Bidding for Matsuzaka Poses Interesting Legal Issues

Today at 5:00 p.m ET, the bidding rights to Japanese pitcher Daisuke Matsuzaka will end. At that time, MLB will inform the Seibu Lions of the winning bid — without identifying the team — and Seibu has until Nov. 14 to accept or reject the bid. The team with the winning bid will then have 30 days to negotiate a contract with Matsuzaka and his agent Scott Boras. If no deal is reached, Matsuzaka returns to Japan and the major league team will be refunded its posting fee, which is predicted to reach as high as $30 million. See Bob Nightengale, USA Today, Matsuzaka market nears close.

ESPN Magazine writer Buster Olney raises a fascinating issue:

The posting system is deeply flawed. For example, here's one sabotage scenario that might interest a team like Baltimore, which is faced with the possibility that Matsuzaka will land with either of the big market monsters in its division, the Yankees or the Red Sox. The Orioles could post a huge bid -- say $50 million -- and blow everybody else out of the water. With exclusive negotiating rights, they then could offer Matsuzaka a take-it-or-leave-it, strategically structured bid, like a 10-year, $5 million-per-year deal. Matsuzaka and agent Scott Boras, with just 30 days to negotiate and with no ability to generate a competing bid from another major league team, would have the stark choice of taking the Orioles' lowball offer or remaining in Japan. If Matsuzaka came to the U.S. under those circumstances -- and that would seem very unlikely -- the Orioles would have a frontline pitcher for less than the total package that everybody expects it will cost to get Matsuzaka. And if he were to stay in Japan after such a lowball offer, the Orioles would get their posting fee back and would still serve their own purposes, as well, by keeping him out of the hands of the Red Sox and Yankees.

I suppose the one "check" on the bidding system is that the MLB team that gets the winning bid would have an implied obligation to negotiate in good faith with Boras. But "good faith" is one of the most difficult concepts to apply in contract law -- What does it mean and how do you prove a breach? I suppose the winning team could argue that the bid price should be taken into account when negotiating Matsuzaka's salary, and thus the bid price should be included with the player's negotiated salary in determining Matsuzaka's fair value. But the counter to that would be that the bid price is merely consideration paid to the Japanese team for the rights to the player, and that his value, for purposes of good faith negotiation, should be looked at separately. If so, what is the standard for determining his fair value? Is Boras entitled to an amount based upon what the player would get in an open free agent market? If so, that value would be difficult to ascertain when the bid process completely eliminates the ability to determine his value in an open market. Or is a portion of the bid price consideration for the MLB team not having to negotiate with other teams in an open market, and thus the player is not entitled to an amount equal to what Boras could get in an open market?

Now, switch gears, because there is another interesting legal issue arising out of the bid process for Matsuzaka. Boras represents the top pitchers competing in the open free agent market this year: Zito, Maddux and Weaver. It's definitely in Matsuzaka's best interest to sign with an MLB team than to go back and play in Japan, even if the contract is something less than what Boras could get in an open market. But is it in the best interest of each of these three pitchers for Matsuzaka to sign right now? Because if Matsuzaka signs, it would eliminate a team who is in dire need of a premier starter from otherwise bidding in an open market for their services in a few weeks, which would obviously impact the bargaining leverage of each of them in the open market. More to the point, what if the team that gets the winning bid is a free-spending team like the Yankees or Red Sox? How would Boras juggle the best interest of each of the four players in that scenario?

UPDATE (Nov. 14): It was reported yesterday that the Red Sox made the highest bid at $42 million! This bid reportedly far exceeded any other team's offer.

UPDATE (Nov. 15): It has just been reported that the Red Sox actually bid $51.1 million for the negotiation rights, and that the Seibu Lions (obviously) accepted the bid.

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