Wednesday, May 2, 2007

Alternative Dispute Resolution & the History of Baseball: Part Three

by Brent S. Gambill

III. ARBITRATION (Continued)

Andy Messersmith & Dave McNally

“Baseball must be a great game. It survives the men who run it,” a wise man wrote many years ago.[1] Following the Hunter decision, the owners appeared to think of Hunter as a bump in the road or more likely another Finley blunder. Their arrogance in the status quo continued as they began collective bargaining sessions with the players following the 1975 season. The owners brought no ideas, proposals, suggestions, or counter proposals to the meetings. The players would make their pitch and the owners would say, “We like things the way they are.” Of course this is collective bargaining, but the owners felt listening was enough to constitute the collective bargaining initiative.

Following the 1975 season, Los Angeles Dodgers Andy Messersmith and Montreal Expos Dave McNally filed grievances. The players declined to sign their contracts for the 1975 season and their owners exercised the option of renewing their contracts unilaterally for the season. Paragraph 10a of the standard one-year player contract gives the owner an option on the man’s services for another year.[2] If a new contract is not agreed upon the employer has the right to renew the expired contract “for a period of one year on the same terms.” The National Football League (NFL) had the same issue at the time, but they had other rules that limited the freedom of players. Baseball had never recognized this loophole.[3] There would have been a third player involved in the arbitration, but Richie Zisk of the Pittsburgh Pirates signed his contract just before the National League playoffs. Jerry Kapstein, Zisk’s agent and formerly Hunter’s agent, said he signed “because he felt it would be in the best interests of his teammates.” Kapstein was just as leery about the Messersmith/McNally arbitration as he was with the Hunter arbitration.[4]

Messersmith and McNally had different futures ahead. Messersmith wanted to remain a Dodger. He simply wanted a “no-trade” clause in his contract. The Dodgers denied this request stating they had no intention of trading. Los Angeles did not want to set the precedent by putting a no-trade clause in his contract because they assumed all their players would want it as well. After Messersmith pondered the Dodgers response more, he thought it sounded like he was being told he could not be paid what he was worth because the rest of the players would want the same. He felt this was unfair, so he did not sign the contract. In 1975, Messersmith pitched 32 innings winning 19 games with a 2.29 ERA striking out 213 batters[5] and was considered one of the best pitchers in baseball at the time.

McNally had won 181 games for the Baltimore Orioles. He had four straight 20-win seasons at one point as he helped anchor the famed Orioles pitching staff.[6] When Baltimore began rebuilding, McNally was traded to the Montreal Expos for Mike Torrez and Ken Singleton.[7] McNally was a 10-5 player, ten years in the majors, the last five with the same team, so he had the right to refuse the trade. He told Expos official John McHale that he wanted a two-year contract at $125,000 per season. Once the deal was done, the Expos only offered one year for $115,000. McNally refused to sign.[8] During the season, he appeared in only 12 games winning three of nine decisions with an ERA of 5.26.[9] McNally battled a sore arm throughout the spring. On June 8th, McNally lost the first game of a double header. He left the club and went home to Billings, Montana, where he was from and had a Ford dealership.[10] He was subsequently placed on the disqualified list. Prior to the arbitration, McNally did not intend to ever play professional again. Legally, the Expos could have easily made his case moot by simply releasing him.[11]

On October 28, 1975, the owners sought an injunction to keep the case out of arbitration.[12] The Federal Judge John W. Oliver in Kansas City refused to enjoin arbitration when the contract specifically calls for arbitration. He did state that the case go to the arbitrator with the understanding that the parties could return later to argue jurisdiction.[13]

Prior to arbitration, owners panicked at the thought of the possible precedent giving players the right to play out their options thus obliterating the reserve clause. The Dodgers offered everything Messersmith wanted and more with a multi-year, no-trade deal with a higher salary than any pitcher had ever made. Expos officials McHale and Jim Fanning spent considerable time in Billings offering McNally a $25,000 bonus and a $125,000 salary for the year[14] which was more than he ever received in Baltimore. This was odd considering he was essentially a retired pitcher.[15] McHale told him that even if he did not play, even if he didn’t last through spring training, the signing bonus was his to keep. Ever the professional, McNally refused as he did not trust McHale given their previous season’s negotiations and he didn’t feel it was right to take the money considering he had no intentions of playing.[16]

On November 21, 1975, the arbitration hearing for Messersmith was held. He was represented by Moss and Miller of the MLBPA as well as Herb Osmond, his agent. The Dodgers were represented by Peter O’Malley, club president, Lou Hoynes, counsel for the National League, Chub Feeney, president of the National League, and James Garner, counsel for the American League.[17] Hoynes and Garner presented the owners case, while Moss did so for the players.

