## Facts

- A major league club and a player entered a two-year uniform player contract for the 1974 and 1975 seasons that included a “special covenant” requiring the club to pay $50,000 per year as deferred compensation to a designee chosen by the player, “during the seasons as earned.”
- The player’s counsel proposed a deferred compensation arrangement and obtained an IRS letter indicating that, if payments were made under the arrangement’s terms, the deferred amounts would not be included in the player’s gross income until paid or otherwise made available.
- The club’s owner refused to execute the deferred compensation documents and refused to pay the $50,000 intended for the deferred arrangement.
- The players’ union filed grievances under the collectively bargained grievance procedure seeking payment of the deferred sums and a ruling that the club’s breach entitled the player to free agency.
- An arbitration panel found the club breached the special covenant, ordered the deferred compensation remedy, and declared the player a free agent.
- The club petitioned in superior court to vacate the award, asserting (1) the award was illegal or against public policy due to alleged tax-evasion concerns and (2) the arbitrators exceeded their powers by granting free agency; the superior court denied vacatur and confirmed the award.
- The club appealed from the judgment denying the petition to vacate.

## Issues

1. Whether the arbitration award was unenforceable as illegal or contrary to public policy because it purportedly required participation in unlawful tax evasion.
2. Whether the arbitrators exceeded their powers under the collective bargaining agreement and submission by interpreting the contract as breached and by awarding free agency as a remedy.

## Decision

- The Court of Appeal affirmed the judgment confirming the arbitration award.
- The court rejected the illegality/public-policy challenge, concluding the award did not require unlawful conduct and the asserted tax-evasion risk was speculative, particularly in light of the IRS letter.
- The court held the arbitrators acted within their authority to interpret the contract and the collective bargaining agreement and to select a remedy, including free agency, so long as the award was grounded in the agreement.
- The court declined to reweigh the merits of the arbitrators’ contract interpretation or remedy choice under the limited standard of review applicable to labor arbitration.

## Legal Principles

- Judicial review of labor-arbitration awards is narrowly limited; courts generally do not revisit the merits if the award is based on the parties’ agreement and the issues submitted.
- An arbitration award may be vacated on public-policy or illegality grounds only where it clearly compels unlawful conduct or directly conflicts with an explicit, well-defined public policy; speculative illegality is insufficient.
- Labor arbitrators have broad authority to interpret collective bargaining agreements and fashion remedies for contract breaches, including remedies that alter the ongoing contractual relationship, when grounded in the agreement and submission.

## Conclusion

The court upheld a labor-arbitration award enforcing a deferred compensation covenant and granting free agency as a remedy for the club’s breach, holding that the award neither compelled illegal conduct nor exceeded the arbitrators’ contractual authority under the collective bargaining framework.


Am. & Nat’l Leagues of Pro. Baseball Clubs v. Major League Baseball Players Ass’n, 130 Cal. Rptr. 626 (Cal. Ct. App. 1976)