Baseball's Territorial Lock
California Lawyer

Baseball's Territorial Lock

San Jose challenges MLB's antitrust exemption.

July 2014


illustration by Randy Lyhus

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As baseball's best gear up for the All-Star Game this month, a key off-the-field contest is under way in federal court in California. The city of San Jose and Major League Baseball (MLB) are pitted against each other as San Jose, in an effort to bring the Oakland Athletics south, takes on baseball's 92-year-old exemption to federal antitrust laws. (City of San Jose v. Ofc. of the Comm'r of Baseball, No. 13-2787 (N.D. Cal.), on appeal, No. 14-15139 (9th Cir.).)

"Major League Baseball as a sport emphasizes competition," argues San Jose's lead attorney, Joseph W. Cotchett Jr., of Cotchett, Pitre & McCarthy in Burlingame, in an appellate brief. "Yet Major League Baseball as a business refuses to believe it is subject to the same antitrust rules that apply to all other sports."

Representing MLB is John W. Keker, of Keker & Van Nest in San Francisco, who says, "the Supreme Court has repeatedly enforced that exemption to dismiss claims brought under both federal and state antitrust laws" - so there's no reason for the Ninth Circuit to break with precedent.

Oral arguments are set for August 12, and the Ninth Circuit ruling is almost sure to be appealed to the U.S. Supreme Court, no matter who wins.

At the heart of the case - though not a party to it - are the A's. The scrappy team from Oakland has famously excelled on the cheap. That has not translated to strong attendance - perhaps in part because the team plays in a deteriorating stadium, shared with football's Raiders, that is widely regarded as one of the worst in baseball. The owners have long eyed San Jose as a home where they could play in a new stadium and court more fans and corporate sponsors. The problem is that the San Francisco Giants hold territorial rights to San Jose and the rest of Santa Clara County under MLB's rules. Commissioner Bud Selig created a panel in 2009 to analyze options for a new stadium , but the panel never made public recommendations.

That left San Jose waiting. And waiting. And waiting. "We finally ran out of patience," says San Jose Mayor Chuck Reed. "Major League Baseball had basically done nothing to move it forward for four years, and we didn't have any other route ... than to go to court."

San Jose's legal theory is that MLB territorial rights amount to a market-distribution scheme that would be illegal without the antitrust exemption, which U.S. District Judge Ronald M. Whyte called an "aberration" that makes "little sense." But he ruled that U.S. Supreme Court precedents required him to uphold it. The Ninth Circuit may agree.

San Jose has argued that the exemption applies only to players' labor issues - though most federal courts haven't seen it that way. Puzzling jurists for decades, the exemption dates to the U.S. Supreme Court's decision in Federal Baseball Club of Baltimore v. National League (259 U.S. 200 (1922)). Justice Oliver Wendell Holmes Jr. wrote for the majority that "the business" of "giving exhibitions of base ball" was purely intrastate activity, thus outside Congress's authority under the Constitution's Commerce Clause. The Court later broadened its view of the Commerce Clause and granted Congress more power to regulate economic activity aside from baseball. And in the 1950s it declined to exempt either football or boxing from antitrust laws (see Radovich v. National Football League, 352 U.S. 445, 452 (1957)); United States v. Int'l Boxing Club of New York, 348 U.S. 236, 241 (1955)).

"Baseball is lucky in that it was sued early," says Stuart Banner, a UCLA law professor and the author of a book on baseball's exemption. In fact, it is partly because football must abide antitrust laws that the Raiders managed to leave Oakland for Los Angeles in 1982 (they returned in 1995). (See Los Angeles Mem'l Coliseum Comm'n v. Nat'l Football League, 726 F.2d 1381 (9th Cir. 1984).) But there may not be public will in Oakland to help fund the new stadium the A's are looking for - especially considering that the city and Alameda County are still on the hook for tens of millions of dollars related to the old stadium's renovations.

"We have our up days, and we have our down days," says Oakland Mayor Jean Quan. Quan, who faces a tough reelection bid this year, says there are viable development sites for a new A's ballpark in Oakland. "I describe this whole thing as a game of chess."

San Jose challenges MLB's antitrust exemption.

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