THE BASEBALL EXEMPTION: AN ANOMALY WHOSE TIME HAS RUN

Philip L. Gregory and Donald J. Polden¹

Both the United States District Court for the Northern District of California and the Ninth Circuit recently upheld the time-worn "baseball exemption" in a case filed by the City of San Jose² that concerned its efforts to attract the Oakland A’s professional baseball team to a new stadium in downtown San Jose.³ Both decisions were fundamentally premised on the 1922 decision of the United States Supreme Court, Federal Baseball Club v. National League⁴ a decision decided on the now defunct argument that the business of baseball is an entirely intrastate affair. As Justice Oliver W. Holmes wrote, "the business is giving exhibitions of base ball, [sic] which are purely state affairs" and therefore not in interstate commerce notwithstanding "the fact that . . . the Leagues must induce free persons to cross state lines."⁵ A product of a bygone era, Federal Baseball is the most widely criticized of the Supreme Court’s antitrust decisions. Justice Harry Blackmun referred to the baseball "exemption" as an "anomaly" and "aberration," writing that "[w]ith its reserve system enjoying exemption from the federal antitrust laws, baseball is, in a very distinct sense, an exception and an anomaly."⁶ Justice Douglas added that "[t]his Court’s decision in Federal Baseball Club. . . is a derelict in the stream of the law that we, its creator, should remove."⁷

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The so-called "exemption"⁸ from the reach of the antitrust laws continues today even through it has been acknowledged by a majority of the Supreme Court justices in another opinion as "unrealistic, inconsistent, or illogical."⁹ "[W]ere we considering the question of baseball for the first time upon a clean slate, we would have no doubt[ ]" that professional baseball would be subject to the federal antitrust laws.¹⁰ In fact, professional baseball is the only sport—amateur, professional, collegiate—that is exempt from the reach of the nation’s competition laws.¹¹

Federal Baseball, approaching its centennial anniversary, has not withstood the test of time. Other Commerce Clause decisions from that era have been updated in light of a keener awareness of real world business circumstances. As legal historian Stuart Banner writes in the introduction to this recent book, The Baseball Trust, "[s]carcely anyone believes that baseball’s exemption makes any sense."¹² In this article, we will explore the lingering anomaly that is the baseball exemption and describe its impact on the City of San Jose as this local government entity seeks to attract a professional baseball team to strengthen its downtown area. The article describes the reasons why professional baseball will be better served if the U.S. Supreme Court abrogates the holding in its 1922 decision that spawned the exemption.

In the next section, we will provide the background of the current dispute between the Commissioner of Major League Baseball ("MLB") and the City of San Jose. The following section of this article provides a brief background on the precedential constraints that courts encounter when they have addressed the exemption, and contrasts

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the quality of competition in other professional sports that do not have immunity from the antitrust laws. The final section of the article describes several reasons why the United State Supreme Court can and should abrogate the exemption and clearly define the scope of the nation’s competition policies and antitrust laws on the business of baseball.

I. THE FACTUAL BACKGROUND OF CITY OF SAN JOSE V. MAJOR LEAGUE OF BASEBALL¹³

On June 18, 2013, the City of San Jose filed its case against MLB, bringing both federal claims under the federal antitrust laws and California state law claims.¹⁴ On August 7, 2013, MLB filed a motion to dismiss.¹⁵ On October 11, 2013, the District Court denied the motion to dismiss as to the California state law interference claims for damages, but granted the motion to dismiss as to the federal and California antitrust and unfair competition claims under Federal Baseball.¹⁶ This section of the article describes the factual background of the City of San Jose case and how it pertains to the District Court’s invocation of the "business of baseball exemption." The factual background provides a compelling set of reasons why the anticompetitive cartel activities of professional baseball club owners should not be permitted to thwart a demand for professional sports in San Jose, the 11^th largest city in the United States, and the efforts of City leaders to attract a professional team to their community.¹⁷

A. The MLB Constitution

The Office of the Commissioner of Baseball, doing business as Major League Baseball, is an unincorporated association of thirty Major League Baseball Clubs, organized into the American League and the National League. All thirty clubs are bound by the Major League Constitution and the rules adopted and promulgated by the Commissioner pursuant thereto. The territorial rights of each of the 30 Major League Clubs are contained in Article VIII, Section 8 of the MLB Constitution: "The Major League Clubs shall have assigned operating territories within which they have the right and obligation to play baseball games as the home Club."¹⁸ Under the MLB Constitution the vote of three-fourths of the Major

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League Clubs is required for the "relocation of any of the Clubs."¹⁹ Similarly a three-fourths vote is required to amend the Constitution (which would be necessary to change the territorial rights specified in Article VIII, Section 8 of the MLB Constitution). A three-fourths vote is also required for there to be expansion by the addition of a new Club or Clubs.²⁰ Notably under Article VI, Sections 1-2, the Clubs agree that any disputes between the Clubs are to be decided solely by the Commissioner as arbitrator, and the Clubs agree not to engage in litigation between the Clubs.

Of the four two-team markets in MLB, only the San Francisco Giants and the Oakland Athletics do not share the exact same geographic boundaries. The following Clubs all share the same operating territories: the Los Angeles Dodgers and the Los Angeles Angels of Anaheim (Orange, Ventura, and Los Angeles Counties); the New York Mets and the New York Yankees (City of New York, Naussau, Suffolk, Rockland, and Westchester Counties in New York; Bergen, Hudson, Essex, and Union Counties in New Jersey; and a portion of Fairfield County in Connecticut); the Chicago White Sox and the Chicago Cubs (Cook, Lake, DuPage, Will, Kendall, McHenry and Grundy Counties in Illinois; and Lake and Porter Counties in Indiana). The relevant operating territories in the Bay Area are:

San Francisco Giants: San Francisco, San Mateo, Santa Clara, Santa Cruz, Monterey and Marin Counties in California.
Oakland Athletics: Alameda and Contra Costa Counties in California.²¹

B. Relevant History of the Athletics

Based in Oakland, the Athletics are popularly known as "the A’s" and are a member of the Western Division of MLB’s American League. While the Athletics have often been playoff contenders, they have not returned to the World Series since 1990. The Athletics are one of the most economically disadvantaged MLB teams. Because of the economic structure of baseball, which does not split team revenues as evenly as other sports, there is wide disparity between rich and poor teams, and the Athletics are a poor team in revenues. The Athletics are heavily dependent on revenue sharing from other Clubs.

The Oakland Athletics are housed in the fourth-oldest ballpark in the majors, commonly known as the Oakland Coliseum. The Oakland Coliseum is the only remaining multi-purpose stadium in the United States, serving as a full-time home to both an MLB Club (the A’s) and a National Football League team (the Raiders).

Since the 1990’s, attendance at A’s games has plummeted and average attendance at the A’s home games is the 25th of the 30 MLB Clubs. In 2014, the A’s drew 2,003,628 for their home games (25,045 per game), ranking 25 of 30 Clubs; the Giants drew 3,368,697 for their home games (41,588 per game), ranking 4 of 30 Clubs.

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C. Relevant History of the Cross Bay Rival—The Giants

The San Francisco Giants are a Major League Baseball Club based in San Francisco, California, playing in the National League West Division. The Giants are currently the reigning World Series champion. The current home of the Giants is AT&T Park, located at the edge of downtown San Francisco and the San Francisco Bay. AT&T Park is widely-acclaimed as one of the best ballparks in the league with its state-of-the-art design and breathtaking views. However, before moving to AT&T Park in 2000, the Giants played their home games in Candlestick Park (from 1960—2000).

D. The Territorial Dispute Between the A’s and Giants

In the late 1980’s, the Giants were hoping to build a stadium in the South Bay Area and the Giants then requested that MLB approve expansion of their territory into Santa Clara and Monterey Counties. Giants then-owner Bob Lurie had declared Candlestick Park "unfit for baseball" and engaged in what proved to be a failed campaign for a new ball park in San Francisco. After considering new stadium sites on the Peninsula and in the South Bay, the Giants sponsored a ballot measure to build a new stadium in Santa Clara. The Santa Clara voters summarily rejected that measure.

In 1990, in a final effort to keep the Giants in the Bay Area, Giants owner Bob Lurie pursued a new stadium in San Jose. However, the Giants faced territorial restrictions under MLB’s Constitution, which expressly limited the Giants to San Francisco and San Mateo Counties. In order to overcome these restrictions, the Giants requested that MLB approve expansion of their territory into Santa Clara and Monterey Counties. As part of his request, Mr. Lurie reached out to then-A’s owner Walter Haas. Over a handshake, Mr. Haas consented to the Giants’ relocation to San Jose. According to an Oakland A’s press release, Mr. Haas never granted the Giants an exclusive right to Santa Clara County, only his consent to pursue relocation of the Club to Santa Clara County in 1990. On June 14, 1990, MLB unanimously approved this expansion.

