The International Informal Verbal Contractual Agreement and its Future with MLB

Keiderson Pavon and Willy Fañas, two teenagers from the Dominican Republic, are suing the Los Angeles Angels.¹[1]Associated Press, Dominican teens sue LA Angels, alleging team broke deal, USA Today (Sept. 9, 2022) https://www.usatoday.com/story/sports/mlb/2022/09/09/dominican-teens-sue-la-angels-alleging-team-broke-deal/50720497/. The young baseball players allege that the Angels breached an agreement entered when they were 14 and 15 years old by retracting verbal promises for them to play in the Angels system. ²[2]Id. Depending on the outcome, these young players’ lawsuits could fundamentally change how international players sign deals with MLB teams. ³[3]Dom. Rep. Lab. Code (No. 16-22 of 1992).

The New Collective Bargaining Agreement and its Neglect of International Players
On March 10, 2022, MLB and the Major League Baseball Players Association (“MLBPA”) reached a new collective bargaining agreement (“CBA”), ending the 99-day lockout between the two sides. ⁴[4]Derick Hutchinson, Everything to know about Major League Baseball’s new collective bargaining agreement, ClickOnDetroit (Mar. 11, 2022) https://www.clickondetroit.com/sports/2022/03/11/everything-to-know-about-major-league-baseballs-new-collective-bargaining-agreement/ . Initial negotiations stalled as the MLBPA sought to abolish the qualifying offer (“QO”) system, while MLB conversely aimed to create a formal international draft. ⁵[5]Id. Despite the disagreements, the QO system remains intact, operating as follows: if a player completes the final year of their contract, has not been previously offered a QO, and spent the entire previous season with that team, then that team may offer them a one-year QO contract for the average salary of MLB’s 125 top-paid players in the league.⁶[6]Anthony Castrovince, MLBPA rejects International Draft proposal; QO remains, MLB (July 25, 2022) https://www.mlb.com/news/mlbpa-rejects-international-draft-proposal#:~:text=MLB’s%20proposal%20had%20called%20for,the%20current%20international%20spending%20limits. . If the player rejects the QO, they subsequently enter the free agent market to attempt to find a better deal for themselves.⁷[7]Id. Finally, if that player signs with a different team, the original team receives a compensatory draft pick while the team that offered them a new contract forfeits a draft pick.⁸[8]Id.
The creation of an international draft would help address corruption in early deals with young players who are not yet eligible to sign contracts. MLB allows players outside of the United States, Puerto Rico, and Canada to be signed only after they have turned 16 years old.⁹[9]Daniel Santiago, “MLB doesn’t enforce anything. They don’t hold their teams accountable” – Los Angeles Angels battle allegations of backing out of deals by two Dominican prospects, sportskeeda (Sept. 11, 2022) https://www.sportskeeda.com/baseball/news-mlb-enforce-anything-they-hold-teams-accountable-los-angeles-angels-battle-allegations-backing-deals-two-dominican-prospects. In addition, informal agreements like verbal deals between professional teams and players under 16 years old are prohibited by law in the Dominican Republic, Venezuela, and other countries in Central and South America.¹⁰[10]Martín José Adames, Dominican teens sue LA Angels, alleging team broke deal, Associated Press (Sept. 9, 2022) https://apnews.com/article/mlb-sports-baseball-lawsuits-los-angeles-angels-b1c794f0f84bd83ae2f84872e53a9bce . Although this practice is prohibited, agreements of this nature are common for MLB clubs.¹¹[11]Id. Despite this, since no agreement on the international draft was reached, talks of its establishment will not resume until the new CBA expires in 2026.¹²[12]Anthony Castrovince, MLBPA rejects International Draft proposal; QO remains, MLB (July 25, 2022).

The Informal Verbal Agreement and its Impact on International Prospects
Serious problems exist regarding informal verbal agreements between international prospects and MLB clubs. Young prospects and their families are often exploited by agents, trainers, and investors who fail to adequately document their business arrangements and who promote aggressive training practices including the use of performance-enhancing drugs.¹³[13]Christian Red and Teri Thompson, In Latin America, big league clubs are exploiting prospects as young as 12, whistleblower told feds, USA Today (June 16, 2020) https://www.usatoday.com/story/sports/mlb/2020/06/16/mlb-international-free-agents-deals-underage-prospects/5334172002/. Verbal guarantees of large payments induce young prospects and their families to enter unfair financial deals that put them on the hook for training expenses.¹⁴[14]Id. Trainers and scouts will then inflate the prospect’s value to their MLB bosses and take kickbacks off any potential future signing bonus.¹⁵[15]Id. Since these international prospects often agree to these deals years before they are actually eligible to sign, this allows time for teams to rethink their agreements to sign that player.¹⁶[16]Id. Additionally, teams can reduce the amount of their signing bonus or renege on any verbal agreement altogether, like in the case of Keiderson Pavon and Willy Fañas.¹⁷[17]Martín José Adames, Dominican teens sue LA Angels, alleging team broke deal, Associated Press (Sept. 9, 2022). Teams may choose to back out for any “legitimate” business reason; because management may now believe that the prospect has regressed since their deal, there is new management within that organization, or because of the impact of the COVID-19 pandemic and declining budgets.¹⁸[18]Christian Red and Teri Thompson, In Latin America, big league clubs are exploiting prospects as young as 12, whistleblower told feds, USA Today (June 16, 2020) https://www.usatoday.com/story/sports/mlb/2020/06/16/mlb-international-free-agents-deals-underage-prospects/5334172002/ . When teams back out, the players and their families could then owe hundreds of thousands of dollars to glorified loan sharks.

