Indians prospect Francisco Mejia, who is generally considered one of the game’s very best prospects, has brought suit against an entity known as Big League Advance, according to a report from ESPN.com’s Jerry Crasnick. The litigation seeks to set aside a series of contracts between Mejia and BLA.
The precise nature of the agreements is itself evidently a subject of the lawsuit. Generally, though, the arrangement was for Mejia to receive a payment ($360K in this case) in exchange for a portion (10%) of his future earnings. Mejia clams the up-front money was in the nature of a loan, whereas BLA characterizes it as a no-strings-attached payment.
This general scheme shares plenty in common with Fantex, which previously struck some notable bargains with young MLB players. Of course, that company originally sought to sell “shares” of its investments to the general public, a novel marketing concept that seems not to have worked in practice. The BLA approach appears to be more of a hedge fund model and is (per its website) focused on pre-MLB players. Unlike players who are already in the majors, many prospects’ earnings are somewhat less certain and presumably can, therefore, be secured for lesser investments.
Unsurprisingly, Mejia’s allegations paint a less savory account of BLA’s business model than would the entity itself. CEO Michael Schwimer, a former MLB pitcher, denied that the organization utilizes abusive recruitment tactics and disputes certain elements of Mejia’s claims in particular. Crasnick ticks through some of the chief allegations. Whether or not the contract is enforceable will ultimately be decided by the pending court case, which is only just getting underway, unless the sides agree instead to a settlement.
Whether or not Mejia will be bound by this agreement is itself of note, as he’s a significant player who is expected to have a chance at staking a claim to a regular MLB job in short order. (Indeed, he already touched the bigs last year, leading BLA to seek its first payment.) But the lawsuit is potentially also of broader consequences, as it could have implications for the still-uncertain development of this model of outside investment in professional athletes’ future earnings.
Most notably, perhaps, is the simple fact that this sort of agreement was struck in the first place. Unlike the Fantex situation, BLA seemingly has not sought visibility. Indeed, it asks in a counterclaim for an injunction forbidding Mejia from publicizing his interactions with BLA. But it certainly seems this isn’t an isolated matter. The entity’s website claims that it has arrangements with at least three (anonymous) players who have reached the majors since originally signing with BLA. The site also quotes some unattributed statements of gratitude from those players.
As all this is going on, the 22-year-old Mejia is trying to force his way into the Indians’ immediate plans. He’s off to a tepid start at Triple-A and still doesn’t have a clear position at the game’s highest level. (A catcher by trade, Mejia is also working in the outfield at Columbus.) But most evaluators expect the youngster to establish himself before long as a high-quality hitter at the game’s highest level.
Prospect rankings — including Baseball Prospectus (#5), ESPN.com (#7), MLB.com (#11), and Baseball America (#20) — unanimously value Mejia as a top-end talent. He’s obviously already on the verge of drawing a major-league salary. Certainly, there’s every chance that ten percent of his eventual earnings will turn out to be quite a tidy return on the initial investment reputedly embodied in the contract that’s now in dispute.
Ugh, frankly I’m not sure who to back on this one. This is basically a viatical settlement, a player is selling his potential future just in case he’s one of the many top prospects every year who fails.
Was Mejia looking for a safety net since most prospects simply don’t make the big money? Was he sold a bill of goods? Or did something else happen?
MLB should make a ruling on whether or not these companies are acceptable and just stick with it.
Yes. Hard to tell at this juncture. But it does sound shady. For the “lender”, they could really be rolling in the $ if only one player makes it big in a career. Are you kidding me? Mejia could be set for a career that could end up making a half a billion before he’s done. At 10%, that’s a huge take in a 350k “loan”.
Did you ever see the movie Fight Club? At the beginning of the movie Edward Norton’s character explains his job is to decide based on probabilities and payoffs if a car should be recalled. This is the job of an actuary, a person who creates a formula to decide if a company should pay now or later.
Essentially these companies are insurance companies who (if honest) rely on actuaries. Probabilities (again, if they’re honest) have been determined and if Mejia fails to live up to his potential they determine the best case scenario is he earns about 3.6 million in his career.
That said, companies like this have existed outside the sports world for a long time and have had massively questionable business practices. So a lot more information is needed or MLB needs to make a ruling and stick by it.
