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WAKE FOREST JOURNAL OF BUSINESS
AND INTELLECTUAL PROPERTY LAW
VOLUME 15 SPRING 2015 NUMBER 3
A BLUEPRINT TO MODERNIZE MAJOR LEAGUE
BASEBALL’S ANTITRUST EXEMPTION IN LIGHT OF CITY
OF SAN JOSÉ
Eli Marger†
I. INTRODUCTION ............................................................. 476
II. BACKGROUND .............................................................. 479 A. “THE BASEBALL TRILOGY” ...................................... 481 B. CITY OF SAN JOSÉ V. OFFICE OF THE
COMMISSIONER............................................................ 485
III. ANALYSIS .................................................................... 488 A. DOES MLB’S ANTITRUST EXEMPTION APPLY
NARROWLY TO THE RESERVE CLAUSE OR BROADLY
TO THE “BUSINESS OF BASEBALL”? ........................... 489 B. SHOULD “RULE STARE DECISIS” OR “RESULT
STARE DECISIS” BE APPLIED TO THE TRILOGY OF
SUPREME COURT CASES THAT HAVE ADDRESSED
MLB’S ANTITRUST EXEMPTION? ............................... 491 C. PUBLIC POLICY CONCERNS, INCLUDING
UNIFORMITY WITH OTHER PROFESSIONAL SPORTS,
SUPPORT A CHANGE TO ALLOW FOR FRANCHISE
RELOCATION FREE OF THE ANTITRUST EXEMPTION .. 498
IV. CONCLUSION .............................................................. 509
V. ADDENDUM .................................................................. 511
† J.D. candidate, May 2016, Wake Forest University School of Law. Staff
Member 2014-15, Managing Editor 2015-16, Wake Forest Journal of Business and
Intellectual Property Law. The author would like to thank friends, family, and
colleagues for their support and encouragement, with special thanks to Bruce
Marger, Erik Albright, Nathaniel Grow, David Shores, and the editors and staff of
the JBIPL.
476 WAKE FOREST J.
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I. INTRODUCTION
“Baseball is almost the only orderly thing in a very
unorderly world. If you get three strikes, even the best
lawyer in the world can’t get you off.”
—Bill Veeck1
When Dan Otero recorded the final out of a healthy 10-2 victory2
for the Oakland Athletics over the rival Seattle Mariners, life in O.Co
Coliseum was not going to get much better. This had been a
remarkably splendid afternoon for baseball—sixty-five degrees, a
breeze out to right field,3 and a hefty dose of California sun—and the
first-place Athletics headed into the locker room ready to celebrate a
win, pack up, and fly to Texas.4 Yet, deep in the bowels of the
Coliseum, something was very wrong, which both the Athletics and
Mariners were about to discover.
Sitting on the floor of both teams’ locker rooms, in all of its rank,
disgusting glory, was almost one foot of raw sewage.5
Had this been an isolated incident, it may have been written off as
the result of a pipe that needed repair. But this was more; this was just
the latest and grossest piece of evidence6
demonstrating that the
Athletics, also known as the A’s, needed a new stadium. For decades,
the A’s have shared the Coliseum with the NFL’s Oakland Raiders,
the only such arrangement remaining in Major League Baseball
(“MLB”) and the National Football League (“NFL”).7 The attendance
at Athletics games has been better in the last three years, but between
2006 and 2011, the A’s ranked in the bottom third of MLB attendance
1 RUSSELL SCHNEIDER, TALES FROM THE TRIBE DUGOUT 184 (2002).
2Jun 16, 2013, Mariners at Athletics Play by Play and Box Score, BASEBALL
REFERENCE.COM, http://www.baseball-
reference.com/boxes/OAK/OAK201306160.shtml (last visited Feb. 13, 2015). 3 Id.
4 Id. See also 2013 Schedule and Results, BASEBALL REFERENCE.COM,
http://www.baseball-reference.com/teams/OAK/2013-schedule-scores.shtml (last
visited Feb. 13, 2015) (showing the Oakland Athletics’ 2013 schedule and results
including the June 17th loss to the Texas Rangers). 5 David Brown, Raw Sewage at Coliseum Forces Athletics and Mariners to
Share Oakland Raiders Clubhouse, YAHOO! SPORTS (June 17, 2013, 2:59 AM),
http://sports.yahoo.com/blogs/big-league-stew/raw-sewage-coliseum-forces-
athletics-mariners-share-oakland-065912101.html. 6 Carl Steward, Oakland A’s Owner Lew Wolff Says Coliseum Sewage Mess Not
Unusual, INSIDE BAY AREA (June 18, 2013, 6:03 AM),
http://www.insidebayarea.com/athletics/ci_23478623/oakland-owner-lew-wolff-
says-coliseum-sewage-mess. 7 See Complaint at 5–6, City of San José v. Comm’r of Baseball, 2013 WL
2996788 (N.D. Cal. 2013) (CV 13-02787).
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in terms of percentage capacity filled.8 Even between 2012 and 2014,
the A’s ranked 27th, 23rd, and 24th in MLB,9 hardly numbers one
would expect from a team whose 278 wins over that span ranked
second in Major League Baseball.10
Aside from attendance issues, the Athletics are one of baseball’s
most economically disadvantaged franchises.11
MLB employs a
revenue-sharing device,12
requiring revenues from richer teams to be
distributed in various degrees to poorer teams. Interestingly, the San
Francisco Bay Area is a metaphor for the economic difference
between rich and poor teams. The San Francisco Giants are one of
baseball’s elite franchises, both on the field, in the stands, and
economically.13
Just sixteen miles away sits the Athletics, a team
whose economic situation has been so dire that Hollywood made a
movie about it.14
Beginning in 2004, the City of San José and its Redevelopment
Agency began to explore the possibility of building a new baseball
stadium to lure the Athletics to relocate to San José.15
Three years
later, a proposal for a 45,000 seat stadium in San José was certified.16
8 MLB Attendance Report – 2014, ESPN, http://espn.go.com/mlb/attendance
(last visited Feb. 9, 2015). 9 Id.
10Major League Baseball Team Win Totals, BASEBALL REFERENCE.COM,
http://www.baseball-reference.com/leagues/MLB (last visited Feb. 10, 2015). 11
Complaint, supra note 7, at 11. 12
See Daniel Jacobson, MLB’s Revenue-Sharing Formula, CBS NEWS,
http://www.cbsnews.com/news/mlbs-revenue-sharing-formula (last updated Aug. 19,
2008, 1:01 PM). 13
The Giants recently defeated the Kansas City Royals to win their third World
Series in five years. Ted Berg, The San Francisco Giants Just Won the World Series
Again, USA TODAY (Oct. 29, 2014, 11:21 PM),
http://ftw.usatoday.com/2014/10/san-francisco-giants-world-series-game-7-
bumgarner-mlb. They also have the ninth-richest regional television contract in
baseball, and have been in the top ten of MLB in terms of payroll in each of the last
five seasons. See Christina Settimi, MLB’s Most Valuable Television Deals, FORBES
(Mar. 26, 2014), http://www.forbes.com/sites/christinasettimi/2014/03/26/mlbs-
most-valuable-television-deals; MLB Salaries, USA TODAY,
http://www.usatoday.com/sports/mlb/salaries/2014/team/all (last visited Feb. 4,
2015). 14
MONEYBALL (Columbia Pictures 2011) (screenplay transcript available at
http://www.screenplaydb.com/film/scripts/moneyball-screenplay.pdf) was based on
a book of the same name by Michael Lewis and documents the cash-strapped
Athletics and their attempt to build a winning team through advanced statistics. In
one scene, Brad Pitt, portraying Oakland general manager Billy Beane, states, “[t]he
problem we’re trying to solve is that . . . there are rich teams, poor teams, 50 feet of
crap and then there’s us.” Id. at 21. 15
Complaint, supra note 7, at 14. 16
Id. at 15.
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The project was eventually modified to reduce seating to 32,000 seats,
and an economic impact analysis, done by the city, concluded that the
development of this stadium would be substantially beneficial.17
In
the interim, the Athletics also explored the possibility of building a
stadium in Fremont, California.18
That project, however, gradually
fell through19
between 2006 and 2009, and the Athletics set their sights
solely on San José.
Over the years that followed, various entities within San José
expressed their support for the Athletics to relocate.20
The mayor of
the city wrote MLB commissioner Bud Selig a letter endorsing the
move.21
It seemed to be only a matter of time before the Oakland
Athletics would become the San José Athletics.
But there was something else at play: a provision in the MLB
Constitution that granted exclusive territorial rights within Santa Clara
County, which includes San José, not to the Athletics, but to the San
Francisco Giants.22
The Giants made clear, through their de facto veto
power23
under the MLB Constitution, that they would block any
potential move by the Athletics to San José.24
Without the Giants’
approval, there would be no San José Athletics. The Athletics want a
new stadium to enhance their revenue streams and end their
dependence on MLB’s revenue sharing.25
The Giants likely see a
move to San José as a threat to their spot at the table of MLB’s elite.
17
Id. at 15–16. 18
Id. at 14. 19
See David Goll, A’s Abandon Plans for Fremont Ballpark, SACRAMENTO
BUS. J. (Feb. 24, 2009, 10:57 AM),
http://www.bizjournals.com/sacramento/stories/2009/02/23/daily28.html. 20
This included the San José Silicon Valley Chamber of Commerce, the San
José Convention and Visitors Bureau, the San José Sports Authority, and Baseball
San José. Complaint, supra note 7, at 19. 21
Mayor Reed’s letter of April 2, 2013, tells Commissioner Selig, “[t]he A’s
ownership continues to express its desire to locate the team in San José and I
strongly endorse that outcome . . . .” See id. 22
See MAJOR LEAGUE CONSTITUTION, Art. VIII, § 8(A) (2005), available at
http://www.bizofbaseball.com/docs/MLConsititutionJune2005Update.pdf (stating
that Santa Clara County shall be included in the operating territory of the San
Francisco Giants). 23
See Complaint, supra note 7, at 2. 24
Id. at 21. 25
Statement by A’s Ownership Regarding A’s and Giants Sharing Bay Area
Territory, MLB.COM (Mar. 7, 2012),
http://m.athletics.mlb.com/news/article/27081248/statement-by-as-ownership-
regarding-as-and-giants-sharing-bay-area-territory.
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Major League Baseball is legally unique as the only professional
sports league in the United States exempt from antitrust law.26
This
exemption, over ninety years old, allows baseball to impose restraints
on competition that would otherwise be prohibited under the Sherman
Antitrust Act.27
The exemption has faced legal challenges many times since its
inception in 1922, and has reached the Supreme Court twice, with the
exemption being sustained both times.28
But the business of baseball
has changed drastically since 1922, and despite the Supreme Court’s
determination that baseball is now interstate commerce,29
no court nor
Congress has made any real effort to modify or abolish the exemption
to better adhere to the realities of the modern game of baseball.
The purpose of this Comment is to examine the roots of the
antitrust exemption for Major League Baseball, how it has developed
over the decades, present challenges against the exemption––
especially as it pertains to the Oakland Athletics’ proposed move to
San José––and to suggest possible legal challenges or legislation that
might modernize this archaic exemption.
II. BACKGROUND
There is no name more synonymous with antitrust law than that of
Senator and former Secretary of State John Sherman, a Republican
from Ohio. In the 19th century he authored legislation30
in response to
the growing problem of massive trusts and combinations of businesses
and their predatory practices in the burgeoning economic environment
of the United States. That legislation, enacted in 1890, is now among
the most recognizable names of any act in the country’s history: the
Sherman Antitrust Act.31
To properly understand the interaction
between MLB and antitrust law, one must first understand why the
Sherman Act was necessary.
