Updated 10:43 a.m.: Before this week, we all assumed that Andy Pettitte would come back to New York or retire. Last week’s news that Andy and Joe Torre were talking L.A. upset that balance.

Today, in the Paper That Must Not Be Named, Dodgers GM Ned Colletti confirmed on the record that the team has “some” interest in the 36-year-old pitcher. This leaves the Yankees in something of a bind as they have a big decision to make after the weekend.

Monday, you see, is MLB’s arbitration deadline. By the end of the day, the Yanks must decide whether or not to offer arbitration to Andy Pettitte. This is a rather complicated decision, and it could play itself out in a variety of scenarios.

The easiest option — and perhaps the most beneficial to the Yanks — would be to offer arbitration to Andy Pettitte and hope that he heads to Los Angeles. As Mike noted earlier this week, the Yanks would land the 17th slot in the draft and a supplemental pick as well. But because the Dodgers would be giving up a fairly coveted spot, they may not be so keen to sign Pettitte if the Yanks offer arbitration.

Meanwhile, this decision could easily backfire on the Yanks. If they offer arbitration and Pettitte accepts and he doesn’t sign with the Dodgers and he wants to play for only one more year, Pettitte could actually take the Yanks to arbitration. While he, as a veteran free agent, wouldn’t be guaranteed at least 80 percent of his 2008 salary of $16 million, players nearly never receive a lower salary in arbitration. So even if he were to lose, he would still get a payday well above what he could probably receive from the Dodgers or Yankees right now.

Of course, those are two extremes. Pettitte could accept arbitration and renegotiate with the Yankees. If the Yankees don’t offer arbitration, they can still renegotiate with Andy Pettitte, but if he were to sign with Los Angeles, the team would receive no compensatory picks.

This is the decision with which Brian Cashman and the Yankees brain trust must grapple this weekend. They have to decide if they want Pettitte, if they feel Pettitte might actually go to the Dodgers and if the arbitration decision wouldn’t come back to haunt them. It ain’t easy being a GM.