One on One: Bob DuPuy
By Alan Schwarz
DuPuy, 55, has been involved in most of MLB's legal issues since 1989, when he was brought in as outside legal counsel. He negotiated the settlement of the collusion grievance in 1990, and served as the principal outside counsel to the commissioner and the executive council from 1992-98, when commissioner Bud Selig hired him as the MLB executive vice president of administration and chief legal officer.
Baseball America senior writer Alan Schwarz sat down to talk with DuPuy on June 26 in New York.
BASEBALL AMERICA: How would you characterize the negotiations as they stand now?
BOB DUPUY: We have made progress on a number of the non-core issues and have cleared some of those out of the way. During the last couple of weeks, we returned to bargaining on the core issues as a result of the clubs making proposals on revenue sharing and the competitive balance tax. More recently, the clubs have made a new proposal on the amateur draft and by that I mean the worldwide draft. We reduced the number of rounds originally from 50 to 40 and now to 38. The union has come back and asked a lot of questions about our proposals. Disappointingly, they have not chosen to respond to any of our moves so far.
All of our proposals are directed at the issue of competitive balance. We think revenue sharing will get more money to the low-revenue teams so that they can spend more on player development and spend more on payroll and become more competitive. We also think that direct payroll regulation is necessary. The competitive balance tax should slow down the top-spending clubs, and the minimum club payroll will force the lower-spending clubs up. That reduction in disparity should improve the competitive nature of our product.
BA: That skips to a point which I wanted to get to later, but we're here now. How would you define "salary restraint"?
DUPUY: Salary restraint is an attempt to compress the industry. To bring the top down toward the bottom. To bring the bottom up toward the top. And, you know, what other leagues have, for example, the NFL, is a salary cap. And we knew that a salary cap was a proposal that was wholly unacceptable for this particular union. We didn't go in with a proposal, as we have in the past, saying we need a salary cap, again, as other leagues have done. We went in with a proposal that we believe is intended to facilitate bargaining to a new agreement, and that is something much more moderate than things we have proposed in prior rounds. And that is a competitive balance--or luxury--tax.
BA: Is MLB still proposing the tax to be 50 percent of payrolls above 98 million?
DUPUY: Yes. But we recently made a transition-rule proposal that would moderate the tax in the first two years.
BA: Obviously you're proposing it because you think it will work, or work enough. How do you see it stemming or stalling the growth of salaries?
DUPUY: Stalling is not the right phrase. Number one, there are a lot of clubs who do not believe that it will work or that it is enough. That's number one. There are a lot of clubs who believe that the only mechanism that works in the type of environment where you need competitors on the field and partners off the field is some form of salary cap. Or a greater restraint.
Now, is it perfect? Will it work perfectly? Probably not. Teams will still sign players.
BA: If it by design creates a less-free market and stems the growth of salaries that players have enjoyed and valued, what incentive is there for them to accept this deal?
DUPUY: The improvement of the game from a competitive standpoint. That every team needs some other number of teams to play. Otherwise you've gotten to a system where you have the Harlem Globetrotters barnstorming, and that's not going to work. Remember, no player wants to play for a team that cannot win.
BA: So you're putting a team in Washington and calling them the Generals?
DUPUY: That would be good. (Laughs.) But to the extent that popularity of the game helps everyone, and that the growth of revenues overall, throughout the game . . . remember, 65 cents of every dollar that's generated right now goes to player salaries. So the extent that you're generating additional revenues as a result of more competition, as a result of more interest, as a result of better media packages, a great portion of that, two-thirds of that, is going to the players as it is. That's the incentive.
BA: Okay, the 60/40 rule (that says clubs can't carry debt more than 40 percent of their value). Commissioner Selig has said that teams would have to comply by June, or they'd be subject to fines, or withholding of national TV revenue or whatever it may be. We're now at the end of June. Are all teams compliant?
DUPUY: Everyone has filed with the commissioner a response to the letters that went out on 60/40. Teams have indicated what action they intend to take to get in compliance with 60/40. The commissioner has been back in contact with certain teams about their proposals. So, is every team in compliance today? No. Has every team responded to the commissioner's mandate? Yes, and the discussions are ongoing.