Actuaries rely on principles and objective past evidence. Ball players have unique skills that unless you had a large enough base to account for injuries, mental toughness and even the present competition to just name a few, the immediate payout would have to be very low. My guess is the reason his legal team is trying to prove it was a loan is they then could argue the rate constituted usery, making the deal illegal. A gift would likely separate the payment from the other terms of the agreement. For a contract to be enforceable there has to be consideration. Monetary even a dollar is the easiest way to satisfy this. You have to wonder what else is in the contract if the money was a gift as BLA is now claiming.
Actuaries rely on principles and objective past evidence. Ball players have unique skills that unless you had a large enough base to account for injuries, mental toughness and even the present competition to just name a few, the immediate payout would have to be very low. My guess is the reason his legal team is trying to prove it was a loan is they then could argue the rate constituted usery, making the deal illegal. A gift would likely separate the payment from the other terms of the agreement. For a contract to be enforceable there has to be consideration. Monetary even a dollar is the easiest way to satisfy this. You have to wonder what else is in the contract if the money was a gift as BLA is now claiming given their demand for secrecy.
So all Mejia has to do is make the major league min. for the first 6 years
and the company will break even on the “loan” and make money on anything over that! Sounds like a good investment on their part.
As a former LA director this is a common practice of those not only by this type of companies but by Buscones. They take advantage of the families’ desperation and in most cases they do not explain what it is that is in the contract they are signing. As usual, MLB International representatives are in La La Land & when they are told about these matters they let it go in one ear and go out the other. It is only when it becomes a Scandal that they try to be involved. What happened with the Braves and others had been brought to MLB attention several years ago and they allowed to go on. The rule was that you could not make a deal any player and/or buscones until the signing date. Today, deals are being made up to 2 years in advance. If you have rules, enforce them.
I read elsewhere that he needed the money for his mom’s medical care. Something about her needing surgery.
It wasn’t for a safety net.
In any case it appears he was in a desperate situation for money and at that point was willing to forfeit future earnings to secure this money. Now he realizes it was a poor decision but if contracted properly will be on the hook for the original agreement. People get desperate when broke.
Yep. I studied contract law, and this just looks like a bad decision on his part.
I wonder if he had sought out help from the Cleveland organization first?
As an actual lawyer, it does look like a bad decision, but there might be a few outs. This might violate state ursury law (I have no idea what state law they put into the contract). But if so it will be an unconscionable term. Highly unlikely the entire contract gets dismissed, but they could change the interest amount.
Did you “study” it on an episode of Law & Order?
Ouch! You’re bad.
SCCBL. Look it up, genius.
Is that the class Jack McCoy taught?
MLB and the MLBPA cannot make rules about outside busienss matters when they are personal in nature. Players have life insurance, disabilty insurance, most of which are purchased outside the confines of MLB. IF a player hedges his future earnings for a lump sum immediately, its a risk/reward he chooses to take. Did he have an issue when he received his payment? Of coursee not. But now, he is looking at potential millions lost on the back end of the deal. If he happened to get injured beyond the ability to play in the future, would he give back the money?
Disgusting concept which hopefully will be found to be illegal. While conceptually it seems like a good idea to provide advance funds to a struggling athlete, the potential for abuse is huge. Athletes in need can easily be taken advantage of and depending on the terms, if allowed could end up as legalized slavery.
Exactly! A person could sell a lot of people that can’t read English to sign on a loan only to find out he has to pay them back 10 percent for ALL he makes in his career. And the player was led to believe he only had to pay back the loan plus interest. HUGE difference.
I don’t think giving up 10% of millions could ever be qualified as slavery.
In the end I believe it all comes down to information and intent. Did the player know that by accepting their payment they were essentially betting against themselves or taking insurance out on their own careers? A few other questions remain in the balance. But I have to imagine the final ones would have to be, what did the player’s agent or coaches say and did they get kick backs?
But again, MLB needs to make a hard and fast ruling. Ruling against this type of business ends it. Ruling for it means MLB needs to regulate it.
When did comparing things to slavery become a thing. I’m hearing this a lot lately in sports about players making millions and it’s completely ridiculous and frankly insulting.
Having said that this is predatory lending at its best. It’s the old Don King ploy of offering an athlete a suitcase of money now in exchange for giving up millions they are due.
I agree with your final sentence, but also believe that “procedure & intent” truly determines whether or not this situation, or other situations like it, should be allowed or not.
