Alex Rodriquez roamed Washington DC’s power corridors Wednesday (pictured), while his agents back home in New York drafted grievance papers against the Yankees for nonpayment of $6 million, due Friday.[i] A-Rod claims the sum as an agreed bonus for hitting his 660th home run on May 1, tying Willie Mays for fourth place on the all-time list. The Yanks say the bonus isn’t due unless achieving the milestone is commercially marketable, which they signal it isn’t, without saying why. A-Rod’s advisors will challenge that conclusion as well as whether the team reached it in good faith, or as a pretext to avoid a sizable payday.[ii]
The outcome is uncertain. While both sides seem to agree that the sole test is whether the Yankees hold a good faith belief that the milestone is not commercially marketable, they may disagree about what those two concepts entail in this particular setting. When contract fights boil down to such disagreements over the contextual meaning of an abstract phrase, a good bet is that both sides will seek to settle rather than fight, as Michael McCann suggests might happen here.
The concept of commercial marketability is inherently elastic. Its meaning has ranged from simple readiness of an economic good or service for public sale or distribution to some reasonable prospect of achieving meaningful levels of sales or profits. In baseball, a player and his achievements have been recognized as such an economic entity whose identity and record translate into revenue and gain for players and teams alike. Broad standards like these leave a wide range of discretion in the party who gets to make the determination of commercial marketability. In this case, that party is the Yankees.
To constrain that discretion, the A-Rod/Yanks contract and general principles of contract law require that the Yankees exercise it in good faith. That means the team must make a determination based on information, experience and judgment about the prospects. They may weigh fan and media interest in home run races generally—the effects when number one Barry Bonds overtook number two Hank Aaron say—and probably would be constrained to consider other races A-Rod has been in, including his current quest for 3,000 hits. The team will heavily weight A-Rod’s poor reputation among fans, given drug abuse and other blemishes; many baseball fans detest the tarnished player’s run for records held by revered titans, like Willie Mays, the beloved “say-hey kid,” or his Godson, Bonds.
Bob MacManaman argues that it is also relevant how A-Rod’s recent performance contributes to the team’s commercial success. The team is in first place thanks in part to A-Rod. But helping the team win does not automatically mean that home run milestones are commercially marketable. Yet the Yankees muffled the marketing by downplaying the quest. They omitted the home run derby from the list media should watch for, as Billy Witz reported for the New York Times. They have not explained why. In contrast, they stoke other A-Rod quests, including his impending 3,000th hit. To raise doubt about good faith, A-Rod will stress that he and the Yankees have no bonus agreement about 3000 hits and other A-Rod targets they are promoting while ignoring the one that triggers bonuses.
It remains a close call and both sides will thus appeal to the equities—as they have been in the media and on the field. The Yankees must worry about perceptions of even handedness. They do not want to alienate other current or prospective players, which is why owner Hal Steinbrenner stresses that the Yanks honor all their contracts.
A-Rod has to improve his profile to reinforce arguments about commercial marketability. That’s why he has been so well-behaved during this episode. It may help explain why he spent Wednesday visiting with the Georgetown Hoyas in DC, though his enemies, like Phillip Bump, find it characteristically distasteful for A-Rod to be hanging out with DC’s pols in the afternoon. All of this points to the prudence of settlement rather than arbitration, which is wasteful and risky.
Lawrence A. Cunningham, a professor at George Washington University, is working on a new edition of his book, Contracts in the Real World: Stories of Popular Contracts and Why They Matter, likely including analysis of the A-Rod v. Yankees case. He is not jealous that A-Rod visited the campus of Georgetown University today.
[i] The due date appears to be “15 business days after reaching the milestone”, which was met on May 1, translating into this Friday May 22. A-Rod would have 30 days to file a grievance for nonpayment.
[ii] To the Yankees, the payout would include another $6 million to Major League Baseball, under its rules taxing luxurious player compensation in the name of equity across baseball teams.