Commenting on this gentlemen’s agreement, Baseball Commissioner Allan Huber "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 didn’t feel it was permission in perpetuity."²² Indeed, the MLB recorded minutes reflect that the San Francisco Giants were granted the Santa Clara County operating territory subject to them relocating to Santa Clara. Ultimately, like the voters in San Francisco and Santa Clara before them, San Jose voters rejected the Giants’ proposal for a taxpayer-funded stadium both in 1990 and again in 1992. After rejection by the voters in San Jose, the Giants abandoned any interest in relocating to San Jose, and set their sights on selling the Club and moving to Tampa Bay, Florida. In 1992, after reaching a deal to relocate to Tampa Bay, by a 9—4 vote, MLB rejected the Florida deal and the Giants remained in San Francisco. The Giants eventually sold to a new ownership group and obtained private financing for the 2000 construction of AT&T Park in San Francisco’s China Basin. Notably, this new stadium was closer to the A’s home stadium than Candlestick Park.

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While the Giants were unable to successfully obtain a vote to move into the County of Santa Clara, the return of the County of Santa Clara to its original "operating territory" status under the MLB Constitution was never formally accomplished.

E. Bringing Baseball to San Jose

As early as 2004, Baseball San Jose, a community organization promoting relocation of the Athletics to San Jose, lobbied the City of San Jose to authorize a new stadium in San Jose to lure the Athletics. San Jose is the tenth largest city in the United States and is the urban center of the Silicon Valley. By population, San Jose is significantly larger than San Francisco. In October 2004, San Jose and the San Jose Redevelopment Agency ("RDA") began studying the potential for developing a ballpark in the Diridon Station area. That process culminated in a ballpark project on approximately 13.36 acres in San Jose, with a seating capacity of 32,000.

In 2005, investors led by John Fischer and Lew Wolff purchased the Athletics. Faced with abysmal attendance and an old stadium in Oakland, Wolff pursued a move to the South Bay. From 2006 to 2009, with MLB’s support, the Athletics attempted to build CISCO Field in Fremont, CA. As it became clear Fremont would not approve the stadium, Commissioner Selig wrote Mr. Wolff indicating that the Athletics had the right to "discuss a ballpark with other communities,"²³ e.g., San Jose.

A 2009 Economic Impact Analysis prepared by Conventions Sports and Leisure International ("CSL") for the RDA detailed the economic benefits of the proposed Athletics stadium in San Jose ("CSL Study").²⁴ The CSL Study provided estimates of the quantifiable impacts that would be generated by an Athletics stadium in San Jose, including: (1) $96 million in new net direct spending in San Jose during a three year construction period; (2) $558,000 in sales tax revenues to the City over the three year construction period; (3) 980 jobs supported annually due to ballpark development; (4) $82.9 million in new net annual direct spending in San Jose following construction, with a thirty-year present value of $1.8 billion; (5) $130 million ballpark-produced annual net new output in the City; and (6) $1.5 million per year in net new tax revenues would be generated for San Jose’s General Fund, and more than $3.5 million per year for other local agencies. The net present value of the City tax revenues generated by the ballpark over a thirty-year and fifty-year period is estimated to be approximately $31.2 million and $42.0 million, respectively. Local hotels, restaurants, stores, and night spots would benefit, with the average ballpark attendee anticipated to spend $47 at businesses outside of the stadium.²⁵

Because of the MLB Constitution, the relocation of the Oakland Athletics to San Jose would purportedly place them within the "operating territory" of the San Francisco Giants Club, and therefore subject to application of Article VIII, Section 8 of the MLB Constitution. The Giants have taken the position that the 1990 consent by the Athletics

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to allow the Giants to relocate to San Jose barred the Athletics from moving to San Jose in perpetuity. In March 2009, Commissioner Selig appointed a special Relocation Committee to evaluate the Bay Area territorial issues.

On March 1, 2012, the Oakland Athletics issued a statement "regarding A’s and Giants sharing Bay Area territory," containing the following points: (a) Of the four two-team markets in MLB, only the Giants and Athletics do not share the exact same geographic boundaries; and (b) the Athletics "are not seeking a move that seeks to alter or in any manner disturb MLB territorial rights." Instead, the Athletics "seek an approval to create a new venue that our organization and MLB fully recognize is needed to eliminate [ ] dependence on revenue sharing."²⁶

In 2010, the San Jose City Council unanimously approved an environmental impact study ("EIS"). Upon approval of the EIS, San Jose Mayor Chuck Reed called for a public vote on whether the Athletics could purchase land and build a new stadium for the Athletics in San Jose. However, at Commissioner Selig’s request, Mayor Reed delayed the vote pending the MLB Relocation Committee’s determination of the A’s—Giants territorial dispute.

On September 10, 2010, through the efforts of the Silicon Valley Leadership Group, a letter from seventy-five of Silicon Valley’s leading CEOs was sent to MLB urging Commissioner Selig to approve the Athletics’ move to San Jose.

On November 8, 2011, the San Jose City Council executed an option agreement with the Athletics Investment Group (the "Option Agreement"). The Option Agreement granted the Athletics a two year option (with an opportunity to extend for an additional year) to purchase six parcels located in the Diridon Area of San Jose to build a new stadium for a purchase price of $6,915,221 (the "San Jose Stadium Property").²⁷ In exchange for the option to purchase these six properties from the JPA, the Athletics agreed to pay $50,000 for the two year option, with the authority to extend the option term by one year for an additional $25,000.²⁸

On December 2, 2011, Stand For San Jose (a coalition group backed by the San Jose Giants to block the Athletics relocation to San Jose) filed a civil action under the California Environmental Quality Act ("CEQA")²⁹ against the City of San Jose, the San Jose Redevelopment Agency, and the Athletics, among others, in Santa Clara Superior Court.³⁰

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As the years dragged on, the MLB Relocation Committee’s activities remained shrouded in secrecy. Commissioner Selig issued a directive that the A’s and the Giants were prohibited from discussing any aspect of the dispute in public. At the January 2012 owners’ meetings, Commissioner Selig said the situation was on the "front burner."³¹ On May 16, 2013, Commissioner Selig said the MLB Relocation Committee "is still at work."³² As of the writing of this article, the Relocation Committee has yet to issue any report or recommendation that is publicly available. Commenting on the controversy, Commissioner Selig stated: "Wolff and the Oakland ownership group and management have worked very hard to obtain a facility that will allow them to compete into the 21st century . . . . The time has come for a thorough analysis of why a stadium deal has not been reached. The A’s cannot and will not continue indefinitely in their current situation."³³ According to MLB’s Case Management Statement in the underlying litigation, Commissioner Selig formally notified the Athletics’ ownership on June 17, 2013 that its relocation proposal was not satisfactory.³⁴

Despite MLB’s refusal to approve the move, the Athletics still desire to move forward with the relocation to San Jose and construction of the stadium. When the original Option Agreement expired, San Jose agreed to a new Option and Purchase and Sale Agreement with the Athletics Investment Group. The 2014 Option Agreement provides the A’s with rights to purchase the property for up to seven years for a purchase price of $7 million. The 2014 Option Agreement also is subject to a CEQA action in Santa Clara Superior Court, Case No. 1-14-CV-274088, filed December 4, 2014.

F. Procedural History

On June 18, 2013, San Jose filed its case against MLB in the United States District Court, Northern District of California.³⁵ The case was assigned to the Honorable Ronald M. Whyte. The Complaint alleged both federal claims under the federal antitrust laws and California state law claims, including claims for tortious interference of the Option Agreement.³⁶ On October 4, 2013, the District Court heard MLB’s motion to dismiss. On October 11, 2013, Judge Whyte denied the motion to dismiss as to the California state law interference claims for damages, but granted the motion to dismiss as to the Sherman Act claims and the state law claims for violation of the Cartwright Act and for

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unfair competition.³⁷ On December 21, 2013, Judge Whyte dismissed without prejudice to refiling in the appropriate state court the two remaining tortious interference claims. On January 23, 2014, San Jose filed a notice of appeal. The case was argued before a panel of the Ninth Circuit Court of Appeals on August 12, 2014, and the panel entered an order and opinion on January 15, 2015 upholding the lower court decision.³⁸ Following entry of the orders dismissing the City of San Jose’s state and federal antitrust action, the San Jose City Council unanimously agreed that an appeal from the 9^th Circuit’s decision should be taken to the United States Supreme Court.