26
Nathaniel Grow, Defining the “Business of Baseball”: A Proposed
Framework for Determining the Scope of Professional Baseball’s Antitrust
Exemption, 44 U.C. DAVIS L. REV. 557, 559 (2010). 27
See id. 28
See Flood v. Kuhn, 407 U.S. 258, 285 (1972); Toolson v. N.Y. Yankees, 346
U.S. 356, 357 (1953) [hereinafter Toolson II]. 29
Kuhn, 407 U.S. at 282 (“Professional baseball is a business and it is engaged
in interstate commerce.”). 30
John Sherman’s Life and Career, SHERMAN HOUSE MUSEUM 2,
http://www.shermanhouse.org/JohnSherman_bio.pdf (last visited Feb. 10, 2015). 31
Sherman Anti-Trust Act (1890), OURDOCUMENTS.GOV,
http://www.ourdocuments.gov/doc.php?flash=true&doc=51 (last visited Feb. 14,
2015).
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In a 1940 U.S. Supreme Court Case, Apex Hosiery Co. v. Leader,32
Justice Harlan Stone discussed the legislative history of the Sherman
Act and noted its enactment came during an “era of ‘trusts’ and of
‘combinations’ of businesses . . . organized and directed to control . . .
the market by suppression of competition . . . .”33
Indeed, the late 19th
century was a time when immense trusts dominated the marketplace,
despite state laws limiting these companies’ power to do so.34
For
example, in 1882, the partners of Standard Oil agreed to combine their
business entities, located all over the country, under a single “trust”,
allowing the stock of the company to be held by trustees.35
Standard
Oil became so big and so powerful that it was able to engage in
territorial price discrimination, with tactics including undercutting
prices in one market to destroy competition while keeping prices high
and even raising them in other less-competitive markets.36
Justice Stone remarked in Apex Hosiery that the goal of the
Sherman Act was to prevent restraints to free competition.37
These
restraints, he said, tended to “restrict production, raise prices or
otherwise control the market to the detriment of purchasers or
consumers of goods and services.”38
Because many of these restraints
on competition crossed state lines, state statutes were no longer
sufficient to regulate these trusts and combinations.39
Faced with that
issue, Congress exercised its regulatory powers under the Commerce
Clause of the U.S. Constitution and enacted the Sherman Antitrust
Act.40
Antitrust law became the preferred method for restricting
companies that restrained trade in a particular market. Even Standard
Oil fell victim to the Sherman Act, as the Supreme Courty ordered that
it be disbanded and split into geographically separate and distinct
32
310 U.S. 469 (1940). 33
Id. at 491–93. 34
William Markham, Why Antitrust Laws Matter?: The True Purpose of
Antitrust Law, LAW OFFICE OF WILLIAM MARKHAM (2006),
http://www.markhamlawfirm.com/articles/Why-Antitrust-Laws-Matter.pdf. 35
See Standard Oil Company and Trust, ENCYCLOPEDIA BRITANNICA,
http://www.britannica.com/EBchecked/topic/562986/Standard-Oil-Company-and-
Trust (last visited Feb. 10, 2014). 36
See generally Kenneth W. Dam, The Economics and Law of Price
Discrimination: Herein of Three Regulatory Schemes, 31 U. CHI. L. REV. 1 (1963). 37
Apex Hosiery, 310 U.S. at 493. 38
Id. 39
See id. at 491. 40
See generally Sherman Antitrust Act, 15 U.S.C. §§ 1–7 (2012); see also U.S.
CONST. art. I, § 8, clause 3 (commonly referred to as the Commerce Clause).
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businesses.41
The same day the Supreme Court effectively dismantled
Standard Oil, it did the same to the American Tobacco Company,42
which had become the dominant tobacco company by acquiring over
200 rival companies.43
A. “The Baseball Trilogy”
In 1922, the Supreme Court faced yet another challenge under the
Sherman Act. This time, the business at issue was not an oil giant or
tobacco conglomerate. Instead, it was an entity vastly intertwined
with the fabric of American culture. This business, just half a century
old,44
did not produce automobiles or cigarettes or textiles. It
produced mystique, emotion, and entertainment unlike any business
this country had ever seen. It was Major League Baseball. The
landmark decision of Federal Baseball Club v. National League had a
simple message: Major League Baseball is exempted from the
Sherman Antitrust Act.45
In 1913, the Federal Baseball League was formed independent of
the still-fledgling Major League Baseball.46
The leagues differed in
the sense that Federal League players were not to be subject to the
reserve clause, a staple in Major League Baseball that gave teams
essentially perpetual rights to a player.47
While players in MLB were
bound to one team until the team traded or sold them, Federal League
players were free to bargain for services with a new team at their will,
allowing for salaries to be driven up through competition. The
Federal Baseball lawsuit, however, did not arise out of the reserve
clause. Instead, it came at a moment of desperation for the Federal
League, when the combination of interference from MLB teams and
the weakening financial situation of owners caused the league to
41
See generally Standard Oil Co. of New Jersey v. United States, 221 U.S. 1
(1911). 42
See generally United States v. Am. Tobacco Co., 221 U.S. 106 (1911). 43
History, AM. TOBACCO HISTORIC DIST.,
http://www.americantobaccohistoricdistrict.com/about/1 (last visited Feb. 7, 2015). 44
The first professional baseball team was the Cincinnati Red Stockings in
1869. Baseball Origins, Growth and Changes in the Game, The People History,
http://www.thepeoplehistory.com/baseballhistory.html (last visited Feb. 14, 2015). 45
See generally Fed. Baseball Club of Baltimore v. Nat’l League of Prof’l
Baseball Clubs, 259 U.S. 200 (1922). 46
See Emil H. Rothe, Was the Federal League A Major League?, SABR
RESEARCH J. ARCHIVE, http://research.sabr.org/journals/federal-league-a-major-
league (last visited Feb. 7, 2015). 47
See Richard B. Blackwell, Baseball’s Antitrust Exemption and the Reserve
System: Reappraisal of An Anachronism, 12 WM. & MARY L. REV. 859, 871–73
(1971) (describing the general effect of the reserve clause).
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fold.48
Of the eight Federal League teams, four were bought out by
the owners of MLB teams, two were merged with existing MLB
teams, and one went bankrupt.49
The remaining team was the Baltimore Terrapins.50
When the
Terrapins received no compensation upon the dissolution of the
Federal League, their ownership group, led by Ned Hanlon, sued the
National League under the Sherman Antitrust Act.51
The owners
alleged that Major League Baseball had engaged in a conspiracy to
monopolize professional baseball by essentially dismantling the
Federal League.52
Despite success in district court, the D.C. Circuit
reversed the decision and awarded a victory to the National League.53
On April 19th, 1922, the case was argued before the Supreme Court,
and on May 29th, Justice Oliver Wendell Holmes handed down a
decision that still stands to this day.54
“The business is giving exhibitions of base ball [sic], which are
purely state affairs[,]” Holmes stated.55
While he acknowledged that
state lines must be crossed to arrange and pay for these exhibitions,
crossing state lines was not enough to change the state character of the
business.56
“[A] firm of lawyers sending out a member to argue a case
. . . does not engage in such commerce because the lawyer . . . goes to
another State[,]” he said.57
In the five paragraphs that comprised his
opinion, Justice Holmes and the unanimous Court carved out an
exemption to all antitrust laws for Major League Baseball.58
Three decades later, in a 1953 decision, the Supreme Court faced a
challenge by George Toolson, a pitcher in the New York Yankees
organization. Toolson had pitched for the Yankees’ triple-A team, but
believed that he was good enough to pitch in the Major Leagues—if
not for the Yankees, then for another team.59
However, baseball’s
48
See generally Nat’l League of Prof’l Baseball Clubs v. Fed. Baseball Club of
Baltimore, 269 F. 681 (D.C. Cir. 1920). 49
See Rothe, supra note 46. 50
Nat’l League, 269 F. at 682. 51
Id. 52
Id. 53
Id. at 687–88. 54
See Fed. Baseball Club of Baltimore v. Nat’l League of Prof’l Baseball Clubs,
259 U.S. 200, 200 (1922). 55
Id. at 208. 56
Id. at 209 (“But the fact that in order to give the exhibitions the Leagues must
induce free persons to cross state lines and must arrange and pay for their doing so is
not enough to change the character of the business.”). 57
Id. 58
Id. at 207–09. 59
Toolson v. N.Y. Yankees, 101 F. Supp. 93, 93 (S.D. Cal. 1951) [hereinafter
Toolson I].
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reserve clause prevented him from seeking employment with other
teams without the Yankees trading or selling him.60
When the triple-A
team was dissolved and Toolson was reassigned to the Yankees’
single-A affiliate in Binghamton, he refused to report to the team and
subsequently filed a lawsuit alleging that baseball should not be
exempt from antitrust laws.61
When the case reached the Supreme
Court, the majority quickly dispatched Toolson’s challenge and, in a
seven-to-two decision, upheld baseball’s antitrust exemption.62
A result of the Toolson II case was that the Supreme Court showed
its hand regarding how it would decide challenges to baseball’s
antitrust exemption. In the per curiam opinion, the majority stated that
the business of baseball had been developing for three decades under
the presumption that it was exempt from antitrust laws,63
and any
change to that exemption would have to come from legislation.
Justice Harold Burton, writing for the dissent, framed the issue
differently, stating that Congress had expressly exempted several
activities from antitrust laws, including labor unions, farm
cooperatives, and insurance.64
Baseball had grown significantly since
the Federal Baseball decision in 1922, Burton argued, and many
aspects of the game had grown to encompass interstate commerce.65
As such, he said, “[Major League Baseball] is subject to the Sherman
Act until exempted.”66
The view of the dissent in Toolson II, especially the notion that
baseball was now interstate commerce, was a thorn in the side of the
supporters of baseball’s antitrust exemption. Nearly twenty years
later, that thorn was pressed deeply into the skin of those supporters in
the most recent and most notable challenge to the exemption.
Flood v. Kuhn is perhaps better known for being the singularity
from which the fall of MLB’s reserve clause and the rise of free
agency arose.67
The suit was brought by longtime St. Louis Cardinals
outfielder Curt Flood, who in 1969 was traded to the Philadelphia
Phillies without being consulted or notified.68
He complained to
60
See Petitioner’s Opening Brief on Writ of Certiorari to the United States
Court of Appeals for the Ninth Circuit at 5–6, Toolson II, 346 U.S. 356 (1953) (No.
18), 1953 WL 78316, at *4–*11. 61
Toolson I, 101 F. Supp. at 93. 62
Toolson II, 346 U.S. at 356. 63
Id. at 357 (“The business has thus been left for thirty years to develop, on the
understanding that it was not subject to existing antitrust legislation.”). 64
Id. at 364 & n.11 (Burton, J., dissenting). 65
Id. at 364–65 (Burton, J., dissenting). 66
Id. at 365. 67
See generally Flood v. Kuhn, 407 U.S. 258 (1972). 68
Id. at 265.
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Bowie Kuhn, the commissioner of Major League Baseball at the time,
and requested to become a free agent, allowed to sign a deal with any
of the teams in the league.69
When Kuhn refused, Flood brought a
lawsuit alleging multiple violations ranging from federal antitrust laws
to civil rights statutes and even a charge of imposition of involuntary
servitude.70
The Flood opinion is widely criticized71
for two reasons. The first
is revealed by reading the opinion of Justice Harry Blackmun, writing
for the majority.72
In what could be described as a romantic,
sentimental diatribe into the undeniable impact baseball has affected
on the United States, Blackmun listed nearly 100 names of famous
baseball players, recited a history of Major League Baseball, and
outlined the cultural impact baseball has had in America.73
After a
lengthy discussion of the parties, the issue, and the precedent,
Blackmun delivered a series of statements that comprise the second
criticism of the Flood decision—hyper-reliance on stare decisis.74
“Professional baseball is a business and it is
engaged in interstate commerce.”75
“Federal Baseball and Toolson [II] have become an
aberration confined to baseball.”76
When read in combination, these two statements seem to favor
Curt Flood’s position heavily. If baseball really was interstate
commerce, how could the Supreme Court not overturn Toolson II? In
the end, the Flood opinion seemed to set the stage—load the bases, if
you will—for the Court to finally overturn the antitrust exemption,
with Justice Blackmun acting as Babe Ruth, ready to hit a grand-slam
home run. Instead, the Court rested on stare decisis, reiterating that if
any action were to overturn this exemption, it would need to come
69
Id. 70
Id. at 265–66. 71
See, e.g., William N. Eskridge, Jr., Overruling Statutory Precedents, 76 GEO.
