In The Baseball Dead Of Winter, An Old And Unresolved Ethics Problem Glows Bright

From left to right: MLB, players, and the union.

…as Major League Baseball ignores it, as usual.

Ethics alarms test: Scott Boras, lawyer and player agent, represents two Washington Nationals free agents in their prime. One is Stephen Strasburg, one of the best and most sought after starting pitchers in the game. He was seeking, on the advice of his agent, a long-term contract of more than 30 million dollars a year. Another is Anthony Rendon, third-baseman, and the Nationals’ best player in 2019, their championship year. He also is seeking a salary of at least 30 million per year, over many years. He is a fan favorite in Washington, D.C., and obviously enjoys playing there. Contrary to popular belief, however, Major League baseball teams do not have endless supplies of money, though they have a lot. Mike Rizzo, Washington Nationals general manager, told the sports media and Washington fans that the team could not afford to sign both Strasberg and Rendon at the rates they were demanding and the marketplace dictated.

Is there a problem, and if so, what is it?

You shouldn’t need much time to answer, but then again, thousands of baseball sportswriters and the entire baseball establishment havn’t figured this out over many years, do I’ll give you a “Jeopardy!” period of reflection:

OK, contestants,what’s your answer?

The answer is that Scott Boras has a conflict of interest, because both players are seeking a single high-paying slot on the same team, and only one can have it. If one is successful, the other is not. There is no way around this, either: while it is true that other teams are also willing and eager to sign Rendon or Strasberg, if Boras persuades the Nationals to sign one, his other client is harmed.

This particular conflict of interest is known as a Zero Sum conflict. Imagine a lawyer is representing a client seeking a government contract. Can that lawyer, or his or her firm, also represent another client seeking the same government contract? No! If that lawyer or firm succeeds for one client, the efforts to achieve that success harm the interests of the other client.

I have written about these conflicts in the context of sports agents before, and only the amounts of money involved have changed. I wrote about Zero Sum conflicts  in a long piece for the baseball wonk site Hardball Times, then  here five years ago, and again earlier this year, when  the piece concluded,

This time, the Zero Sum Conflict is a little different. Boras represents the last two highest priced free-agents, Harper and Houston starter Dallas Keuchel. Keuchel turned down a 5 year, 90 million dollar contract in 2016, so it is assumed that it will cost more than $100,000,000 to sign him now. The problem is that there are very few teams with both the money, the need, and the salary flexibility as Spring Training is starting to commit to 9-figure salary additions. Some of those are the same teams Boras is talking to about Harper, and it is very likely that no team has the resources or desire to sign both. When, as is widely expected, Harper agrees to his mega-contract with Philadelphia nest week, Boras will have directly harmed his other client, Keuchel’s, financial interests. Has Boras received an informed waiver from Keuchel and other clients regarding Zero Sum Conflicts? I very much doubt it, and I also doubt that an informed consent would be truly informed if Boras was the one doing the explaining.

I guarantee, however, that if I were the one explaining the conflict, no waivers would get signed.

Do you know what happened? Keuchel never found a big free agent contract. He ended up sitting out half the season before signing a short term, relatively low salaried contract.

In the Strasberg-Rendon conflict, both players ended up doing well. The pitcher got the coveted Nationals deal, at $245 million for seven years. Rendon subsequently signed for with the L.A. Angels for exactly the same number of years and dollars. Two points about that, however: 1) the fact that a conflict of interest ends up not harming the victims of it doesn’t render the conflict null and void, or excuse the conflicted party. That’s just moral luck at work, and 2) all things being equal, a deal with the World Champion Nationals is more attractive than a deal with the losing Angels, who had their worst season in two decades. They are also reputed to be cursed…

…but that’s another story, at least until Rendon perishes suddenly, like Angels pitcher Tyler Skaggs did last season, or is the victim of a mistaken identity drive-by shooting, like young star Lymon Bostock in his first season of a free agent contract with the team.

Why don’t players, their union and baseball do something about this?  One reason is that enough players are getting paid astounding sums that they are happy to look the other way. Another is that they are misinformed. In another baseball wonk website, Sheryl Ring wrote a misleading but authoritative post called, How an Agent with Multiple Players Avoids Conflict of Interest. Even the title is misleading, because such agents don’t avoid the conflicts at all. They just ignore them.

Ring’s explanation of why it’s not a conflict for agents like Boras to represent a ridiculous number of clients, meaning that he can’t possibly give diligent and competent representation to all of them? “Since sports agents are fiduciaries, you could also argue that taking on more than one client is an inherent conflict of interest, because every minute dedicated to one player’s case is a minute not dedicated to another’s, to whom a fiduciary duty is owed. But that can’t be right either, because Scott Boras, for instance, has lots of clients. Most agents have multiple clients.” Oh! Everybody does it, so it’s ethical! Got it.