The Story of Keiderson Pavon and Willy Fañas
In 2018, the Los Angeles Angels signed both 14-year-old Willy Fañas to a $1.8 million contract and 15-year-old Keiderson Pavon to a $425,000 contract.¹⁹[19]Jeff Passan, Prospects Willy Fañas, Keiderson Pavon suing Los Angeles Angels, alleging agreements pulled back by team, ABC News (Sept. 8, 2022). According to Attorney Jose Jerez, who represents both Mr. Pavon & Mr. Fañas, “Negotiations were made, and values were reached where amounts were agreed.”²⁰[20]Martín José Adames, Dominican teens sue LA Angels, alleging team broke deal, Associated Press (Sept. 9, 2022) . Mr. Pavon’s deal was even filmed and posted on YouTube showing the verbal agreement taking place.²¹[21]The 2019 agreement Angels broke w/ Keiderson Pavon- El acuerdo que los Angelinos Rompieron con Pavon. (Sept. 2, 2022) https://www.youtube.com/watch?v=mty670HTAho. When the Los Angeles Angels reneged on the deal, the players filed a lawsuit in the Dominican Republic against the Los Angeles Angels.²²[22]Associated Press, Dominican teens sue LA Angels, alleging team broke deal, USA Today (Sept. 9, 2022). Although the complaint and much of Dominican Republic law are not currently available to the public, these lawsuits most likely state that employees of the Angels committed to formally signing these young players when they became 16 years old in 2020 and were thus permitted by Dominican law to sign the agreements.²³[23]Id. Due to the COVID-19 pandemic, the signing date for international players was postponed to January 15, 2021, but the Angels refused to sign the players following a change in their front office.²⁴[24]Id. Mr. Pavon quickly signed with the Texas Rangers that day for $150,000 and is seeking $4.25 million in damages while Mr. Fañas, who signed with the New York Mets the following year in January 2022 for $1.5 million, seeks $17 million in damages.²⁵[25] Jeff Passan, Prospects Willy Fañas, Keiderson Pavon suing Los Angeles Angels, alleging agreements pulled back by team, ESPN (Sept. 8, 2022)https://www.espn.com/mlb/story/_/id/34549387/prospects-willy-fanas-keiderson-pavon-suing-los-angeles-angels-alleging-agreements-pulled-back-team .
Mr. Fañas’ case exemplifies the issues of early deals that do not materialize. With the Angels backing out of the deal so late, it became more difficult to find a spot in another MLB organization.²⁶[26] Id. Instead of quickly choosing the option to sign for a lower bonus amount, Fañas decided to wait until the next signing year, January 15, 2022, to sign with the Mets for $300,000 less than the alleged contract with Los Angeles.²⁷[27]Id.

Potential Impact
Deals of this nature are common in MLB. ²⁸[28]Id. In the past, players themselves have also backed out of verbal agreements with teams to receive larger salaries elsewhere.²⁹[29]Id. However, unlike past agreements, the cases of Mr. Pavon and Mr. Fañas are the first to require multiple hearings in the Dominican justice system, where, according to lawyers, the law gives greater weight to verbal contracts and their enforceability than in the United States.³⁰[30]Id. If the court rules in favor of Mr. Pavon and Mr. Fañas, the future impact on how deals are made with young international players could be monumental. Teams may become more hesitant when approaching young players about their futures. Further, if these verbal contracts are considered valid and enforceable, then all future verbal contracts with young international players may also be enforceable agreements. The international free agent system could change drastically as teams may be more reluctant to “sign” a 13-year-old player, three years before he can be officially brought into the organization.³¹[31]Brett Taylor, Lawsuit in the Dominican Republic Could Fundamentally Change the Way International Prospects Are Signed, Bleacher Nation (Sept. 13, 2022) https://www.bleachernation.com/cubs/2022/09/13/lawsuit-in-the-dominican-republic-could-fundamentally-change-the-way-international-prospects-are-signed/ .
With this potential change in mind, it will be interesting to see if there will be a shift towards fewer young international players entering verbal agreements. In the past, these teams were able to back out if some incident occurred changing the circumstances surrounding that player. ³²[32]Id. According to Jeff Passan of ESPN, “If Major League Baseball doesn’t force the teams to honor their agreements, this judgment won’t necessarily stop the practice, but it’ll be a precedent. ³³[33]Jeff Passan, Prospects Willy Fañas, Keiderson Pavon suing Los Angeles Angels, alleging agreements pulled back by team, ESPN (Sept. 8, 2022) . That’s what we’re pursuing: a precedent.” If Mr. Pavon and Mr. Fañas succeed in this lawsuit, MLB organizations may no longer be able to back out in these situations.

Next Steps
At an earlier hearing on August 31, 2022, the judge postponed the appearances of witnesses until November 30, 2022, resulting in this case stretching into 2023. ³⁴[34]Id. There has been no public update regarding this case as of March 19, 2023. Mr. Pavon and Mr. Fañas seek compensation from the Angels for the material and psychological damages caused by the breach of their respective agreements.³⁵[35]Martín José Adames, Dominican teens sue LA Angels, alleging team broke deal, Associated Press (Sept. 9, 2022)

Written by: Corey Weisfeld
Corey is a 2024 J.D. Candidate at Brooklyn Law School