft).

Another notable international occurrence involved the San Francisco Giants Baseball

Club (“Giants”) and Lucius Fox (“Fox”). On July 2, 2015, the Giants signed Fox to a $6 million

deal—only Dansby Swanson (“Swanson”), at $6.5 million, agreed to a higher signing bonus

from the 2015 draft class—after MLB allowed Fox to opt out of the draft. Draft experts

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speculate that Swanson would have commanded between $20-25 million on the international

market as an amateur player (penalties would make the total investment nearly double). Draft

experts also speculate that Fox was able to triple or even quadruple his signing bonus since being

allowed to opt out of the draft and signing as an international free agent.

Fox’s $6 million bonus is the top non-Cuban international amateur bonus of all-time,

surpassing Dominican outfielder Nomar Mazara, who received $4.95 million in 2011. 13 Fox,

an eighteen year-old shortstop, attended American Heritage High School in Florida but left to

move to the Bahamas, where he was born, so he could sign as an international free agent. 14 Fox

was considered a top fifty draft prospect had he been eligible for the draft. 15 Interestingly

enough, Peter Lambert, the 50th best draft eligible player in this year’s draft (according to

mlb.com) signed for only $1.495 million. Brendan Rodgers, the best player in this year’s draft

(according to mlb.com) signed for $5.5 million. Fox was able to benefit from a broken system

and as a result ended up with a substantially larger payday since Fox (like Moncada) was

allowed to negotiate directly (and with the presence of an agent) with all thirty MLB teams.

MLB's talent acquisition system is broken and unfair, and it has been for years. 16

Moncada and Fox did well by obtaining larger financial commitments than the system allows for

draft eligible players, but every amateur player should have the same opportunity regardless of

where they were born—that is just not the case. 17

B. Ben Wetzler found in violation of NCAA’s “No Agent Rule”:

Ben Wetzler was suspended for the first eleven games of the 2014 college baseball

season based on allegations that Wetzler used counsel in direct negotiations with the

Philadelphia Phillies (“Phillies”)—a violation of the NCAA’s “No Agent Rule” which restricts

the assistance of counsel (attorney or agent) for a student-athlete while communicating with team

6

officials. 18 Wetzler was selected by the Phillies in the fifth round of the 2013 draft. 19 After

Wetzler and the Phillies failed to reach an agreement, Wetzler decided it was in his best interest

to return to Oregon State University (“OSU”) and complete his senior season. 20 The Phillies

had their own agenda. 21 The Phillies reported Wetzler’s agent-related contact to the NCAA

after feeling spurned by spending a high draft pick on a player who did not sign. 22

Consequently, Wetzler was forced to sit out 20 percent of OSU’s season, simply because Wetzler

sought the assistance of counsel. 23

C. Business is booming for MLB teams; players deserve a higher revenue share and a

higher league minimum salary; minor league players are extremely poor:

Baseball is awash in money. 24 Baseball has become a $9 billion business in significant

part because of national and local broadcast revenue. 25 The average value of a major league

franchise is $1.2 billion, an increase of 48 percent from one year ago. 26 The New York Yankees

lead the way with a value of $3.2 billion and are followed by the Los Angeles Dodgers at $2.4

billion. 27 And fifteen of the thirty teams—exactly half—are worth at least $1 billion. 28

In the next round of negotiations between the MLBPA and the owners, the MLBPA’s

aim will be to close the growing gap between player salaries and owner revenues. 29 Player

salaries a decade ago represented 55 percent or more of revenue, but that percentage has fallen

under 40 percent as salaries have not kept pace with revenue. 30 The players have several

options to try and increase salaries, but the simplest and perhaps most effective route is to

significantly increase the minimum salary. 31

Currently, players have to accrue six years of service time (or more) to earn free

agency—where the players can earn market value for their services. This current model—

favoring veteran players—has worked extremely well when quality veterans were plentiful,

driving up total free-agent prices and growing the players’ share of the pie. 32 However, young

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players are being extended earlier—in advance of free agency—causing the number of quality

veteran players to diminish significantly in recent years. The MLBPA should shift its focus and

bargain for a higher league minimum salary if they intend on obtaining a higher share of MLB’s

influx of capital during the next CBA. 33

Another clear measure that needs to be taken is to provide minor league players with

significantly higher wages. Most minor league players earn between $3,000 and $7,500 for a

five-month season (not including time spent in Spring Training). 34 By comparison, fast food

workers average between $15,000 and $18,000 a year. 35 The majority of minor league players

do not make enough to live on, especially those with families, so they are forced to supplement

their income with offseason jobs or side jobs during the season in order to make ends meet. 36

The driving force behind the suppression of wages and treatment of minor league players

is that minor league players do not have a union behind them like the MLBPA. Furthermore,

most minor league players never make it to the major leagues and are not considered legitimate

prospects by their employers (the MLB team). Consequently, teams maintain a steady stream of

players ready to fill in for current minor league players, creating significant disparity and

injustices for these players.

Each of these examples provide a slightly different view of the underlying injustices

working together to limit earnings for young players. Each example appears to be relatively

straightforward but what happens when the only reason that the transactions occur is due to

MLB’s exemption from rules and regulations that strictly govern the rest of the U.S.?

Federal Antitrust Exemption and Reserve Clause:

One of the restrictions preventing amateur players from realizing a free, open market is

the long-standing and outdated antitrust exemption granted to MLB by the federal government.

8

Organized baseball has enjoyed a virtually complete exemption from the application of antitrust

laws since 1922. 37 In Federal Baseball Club of Baltimore, Inc. v. National League (“Federal

Baseball Club”), challenges were made against the contractual relationships between the major

league teams and their players, which subsequently came to be known as the “reserve system.”

38 Under the reserve system, player’s rights were controlled indefinitely—essentially creating a

perpetual option for the teams regarding the player.

