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The Astros are being sued for tanking

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The Former Astros Owner Accused the Current Astros Owner of Losing on Purpose.

Mlstros at the English language Wikipedia [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)]

Tanking might be all the rage in baseball these days, but back in the heady days of 2011, it was the Houston Astros who birthed the idea in its modern form. In 2010, the Astros went 76-86, a sub-par but still somewhat respectable showing from veterans Hunter Pence, Lance Berkman, Brett Myers, Roy Oswalt, and Wandy Rodriguez. It wasn’t a good team, but no one would mistake it for a Triple-A farm outfit either.

Over the next few years, however, the major league club was strip-mined of assets. The 2011 team lost 106 games. The 2012 team lost 107 games and didn’t have a single regular position player with an OPS+ of 110 or better or starting pitcher with an ERA+ of 110 or better. By 2013, the year the Astros lost 111 games, the team’s best pitcher was Bud Norris (103 ERA+) and best position player was catcher Jason Castro. Reinforcements arrived in 2014 in the form of George Springer, Marwin Gonzalez, and Dallas Keuchel, and Jose Altuve broke out into a legitimate star player, as the nucleus of the super-team of the past few years finally began to coalesce.

Still, there’s no denying that the 2011-2013 era was a dark period; Justin Maxwell led the 2012 Astros in home runs with 18. The problem is that other teams seem to have looked at the Astros’ success after tanking as a model to emulate; this year saw a staggering four teams (Orioles, Royals, Marlins, Tigers) lose over 100 games, with three more (Blue Jays, Mariners, Pirates) losing at least 93 games. All of the losing has led to commentators arguing that tanking is bad for the game.

Fortunately, someone has stepped up to solve this problem for us. Unfortunately, that someone is former Astros owner Drayton McLane. Yes, that’s this Drayton McLane, the billionaire grocery mogul-cum-team owner who sold the Houston baseball franchise to current owner Jim Crane back in 2011.

You see, back in 2013, Crane sued McLane for fraud. Per Matt Snyder of CBSSports:

Two years after buying the Houston Astros for $615 million, Jim Crane has filed a lawsuit against former owner Drayton McLane, alleging that McLane misrepresented the value of the Astros’ TV contract -- which has allegedly lost Crane hundreds of millions of dollars.

Astros games are broadcast locally on Comcast Sports Houston, of which Crane bought a 40 percent stake while purchasing the Astros. The channel, though, is only available in about 40 percent of the viewing area due to high local subscription fees.

Crane’s lawsuit alleges that McLane was fully aware that the fees were “too high and that other distributors would not agree to pay the rate.”

During a press conference Friday, Crane said that the network issues have caused the Astros to lose “tens, possibly hundreds” of millions of dollars. He also noted that if changes weren’t made to the TV deal, that would continue to be the case moving forward.

”We now face a situation where either we accept millions of dollars in loss each year, with the damage to this franchise and this city for next 20 years, or we fight back,” Crane said, via Associated Press. “I did not buy this team to have a low payroll and be mediocre. We bought this team to win championships and we bought part of this network so our fans can watch the games.”

In other words, Crane alleged, in essence, that the team’s tanking was, at least in part, the result of lack of revenue from the team’s television contract, and that McLane misrepresented hos much money the team received from that contract. The two sides fought for five long years over whether the matter would be heard in state or federal court, before the case was remanded back to Texas state court earlier this year to finally begin substantive merits determinations.

That means that McLane had to respond to the Complaint. His response? A counterclaim, alleging that Crane tanked the Astros on purpose in order to destroy the team’s television contract so he could sue McLane and recoup his purchase price.

McLane has been hinting at this for a while. Back in 2014, he gave a series of interviews and penned an op-ed in which he said that he was responsible for the farm system which fueled the Astros’ rise, and therefore tanking wasn’t necessary.

Finally, contrary to what some have said, we provided a strong farm system to Jim Crane’s ownership group. It included a number of players you see now, such as Jose Altuve, Jason Castro, George Springer and others you have seen on today’s 40-man roster or on other major league teams.

Let’s take a look at what McLane is alleging. Here’s his counterclaim (it’s after his motion to dismiss, which doesn’t concern us right now).

HBP and/or HBP Team [Crane’s entities] purchased the Houston Astros and a share of the HoustonRegional Sports Network (the “Network”) from [McLane] and then proceeded to intentionally and deliberately destroy the Network which it accomplished, in part, by “tanking” the baseball team. The destruction of the Network was undertaken so HBP could recapture what it believed were undercompensated Astros broadcast fees. In short, HBP thought its television rights agreementwith the Network was a bad deal which it could escape if the Network defaulted. That plan was thwarted when Comcast threw the Network into bankruptcy thus halting the contemplated default.

* * *

In addition to destroying the Network, HBP Team also tanked the team that was supposed to attract fans to watch the Network. Indeed, the Astros were the worst team in baseball following the sale. After years of success on the field, the Astros’ demise began with the current ownership trading many of the Astros’ star players for minor league prospects and even ordering prior ownership to trade high performance players prior to the sale. The success (or in this case failure) of the Astros and the Network was beyond the control of [McLane] after the closing. It was entirely in the hands of HBP Team.

The closing the Counterclaim refers to was the closing on the Purchase and Sale Agreement for the team in November 2011. Yes, you close on a baseball team, just as you close on a house. Do you want to see the Purchase and Sale Agreement? Of course you do. Here it is.

