August 9, 2013

A-Rod and Arbitration

aroid.bmp New York Yankees slugger Alex Rodriguez (hereinafter "A-Rod") was recently suspended for 211 games by Major League Baseball for his involvement with performance-enhancing drugs. However, as of this writing, A-Rod is currently playing third base for the Yankees. Why is this? The reason is that the collective bargaining agreement between the Major League Baseball Players Association (MLBPA) and Major League Baseball (MLB) allows any player suspended for this reason to appeal his penalty to a neutral, third-party arbitrator, and to continue to play until the arbitration appeal is resolved.

The existence of a neutral arbitrator in these situations is quite common in most labor - management agreements. In fact, the first executive director of the MLBPA, Marvin Miller, had a background working for the United Steelworker's Union prior to taking the MLBPA position. Because of his prior experience negotiating with U.S. Steel, he recognized the importance of a neutral, third party arbitrator to resolve disputes. In the 1968 Basic Agreement between MLB and the MLBPA, the parties agreed to the appointment of such an arbitrator.

In 1976, Peter Seitz, as arbitrator, resolved a dispute involving whether a player could "play out his option" and become a free agent after his existing contract expired and was renewed for one year by his team. Seitz ruled that the team's renewal option was for one year only, and, after that renewal or "option" year, a player would become a free agent, free to negotiate with any team. The team owners were quite chagrined at this outcome, and immediately fired Seitz, but the ruling stood, giving players the leverage to negotiate a new labor agreement allowing them to become free agents after a certain period of major league service time.

Courts have upheld the principle that, when the parties in a labor dispute agree to arbitration, such arbitrator's decision is final and generally not subject to appeal. Although MLB owners were extremely unhappy with the Seitz ruling, an appeal to the Courts was unsuccessful and the ruling stands to this day.

In general, parties in any contractual relationship can agree to resolve disputes through an arbitration process. A contract may have a clause whereby the parties agree to forego the Court system and submit all disputes relating to the contract to a neutral arbitrator. If a party ignores this provision and commences litigation, the other party can request that the litigation be stayed (meaning the Court will take no action) pending an arbitration.

The parties will also usually agree to the specific forum of the arbitration, meaning the physical location of the arbitration as well as the proposed arbitrator or arbitrators. The most common is to agree to submit the dispute to the American Arbitration Association (AAA). For a fee, the AAA supplies a neutral arbitrator with expertise in the subject area of the contract. For example, if the contract is for construction of a building, the AAA will supply the parties with a list of arbitrators with experience in construction law and litigation. If both parties are members of the same religious community, they may choose to submit their disputes to a religious tribunal, such as a Beth Din.

In general, once the parties agree to an arbitrator, and the arbitrator issues her decision, that decision is binding on the parties and not appealable to the Court system. An exception would be if the arbitrator was obviously biased against one of the parties, or if the arbitrator's decision was "arbitrary and capricious." Such appeals are almost always unsuccessful, leaving the arbitrator's decision as the last word in the dispute. After a decision has been rendered, the successful party may have the decision confirmed in a Court of appropriate jurisdiction. For example, if an arbitrator found that one party owned the other $50,000.00, that party would file a motion in Supreme Court in the appropriate county to confirm the decision and enter a judgment for that amount.

Weiss & Weiss has experience resolving all disputes through the arbitration process, and welcomes all inquiries relating to such contractual matters. Our attorneys will also continue to monitor the arbitration process as it relates to A-Rod.