Sports Litigation Alert – The Evolution of the U.S. – Japanese Player Contract Agreement

The Evolution of the United States – Japanese Player Contract Agreement

(Editor’s Note: What follows is a piece by Robert J. Romano, founding partner of The Romano Sports & Entertainment Agency. Romano can be reached at (203) 777-9797)

History of the Agreement

The initial United States – Japanese Player Contract Agreement was entered into in 1967 after a dispute arose between Major League Baseball’s (MLB) San Francisco Giants and Japanese Professional Baseball League’s (NPB) Nankai Hawks over the rights to pitcher Masanori Murakami.  Prior to the 1967 agreement, Murakami played for the Giants’ minor league affiliate in Fresno, California.  In 1964, Murakami was called up to the Giants and became the first Japanese-born player to appear in a Major League Baseball game.  Following the 1965 season, however, Murakami, over the Giants’ objection, was required to return to his Japanese team to fulfill his contractual obligation with the Nankai Hawks.  As a result of this dispute, the initial The United States—Japanese Player Contract Agreement was signed stating that all Japanese professional baseball players will stay in Japan and play for the NPB and all American professional baseball players, at either the major and/or minor league level, will stay in the U.S. and play for MLB.

By the 1990’s, salaries for MLB players, as a result of free agency and advances made by the MLB players’ association through collective bargaining, increased significantly.[1]  Japanese players, aware of these high salaries, wanted to come to the U.S. to see if they too could secure a lucrative contract with an MLB franchise.

Hideo Nomo was the first NBP baseball player who successfully “cashed in” by signing with an MLB franchise.  After retiring from NPB in1994, he signed a 3 year, $4.3 million dollar contract to play for the Los Angeles Dodgers.  Nomo was able to sign with the Dodgers since the NPB players’ contract reserve clause only controlled the actions of Japanese players within the Japanese Professional Baseball League.  The reserve clause was silent when it came to players signing with a non-Japanese baseball team.

A second Japanese player, pitcher Hideki Irabu, wanted to play for the New York Yankees and asked for a trade from his current NPB club, the Chiba Lotte Marines.  The Chiba Lotte club agreed to the trade but opted to send him to the San Diego Padres instead.  After a lengthy series of “negotiation”, MLB ordered the Padres to relinquish all rights to Irabu, allowing him to sign with the Yankees.

Another occurrence involved Alfonso Soriano.  Soriano wanted an increase from the league minimum in which his current NPB team, the Hiroshima Toyo Carps, was paying him.  The Carps failed to make Soriano a significant offer.  He therefore decided to retire from NPB to pursue a career with an MLB franchise. Soriano was successful, despite the best efforts of NPB to stop him from signing with an MLB team, because there were no rules to preclude him from retiring from the NPB and signing with an MLB franchise.  Soriano was deemed a free agent by MLB and signed a five-year, $3.1 million contract with the New York Yankees.

Following this series of player departures, Japanese baseball clubs believed the players exploited loopholes in United States – Japanese Player Contract Agreement, namely its reserve clause.  The reserve clause, the clubs believed, allowed Japanese players to escape their NPB contracts and play for MLB teams without MLB teams having to compensate their former NPB teams.  Feeling they were left with nothing, the NPB petitioned for a new agreement with MLB that would govern when a player could be released from his NPA contract and play for an MLB franchise.

In 1998, a new “posting system” was agreed upon, modifying the United States – Japanese Player Contract Agreement in effect between NPB and MLB.  The new agreement, written by Orix Blue Wave general manager Shigeyoshi Ino, designed a plan wherein NPB players could be traded to an MLB franchise in exchange for monetary compensation.  This new agreement applied only to players currently under contract with an NPB team.  Free agents and players who have completed nine years of service were exempt from the posting rules and could negotiate with foreign professional baseball leagues without restraint.  In addition, the new agreement did not apply to Japanese players who never played professionally in Japan, or American players playing with an NPB franchise.  (These players are treated by standard free agent rules.)

The term of this new agreement was for one year with each league having the option to terminate it by providing written notice by June 18th of the year preceding termination of the agreement.  To date, neither MLB nor NPB has exercised this termination option.

How the Posting System Works

The “posting system” works in the following manner.  Japanese players can request to be posted by their current NPB club.[2]  If the team agrees to grant the player’s request, and only if the team agrees to do such, the team will then notify the NPB Commissioner’s Office of its decision.  The NPB Commissioner’s Office then contacts the MLB Commissioner, who in turn notifies all American and National League front offices.