So let’s take a look at this contract, both because it’s extremely relevant, and also because we rarely get to see how billionaires convey things like baseball teams; this contract, like so many others, has a confidentiality provision.

In any event, let’s start with something straightforward. McLane alleges that Crane ordered him to sell off “high performance players” prior to the closing. The Astros made three notable deadline deals in 2011:

  • On July 19th, the team traded infielder Jeff Keppinger to San Francisco for Jason Stoffel and Henry Sosa. At the time, Keppinger was hitting .307/.320/.436 (108 OPS+) and the Astros were 32-65.
  • On July 29th, the team dealt outfielder Hunter Pence to the Phillies for Jarred Cosart, Jon Singleton, Josh Zeid, and a player to be named later who became Domingo Santana. At the time, Pence was hitting .308/.356/.471 (128 OPS+) and the team was 35-71.
  • On July 31st, the Astros sent outfielder Michael Bourn to Atlanta for Juan Abreu, Paul Clemens, Brett Oberholtzer and Jordan Schafer. At the time, Bourn was hitting .303/.363/.403 (113 OPS+), and the team was 35-73.

Hunter Pence was certainly a high-performing player, but calling Bourn and Keppinger that was a stretch; both fell off mightily in the second half with their new teams as they reverted closer to their career norms. Meanwhile, after the trades, the Astros went 21-33, which was actually a better record than beforehand. So arguing that the Crane began tanking the team even before he took over isn’t really supported by the evidence. Frankly, the reason the Astros needed to rebuild was because Keppinger and Bourn were among their highest-performing players.

In fact, there’s nothing in the 61-page contract and all of its exhibits and amendments (80+ pages worth) which expressly grant authority to Crane’s group to make that kind of order. As such, it doesn’t look like McLane was “ordered” to do anything at all. Now, it’s possible that it could be implied authority under provisions like on page 20, which authorizes the Astros to continue operating during the sale, or the waiver transferring the team from the National League to the American League (on page 114).

Still, if McLane was as concerned about these “orders” as he now claims, why didn’t he do something then? To the extent that the team did make trades before Crane assumed ownership, it seems far more likely doing so was a combination of reducing payroll for the new owner so as to facilitate the sale and as typical baseball moves for a team going nowhere. If you’re 32-65 through 97 games, you’d need to go 58-7 to win 90 games and have a decent shot at a wild card. That’s not happening, which means selling off trade-able assets is a viable strategy.

There’s also one more wrinkle to this. Last year for FanGraphs, I wrote about the legal side of tanking under Major League Baseball Rule 21(a).

There’s little doubt that the players on the 2013 Astros were actively trying to win, even on their way to a 111-loss season. But that’s not all [Rule 21(a)] requires, because the Rule doesn’t apply only to the players. It says any player or person. To show where we’re going with this, let’s take out a few words for clarity:

(a) MISCONDUCT IN PLAYING BASEBALL. Any person connected with a Club who shall fail to give his best efforts towards the winning of any baseball game with which he is or may be in any way concerned, or who shall intentionally lose or attempt to lose, or who shall solicit or attempt to induce any player or person connected with a Club to lose or attempt to lose, shall be declared permanently ineligible.

It would seem that, according to the language used here, the front office and management of a Major League Baseball team is also bound to try its best to win games. Is a front office giving its best efforts towards the winning of a baseball game, though, if it strips it bare of major-league talent before the season begins? Or is that front office attempting to lose those games? By the plain language of the rule, it seems like tanking might actually be prohibited.

The gray area was in the point of the tanking. If you’re tanking to get great prospects and win later, it’s arguable that whereas you aren’t violating the letter of Rule 21(a), even if you are contravening its spirit. But if, as McLane is alleging, the Astros tanked not for draft picks but instead for money, that’s a different story entirely that is almost undoubtedly a violation of the major league rules. But since McLane participated in this scheme he’s alleging - by his own admission - he would have violated the rules too. It’s certainly a bold strategy, but not necessarily a wise one if he ever plans on being involved in Major League Baseball again.

Then there’s the fact that the 2011 Astros, at the end of the day, were just about every bit as bad as the two teams which followed them. The 2012 Astros lost a single more game than did the 2011 team. The 2013 team lost five more games than the 2011 team. There simply wasn’t a giant down-tick on performance. The 2011 team was bad, and so the 2012 team was also bad, and the 2013 team was—you guessed it—bad.

McLane’s counterclaim, in other words, was designed to generate headlines, but it’s all smoke and no fire. At the same time, Jim Crane righted the ship fairly quickly. After the wilderness years, the 2014 Astros won 86 games, and the franchise is now a strong contender for team of the decade. For all the hand-wringing about tanking in baseball, the original tank artists were truly “unwatchably bad” for only a couple of years; the entire rebuild took less time than Jerry DiPoto has run the Mariners or A.J. Preller has helmed the Padres.

There are many dubious rebuilds out there. The Astros, a behemoth in their third consecutive ALCS and a $200 million payroll ten times what it was in the lean years, aren’t one of them.

Sheryl Ring is a litigation attorney and Legal Director at Open Communities, a non-profit legal aid agency in the Chicago suburbs. You can reach her on twitter at @Ring_Sheryl. The opinions expressed here are solely the author’s. This post is intended for informational purposes only and is not intended as legal advice.