BA: Given that 60/40 counts long-term player contracts as debt, and a club can't just make a contract commitment go away, what effect will 60/40 have on any free-agent market this offseason? Teams have already committed dollars when that rule really wasn't in effect, or being enforced.
DUPUY: The rule has been in effect. The enforcement of it was held in abeyance after the last strike because, basically, no one could comply given the economic devastation that occurred. The commissioner gave the clubs time and gave the industry time to regenerate and to get back in a position where the rule could again be enforced. Even more important, the clubs have known since December of 1998 that we were going to reinvigorate the rule. So there's been no change to the rule. In fact, the only thing that's happened is the base for asset value has been liberalized, in terms of helping the club's compliance with 60/40.
Sixty/forty is an overall test of financial stability. Long-term player contracts are no more an issue than bank debt, lines of credit, how much equity is in the club, the value of the franchise. All of it needs to be taken into account in determining how much a club can spend. It is not an inappropriate exercise, for all the reasons we've talked about, to induce . . . to allow teams have enough assets to cover their liabilities. You know, teams ought to have enough resources to pay their debts as they come due. It's sort of a textbook bankruptcy definition.
BA: Would it be fair to say that it certainly will not drive salaries higher, the way a luxury tax won't?
DUPUY: I wouldn't draw that conclusion. I think the market continues to drive salaries higher. Sixty/forty has been in place. It has been enforced in the past. Nothing has seemed to have an impact on salaries other than competitive juices.
BA: But it wasn't enforced recently.
DUPUY: From '95 through '99, it was not enforced. In '99, the commissioner announced that he was looking at it and was going to give teams a chance to get into compliance, and then roughly, what, eight months ago, he told them that they were going to have to comply by June and put that into place.
DUPUY: About a third of the clubs were wholly in compliance and had no problem. About a third of the clubs were very close and put on a watch list--they went two or three points either way of being in compliance. And then there were about a third of the clubs who were out of compliance. So it's within one or two of a third of the clubs.
BA: Getting back to the state of the negotiations now . . . What type of progress do you anticipate before the All-Star Game, which is sort of a checkpoint, specifically with the union meeting on July 8th?
DUPUY: Well, that's a checkpoint for them. Remember, the clubs, during the last collective bargaining agreement, negotiated to have the contract expire at the end of the 2001 season, instead of December 31 as had been the case with previous collective bargaining agreements. The commissioner and the clubs chose, for lots of reasons, including the horrendous devastation of September 11th, not to exercise their economic leverage. They are playing another year under the status quo. During spring training, Bud told the fans and told the press that the owners would not implement, would not lock out during the course of the 2002 season. That it was our intention of playing the 2002 season.
It is to our benefit to get a deal done, to have this type of revenue sharing, to have this type of competitive balance tax, to have these types of modifications to the core economic system of the game in place as soon as possible. So, it is our goal to have as much progress by the All-Star Game as possible. To have as much progress by August 1st as possible. To have as much progress by Labor Day as possible. To have as much progress by the end of the season as possible. And to have a deal as quickly as we can within those parameters.
BA: Talking about the promise that Selig made, about a lockout. Your guys' hammer, implementation, takes place after the season anyway. There might have been some things you could have implemented recently, like a worldwide draft, but you really didn't give up that much.
DUPUY: There were things that could have been done--for example, the revenue sharing could have been implemented.
BA: But if you want to make a promise to fans, why not promise not to implement? That's what, at least from the outside, is causing a lot of the fear that people have, including the union.
DUPUY: Put aside interest. Put aside depreciation. Just in operations alone, the clubs last year lost over $300 million. This year, they're going to lose more than that. The status quo is not acceptable. We have said the status quo is not acceptable. We said there has to be economic reform. We've said we need additional revenue sharing. We've said we need some form of competitive balance tax. We have played another full year under that system. We didn't go in and ask for a salary cap. We went in with a proposal that was intended to drive a collective bargaining agreement. That's why.
BA: Is a promise not to implement even considered?
DUPUY: You have never heard the commissioner use the word "implement." You have never heard an owner use the word "implement." You will not hear that. It is our intention to get a deal as quickly as possible, and to consider the alternatives as they arise and when they arise. The only people talking about implementation are people from the MLBPA (Major League Baseball Players Association) who are trying to convince the players to strike and to convince the public that they are somehow threatened.