She justifies agents operating with these conflicts because she seems to think waivers are a panacea. She writes,

“A conflict waiver — that is, a waiver of a conflict of interest — is a document which (a) discloses a potential conflict to a beneficiary, (b) discloses why it’s a potential conflict, and (c) grants the beneficiary’s permission to the fiduciary to maintain the representation.”.

She also seems to think that so called “Chinese Walls” are relevant to the issue, which they are not, and why that is true is too complicated to go into. Leave it to say that she doesn’t understand conflicts after studying the issue, but believes that players can give an informed waiver. They can’t, in most cases, because they are neither educated nor experienced enough to comprehend what a lot of lawyers fail to grasp (trust me, I know.) Moreover, zero sum conflicts are usually not waivable. Even when a conflict is waivable, the sports agent’s interest in getting the waiver requires that the player have separate legal counsel to advise him regarding the waiver. Do you think Scott Boras made sure that an independent counsel advised Anthony Rendon that Boras shouldn’t represent him?

I don’t.

14 thoughts on “In The Baseball Dead Of Winter, An Old And Unresolved Ethics Problem Glows Bright

  1. Mr. Marshall.

    I have read your posting and–after the first pass–see no points where I wish to disagree with you. Since you do not care for comments that can be reduced to a simple ‘I agree.’ There is nothing to add.

    Perhaps your problem with the lack of response to your baseball postings is that they are simply so good that everyone who reads them sits in stunned silence.

  2. The problem is that every player wants Scott Boras to represent them. Conflicts, Schmomflicts. Players have clearly concluded that a conflicted (whatever the hell that means) Boras is worth more than any other agent. And he may be. I’m surprised the owners haven’t tried adopting an enforcing a one client rule for agents. Only one team would have to deal with Boras to sign a single player at any given time. Delightful! Fat chance of that getting past the union.

  3. Is it a conflict of interest for a lawyer to represent several clients, if the clients cases are not in conflict? What I don’t know —maybe you do, Jack (oops, I had to correct my own typing error as that name came out “Hack” which you aren’t) — is whether Boras fully disclosed the potential conflict, whether both clients agreed to proceed knowing the potential conflict, and whether one client had a atrong desire to stay with the Nats and the other did not as long as he got the money he wanted. In other words, did Boras try to “cure” a potential conflict the same way that lawyers do? When I was running a business, it was rare but not unheard for one of the top firms we engaged to come to me after doing their internal conflicts due diligence , identify a POTENTIAL (yes, I deliberately stressed that word) conflict, and ask whether I wanted them to disqualify themselves. The firms also vetted the issue with the “conflicting” client is I wanted them to proceed. They also routinely asked me if I knew of any potential conflict with other clients they represented. So, did Boras do the betting with his two star clients, or did he just proceed without the proper advice and cautions? I do not know but would not assume there was an unresolved conflict; but I do agree it is unethical to “represent” multiple clients with actual or potential conflicting objectives unless a very thorough conflict identification and resolution is accomplished.

  4. It’s an unusual situation, in which the union establishes a wide array of working conditions, but the agents negotiate the cash compensation for each player. Agents are certified by the union:

    https://www.mlbplayers.com/agents

    If you click through that, you’ll come to about a 60-page PDF of regulations governing agent conduct. I guess the union’s answer would be that there are also advantages to having an agent represent multiple players, and those outweigh the disadvantages as long as a player retains the option to move to another certified agent.

  5. Another aspect I’ve heard rumors of is agents using big names to get lesser players they represent signed – “Oh you want to sign Big Shot player next year? It would be a shame if Middle of the Road player didn’t get a new contract this year.” Another ethical issue, but this time to the detriment of the team.
    It really feels like agents have inserted themselves as middlemen with the sole purpose of playing both sides against each other for their own maximum benefit.

    • Ban agents? In sports? How about theatrical agents? Corporate management agents and headhunters?

      I just think if you want shark to represent you, you’re going to get a shark representing you. Sharks bite indiscriminately. Query: could a lawyer ethically represent more than a single player in a given league? Even after the contract is in place?

  6. The Angels cursed? That’s as good an explanation as any I’ve heard. It doesn’t mean that Rendon will suddently drop dead, though, it’s just that he may have an un-carreer year or something like it (he hits .220).

    The Angels have had a gift for signing some of the top talent in the game and blending them all together to produce a losing team. It’s a gift, certainly. Not many teams are able to pull this off consistently.

    The person I really feel for is Mike Trout. By all I’ve heard he is a good guy, and he’s certainly one of the best performing players in the game, year after year. But the Angels are able to overcome that and consistently produce an inferior team. Of course, as a fan of the Rangers and the Astros that doesn’t break my heart, but still….

    • Bostock was the most horrible, I’d say, but I decided they really were cursed when they signed former Red Sox MVP Mo Vaughn to a rich, long term contract, and he injured himself on Opening Day as an Angel, falling down the dugout stairs. He was never any good, for anyone, after that.

      • And then there’s Donnie Moore.

        I think the Angels’ main problem in more recent history is an over-involved owner, Artie Moreno. A bill board guy making baseball decisions.

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