shea ws (3)
I am a baseball fan from way back. I’m also an eternal optimist, which explains my being a Mets fan. See? That’s me holding the banner on the right, celebrating the Mets 1969 World Series victory on the field at Shea Stadium.
But I digress. With pitchers and catchers reporting to spring training in a few weeks, I thought now would be a good time to examine the role arbitration plays in keeping the boys of summer on the playing field and out of court.

Baseball Arbitration: a Primer
Last month, I blogged about hybrid forms of alternative dispute resolution. To review, while there are virtually limitless forms of hybrid ADR forms, in my mind these alternate forms of ADR fall into three major groups: 1) arbitration variations; 2) mediation variations; and 3) what I call potpourri – a mixture of dispute resolution methods. Again, the basic definitions are:

Arbitration: an agreement in writing to submit an existing or future dispute to an arbitrator for final and binding resolution. The Federal Arbitration Act, 9 U.S.C §§ 1 et seq., as well as state arbitration laws, provide for very limited court review of arbitration decisions, rendering arbitration awards essentially “final and binding.”

Mediation: an agreement, not necessarily in writing, to submit an existing or future dispute to a third party (the mediator), who will work with the parties to help them reach a settlement. The mediator cannot impose a settlement on the parties.

Major League Baseball and the Players Association

The owners and the players’ union employ a hybrid form of ADR called “Final Offer” or “Last-Best Offer” (“LBO”) arbitration to resolve salary disputes. Believe it or not, this is an arbitration system designed not to have arbitrators decide cases. How’s that? Here’s how it works: the team and an eligible player whose contract is expiring do their best to negotiate a new contract. If they can’t, they go to LBO. These cases typically are heard in a short window of time that happens around this time of year. This year, 175 players filed for arbitration with their team by the deadline earlier this week. In this form of arbitration, the parties negotiate to their last and best offer; in the case of major league baseball, the player’s last demand and the team’s last offer. After hearing the case the arbitrator can only go with one figure or the other, nothing in between. For example, if the player’s last demand is $15,000,000 and the team’s last offer is $10,000,000, the arbitrator must take either figure but not something more, less, or in between. In other words, the award is either $15,000,000 or $10,000,000. There’s no opinion accompanying the award.

An Arbitration System Designed to Avoid the Arbitrator?
Why do I say the baseball LBO salary arbitration is designed to avoid arbitration? In my view, the system’s purpose is to encourage settlement, not to foster arbitration cases and hearings. Because the arbitrator must select one figure or the other, the parties have a very strong incentive to bargain in good faith. If not, the arbitrator’s hands are tied and he or she may end up selecting the least ridiculous offer (a term some derisively ascribe to this form of arbitration).

Knowing that the arbitrator can only pick one figure or the other, the parties negotiate in good faith and do indeed settle most cases. In fact, in 2013, 100% of MLB salary arbitration cases settled, for the first time. Already, many players have already settled with their team. Disputes that are not settled are heard by an arbitrator in early February. The bottom line is that this process is quick, promotes settlement, gives the parties a certain level of control regarding outcomes, and the case will end either by settlement or arbitrator’s decision in time for spring training.

What is the Purpose?
If the purpose of this system of arbitration is to avoid the arbitrator, what is its purpose? This one’s a hanging curveball…. The purpose of the baseball arbitration system is to quickly, fairly, and inexpensively resolve disputes so players can get back on the field where they belong. Or, stated succinctly, “Play ball!”

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