The arbitration was heard by a three-person arbitration panel headed by Seitz. The other two members of the panel were again Miller and Gaherin. The witnesses for the players were MLBPA’s Miller, former Major League pitcher Jim Bouton, and New York Mets player representative Joe Torre.[18] Kuhn was a witness for the owners.[19] Kuhn actually wanted to make a statement at the opening of the hearing to which the players objected. If he wanted to speak he could be called as a witness to testify which is what he did. The first matter to be considered was the owner’s argument that the grievance was outside an arbitrator’s jurisdiction. Each side presented its case and the hearing recessed for a week. After reviewing the transcript, Seitz ruled the grievance was arbitrable.[20]

Moss argued that the renewal clause merely was a one-shot affair. He further contended that Paragraph 10(a) of the basic agreement between the players and the owners gives the owners the right to renew an unsigned player’s contract for one year and one year alone.[21] In Messersmith’s case, it was only good for the 1975 season. The owners’ position was that “on the same terms” means with another one-year option. The Dodgers stated that 10(a) becomes a part of the renewed contract and can be invoked by the owners as long as they wish.[22] After three days of testimony, each side rested their case. Post-hearing briefs were suggested, but Seitz dry sense of humor shone through as he gently urged the parties to consider the impact on the environment: “Whole hillsides are being decimated for the exhibits in this case.” The transcript still ran 892 pages nonetheless.[23]

Seitz urged the parties to settle their differences outside of arbitration. During Kuhn’s testimony, Seitz said to him, “Don’t be bashful, if you have ideas, call me up in the middle of the night. I welcome them.” He later reminded both sides that hey were engaged in negotiations for a new basic agreement on working conditions, which include the reserve system. He insisted the sides meet immediately and try to bargain out the issue instead of waiting for a quasi-judicial opinion. They never met.[24] On December 8th, Seitz called a meeting of the three-man arbitration panel, Miller and Gaherin, and told them according to Gaherin: “If there’s going to be a decision here someone is going to get hurt. I’m willing to be of service to you two. I’m willing to say what my impressions are at this moment.” Miller felt the players were going to win following the meeting, but he was not certain. Gaherin, with support from his counsel, Barry Rona, a labor lawyer pushed aside in the case by the league lawyers, tried to prevail upon the owners to let him try to negotiate a settlement to no avail.

Four weeks went by before Seitz called a meeting at Gaherin’s office on December 21, 1975. Gaherin, Rona, Miller, and Moss were all in attendance. Upon Seitz arrival he presented a copy of his sixty-one page decision.[25] The decision was announced publicly on December 23rd[26]:


The grievances of Messersmith and McNally are sustained. There is no contractual bond
between these players and the Los Angeles and Montreal clubs, respectively. Absent such a contract, their clubs had no right or power, under the Basic Agreement, the uniform player contract or Major League Rules to reserve their services for their exclusive use for any period beyond the “renewal year” in the contracts which these players had heretofore signed with their clubs.[27]

He ruled that Messersmith and McNally were free agents as they played out their option by playing without a contract in the previous season. Seitz rejected the owners’ argument that the case was not subject to arbitration. He further rejected the team’s claim that the clubs may renew a player’s contract forever. Seitz ruled the players were free to bargain with other clubs once their contracts expired.[28] Seitz explained that “the panel’s sole duty is to interpret and apply the agreements and understandings of the parties” and in this case to decide what is meant by the language of the option clause of the standard player contract.[29] Basically, Seitz decided that when a player’s contract says “for a period of one year” it does not mean two years or 20 or 200.[30]

Seitz also advised that a suitable procedure for free agency be established in the new Basic Agreement. He continued his pre-decision advice: “…it still isn’t too late. If this finding is destructive to the reserve system, if it is a blow to the national game, there is still time for them to sit down and ameliorate the blow. As I understand it, the Player’s Association was not opposed to the reserve system; it was opposed to the reserve system with the present restrictions.”[31]