In Federal Baseball Club, the Supreme Court held that the business of baseball

principally involved intrastate activities, to which the antitrust laws did not apply, since their

reach extended only to interstate commerce. 39 Baseball was different and should be treated as

such. Although this crabbed view of the general scope of the Commerce Clause has long since

been eroded, thereby removing the predicate for the Federal Baseball Club decision, the

Supreme Court has since reaffirmed that baseball remains exempt from antitrust liability. 40

In Toolson v. New York Yankees, Inc. (“Toolson”), the Supreme Court was presented

with an opportunity to correct itself; however, the Court refused to do so, holding instead that it

was up to Congress to demystify the national pastime if Congress decided to do so. 41 The last

case to make it to the Supreme Court regarding MLB’s antitrust exemption came in 1972, Flood

v. Kuhn (“Flood”). In Flood, the Court admitted that it had erred in Federal Baseball by

holding that MLB was not engaged in interstate commerce. 42 But, nevertheless, the Court

refused to overturn the decision or to render the Sherman Act applicable to MLB. 43

Instead, in a telling passage, the Court held that the Federal Baseball and Toolson

decisions were “aberrations confined to baseball.” 44 Further, in justifying the perpetuation of

9

these aberrations, Justice Blackmum, announced in plain terms that baseball was indeed

something different than anything else:

“Baseball has been the national pastime for over one hundred years and enjoys a

unique place in our American heritage. Major league professional baseball is

avidly followed by millions of fans, looked upon with fervor and pride and

provides a special source of inspiration and competitive team spirit especially for

the young.

“Baseball’s status in the life of the nation is so pervasive that it would not strain

credulity to say the Court can take judicial notice that baseball is everybody’s

business. To put it mildly and with restraint, it would be unfortunate indeed if a

fine sport and profession, which brings surcease from daily travail and an escape

from the ordinary to [267] most inhabitants of this land, were to suffer in the least

because of undue concentration by any one or any group on commercial and

profit considerations. The game is on higher ground; it behooves everyone to

keep it there.” 45

MLB’s exemption from federal antitrust legislation is mainly based on the principle of

stare decisis—or simply, since this is the way the courts have decided this in the past, this is the

way that it should be decided now. Originally, the exemption was given based on the belief that

baseball was just a game and that the travel was incidental to the play of the game. In Federal

Baseball Club, the Court did not state that even if the activities of organized baseball amounted

to interstate trade or commerce those activities were exempt from the Sherman Act. 46 The

Court acted on its determination that the activities before it did not amount to interstate

commerce. 47 Today, the reasoning is that Congress never intended to bring baseball within the

antitrust laws regardless of the fact that baseball’s activities protruded across state lines and

substantially affected interstate commerce.

Since the decision in Flood—which paved the way to restricting baseball’s “reserve

clause”, enabling players to earn free agency—much of the flexibility that baseball teams would

enjoy under federal antitrust exemptions when dealing with players has been eroded through

10

CBA negotiations. 48 In 1998, Congress took action to limit baseball’s antitrust exemption by

passing the Curt Flood Act of 1998 (“Curt Flood Act”). 49 The Curt Flood Act eliminated

antitrust immunity for actions affecting the employment of MLB players but retains the antitrust

exemption for MiLB and for decisions regarding league expansion, franchise relocation, the

draft, broadcast rights, and employment relations with non-players. 50 The Curt Flood Act also

provided MLB players the right to sue in court if contract issues arise with franchise owners. 51

As a result of the wide berth provided to MLB by the federal courts and legislature,

including antitrust exemption, MLB has largely been free to govern itself pursuant to its own

definition of what is in the “best interest of baseball.” 52 In the process, MLB has successfully

denied its players even the most basic and fundamental due process rights, while willfully

violating federal law that has applied to MLB for decades in theory, but not in practice, in the

process. 53 Since MLB’s inception in 1876 to the present, MLB has been, in effect, an extra-

judicial entity, a society unto itself, answerable to no one in all but the most extreme

circumstances—the law does not apply to MLB. 54

Lifting MLB’s antitrust exemption would permit judicial review of baseball’s policies,

procedures, and actions. 55 Given that MLB faces no direct competition (MLB is the only top-

level professional baseball league in the United States) and that it is not regulated, the

opportunity for judicial review would provide the only chance to limit the abuse of MLB’s

monopolistic powers. 56

International Free Agency/Prospect Signings:

A. Background:

Earlier this decade, teams began making mountains of cash from both national and local

television deals. 57 Even after raises in arbitration and free-agency compensation for major

11

league players—in addition to stadium renovations, padding their own profit margins, and all the

other ways teams could spend this new money—some especially wealthy and/or aggressive

teams still found themselves with money burning a hole in their pockets. 58

Teams began to focus on amateur spending as an outlet for the new revenue. 59 Except,

teams could not just plow money into the draft, because the penalties for excessive spending

were far stricter in the draft than the penalties imposed on international signings, and teams

had no interest in sacrificing high draft picks for the sake of landing any one individual player.

60 Teams started to realize that going over the suggested limits on international players was not

that big of a deal if the right-caliber prospects came along, given all the new money they had at

their disposal. 61 Moreover, unlike during the draft, where teams had to sacrifice actual talent in

the form of forfeited picks for exceeding their bonus pools, the international penalties

were only about money and future signings. 62

B. Amateur players eligible to sign as international free agents:

International players are eligible to sign with any MLB team (a significant change from

the process imposed on American-born amateur players) between July 2nd and June 15th (June

15th through July 1st are “dead periods”—no signings can occur) of the next year if the player is

seventeen years old or will turn seventeen years old by the end of the first season of his contract.

Additionally, prospects that are seventeen years of age or older and have not previously

signed a major or minor league contract, reside outside the United States, Canada, and Puerto

Rico, and have not been enrolled in a high school or college in the United States, Canada or

Puerto Rico within the previous year are eligible to sign during the international signing period.

The international signing guidelines do not apply to players who previously signed a

contract with a MLB or MiLB team, nor do they apply to players who are at least twenty-three

12

years old and have played as a professional in a league recognized by the Commissioner’s Office

for a minimum of five seasons. Cuban players who are at least twenty-three and have played in a

Cuban professional league for five or more seasons are also exempt.

C. International bonus pools and penalties for exceeding bonus pool allotment:

Teams are allocated a budget or “international bonus pool” in which they can spend to

sign international players. Penalties are given in instances teams go over their international

bonus pool. However, due to the uncertainty of the market and the fact that most of the players

signed are significantly younger than the players taken in the draft, teams are willing to accept

the appropriate penalties.

Each team is allotted a base of $700,000 and an international bonus pool made up of four

“slot values” based on the team’s record for the previous year to spend on these prospects.

Teams are allowed to trade pool money and bonuses but cannot acquire more than 150 percent of

their initial international bonus pool.

Teams that exceed the pools by zero to five percent have to pay a 100 percent tax on the

pool overage. Teams that exceed the pools by five to ten percent pay a 100 percent tax on the

pool overage and are not allowed to sign a player for more than $500,000 during the next signing

period. Teams that exceed the pools by ten to 15 percent have to pay a 100 percent tax on the

pool overage and are not allowed to sign a player for more than $300,000 during the next signing

period. In the most severe penalty, teams that exceed the pool by 15 percent or more have to pay

a 100 percent tax on the pool overage and are not allowed to sign a player for more than

$300,000 during the next two signing periods.