L.J. 1361, 1381 (1988) (Calling Flood a “comical adherence to the strict rule against
overruling statutory precedents . . . .”); David Greenberg, Baseball’s Con Game,
SLATE (July 19, 2002),
http://www.slate.com/articles/news_and_politics/history_lesson/2002/07/baseballs_c
on_game.html (“The opinion . . . included a juvenile, rhapsodic ode to the glories of
the national pastime . . . .”). 72
Flood, 407 U.S. at 260–64 (Blackmun, J.). 73
Id. 74
Greenberg, supra note 71 (criticizing Justice Blackmun for relying on stare
decisis despite evidence that such reliance was not appropriate). 75
Flood, 407 U.S. at 282. 76
Id.
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from Congress.77
“If there is any inconsistency or illogic in all this,”
Blackmun stated, “it is an inconsistency and illogic of long standing
that is to be remedied by the Congress and not by this Court.”78
And
so it stood—baseball was ruled to be interstate commerce, yet still
exempt from the Sherman Act.
It has been forty-two years since Flood, and no challenge has come
close to overruling MLB’s antitrust exemption. There have been
plenty of challenges, but none have reached the Supreme Court.79
This is where the story heads back out west to the Bay Area.
B. City of San José v. Office of the Commissioner
In 1990, the San Francisco Giants were considering being sold and
relocated to another Bay Area—Tampa Bay, Florida.80
The owner of
the Giants also looked into relocating the team to San José and, in
hopes of keeping the Giants in California, the former owner of the
Athletics, Walter Haas, gave his permission for the Giants to move to
San José, with no compensation going to Oakland.81
Shortly
thereafter, MLB amended its Constitution and gave the Giants
exclusive territorial rights to Santa Clara County, which includes the
City of San José.82
The Giants ended up staying in San Francisco and
building a gorgeous waterfront stadium, but to this day continue to
hold the sole rights to Santa Clara County.83
In November 2011, the City Council of San José entered into a
two-year option agreement with Athletics Investment Group, the
77
Id. at 284. 78
Id. 79
See e.g., Finley v. Kuhn, 569 F.2d 527, 541 (7th Cir. 1978), cert. denied, 439
U.S. 876 (1978); McCoy v. Major League Baseball, 911 F. Supp. 454, 457 (W.D.
Wash. 1995), aff’d by, 67 F.3d 1054 (2d Cir. 1995); Piazza v. Major League
Baseball, 831 F. Supp. 420, 438 (E.D. Penn. 1993). 80
Complaint, supra note 7, at 9. 81
Lester Munson, San José Suit Appears to Be Strong, ESPN (June 19, 2013),
http://espn.go.com/mlb/story/_/id/9403225/the-san-jose-legal-case-oakland-strong. 82
Id. Commenting on this gentleman’s agreement, Commissioner Bud Selig
said, “Walter Haas, the wonderful owner of the Oakland club who did things in the
best interest of baseball, granted permission . . . . What got lost there is they [the
A’s] didn’t feel it was permission in perpetuity.” Id. Records seem to show that the
Giants were given Santa Clara County provisionally, if the Giants were to actually
move to San José. See Ken Belson, In Tug of War over San José, A’s and the Giants
Remain at A Standoff, N.Y. TIMES (Apr. 2, 2012),
http://www.nytimes.com/2012/04/02/sports/baseball/as-and-giants-in-tug-of-war-
over-rights-to-san-jose.html?pagewanted=all&_r=0. Despite this seemingly limited
granting of consent to look into Santa Clara County for relocation, Santa Clara
County has remained the operating territory of the Giants. Id. 83
See Belson, supra note 82.
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partnership that owns and operates the A’s, and gave the team two
years to decide whether to purchase six adjacent parcels of land that
would be used to develop a 32,000 seat stadium in San José and serve
as the new home for the Athletics.84
With everything seeming to be
falling into place for the move, the San Francisco Giants exercised its
veto power85
under Article VIII, Section 8 of the MLB Constitution,86
which states that no relocation or expansion of a team within the
territory of another team will be approved without the pre-existing
team’s written consent.
Very shortly after the sewage incident at the Coliseum, on June
18th, 2013, the City of San José filed a forty-four-page complaint
against the Office of the Commissioner of Baseball.87
The complaint
alleges two instances of tortious interference, two violations of
California law, and violations of Sections I and II of the Sherman
Antitrust Act.88
The introduction to the complaint states that the city
challenges the antitrust exemption and that Major League Baseball has
engaged in a “blatant conspiracy” to prevent the Athletics from
moving to San José.89
The complaint further alleges that MLB has
similarly conspired for years “under the guise of an ‘antitrust
exemption’ applied to the business of baseball.”90
In particular, the complaint challenges two sections of MLB’s
Constitution—Article 4.2 and 4.3—as “unreasonable, unlawful, and
anticompetitive restraints under Section I of the Sherman Act.”91
Additionally, member teams of MLB had allegedly been conspiring to
acquire and maintain monopoly power within their particular
“operating territories,” a violation of Section II of the Sherman Act.92
According to the trial court, the dispositive issue in this instance
was whether the relocation of a franchise was a part of the “business
84
Complaint, supra note 7, at 3–4. 85
John Royal, San Jose Attempting to Out-Bully Bud Selig, HOUSTONPRESS
(June 24, 2013, 9:00 AM),
http://blogs.houstonpress.com/news/2013/06/bud_selig_bully.php (“[T]he San
Francisco Giants . . . [ha]ve vetoed the move of the A’s.”). 86
MAJOR LEAGUE CONSTITUTION, art. VIII, § 8 (2005), available at
http://bizofbaseball.com/docs/MLConsititutionJune2005Update.pdf. 87
See generally Complaint, supra note 7, at ii. 88
See id. 89
Id. at 1. 90
Id. 91
Id. at 2. This appears in Section VIII of the 2005 MLB Constitution. While
the cited version of the MLB Constitution is no longer in force, it is still valid in
reagards to the operating territories. 92
Id.
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of baseball” and therefore within the antitrust exemption.93
The
“business of baseball” is a somewhat abstract concept, because the
character of that business has changed so much since the 1922 Federal
Baseball decision.94
Indeed, baseball in 1922 was merely a shell of
what it is today. The economic issues that define the business of
baseball today—revenue sharing, luxury taxes, television rights,
merchandise licensing, and international scouting, among others—
simply were not present in 1922.95
Courts both at the highest levels, in
Toolson II and Flood, and lower levels, through a plethora of
decisions, have had to adapt over the decades to a changing definition
and scope of what exactly constitutes the business of baseball.96
In a 2010 law review article,97
Professor Nathaniel Grow proposed
a uniform standard for evaluating challenges as coming under the
scope of the “business of baseball.” He writes that the antitrust
exemption should be limited to those activities “directly related to
providing baseball entertainment to the public.”98
Included in that
standard would be decisions limiting franchise locations, which give
leagues the ability to sufficiently allocate teams throughout the
country, affecting competitive balance and the even distribution of
MLB’s product.99
This standard seems to be undeniably sensible, and the court in
City of San José struck the same chords as Professor Grow in its
opinion.100
The district court granted in part and denied in part Major
League Baseball’s motion to dismiss San José’s claims,101
and San
José subsequently filed an appeal to the Ninth Circuit.102
The court
expressed its desire to adhere to the precedent set forth in the so-called
93
See City of San José v. Comm’r of Baseball, No. C-13-02787, 2013 WL
5609346, at *11 (N.D. Cal. Oct. 11, 2013) (stating that “interference with . . .
relocation efforts presents an issue of league structure that is ‘integral’ to the
business of baseball . . . falls within the exemption.”). 94
See Toolson II, 346 U.S. 356, 357–58 (1953). 95
See Daniel Barbarisi, The Changing Economics of Baseball: Winter Meetings
End Without Yankees as Major Players, THE WALL STREET J. (Dec. 11, 2014),
http://www.wsj.com/articles/the-changing-economics-of-baseball-1418341551. 96
See generally Flood v. Kuhn, 407 U.S. 258 (1972); Toolson II, 346 U.S. 356. 97
See generally Grow, supra note 26. 98
Id. at 580. 99
Id. at 609. 100
City of San José v. Comm’r of Baseball, No. C-13-02787, 2013 WL
5609346, at *11 (N.D. Cal. Oct. 11, 2013) (“[T]he alleged interference with a
baseball club’s relocation efforts presents an issue of league structure that is
‘integral’ to the business of baseball, and thus falls squarely within the exemption.”). 101
See id. at *16. 102
See City of San José v. Comm’r of Baseball, No. 14-15139, 2015 WL
178358 (9th Cir. Jan. 15, 2015).
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“Trilogy” of Federal Baseball, Toolson II, and Flood.103
Interestingly,
it also discussed the Curt Flood Act, a 1998 statute104
that stood for the
proposition that baseball’s antitrust exemption did not apply to matters
directly affecting the employment of baseball players. However, the
court was careful to note that the language of the statute did not apply
to issues of franchise expansion, location or relocation.105
And this, as
the reasoning went, was evidence of the Congressional intent to keep
the antitrust exemption in place as it pertains to the issue of franchise
relocation.106
This Comment is not an attack on the antitrust exemption. It is not
a criticism of the Supreme Court for its refusal to overturn an archaic
rule. This Comment is, however, perhaps a blueprint—a plan of
attack—for the litigator who hopes to take this exemption to task and
reshape it in a way that will promote competition among MLB’s
constituent teams while holding the tune that has been stuck in the
heads of lawmakers and jurists alike for nearly 100 years: that baseball
is a unique business and deserves unique treatment.
III. ANALYSIS
The establishment has been challenged before in baseball. The
challenge to, and the eventual downfall of, the reserve clause is a
prime example.107
Even beyond that, the sabermetric revolution108
that has swept across Major League Baseball in the last fifteen years
has shaken baseball purists to their core and forced the architects of
baseball teams to rethink how teams are built.109
Baseball is no longer
America’s most popular sport,110
but no other sport is so closely
connected with the cultural heritage of modern America111
103
Id. at *10. 104
15 U.S.C. § 26b (2012). 105
Id. at § 26b(b)(3) (limiting the reach of the statute to exclude franchise
expansion, location, or relocation). 106
City of San José, 2013 WL 5609346 at *10. 107
See supra text accompanying notes 67–70. 108
See generally MICHAEL LEWIS, MONEYBALL: THE ART OF WINNING AN
UNFAIR GAME (2003) (discussing the Oakland Athletics’ use of sabermetrics to build
a winning roster). 109
See generally Matthew Futterman, Baseball After Moneyball, THE WALL
STREET J. (Sept. 30, 2011),
http://www.wsj.com/articles/SB10001424053111903791504576584691683234216. 110
See Darren Rovell, NFL Most Popular for 30th Year in Row, ESPN (Jan. 26,
2014) http://espn.go.com/nfl/story/_/id/10354114/harris-poll-nfl-most-popular-mlb-
2nd. 111
See generally Allen Barra, Sorry, NFL: Baseball Is Still America’s Pastime,
continued . . .
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Adaptation—acceptance of the realities of the marketplace and the
willingness to embrace them—has been the hallmark of both baseball
and America.112
While baseball interacts with the laws of the United
States, there should be continuing adaptation. This adaptation can
come in two forms, both of which will be discussed at length. First,
the scope of the antitrust exemption must be clarified—does it apply
only to the reserve clause, or in a broad sense to the business of
baseball? Second, the strength and nature of stare decisis must be
investigated as it pertains to this exemption to determine if the relevant
precedent remains applicable.
Analyzing baseball’s antitrust exemption is a difficult exercise.
The business of baseball is so broad, so powerful of a phrase that it
seems that, using Professor Grow’s standard, the exemption is
sacrosanct as it pertains to such issues as franchise relocation.113
The
battle that the City of San José has been fighting seems to be one of
futility, and Professor Grow himself remarked114
that there was a very
low—though nonzero—chance of City of San José being resolved in
favor of the plaintiffs. Regardless of how the case is decided, the
appellate briefs and applicable precedent raise interesting questions
that future challengers could raise, whether to a high court or
Congress.