Seitz and Miller signed the decision. Gaherin signed it on the line that read “dissenting,” looked up at Seitz and said, “Peter, I’m sorry. I love you dearly, but you’re out.”[32] Before the ink was dry, Seitz was fired. Gaherin gave the following statement on the dismissal: “Professional Baseball has instructed me to terminate Peter Seitz as chairman because it no longer has confidence in the arbitrator’s ability to understand the basic structure of organized baseball.”[33] Per the agreement, Seitz was able to be dismissed by either side following completion of any baseball related arbitration obligations. “You expect it, because somebody always loses. But I’ve never been terminated this way. Two minutes after I sign the order, I’m gone,” commented Seitz.[34] If the owners had shown the slightest inclination to resolve their differences with the players, Seitz indicated he would have left ample time for the parties to negotiate and reach a settlement. Following the decision, Seitz stated, “I begged them to negotiate. The owners were too stubborn and stupid. They were like French barons in the twelfth century. They had accumulated so much power they wouldn’t share it with anybody.”[35] Along with the dismissal notice went a demand that Seitz release no copies of his opinion and refrain from discussing it, writing about it or making speeches about it. Seitz, ever the professional, agreed he would not circulate the opinion because he felt it was the property of the parties involved. He later added that he regarded the order to button his lip, coming from the people who had just fired him, as the ultimate in arrogance.[36]

American and National League Presidents, Feeney and MacPhail, released a joint statement that the arbitrator had overreached his authority “when the Supreme Court, the Congress and other authorities have clearly placed the reserve system above narrow, individual disputes.” This was obviously untrue. The Supreme Court has never reviewed the reserve system. Baseball as interstate commerce is the only issue ever brought before the Supreme Court. As for Congress, that body has considered many bills to give baseball and the reserve system statutory exemption from antitrust law and has rejected them all. A Congressional subcommittee headed by Emanuel Celler of Brooklyn did conduct public hearings on three such bills in 1951 and concluded that baseball needed “some sort of reserve clause.” Those testifying before the subcommittee included Ty Cobb, Bill Werber and Walter A. Smith.[37]

An appeal was filed immediately in federal court in Kansas City by the owners. MLBPA filed a counterclaim.[38] Marvin Miller commented on the appeal: “It’s counterproductive for them to go back into court. The problems have to be resolved at the bargaining table. It’s always terrible to agree in a contract to accept final and binding arbitration, then be unable to accept the decision and go into court and try to overturn it. I think there’s bad faith involved.”[39]

A pretrial hearing was held on January 8, 1976. Judge Oliver said the two sides could settle their dispute out of court if Commissioner Kuhn took the initiative. Kuhn never came forward with any suggestions.[40] Kuhn later said, “I am not in a position to comment as to what is going on in Judge Oliver’s court, but I certainly have urged the owners’ players relations committee to find some reasonable compromise.”[41] By January 19th, the judge asked the 11 attorneys to try and reduce the number of suggested findings submitted by the two sides to expedite the case. The parties were working on a stipulated set of facts for the judge to base the future proceedings of the case. The owners included 107 suggested findings of fact in a 76-page brief, while the players association included 18 suggestions of fact in a 45-page brief.[42] Judge Oliver spent the next two days helping attorneys reach agreement over the 107 findings of fact presented by the owners. The parties agreed to all 18 findings of fact presented by the players.[43]

On February 4, 1976, Judge Oliver upheld the arbitrator’s ruling stating that he lacked authority to review grievances submitted to arbitration panels. “The Supreme Court has determined courts have no business overruling an arbitrator’s decision. The Federal policy of settling labor disputes by arbitration would be undermined if courts had the final say on the merits of the awards,” said Oliver in his 53-page opinion. The owners had argued that the reserve system was exempt from all parts of the 1973 Basic Agreement between the players and owners, including the section setting up grievance procedures. The owners and players had agreed to use of an arbitrator to solve their problems and “did not bargain for the decision of this or any other court.” The players counsel was ordered to prepare the final judgment.[44] In ruling that the arbitrator did not exceed his authority, Oliver stated that Seitz had discharged his duties with the highest sense of fidelity, intelligence and responsibility.[45] On February 11th, Oliver denied the owners request for a stay of his order while they appealed.[46]

Prior to the Messersmith/McNally decision, it was the players who insisted on change while the owners were content with the status quo. Now it was the players wanting the status quo and the owners in favor of change. It was quite a reversal of fortunes. “We have no proposals for change in the entire reserve rules system. Any dispute that exists arises because of the owner’s demands for change. To those who ask what the players want now, the answer is nothing,” said MLBPA’s Miller. It appears the players’ strategy was to strategically use the owner’s litigation against them in labor negotiations. The players’ association proposed to the owners that they set aside discussions on the reserve system pending completion of litigation and proceed with negotiations on other aspects of the basic agreement.[47]