Outside of rare occasions, MLB did not anticipate teams going over the international

bonus pool limitations. The league was, of course, very wrong. 63 Each signing period several

13

teams blow past their bonus pool limitations, sign as many high-end players as they can, and

accept the system’s most severe penalty. Five teams (several other big spending teams were

prohibited due to exceeding bonus pools in previous signing periods) exceeded the 2014-15 pool

by at least 15 percent, and cannot sign any pool-eligible players for more than $300,000 during

the next two signing periods—a dramatic shift from the methodology within the industry

regarding draft eligible players.

Teams get a relatively small bonus pool each year to spend as they see fit, and penalties

are imposed for exceeding the pool, as the Red Sox experienced when signing Moncada. 64 The

Red Sox’s $31.5 million deal for Moncada by far surpassed their entire international bonus pool,

consequently the team will pay a 100 percent tax on Moncada’s bonus—bringing the total

acquisition cost to $63 million. 65 On top of that, the Red Sox will be restricted from signing

any international amateur for more than $300,000 in the 2015-16 and the 2016-17 international

signing periods. 66

The Rule 4 Draft or First-Year Player Draft:

A. Background:

The MLB Amateur Draft started in 1965. 67 It was renamed the First-Year-Player Draft

(also known as the Rule 4 Draft) in 1998, after a challenge by agent Scott Boras (“Boras”) to

have client, J.D. Drew (“Drew”), declared a free agent based on the interpretation of the word

“amateur.” 68

Boras has long been an outspoken opponent of the current drafting system as Boras

believes that the draft “suppresses the incomes of draft eligible players to twenty cents on the

dollar.” 69 In 1997, Drew was selected second overall by the Phillies but was not able to come

to terms on a contract. 70 Boras advised Drew to sign with an independent minor league team

14

instead—believing that Drew would then be declared a free agent one week prior to the 1998

draft, since the “Amateur Draft” only applied to players who had never signed a contract with a

major or minor league team. 71 However, before the 1998 draft, MLB revised the rule, renaming

the draft the “First-Year-Player Draft” and stating that independent league players were still

subject to the draft. 72

The draft was devised to give weaker organizations the first crack at top talent, as a result

teams select players in reverse order of the previous season’s standings. 73 At its inception the

draft lasted as long as teams wished to continue drafting players; however, today the draft ends at

the fortieth round (teams can choose to pass on selecting a player in any round at any time).

Compared to other sports there is a lot more guess work involved in scouting and drafting

amateur baseball players. Most players are a minimum of four or five years away from a chance

to start a major league career—spending time at each level of the rookie leagues, Class A (A

ball), Class A+ (Advanced A), Class AA (Double A), Class AAA (Triple A) before having a

chance at making a major league roster. 74

Most drafted players never reach the major leagues and with signing bonuses continuing

to rise (prior to the current CBA)—reducing MLB teams’ return on investment—owners desired

a means to control spending. The desire of team owners to reduce spending should not come as

a surprise given MLB’s past—from apocalyptic battles for salary caps to treating many minor

leaguers like little more than chattel, team owners have a long history of reaching for every

dollar in players’ pockets. 75 Since the MLBPA only looks after its own members (major league

players and minor league players that are on a team’s 40-man roster), the owners knew they

could ram this change through during CBA negotiations without any interference. 76

Consequently, the current CBA implemented harder caps on amateur spending.

15

B. Amateur players eligible for the draft:

If a player is a resident of the United States, Canada, Puerto Rico or other territory of the

United States, he can sign with a major league team only after being selected by the team in the

draft or sign with any team after not being selected in a draft in which the player is eligible. 77

Also considered residents are players who enroll in a high school or college in the United States,

Canada, Puerto Rico or other territory of the United States, regardless of where they are from

originally. 78

Graduating high school seniors and college juniors and seniors attending school in the

United States, Canada, Puerto Rico or other territory of the United States are eligible to be

drafted. In some instances college sophomores are eligible to be drafted, but only if their twenty-

first birthday is within forty-five days of the draft. Players attending a junior college with a

qualified baseball program are also eligible for the draft after each season (freshman and

sophomore seasons). A player could conceivably be drafted by a professional team as a high

school senior, attend a junior college and be drafted after the freshman and sophomore seasons

(or fall into the exception and be drafted as a sophomore from a four-year university after

attending a junior college for the freshman season), transfer to a four-year university and be

drafted after the junior and senior seasons.

Entry into MLB through the draft does not allow a player to choose his employer and

there is no free market of teams bidding to acquire his services. 79 Drafted players get the short

end of the stick. 80 Players that are drafted are selected by teams and can only negotiate with

that team, killing their leverage. 81 For an American player to attempt to gain free agency, the

player would have to give up citizenship (let alone not attending high school or college in the

United States, Canada, Puerto Rico or other territory of the United States)—an unreasonably

burdensome task—and even then MLB could still consider the player subject to the draft if MLB

16

believed the player attempted to circumvent the rules and gain free agency. MLB considerers the

following factors when determining residency for draft purposes: length of stay at the current

address, where the player intends to live long-term, where the player has previously lived, where

the player obtained his passport, and the player’s place of birth. 82

C. Bonus pool system:

The current CBA added heavy restrictions on draft spending. 83 Under this system each

team has an allotted spending pool from which their signing bonuses come—significantly

reducing signing bonuses for draft eligible players. The league has assigned a slot value to each

pick in rounds one through ten (including supplemental and compensation rounds), and a team’s

draft pool is the sum of the slot values for each of their picks. 84

Teams are not bound to the individual assigned slot values and can sign picks for

whatever they want. Savvy teams often sign players below full slot value in order to disperse the

“savings” to high upside players taken in later rounds. Unfortunately, this approach is

commonly directed toward college seniors—who lack the leverage of returning to college and re-

entering the draft. Under the current system, it is quite common for teams to select college

seniors and sign them for $5,000-$10,000 in the ninth and tenth rounds of the draft (slot values

for picks in the ninth and tenth rounds are roughly $150,000-$165,000). Players selected after

the tenth round do not count toward the bonus pool, so long as they receive no more than

$100,000. 85 Anything over $100,000 would count toward the team’s bonus pool. 86

The thirty MLB teams combined to spend $234 million in the 2011 draft on amateurs

residing in the United States, Canada, and Puerto Rico. 87 The total dropped to $223 million in

the first year of the bonus pool system (2012), dropped to $220 million in 2013, and rose slightly

to $224 million in 2014. 88 Though volatile year to year, draft spending rose an average of 4.9

17

percent annually in the eleven years before the bonus pool system took effect and often outpaced

increases in major league payroll. 89

Spending on major league payroll rose five percent in 2012, 6.2 percent in 2013, and 8.6

percent in 2014. 90 Had expenditures for amateur players mirrored the payroll increase pace, the

total spent by the thirty teams in the draft would have been around $286 million in 2014

(compared to actual spending—$224 million). 91 Had expenditures increased at a more

conservative rate of 4.9 percent (the average rate of increase in draft spending in the eleven years

before the bonus pool system), the total 2014 draft spending would have been about $271

million. 92 As a result, amateur players have been given approximately $106 million less over

the last three drafts under the bonus pool system.