II. THE SCOPE AND REACH OF "THE BUSINESS OF BASEBALL’S" IMMUNITY FROM COMPETITION LAWS

Professional baseball’s exemption from the reach of the federal antitrust laws had an inauspicious launch in a 1922 opinion of the U.S. Supreme Court in a case involving baseball clubs’ ability to restrict mobility of their contracted players. The case was decided on a then hotly debated issue of the proper reach of the relatively new Sherman Antitrust Act. The basis for the Court’s holding—that baseball was a merely local business activity and therefore outside the reach of the Sherman Act because the challenged conduct was not in interstate commerce—was subsequently overruled by the Supreme Court.³⁹ Notwithstanding the reversal of the legal foundation for the case, and therefore the exemption, the Supreme Court failed to correct its error in two subsequent cases.⁴⁰The Court is not alone in taking blame for the continuation of this anomalous ruling; Congress has passed up multiple, begged-for opportunities to align professional baseball’s conduct with national competition policy reflected in the Sherman Act. Thus, neither Congress nor the United State Supreme Court have been able to articulate a coherent theory of why professional baseball should alone among professional sports (and most of the United States economy) be exempt from national competition laws. Instead, the three Supreme Court cases’ creation, and then failure to fix this legal and conceptual anomaly, have spawned dozens of inconsistent lower court cases that have attempted to understand the purpose and scope of the exemption. The final straw in the twisted history of the "baseball exemption" came when Congress, in 1998, passed legislation that imposed antitrust norms on the player employment aspects of the largely undefined "business of baseball" but refused to either abrogate the judicially developed exemption or codify it into federal antitrust law.⁴¹ This is the confused landscape into which the lower courts waded in the City of San Jose v. MLB litigation.

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A. The Federal Baseball Case

In 1922, the United States Supreme Court decided to address the issue of whether the provisions of the Sherman Act⁴² could reach the activities of professional baseball clubs. At issue was the baseball leagues’ structure and practices of reserving players’ contracts exclusively for the baseball clubs. One club, the Federal Baseball Club of Baltimore, sued under the Sherman Act, claiming that the leagues conspired to violate the antitrust laws, and it was initially successful in having summary judgment entered in its favor. The Court of Appeals for the District of Columbia, however, disagreed and held that the activities of the leagues were not within the Sherman Act.⁴³ The United State Supreme Court agreed with the Court of Appeals, holding, first, that baseball was a business and that "[t]he business is giving exhibitions of base ball, which are purely state affairs."⁴⁴ Further, the Court held that the business of baseball was not conducted or engaged in interstate commerce and that any interstate activities of the clubs were merely incidental to the state exhibitions and therefore "would not be called trade or commerce in the commonly accepted use of those words."⁴⁵ The Supreme Court concluded that "the restrictions by contract that prevented the plaintiff from getting players to break [the reserve system] and the other conduct charged against the defendants were not an interference with commerce among the States."⁴⁶

B. The Progeny of Federal Baseball Case—A "Trilogy" of U. S. Supreme Court Decisions

Thirty years after the Federal Baseball case was decided, the Supreme Court addressed the continuing vitality of professional baseball’s immunity from claims under the Sherman Act in the case of Toolson v. New York Yankees, Inc.⁴⁷ The Court, in a per curiam opinion, stated that since Federal Baseball was decided:

Congress has had the ruling under consideration but has not seen fit to bring such business under these laws by legislation having prospective effect. The business has thus been left for thirty years to develop, on the understanding that it was not subject to existing antitrust legislation. The present cases ask us to overrule the prior decision and, with retrospective effect, hold the legislation applicable. We think that if there are evils in this field which now warrant application to it of the antitrust laws it should be by legislation. Without re-examination of the underlying issues, the judgments below are affirmed on the authority of [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 law.⁴⁸

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Put in proper context, Toolson is unusual. First, even though the Supreme Court in Federal Baseball created the baseball exemption, the Toolson Court made it incumbent upon Congress to affirm or reject the exemption’s continuing viability. Failing Congressional action, the Toolson Court inferred congressional acquiescence in the holding. This approach by the Toolson Court has been attacked for two primary reasons: First, a great deal of federal antitrust law is " judge-made law" as the statutes are very general and courts are required to define the scope and meaning of the broad statutory provisions.⁴⁹ Second, the "congressional inaction" doctrine has largely been abandoned by more analytically sound theories of interpretation of a lack of congressional response to a Supreme Court decision.⁵⁰

The Toolson Court also expressed concern about the "retrospective effect" on baseball if the exemption was suddenly overturned. This concern has been met with skepticism because federal courts have considerable experience defining retroactive application of new judicial rulings.⁵¹ In fact, contrary to dicta in Toolson, the Federal Baseball decision was not predicated on finding that "Congress had no intention of including the business of baseball within the scope of the federal antitrust law."⁵² Rather, the Federal Baseball ruling was predicated on the then-Supreme Court’s analysis about the reach of the Commerce Clause; the core holding of the case and one that was subsequently reversed in the Flood case.

In 1972, the Supreme Court revisited the holding in Federal Baseball and professional baseball’s reserve clause in Flood v. Kuhn.⁵³ Curt Flood, an All-Star professional baseball player, was traded from the St. Louis Cardinals to the Philadelphia Phillies without his knowledge or permission. Such a trade was possible under the contracts offered by all MLB Clubs to players. Flood insisted on the right to sign a new contract with any team

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as a "free agent."⁵⁴ The then-Commissioner of Baseball, Bowie Kuhn, denied Flood’s request and Flood sued claiming that Major League Baseball, the two major leagues and the major league teams had violated, inter alia, the Sherman Act. The District Court dismissed Flood’s antitrust claims and that ruling was affirmed by the Second Circuit Court of Appeals.⁵⁵ The U. S. Supreme Court affirmed the dismissal of all Flood’s claims but on grounds different than those in Federal Baseball.

The Flood Court, reversing the holding in Federal Baseball, held that "professional baseball is a business and it is engaged in interstate commerce."⁵⁶ Professional baseball was finally recognized as an economic activity that is in and affects interstate commerce. However, the Court went on to hold that Congress’s inaction for "a half a century" reflected a Congressional intention for baseball to remain outside the scope of antitrust laws.⁵⁷ Despite describing the baseball exemption as an "aberration," the Court held that "the aberration is an established one . . . that has been with us now for half a century, one heretofore deemed fully entitled to the benefit of stare decisis, and one that has survived the Court’s expanding concept of interstate commerce. It rests on recognition and an acceptance of baseball’s unique characteristics and needs.⁵⁸

The Court determined that Congress has had "no intention to subject baseball’s reserve system to the reach of the antitrust statutes" and that this intentional inaction "has been deemed to be something other than mere congressional silence and passivity."⁵⁹The Flood Court proceeded to hold that the protection afforded to the reserve system could not be subject to an action under federal antitrust laws.

There were notable anomalies created by the Flood decision. First, while the Flood Court struck down the core holding of Federal Baseball—that baseball was a purely local activity not affecting interstate commerce—it concluded that congressional inaction to correct the erroneous decision compelled its decision that the exemption remained viable. But for the "congressional inaction" holding, the Court would have held that if the business of professional baseball was in interstate commerce, then, barring some other

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exemption or immunity, collusive activity by the leagues and clubs would fall within the reach of the antitrust statute. Second, the Court did not perform any full-blown antitrust analysis of why the reserve clause was pro-competitive or why the antitrust laws had not been violated by MLB’s treatment of Flood’s request. Instead, the Court alluded to "baseball’s unique characteristics and needs"⁶⁰ but without ever describing them and attempting to balance them against the goals and purposes of the Sherman Act. Furthermore, in cases involving other professional sports where the antitrust exemption was found not to apply to team and league conduct, the Court had reiterated the ongoing viability of the baseball exemption, but failed to articulate any reason for this disparity in treatment.⁶¹

C. Lower Court Treatment of the Baseball Exemption

The treatment of the baseball exemption in the lower courts has been similarly unsettled and, at times, incomprehensible.⁶² While the Baseball Trilogy (the Supreme Court decisions in Federal Baseball, Toolson, and Flood) all involved the reserve (and related personnel) system, many cases have involved other aspects of the "business of baseball," including: (1) the scope of the baseball exemption with respect to personnel issues and ancillary activities; and (2) clubs location and re-location decisions. Some of these cases have construed the baseball exemption broadly; others have given the exemption a narrow construction.⁶³

With respect to personnel issues and ancillary activities, the lower courts have held the following issues to be subject to the antitrust laws: a concessioner’s long-term, exclusive contract to provide concessions for a professional baseball team;⁶⁴ agreements to broadcast baseball games;⁶⁵ and acts of discrimination against a female umpire.⁶⁶ In determining that the exemption does not apply to claims of discrimination by a female minor league umpire, one court reasoned that "the baseball exemption does immunize baseball from antitrust challenges to its league structure and its reserve system, [but does not] provide baseball with blanket immunity for anticompetitive behavior in every context in which it operates."⁶⁷ In the cases where the baseball exemption was found not to apply, the courts have analyzed whether the allegedly illegal conduct was related to,