BA: What's your definition of the word "impasse?"
DUPUY: Impasse is a legal term, and I'm not going to offer a legal definition. You would have to talk to labor lawyers about a technical definition of the word "impasse." But the common definition of the term is the inability of someone to reach an objective.
DUPUY: If and when you get to a situation where that has to be considered, that will be considered and the lawyers will reach their judgment on the facts surrounding it. But the nice part about impasse is, you can't set a date. You can't say, as of August 1st, we will be at impasse. An impasse occurs when an impasse occurs.
BA: Assuming there's no agreement by then, what role will the contraction grievance ruling due on July 15th have?
DUPUY: Less than the press has suggested over the course of the last few months. The owners believe they have the right to contract as a matter of law. They concede that they have to bargain the effects of contraction. So, whether the owners win or lose the grievance, they will bargain the effects of contraction with the union. Similarly, if the owners lose the grievance, all that means is that contraction is a mandatory subject of bargaining, which means that we will, as part of the bargaining process, just as we bargain the competitive balance tax, just as we bargain the worldwide draft, just as we bargain travel restrictions, we'll bargain the decision or the desire to contract.
BA: Speaking of the draft, Baseball America and its readers are, needless to say, very interested in that less hot-button issue. It seems as if there has been more agreement on the draft than in other matters. Where does that stand at this point?
DUPUY: We made a comprehensive proposal about a unified, worldwide draft of 40 rounds. We also propose trading picks. Although the commissioner has, himself, indicated that while he is very favorably disposed to a worldwide draft, he has reservations about trading picks. That's not an issue on which all clubs are united. The Players Association came back with bifurcated draft, two separate drafts of eight rounds each. This week we made a new draft proposal cutting the rounds to 38. Bluntly, we are waiting for a response.
BA: The draft is one of the greatest examples of Major League Baseball thinking it can implement changes, and after the arbitration process, finding out it can't. It's a bit of a pattern. Contraction, too. From the outside it appears MLB overestimates its ability to do what it wants unilaterally.
BA: The lawsuits that delayed contraction for at least year.
DUPUY: One lawsuit where a court rendered a decision that can't be found anywhere else in United States jurisdiction--that somehow a tenant can't vacate on a lease and is responsible for living there rather than paying rent.
BA: But Bud did say, very forcefully, "We will contract in 2002."
DUPUY: No, what the clubs directed the commissioner to do was to contract by two teams as soon as possible, and in 2002, if possible. We expected a grievance; we didn't expect it to go nine months. We expected a lawsuit. Montreal, we've had very little opposition. And in fact that club is packaged and available for contraction. But, we did not expect the result we got in court in Minnesota, that's correct.
BA: But Major League Baseball behaved as if contraction in 2002 was all but a fait accompli.
BA: OK, so moving past that, in '94-'95, the implementation that was done in December and thrown out by Judge (Sonia) Sotomayor--or in a manner of speaking was thrown out. I don't know if you have to go to her, or her equivalent, in order to implement again. I'm sure it's a little more textured than that. But it's no secret you guys have the option to implement . . .
BA: . . . If you could satisfy certain conditions. One is the definition of "impasse." And two appears to be the directive of her opinion from March of 1995.
DUPUY: I don't think the opinion of '95 has anything to do with a potential impasse and implementation issue. Entirely different issues, entirely different structure. But again, I don't want to suggest that this is, at all, a strategy that the commissioner and the clubs have or are embarking on. The commissioner has repeatedly stated that we need a deal and we need a deal at the table. Even if it were to ever come to that, we still need, eventually, to reach a deal with the Players Association going forward. And that's his goal, and that's what he's focused on. That's the only thing he's focused on. We have taken concrete steps, for example our unilateral withdrawal of the information bank proposal, to demonstrate this to the union. They have not responded in kind.
BA: But if you do have no intention of implementing, if you feel you need a deal at the table, why not promise not to implement, and take everyone's fears away?
DUPUY: For the same reason that the players haven't indicated that they won't strike. It's all part of the way labor laws operate.
BA: The dance--it's part of the dance.
DUPUY: Right. Right.
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