Batter Up: Let’s Play Baseball Arbitration
By Larry A. Jordan
In my 12 years at Judicial Dispute Resolution, I have arbitrated hundreds of cases using the traditional arbitration process, which generally consists of briefs, exhibits, testimony, argument of counsel and an award. Other forms of arbitration include high-low and final offer/baseball arbitration, a method employed by Major League Baseball to resolve player salary disputes.
In baseball arbitration, the player and team each submit a proposed salary figure to an arbitrator who is required to accept either the player’s demand or the team’s offer. The arbitrator is not permitted to select any other number. Night-baseball arbitration is a variation where the parties exchange written proposals without disclosing them to the arbitrator. After a hearing, the arbitrator makes an award, which is then amended to conform to the closest of the proposals.
In civil litigation, baseball arbitration takes several forms. The most common is one in which the parties agree in writing to submit their proposed awards simultaneously to an arbitrator. The arbitrator communicates the proposed awards to the parties, after which mediation often occurs.
These cases frequently settle at this point because the proposed awards tend to be more “reasonable” than the opening offer/counteroffer process in the typical mediation. If the case does not settle, the written agreement may or may not provide for a hearing with evidence presented either through testimony or declarations, followed by written and/or oral argument of counsel.
The arbitrator is then required to choose one of the two proposed awards, generally without giving any reasons. Sometimes the parties agree in writing to mediation and, if the case does not settle, the parties submit their final offers and the arbitrator chooses one to resolve the case.
In a slight variation of the process, after the arbitrator communicates the parties’ proposed awards, each side has the right to give the arbitrator a revised proposal. Again, depending on the agreement, this process may or may not include the presentation of evidence, briefing and argument. The arbitrator must then choose one of the two new proposals in making the award.
Since the arbitration process is by mutual consent, it is imperative that the parties enter into a written agreement that clearly defines the process and is not either procedurally or substantively unconscionable. In the recent case of Hill v. Garda CL Northwest, Inc., decided September 12, the Washington Supreme Court held that a labor agreement containing an arbitration clause was substantively unconscionable as to the provisions relating to the 14-day limitations period, the four-month limitation on back-pay damages and the cost-prohibitive fee-sharing provision.
Relying on Gandee v. LDL Freedom Enters. Inc., the Court stated that an arbitration clause “is substantively unconscionable where it is overly or monstrously harsh, is one-sided, shocks the conscience, or is exceedingly calloused.” On the same day, the Court in Weidert v. Hansen held that it was error for the trial court on equitable grounds to refuse to compel arbitration under an otherwise valid arbitration clause.
In Brown v. MHN Government Services Inc., filed August 15, the Washington Supreme Court, in applying California law, held that an arbitration agreement in an employment context was permeated with unconscionability and was unenforceable. The Court held that the arbitration agreement was procedurally unconscionable because it lacked clarity as to which set of AAA rules would govern the arbitration.
Interestingly, citing California case law, the Court suggested that an arbitration agreement may be procedurally unconscionable if the rules are not attached to the agreement. The Court upheld the forum selection and punitive damages provisions, but held that the statute of limitations provision, the arbitrator selection process and the fee-shifting provisions were substantively unconscionable.
My Experience with Baseball Arbitration
In my experience, baseball arbitration is rarely used in Washington. It is, however, the process set forth in the rules in asbestos trusts that are formed during bankruptcy proceedings. Most of the trust rules provide that the arbitration will be conducted in the “final offer” format also known as “baseball arbitration.”
In one of my dissolution meditations, the parties had agreed on all of the other financial issues, including the percentage of the property division, but could not agree on the value of their residence. A written baseball arbitration agreement was executed, which authorized the mediator to resolve the dispute.
Both parties simultaneously submitted their proposed valuations and, based on the discussions in each room, the mediator was authorized and required to select one of the two proposals. Of course, this process could have taken on any number of forms, including a more formal presentation with limited evidence and argument of counsel, but for cost reasons the parties opted for a more streamlined process.
Although extremely rare, it is always possible that one of the parties’ proposals actually will favor the other party. If so, the parties may agree that the arbitrator is authorized to split the difference. In such a rare circumstance, however, the parties will generally settle after the arbitrator discloses the proposals. I actually had this unusual situation occur in a case involving the setting of future commercial lease payments. The parties had agreed in advance of the baseball arbitration that I was authorized to split the difference.
In Bowers v. Raymond J. Lucia Companies, Inc., the defendant appealed a judgment enforcing a settlement agreement resulting in a binding mediation award in favor of the plaintiff. The parties had agreed in writing to a one-day mediation, and if the case did not settle there would be binding baseball arbitration where the mediator would be required to pick either the plaintiff’s last demand or the defendant’s last offer.
The plaintiff’s last demand was $5 million and the defendant’s final offer was $100,000. The mediator/arbitrator chose the plaintiff’s $5-million demand. On appeal, the court upheld the $5-million judgment based on the mutual consent of the parties even though there was no formal arbitration hearing.
Bowers is unusual because of the very significant difference between the two numbers, but it highlights the need for a written arbitration agreement that clearly defines the process.
There are several benefits to binding baseball arbitration, including a quicker process that usually is less costly and the fact that it often leads to settlement, as the parties will give a more reasonable final offer to the arbitrator or risk that the other party’s offer will be chosen. So, maybe now that MLB’s “Fall Classic” is over for 2013, Washington lawyers should “play ball” and try baseball arbitration.
If you have any comments or questions, please feel free to contact me at firstname.lastname@example.org.
1 176 Wn.2d 598, 293 P.3d 1197 (2013).
2 142 Cal. Rptr. 3d 64 (2012).