A. Does MLB’s Antitrust Exemption Apply Narrowly to the
Reserve Clause or Broadly to the “Business of Baseball”?
One of the questions posed in the City of San José’s appellate brief
was to echo a point made in a previous lower court decision, Piazza v.
Major League Baseball.115
The court in Piazza said that Flood was
stripped of any precedential value beyond the facts of the case despite
THE ATLANTIC (Oct. 30, 2013)
http://www.theatlantic.com/entertainment/archive/2013/10/sorry-nfl-baseball-is-still-
americas-pastime/280985/. 112
Baseball has constantly changed and expanded in response to the social
landscape since its inception, much like America as a whole. See U.S. Department
of State, Baseball in America: A History, FACT MONSTER,
http://www.factmonster.com/ipka/A0875086.html (last visited Feb. 10, 2015). 113
See Grow, supra note 26, at 583–84. 114
Howard Mintz, San José Antitrust Case Against MLB at Crucial Stage,
MERCURYNEWS.COM (Aug. 11, 2014), http://www.mercurynews.com/crime-
courts/ci_26311761/san-jose-antitrust-case-against-mlb-at-crucial?source=infinite
(“‘San José’s odds of prevailing at the 9th Circuit are slim, I’d say under 10 percent,’
Grow said.”). 115
See Piazza v. Major League Baseball, 831 F. Supp. 420, 436 (E.D. Pa. Aug.
4, 1993).
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its express declaration that baseball was interstate commerce.116
Because Flood dealt only with the reserve clause, the plaintiffs argued
that the holding of the case was limited to the reserve clause.117
Combined with the recognition that baseball was a business engaged
in interstate commerce, the Piazza court seemed to imply that the
antitrust exemption applied only to the reserve clause.118
Professor
Grow is dubious of this claim,119
and upon closer examination of the
Piazza decision, he appears to be correct. “[H]ad the Court intended
to veer from the commonly understood meaning of its prior precedent,
it would have recognized the need to do so expressly[,]” he said,
referencing Flood’s facially narrow but implicitly broad holding.120
While the Piazza decision may have been incorrect regarding the
scope of Flood’s holding, it provides food for thought regarding the
future of the exemption. The question that keeps coming up, and one
that bears addressing, is the question of the scope of the exemption—
does it apply to franchise relocation? Is it really limited to the reserve
clause?
That question is important, but it should not be considered alone.
Perhaps the question should be reframed. The holding in Federal
Baseball framed the relevant business as the business of giving
exhibitions of baseball.121
Like Professor Grow’s proposed standard, a
direct relationship of activities related to the business of providing
baseball entertainment to the public,122
the Federal Baseball holding
seems to focus on the provision of entertainment to the public. So the
question becomes this: given the current state of Major League
Baseball, is franchise relocation directly related to providing
entertainment in the form of a baseball game? That is, does it really
matter where the games are played so much as how the games are
being played?
Given what has been discussed so far, the answer appears to be
yes. The trilogy of Supreme Court cases all appear to support a broad
construction of the antitrust exemption to cover the business of
baseball, generally.123
But perhaps the combination of the Supreme
116
Id. 117
Id. at 435. 118
See id. at 438. 119
Grow, supra note 26, at 591. 120
Id. at 595. 121
Fed. Baseball Club of Baltimore v. Nat’l League of Prof’l Baseball Clubs,
259 U.S. 200, 208 (1922) (“The business is giving exhibitions of base ball [sic] . . .
.”). 122
Grow, supra note 26, at 580. 123
See generally Flood v. Kuhn, 407 U.S. 258 (1972); Fed. Baseball, 259 U.S.
200; Piazza, 831 F. Supp. 420.
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Court’s recognition that the exemption was an aberration,124
lower
courts’ recent assertions that the Supreme Court trilogy should be read
narrowly,125
and a practical analysis of franchise relocation in
American sports provides enough backing to support the notion that,
whether by judicial or legislative action, baseball’s antitrust exemption
should not apply to franchise relocation and the Oakland Athletics
should be allowed to move to San José. But perhaps an answer may
be found in a concept much more elementary, a concept law students
are taught on their first day of law school—stare decisis.
B. Should “Rule Stare Decisis” or “Result Stare Decisis” Be
Applied to the Trilogy of Supreme Court Cases that Have
Addressed MLB’s Antitrust Exemption?
When answering the question of how broadly the antitrust
exemption should be construed, the Flood decision does not provide
much help. In Section V of Justice Blackmun’s opinion, he says that
the exemption applies to baseball’s reserve clause.126
He then goes on
to say that Congress “has had no intention to subject baseball’s reserve
system to the reach of the antitrust statutes.”127
Later in his opinion,
however, he quotes an excerpt from Toolson II, affirming Federal
Baseball “so far as that decision determines that Congress had no
intention of including the business of baseball within the scope of the
federal antitrust laws.”128
When considering the exemption as applied to the reserve clause
only versus the business of baseball, the question turns to a narrow
versus broad reading of the Federal Baseball decision. Erroneous as
the aforementioned Piazza decision may be, it does provide some
valuable guidance to this issue. In the Piazza opinion, Judge Padova
discusses the relevant market to which the exemption applies.129
Several aspects of Judge Padova’s analysis are useful here. He states
the “well settled” principle that “exemptions from antitrust laws are to
124
Flood, 407 U.S. at 282 (describing the antitrust exemption as an established
“aberration” that has been well-recognized in the Supreme Court). 125
See, e.g.,Piazza, 831 F. Supp. 420. 126
Flood, 407 U.S. at 282 (“With its reserve system enjoying exemption from
the federal antitrust laws, baseball is, in a very distinct sense, an exception and an
anomaly.”). 127
Id. at 283 (emphasis added) (“Congress as yet has had no intention to subject
baseball’s reserve system to the reach of the antitrust statutes.”). 128
Id. at 285 (emphasis added) (quoting Toolson II, 346 U.S. 356, 357 (1953)). 129
Piazza, 831 F. Supp. at 429–31.
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be narrowly construed.”130
In light of this, and in light of prior
readings of the exemption as extending to the business of baseball, he
takes it upon himself to determine “exactly how far the exemption
reaches,” and that the business of baseball does not adequately explain
the scope of the rule.131
Beyond that, his opinion is primarily
speculation, but he leaves open the question of the rule’s scope.132
After looking at the trilogy of Supreme Court cases which support
a broad reading of the antitrust exemption133
and two more recent
cases that support a much more narrow reading,134
the question
remains: is franchise location central to the business of baseball, and
therefore covered under the antitrust exemption?
Intuitively, the answer seems to be yes. Professor Grow’s article
gives two compelling reasons why the location of a franchise is
directly related to the provision of baseball exhibitions to the public,
including evenly distributing MLB’s product nationwide and allowing
for competitive balance by limiting the number of teams in a given
population center.135
As franchise location is an issue of league
structure, Professor Grow notes that “a majority of courts have
correctly concluded that decisions regarding baseball’s league
structure are integral to the business of baseball.”136
From a legal perspective, Professor Grow is spot-on. There is a
very close nexus between franchise location and the business of
baseball. Even beyond the cited reasons of even distribution and
competitive balance, franchise location plays an integral role in
determining how MLB is structured as far as geographic divisions and
natural rivalries, such as the Dodgers-Giants, Cubs-White Sox, or
Yankees-Mets, all of which originated from teams sharing one city.137
From a business perspective, regional television deals, which drive a
130
Id. at 438 (“It is well settled that exemptions from the antitrust laws are to be
narrowly construed.”) (citing Group Life & Health Ins. Co. v. Royal Drug Co., 440
U.S. 205, 231 (1979)). 131
Piazza, 831 F. Supp. at 439. 132
Id. at 438. 133
Flood v. Kuhn, 407 U.S. 258 (1971); Toolson II, 346 U.S. 356 (1953) (per
curiam); Fed. Baseball Club of Baltimore, Inc. v. Nat’l League of Prof’l Baseball
Clubs, 259 U.S. 200 (1921). 134
City of San José v. Comm’r of Baseball, No. 14-15139, 2015 WL 178368
(9th Cir. 2015); Piazza, 831 F. Supp. 420. 135
Grow, supra note 26, at 608–09. 136
Id. at 607. 137
See Bill Evans, It’s rivalry week in Major League Baseball. How “natural”
is your natural rivalry? NJ.COM (May 26, 2013, 12:03 AM),
http://www.nj.com/phillies/index.ssf/2013/05/its_rivalry_week_in_major_leag.html.
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huge portion of revenue for franchises,138
are a major money-making
activity which is directly affected by the location of a franchise.139
Because television deals and ticket sales, two of the most vital revenue
activities for franchises,140
are directly impacted by the team’s
location, the issues of franchise location or relocation are directly
related to the business of baseball and therefore within the antitrust
exemption.
Not surprisingly, many legal commentators believe that the City of
San José’s challenge of the exemption will fail.141
But before
considering the appeal and future similar cases “dead on arrival,” one
possible alternative interpretation should be raised.
In Piazza, the court discussed a distinction between “rule stare
decisis” and “result stare decisis” in criticizing the Flood majority.142
In the American legal system, the commonly-understood meaning of
stare decisis is to apply to the rule of a case—that is, a rule articulated
by the Supreme Court is binding on all lower federal courts until the
Supreme Court itself says otherwise.143
The English system of law,
however, has historically limited its concept of stare decisis to the
facts of the case—that is, only under substantially similar factual
circumstances must lower courts follow the high court’s ruling.144
The
138
See Christina Settimi, Baseball’s Biggest Cable Deals, FORBES (Mar. 21,
2012, 12:28 PM),
http://www.forbes.com/sites/christinasettimi/2012/03/21/baseballs-biggest-cable-
deals/; see also Maury Brown, MLB’s Billion Dollar TV Deals, Free Agency, and
Why Robinson Cano’s Deal With the Mariners isn’t “Crazy”, FORBES (Jan. 7, 2014,
10:13 AM), http://www.forbes.com/sites/maurybrown/2014/01/07/mlbs-billion-
dollar-tv-deals-free-agency-and-why-robinson-canos-deal-with-the-mariners-isnt-
crazy/ (noting the plethora of massive individual media rights deals that have been
recently signed by traditionally smaller market teams). 139
See Grow, supra note 26, at 609, 611 (explaining that broadcasts of baseball
games over television is a central facet of the provision of baseball entertainment,
and that the provision of baseball entertainment to the public is directly impacted by
franchise location). 140
Ticket sales accounted for 32.8 percent of estimated revenue in MLB in
2013, down from 38.2 percent in 2009, MLB saw gate receipts of $2.33 billion
during the 2013 season. See MLB gate receipts from 2009 to 2013, STATISTA,
http://www.statista.com/statistics/294185/mlb-gate-receipts (Last visited Oct. 14,
2014), and Regular Season ticketing revenue as a percentage of total revenue in
MLB from 2009 to 2013, STATISTA,
http://www.statista.com/statistics/193408/percentage-of-ticketing-revenue-in-the-
mlb-since-2006 (last visited Oct. 14, 2014). 141
See, e.g., Mintz, supra note 114. 142
Piazza v. Major League Baseball, 831 F. Supp. 420, 437–38 (E.D. Pa. Aug.
4, 1993) (quoting Planned Parenthood of Southeastern Pa. v. Casey, 947 F.2d 682
(3d Cir. 1991)) (distinguishing “rule stare decisis” from “result stare decisis”). 143
Id. 144
Id.