D. Penalties for exceeding bonus pool:

Teams are technically permitted to spend as much as they want in the draft; however,

severe penalties are in place if a team exceeds the total amount of their bonus pool (combined

slot-values of the team’s picks in the first ten rounds)—strictly limiting teams’ spending. Should

a team exceed its draft bonus pool by up to five percent, the team will pay a 75 percent luxury

tax on the overage. A five to ten percent overage will result in a 75 percent luxury tax on the

overage and the loss of next year’s first-round pick. A ten to 15 percent overage results in a 100

percent tax and the loss of a first and second-round pick in the next draft. And, exceeding the

draft pool by more than 15 percent results in a 100 percent luxury tax on the overage and the loss

of the team’s next two first-round picks.

Under these rules, no team has been willing to pay the price of forfeiting a future pick

and no team has exceeded its pool by more than five percent. Teams value prospects more than

ever (oddly while paying them less) and are focused on building from within through the draft.

18

Consequently, teams are not willing to give up future draft picks to sign amateur players (unlike

in the international market where players are further away from the major leagues, more risky,

etc.)—making the bonus pool system an increasingly difficult burden for amateur players to

overcome in order to achieve equitable compensation (even at a reduced rate) for their services.

Four drafts have occurred under the new bonus pool system, producing a total of six

players to receive signing bonuses of $6 million or higher—Dansby Swanson 2015 ($6.5

million), Carlos Rodon 2014 ($6.582 million), Tyler Kolek 2014 ($6 million), Kris Bryant 2013

($6.7084 million), Mark Appel 2013 ($6.35 million), and Byron Buxton 2012 ($6 million). In

the season immediately preceding the implementation of the bonus-pool system (the 2011 draft),

four players received signing bonuses of $6 million or more—Gerrit Cole ($8 million plus

incentives if promoted to MLB by 2013), Bubba Starling ($7.5 million), Danny Hultzen (major

league deal with a $6.35 million signing bonus and a higher annual salary to make commitment a

total of $8.5 million over five years), and Anthony Rendon (major league deal with a $6 million

signing bonus and a guarantee of $7.2 million over four years). (Dylan Bundy received a signing

bonus of $4 million and a major league contract worth a total of $6.225 million over five

seasons—making a total of five players to receive total commitments worth more than $6 million

in the 2011 draft.) (Players who signed major league deals were immediately added to the 40-

man roster and were members of the MLBPA; however, players are no longer able to sign major

league deals under the current draft structure.)

Not only has the bonus pool system significantly impacted signing bonuses but it has also

effected the manner in which teams select players in the draft. Many teams want to select a first-

round player that will sign below slot value, enabling the team to dispense the savings to players

19

in late rounds. This methodology works fine with high school players, but when a top-of-the-

draft talent falls, it makes it much more difficult for the player to recoup any lost earnings.

Mark Appel (“Appel”) was selected eighth overall by the Pittsburgh Pirates Baseball

Club (“Pirates”) in the 2012 draft—after being regarded as the top talent available by most

industry experts. The Pirates were not able to meet Appel’s salary demands (slot value of the

eighth overall pick was $2.9 million) and Appel re-entered the 2013 draft (selected first overall)

and signed with the Houston Astros Baseball Club for $6.35 million (slot value $7.7904 million).

Appel primarily dropped because of salary demands. In the past players would slide because of

bonus demands, but only to a team willing to recognize and capable of affording the bonus

demands (or at least willing to negotiate). With the limited funds available under the current

draft structure—not to mention lack of an open market for amateur players—it is increasingly

difficult for draft eligible players to equitably maximize earning potential.

E. MLBPA collectively bargains amateur players’ rights away in collective bargaining

negotiations with MLB owners:

Unfortunately, everything MLB and the MLBPA has done in recent years has only

further stacked the cards against drafted players. 93 Amateur players are not members of the

MLBPA until they are promoted to a team’s 40-man roster and since there is no labor union for

minor league players, there has been no collective bargaining where a player’s representative

bargained away free labor market rights in exchange for other benefits. 94 Since the MLBPA

does not represent amateur players and is allowed to negotiate on their behalf regarding the draft,

if the owners and MLB want the rules to change, it almost automatically happens. 95

MLB and the owners want to keep costs down and the MLBPA does not care because

drafted players are not union members—it is a concession each party (MLB, MLBPA, and the

owners) is readily willing to make. 96 The MLBPA is worried about 40-man roster players

20

(union members), and hey, every dollar ownership saves on a drafted player is a dollar that

theoretically goes to a union member. 97

The MLBPA perceives itself to have standing in draft issues because the current CBA

stipulates a system by which draft picks are used to compensate teams for the loss of players who

sign with other clubs in free agency. 98 This tangential connection to the draft enables the

MLBPA to have control over the draft and amateur players, but the union does not yield nearly

as much power in negotiations for amateur players as it does over key labor issues wholly

involving major leaguers, such as free agency and arbitration. 99

Actual MLBPA members are players who are no longer adversely affected by the

treatment of amateur players by the MLBPA (since they have already gone through the process).

A large amount of leverage that MLBPA members have in bargaining is the ability to strike

(albeit at last resort) to force the hand of team owners to meet demands should the typical give-

and-take negotiations fail. Threats of a work-stoppage do nothing for amateur players and MLB

players are hardly inclined to strike—sacrificing major league pay—on their behalf.