If a person with cash makes an offer to provide immediate financial relief for a player who is struggling financially, they deserve a return on their investment. If Full Disclosure of the terms of the contract is provided before signing, and ample time for that person to “look it over / have it checked out”…..then it’s my belief that they have entered into a Bilateral Contract that should be enforceable.
When people are in a desperate situation, they sometimes make an agreement that……Once They Are Back On Their Feet…..they want to back out of.
I’ve hired guys that said “I need this job badly, I’ll sweep the floor, I’ll clean toilets, I’ll wash your car every week…..for $12.00/hr…….if you hire me.
Well….3 months later, when he was “back on his feet”, he complained about the work he was doing and the money he was making. Initially, I rescued him…..now I’m a greedy owner. Nothing else had changed. That’s human nature.
I believe that the kids who take these deals are only thinking about TODAY, and they don’t care about the future, until the future becomes “Now”. Then they regret having Made That Deal……and try to back out of it.
That’s wrong. They made a Deal…..They need to Stick To It (unless there was deception or coercion). If they didn’t “check it out before signing…..that’s on them, not the “investor”……….Caveat Emptor!!!!
Dilly dilly
There are laws in play. NY for example is a tough state to sell an annuity in because the laws protect against an unfair rate of return. If as another poster wrote, he needed emergency funding for a medical emergency, the fairness of the return could dictate its’ enfirceability. Duress is a hard but not impossible argument to raise. Time will tell. My prior comparison to slavery might have been an overreach, a knee jerk reaction so to speak. I am though concerned about the length. It reminds me of the original movie and music deals that were eventually outlawed. Since we don’t know the full terms, everyone especially me is just guessing.
republican…..
No it wasn’t.
So you think the slime balls who smuggled the players here from Cuba for a % of their future earnings were just being good business men right ? It takes one to know one!
It’s like slavery in the sense they are buying a piece of a person. Disgusting. That said wasn’t “The Big Hurt” Thomas HOF one of the first players to do this?
Sounds just like the newest scam in real estate of reverse mortgage lending . Bunch of vultures !
This why players have agents. Life insurance is a similar product. They agree to pay you much more than your premiums, expecting you to actually live long enough to either pay continuously and earn money on your premiums, or in cases of term, live past the “need” of life insurance and keep the premiums for the comfort of having protection.
Is it really that different from a player agreeing to a pre-arb extension with their team? The only difference is that in pre-arb deals, the Team doesn’t have to pay all the money up front, instead getting to spread that liability over multiple seasons.
It will be interesting to see where some people apply their selective morality. I do think many people are numb to the power of cost control that Teams currently monopolize and hold over players.
We don’t know the length of the alleged agreement. My comment was under the belief it was for more than his initial MLB contract or perhaps open-ended which likely would not pass legally. A contract has to state terms and while not necessarily having to be financially equitable, they have to pass state and federal laws. If it truly was a gift. then what are the secretive terms that BLA wants to keep private? This just smells worse that dead fish on a dry, hot day.
Plus don’t states have laws against certain types of these contracts who charge way too much interest on a loan ? I think it’s called loan sharking!
The strange thing about this case is that they don’t seem to agree on ANYTHING. I don’t mean just things that can be interpreted differently, but basic facts like whether or not they showed up at his house to seek payment.
For me, the case hinges on the video. They claim they asked him on video, with his agent listening, if he understood that he would pay them $50 million if he made $500 million in his career and he said he did If that video really exists and is described, it’s case over for me. We can argue over whether or not the behavior is slimy or exploitative but if they literally have video of him confirming he understood what he was signing then I have no respect for him trying to get out of the contract now.
Whoa!!! Since when did they let all these F. Lee Bailey’s on the thread. I think the only bar these posters know are the one’s where they get their appletinis.
And now… back to baseball.
You don’t have to be a lawyer to know what’s right and wrong, or Fair Play (actually, I think if you are NOT a lawyer, you’ll do a better job of figuring that out…..LOL).
Ethics is taught in High School…..with more extensive classes offered in college. But Life Itself has many opportunities to evaluate Fair/Unfair. We, as people, have plenty of practice with making that determination.
Without referring to the legal aspect, most comments here probably are based on our belief of Fair Play…..not on “what will actually be decided in court”.
Not to mention, F.Lee Bailey practiced criminal defense, but whatever.
Can’t teach ethics.
And the Inmate would know a criminal lawyer when he saw one.