On February 12, 1976, the owners filed a notice of appeal with the Eighth Circuit Court of Appeals along with a stay of injunction seeking to prevent Oliver’s ruling from taking effect.[48] On March 9, a three-judge panel of the Eighth U.S. Circuit Court of Appeals unanimously ruled that Peter Seitz had the authority to hear the players’ grievances and declare them free agents. The 44-page opinion by Judge Gerald W. Heaney was joined in the decision by Judge Floyd R. Gibson and Roy L. Stephenson.[49] The panel strongly suggested that the two sides settle their differences in negotiations.[50] Peter Seitz commented following the courts ruling, “I’m delighted and honored. However, I’m in some condition of wonderment over why I should have been fired when two courts said the same thing as I did.”[51] Following the decision, the owners decided for a lockout of the players from spring training. After 17-days of a lockout, Commissioner Kuhn ordered camps open in response to progress in labor negotiations.[52] The owners decided not to appeal to the United States Supreme Court,[53] thus Messersmith could finally begin negotiations for a new contract as a free agent.

On March 31st, 1976, the New York Yankees claimed that free agent Messersmith had reneged on a four-year, $1 million agreement and appealed to the commissioner. The contract was not signed. The Yankees attest that under baseball rules that an agreement between a player and a club before the contract is signed can bind a player to that club. Osmond, Messersmith’s agent, and Gabe Paul, Yankees President, each signed a written agreement on the four-year deal. Part of the salary to Messersmith was to be made in the form of deferred payments over a 20-year period, but the issue was over interest on the deferred money. The supposed written agreement turned out to only be some details on a handwritten piece of paper outlining a few provisions. “This was supposed to be presented to Andy and be followed by a contract,” said MLBPA’s Miller.[54] In the end, the Yankees made a contract proposal and Messersmith refused to sign. On April 11th, 1976, Messersmith signed a three-year contract worth $1.75 million dollars with Ted Turner’s Atlanta Braves. Braves General Manager Eddie Robinson called Commissioner Kuhn to insure that Messersmith was still a free agent following the Yankee debacle. The Braves made the signing while on a road trip in San Diego. Ray Kroc, owner of the San Diego Padres, had offered $1.15 million. Following Messersmith’s rejection of his offer, Kroc was quoted as saying, “For my part, he can go wash cars.” At the signing, Messersmith conceded that the remark had helped convince him to become a Brave.[55] The irony of the contract was that Messersmith signed a contract giving Atlanta the right of first refusal following the end of his contract. In essence, he signed away his future free agency status, which was the very rights he gained by his arbitration. A provision of the basic agreement prevented a player, knowingly or otherwise, from signing away rights that the union had won in collection bargaining. Miller immediately called Feeney and the clause was taken out of the contract without arbitration.

Messersmith never reached his previous measure of success with the Braves, who were the worst club in the National League. In 1978, he was traded to the Yankees and he finished his career with the team he never wanted to leave in the first place, the Los Angeles Dodgers.[56] Messersmith’s post free agency career might have been lackluster, but his name will forever be linked to the historical birth of free agency for players in baseball. In the coming years, player salaries soared as the average salary went from $38,000 in 1974[57] to $121,000 in 1979. The odd part of the equation was that baseball’s owners did not begin losing money. While ticket prices were raised, attendance and television revenue went up bringing even more money into the coffers of the owners.[58]