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but not an essential aspect, of the business of baseball. If the conduct is not integral to or an essential aspect of baseball, then it was not to be covered by the exemption.⁶⁸

Courts have inconsistently applied the baseball exemption to alleged violations of the federal antitrust laws stemming from leagues’ refusal to permit owners to locate their teams in desired venues. For example, Piazza v. Major League Baseball⁶⁹ involved efforts to relocate the San Francisco Giants to Tampa Bay, Florida. The district court concluded that the Flood Court "stripped from Federal Baseball and Toolson any precedential value those cases may have had beyond the particular facts there involved, i.e., the reserve clause."⁷⁰ The Florida Supreme Court, in a case involving the Florida Attorney General’s efforts to force the league to permit the same investors’ group to relocate the Giants to Tampa Bay, applied the Piazza decision and upheld the Attorney General’s efforts to force the MLB to disclose information.⁷¹

Yet other cases involving the Giant’s relocation efforts upheld applicability of the baseball exemption when MLB rejected the Giants’ efforts. A District Court in Florida refused to apply the decisions in Piazza case and the Florida Supreme Court decision in Butterworth, holding that the Federal Baseball decision controlled and the exemption protected Major League Baseball from antitrust lawsuits.⁷²

Several cases decided after Flood addressed the scope and applicability of the baseball exemption in situations involving player contracts and the reserve system. In one case, the Seventh Circuit Court of Appeals addressed the ability of a club to assign its rights in three players’ contracts to other teams. The Seventh Circuit concluded that the Baseball Trilogy "intended to exempt the business of baseball, not any particular facts of that business, from the federal antitrust laws."⁷³ However, this appellate court opinion, like the Ninth Circuit Court of Appeals decision in City of San Jose, gave a broad reading to the scope of the exemption but these holdings have been contradicted by other court decisions and scholarly opinion.⁷⁴ Indeed, it is fair to conclude that the lower courts have paid considerable deference to the Supreme Court’s decisions in Federal Baseball, Toolson and Flood, but they do so without conviction and without a clear sense of the fundamental reasoning behind the exemption.⁷⁵

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D. The Curt Flood Act of 1998

Following the Supreme Court’s decision in the Flood case, and a players strike in 1994-1995, Congress was prompted into action and passed the Curt Flood Act of 1998.⁷⁶ The Flood Act provides in section (a):

Subject to subsections (b) and (d) of this section, the conduct, acts, practices, or agreements of persons in the business of organized professional major league baseball directly relating to or affecting employment of major league baseball players to play baseball at the major league level are subject to the antitrust laws to the same extent such conduct, acts, practices, or agreements would be subject to the antitrust laws if engaged in by persons in any other professional sports business affecting interstate commerce.⁷⁷

However, while extending the reach of the federal antitrust laws to employment-related issues in major league baseball, the Flood Act goes on in section (b) to provide: "[n]o court shall rely on the enactment of this section as a basis for changing the application of the antitrust laws to any conduct, acts, practices or agreements other than those set forth in subsection (a)."⁷⁸ To make clear the limited reach of the Flood Act, it also states that the Act "does not create, permit, or imply a cause of action by which to challenge under the antitrust laws, or otherwise apply the antitrust laws to", among other things, (1) minor leagues and minor league reserve clauses; (2) franchise relocation or expansion, franchise ownership issues, or ownership transfers.⁷⁹ Thus, a fair reading of the Flood Act shows Congress intended to peel back the scope of the court-created baseball exemption only with respect to the "business of organized professional major league baseball directly relating to or affecting employment of major league baseball players,"⁸⁰ but not to any other aspect of professional baseball. The Flood Act fails to address exactly what conduct, activities, practices, and agreements are within (or outside) the baseball exemption. The legislative history—stating the Act "is intended to have not effect other than to clarify the status of major league players under the antitrust laws.. .the law will be the same after passage of the Act as it is today"⁸¹—does not materially resolve the lack of clarity over the scope and reach of the baseball exemption.

Following the Flood decision and the subsequent passage of the Curt Flood Act, questions remain as to what is the net effect of those two pronouncements—one legislative and the other judicial—on the continuing efficacy of the baseball exemption. Do they simply extend the reach of the antitrust laws only to the employment issues created by the reserve system—including the free agent rights of players—or do they articulate a broad and all-encompassing exemption from the antitrust laws for all things involved in baseball, including the farm system, employment of umpires, team relocation

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and collateral activities?⁸² The Ninth Circuit in the City of San Jose case concluded that the baseball exemption remains unchanged, that the "business of baseball" is not limited to the reserve system, and that the Curt Flood Act affirmatively exempts MLB’s decisions on team location and relocation. Those debatable findings are addressed below.

E. Antitrust in Other Professional Sports

Perhaps the greatest insight into the mischief of the baseball exemption is the rigorous application of the antitrust laws and national competition policy to all other major league sports while baseball remains immune. What is so special or unique about professional baseball that would justify such a glaring constraint on national competition policy in one narrow area of the economy?

Some notable examples of federal antitrust policy as a principled constraint on anticompetitive activity by other sports’ leagues and teams are:

• Striking down a National Football League rule that required unanimous approval of all owners to permit a team to relocate to the home territory of another team.⁸³
• Finding that the NFL entered into a boycott of players who previously played in a competitor league.⁸⁴
• Holding that the concerted action of NFL’s teams to cooperatively license their intellectual property rights in, for example, branded apparel was subject to scrutiny under the Sherman Act.⁸⁵
• Applying the Sherman Act’s rule of reason analysis to a PGA rule that restricted members from playing in non-tour events.⁸⁶

Without question, the application of federal antitrust laws to professional sports has enhanced the success of those sports by ensuring that the benefits of market-based economics guide them. Can the same be said of major league baseball? Courts have recognized that sports leagues need latitude in articulating rules of competition because such rules are necessary if there is to be a sport at all; but the antitrust laws have been

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used to ensure that the articulation and enforcement of such rules is not overly broad.⁸⁷Further, the antitrust laws have forced professional sports leagues to have valid and narrowly tailored polices for relocation of team franchises rather than fiat by the league office or cartel-like approval of competing owners.⁸⁸ Would an identical application of the federal antitrust laws to activities of MLB and the Clubs have a similar competition-enhancing effect?

III. WHY THE U.S. SUPREME COURT SHOULD ABROGATE BASEBALL’S EXEMPTION FROM OUR NATION’S COMPETITION LAWS

There are several reasons why the United States Supreme Court should finally address the policy implications and continuing utility of the lingering vestige that is the exemption for "the business of baseball." The following sections address the most substantive reasons why the Court should grant certiorari and hear the City of San Jose case.

A. Neither Stare Decisis Nor Congressional Inaction Require Affirmation of the Baseball Exemption

Two prevalent arguments in support of maintenance of the baseball exemption are: (1) the Court has invited Congress to legislate in this area and, because Congress has failed to do so, courts should interpret such inaction as affirmation of Federal Baseball’s exemption; and (2) the fundamental doctrine of stare decisis requires that the Supreme Court’s decisions creating and continuing the baseball exemption should be honored until the Court reverses or distinguishes its judicially created exemption. Neither argument is particularly persuasive when viewed in a contemporary context

1. Application of Doctrine of Stare Decisis

The history of the baseball exemption has been marked by many calls for either deference to Congress or deference to the doctrine of stare decision. The Toolson Court suggested that, since the baseball exemption had been in existence for 30 years, the decision to extend or overrule the exemption created in Federal Baseball should be made by Congress. Remarkably, this holding was reaffirmed in Flood v. Kuhn. Deference to Congressional action is counterintuitive since the exemption was created by the Supreme Court in the first instance. Why should it be the sole province of the Congress to correct errors made by the Supreme Court? Given the Court’s deference to Congress to codify or overrule the baseball exemption, can continuation of the baseball exemption be justified on the basis of judicial adherence to past decisions on the baseball exemption through the doctrine of stare decisis?

