Salary Arbitration Strategies: Shelby Miller, Welington Castillo, Daniel Hudson

If they haven’t already settled on a 2016 salary, seven D-backs players will file for arbitration on January 12th, next Tuesday, with exchanging figures with the team a few days later, on Friday, January 15th. So what’s going on with those cases right now? On Monday, I ran through pre-figure exchange strategies for both sides with respect to Rubby De La Rosa, Randall Delgado, Patrick Corbin and A.J. Pollock. Today, let’s take the same look at the first-year case of Shelby Miller, the second-year case of Welington Castillo, and the third-year case of Daniel Hudson. The Miller arbitration will be something of an archetype, but still unusual; Castillo’s situation is going to be pretty strange; and the Hudson arbitration is going to be downright bizarre. For a baseball lawyer, this would have to be as fun as it gets.

To review, player and team can make just about any kind of deal they want, except that they can’t agree on a salary that would be a reduction of 10% or greater off of a player’s previous year salary, or 20% or greater off of the salary the player made the year before. They could negotiate a one-year deal, knock off more than one arbitration season at once, work out an extension that involves would-be free agent years, or go to a hearing. Over the next week or so, agents and the team’s representatives will be working to land on a 2016 contract, but they will also be working hard to move the other party’s filing figure — and they will be working hard to get a read on what that filing figure will be. Team wants the salaries low, players want the salaries high. But for the positions below, I’m also assuming for the team that depressing 2018 salaries is a priority (2016-2017 doesn’t change the strategies below anyway), and that players would place some value on securing a “first fortune” that constitutes lifelong financial security.

Shelby Miller — MLBTR Projection $4.9M

Player: Representing Miller, I’m in a tough spot. On the one hand, Miller is coming off of a fantastic season, one that all but erased a mediocre 2014 from the back of his baseball card. It’s not a flash in the pan, exactly, as the very high MLBTR projection suggests; Miller’s great 2013 season is also in play. If Miller had stayed with the Braves, I’d have worked on an extension, but I wouldn’t have felt like it was a need. Another very strong year would change the math in a big way at the right time, and since Miller’s 2015 was based in part on some very real adjustments, it’s not outside the realm of possibility. In addition, even if Miller didn’t match his 2015, there’s no way he gets non-tendered at the end of the year (even in the event of Tommy John this season), which means that it in all practical respects, Miller is already going to be set for life if he goes to arbitration this year.

There is, unfortunately, the other hand. If Miller had stayed with the Braves, I’d be more willing to turn down an extension than I normally would be for a player coming off of a career-ish rebound year. But this is Arizona now. It may very well be that Miller will do better than most people think; the more you know how Miller does what he’s been doing, the more confidence you get. But Miller could be equally as good as he was last year and still be a less-than-glimmering jewel a year from now (say, 3.50 ERA instead of 3.06 ERA). Whether it’s dry baseballs, the elevation, the heat or a combination of things, pitchers do worse with the D-backs. For that reason (and because it looks to me like the D-backs don’t understand how that works), I’m looking to capitalize on 2015 and sign an extension (probably three year deal), even if they won’t fully credit Miller for being the pitcher he was in 2015.

In terms of filing figures, I almost can’t lose; anything around $5M is a great number and a great platform for years 2 and 3. I don’t want to be too aggressive, because I am going to want to settle with the team if possible even after figures are exchanged (and being too far apart would make the team feel like the number was high just to push up the midpoint, making them more likely to go to trial). Normally, the farther the other party from the probable midpoint, the farther you want to be; here, though, I’m just trying to stay ahead. If I think the D-backs are thinking $4.2M for a figure, I’m at $5.8. If they seem like they’re entertaining $4.8M, I’m kicking around $6.5M.

Team: For the team, this position is almost too obvious to write. It may be that baseball operations thinks Miller is every bit as good as his 2015, or better, but just about everyone in the organization would admit that chance favors Miller’s stock going down rather than up after pitching one year at Chase Field. Add to that the counterveiling policy that going year to year with any pitcher is probably a good idea if you can swing it. You could make an argument here that a two-year extension could make sense, as an attempt to keep Miller’s 2017 down to lower his platform for 2018 (when financial constraints could help determine whether the Contention Window stays open). It’s hard to see the appeal, though.

