Aaron Judge Contract Negotiations: A Case Study in Leveraging Power

For those of you who are not sports/baseball fans, you may not have known (or cared) that Aaron Judge, who has played for the New York Yankees since 2016 and became a free agent after the 2022 season, had been negotiating his new contract. Drafted in 2013 and making his major league debut in 2016, Judge was the AL rookie of the year in 2017, and won the American League MVP award this past season, while breaking the American League record for home runs in a single season. His current contract expired at the end of  the 2022 season. Yankees fans (like me) desperately wanted him to stay: he is a terrific player, clubhouse leader, and all-around great  guy — a “franchise player.” But, at the beginning of the 2022 season, he turned down a contract extension offer from the Yankees for $218 million dollars over 7 years.

Yesterday, the news spread like wildfire: he signed with the Yankees, accepting a $360 million, 9 year offer, pretty much guaranteeing he will be a Yankee until he is 40 years old, likely the rest of his baseball-playing career. So, how did he extract $142 million and 2 years extra in value in less than a year?

The story of his wildly successful negotiations, at least what is known publicly about them–is a poster-child case study in using power to extract more value in a negotiation.  Judge bet on himself–taking the risk that he could have a bad season and reduce his value, or the upside that he could have a phenomenal season and increase his bargaining power. Well, the latter happened, and he found himself the subject of a bidding war when several teams pursued him. In the end, he was choosing between the San Francisco Giants and the Yankees.

Based on information widely known and reports I have read over the past few days in The Athletic, mlb.com, and ESPN.com, Judge and his agent took crucial steps to make this happen. First, between the beginning and end of the 2022 season, Judge improved his BATNA by playing offense, defense and leader in such an extraordinary fashion that other teams expressed genuine interest in him at a very high price. Second, he engaged in principles- based bargaining by empirically demonstrating his worth, and arguing he had earned a richer contract. He also did not say a negative word publicly about the Yankees, demonstrating good faith and continued interest in entertaining a contract offer from them (albeit a higher offer than the original $218 million). Third, he carefully controlled the flow of information, by keeping his cards (i.e., information) close to the vest and publicly appearing to be seriously considering an offer from San Francisco.  As a Yankees fan, watching the news coverage of his visit to San Francisco and hearing about heavy recruiting pitches from Steph Curry and other Bay Area athletes was heart-breaking. Other than stating during the season that he would like to remain a Yankee, Judge did not reveal to the outside world whether he would have left the Yankees for the right price.

Ultimately, the strategy worked. Whether it was devised by him or his agent, or a combination of both, it offers an excellent case study in how to use one’s athletic talent, popularity, good will and character to leverage a better deal.

author

Jill Gross

Professor Jill I. Gross has been a director of the Investor Rights Clinic (formerly the Securities Arbitration Clinic) since 1999. Professor Gross teaches the Investor Rights Clinic and Seminar, Mediation and Arbitration, and Securities Litigation and Enforcement. She has published numerous law review articles in the area of dispute resolution… MORE

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