Judge Thwarts Attempt to Force Athletics' Move
SAN JOSE, Calif. (CN) - Citing Major League Baseball's antitrust exemption, a federal judge dismissed claims that would have cleared a path for the Oakland Athletics to build a new stadium in San Jose.
The antitrust exemption gives Major League Baseball control over broadcast rights, apparel, stadium vendors, team locations and other aspects of the cash cow that is professional baseball. The exemption, which the U.S. Supreme Court upheld in 1922, found that baseball games are local affairs and not interstate commerce.
While agreeing with other jurists that the exemption is "unrealistic, inconsistent, or illogical," and an "aberration" that makes "little sense given the heavily interstate nature of the 'business of baseball' today," U.S. District Judge Ronald Whyte noted last week that it has lived on because of congressional inaction.
The finding unravels San Jose's claims that the Office of MLB Commissioner Bud Selig illegally prevented the Oakland Athletics from moving to a new stadium in its city.
San Jose had challenged the league's antitrust exemption as well as the San Francisco Giants' claim to territorial rights in the southern Bay Area.
For years, MLB has unlawfully conspired to control the location and relocation of major league men's professional baseball clubs under the guise of an 'antitrust exemption' applied to the business of baseball," the city claimed in the suit.
Judge Whyte noted Friday, however, that he is "still bound by the Supreme Court holdings, and cannot conclude today that those holdings are limited to the reserve clause."
San Jose had tried to argue that court rulings upholding the exemption applied only to "essential aspects" of the game, like a reserve clause that tied players to their clubs for their entire career and did not apply to aspects of the game that were "related to" but not "essential" to the business of baseball. The city argued that team relocation was one such "related" aspect.
In Flood v. Kuhn, in which player Curt Flood unsuccessfully challenged the reserve system, the Supreme Court held that under two previous rulings the "reserve system, a part of the broader 'business of baseball,' continued to enjoy exemption from the antitrust laws."
Whyte noted that the "court's recognition and holding in Flood that the business of baseball is now interstate commerce cannot override the court's ultimate holding that Congressional inaction (at that time for half a century, but now for over 90 years) shows Congress's intent that the judicial exemption for the 'business of baseball' remain unchanged." (Parentheses in original.)
"The Supreme Court is explicit that 'if any change is to be made, it [must] come by legislative action that, by its nature, is only prospective in operation," Whyte added.
Although an arbitrator struck down the reserve system in 1975, and Congress passed the Curt Flood Act of 1998, that law prohibited courts from relying on the act as a basis to challenge any aspect of baseball other than the direct employment of baseball players.
"Despite the opportunity to do so, Congress chose not to alter the scope of the exemption with respect to any issues other than those 'directly relating to or affecting employment of major league baseball players,'" Whyte wrote.
He added that "the federal antitrust exemption for the 'business of baseball' remains unchanged, and is not limited to the reserve clause" and that "MLB's alleged interference with the A's relocation to San Jose is exempt from antitrust regulation."
Whyte also found that, while San Jose might have standing to sue for injunctive relief and might have suffered an injury in the relevant market, the court need not consider the issues because the antitrust exemption means the court had to dismiss all antitrust claims.
The court also dismissed the city's Cartwright Act claims under the commerce clause of the U.S. Constitution, citing Flood and other decisions that it needed to follow to maintain uniformity in the regulation of baseball.
Dismissing unfair-competition claims under state law, Whyte noted that such claims require the violation of an antitrust law.
Joseph Cotchett, attorney for San Jose, told Courthouse News that he "respects tremendously the judge's ruling."
He explained that, though the judge "heavily criticized" precedent upholding the antitrust exemption, the judge "did not find it was in his domain to overturn the Supreme Court rulings."
Cotchett is a partner with Cotchett Pitre & McCarthy LLP in Burlingame, Calif.
Whyte did uphold claims for tortious interference with prospective economic advantage, which do not explicitly require an antitrust violation to survive.
San Jose argued that the MLB Relocation Committee has delayed for over four years in deciding whether to approve the A's move, which "caused a disruption of the A's ability to execute an option agreement and disrupted any future negotiation of a purchase agreement, presumably causing damage to the city."
The city also delayed a public vote, at Commissioner Selig's request, on whether the A's could buy land and build a stadium.
Whyte noted that "it is reasonable to infer that the A's and the city entered into an option agreement with the understanding that MLB would return a relocation decision within the two year term of the contract."
The "court finds that the complaint sufficiently alleges a 'disruption' of the contract because, here, the A's are unable to exercise the option due to MLB's delay in conducting the vote pursuant to the MLB constitution to approve or deny relocation," Whyte added. "By asking the city to delay a public vote on the stadium, the city was justified in assuming that MLB would make a decision within a reasonable time which it has not. Regardless of whether MLB ultimately approves or denies the relocation request-and the court has concluded that it is within MLB's authority to decide either way-the A's were recently forced by MLB's delay to extend the option agreement for another year, or lose the option. As a result of MLB's delay, the A's incurred an additional $25,000 expense to renew the option, and the city is left waiting another year to sell the land set aside for the stadium in question."
While noting that the delay does not violate antitrust laws, Whyte concluded that the league "has engaged in acts (or rather, has failed to engage a vote pursuant to the MLB constitution) indicating an intent to frustrate the contract. The court concludes that the allegations in the complaint are sufficient to state a claim for tortuous interference with contract. The alleged tortuous interference with contract is an independently unlawful act sufficient to support the city's tortious interference with prospective economic advantage claim, although the claims may be duplicative."
Cotchett, the lawyer for San Jose, said it was "only a question of time until we start taking depositions on those claims."
Bradley Ruskin, a partner with New York City's Proskauer Rose LLP, represents MLB and Commissioner Selig. Ruskin did not immediately return a request for comment.