Inside the Major League Rules

Major League Baseball's fundamental governing documents – the Major League Agreement, Major League Rules and league constitutions – aren't generally available to the public. A few months ago, though, I spent several hours reviewing the 1999 editions of these documents. Some of these provisions may since have been amended, but most should remain in full force and effect.

Major League Agreement. The document which creates and defines the Commissioner's office and sets the rules of procedure for major votes:

Commissioner can discipline leagues, clubs, officers, employees and players for conduct "deemed by the Commissioner not to be in the best interests of Baseball." Penalties can include a reprimand; deprivation of a club's representation at joint meetings; suspension or removal of league or club officers or employees; temporary or permanent ineligibility of a player; fines of up to $250,000 against leagues and clubs, $25,000 against officers and employees, and $50 against players; and loss of benefits under the Major League Rules, including the right to draft players.

Except as necessary to preserve the integrity of, or public confidence in, baseball, the best-interests power does not extend to anything that requires the club to act, or not to act, on the election of a Commissioner; expansion; sale or relocation of a club; provisions affecting revenue sharing; provisions amending the Major League Agreement; any matter subject to collective bargaining with the MLBPA; or anything which a league constitution specifies must be voted on by members of the league.

Commissioner elected for a term of at least three years, longer if the clubs specify; re-election to be considered at a joint meeting to be held between six and 15 months prior to expiration of the contract. Election (by written ballot) requires 3/4 majority of all major league clubs, including at least five clubs in each league; re-election of a sitting Commissioner requires a simple majority, including at least five clubs in each league.

Unless otherwise specified, all votes require a simple majority of all clubs in both leagues, with the vote of each team in the smaller league weighted so the leagues collectively cast the same number of votes. (Thus each of the 16 NL clubs receives one vote, each of the 14 AL clubs receives 1-1/7 vote.) The specified exceptions include:

Simple majority, including at least five clubs in each league: matters subject to collective bargaining with the MLBPA.

Simple majority of clubs in each league, counted separately: issues affecting the scheduling of both leagues' seasons; any action affecting the All-Star Game or any postseason series; amendment of the playing or scoring rules (where if the leagues disagree, the Commissioner can cast the deciding vote); any action relating to radio or television.

3/4 majority of the clubs in each league: interleague play; switch in either league away from current three-division format; any amendment to the Central Fund Agreement except those affecting radio and TV (which, as noted above, can be changed by a simple majority in each league).

3/4 majority in the affected league, plus a majority of clubs in the other league: expansion, sale or transfer of control of a club (except that control passing to a spouse or descendant requires only a majority vote), relocation of a club to a city not within the other league's circuit [transfers into another club's territory require 3/4 majority in both leagues]

3/4 majority of all member clubs: any change in revenue sharing that affects both leagues, except for amendments to the Central Fund Agreement [3/4 majority of each league]; amendments to the Major League Agreement, except that those affecting the Commissioner, the Executive Council and the procedure, including voting requirements, applicable at joint meetings require a 3/4 majority of the clubs in each league.

Renewal or extension of the Major League Agreement requires the approval of both leagues, with each free to determine the vote necessary to approve.

Clubs agree to submit all disputes, except those for which a resolution procedure is expressly provided in MLB's governing documents, to the Commissioner as binding arbitrator, and agree not to challenge the Commissioner's actions in court. If a club violates this agreement, the Commissioner is empowered to order him to pay the defendant's attorneys' fees.

All parties agree that "no diminution of the compensation or powers of the present or any succeeding Commissioner shall be made during his term of office."

Major League Rules. These include the rules establishing teams' territories and governing franchise moves, expansion and discipline. They also include the draft and waiver provisions, which I didn't have time to review thoroughly

Territorial Limits: Expanded between the 1990 and 1994 Major League Rules to include not just a club's home city, but also surrounding counties. Of particular interest in this respect:

• The Orioles' territory includes Anne Arundel, Howard, Carroll and Harford Counties in Maryland;

• The Marlins' major league territory includes Palm Beach County;

• The Dodgers' and Angels' territory includes Orange, Ventura and Los Angeles Counties;

• The Yankees' and Mets' territory includes New York City, plus Nassau, Suffolk, Westchester and Rockland Counties in New York; Fairfield County south of I-84 and west of SR 58 in Connecticut; and Bergen, Hudson, Essex and Union Counties in New Jersey;

• The Athletics' territory includes Alameda and Contra Costa Counties;

• The Phillies' territory includes Gloucester, Camden and Burlington Counties in New Jersey;

• The Giants' territory includes San Francisco, San Mateo, Santa Cruz, Monterey and Marin Counties, plus Santa Clara County with respect to another major league team.

Under Rule 1(c), either league can move into a territory belonging to a club in the other league, so long as (a) 3/4 of the affected league's teams consent; (b) the two parks are at least five air miles apart unless the two clubs mutually agree otherwise; (c) the newcomer pays the existing club $100,000 plus half of any previous indemnification to invade the territory; and (d) the move leaves no more than two clubs in the territory. This provision dates to late 1960, when it was adopted to establish the terms for the expansion Los Angeles Angels to play in the territory claimed by the Dodgers in 1958.