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Piazza court proposed that the Flood decision should be treated as the
latter and limited to its facts, since the “rule stare decisis” was so
obviously eroded.145
While this distinction has been seemingly brushed aside by legal
commentators and lower courts,146
the Supreme Court appears to
support it. In a 1997 case, State Oil Co. v. Khan,147
a vertical price-
fixing case, Justice Sandra Day O’Connor, writing for a unanimous
court, considered the application of stare decisis to antitrust law. This
case dealt with the termination of a contract between a gasoline
supplier and gas station operator; the operator argued that the
supplier’s vertical price fixing was a violation of the Sherman Act.148
The Supreme Court overruled the holding from Albrecht v. Herald
Co.,149
which ruled vertical price fixing to be a per se violation of the
Sherman Act, and stated that these cases should be examined under the
rule of reason analysis.150
According to Justice O’Connor, the policy underpinnings for stare
decisis—articulated as the idea that “it is more important that the
applicable rule of law be settled than that it be settled right”—have
promoted an evenhanded and consistent development of legal
principles.151
However, antitrust law does not necessarily fit into that
strict interpretation of stare decisis. The concept of stare decisis has a
competing interest in antitrust cases in the form of recognition and
adaptation to “changed circumstances and lessons of accumulated
145
Id. at 438 (stating that the Supreme Court’s departure from the rules of
Federal Baseball and Toolson II means that no rule from those cases binds the lower
courts). 146
In Professor Grow’s article, he dismantles the Piazza opinion. He states that
the court (1) misinterpreted the Flood decision, (2) failed to appreciate the
significance of Toolson II, and (3) misunderstood the facts of those cases.
Concluding his analysis, Professor grow said that though Piazza correctly limited
those two cases to their facts, it incorrectly ruled that those cases dealt solely with
the reserve clause. Grow, supra note 26, at 591–600. See also McCoy v. Major
League Baseball, 911 F. Supp. 454, 457 (W.D. Wash. 1995). 147
State Oil Co. v. Khan, 522 U.S. 3 (1997). 148
Khan leased and operated his own gas station from State Oil. In the lease
agreement, it was provided that Khan would obtain gas from State Oil at a specified
price minus a margin of 3.25 cents per gallon. If the price charged at the gas station
was higher than the suggested retail price, the excess would be rebated to State Oil.
After Khan fell behind on lease payments, State Oil acted to evict him from the gas
station. Id. at 7–8. 149
Albrecht v. Herald Co., 390 U.S. 145 (1968). 150
Id. For a comprehensive overview of how the rule of reason operates, see
generally Phillip Areeda, The “Rule of
Reason” in Antitrust Analysis: General Issues (Federal Judicial Center 1981), availa
ble at http://www.fjc.gov/public/pdf.nsf/lookup/antitrust.pdf/$file/antitrust.pdf. 151
Khan, 522 U.S. at 20.
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experience.”152
In Khan, the court used previous decisions,
scholarship, and the purpose of antitrust law as protecting inter-brand
competition to invalidate the rule of Albrecht.153
The general presumption in antitrust cases before the Supreme
Court has been that changes to the Sherman Act should be left to
Congress.154
But Congress has expected the courts, not the legislative
bodies, to “give shape to the statute’s broad mandate by drawing on
common-law tradition.”155
And the Supreme Court itself has
commented on the Sherman Act, specifically the phrase “restraint of
trade,” as invoking the common law, rather than a static definition that
applied upon the Act’s passing in 1890.156
In at least three Supreme
Court decisions, the Supreme Court has reconsidered its previous
antitrust decisions when the “theoretical underpinnings of those
decisions” were “called into serious question.”157
In a 1977 case, Continental T.V. v. GTE Sylvania, Inc.,158
the
Supreme Court considered a challenge by Continental that Sylvania
had violated the Sherman Act by refusing to grant them a franchise in
Sacramento, California.159
The Court had articulated previously that
similar situations were to be analyzed as a per se violation,160
but the
Court in GTE Sylvania overruled its holding in U.S. v. Arnold,
Schwinn & Co., saying that rule of reason analysis should govern.161
The overruled precedent, the Court said, was an “abrupt and largely
unexplained departure” that “has been the subject of continuing
controversy and confusion.”162
The Court went on to discuss
economic scholarship that gave ample reason, in the Court’s opinion,
to overrule Schwinn.163
152
Id. 153
Id. at 4–5. 154
Id. at 20. 155
Id. (quoting Nat’l Soc. of Prof’l Eng’r v. United States, 435 U.S. 679, 688
(1978)). 156
The term “restraint of trade” as used in 1890, the Court explains, was not a
“static” definition. Id. at 21 (citing Bus. Elect. Corp. v. Sharp Elect. Corp., 485 U.S.
717, 732 (1988), and McNally v. United States, 485 U.S. 350, 372–73 (1987)
(Stevens, J., dissenting)). 157
Id. at 21 (citing three Supreme Court cases). 158
Cont’l T.V. Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977). 159
Id. at 39–41. 160
See United States v. Arnold, Schwinn & Co., 388 U.S. 365, 382 (1967)
(finding that vertical price restraint was a per se violation of the Sherman Act). 161
GTE Sylvania, 433 U.S. 36 at 58–59. 162
Id. at 47. Compare with Flood v. Kuhn, 407 U.S. 258, 279 (1972) (calling
MLB’s antitrust exemption “an aberration” that is to be regarded as “unrealistic,
inconsistent, or illogical”). 163
GTE Sylvania, 433 U.S. 36 at 47–49.
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Three decades later, and ten years after Khan, the Supreme Court
overruled a 96-year-old precedent in Leegin Creative Leather
Products, Inc. v. PSKS, Inc.164
In the 1911 case Dr. Miles Medical Co.
v. John D. Park & Sons Co.,165
the Supreme Court ruled that a rule of
per se illegality for vertical price restraints applied.166
Shortly after the
decision, the rule became quickly disfavored.167
The majority in
Leegin discussed that, were this issue one of first impression, they
would hold that the rule of reason, rather than per se rule, would
apply.168
The Court reasoned that because of the treatment of the
Sherman Act as a “common-law statute,” its prohibition on restraints
of trade “evolves to meet the dynamics of present economic
conditions.”169
Citing the Court’s history of overruling precedents
when subsequent cases have weakened their doctrinal underpinnings,
the Supreme Court overruled Dr. Miles.170
Perhaps these cases have demonstrated that stare decisis is not the
“inexorable command” that the majority in Flood recognized,171
especially in the antitrust context. Perhaps, then, the Piazza court had
a point. In fact, perhaps they had a very real argument to overrule
Flood in the broadest sense possible.
Flood stood for the proposition that baseball’s exemption from
antitrust laws continued to apply, both generally and in the specific
context of the reserve clause.172
The result stare decisis in the case
arguably requires future courts to rule that the reserve clause continues
to be subject to antitrust laws, in light of Curt Flood’s challenges to the
reserve clause system. That issue, however, is now moot—baseball
has since done away with the reserve clause in favor of free agency.173
164 Leegin Creative Leather Prod. v. PSKS Inc., 551 U.S. 877, 877 (2007).
165 See generally Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373
(1911) (holding a vertical price-fixing agreement to be per se illegal under the
Sherman Act). 166
See id. at 406–07. 167
The Supreme Court quickly distanced itself from Dr. Miles, namely because
it was decided so soon after the Sherman Act was enacted and at a time when the
Court had little experience with antitrust cases. The Supreme Court had, in more
recent years, limited or overruled similar decisions. Leegin Creative Leather
Products, 551 U.S. at 879. 168
Id. at 878. 169
Id. at 879. 170
Id. at 879–80 (citing Dickerson v. United States, 530 U.S. 428 (2000)). 171
“[MLB’s antitrust exemption] is an aberration that has been with us now for
half a century, one heretofore deemed fully entitled to the benefit of stare decisis . . .
.” Flood v. Kuhn, 407 U.S 258, 282 (1972). 172
Id. at 283–84. 173
History of the Major League Baseball Players Association, MLB,
http://mlb.mlb.com/pa/info/history.jsp (last visited Oct. 31, 2014) (describing the
move from the reserve clause to free agency).
2015] MODERNIZING MLB’S ANTITRUST
EXEMPTION AFTER CITY OF SAN JOSÉ
497
The rule stare decisis is that the business of baseball is broadly exempt
from the antitrust laws.
The Piazza court says that because of the express declaration of
the Flood majority that baseball is interstate commerce, the rules of
Federal Baseball and Toolson II are invalidated outside of their
facts.174
Both of those cases were decided under the assumption that
baseball was not interstate commerce and, because the underpinnings
of those decisions drastically changed, they carry no rule stare decisis
value.175
Because Flood relied upon those decisions to reach its broad
holding that the business of baseball remained exempt from antitrust
law, the Piazza court stated that it, too, had no precedential bearing.176
This argument is weakened, however, by the Supreme Court’s
declaration in Radovich v. National Football League that the rulings in
Federal Baseball and Toolson II—it should be noted that Radovich
was decided before Flood—should be limited to “the business of
organized professional baseball.”177
This language, in tandem with
Toolson II and Flood, lends support that the exemption of the business
of baseball was the intended precedent to be set, rather than the more
narrow holdings suggested by Piazza.
Though the Piazza court’s approach is not ironclad, it is the basis
for an avenue of attack on the antitrust exemption set forth in Federal
Baseball that can be potentially applied under the facts of City of San
José. The argument would be made, as follows: the theoretical
underpinnings of Flood do not apply to these facts, and the changed
circumstances and lessons of accumulated experience since the Flood
decision support the interpretation that MLB’s antitrust exemption
does not apply to franchise relocation. If the theoretical plaintiff filed
suit on these grounds, would he even survive a 12(b)(6) motion, much
less be able to sustain the challenge all the way up to the Supreme
Court of the United States? That is not for us to answer here—only to
propose.
The success of such an argument would depend on the underlying
facts—that is, how have the circumstances present when Flood was
decided or the theory behind applying the exemption changed? While
a factual determination would be essential, investigating these
questions raise interesting issues of public policy when discussing the
174 Piazza v. Major League Baseball, 831 F. Supp. 420, 436 (E.D. Penn. 1993)
(claiming that Flood stripped Federal Baseball and Toolson II of any precedential
value beyond the facts there involved). 175
Id. 176
Id. 177
Radovich v. Nat’l Football League, 352 U.S. 445, 451 (1957) (limiting the
ruling of Federal Baseball and Toolson II to the “business of organized professional
baseball”).
498 WAKE FOREST J.
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antitrust exemption. The inquiry becomes less about substantive law
than it does about recognizing the landscape of sports in the United
States.
C. Public Policy Concerns, Including Uniformity with Other
Professional Sports, Support a Change to Allow for Franchise
Relocation Free of the Antitrust Exemption
In 1985, the Kansas City Royals and St. Louis Cardinals faced off
in the World Series, with the Royals prevailing four games to three.178
Television ratings for that series were a very solid 25.3.179
In the most
recent World Series, the Kansas City Royals lost in seven games to the
San Francisco Giants.180
The television ratings were nearly one-third
of what they were in 1985, a paltry 8.2.181
Baseball may very well be America’s pastime, but it is no longer
America’s game. It is more entrenched in American culture than other
sports, perhaps, but in the current landscape of professional sports in
the United States, baseball is no longer king.182
In 1922, when
Federal Baseball was decided, the NFL was two years old, the
National Basketball Association (“NBA”) was 24 years from being
created, and the National Hockey League (“NHL”) would not add an
American team for another two years.183
Major League Baseball, on
the other hand, has operated in some capacity since 1876.184
By the
178
1985 World Series, BASEBALL REFERENCE, http://www.baseball-
reference.com/postseason/1985_WS.shtml (last visited Oct. 18, 2014). 179
World Series Television Ratings, BASEBALL ALMANAC, http://www.baseball-
almanac.com/ws/wstv.shtml (last visited Oct. 18, 2014). 180
Sara Bibel, 52 Million Viewers Tune-In to World Series Game 7, ZAP2IT
(Oct. 30, 2014), http://tvbythenumbers.zap2it.com/2014/10/30/52-million-viewers-
tune-in-to-world-series-game-7/322356. 181
Id. 182
Darren Rovell, NFL most popular for 30th year in row, ESPN (Jan. 14,
2014), http://espn.go.com/nfl/story/_/id/10354114/harris-poll-nfl-most-popular-mlb-
2nd. 183
Christopher Klein, The Birth of the National Football League, HISTORY
(Sept. 4, 2014) http://www.history.com/news/the-birth-of-the-national-football-
league (reporting that the NFL was founded in 1920). History of Basketball in
Canada, NBA (Mar. 8, 2002, 2:47 PM), available at
http://www.nba.com/canada/History_of_Basketball_in_Canad-
Canada_Generic_Article-18023.html (reporting that the first NBA game was played
on November 1, 1946). On October 11, 1924, the Boston Bruins became the first
American team to join the NHL. Bruins and Maroons Join the NHL, NHL,
http://www.nhl.com/history/101124.html (last visited Nov. 1, 2014). 184
The National League, one of the constituent leagues of Major League
Baseball, was formed in 1876. Reds Timeline, MLB, available at
http://mlb.mlb.com/cin/history/timeline.jsp (last visited Nov. 1, 2014).