Overall, the priority is to keep Miller’s 2018 salary low, but the way to do that is by nickel and diming Miller the next two seasons, since arb salaries/awards snowball from year to year. My goal would be to come under the midpoint, and I trust the MLBTR projection as a very good stand-in for the midpoint. In the next week, I’m having honest discussions aimed at a one-year settlement. Regardless of what it seems like Miller would do with a filing figure, though, I’m coming in around $4.5M or $4.6M. If Miller comes in around $6M or so, I’m hanging tough and heading to trial (unless that calls Miller’s bluff). If Miller comes in around $5.5M or so, I’d be content to settle around the midpoint, up to $5M or even $5.1M.

Welington Castillo — MLBTR Projection $3.6M

Player: If Miller might have been a little crestfallen to get the news his pre- free agent years would be spent in the desert, how happy was Beef to get the news he’d be heading to Arizona? Castillo went on a home run rampage once he joined the team, and if his 2015 batting line was the whole story, he’d be getting paid pretty damned well. Castillo suffers a bit for counting stats due to being a catcher and to being squeezed out in both Chicago and Seattle, but I’m not sure that would carry over to 2017, his final arbitration year. In terms of playing time, Castillo can’t really lose; if he’s a full time catcher, he should get plenty of counting stats; if he gets rested liberally against RHP, his rate stats will probably be the better for it.

This one comes down to Castillo’s highest priority. On the one hand, he’s watched the life of a full-time catcher pass him by, for a not-insubstantial period of time. He also does have the ability to make a “first fortune” right now, just by signing a two-year deal for $8M or even $10M that would almost definitely be available. On the other hand, Castillo is holding three kings; if he goes year to year, he gets the Arizona Bump for his third-year arbitration, with nearly two years of stats dominating the discussion, and if he’s got two Arizona years as his free agent platform, someone will pay him to hit (imagine if Castillo played at Coors!).

It’s Castillo’s decision, but with this one, “first fortune” looks like it might be the best call. I don’t want to give Arizona an option year, but if they want cost certainty, they can have it. I’m also not signing a three year deal with an option, giving Arizona control over two additional seasons. If the D-backs want to make sure they have a plan at catcher for the mystery season of 2018 (as in, Contention Window or not), they’ll have to pay for it. I want a five year extension, at decent money. Otherwise, I’m happy to get Castillo locked up for $8M or $9M for two years. I’m also not looking to show the D-backs in February the way I’m going to approach the arbitration hearing in 2017. I’m not aiming for a hearing. If the D-backs don’t want to settle, I’m not getting very aggressive, instead aiming around $4.3M.

Team: Wow, weird that the player guessed it somehow: I have my eyes on 2018, and trying to make sure I at least have as a viable option the decision to decree the Contention Window open for 2018 as well as 2016-2017. I’m also anticipating that Castillo will continue to hit at Chase Field, and I think Castillo’s 2015 production really wasn’t all that unreasonable. Knowing Castillo’s first fortune is in reach, what can I get by frontloading a multi-year deal with Castillo? Can I get him to give me a $10M option year for 2018 (expensive, yes) with a minimal buyout in exchange for a contract that pays Castillo $5M in 2016 and $6.5M in 2017 (okay, not really frontloading, but frontloading in contrast to the regular salary progression). I really, really want to make sure I can have Castillo in 2018 if I want him, and there’s no longer a way to get that control at something under than expected market rate. Higher salaries now is a price I’m willing to pay to get there.

That said, the offer I just described isn’t something I’d suggest before figures are exchanged on January 15th, but after; I don’t want my falsely high 2016 salary to give Castillo’s reps any ideas. In addition to doing harm before figures are exchanged, it could help sell the offer to wait, because $5M or so may be Castillo’s ask, or it may be even a little higher, underscoring its size.

Before Jan 15th, I’m planning to reach out to Castillo’s reps with something a lot different: a $4M salary for 2016 with two one-year options at good (for me) salaries: $6M for 2017, and $8M for that first free agent year in 2018. When Castillo’s reps push back or push me away, I’d gladly bid against myself (ordinarily a big no-no) by increasing the buyouts on the two years to surprising levels, over $2M for each option. There’s a non-zero chance Castillo takes it, and then I have something I really want — 2018 at cost control. It could seem attractive, because the buyout, when combined with $4M for 2016, is essentially “first fortune” levels for a player already coming off of a $2.1M salary. If Castillo turns down my two-option offer, I’ve still accomplished something, in my view: I established that I’m willing to take a hard line on a low salary before figures are exchanged, and that I’m not going to bend over backwards with an absurd short term deal or absurdly long deal just to get 2018 control. In the hearing, my theme is that Castillo is a platoon player, taking the ground of reasonableness by saying that can be useful at catcher in the right situation, but noting that finding that particular kind of platoon partner is nigh impossible, limiting Castillo’s market.