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The Supreme Court has, on occasion and for proper reasons, reviewed longstanding precedent and reversed or modified its prior holdings to conform to modern circumstances. An important contemporary example is Leegin Creative Leather Products, Inc. v. PSKS, Inc.⁸⁹, in which the Supreme Court overruled a 96-year old ruling that held that vertical minimum price fixing is illegal per se under the Sherman Act.⁹⁰ The Court granted certiorari to determine if its 1911 holding in the Dr. Miles case should be reversed or modified in light of substantial criticism from many antitrust commentators. In particular, the Court considered criticism by economists and lawyers who argued that the economic effects of minimum resale price maintenance arrangements indicated that such arrangements were more likely pro-competitive and that the rule of presumptive illegality was inappropriate applied to this type of commercial restraint. After a comprehensive review of the post-Dr. Miles literature on these price arrangements, the Court held: "[W]e think that were the Court considering the issue as an original matter, the rule of reason, not the per se rule of unlawfulness, would be the appropriate standard to judge vertical price restraints."⁹¹ In determining whether the Dr. Miles case was entitled to deference under the doctrine of stare decisis, the Leegin Court concluded: "Stare decisis is not as significant in this case, however, because the issue before us is the scope of the Sherman Act. From the beginning the Court has treated the Sherman Act as a common-law statute.⁹²

The Leegin Court’s consideration of the prudential constraints of stare decisis included the notion that "the fact that a decision has been ‘called into serious question’ justifies our reevaluation of it."⁹³ According to the Court, the need to review and overturn prior decision is relevant where subsequent decisions of the Court have "undermined their doctrinal underpinnings" of the longstanding rule.⁹⁴ Applying the Leegin Court’s reasoning to the Baseball Trilogy, it is clear that the Court itself has "called into serious question" the continuing need for and the logical integrity of the baseball exemption⁹⁵ and thus should review and overturn its prior holdings creating and continuing the baseball exemption.

2. Congressional Inaction

A second argument relates to the implications that courts can derive from the fact that Congress has failed to respond to the call in Toolson for legislative action to either affirm or overrule the holding in Federal Baseball. Congress has previously considered legislation

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addressing the existence and scope of professional baseball’s antitrust exemption.⁹⁶However, there are several plausible explanations as to why Congress never acted upon the Court’s holding in Federal Baseball.⁹⁷ So, the question for the Court is whether Congressional inaction (except the Curt Flood Act, discussed below) in addressing Federal Baseball‘s creation of an exemption from enforcement of national competition policy can plausibly be interpreted as congressional approval of the exemption.⁹⁸ In significant part, this question was addressed in the Supreme Court’s decision in State Oil Co. v. Kahn,⁹⁹ in which the Court overruled its longstanding application of the rule of per se liability to maximum resale price maintenance arrangements.¹⁰⁰ In addressing the argument that the per se rule applied by the Albrecht Court in 1968 had not been reversed or modified by congressional action and, therefore, there was an inference of congressional approval of the ruling, the Supreme Court stated:

In the area of antitrust law, there is a competing interest [against the Court’s reluctance to overrule decisions involving statutory interpretation], well represented in this Court’s decisions, in recognizing and adapting to changed circumstances and the lessons of accumulated experience. Thus, the general presumption that legislative changes should be left to Congress has less force with respect to the Sherman Act in light of the accepted view that Congress ‘expected the courts to give shape to the statute’s broad mandate by drawing on common-law tradition.’ Accordingly, this Court has reconsidered its decision construing the Sherman Act when the theoretical underpinnings of those decisions are called into serious question."¹⁰¹

This analysis suggests that Congressional inaction since 1922 when Federal Baseball was decided does not per force compel a conclusion that Congress has acquiesced in or otherwise approved of the judicially-created exemption for the business of baseball.¹⁰²

The baseball exemption presents the most appropriate candidate for Supreme Court reappraisal in light of the Court’s own protestations about the weak underpinnings of

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the exemption as an expression of the policies of the Sherman Act. The Flood Court, following the full development of the Commerce Clause and the obvious irrelevance of the underpinnings of the Federal Baseball opinion, questioned the inherent purpose of the exemption while pleading for assistance from Congress. Following antitrust cases such as Leegin and Khan, it is the time for the Roberts Court to take up the fundamental issue of why MLB and the Clubs, unlike every other professional sport in America, should be exempt from the national competition policy reflected in the Sherman Act.

B. The Flood Act Does Not Immunize MLB From Antitrust Liability for Anti-competitive Conduct Preventing the A’s Relocation Efforts

The Ninth Circuit decision in City of San Jose provides an unusual interpretation of the Curt Flood Act.¹⁰³ Nearly all commentators and courts interpreting the Flood Act have taken the position that Congress meant what it said in the Act’s "purpose" provision: The purpose for the enactment was to permit major league baseball players to have the same protections under the antitrust laws that are enjoyed by players in all other professional sports and, equally important, to take no steps to increase or reduce the reach of the antitrust laws in professional sports.¹⁰⁴ The legislative history of the Flood Act confirms that its purpose was quite narrow and intended to help end the 1994-95 players’ strike that had crippled professional baseball. Most commentators and courts have taken that statutory language to heart in concluding that the Flood Act did not attempt, and should not be construed to legislatively articulate, a broad antitrust exemption for the business of baseball.¹⁰⁵ However, the Ninth Circuit reached a different conclusion in the City of San Jose case. That panel determined that the Flood Act "withdrew baseball’s antitrust exemption with respect to the reserve clause and other labor issues, but explicitly maintained it for franchise relocation."¹⁰⁶ The Ninth

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Circuit panel attempted to bolster its unique take on the legislative purpose of the Flood Act with the following distinctive analysis:

In an ordinary case, congressional inaction ‘lacks persuasive significance because several equally tenable inferences may be drawn from such inaction.’ But when Congress specifically legislates in a field and explicitly exempts an issue from that legislation, our ability to infer congressional intent to leave the issue undisturbed is at its apex. The exclusion of franchise relocation from the Curt Flood Act demonstrates that Congress (1) was aware of the possibility that the baseball exemption could apply to franchise relocation; (2) declined to alter the status quo with respect to relocation; and (3) had sufficient will to overturn the exemption in other areas. Flood‘s clear implication is that the scope of the baseball exemption is coextensive with the degree of congressional acquiescence, and the case for congressional acquiescence with respect to franchise relocation is in fact far stronger that it was for the reserve clause at issue in Flood itself.¹⁰⁷

Given the clarity and precision of the purposes clause of the Flood Act, it is remarkable that a court has essentially rewritten the legislation to flesh out a full blown version of the exemption that the legislative drafters took great pains to prevent. Without question, the Supreme Court should grant the City of San Jose’s petition for certiorari to clarify this novel interpretation of the scope and meaning of the Curt Flood Act.

C. Abrogation of the Exemption Will Not Unfairly Disadvantage MLB Due to Its Reliance on Its Immunity

The Toolson Court opinion fleetingly suggested that Congressional action was necessary to alter the Federal Baseball holding because MLB and the Clubs had relied on the 1922 decision in building their businesses. There are at least two aspects of this concern: Will prospective application of a reversal of the Professional Baseball rule unfairly affect the past agreements, policies and arrangements implemented by Clubs? Is it unfair to MLB and the Clubs to suddenly change the ground rules of antitrust exemption when MLB has supposedly relied on the exemption for many years?

This precise issue was recently addressed by the Supreme Court in the Leegim Creative Leather Products case. There the Court overruled the 93 year old Dr. Miles decision and held that resale price maintenance agreements between distributors and their dealers or retailers would be analyzed under the rule of reason rather than the per se rule. During that 93-year time period, Congress had passed legislation permitting such restraints if state fair trade laws were enacted in permitting States and then later repealing the exception for state fair trade legislation. Proponents of the rule in the Dr. Miles case had argued that long-time reliance on the holding in Dr. Miles (as well as the intervening Congressional action modifying the holding and then opting not to legislate in the area) warranted continuation of the rule of per se illegality. Disagreeing, the Court held:

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Reliance interests do not require us to reaffirm Dr. Miles. To be sure, reliance on a judicial opinion is a significant reason to adhere to it, especially ‘in cases involving property and contract rights[.]’ The reliance interests here, however, like the reliance interest in Khan, cannot justify an inefficient rule . . . .¹⁰⁸

In considering elimination of the baseball exemption, the Court should ask the essential questions: Has the exemption resulted in anti-competitive conduct, a stifling of innovation, and harm to fans and other consumers? Will MLB and the Clubs be more efficient if they must comply with national competition policy? This is an issue for the Supreme Court to address now.

D. Uniform Application of Federal Antitrust Laws is Appropriate for All Professional Sports

Related aspect to the issue of whether elimination of the exemption is fair to baseball is the question of what will happen to the business of baseball if the protections of the exemption are removed. If the exemption is eliminated, then MLB will be subject to the same antitrust rules that govern the rest of professional sports (and every other business operating in America). How unfair is such an outcome?

