Avoiding contractual liability to baseball players who have used performance enhancing drugs: can we knock it out of the park?

• Author: Gottlieb, Bryan

INTRODUCTION

In 2007, Alex Rodriguez signed a $275 million, ten-year contract with the New York Yankees, setting the record at the time for largest sports contract in history. (1) Since then, he has faced many allegations of performance enhancing drug ("PED") use, one of which he confirmed through a public admission. (2) Regardless of these allegations and admissions, Rodriguez continues to reap the benefits of his record deal despite the fact that his performance has been rapidly declining in recent years. (3) When Rodriguez initially received his massive payday, he was one of best players in the game, having previously won three American League Most Valuable Player awards. (4) By most accounts, his PED usage contributed greatly to the many successes early on in his career.

Rodriguez is not alone in his transgressions. Baseball's drug problem came into the light in the now infamous Mitchell Report, (5) in which ex-senator and prosecutor George Mitchell was asked by Baseball Commissioner Bud Selig to examine the history and prevalence of PED use in the league. (6) This independent report drew back the curtain on the drug culture in Major League Baseball ("MLB"), and quantified steroid use in baseball as widespread. (7)

Baseball is far from the only professional sport that has had to deal with the PED issue. (8) Seven-time Tour de France winner Lance Armstrong now faces a lifetime-ban from cycling handed down by the United States Anti-Doping Agency, and has been stripped of all seven of his victories. (9) He has recently drawn the ire of no less than the United States Department of Justice, which has expressed a desire to see Armstrong prosecuted for his lies about PED usage. (10) In the National Football League ("NFL"), All-Pro linebackers Shawne Merriman and Brian Cushing have both faced suspensions for PED usage. (11) The National Basketball Association's ("NBA") Rashard Lewis demonstrated that PEDs had a place in basketball as well, even though basketball is a game where brute strength is not often thought of as a required attribute. (12)

As PEDs continue to make their presence felt throughout professional sports, owners and sponsors find themselves paying out large sums of money to athletes who have used the drugs to bolster their performances at the expense of their sport's reputation. (13) In addition, after an athlete discontinues use of performance enhancers, sharp statistical declines appear to be the norm. (14) Do teams have any hope of avoiding contractual liability to these "lemon" players, or are they stuck footing the bill?

This paper seeks to identify the availability and relative strengths and weaknesses of various legal safeguards that MLB teams and sponsors of players have at their disposal for avoiding contractual liability to athletes who have been discovered to have used PEDs. Part I will seek to answer the question of whether MLB is actually attempting to remove steroids from its game or is simply "going through the motions" to appease disgruntled onlookers. Part II will discuss a longstanding bastion of contract law, the morals clause, and its ineffectiveness under the governance of MLB's collective bargaining agreement ("CBA"). Part III will discuss the assertion of fraudulent misrepresentation to challenge the validity of the formation of MLB employment contracts. Part IV will discuss why prompt rescission of the employment contracts upon discovery of previously undetected PED usage is critical to avoid a later argument of ratification as a counter-defense to fraudulent misrepresentation. Part V will conclude why MLB teams should shift away from current drug policy protections and start voiding contracts on the ground of misrepresentation if they are truly desirous of cultivating a PED-free game environment.

1. CIRCLING THE WAGONS: DENYING THAT WE HAVE A PROBLEM

   In a discussion of PED-related contract avoidance, one question that is naturally raised is whether MLB actually cares about removing PEDs from the game. The current drug policy and consistent failures to bring meaningful punishment to those who operate outside the rules strongly suggests that it does not. Since steroid-using players have faced little civil or criminal liability for their transgressions, (15) the decision on the part of many players as to whether or not to take PEDs can be said to strongly center on an economic determination, regardless of whether this determination is a conscientious one. (16) So long as economic incentives continue to motivate players to use PEDs and attempt to evade detection by MLB's drug enforcement regime, players will continue to do so. (17)

   While it is true that the current drug enforcement plan slightly disincentivizes PED use via suspension, were MLB to take steps to further impress the negative economic impact of a positive drug test on players, PEDs would likely play a less pervasive role in the sport. (18) The economic benefit of increasing statistical production is just too substantial to ignore in many cases. This is especially true for players on the cusp of playing in the major leagues, where making the big leagues was worth at a bare minimum $480,000 a year and the average annual salary was $3.2 million in 2012. (19)

   Imagine if, instead, the teams rescinded employment contracts in lieu of game suspensions for PED usage. If a player knew that he could be forfeiting otherwise guaranteed millions simply by using PEDs, then the problem of PEDs would likely vanish very quickly.

