Monday, August 19, 2013

A possible breach of contract action arising out of the dispute between the New York Yankees and Alex Rodriguez.

Recently, New York Yankees' third baseman Alex Rodriguez was suspended for 211 games by Major League Baseball (MLB) for performance-enhancing drug use. Rodriguez appealed, but the appeal is not likely to be decided until after the 2013 season. The suspension was not due to a failed drug test, but due to records and statements provided by a performance-enhancing drug distributor.

Rodriguez alleged that the Yankees worked with MLB to suspend him, because the team wanted a reason to void the remainder of Rodriguez's contract. Rodriguez recently returned from injury. He is aging and arguably not producing at the level the Yankees are obligated to pay him. Per Rodriguez,
"[W]hen . . . people are finding creative ways to cancel your contract, I think that's concerning for me. . . . "
The Yankees denied the allegations. I would not be surprised if this ends up in litigation, even if it is not the most likely scenario. If the 211-game suspension is upheld on appeal, the Yankees may be able to avoid full payment on Rodriguez's contract. If Rodriguez's allegations of collusion between the Yankees and MLB are true, he would have a breach of contract action against the Yankees.

The obligation of good faith and fair dealing is implicit in a contract. If a party enters into a contract and later engages in subterfuge to impede the contract's function, it is a breach of contract. In other words, if the Yankees contract with a player, they cannot secretly sabotage the player to avoid making payment on the contract.

Rodriguez's contract likely has a choice of law provision (preference for New York law). It may also have an agreement to arbitrate all disputes arising out of the contract. To prove a breach of contract, Rodriguez would have to show that he did what the contract required, and the Yankees breached the contract. If Rodriguez ends up suing, the Yankees would counterclaim for breach of contract. The Yankees would argue that Rodriguez's performance-enhancing drug use was a breach of the contract. As an affirmative defense to Rodriguez's claim, the Yankees would argue that Rodriguez's performance-enhancing drug use excused the team from having to fully perform the contract.

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