The Supreme Court recently visited the issue of antitrust liability for allegedly anticompetitive conduct by professional sport leagues in American Needle, Inc. v. National Football League.¹⁰⁹ The NFL had granted an exclusive licensing arrangement to manufacture NFL team uniforms, equipment, apparel, and headwear.¹¹⁰ American Needle, a longtime headwear manufacturer, sued, claiming the granting of an exclusive arrangement to serve all teams to one manufacturer violated the Sherman Act.¹¹¹ In a unanimous opinion, the Supreme Court rejected the NFL’s argument that the teams were a single entity incapable of conspiring under Section 1. The Court held that the 32 NFL teams cannot be considered a single entity because they are "substantial, independently owned, independently managed business(es)," whose "objectives are not ‘common’" and are therefore not immune from antitrust scrutiny.¹¹² If a similar decision applied to professional baseball, MLB would not be able to engage in concerted activity affecting fans, suppliers, and others without analyzing the competitive aspects of their conduct. While increasing the expense and uncertainty of business decision-making by MLB and its Clubs, removing the exemption would protect consumers and those who do business with the teams.¹¹³

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Overruling the Baseball Trilogy would also require application of the rule of reason to MLB’s decisions on relocation of a Club or, as alleged in the City of San Jose’s case, to engage in a deliberate and manipulative scheme to forestall consideration of the request. Relocation requests present an ideal situation for applying the pro-competition policies of the Sherman Act to cartel decision-making.¹¹⁴ In other sports, the rule of reason has been applied to league decision-making on relocation requests and the result has been very active and competitive markets for team movement and, with it, greater responsiveness to sports fans.¹¹⁵

The Ninth Circuit’s opinion in City of San Jose represents a contrary view. The court states that geographic and territorial restrictions on team mobility "is the league’s basic organizing principle" and that:

Limitations on franchise relocation are designed to ensure access to baseball games for a broad range of markets and to safeguard the profitability—and thus viability—of each ball club. Interfering with franchise relocation rules therefore indisputably interferes with the public exhibit of professional baseball.¹¹⁶

In reality, baseball’s version of "limitations on franchise relocation" has resulted in virtually no requests for franchise relocation being granted while other sports subject to the Sherman Act’s rule of reason have benefited themselves and their fans with expansive growth and innovation. Since 1967, only one MLB team has been permitted to relocate territories while during the same period of time the National Football League, National Basketball League and the National Hockey League collectively saw twenty-two relocation moves.¹¹⁷ Which sports league’s fans are better off?

IV. CONCLUSION

The District Court and Ninth Circuit Court of Appeals opinions in City of San Jose provide an ideal opportunity for the United States Supreme Court to finally address why, if at all, professional baseball, a multi-national, multi-billion dollar business, should not be required to pass the threshold scrutiny provided by the Sherman Act. All other professional sports teams and leagues routinely make important business decisions that affect millions of fans throughout the world and that comply with federal competition policy and law. Why should the antitrust laws not apply to professional baseball? The Ninth Circuit in City of San Jose determined professional baseball does not need to comply with overarching national competition policy, relying on an outdated and discarded Supreme Court decision in Federal Baseball. The Ninth Circuit even went so far as to find that the Curt Flood Act affirmatively immunizes MLB’s location decisions from the reach of the antitrust laws despite the clear statements

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of the Act’s co-sponsors and the President of the United States that "the Act in no way codifies or extends the baseball exemption."¹¹⁸ In fact, Congress has never recognized purportedly broad scope of baseball’s antitrust exemption, with the Flood Act limiting the already narrow exemption to player labor disputes. Moreover, on the issue of franchise relocation, Congress has intimated that to the extent MLB attempts to broaden its limited exemption to franchise relocation, such expansion would be patently inappropriate and in direct contravention of federal antitrust laws.¹¹⁹

The Baseball Trilogy should not be construed to allow MLB carte blanche for all of its actions, especially the decision to prevent a Club from relocating to another city. While perhaps the exemption was historically necessary to protect the reserve clause, that does not mean the exemption should immunize all the decisions of MLB (and the decisions of specific Clubs). When MLB blocks a Club, such as the A’s, from acquiring land, building a ballpark, and relocating the team, that practice should be subject to a proper rule of reason analysis as it is with any other professional sports league.¹²⁰

Because the Baseball Trilogy fails to provide guidance, the Supreme Court needs to determine: (1) whether an exemption still exists; (2) what is the legal basis for the exemption; and (3) what is the scope of that exemption. As part of that analysis, the Supreme Court should find that franchise relocation does not fall within the scope or meaning of baseball’s anomalous exemption. It is clearly time for the Supreme Court to revisit this conflicted area of antitrust law and find MLB subject to the same antitrust scrutiny as other professional sports. The national pastime should be subject to all of our Nation’s laws.

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Notes:

^1. Philip L. Gregory is a Partner in the law firm of Cotchett, Pitre & McCarthy, LLP, in Burlingame, California. He represents the City of San Jose in the antitrust litigation against Commissioner of Major League Baseball, an unincorporated association doing business as Major League Baseball and Allan Huber "But" Selig. Together with Joseph Cochett, Mr. Gregory argued the case before a panel of the Ninth Circuit Court of Appeals and before the District Court. Donald J. Polden is Dean Emeritus and Professor of Law at Santa Clara University where he teaches antitrust law. This article reflects the views of the authors and not necessarily those of Cotchett, Pitre & McCarthy LLP, its attorneys, or its clients.

^2. The Plaintiffs are: (1) the City itself; (2) the entity responsible for winding up the affairs of the dissolved Redevelopment Agency of the City of San Jose; and (3) the joint powers authority formed by the city and the former redevelopment agency. Collectively, these Plaintiffs are referred to herein as "the City of San Jose."

^3. City of San Jose v. Commissioner of Baseball, No. C-13-02181 RMW, 2013 WL 5609346 (N.D. Cal. Oct. 11, 2013), aff’d, No. 14-15139, 2015 WL 118358 (9th Cir. Jan. 15, 2015).

^4. 259 U.S. 200 (1922).

^5. Id. at 208-09.

^6. Flood v. Kuhn, 401 U.S. 258, 282 (1912).

^7. Id. at 286 (emphasis added).

^8. The term "exemption" has been used to describe the status of professional baseball’s immunity from private actions under the federal antitrust law. However, that status was first created, as we discuss in more detail below, by a U.S. Supreme Court decision holding that the regulatory powers of the U.S. Government granted under the Sherman Act could not reach a local activity such as baseball. That decision was made on the state of the law governing the federal government’s constitutional powers to reach conduct not in interstate commerce. The U.S. Supreme Court, in Flood v. Kuhn, subsequently admitted that the interstate commerce holding in its 1922 Federal Baseball case was no longer good law, but the Court thereafter failed to conform its holding to the evolving constitutional case law. Thus, the so-called exemption is really a judicially created immunity from antitrust law liability. Given the history of the Court’s treatment of professional baseball, the distinction between a judicially-created immunity and an "exemption" from the reach of the law is perhaps irrelevant because as long as the Court fails to address baseball’s immunity from federal antitrust law liability, there is no opportunity for definitive analysis of and justification for the immunity. For purposes of this Article, the authors use the conventional description, "exemption" or "business of baseball exemption" to describe this unusual jurisprudence.

^9. Radovich v. Nat’l Football League, 352 U.S. 445, 452 (1951).

^10. Id.

^11. American Bar Association: Section on Antitrust Law, Sports And Antitrust Law i (2014) ("Baseball is the only sport that enjoys immunity from the antitrust laws.").

^12. Stuart Banner, The Baseball Trust: A History of Baseball’s Antitrust Exemption xi (Oxford 2013); see generally Connie Mack & Richard M. Blau, The Need for Fair Play: Repealing the Federal Baseball Antitrust Exemption, 45 Fla. L. Rev. 201 (1993); Samuel G. Mann, In Name Only: How Major League Baseball’s Reliance on its Antitrust Exemption is Hurting the Game, 54 Wm. & Mary L. Rev. 581 (2012); Mitchell Nathanson, The Irrelevance of Baseball’s Antitrust Exemption: A Historical Review, 58 Rutgers L. Rev. 1 (2005); Stephen F. Ross, Reconsidering Flood v. Kuhn, 12 U. Miami Ent. & Sports L. Rev. 169 (Fall 1994/Spring 1995); Morgen A. Sullivan, Note, A Derelict in the Stream of the Law: Overruling Baseball’s Antitrust Exemption, 48 Duke L.J. 1265, 1218-80 (1999) [hereinafter, Sullivan, A Derelict].

^13. This Factual Background Section is taken from the complaint filed on behalf of the City of San Jose.

^14. Complaint, City of San Jose v. Commissioner of Baseball, 2013 WL 5609346 (N.D. Cal. Oct. 11, 2013) (No. 5:13CV02787).

^15. Defendant’s Motion to Dismiss, City of San Jose v. Commissioner of Baseball, 2013 WL 5609346 (N.D. Cal. Oct. 11, 2013) (No. 13-CV-02787-RMW).

^16. City of San Jose v. Commissioner of Baseball, No. C-13-02787 RMW, 2013 WL 5609346 (N.D. Cal. Oct. 11, 2013).

^17. It should be noted that even if the City of San Jose is ultimately able to convince the U.S. Supreme Court to prevent baseball’s exemption from constraining the Oakland A’s choices for relocation, there are several other issues that must be navigated successfully by the City before the A’s are able to relocate, including financing, completion of site requirements, etc. However, the City is thwarted in taking up these political, community and economic steps if their "partner" in the process, the Oakland A’s baseball organization, is prevented from even considering relocation due to action of MLB and its group of owners.