2015] MODERNIZING MLB’S ANTITRUST
EXEMPTION AFTER CITY OF SAN JOSÉ
499
time Federal Baseball was decided, baseball had been developing for
46 years and was in the midst of a massive spike in popularity,185
due
in no small part to the emergence of great players such as Ty Cobb,
Walter Johnson, and, most notably, Babe Ruth. Baseball was unique.
1. Baseball is facially similar in a business sense to every
other major American professional sport
Perhaps in 1922, baseball did have unique characteristics and
needs. Even in 1953, baseball was considered to be in a unique
position. In the amicus curiae brief filed by the Boston Red Sox in the
Toolson II case, baseball was painted as a “unique enterprise.”186
Why? For baseball to be successful, the brief stated, a paramount
consideration must be a player’s undivided allegiance, and the only
way to assure this allegiance was to safeguard the system by which
players were trained and developed for a team.187
This was baseball’s
unique characteristic, and it was compared to professional soccer in
England.188
But this unique characteristic—the brief was describing
the reserve clause189
—no longer exists, not just in baseball, but in any
American professional sport.
What does it mean, then, as to the statement in Flood that
baseball’s antitrust exemption rests on the sport’s unique
characteristics and needs? If the unique characteristic on which the
courts have relied truly is the reserve clause, there is definitively
nothing to differentiate MLB from its siblings, the NFL, NBA, and
NHL.
Even if the alleged unique characteristics and needs are broader, is
there any aspect of the business of baseball so unique to the sport as to
justify receiving preferential treatment under antitrust laws?
All of the “Big Four” sports (MLB, NFL, NBA and NHL) have
free agency for players.190
All of the Big Four have revenue sharing
185
Peter Panacy, Major League Baseball Finds its Roots in Progressive
America, BLEACHERREPORT (Apr. 11, 2011),
http://bleacherreport.com/articles/661802-major-league-baseball-finds-its-roots-in-
progressive-america. 186
Brief for Boston American League Base Ball Co. as Amicus Curiae
Supporting Respondents at 2, Toolson II, 346 U.S. 356 (1953). 187
Id. at 2. 188
Id. at 15. 189
MLBPA Info, History of the Major League Baseball Players Association,
MLBPA, http://mlb.mlb.com/pa/info/history.jsp (last visited Feb. 6, 2015). 190
See e.g., MAJOR LEAGUE CONSTITUTION, (2005), available at
http://www.bizofbaseball.com/docs/MLConsititutionJune2005Update.pdf; MAJOR
LEAGUE BASEBALL PLAYERS ASSOCIATION, COLLECTIVE BARGAINING AGREEMENT
continued . . .
500 WAKE FOREST J.
BUS. & INTELL. PROP. L.
[VOL. 15
programs.191
All of the Big Four have national television deals, and all
but the NFL allow teams to have accompanying regional television
deals.192
All of the Big Four are governed by a commissioner, split
into two conferences, and split into divisions within the
conferences.193
All of the Big Four have championship events—three
use a “series” to decide the champion, and one uses a single game.194
All of the Big Four utilize amateur drafts from some combination of
high school, college, and international talent pools.195
All of the Big
Four have seen franchises relocate within the last decade.196
All of the
Big Four teams play in designated home facilities, draw from a large
base of season ticket holders, and rely on many of the same revenue
streams.197
All of the Big Four have designated television networks,
websites, and mobile phone applications.198
Beyond that, any
differences are minor, with the obvious exception being baseball’s
exemption from antitrust law.
This is to say that, in a general sense, the thesis that the business of
baseball is unique from any other professional sport is an invalid one.
The rules of baseball, the style of play, the viewing experiences, the
vast history—these are all unique to baseball, but nothing on the
business side clearly distinguishes it from any of the other Big Four
sports.
(2012), available at http://mlb.mlb.com/pa/pdf/cba_english.pdf; Constitution and
Bylaws of the National Basketball Association (2012), available at
http://mediacentral.nba.com/media/mediacentral/NBA-Constitution-and-By-
Laws.pdf; CONSTITUTION AND BYLAWS OF THE NATIONAL FOOTBALL LEAGUE
(2006), available at
http://static.nfl.com/static/content/public/static/html/careers/pdf/co_.pdf;
CONSTITUTION OF THE NATIONAL HOCKEY LEAGUE (2014), available at
http://sportsdocuments.com/2013/11/13/nhl-constitution/; NATIONAL HOCKEY
LEAGUE PLAYERS’ ASSOCIATION, COLLECTIVE BARGAINING AGREEMENT (2013),
available at
http://cdn.agilitycms.com/nhlpacom/PDF/NHL_NHLPA_2013_CBA.pdf . 191
See id. 192
See id. 193
See id. 194
See id. 195
See id. 196
Recent Professional Sports Teams that have Relocated, AZCENTRAL (July
3, 2013, 12:59 PM),
http://archive.azcentral.com/sports/coyotes/articles/20130701recent-professional-
sports-teams-that-have-relocated.html. 197
See generally Danette R. Davis, The Myth & Mystery of Personal Seat
Licenses and Season Tickets: Licenses or More?, 51 ST. LOUIS U. L.J. 241 (2006). 198
See, e.g., www.mlb.com; www.nfl.com; www.nba.com; www.nhl.com.
2015] MODERNIZING MLB’S ANTITRUST
EXEMPTION AFTER CITY OF SAN JOSÉ
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2. MLB’s antitrust exemption has been found to be illogical
and flawed by many sources over the years
The illogic behind baseball’s antitrust exemption has been well-
documented. In 1976, just four years after the Flood decision, the
exemption was examined in great detail by the House Select
Committee on Professional Sports, known as the Sisk Committee.199
After hearing testimony in favor of the exemption from Commissioner
Bowie Kuhn and the owners of various MLB teams, and in opposition
to the exemption from MLB Players Association President Marvin
Miller; economist Roger Noll; and lawyer Steven Rivkin; the Sisk
Committee determined that adequate justification for the antitrust
exemption does not exist.200
No legislation was produced as a result,
and the motivations of the Sisk Committee seemed to be self-
serving.201
Regardless, the record shows a strong opposition to the
exemption.
In 1981, Deputy Assistant Attorney General Tad Lipsky testified
before the House Judiciary Committee that the Antitrust Division of
the Department of Justice had a firm position that “baseball’s antitrust
exemption is an anachronism” that should be eliminated.202
With a
special House committee and the Department of Justice supporting
elimination of the antitrust exemption within a decade of Flood,
support for baseball’s exemption appeared to be waning. Yet in the
time since these discussions, Congress has not addressed the
exemption aside from the Curt Flood Act.203
The Act, which makes
all matters relating to employment of major league baseball players
subject to antitrust law, has a very narrow scope and simply states that
the act does not create a cause of action to challenge the antitrust
exemption as it otherwise pertains to the business of baseball.204
In the law review article by Professor Grow cited earlier,205
over
one dozen pieces of legal scholarship were introduced, many casting a
skeptical eye towards, if not vehemently opposing, the exemption.206
So many pieces of legal scholarship have been written on this topic,
199
Professional Sports Antitrust Immunity: Hearing on H.R. 2784 and H.R.
2821 Before the S. Comm. on the Judiciary, 97th Cong. 381 (1982) (statement of
Donald M. Fehr, General Counsel, Major League Baseball Players Association). 200
Id. at 388. 201
JEROLD J. DUQUETTE, REGULATING THE NATIONAL PASTIME: BASEBALL AND
ANTITRUST 71–72 (Greenwood Publ’g Grp. 1999). 202
See Professional Sports Antitrust Immunity, supra note 199, at 381. 203
Curt Flood Act, Pub. L. 105-297, Oct. 27, 1998, 112 Stat. 2824. 204
15 U.S.C. § 26(b) (2012). 205
Grow, supra note 26. 206
See id. at 261 n.8.
502 WAKE FOREST J.
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and so many in staunch opposition to the exemption,207
that it becomes
baffling to decipher just why the “tipping point” has yet to be reached.
For a rule that has been described by the Supreme Court as illogical
and an aberration, that has been opposed by Congress and the
Department of Justice, and has been continuously attacked by legal
and economic commentators, it seems that MLB’s antitrust exemption
simply cannot be struck out.
3. Franchise relocation free of significant restraints promotes
the economic interests of leagues and teams
The crux of the public policy discussion as it pertains to franchise
relocation, however, is the effect of limiting the ability of teams to
relocate. Between 1960 and 1971, Oakland received three
professional sports franchises. In 1960, the Oakland Raiders, then in
the American Football League, began playing at what is now O.Co
Coliseum, and continued to do so after joining the NFL in 1970.208
In
1968, the former Kansas City Athletics were moved to Oakland by
owner Charles O. Finley and also made their home in the Coliseum.209
In 1971, less than a decade after moving from Philadelphia to San
Francisco, the San Francisco Warriors of the NBA moved into what is
now Oracle Arena, becoming the third major professional team in
Oakland.210
The three franchises likely thought little of Flood v. Kuhn, which
was decided one year after the Warriors’ move, and rightfully so. At
the time, relocation of professional sports franchises was surging.
Between 1950 and 1980, across the United States’ four major
professional sports leagues and franchises were relocated 32 times,
including nine times in Major League Baseball.211
The westward expansion of baseball is perhaps the most notable
example of franchise relocation. Beginning with the Brooklyn
207
See e.g., id.; see generally Colleen Ganin, With San Jose at Bat, Federal
Baseball is in the Bottom of the 9th
, 56 ARIZ. L. REV. 1129 (2014); Mark T. Gould,
Real Fantasy Baseball – Will the Antitrust Exemption Ever End, 11 ENT. & SPORTS
LAW. 3 (1993-1994). 208
Timeline—Raiders Historical Highlights, OAKLAND RAIDERS,
http://www.raiders.com/history/timeline.html (last visited Nov. 2, 2014). 209
JOHN E. PETERSON, THE KANSAS CITY ATHLETICS: A BASEBALL HISTORY,
1954-1967, 260 (McFarland 2003). 210
Warriors History, NBA,
http://www.nba.com/warriors/team_history_index.html (last visited Nov. 2, 2014). 211
Relocation of Professional Sports Teams, WIKIPEDIA,
http://en.wikipedia.org/wiki/Relocation_of_professional_sports_teams (last visited
Nov. 3, 2014).
2015] MODERNIZING MLB’S ANTITRUST
EXEMPTION AFTER CITY OF SAN JOSÉ
503
Dodgers and New York Giants, who in 1958 simultaneously moved to
Los Angeles and San Francisco, respectively, MLB saw an
unprecedented period of franchise relocations.212
Between 1950 and
1980, MLB relocations occurred between Washington, D.C. and
Minneapolis; Milwaukee and Atlanta; Seattle and Milwaukee;
Washington, D.C., and Arlington, Texas; and, of course, Kansas City
and Oakland.213
Interestingly, many of these relocations were not accompanied by
a change in ownership. Economic factors, such as the desire to protect
baseball nationally from competition and the potential for television
revenue in large markets led teams to relocate like never before.214
Because relocation is and has been subject to league approval215
—the
degree of approval being a pertinent issue here—many of the moves
that shaped MLB into what it is today were done with league-wide
interests in mind.
Across the other major sports in the United States, relocation is
also a controversial topic. The competing interests are the same
regardless of the sport.216
On one hand, the league and owner of the
franchise want to advance the interests of the league and team.217
On
the other hand, the interests of the communities involved must be
considered—can the new city economically support a team?218
Will
the old city be left in the dark and crippled economically?