Daniel Hudson — MLBTR Projection $2M

Player: I’m so unsure of myself with this bizarre arbitration scenario that I’d even read other people’s blog posts about how they’re unsure of themselves on his bizarre arbitration scenario. All bets are off, here. Hudson’s record as a starter with Arizona would be so great to work with — how many RHP have done what he did in 2011 with Arizona? But we are so far removed from 2011 that the only thing it’s useful for is a testament to Hudson’s talent. As far as the arbitration panel would be concerned, Hudson is a reliever — and one without much of a track record, or counting stats.

There’s just one opportunity here. Through badly timed bad luck, Hudson’s third-year case is going to look like a first-year case. But it is a third year case. Comps are huge in arbitration, and the most advanced comps one is allowed to present are comps from one year beyond the player’s current stage on the arb ladder. For third-year players, that means comparison to the free agent market. Huzzah! As LUCK would have it, the reliever market is a flood of cash this offseason — a sea change.

In making Hudson’s case, I will flat-out refuse to refer to counting stats. Nope — not there. Yes, I’m supposed to use them… I’m required to use them. But I won’t. I can credibly argue that Hudson is a special case. Counting stats can’t possibly work in administering the arbitration process for Hudson. So I go tools — I go deep. I get visual, with movement charts and whiff rates. Hudson is a BAMF. That’s the only story I will let the arbitration panel hear, as far as I can help it.

I don’t know if it’ll work, but I don’t know it won’t. And I know it can. So that’s where I’ll go, comparing Hudson’s rates and stuff to that of John Axford, who just got $5M a year. David Hernandez, who signed for $3.9M. Huddy looks good as compared to Shawn Kelley ($5M/year), Ryan Madson ($7.33M/year), Jason freaking Motte ($5M/year). Can I make Hudson look fairly similar to Darren O’Day ($7.75M/year)? You bet, but I won’t, because I won’t invite the track record comparison. But guys with Kelley’s ceiling, guys with injury/breakdown concerns like Axford and Jonathan Broxton and Madson and Joakim Soria all work beautifully. The going rate for those guys is $5M a season, folks. And Hudson is better — why should he be awarded anything less?

Yep — I’m insisting on $5M in negotiations with the D-backs right now. Let’s get as close as we can to that first fortune, because nothing else would be guaranteed. The D-backs won’t buy it — they can’t. And even if they moved toward $3M, I’d advise Hudson to stay away. We can use the free agent comps. Let’s roll the dice, tell the D-backs we want $5M, and then file for exactly $5M. We’re framing the debate, we’re being exciting, and we’re making the arbitration process our own. It’s the arbitration case of a lifetime.

Team: I’m flush with relief options, many of them plus; and Hudson is not clearly above the rest. Tendering Hudson a contract was an easy decision, because he’s a good pitcher, and because his 2015 salary was so damned low that we almost can’t lose in arbitration. An increase? Sure. And I’m not sure I trust the MLBTR projection as a true midpoint for Hudson — his case really is pretty unique.

Right now Hudson is exactly one thing for us: a short reliever, one that we may need to work around a bit in terms of pitching schedule. He’d be an asset to this team even at $4M, although even before we got there, we’d have to start to ask some hard questions. In addition, while there’s not a ton of data to go on and there’s no reason to be sure that second Tommy John surgeries are inherently worse than first ones, Hudson does present an injury risk; letting him go unsigned this far was the right way to go. And, hey, Hudson’s missed injury time isn’t just less data as far as the arbitration panel is concerned — it is data. It’s not just that Hudson lacks advantages, but that we have the missed time as an advantage.

Pitching is fungible in this game, but not perfectly, and not for every pitcher. Quite a few teams would pick up Hudson if he became a free agent right now, but not every team — how many would vie for his services in late April? On behalf of the team, I’d be fine wondering out loud whether Hudson would be a fit for the Jhoulys Chacin situation with the Rockies last year — whether, if Hudson is making too much and starts the season poorly, it might make sense to cut Huddy without paying his full year salary. That could be a kiss of death to Hudson’s free agent case a year from now, even though it shouldn’t be.

I can’t afford to give away money I don’t need to part with. A player’s previous year salary is one of the principal things considered by the arbitration panel, and in 2015, Hudson made $800k in his second arbitration season. I’d open the negotiations at an objectively generous $1.6M, double Hudson’s previous salary. I might even file that number — it’s nice and neat. If I can credibly claim that I will file that number and stick with it if it’s filed, would Hudson’s representatives come down to $2.5M as a demand? Possible. If so, I can meet them somewhere, as far as $2.3M or so.