In the Matter of the Arbitration Between Major League Baseball Player Relations Committee and Major League Baseball Players Association

Tommy John (plaintiff) was a free agent after the 1978 Major League Baseball (MLB) season. In November, John and his agent, Robert Cohen, reached an agreement in principle with the New York Yankees (New York) (defendant). The parties agreed that the contract would be fully guaranteed, which, as Cohen explained to Al Rosen, New York’s general manager, meant that John would be paid unless he arbitrarily decided not to play baseball. The parties also agreed that New York would secure a $500,000 insurance policy for John. By January 2, 1979, John and George Steinbrenner, New York’s owner, signed the contract. Shortly thereafter, Rosen advised Cohen that New York was having trouble securing a $500,000 insurance policy and asked whether it would be okay to reduce the initial policy to $250,000 and later increase it to $500,000. John agreed, but before the parties could document that change, Rosen and another New York representative told Cohen in three separate conversations that Steinbrenner was very upset that the contract did not provide that John would not be paid if MLB’s players went on strike. Cohen responded that he intended for John’s salary guarantee to cover a strike and saw no reason to change the contract. Nevertheless, Cohen told New York that John would give up his strike protection if New York agreed to pay him in the event of a lockout and if New York provided the $500,000 policy. New York agreed, and both parties signed the revised contract. However, the American League president refused to approve the lockout-protection provision. Steinbrenner then proposed eliminating the lockout provision but keeping the strike exclusion and $500,000 policy. When Cohen said no, Steinbrenner suggested calling the whole thing off. Cohen agreed, noting that another team was very interested in signing John. Steinbrenner relented, saying “you win.” The parties then signed a third contract that had no exception for a strike or lockout and provided for a $500,000 policy. MLB players went on strike on June 12, 1981. New York did not pay John’s salary during the strike, claiming that John’s salary guarantee did not apply during a strike. John and the MLB Players Association (plaintiff) filed a grievance against the MLB Player Relations Committee, Inc. (defendant) and New York, seeking payment.