The dark side of relocation reared its ugly head in 1967 when
Kansas City, Missouri, was making an effort to keep their major
league team, the Athletics.219
Owner, Charlie Finley, had been
publicly exploring options elsewhere, including Seattle, Washington;
Milwaukee, Wisconsin; and Oakland, California.220
In an effort to
212
Id. 213
Id. 214
See Daniel E. Lazaroff, The Antitrust Implications of Franchise Relocation
Restrictions in Professional Sports, 53 FORDHAM L. REV. 157 (1984). 215
Tim Hull, San Jose’s Appeal Over Oakland A’s Struck Out, COURTHOUSE
NEWS SERVICE (Jan. 15, 2015, 6:12 PM),
http://www.courthousenews.com/2015/01/15/san-joses-appeal-over-oakland-as-
struck-out.htm. 216
Taylor F. Brinkman, Confronting the Problems of Professional Sports: A
Public Policy Response to Franchise Relocation and Stadium Subsidization, 1
VAND. UNDERGRADUATE RES. J., no. 1, Spring 2005, at 1. (starting from the premise
that all sports league relocations pose the same fundamental challenges.). 217
Ken Woolums, The Next MLB City: “The Top 10,” SB NATION (June 21,
2013, 4:09 PM), http://www.beyondtheboxscore.com/2013/6/21/4452550/the-next-
mlb-city-the-top-10. 218
Id. 219
See Peterson, supra note 209, at 252. 220
Id. at 258.
504 WAKE FOREST J.
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keep the Athletics in Kansas City, voters approved a bond issuance of
$43 million to build a sports complex including a new stadium.221
But, when Oakland promised a hefty stake in multiple revenue
streams, Finley decided on October 11 of that year to move the
Athletics there.222
Where baseball had to be “force-fed” in Kansas
City, it was presented with a very attractive option in Oakland for the
franchise to prosper.223
Kansas City was hung out to dry, and that did not sit well with
people, from local officials all the way up to United States Senators.
When faced with the prospect of being without a MLB team for up to
three years, Kansas City turned to U.S. Senator Stuart Symington, who
threatened to introduce legislation that would upset MLB’s antitrust
exemption if Kansas City was not granted a franchise within a year.224
In the end, the city got its wish—the Kansas City Royals began
playing in 1969 and eventually moved into newly-constructed
Kauffman Stadium in 1973.225
But, the manner in which Finley and
the Athletics left showed the dark side of relocation.
The pertinent discussion here, however, is not just one of franchise
relocation. The Oakland Athletics are attempting to move into another
team’s territory. This sort of move is far from unprecedented,for
example, the Seattle Supersonics moving to Oklahoma City, and the
Atlanta Thrashers moving to Winnipeg.226
Those moves involved
teams moving into markets that were completely unsaturated.227
But
the proposed move of the A’s to San José is controversial primarily
221
Id. at 252. 222
Id. at 257. 223
Id. at 258. 224
Id. at 260. 225
Kansas City Royals History, CBSSPORTS.COM,
http://www.cbssports.com/print/mlb/teams/history/KC/kansas-city-royals (last
visited Feb. 7, 2015). 226
See, e.g., Percy Allen, NBA Approves Sonics’ Move to Oklahoma City, THE
SEATTLE TIMES (Apr. 19, 2008, 12:00 AM),
http://seattletimes.com/html/sports/2004358405_websonivote18.html; Thrashers
Headed to Winnipeg, ESPN (June 1, 2011, 11:16 AM),
http://sports.espn.go.com/nhl/news/story?id=6610414. 227
Peter Keating, No. 1: Oklahoma City Thunder, ESPN THE MAGAZINE, (Sept.
17, 2012), available at http://espn.go.com/espn/story/_/id/8339695/oklahoma-city-
thunder-ranked-best-franchise-sports-ultimate-standings-espn-magazine; see also
NBA Expanded Standings – 2007-2008, NBA,
http://espn.go.com/nba/standings/_/type/expanded/year/2008 (last visited Feb. 5,
2015); see Brad Lendon, NHL’s Atlanta Thrashers set to Move to Winnipeg, CNN
NEWS BLOG (May 31, 2011, 1:45 PM),
http://news.blogs.cnn.com/2011/05/31/report-move-of-nhls-atlanta-thrashers-to-
winnipeg-set/; 2009-2010 Regular Season Team Schedules, NHL,
http://www.nhl.com/ice/page.htm?id=37787 (last visited Feb. 5, 2015).
2015] MODERNIZING MLB’S ANTITRUST
EXEMPTION AFTER CITY OF SAN JOSÉ
505
because of its potential to adversely impact the incumbent franchise’s
finances.228
There are only five markets in the United States where multiple
teams from one sport play.229
In the New York City market, there are
two MLB teams, two NFL teams, two NBA teams, and two NHL
teams.230
In Los Angeles, there are two MLB teams, two NBA teams,
and two NHL teams.231
In Chicago, there are two MLB teams.232
In
the Baltimore-Washington corridor, there are two NFL teams and two
MLB teams.233
And then there is the San Francisco Bay Area, with its
two baseball teams, the Giants and Athletics, and its two football
teams, the 49ers and Raiders.234
Strangely enough, the exact situation that City of San José
confronts has already occurred in the San Francisco area. On July 17,
2014, a new stadium in Santa Clara County opened for a Bay Area
team, despite there being another team in close proximity.235
State-of-
the-art Levi’s Stadium, a $1.2 billion project that had been in the
works since 2007, would play host to a variety of sporting events but
its primary tenant was a National Football League team—the San
228
Terra Hittson & Deirdre A. McEvoy, Oakland A’s May Not Move, Ninth
Circuit Says, THE ANTITRUST LAW BLOG OF PATTERSON BELKNAP WEBB & TYLER
LLP, (Jan. 26, 2015), http://www.antitrustupdateblog.com/blog/oakland-as-may-not-
move-ninth-circuit-
says/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-
Original; Mike Rosenberg, San Jose Appeals A’s Lawsuit Against MLB to U.S.
Supreme Court, THE REPORTER, (Feb. 4, 2015),
http://www.thereporter.com/sports/20150203/san-jose-appeals-as-lawsuit-against-
mlb-to-us-supreme-court. 229
See The Mag’s Ultimate Standings 2014, ESPN,
http://espn.com/sportsnation/teamrankings (last visited Feb. 5, 2015). 230
Michael Leboff, The State of New York Sports, THE ROCKAWAY TIMES (Feb.
2, 2015), http://rockawaytimes.com/2015/02/02/state-new-york-sports/. 231
Team-by-Team Information, MLB, http://mlb.mlb.com/team/ (last updated
June 30, 2014); Teams, NBA, http://www.nba.com/teams/ (last visited Feb. 5, 2015);
Teams, NHL, http://www.nhl.com/ice/teams.htm (last visited Feb. 5, 2015). 232
Andy Schmidt, Which Chicago Team has Better 2015; Cubs or White Sox?,
SPORTSBLOG (Jan. 29, 2015),
http://sportsinferno.sportsblog.com/posts/1716816/which_chicago_team_has_better_
2015__cubs_or_white_sox_.html. 233
Teams, NFL, http://www.nfl.com/teams (last visited Feb. 5, 2015); Team-by-
Team Information, supra note 231. 234
Jamie Jarvis, Best of the Bay: Sports, BAY AREA KID Fun,
http://www.bayareakidfun.com/best-of-the-bay-sports/ (last visited Feb. 5, 2015). 235
See Goodell: Levi’s Might Fit Raiders, ESPN (July 18, 2014),
http://espn.go.com/nfl/story/_/id/11229559/roger-goodell-floats-san-francisco-49ers-
levi-stadium-oakland-raiders-option.
506 WAKE FOREST J.
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Francisco 49ers.236
The stadium will see college football conference
championship games, outdoor hockey games, a wrestling match, and,
on February 7 of 2016, will be host to Super Bowl L.237
Before
moving to Levi’s Stadium, the 49ers played in Candlestick Park, a
mere twenty-two miles away from O.Co Coliseum where the
neighboring Oakland Raiders play its home games.238
The Raiders did not block the 49ers move to Santa Clara.239
In
fact, many commentators have noted that, rather than build a new
stadium themselves, the Raiders may end up sharing Levi’s Stadium
with the 49ers,240
just like the New York Giants and Jets share
MetLife Stadium in East Rutherford, New Jersey.241
The 49ers’ move
to Santa Clara reinforces two salient points—first, that MLB is unique
in its enabling of teams to unilaterally block other teams’ moves, and
second, that Santa Clara County, the “South Bay,” is an attractive spot
for Bay Area teams to build stadiums.
In the Major League Baseball Constitution, Article V, Section
2(b)(3), franchise relocation is subject to approval by three-fourths of
all teams—in a thirty-team league, that amounts to approval by at least
twenty-two teams.242
This is similar to relocation rules in the NBA,
which requires a majority vote,243
and in the NFL, which also requires
three-fourths majority.244
But baseball differs from the NBA and NFL in the unique “veto
power” possessed by individual teams. In the rules of Major League
Baseball, Rule 52 contains the procedural requirements for relocation,
236
Matt Niska, Niska: Examining the History Behind the Construction of Levi’s
Stadium, STANFORD DAILY (Aug. 10, 2014) available at
http://www.stanforddaily.com/2014/08/10/niksa-examining-the-history-behind-the-
construction-of-levis-stadium/. 237
10 Biggest Upcoming Events At Levi’s Stadium That Don’t Involve The
49ers, CBS SF BAY AREA (Aug. 18, 2014, 1:26 PM),
http://sanfrancisco.cbslocal.com/2014/08/18/biggest-upcoming-events-at-levis-
stadium-pac-12-super-bowl-mexico-chile-football-nhl-outdoor-wrestlemania/. 238
Goodell: Levi’s Might Fit Raiders, supra note 235. 239
See id. 240
See id. 241
Id. 242
MAJOR LEAGUE CONSTITUTION, art. V, § 2(B)(3) (2005) available at
http://www.bizofbaseball.com/docs/MLConsititutionJune2005Update.pdf. 243
See CONSTITUTION AND BYLAWS OF THE NATIONAL BASKETBALL
ASSOCIATION (2012), available at
http://mediacentral.nba.com/media/mediacentral/NBA-Constitution-and-By-
Laws.pdf. 244
See CONSTITUTION AND BYLAWS OF THE NATIONAL FOOTBALL LEAGUE
(2006), available at
http://www.nfl.com/static/content/public/static/html/careers/pdf/co_.pdf.
2015] MODERNIZING MLB’S ANTITRUST
EXEMPTION AFTER CITY OF SAN JOSÉ
507
detailing a strict, difficult process for obtaining approval to relocate.245
If a franchise wants to relocate into the operating territory of another
franchise—like the Athletics moving into the Giants’ territory—the
most significant hurdle is obtaining the consent of both the franchise
controlling the territory, and the league.246
The de facto veto ability
possessed by franchises is argued to be a significant restraint of
trade,247
and is probably a major reason that, since the flurry of
relocations between 1950 and 1980 in the MLB, there has only been
one subsequent relocation—and even that relocation is the subject of
controversy.248
Is Major League Baseball promoting its own economic interests by
restricting relocation in this manner? This is certainly an arguable
point. Ultimately, owners of baseball teams are in a for-profit
endeavor. When Lew Wolff and his ownership group bought the
Oakland Athletics in 2005, they paid $180 million.249
Today, the
Athletics are valued at $495 million, despite the economic challenges
faced by the team.250
Were Mr. Wolff to sell the team tomorrow, he
would likely realize a profit of at least $300 million.