F. NCAA’s unconscionable “No Agent Rule”:

MLB, the MLBPA, and team owners are not the only parties who inhibit amateur players

from realizing a fair process to begin a career in MLB—the NCAA also plays a vital role

restricting the rights of amateur players. NCAA Bylaw 12.3.2.1 (“No Agent Rule”), which is

titled “Presence of a Lawyer at Negotiations” and reads, “A lawyer may not be present during

discussions of a contract offer with a professional organization or have any direct contact (in

person, by telephone or by mail) with a professional sports organization on behalf of the

individual. 100 A lawyer’s presence during such discussions is considered representation by an

agent.” 101

21

NCAA rules allow a baseball student-athlete to receive advice from a lawyer or agent

regarding a proposed professional sports contract; however, if the student-athlete is considering

returning to an NCAA school, that advisor may not negotiate on behalf of a student-athlete or be

present during discussions of a contract offer, including phone calls, email or in-person

conversations with team officials. 102

Although the No Agent Rule specifically states that lawyers are restricted from

negotiating directly with teams on the player’s behalf, the NCAA has universally characterized

any negotiation by an agent, advisor, lawyer or other party directly with team officials to be in

violation of the No Agent Rule—severely limiting the scope of representation and the agent’s

ability to adequately inform the young player through the negotiation process. Players typically

refer to agents as “advisors” during this process as a means to minimize the perception of the

agent’s (or advisor’s) role and as an attempt to deter punishment from the NCAA.

Advisors and amateurs routinely get deals done, circumventing the No Agent Rule;

however, severe penalties occur if a player is determined to have had a representative in direct

communication with teams during the negotiation process. College eligibility can be lost and the

player may have to forfeit college scholarships if the NCAA determines the player in violation of

the No Agent Rule—a rule by which restricts competent representation through one of the most

important and significant decisions of the player’s life.

If the player loses college eligibility, the team’s leverage is greatly increased in

negotiations and the player is left with few alternatives. For this reason, maintaining college

eligibility is paramount to the player and the restriction of representation through this process is

purely an act of misfeasance by the NCAA. Meanwhile, teams employ sophisticated

professionals to negotiate with these young players. Ivy League graduates are employed by

22

virtually all MLB organizations and are well versed in these types of negotiations. This creates a

tremendous inequality and disparity in bargaining position, further hindering the player’s

financial expectancy.

A further act of misfeasance can occur when the team or team official(s), after being in

direct negotiations with the player and the player’s representative—a clear violation of the No

Agent Rule—choose to disclose the negotiations to the NCAA (subjecting the player to

disciplinary action by the NCAA). Let’s be honest here, negotiations between the player, the

player’s representative, and team officials happen all the time—it is the only way that these deals

can occur in a relatively equitable manner. But once negotiations turn south, the team is

presumed to have a duty of nondisclosure regarding the negotiation process.

However, some teams break the presumed duty and unilaterally alienate the young

amateur player (as seen in the Wetzler example). The decision of members of the Phillies

organization led to Wetzler receiving a suspension for 20 percent of his season—even though the

penalty could have been much worse, it is still significant, should not have happened, and should

not be overlooked.

The Phillies purposefully sought to retaliate against Wetzler for failing to reach an

agreement—a choice that Wetzler had as much as the Phillies had to not sign Wetzler. The No

Agent Rule itself is ridiculous and deserves to be abolished; however, the Phillies’ use of an

asinine regulation to punish a player for not signing with the club is downright deplorable. 103

Although the No Agent Rule is widely criticized and needs to be eliminated, no one has

come closer to abolishing the rule than a recent case involving Andrew A. Oliver (“Oliver”).

Oliver was a stand-out pitcher for Vermilion High School in Ohio, finishing his senior season

with a 6-0 record, 0.40 earned run average (ERA), and 108 strike outs in 52 innings pitched—

23

prompting the Minnesota Twins Baseball Club (“Twins”) to select Oliver in the seventeenth

round of the 2006 draft.

Oliver hired Robert and Tim Baratta to advise him through the contract negotiations but

was not able to agree to terms with the Twins—attending Oklahoma State University instead

(“OSU”). Since Oliver attended OSU he was not eligible for the draft again until 2009. In

March 2008, Oliver terminated the Barattas and hired Boras as an advisor. In April, the Barattas

sent Oliver an invoice for $113,750 for legal services performed during the 2006 draft. In May,

the Barattas notified the NCAA of Oliver’s violations of NCAA rules and as a result Oliver was

suspended for violating the No Agent Rule.

Oliver sued seeking an injunction and to restore his eligibility. The case went to trial and

the court found that the NCAA’s No Agent Rule was arbitrary (illogical) and capricious

(unreliable). The court found that no entity, other than one designated by the state, can dictate to

an attorney where, what, how or when he should represent his client. The No Agent Rule

appeared to be over; however, the court’s order voiding the No-Agent Rule was vacated when

Oliver settled with the NCAA for the sum of $750,000.

The No Agent Rule should be abolished—the Oliver case proved that. An entity cannot

restrict the ability to retain counsel, only the states can restrict the right of counsel through varies

legislative and judicial acts. However, if the No Agent Rule is going to remain as an NCAA

Bylaw and one that the NCAA wishes to enforce against baseball student-athletes, then the

NCAA must impose penalties in an equitable manner and based on the text of the Bylaw—not

whatever the NCAA interprets the Bylaw to mean. These Bylaws are adversely effecting young

athlete’s lives and need to be applied in a clear and consistent manner or abolished all together.

24

G. Conflict of interest among agents representing multiple clients in the draft:

All things being otherwise equal, an athlete would be best served by an attorney-agent

because of the added protection of the attorney’s code of professional responsibility. 104

Attorneys are held to a high professional standard and are well versed in representing the

interests of others. Attorneys are held accountable for actions that are unethical under the rules

of professional responsibility but would otherwise be unpunished in the sports industry.

Direct and indirect conflicts of interest are one type of dilemma that sports agents must

carefully handle when deciding to represent multiple clients. Some attorneys maintain that these

potential conflicts are governed solely by the MLBPA; however, based on case law it is clear

that most business practices of an attorney fall under the scope of the rules of professional

responsibility.

Under the rules of professional responsibility, a lawyer shall not represent parties who

have interests that are adverse to each other, unless the lawyer reasonably believes the

relationships with each party will not adversely affect one another, each client is aware of the

potential conflict, and each client consents to continue representation by that attorney. With

these heightened professional standards are obligations that guide attorneys in representing

clients in a professional capacity.

Although representing several clients in a particular draft is not uncommon (especially

for larger agencies), the new bonus pool system creates an interesting and more direct conflict of

interest, specifically for agents representing multiple clients drafted by the same team. The

bonus pool system essentially mandates what teams are allowed to spend in a particular draft

(teams are not bound to their bonus pools but have been extremely reluctant to exceed the pool

by more than five percent—no team has to this point).

