The Curious Arbitration Case of Junichi Tazawa

A “baseball arbitration” is a term with some currency in the Alternative Dispute Resolution (“ADR”) corner of the world. It’s not particularly helpful in a lot of circumstances to limit what an arbitrator can do, but in baseball it makes a ton of sense: we’re not looking at whether someone did or didn’t skip out on a contract obligation or should be responsible for certain medical expenses, we’re putting a number to something that doesn’t naturally have one. Without having teams and players name figures, baseball’s arbitration panels could have ended up yielding some wildly inconsistent results.

The very-young-and-very-veteran Red Sox were lined up with just three players eligible for arbitration as of a few weeks ago; Robbie Ross, Joe Kelly and Junichi Tazawa. On Friday, Kelly settled for an arbitration salary of $2.6M. Ross and the Red Sox are working on a reported narrow divide. Tazawa did not settle — and so he became one of the 33 players (out of 156 to file for arbitration) to exchange an arbitration figure with his team. Tazawa filed at $4.15M, the Red Sox $2.7M.

Player and team are pretty entrenched, making a settlement at this point a little more complicated.

In baseball’s version of arbitration, the figure exchange gets the process partly underway before the arbitration hearing ever starts; both sides are forced to come up with a number that they could actually defend, unlike days or even minutes before figures are exchanged, when parties are otherwise free to be as unreasonable as they please. Tazawa’s representatives and the Red Sox didn’t move very close to the middle, however — player and team are pretty entrenched, making a settlement at this point a little more complicated than it might normally have been.

The $1.45M gap between Tazawa and the team is not an outlier, exactly, but in those 33 cases in which figures were exchanged, there aren’t too many that have wider gaps, especially in terms of percentages. Some of the widest gaps are for unusual kinds of players, like something-more-than-platoon-hitters in Lucas Duda ($1.5M gap), Brandon Belt ($2.2M) and Mitch Moreland ($1.325). The biggest gap belongs to fringe-starter-turned-ace Jake Arrieta ($5.5M) Quite a few of the widest gaps, though, are relievers like Tazawa. In Zach Britton’s second of four turns in arbitration, his figure is $2.3M apart from that of the Orioles. The Rangers and Shawn Tolleson are $1.3M apart. And the Yankees and Aroldis Chapman are a whopping $4.1M apart with their figures in what should be Chapman’s last turn in arbitration — just short of Tazawa’s filing figure.

It may be that the market is still struggling a bit to catch up with some of the large relief contracts that were signed this offseason, and that were reflected in some trade values, as well. Still, the Red Sox and Tazawa don’t care anymore about how they got here — that’s part of the beauty of this style of arbitration. All that matters now is that they are here. And at this point, both the Red Sox and Tazawa and his reps really have just one course: take their case to a hearing, or try to return to settlement talks that may not have gotten very far through last week.

The Game

The CBA spells out what the arbitration panel can and can’t take into account in deciding between a player’s figure and his team’s. The main ingredient, of course, is on-field performance. The player’s previous salary also figures in, though, especially in cases like Tazawa’s when the player has already been eligible for arbitration in previous seasons. The CBA also requires that the panel “give particular attention” to the salaries of other players at, under, or one level above the player in terms of the year-to-year arbitration ladder. For players in their last go-round in arbitration like Tazawa, that includes free agency.

One way to think of it is that the factors that will be considered point to a particular “ideal” number, which is usually somewhere lower than the team’s figure but higher than the player’s figure. The parties may not agree on what that “ideal” number actually is (and they’re unlikely to talk about it with each other), but they may not be that far apart. If you think about the arbitration process as being about how close each party is to that “ideal” number, it becomes a neat little game.

For example, pretend that the “ideal” salary for Tazawa were $4M, but that the team had come in at $2M and Tazawa had filed $5M as his figure. The analysis would go like this: Tazawa’s number would be twice as likely to be picked by the arbitration panel as the team’s $2M. If the parties looked to settle before the hearing, then, they’d build in those risks about that way; you’d expect them to agree to be twice as close to Tazawa’s number as the team’s, and they’d end up settling right around that “ideal” number, $4M. The “midpoint” between $2M and $5M might be a point of conversation, but little more than that; $4M would loom larger in those negotiations than would $3.5M.

The sticky part is that the parties may not agree on what the “ideal” number really is, and that may be the sticking point that is responsible for most of the cases that actually go to a hearing. Most teams have their own projection system for arbitration salaries, and it’s hard to to imagine that the Red Sox aren’t one of those teams. If a projection system spit out a particular number — say, $3.5M — there’s good reason to treat that as the “ideal” number. With the limited universe of information eligible to be considered by the panel, a good projection can take most of the right things into account.

The Player

We don’t know what the Red Sox have in mind as an “ideal” number for Tazawa this year, but we do have a damned good projection: those generated by Matt Swartz and published at MLB Trade Rumors, which do have Tazawa projected at $3.3M. Again, there’s no way for that number to come out of the formal arbitration process at this point; if Tazawa and the Red Sox go to a hearing, the number will be $2.7M or $4.15M.

Both parties may (privately) think the “ideal” number is $3.3M or close to it, and right now, the midpoint between their filed numbers is $3.425M — pretty damned close to “ideal,” despite the sizable gap between the filed numbers. Still, the team is closer to the “ideal” number than to the midpoint, and it stands to reason that an arbitration panel is more likely to pick the Red Sox’s number than Tazawa’s number. Just running the numbers as a function of how close they are to an “ideal” $3.3M, there’d be an almost 60% chance of the Red Sox winning. If the parties were to settle right now and they agreed on what the “ideal” number should be, they’d be likely to hedge closer to the team’s figure, and maybe closer to $3.3M than $3.425.

There’s a wild card here, though. Everything above would apply best if Tazawa were still on year 2 of three arbitration years. The only things that could change a panel’s math since those MLB Trade Rumors numbers came out would be other arbitration cases settled this offseason. Since Tazawa is in his last year, though, the free agent deals we’ve seen this offseason could also figure in — and with the unexpectedly significant deals executed by the likes of Darren O’Day this offseason, the “ideal” number in the minds of the Red Sox and Tazawa’s agents could be higher.

The market has treated good relievers differently this winter than it has in the recent past, and the Red Sox and Tazawa will both have that in mind.

If you were pressed to choose between Shawn Kelley and Junichi Tazawa on a one-year deal in 2016, at equal salaries, who would you pick? How about Mark Lowe? Maybe those answers aren’t that clear, but even with his struggles at the end of 2015, few wouldn’t be happier to take Tazawa than to take total wild cards in Neftali Feliz or David Hernandez, both of whom signed one-year deals for $3.9M this winter. It’s not an apples-to-apples comparison — the panel can look at these free agent numbers, but they won’t give them the same weight that last-year arbitration comps will have. Nonetheless, the market has treated good relievers differently this winter than it has in the recent past, and the Red Sox and Tazawa will both have that in mind.

In the end, the late-inning gold rush this winter could push both parties’ ideas of Tazawa’s “ideal” number not just higher, but beyond their $3.425M midpoint, maybe to $3.5M. That’s not a huge difference from $3.3M, but it would push the “ideal” number to the other side of the midpoint, at least in Tazawa’s eyes — and if the parties don’t agree on which side of the midpoint the “ideal” number is, a hearing could become more likely. This winter’s free agency could really be enough, though, to make Tazawa’s $4.15M a more likely panel award than the $2.7M figure of the Red Sox. If that’s the case, that could encourage Tazawa to put negotiations on hold and head to a hearing.

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