As additional territorial protection, Rule 52 allows a major league club to block any other major or minor league clubs from playing within 15 miles of its territory without permission.

Rule 1(d) provides for the recognition of new major leagues: Any group of eight clubs can apply for major league status if it meets the following criteria:

• Evidence of financial soundness;
• 15,000,000 population in the eight cities;
• All cities with parks seating at least 25,000;
• Average paid attendance of 3.5 million over the three previous seasons;
• Balanced schedule of at least 154 games;
• Major league minimum salary, with no maximum;
• Agreement to become parties to the Major League Agreement and the Professional Baseball Agreement;
• Agreement to accept Uniform Players' Contract;
• Agreement to join the major league players' pension plan or create something comparable.

These conditions have remained largely the same since 1959, when they were adopted in response to the two-pronged threat posed by the Continental League: competition for fans and players, and a challenge, in Congress and the courts, to Organized Baseball's antitrust exemption. Under Rule 1(e), a new league can apply for major league status if it meets all of these requirements except the average paid attendance.

Roster Limits: Governed by Rule 2. Major league clubs can reserve 40 players, only 25 of whom can be on the active roster between Opening Day and midnight August 31. AAA clubs can reserve 38 and AA clubs can reserve 37, with roster limits of 24 from Opening Day through the 30th day of the season and from August 10 until the end of the season, 23 between these dates. Teams in A, short-season A and Rookie leagues can reserve 35. Class A clubs play with 25-man rosters, while short-season A clubs have 30-man rosters, only 25 of whom are eligible to play in any given game, and Rookie league clubs have 30-man rosters.

Disciplinary Lists: MLB maintains Suspended, Restricted, Disqualified and Ineligible lists. A player earns a spot on the Suspended list for insubordination or breaching a regulation or other provision of violating his contract. The Reserve list is reserved for those who fail to report, or to sign a contract, within 10 days after the start of the regular season; the Disqualified list includes those who play with or against a club which during the current season has had a connection with an ineligible player or person; and the Ineligible list collects those involved with attempts to throw games, bribe players or umpires, or bet on games, and those convicted of crimes involving moral turpitude.

Conflicts of Interest: Rule 20 contains several provisions the Commissioner and others at MLB seem to have forgotten:

(a) OWNERSHIP AND FINANCIAL INTERESTS. "No Club, or owner, stockholder, officer, director or employee (including manager or player) of a Club, shall, directly or indirectly, own stock or any other proprietary interest or have any financial interest in any other Club in its League, provided, however, that any owner or stockholder of a Major League Club (who is not also an officer, director or employee of a Club) whose interest does not exceed 5% of such Club and whose interest does not constitute a control interest [as defined] may own a non-control interest not exceeding 5% of any other Club or Clubs in its League, unless the Commissioner determines that such ownership would not be in the best interests of Baseball."

(c) LOANS TO CLUBS AND OTHER INDIVIDUALS. "No Club, or owner, stockholder, officer, director or employee (including manager or player) of a Club shall, directly or indirectly, loan money to or become surety or guarantor for any Club, officer, employee or umpire of its, his or her League, unless all facts of the transaction shall first have been fully disclosed to all other Clubs in that League, and also to the Commissioner, and the transaction has been approved by them."

(d) LEAGUE OFFICIALS. "No officer, employee or umpire of a League shall, directly or indirectly, own stock or any other proprietary interest or have any financial interest in any Club of his or her League, or loan money to or become surety or guarantor for any such Club."

AL Constitution. 3/4 majority needed to expand. 3/4 majority must approve relocation, with the added proviso that relocation to within 100 air miles of another club must also be approved by that club. Transfers of control in a club require 3/4 approval, with the exception of transfers to heirs or legatees upon an owner's death. If the owner of a club decides to sell stock in the club to the public, the AL can require that membership in the league itself be held by a separate subsidiary corporation, all or nearly all of which is retained by an owner. Amendments require 3/4 vote, except that the rules governing involuntary termination of membership, termination procedure, action without a meeting, and the amendment process itself can't be amended without unanimous consent.

Rule 8.7, "Fiscal Responsibility," mandates that each club retain a 60:40 ratio of assets to liabilities at the close of its fiscal year. An AL resolution, adopted December 12, 1982 and amended December 8, 1983, provides that for purposes of the 60/40 rule, balance sheets shall be recast to:

Value non-current baseball assets (stadia, spring training camps, franchise, player contracts, right to future broadcasting revenues, etc.) at $20 million, if the balance sheet shows less;

Eliminate advance ticket sales, and other advanced monies, from both sides of the balance sheet;

Record the value of all current assets (cash, receivables, securities, etc.) as booked, and the value of all non-current non-baseball assets at a value determined by an appraisal of their net fair market value;

"Include in a club's liabilities the present value of all long-term baseball commitments"; and

"Exclude from a Club's liabilities any debt obligations relating to stadium improvement or acquisition."

NL Constitution. 3/4 majority to expand or to amend the league constitution. Sale or relocation of a franchise must be approved by 3/4 of the other franchises, exclusive of the affected club.

Copyright © 2002 Doug Pappas. All rights reserved.
Originally published in the Fall 2002 issue of Outside the Lines, the SABR Business of Baseball Committee newsletter.

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