25

When an agent represents multiple players, both of which are negotiating with the same

team, for the largest portion of pool money that they can achieve, the players end up going after

the same money. The more one client receives as a signing bonus, the less money left in the

bonus pool to be available to the other player(s) as a signing bonus. This is a direct conflict of

interest for a sports agent—particularly agents who are attorneys and governed under the model

rules of professional responsibility.

Free Agency:

Free agency is what every MLB player dreams of—a chance to capitalize on the open

market and realize full market value for their services. Free agency is the only time in which a

professional baseball player is paid based on the perceptions of the player’s value on the open

market, achieved many years after entry into professional baseball. Throughout the history of

MLB, team owners have enjoyed various levels of control over players, most notably the

Reserve Clause, which essentially guaranteed team owners a perpetual team option on their

players. Several court decisions and CBA have led to the current structure that is in place today.

Under the current CBA, players with more than six years of service time in MLB are

granted free agency at the expiration of their contracts. 105 A tier below the free agents are

players with at least three years of service time (but less than six years) who are eligible for

salary arbitration—meaning that their salaries are determined by an independent arbitrator based

on salaries of similar players (statistically) with similar service time. Generally, players receive

between 40 and 80 percent of free agency salaries on one-year contracts during the arbitration

process (gradually increasing as the player accrues more service time and gets closer to free

agency).

26

A step below the arbitration eligible players are active MLB players with under three

years of service time (except for the top 22 percent of players with between two and three years

of service time who are also eligible for arbitration—known as “Super-Two” eligible players).

The MLB players not eligible for arbitration face a purely monopolistic market and have their

salary set by their team, usually very close to MLB minimum which is currently $507,500. 106

In the tier below active players are players on the 40-man roster in the minor leagues who

receive union protection and a minimum minor league salary. The rest of the minor leaguers are

not union members and have had many potential protections and salary bonuses bargained away

by the MLBPA.

Contrast the domestic free agency process with that of international free agency.

International players are granted free agency as long as the player has completed five years in a

league recognized by MLB’s Commissioner’s Office and is twenty-three years of age or older—

allowing these players to fully test the open market. Meanwhile, domestic players have a

significantly longer process until reaching free agency—domestic players are at least seventeen

when drafted, have to spend several seasons in the minor leagues, and have to play six or more

seasons in the majors before experiencing free agency.

Bryce Harper (“Harper”) was one of the most advanced prospects to ever play the game

of baseball. Harper was so advanced and so good that he was heavily scouted before he was ten

years old. Harper got his GED in high school in order to expedite his major league career (and

also so he could face better competition)—becoming draft eligible a year early after attending

junior college for what would have been his junior year in high school. Even with Harper’s

advanced approach and natural ability, Harper still spent parts of three seasons in the minors

before finding his way on a major league roster. Consequently, Harper is eligible for free agency

27

after the 2018 season at just twenty-six years of age (an extremely early age to hit the open

market—most players reach free agency between twenty-nine and thirty-one years of age or

older).

(Teams can also manipulate team control by strategically promoting players to the major

leagues. Delaying a promotion to the major leagues by roughly two weeks to start the season

would allow the team to control the player an extra year, as the player would not be able to

accumulate enough service time to hit the one year mark during the current season—still leaving

the team with six years of team control.)

The effect of prolonged team control is that the salary for major league players is delayed

until much later in their careers—often once the player has experienced a decline in performance

(lowering the gain the player experiences on the open market) or when the player is suspected to

decline due to age (also limiting the player’s market). If players were paid based on market

demand earlier in their careers, instead of shifting capital to later in the players’ careers, players

could sign contracts with salaries that correspond more closely to the player’s natural production

curve (compared to long-term contracts today that lock-up players into their late thirties or early

forties and are often back-loaded—guaranteeing the bulk of the salary in years that do not figure

to be the player’s most productive seasons).

Another important aspect of this “salary shifting”, is that, while rewarding the players

that get the opportunity to experience free agency (which for most players is a singular, once-in-

a-lifetime experience), many players do not make it far enough to realize the gains available to

them on the open market. Some players never make it to the major leagues, others do not

produce enough to stay in the major leagues once they get there, and others see their careers

28

plagued by injury and are forced into an early retirement. These players never reach the open

market and are never paid market-based compensation for their services.

MLB and Team Revenue at All-Time High:

MLB is an organization that has evolved over the years. 107 Baseball was once a game

played by residents of small farm towns across the country and is now a multi-billion dollar

industry with international ties and ever-expanding exposure. 108 Extremely lucrative television

deals have transformed the game of baseball into an empire.

In an age where everyone is pushed to the internet to stream shows, movies, and other

video content, cable providers grasp the hands of professional sports teams in an effort to maintain

their customer base. Sports are virtually the only DVR-proof programming that remains and cable

providers are eager to compensate teams to keep customers on cable. As a result, MLB currently

has eight-year national television contracts with ESPN, FOX, and TBS—worth $1.5 billion

annually, up from $711.7 million a year in the previous deals—not including lucrative regional

deals for essentially all thirty MLB teams. 109

Franchise values have also skyrocketed over the course of the last few years. The average

value of a MLB franchise is $1.2 billion, an increase of 48 percent from a year ago. 110 The New

York Yankees lead the way with a value of $3.2 billion and are followed by the Los Angeles

Dodgers at $2.4 billion. 111 But fifteen of the thirty clubs—exactly half—are worth at least $1

billion. 112 The Pirates rank seventeenth with a value of $900 million, a 57 percent increase from

2014. 113 Any way you look at it, the business of baseball has never been better.

A. Team revenues are rising disproportionately to player salaries:

The MLBPA has a significant and pressing—but often overlooked—issue to address in

the next round of CBA negotiations: the players’ plummeting share of overall MLB league

29

revenues. 114 Since 1995, MLB’s overall league revenues have increased nearly 650 percent,

going from around $1.4 billion to over $9 billion in 2014. 115 During that same time period,

though, MLB payrolls have only increased by around 378 percent, from roughly $925 million in

1995 to just under $3.5 billion last year. 116

At first glance, an increase of $2.5 billion in annual salary divided among roughly 1,200

players does not sound that bad, but when viewed as a percentage of overall league revenues,

players’ salaries have been decreasing at a rather startling rate. 117 After peaking at a little more

than 56 percent in 2002, today MLB player salaries account for less than 40 percent of league

revenues, a decline of nearly 33 percent in just 12 years. 118 As a result, player payroll today

accounts for just over 38 percent of MLB’s total revenues, a figure that just ten years ago would

have been unimaginably low. 119

So even though MLB’s television revenues and franchise values have increased

substantially in recent years, relatively little of this extra money is flowing to the players. 120

Instead, teams are largely pocketing these additional revenues as extra profits, raising the

league’s overall revenue without a corresponding increase in player payroll. 121 As a result, the

new television money is actually lowering the players’ share of overall league revenue on a

percentage basis. 122 Add in the corresponding bonus pool system for the draft, limiting the

amount teams can invest on amateur players, and you get a recipe that continues to shift the

needle in favor of the owners.