^18. Major League Baseball, Major League Constitution 13, available at http://bizofbaseball.com/docs/MLConsititutionJune2005Update.pdf

^19. Id. at Article V § 2(b)(3).

^20. Id. at Article V § 2(b)(1).

^21. According to the 2010 census, the Giants’ territory includes 4.2 million people; the A’s territory 2.6 million.

^22. Mark Purdy, Giants, A’s Ownership Should Do What’s Right for Baseball, San Jose Mercury News, May 13, 2012.

^23. Associated Press, Selig Pushes For New A’s Ballpark, ESPN MLB (Jan. 14, 2009, 7:48 PM), http://sports.espn.go.com/mlb/news/story?id=3833512

^24. Conventions, Sports & Leisure International, Proposed Major League Ballpark (2009), available at http://dig.abclocal.go.com/kgo/PDF/SJ_EI_Report.pdf.

^25. Id. at i-vii.

^26. Oakland A’s, Statement By Oakland A’s Ownership Regarding A’s and Giants Sharing Bay Area Territory (2012), available at http://oakland.athletics.mlb.com/news/print.jsp?ymd=20120301&content_id=21081248&vkey=pr_oak&c_id=oak.

^27. During this litigation, the Athletics extended the option for a third year.

^28. The validity of the Option Agreement has been challenged in two consolidated suits presently before the California Superior Court for Santa Clara County. Stand For San Jose v. City of San Jose, No. 1-11-CV-214196 (Cal. Super. Ct. filed Dec. 2, 2011), No. 1-13-CV-250312 (filed July 30, 2013).

^29. Cal. Pub. Res. § 21000 et seq.

^30. Stand For San Jose v. City of San Jose, No. 1-11-CV-214196 (Cal. Super. Ct. filed Dec. 2, 2011).

^31. Mark Purdy, A’s Bid to Pursue Ballpark in San Jose is ‘On the Front Burner’ For MLB, San Jose Mercury News, Jan. 12, 2012.

^32. Ronald Blum, MLB Hopingfor Large Replay Expansion in 2014, The Big Story (May 16, 2013, 6:00 PM), http://bigstory.ap.org/article/mlb-hoping-large-replay-expansion-2014.

^33. Susan Slusser, Committee to Look at A’s Situation, SF Gate (Mar. 20, 2009, 12:11PM), http://blog.sfgate.com/athletics/2009/03/30/committee-to-look-at-as-situation/.

^34. MLB has not yet made this June 17, 2013 notice publicly available. For more information on this rejection, see Associated Press, MLB Denied Oakland’s Move to San Jose in June, USA Today (Dec. 8, 2013, 10:44 PM), http://www.usatoday.com/story/sports/mlb/2013/12/08/mlb-denied-oaklands-san-jose-move-request/3914285/.

^35. City of San Jose v. Office of Comm’r of Baseball, No. C-13-02787 RMW, 2013 WL 5609346 (N.D. Cal. Oct. 11, 2013).

^36. Complaint, City of San Jose v. Office of Comm’r of Baseball, 2013 WL 5609346 (N.D. Cal. Oct. 11, 2013) (No. 5:13-CV-02787).

^37. City of San Jose, 2013 WL 5609346.

^38. City of San Jose v. Office of the Comm’r of Baseball, No. 14-15139, 2015 WL 118358 (9th Cir. Jan. 15, 2015).

^39. Flood v. Kuhn, 401 U.S. 258, 282 (1912).

^40. This point was bluntly addressed in Justice Douglas’s dissenting opinion (joined by Justice Brennan) in the Flood case. He referred to the exemption as "a derelict in the stream of law that we, its creator, should remove.’ Flood, 401 U.S. at 288 (Douglas, J., dissenting). Further, he concluded that "[t]here can be no doubt ‘that were we considering the question of baseball for the first time upon a clean slate’, we would hold it to be subject to federal antirust regulation. The unbroken silence of Congress should not prevent us from correcting our own mistakes." Id.

^41. See infra note 16 and accompanying text.

^42. 15 U.S.C. §§ 1, 2.

^43. Nat’l League of Prof’l Baseball Clubs v. Fed. Baseball Club of Baltimore, Inc., 269 F. 681 (D.C. Cir. 1920).

^44. Fed. BaseBall Club of Baltimore, Inc. v. Nat’l League of Prof’l Base Ball Clubs, 259 U.S. 200, 208 (1922).

^45. Federal BaseBall, 259 U.S. at 209.

^46. Id.

^47. 346 U.S. 356 (1953).

^48. Id. at 351.

^49. See Leegin Creative Leather Products v. PSKS, Inc., 551 U.S. 877, 899 (2007) (citations omitted) ("From the beginning the Court has treated the Sherman Act as a common-law statute . . . Just as the common law adapts to modern understanding and greater experience, so too does the Sherman Act’s prohibition on "restraint[s] of trade" evolve to meet the dynamics of present economic conditions. The case-by-case adjudication contemplated by the rule of reason has implemented this common-law approach.").

^50. See infra note 96 and accompanying text.

^51. The Supreme Court is adept at considering various ways of treating new holdings which have prospective and retrospective application issues. See Jill E. Fisch, Retroactivity and Legal Change: An Equilibrium Approach, no Harv. L. Rev. 1055 (1997) (including the use of selective or modified prospectivity of Supreme Court holdings by courts, such as James B. Beam Distillery Co. v. Georgia, 501 U.S. 529 (1991)).

^52. Toolsen, 346 U.S. at 357.

^53. 407 U.S. 258 (1972).

^54. The background of the case made the effect of Major League Baseball’s refusal to permit Flood to sign with another team more pernicious. Flood’s team, the St. Louis Cardinals, had assigned rights to his contract to the Philadelphia Phillies and Flood, an African-American, expressed concerns about playing the rest of his career in a community known for racism and hostility to African-Americans. Flood, with the support of the Players’ Union, petitioned Commissioner Bowie Kuhn for permission to sign with another team, but Kuhn merely polled the team owners and discerned that they were opposed to Flood’s request to sign with another team. See Martin M. Tomlinson, The Commissioner’s New Clothes: The Myth of Major League Baseball’s Antitrust Exemption, 20 St. Thomas L. Rev. 255, 267-68 (2008) [hereinafter Tomlinson, The Commissioner’s New Clothes].

^55. Flood v. Kuhn, 443 F.2d 264 (2d Cir. 1971).

^56. Flood, 407 U.S. at 282.

^57. Id. The Court went on to write, "We continue to be loath, 50 years after Federal Baseball and almost two decades after Toolson, to overturn those cases judicially when Congress, by it positive inaction, has allowed those decisions to stand for so long and, far beyond mere inference and implication, has clearly evinced a desire not to disapprove them legislatively." Id. at 283-84. The Flood Court’s majority opinion generated biting dissenting opinions from Justices Douglas and Marshall. See supra note 40.

^58. Flood, 407 U.S. at 282.

^59. Id. at 283.

^60. Id. at 282.

^61. See, e.g., Radovich v. Nat’l Football League, 352 U.S. 445, 452 (1951).

^62. See Stuart Banner, The Baseball Trust: A History of Baseball’s Antitrust Exemption 242-49 (Oxford 2013).

^63. See Tomlinson, The Commissioner’s New Clothes, supra note 54, at 211-282; Colleen Ganin, Note, With San Jose at Bat, Federal Baseball is in the Bottom of the Ninth, 56 Ariz. L. Rev. 1129, 1149-54 (2015) [hereinafter Ganin, San Jose at Bat].

^64. Twin City Sportservice, Inc. v. Charles O. Finley & Co, Inc., 616 F.2d 1291 (9th Cir. 1982).

^65. See, e.g., Henderson Broadcasting Corp. v. Houston Sports Ass’n, Inc., 541 F. Supp. 263 (S.D.Tex. 1982).

^66. Postema v. Nat’l League of Prof’l Baseball Clubs, 199 F. Supp. 1415 (S.D.N.Y. 1992).

^67. Id. at1489.

^68. City of San Jose v. Commissioner of Baseball, No. C-13-02787 RMW, 2013 WL 5609346 (N.D. Cal. 2013).

^69. 831 F. Supp. 420 (E.D. Pa. 1993).

^70. Id. at 436.

^71. Butterworth v. Nat’l League of Prof. Baseball Clubs, 644 So. 2d 1021 (Fla. 1994).

^72. Major League Baseball v. Butterworth, 181 F. Supp. 2d 1316, 1330 (N.D. Fla. 2001).