END NOTES:
[1] Red Smith, The Men Who Run Baseball, N.Y. Times, Oct. 26, 1975, at 221.
[2] Red Smith, Dodger Begins Free-Agent Bid, N.Y. Times, Nov. 22, 1975, at 21.
[3] Smith, at 221.
[4] Kenneth Denlinger, If You Don’t Like the Call, Then Fire the Umpire, The Washington Post, Dec. 25, 1975, at E11.
[5] Red Smith, Where One Year Is Forever, N.Y. Times, Dec. 5, 1975, at 31.
[6] John Helyar, Lords of the Realm: The Real History of Baseball 158, Villard Books (1994).
[7] Red Smith, The Men Who Run Baseball, N.Y. Times, Oct. 26, 1975, at 221.
[8] Helyar, at 158. [9] Red Smith, Where One Year Is Forever, N.Y. Times, Dec. 5, 1975, at 31.
[10] Helyar, at 158.
[11] Red Smith, The Men Who Run Baseball, N.Y. Times, Oct. 26, 1975, at 221.
[12] Arbitrator Upheld Ruling In Baseball Ruling, N.Y. Times, Feb. 5, 1976, at 45.
[13] Red Smith, Where One Year Is Forever, N.Y. Times, Dec. 5, 1975, at 31.
[14] Marvin Miller, A Whole Different Ball Game: The Sports and Business of Baseball 245, Birch Lane Press (1991).
[15] Smith, at 31. [16] Miller, at 245.
[17] Murray Chase, Threat Now Looming For Spring Training, Dec. 25, 1975, at 15.
[18] Red Smith, Dodger Begins Free-Agent Bid, N.Y. Times, Nov. 22, 1975, at 21.
[19] Murray Chass, Insiders Recall Birth of Free Agency 10 Years Ago, N.Y Times, Dec. 22, 1985, at S3.
[20] Miller, at 247.
[21] Arbitrator Rules 2 Pitchers ‘Free’, The Washington Post, Dec. 24, 1975, at C1.
[22] Arbitrator Rules 2 Pitchers ‘Free’, at C1. [23] Miller, at 248.
[24] Red Smith, Christmas Spirit, N.Y. Times, Dec. 24, 1975, at 15.
[25] Miller, at 250. [26] Bowie Kuhn, Hardball 160, Times Books (1987).
[27] Murray Chass, Insiders Recall Birth of Free Agency 10 Years Ago, N.Y Times, Dec. 22, 1985, at S3.
[28] Arbitrator Rules 2 Pitchers ‘Free’, The Washington Post, Dec. 24, 1975, at C1.
[29] Red Smith, Wanted: New Ghostwriters, N.Y. Times, Dec. 28, 1975, at 139.
[30] Red Smith, Christmas Spirit, N.Y. Times, Dec. 24, 1975, at 15.
[31] Smith, at 15.
[32] Marvin Miller, A Whole Different Ball Game: The Sports and Business of Baseball 250, Birch Lane Press (1991).
[33] Arbitrator Rules 2 Pitchers ‘Free’, The Washington Post, Dec. 24, 1975, at C1.
[34] Kenneth Denlinger, If You Don’t Like the Call, Then Fire the Umpire, The Washington Post, Dec. 25, 1975, at E11.
[35] Miller, at 251. [36] Smith, at 15.
[37] Red Smith, Homework for Chub and Lee, N.Y. Times, Dec. 30, 1975, at 17.
[38] Arbitrator Rules 2 Pitchers ‘Free’, The Washington Post, Dec. 24, 1975, at C1.
[39] Murray Chase, Threat Now Looming For Spring Training, Dec. 25, 1975, at 15.
[40] Judge Seeks To Speed Up Baseball Suit, N.Y. Times, Jan. 20 1976, at 52.
[41] Progress Is Made In Suit by Baseball, N.Y. Times, Jan. 21, 1976, at 63.
[42] Judge Seeks To Speed Up Baseball Suit, at 52.
[43] Progress Is Made In Suit by Baseball, at 63.
[44] Arbitrator Upheld Ruling In Baseball Ruling, N.Y. Times, Feb. 5, 1976, at 45.
[45] Judge Upholds Arbitrator Ruling for Baseball Players, N.Y. Times, Feb. 5, 1976, at F1.
[46] Baseball to Appeal Court Ruling, N.Y. Times, Feb. 12, 1976, at 50.
[47] Ballplayers Shun Hasty Agreement, N.Y. Times, Feb. 13, 1976, at 55.
[48] Owners File Appeal In Reserve Ruling, The Washington Post, Feb. 13, 1976, at C8.
[49] Kansas City Royals Baseball Corporation v. Major League Baseball Players Association, 532 F.2d 615 (8th Cir. 1976).
[50] Murray Chass, Baseball Owners Lose Again: Free-Agent Status of 2 Upheld, N.Y. Times, Mar. 10, 1976, at 63.
[51] Murray Chass, Owners Seen Unready for Compromise, N.Y. Times, Mar. 11, 1976, at 53.
[52] Kuhn Orders Camps Opened, The Washington Post, Mar. 18, 1976, at C1.
[53] Marvin Miller, A Whole Different Ball Game: The Sports and Business of Baseball 252, Birch Lane Press (1991).
[54] Yankees’ Claim Of Pact Is Denied By Messersmith, The Washington Post, Apr. 1, 1976, at E1.
[55] Messersmith Signs A Braves’ Contract, N.Y. Times, Apr. 11, 1976, at 161.
[56] Miller, at 253.
[57] Robyn Norwood, Salary Arbitration Is No. 1 Issue in Baseball Stalemate, The Washington Post, Aug. 7, 1985, at G3.
[58] Red Smith, The Best and Worst of Times, N.Y. Times, Dec. 30, 1979, at S5.


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