B. While MLB revenues are at an all-time high minor league players fight poverty

while pursuing a career in MLB:

The existence of a vertically integrated minor league system distinguishes MLB from

other sports leagues. 123 Although MLB may still enjoy immunity from federal antitrust

30

regulations, MLB’s immunity does not mean the league or its teams can ignore federal and state

laws that require employees (minor league players) to be paid a minimum wage. 124

The CBA between MLB and the MLBPA governs a good portion of a minor leaguer’s

working conditions, even though minor league players are not members of the MLBPA and have

no way of influencing the negotiations. 125 The on-going struggles of minor leaguers to earn a

sustainable salary (or even minimum wage) as compensation for their services in nothing new.

Minor league players struggle to make ends meet. Often players are forced to share

apartments with numerous teammates in order to try to stretch their earnings further. Minor

league players earn less than minimum wage and have minimal discretionary income available

after paying bills. Signing bonuses do not last players long enough—especially considering that

most players do not earn a substantial signing bonus through the draft and the amount of time it

takes to advance to the major league level (which most never experience).

A current class-action lawsuit containing thirty-four plaintiffs is currently being litigated.

The legal claims are based on the Fair Labor Standards Act, the federal statute that creates a

national floor of wage protection for workers. 126 Employers must pay employees the minimum

wage for a forty-hour work week and time-and-a-half for overtime. 127 The federal minimum

wage is $7.25 per hour. 128

According to the complaint, most minor leaguers earn between $3,000 and $7,500 for the

entire year. 129 The complaint also alleges that, while the salaries of major leaguers have

31

skyrocketed by more than 2,000 percent since 1976, the average wage earned by minor leaguers

has increased only 75 percent, far below the inflation rate of 400 percent in that spell. 130

“With no union to represent and advocate for the minor leaguers, owners have all

the leverage and no incentive to raise salaries. On one hand you have a group of

workers who are desperate to enter the industry, and oftentimes they are kids who

just graduated from high school or are 16 and 17 year old Latinos who barely

speak English. And they have no union at all. On the other side, you have these

powerful MLB owners who are sophisticated business people and they have an

antitrust exemption, so they can actively get together and collude to set prices. So

it makes for this perfect recipe for exploitation,” says Garrett Broshuis, one of the

lead attorneys on the case. 131

The outcome of this case could have a substantial impact on the treatment and lifestyle of

minor league players throughout all levels of the minor leagues and could finally give minor

league players the equitable compensation that they deserve.

Conclusion:

There is a significant opportunity for MLB to restructure how it compensates players—in

the major leagues, minor leagues, and through the draft. The current draft structure penalizes

players based on national origin, allowing international amateurs to negotiate with all thirty

teams and restricting domestic players to negotiating with only one. The bonus pool system

suppresses potential earnings and restricts total team investment in amateur players. Meanwhile,

MLB revenues are at an all-time high and the disparity between revenues and player salary

continues to increase.

It is unfortunate that there have been fifty years of baseball entry drafts in which

American amateurs have been treated worse than foreign players, but the past cannot be changed,

and only baseball’s future can be altered. 132

32

1 Liz Mullen (@SBJLizMullen), TWITTER, https://twitter.com/SBJLizMullen/status/616664569772154880 (last

visited July 2, 2015).

2 WALTER T. CHAMPION, JR., BASEBALL AND THE LAW: CASES AND COMMENTS 111 (Jamie Giganti eds., 2015).

3 Nicholas A. Deming, Note: Drafting a Solution: Impact of the New Salary System on the First-Year Major

League Baseball Amateur Draft, 34 Hastings Comm. & Ent. L.J. 427, 427 (2012) (provides background on the game

of baseball and the amateur draft).

4 Id.

5 Id.


7 Steve Adams & Mark Polishuk, Red Sox Sign Yoan Moncada, MLB TRADE RUMORS (Mar. 12, 2015, 7:46 AM),

http://www.mlbtraderumors.com/2015/03/red-sox-to-sign-yoan-moncada.html.

8 Id.

9 Mike Axisa, Yoan Moncada signing shows MLB’s amateur talent system is unfair, CBS SPORTS (Feb. 23, 2015,

3:08 PM), http://www.cbssports.com/mlb/eye-on-baseball/25079118/yoan-moncada-signing-shows-mlbs-amateur-

talent-system-is-unfair.

10 Id.

11 Id.

12 2015 Draft Database, BASEBALL AMERICA http://www.baseballamerica.com/draftdb/index.php.

13 Ben Badler, Giants Agree To Sign Lucius Fox, BASEBALL AMERICA (July 2, 2015),

http://www.baseballamerica.com/international/giants-lucius-fox/.

14 Id.

15 Id.




17 Id.

18 Darren Heitner, Why The Phillies And NCAA Deserve Your Scorn, FORBES (Feb. 23, 2014, 2:45 PM),

http://www.forbes.com/sites/darrenheitner/2014/02/23/why-the-philadelphia-phillies-and-ncaa-deserve-your-scorn/.

19 Id.

20 Id.

21 Id.

22 Id.

23 Id.

33

24 Ron Cook, Baseball business is booming, PITTSBURGH POST-GAZETTE (Apr. 5, 2015, 12:00 AM),

http://www.post-gazette.com/sports/ron-cook/2015/04/05/Baseball-businessis-booming/stories/201504050112.

25 Id.

26 Id.

27 Id.

28 Id.

29 Craig Edwards, MLBPA Should Seek a Higher Minimum Salary, FANGRAPHS (May 15, 2015),

http://www.fangraphs.com/blogs/mlbpa-should-seek-a-higher-minimum-salary/.

30 Id.

31 Id.

32 Id.

33 Id.

34 Mark Townsend, Union workers gather to support minor leaguers, YAHOO! SPORTS (Mar. 29, 2015, 3:44 PM),

http://sports.yahoo.com/blogs/mlb-big-league-stew/union-workers-gather-at-spring-training-to-support-underpaid-

minor-leaguers-061841237.html.

35 Id.

36 Id.

37 10-74 Federal Antitrust Law § 74.2.