Why is this an ethics issue? If indeed the player understood that for an upfront payment of $360K he would then give the agency 10% of future earnings, its called a business deal. What if the player suffers a career ending injury tomorrow. Would anyone be saying the same thing? Of course not.. Its called risk and reward. The agency is betting that the player will be a dominant MLB player and earn more than $3.6 million in career earnings (that is the break even point for the agency). Even in his first few seasons, where he earns the league minimum, the agency is taking a risk with a return of about $100K. Assuming he then makes $1 million in arbitration year three, the agency then collects another $100K and still is behind $160K. And if the player becomes the next Travis D’Arnaud, with nothing but injuries and never makes $3.6 million, the agency takes the loss. Many of commentators are making the assumption that all of these “can’t miss” prospects are going to make hundreds of millions. It doesn’t happen.
The Inmate certainly would. I personally wouldn’t.
So the old joke is ; how can you tell when a lawyer is lying ? When his mouth is open!
I gotta back the company on this. This is basically an insurance policy against a failed career that a player purchases in exchange for an upfront payment. For every player that does fail, there has to be someone paying for it. That would be the ones that are successful. Companies are designed to make money and if there was an agreement for an upfront payment, then the rules of that contract should be upheld. It might seem underhanded, even a bit sleazy, but all of those players accepted the money. This just seems like a case of wanting your insurance payments back since you didn’t end up needing them.
Agree^^^^^
It was for his mom’s medical care.
Doesn’t make it right
No right or wrong involved. Only a caring son and an exchange of money for future earnings contract.
I have to disagree. Everything I read says otherwise.
What are the tax implications? The 10% will be off the gross right? Does the govt lose because the the 10% would be taxed at a corporat rate?
$360K gift to a DR kid? Well if its a gift then there is no need to pay anything back. Unless that is some Loan Shark type of deal.
I will gladly pay you 2 hamburgers tomorrow for 1 hamburger now.
Sounds like one of those shady payday loans they out of here in Florida
**they have
BLA is basically J.G. Wentworth for ballplayers.
There are lots of companies out there whose business model is buying future earnings/income from financially illiterate people.
Why any player with an agent would ever agree to one of these deals makes no sense to me.
UVa and prep school silver spoon (Schwimer) exploiting Latinos in a futures gamble. I’m not sure how I feel about this. At its base level it’s a redistribution of wealth with a 10% scrape to the Schwimer house. Mejia’s war chest (and others) would be funding other young Latinos who don’t make it. If it’s all above board then nothing is wrong other than Mejia’s agent took the cash grab instead of exercising patience. I hope MLB investigates and does the right thing with whatever evidence they find.
It’s pretty ridiculous that so many people act like Latin players are for lack of a better term, stupid. I’m pretty certain the math showing 10% of your future is the same math we do here in America. The guy agreed to take certain money now knowing it may be less than he’ll ever make the company, or it could be way less than 10% of his future earnings.
Stop acting like these guys are children because they weren’t born here. Stop acting like they were taken advantage of. They knew they were getting guaranteed money rather than just hoping they make the majors. That’s not a bad deal. If he ever makes enough to pay more than what he borrowed, he’ll be sitting pretty anyway. He made a decision that quite frankly doesn’t seem like a bad one.
From a players perspective, I could see someone agreeing to one of these deals if he already has a young family, or possibly an injury risk. Those situations could lead him to need a bit of money/insurance upfront. From the company’s perspective, I can see why someone is willing to bet the money on some of these guys’ upside. The possible returns are incredible. If they do decide going forward that it is legitimate business, I do believe that they should have a limited amount of time to take the percentage, a max on the percentage paid back, and a minimum offer. I think 6.000 service time could work, keeps arb years in play and free agent years out of it. Return would top out at $5Mish(at least for now) for elite 4-year arb guys. Ten percent take is plenty. Since the company is willing to bet on the player’s career, the minimum offer should at least be a year’s pre-arb salary. I’m sure there are plenty of holes in all of that since it was just off the top of my head…
Yeah only the banking industry should be able to take money from people for decades
Indians need to move on from this guy
Agreed.
In fact, the Tribe can just leave him in Chicago next time they come to town. We’ll take this problem child off their hands.
Chicago is a cesspool, they don’t deserve him either
What? That’s a really stupid statement !
But they do
But they do what? You’re an idiot!
No matter what they tell you in person, the devil is in the fine print (allegedly).
This seems like the same kind of contract people enter into on Shark Tank. Not sure how it’s any different.