   It is strange that the MLB Players Association does not take a more active role in lobbying for more intense PED punishments. While the increased punishment of PED usage is on its face a forfeiture of rights for the players' union, (20) when you consider the goal of protecting the entirety of the player base, stricter penalties have an upside. Consider the aforementioned case of the minor leaguer who is desperate to enter the major league. Ensuring that such an individual is never deprived of his chance in the majors due to his unwillingness to use potentially harmful PEDs would be an unquestionably positive development. Some have asserted that failing to do more to protect these minor leaguers may in fact be a violation of MLB's anti-trust exemption. (21) Action on behalf of baseball to get out in front of the problem before it turns into a bigger litigious mess may serve the future health of the sport.

   Despite these factors, there are also potential reasons why MLB may continue to favor a softer stance on PED punishments. Following a league strike in 1994, attendance figures were dismally low. (22) MLB found itself on unsure footing both financially and in terms of its stature in American culture. (23) Then baseballs began flying out of the park at an unprecedented rate, exemplified perhaps most clearly by Sammy Sosa's and Mark McGwire's concurrent pursuits and eventual overtaking of Roger Maris's single season home run record in 1998. (24) Attendance began to quickly recover, and the entire nation found itself drawn back to "America's pastime." (25) The MLB marketed the home run chase to the fullest extent possible, taking advantage of the fascination with the long ball. (26) Both Sosa and McGwire were later tied to PEDs. (27)

   The ability of exponentially greater offensive production to draw fans to the game was made clear though, and it may be for this reason that MLB is hesitant to completely remove PEDs from its sport. (28) The current PED policy can be thought of as lip service, designed to comply with a threat from no less than the U.S. Congress. (29) While it acts as a check on PED usage, a more hard line stance would likely produce the results that the MLB claims to be desirous of. (30)

2. THE MORALS CLAUSE

   1. Generally

      Morals clauses have their roots in 1920s Hollywood, where film executives sought to use them to control the conduct of actors in the burgeoning film scene. (31) From these roots, the morals clause proliferated throughout various forms of employment contracts, gaining widespread acceptance in the sports world in the 2000s. (32) The four major sports leagues (MLB, NBA, National Hockey League, and NFL) now all have morals clauses built into their league constitutions, which were established via CBAs. (33)

      In addition, morals clauses are often contained in individual player contracts. (34) Morals clauses can allow for suspensions, fines, and even the termination of a contract if the player acts in contravention of accepted standards of behavior and fair play. (35)

   2. Sponsors Avoidance of Contractual Liability via Morals Clause

      Beyond their presence in team-to-player contracts, athletes often find themselves subjected to morals clauses in their endorsement contracts. (36) The dramatic increase of public visibility experienced by athletes in the modern world has increasingly led companies to look towards these morals clauses to protect their brands. (37)

      Certainly, an athlete can expect to have some leeway in the negotiation of his contract, but as of 2003, morals clauses were appearing in at least 75 percent of all athlete endorsement deals. (38) While morals clauses vary in their language from contract to contract, there is a reasonable amount of case law and scholarship defining when a morals clause in a contract is likely to be triggered. (39) Morals clauses can be loosely classified as narrowly or broadly drafted. (40)

      The specificity with which the contract provision defines the circumstances that lead to a breach of the clause is quite often determinative of what activities will be identified as triggering conduct. (41) For instance, a morals clause that triggers upon actions that "offend ... public decency [and] morality" (42) is more likely to bring about disciplinary action than a clause that specifically limits discipline to "illegal activities." (43)

      Consider, for instance, former NBA player Chris Webber. Webber held an endorsement deal with athletic wear...