A Japanese baseball player can be posted only between November 1st and March 1st.  Once posted, MLB teams have four days to bid on rights to a thirty-day window of exclusive contract negotiations with the player.[3] These bids are sealed and bidders do not know the amount of another MLB team’s bid.  Placed in U.S. dollars, bids are sent directly to the MLB Commissioner’s Office.

Following the completion of the four-day auction period, MLB then notifies the player’s NPB ballclub (via the NPB Commissioner’s Office) of the winning bidder.[4] If the NPB club chooses to accept the winning bid, they agree to grant the MLB franchise a thirty-day period of private contract negotiations with the posted player.  If the NPB team rejects the bid, they forfeit any bid amount offered by the MLB franchise.[5]  Additionally, if the NPB club accepts the bid, the MLB franchise must come to contract terms with the player within the thirty-day period.  If a contract is not signed between the posted Japanese player and the MLB franchise, the player returns to play for his NPB club and the MLB franchise does not have to pay the bid amount to the NPB team.[6]  However, if a contract is reached, the MLB franchise has to pay out its bid amount to the NPB team.  This amount is paid on top of whatever amount it has contracted to pay the former NPB player for his services.

Since the new United States-Japanese Player Contract Agreement came into play in 1998, 21 Japanese players have used the posting system, with 14 signing contracts with MLB franchises.

Date Player posted Team posting Team claimed Price
February 2, 1999 Alejandro Diaz Hiroshima Toyo Carp Cincinnati Reds $400,001
February 2, 1999 Timoniel Perez Hiroshima Toyo Carp No claim No Price
November 9, 2000 Ichiro Suzuki Orix Blue Wave Seattle Mariners $13,125,000
January 9, 2002 Kazuhisa Ishii Yaklut Swallows Los Angeles Dodgers $11,260,000
February 6, 2003 Ramón Ramírez Hiroshima Toyo Carp New York Yankees $300,050
December 18, 2002 Akinori Otsuka Osaka Kintetsu Buffalo No claim No Price
November 19, 2003 Akinori Otsuka Chunichi Dragons San Diego Padres $300,000
January 28, 2005 Norihiro Nakamura Orix Buffalo Los Angeles Dodgers Not disclosed
November 6, 2005 Shinji Mori Seibu Lions Tampa Bay Rays $1,000,000
November 30, 2005 Yusaku Iriki Hokkaido Nippon Ham Fighters No claim No Price
November 9, 2006 Daisuke Matsuzaka Seibu Lions Boston Red Sox $51,111,111.11
November 11, 2006 Akinori Iwamura Tokyo Yakult Swallows Tampa Bay Rays $4,550,000
November 20, 2006 Kei Igawa Hanshin Tigers New York Yankees $26,000,194
December 18, 2008 Koji Mitsui Saitama Seibu Lions No claim No Price
January 8, 2009 Koji Mitsui Saitama Seibu Lions No claim No Price
November 1, 2010 Hisashi Iwakuma Tohoku Rakuten Golden Eagles Oakland Athletics $19,100, 000-DNS
November 17, 2010 Tsuyoshi Nishioka Chiba Lotte Marines Minnesota Twins $5,329,000
November 28, 2011 Hiroyuki Nakajima Saitama Seibu Lions New York Yankees $2,500,000 – DNS
December 1, 2011 Hiroki Sanada Yokohama Bay Stars No claim No Price
December 8, 2011 Yu Darvish Hokkaido Nippon Ham Fighters Texas Rangers $51,703,411
December 12, 2011 Norichika Aoki Tokyo Yakult Swallows Milwaukee Brewers $2,500,000

[1] Top 6 -1990 MLB players’ salaries:

Robin Yount Milwaukee Brewers

$ 3,200,000

Kirby Puckett Minnesota Twins

$ 2,816,667

Roger Clemens Boston Red Sox

$ 2,600,000

Paul Molitor Milwaukee Brewers

$ 2,600,000

Eddie Murray Los Angeles Dodgers

$ 2,513,703

Don Mattingly New York Yankees

$ 2,500,000

[2] United States – Japanese Player Contract Agreement paragraph 9.

[3] United States – Japanese Player Contract Agreement paragraph 9.

[4] United States – Japanese Player Contract Agreement paragraph 10.

[5] United States – Japanese Player Contract Agreement paragraph 10.

[6] In 2010, the Oakland Athletics won the bid for Japanese pitcher Hisashi Iwakuma with an amount of $19.1 million.   However, contract negotiations failed and Oakland was returned its bid offering.

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