38 Id.

39 Id.

40 Id.

41 Mitchell Nathanson, Article the Sovereign Nation of Baseball: Why Federal Law does not apply to America’s

game and how it got that way, 16 Vil. Sports & Ent. L.J. 49, 75 (2009) (details the holding in Toolson v. New York

Yankees).

42 Id.

43 Id.

44 Id.


46 Id. at 105.

47 Id. at 106.


34

49 Federal Baseball Club, Inc. v. National League of Professional Baseball Clubs, 259 U.S. 200 (U.S. 1922).

50 Id.


52 Mitchell Nathanson, Article the Sovereign Nation of Baseball: Why Federal Law does not apply to America’s

game and how it got that way, 16 Vil. Sports & Ent. L.J. 49, 50 (2009) (details the holding in Toolson v. New York

Yankees).

53 Id.

54 Id.

55 The Practical Significance of Baseball’s presumed antitrust exemption, 22 Ent. & Sports Law 1, 2 (2004)

(contains the effect of lifting MLB’s exemption from federal antitrust law).

56 Id.

57 Jonah Keri, Why MLB Can’t Stop Dodgers From Spending on International Free Agents, GRANTLAND (July 10,

2015), http://grantland.com/the-triangle/los-angeles-dodgers-international-spending-guide-yadier-alvarez/.

58 Id.

59 Id.

60 Id.

61 Id.

62 Id.

63 Id.




65 Steve Adams & Mark Polishuk, Red Sox Sign Yoan Moncada, MLB TRADE RUMORS (Mar. 12, 2015, 7:46 AM),

http://www.mlbtraderumors.com/2015/03/red-sox-to-sign-yoan-moncada.html.

66 Id.

67 1-5 Sports Law Practice § 5.25.

68 Daniel Hauptman, NOTE & COMMENT: THE NEED FOR A WORLDWIDE DRAFT TO LEVEL THE PLAYING

FIELD AND STRIKE OUT THE NATIONAL ORIGIN DISCRIMINATION IN MAJOR LEAGUE BASEBALL, 30

Loy. L.A. Ent. L. Rev. 263, 294 (2010) (explains the history of the “amateur draft” and the renaming of the draft to

MLB’s First-Year-Player Draft).

69 Id. at 293.

70 Id.

71 Id.

35

72 Id.

73 Id. 269.

74 1-5 Sports Law Practice § 5.25.

75 Jonah Keri, Why MLB Can’t Stop Dodgers from Spending on International Free Agents, GRANTLAND (July 10,

2015), http://grantland.com/the-triangle/los-angeles-dodgers-international-spending-guide-yadier-alvarez/.

76 Id.





78 Id.

79 Id. at 264.




81 Id.








84 Steve Adams, 2015 MLB Draft Primer, MLB TRADE RUMORS (June 8, 2015, 1:49 PM),

http://www.mlbtraderumors.com/2015/06/2015-mlb-draft-primer.html.

85 Id.

86 Id.

87 Ronald Blum, MLB Draft means $100M less for amateurs, THE DENVER POST (June 4, 2015, 11:56 AM),

http://www.denverpost.com/rockies/ci_28251586/mlb-draft-restraints-mean-100m-less-amateurs-over-3-

years?source=infinite.

88 Id.

89 Id.

90 Id.

91 Id.

92 Id.

36




94 The Practical Significance of Baseball’s presumed antitrust exemption, 22 Ent. & Sports Law 1, 1 (2004)

(contains the effect of lifting MLB’s exemption from federal antitrust law).

95 Kiley McDaniel, Signing July 2nd Players Even More Complicated, FANGRAPHS (June 29, 2015),

http://www.fangraphs.com/blogs/signing-july-2nd-players-has-gotten-even-more-complicated/.




97 Id.





99 Id.

100 Darren Heitner, Is the NCAA Improperly Suspending Student-Athletes, FORBES (Feb. 26, 2014, 3:54 PM),

http://www.forbes.com/sites/darrenheitner/2014/02/26/is-the-ncaa-improperly-suspending-student-athletes-by-

relying-on-the-no-agent-rule/.

101 Id.

102 Id.

103 Darren Heitner, Why the Phillies and NCAA Deserve Your Scorn, FORBES (Feb. 23, 2014, 2:45 PM),

http://www.forbes.com/sites/darrenheitner/2014/02/23/why-the-philadelphia-phillies-and-ncaa-deserve-your-scorn/.

104 Robert P. Garbarino, ARTICLE: Practitioner’s Note: So You Want to be a Sports Lawyer, or is it a Player

Agent, Player Representative, Sports Agent, Contract Advisor, Family Advisor or Contract Representative, 13 Vill.

Sports & Ent. L.J. 1, 23 (2006) (discusses the importance for amateur players to hire sports attorneys instead of

sports agents).

105 Joshua P. Jones, NOTE: A CONGRESSIONAL SWING AND MISS: THE CURT FLOOD ACT, PLAYER

CONTROL, AND THE NATIONAL PASTIME, 33 Ga. L. Rev. 639, 642 (1999) (explains team control).

106 Id. at 643.




108 Id.

109 Ron Cook, Baseball business is booming, PITTSBURGH POST-GAZETTE (Apr. 5, 2015, 12:00 AM),

http://www.post-gazette.com/sports/ron-cook/2015/04/05/Baseball-businessis-booming/stories/201504050112.

110 Id.

37

111 Id.

113 Id.

114 Nathaniel Grow, MLBPA Has a Problem, FANGRAPHS (Mar. 30, 2015), http://www.fangraphs.com/blogs/the-

mlbpa-has-a-problem/.

115 Id.

116 Id.

117 Id.

118 Id.

119 Id.

120 Id.

121 Id.

122 Id.

123 Joshua P. Jones, NOTE: A CONGRESSIONAL SWING AND MISS: THE CURT FLOOD ACT, PLAYER

CONTROL, AND THE NATIONAL PASTIME, 33 Ga. L. Rev. 639, 649 (1999) (explains team control).

124 Wendy Thurm, MLB under Attack to Pay Minimum Wage, FANGRAPHS (Feb. 13, 2014),

http://www.fangraphs.com/blogs/mlb-under-attack-on-all-sides-for-failing-to-pay-mimimum-wage/.

125 Id.

126 Id.

127 Id.

128 Id.

129 Jorge Ortiz, Minor Leaguers Want Minimum Wage for Maximum Effort, USA TODAY (Apr. 22, 2015, 12:57 PM),

http://www.usatoday.com/story/sports/mlb/2015/04/22/minor-league-baseball-players-lawsuit-mlb-major-league-

baseball-minimum-wage/26179605/.

130 Id.

131 Id.





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