Business decisions by franchise owners are economically
motivated, with a particular emphasis on increasing franchise value.251
While there are many justifications for the strict view on relocation
articulated by the MLB, the profit-seeking motives of owners are a
compelling justification for allowing less-regulated relocation. In the
example of the Athletics, a move to San José likely would allow the
245
See MAJOR LEAGUE RULES (2008),
http://www.bizofbaseball.com/docs/MajorLeagueRules-2008.pdf. 246
Id. 247
See Complaint, supra note 7, at 2. 248
When the Montreal Expos moved to Washington, D.C., to become the
Washington Nationals, a television rights dispute with the neighboring Baltimore
Orioles began to develop. This dispute has entered the legal system. See Dayn
Perry, Report: Nationals-Orioles TV rights dispute getting uglier, CBS SPORTS (July
29, 2014, 4:27 PM), http://www.cbssports.com/mlb/eye-on-
baseball/24641928/report-nationals-orioles-tv-rights-dispute-getting-uglier. 249
Oakland Athletics Team Valuation, FORBES,
http://www.forbes.com/teams/oakland-athletics/ (last visited Feb. 14, 2015). 250
Id. 251
Cf. Mike Ozanian, Baseball Team Values 2014 Led By New York Yankees At
$2.5 Billion, FORBES (March 26, 2014, 9:54 AM),
http://www.forbes.com/sites/mikeozanian/2014/03/26/baseball-team-values-2014-
led-by-new-york-yankees-at-2-5-billion/; Travis Waldron, Forbes: The Average NFL
Franchise Is Now Worth $1.4 Billion, THINKPROGRESS (Aug. 22, 2014, 1:00 PM),
http://thinkprogress.org/sports/2014/08/22/3474584/the-average-nfl-franchise-is-
now-worth-14-billion/; Cork Gaines, Why NBA Franchise Values Are Skyrocketing,
BUSINESS INSIDER (Jun. 10, 2014, 4:26 PM), http://www.businessinsider.com/why-
nba-franchise-values-are-skyorcketing-2014-6.
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team to become so much stronger economically that the team’s
dependence on revenue sharing could end.252
The long-term value of
the Athletics in a new, baseball-friendly stadium in a burgeoning
market, such as the South Bay, should be significantly higher than
what it would be in the decaying, multipurpose Coliseum in the
economically-disadvantaged market in Oakland. In 1998, for
example, the San Francisco Giants were worth $213 million while
playing in multipurpose, outdated Candlestick Park.253
Sixteen years
later, playing in beautiful AT&T Park, the Giants are reportedly worth
$1 billion.254
Even adjusting for inflation, the team’s value has
increased by 237 percent.
This is not to say that a team’s stadium and location are the sole
determinant of franchise value—that could not be further from the
truth. However, the Giants are a clear illustration in a relevant market
that long-term value does appear to be positively impacted by
“modernizing” the ballpark. The Athletics are profit-seekers, just as
the Giants were when they threatened to move to Tampa Bay in the
early 1990s, and just as the 49ers were when they moved to Santa
Clara, and just as the Golden State Warriors are by agreeing to move
back to San Francisco from Oakland in 2018.
For as much as Oakland experienced a great influx of professional
sports franchises decades ago, the city is facing the prospect of losing
all three of its teams—and likely all to other municipalities within the
Bay Area. If the Raiders end up sharing Levi’s Stadium with the 49ers
and with the Athletics almost certainly heading for San José if the
move is approved, Oakland could go from having three professional
teams to zero in less than a decade.
The 49ers’ move to Santa Clara County is, if nothing else,
recognition of the economic value the South Bay possesses. San José,
the centerpiece of the South Bay, had the second-highest increase in
economic output among major urban areas between 2012 and 2013.255
Continuing efforts by local business leaders and politicians to improve
the infrastructure and housing situations in the South Bay are leading
toward San José blossoming into “the urban heart of Silicon
252
See Complaint, supra note 7, at 17. 253
Forbes Valuations of the 30 Clubs in MLB, BUSINESS OF BASEBALL,
http://www.bizofbaseball.com/index.php?option=com_wrapper&Itemid=126 (last
visited Nov. 2, 2014). 254
San Francisco Giants Team Valuation, FORBES,
http://www.forbes.com/teams/san-francisco-giants/. 255
Richard Florida, Houston and San José are Leading U.S. Economic Growth,
CITYLAB (Sept. 17, 2014), http://www.citylab.com/work/2014/09/houston-and-san-
José-are-leading-us-economic-output-growth/380360/.
2015] MODERNIZING MLB’S ANTITRUST
EXEMPTION AFTER CITY OF SAN JOSÉ
509
Valley.”256
While Oakland is not necessarily in dire straits
economically,257
it is clear that the grass is greener in the South Bay.
The corporate environment in San José and its surrounding
communities promote a large season ticket base, including a likely
high demand for luxury boxes, a major sub-source of revenue for
teams.258
Whatever reasons the Giants have for exercising their veto power
to prevent the Athletics from moving south, there are strong policy
reasons to prevent them from doing so. The Athletics have the ability
to revitalize their franchise and end their dependence on revenue
sharing, all without any significant threat to the Giants, who, ironically
would not even have these territorial rights had former A’s owner
Walter Haas not agreed to let the Giants move to San José in the early
1990s.259
MLB’s antitrust exemption provides a means for the league and a
team to control franchise location beyond any reasonable degree.
Conversely, the league profits as a whole when its constituent teams
are in sound financial condition—the league becomes more
competitively balanced, and MLB does not have to expend resources
to help flailing franchises.260
Yet the exemption persists, and as long
as it persists, the Athletics will likely be handcuffed into a suboptimal
resolution of its situation.
IV. CONCLUSION
On July 22, 2014, the Oakland Athletics announced that they had
signed a new 10-year lease to stay in Oakland and continue playing at
256
George Avalos, Will housing and traffic woes jeopardize South Bay
economy?, SAN JOSÉ MERCURY NEWS (May 30, 2014, 2:36 PM),
http://www.mercurynews.com/business/ci_25852564/housing-and-traffic-woes-may-
jeopardize-south-bay. 257
Fitch Affirms Oakland, CA’s GOs at ‘A+’; Outlook Stable, BUSINESSWIRE
(July 28, 2014, 4:19 PM),
http://www.businesswire.com/news/home/20140728006165/en/Fitch-Affirms-
Oakland-CAs-GOs-Outlook-Stable#.VHOVPovF-So. 258
Mark Koba, Luxury Suites Rule in Professional Sports Revenue, USA
TODAY (Feb. 4, 2012),
http://usatoday30.usatoday.com/money/economy/story/2012-02-04/cnbc-super-
bowl-suites/52948968/1; Fact Sheet: History & Geography, CITY OF SAN JOSE, at 6,
https://www.sanjoseca.gov/DocumentCenter/View/780 (last visited Feb. 5, 2015). 259
A’s Seek Territorial Rights Resolution, ESPN (March 7, 2012, 9:39 PM),
http://espn.go.com/mlb/story/_/id/7658699/oakland-athletics-san-francisco-giants-
odds-territorial-rights. 260
See Jacobson, supra note 12.
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the Coliseum.261
Upon signing the lease, the Athletics said in
statement that, “Most of all, we are happy for our great fans who . . .
will know that the Oakland Athletics will continue to play its games at
O.Co Coliseum.”262
Yet within the lease is a provision stating that if the Athletics leave
Oakland at least two years into the lease, they face a penalty of $1.6
million per year.263
Further, the Athletics agreed to engage in good-
faith discussions about building a new stadium in Oakland.264
Whether or not the 2017 Oakland A’s or 2020 Oakland A’s play
their home games at O.Co Coliseum will likely be decided behind
closed doors, in discussions between team ownership, local leadership,
and MLB authorities. Perhaps the team will not partake in the exodus
from Oakland and stay, whether in the Coliseum or in a new stadium.
Maybe the Athletics and Giants can strike a “gentleman’s agreement,”
much like the one Walter Haas made to grant Santa Clara County to
the Giants,265
which would allow for the A’s to move to the South
Bay. Maybe MLB will simply amend its constitution, stripping the
Giants of their right of refusal and clearing the path for a move to San
José.
Or maybe, at some point in the near future, MLB’s antitrust
exemption will cease to exist in its current form. It could come by
Supreme Court ruling. It could come by legislative action. However
it would happen, it would be a welcome move. A move away from the
antitrust exemption is a move towards a more modernized professional
sports league. The time has come for baseball to join its counterparts
in the 21st Century and not rely on the outdated declarations of the
courts that baseball is an anomaly that must stay an anomaly.
The blueprint is here. The cards are on the table. The runners who
will end Major League Baseball’s antitrust exemption as we know it
are in scoring position. The only question that remains to be answered
is this:
Who will drive them in?
261
A’s Reach Deal to Stay in Oakland, ESPN (July 22, 2014, 11:13 PM),
http://espn.go.com/mlb/story/_/id/11250085/oakland-athletics-agree-10-year-lease-
stay-town. 262
Id. 263
Id. 264
Id. 265
A’s Seek Territorial Rights Resolution, supra note 259.
2015] MODERNIZING MLB’S ANTITRUST
EXEMPTION AFTER CITY OF SAN JOSÉ
511
V. ADDENDUM
“If only Casey could but get a whack at that—We’d
put up even money now, with Casey at the bat.”
—“Casey at the Bat” by Ernest Thayer266
On January 15th, 2015, nearly five months after the Ninth Circuit
Court of Appeals heard oral arguments, its decision in City of San José
v. Office of the Commissioner of Baseball was filed.267
As expected,
the three-judge panel affirmed the district court’s dismissal of the City
of San José’s antitrust lawsuit,268
and once again, Major League
Baseball’s exemption from antitrust laws stood tall. As the opinion
stated, inspired by the iconic baseball poem, “Like Casey, San José
has struck out here.”269
Well-meaning as Judge Kozinski’s hat tip to Mr. Thayer may be,
the reference was perhaps misplaced. Casey was never at bat here,
because this was not the situation for Casey to bat. As the court points
out, “Only Congress and the Supreme Court are empowered to
question Flood’s continued vitality.”270
This decision was
unremarkable, if for no other reason than its deference to precedent
and Congressional inaction,271
the same justifications that Toolson II
and Flood used in upholding Federal Baseball.272
In short, for Casey
to “get a whack at that”,273
and for the loyal patrons of Mudville to
like their odds, Mighty Casey would have to go to bat either before the
Supreme Court or Congress.
In the Ninth Circuit’s decision, special attention is given to the
Curt Flood Act of 1998.274
Where ordinarily, congressional inaction
lacks significance, specific legislation in a field that explicitly exempts
an issue from that legislation is dispositive of congressional intent.275
The Ninth Circuit found that, by explicitly exempting franchise
relocation from the Curt Flood Act, Congress made clear its intention
to keep franchise relocation firmly within the grasp of the antitrust
266
Ernest L. Thayer, Casey at the Bat (1888), available at
http://www.poets.org/poetsorg/poem/casey-bat. 267
City of San José v. Comm’r of Baseball, No. 14-15139, 2015 WL 178358
(9th Cir. Jan. 15, 2015). 268
See id. 269
Id. at *5. 270
Id. 271
Id. at *2–4. 272
Id. at *3. 273
Thayer, supra note 266. 274
See 15 U.S.C. § 26(b) (2012). 275
Office of the Comm’r of Baseball, No. 14-15139, 2015 WL 178358 at *4
(9th Cir. Jan 15, 2015) (citing Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S.
633, 650 (1990) and Kimbrough v. U.S., 552 U.S. 85 (2007)).
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exemption.276
Combined with a continued affirmation of the
principles of stare decisis articulated in Flood, the court made it
abundantly clear that San José’s challenge would hardly make a dent
in the antitrust exemption.
The outlook wasn’t brilliant for Casey’s Mudville nine, and it is
not brilliant for the City of San José either. Perhaps the Supreme
Court will decide it is time to make another ruling on MLB’s antitrust
exemption, but given the Ninth Circuit’s rapid and strong takedown of
the appellants, that seems unlikely. Rather, the Oakland Athletics are
likely stuck without a legal remedy for their failed attempt to relocate
to San Jose.
As for the exemption, it remains as strong as ever. Perhaps the
next challenge will attack its shaky, outdated foundation. For now,
there appears to be no real threat to the exemption. Perhaps Judge
Kozinski was correct—maybe Casey did strike out.
Or maybe Casey is back in the dugout, sitting on the bench,
waiting for the chance to face the right pitcher.
276
See id.
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