^73. Charles O. Finley & Co. v. Kuhn, 569 F.2d 527, 541 (7th Cir. 1978); see also, Prof’l Baseball Schools & Clubs, Inc. v. Kuhn, 693 F.2d 1085 (11th Cir. 1982); Portland Baseball Club, Inc. v. Kuhn, 491 F.2d 1101 (9th Cir. 1974) (per curiam) (writing only one sentence in dismissal of antitrust claims and citing Flood).

^74. See Tomlinson, The Commissioner’s New Clothes, supra note 54, at 271-77 (collecting and describing cases and com mentar y).

^75. See Tomlinson, Commissioner’s New Clothes, supra note 54, at 271-84 (describing the significant range of lower court opinions broadly viewing the reach of the exemption and narrowly construing the scope of the exception).

^76. 15 U.S.C. § 26b.

^77. Id. § 26b(a).

^78. Id. § 26b(b).

^79. Id. § 26b(b)(1), (3).

^80. Id. § 26b(a).

^81. 145 Cong. Rec. S9621 (daily ed. July 31, 1998) (statement of Sen. Hatch, a co-sponsor). See also, Tomilson, The Commissioner’s New Clothes, supra note 54, at 286-88.

^82. Tomilson, The Commissioner’s New Clothes, supra note 54, at 271-72 (describing the "ample support" for the view that "the antitrust exemption applies only to the reserve system in professional baseball and nothing else").

^83. Los Angeles Mem’l Coliseum Comm’n v. Nat’l Football League, 726 F.2d 1381 (9th Cir. 1984).

^84. Bowman v. Nat’l Football League, 402 F. Supp. 754 (1975).

^85. American Needle, Inc. v. Nat’l Football League, 560 U.S. 183 (2010). Justice Stevens, writing for a unanimous Court, held, "The fact that NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate in the production and scheduling of games, provides a perfectly sensible justification for making a host of collective decision. But the conduct at issue in this case is still concerted activity under the Sherman Act that is subject to [section] 1 analysis." Id. at 202-03.

^86. Toscano v. PGA Tour, Inc., 201 F. Supp. 2d 1106 (E.D. Cal. 2002).

^87. See, e.g., Denver Rocket’s v. All-Pro Management, Inc., 325 F. Supp. 1049 (C.D. Cal. 1971) (providing an example of a Sherman Act action against a league rule that prohibited an otherwise qualified player from negotiating with any NBA team until four years after his high school graduation, with no exception).

^88. See, e.g., Los Angeles Mem’l Coliseum Comm’n, 726 F.2d 1381; Nat’l Basketball Ass’n v. SDC Basketball Club, Inc., 815 F.2d 562, 568 (9th Cir. 1987) ("Franchise movement restrictions are not invalid as a matter of law. . .[A]ntitrust analysis under Raiders I indicates that the question of what restraints are reasonable is one of fact.").

^89. 551 U.S. 877 (2007).

^90. Id. at 889 (overruling Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911).

^91. Id. at 899.

^92. Id. (citing State Oil Co. v. Khan, 522 U.S. 3, 20 (1997)) ("[T]he general presumption that legislative changes should be left to Congress has less force with respect to the Sherman Act."). Professor William Eskridge, Jr., a noteworthy scholar of legislative and statutory analysis, stated that "Flood v. Kuhn is an almost comical adherence to the strict rule against overruling statutory precedents, particularly considering that the Sherman Act developed essentially through a common law process." William N. Eskridge, Jr., Overruling Statutory Precedents, 76 Geo.L.J. 1361, 1381. (1988) [hereinafter, Eskridge, Overruling].

^93. Leegin Creative Leather Products, 551 U.S. at 900 (citing Kahn, 522 U.S. at 21).

^94. Id. (citing Dickerson v. United States, 530 U.S. 428, 443 (2000)).

^95. See supra note 58 and accompanying text.

^96. The Supreme Court in Flood found that, in the 19 years between its decisions in Toolson and Flood, "more than 50 bills [were] introduced in Congress relative to the applicability or nonapplicability of the antitrust laws to baseball." Flood v. Kuhn, 407 U.S. 258, 281 (1972). In the 42 years since Flood, Congress has held 45 hearings on baseball’s antitrust exemption. See, e.g., S. 500, 103d Cong. (1993); H.R. 386, 104th Cong. (1995). These proposed bills would amend the Clayton Act to add that "the antitrust laws shall apply to the business of organized professional baseball."

^97. See Eskridge, Overruling, supra note 92, at 1405-06 (stating that possible explanations include congressional apathy toward the Federal Baseball decision, failure of the formation of a majority congressional group to change the decision, other congressional priorities, and sustained efforts of baseball owners to block any curative legislation). See also, Sullivan, A Derelict, supra note 12, at1278.

^98. For a detailed examination of the application of the positive inaction doctrine to the baseball exemption, see, Sullivan, A Derelict, supra note 12, at 1276-87.

^99. 522 U.S. 3 (1997).

^100. The Court in State Oil Co. v. Kahn overruled its decision in Albrecht v. Herald Co., 390 U.S. 145 (1968), which held that vertical maximum price fixing arrangements were subject to the per se rule rather than the rule of reason analysis.

^101. Kahn, 522 U.S. at 20-21 (citations omitted). See also Leegin Creative Leather Products Inc., v. PSKS, Inc., 551 U.S. 877, 899-900 (2007).

^102. See Sullivan, A Derelict, supra note 12, at 1282-83; Ganin, San Jose at Bat, note 63, at 1142-44.

^103. 15 U.S.C. § 26b.

^104. The Flood Act states: "It is the purpose of this legislation to state that major league baseball players are covered under the antitrust laws (i.e., that major league baseball players will have the same rights under the antitrust laws as do other professional athletes, e.g., football and basketball players), along with a provision that makes it clear that the passage of this Act does not change the application of antitrust laws in any other context or with respect to any other person or entity." Pub. L. 105-297, § 3, 112 Stat. 2824.

^105. Banner, The Baseball Trust, supra note 12, at 246; Tomlinson, The Commissioner’s New Clothes, supra note 54 at 288 ("It seems clear that (a) the Curt Flood Act explicitly applies federal antitrust laws to any surviving remnants of the reserve system, and (b) the Curt Flood Act does not alter the application or non-application of federal antitrust law to any other area of Major League Baseball.") See also, Ganin, San Jose at Bat, supra note 63, at 1148.

^106. City of San Jose v. Comm’r of Baseball, No. 14-15139, 2015 WL 178358, *4 (Jan. 15, 2015). Some commentary supports the Ninth Circuit’s view in the City of San Jose case. See John L. Cooper & Racheal Turner, Major League Baseball is Exempt From the Antitrust Law—Like It or Not, 24 COMPETITION (2015) ("Congress affirmatively carved out employment issues from baseball’s antitrust exemption, but otherwise left ‘the business of baseball’ exempt from federal antitrust laws.") But see Tomlinson, The Commissioner’s New Clothes, supra note 54, at 286 ("The Committee Report certainly makes it clear that it does not view the antitrust exemption, as it applies or does not apply to any aspect of baseball other than employment negotiations between major league players and team owners, to be affected at all by the Curt Flood Act.")

^107. City of San Jose, 2015 WL 178358, at *4 (citations omitted).

^108. Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 906 (2007) (citing State Oil Co. v. Kahn, 522 U.S. 3, 20 (1997)) (other citations omitted).

^109. 560 U.S. 183 (2010).

^110. Id. at 187.

^111. Id.

^112. Id. at 196, 204 (citing Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 771 (1984)).

^113. The Supreme Court has repeatedly held that the fundamental purpose of the antitrust laws is to protect competition and consumers rather than to protect competitors. Leegin, 551 U.S. at 906; Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 338 (1990).

^114. See Michael J. Mozes & Ben Glicksman, Adjusting the Stream? Analyzing Major League Baseball’s Antitrust Exemption After American Needle, 2 Harv. J. Sports & Ent. L. 265, 294 (2011).

^115. See Ganin, San Jose at Bat, supra note 63, at 1164-68.

^116. City of San Jose v. Comm’r of Major League Baseball, No. 14-15139, 2015 WL 178358, at *3 (Jan. 15, 2015). It should be noted that, because the Ninth Circuit was reviewing a decision on a Motion to Dismiss, there was no underlying evidence supporting MLB’s position on the role, if any, of geographic and territorial restrictions on team mobility to professional baseball.

^117. Ganin, San Jose at Bat, supra note 63, at 1155.

^118. Tomilson, The Commissioner’s New Clothes, supra note 54, at 287-88.

^119. See infra note 75 and accompanying text.

^120. See, e.g., Los Angeles Mem’l Coliseum Comm’n v. Nat’l Football League, 726 F.2d 1381, 1391 (9th Cir. 1984) ("Rule of reason used to engage in a ‘thorough investigation of the industry at issue and a balancing of the arrangement’s positive and negative effects on competition.’") (citation omitted).