WAKE FOREST JOURNAL OF BUSINESS

AND INTELLECTUAL PROPERTY LAW

VOLUME 15 SPRING 2015 NUMBER 3

A BLUEPRINT TO MODERNIZE MAJOR LEAGUE

BASEBALL’S ANTITRUST EXEMPTION IN LIGHT OF CITY

OF SAN JOSÉ

Eli Marger†

I. INTRODUCTION ............................................................. 476

II. BACKGROUND .............................................................. 479 A. “THE BASEBALL TRILOGY” ...................................... 481 B. CITY OF SAN JOSÉ V. OFFICE OF THE

COMMISSIONER............................................................ 485

III. ANALYSIS .................................................................... 488 A. DOES MLB’S ANTITRUST EXEMPTION APPLY

NARROWLY TO THE RESERVE CLAUSE OR BROADLY

TO THE “BUSINESS OF BASEBALL”? ........................... 489 B. SHOULD “RULE STARE DECISIS” OR “RESULT

STARE DECISIS” BE APPLIED TO THE TRILOGY OF

SUPREME COURT CASES THAT HAVE ADDRESSED

MLB’S ANTITRUST EXEMPTION? ............................... 491 C. PUBLIC POLICY CONCERNS, INCLUDING

UNIFORMITY WITH OTHER PROFESSIONAL SPORTS,

SUPPORT A CHANGE TO ALLOW FOR FRANCHISE

RELOCATION FREE OF THE ANTITRUST EXEMPTION .. 498

IV. CONCLUSION .............................................................. 509

V. ADDENDUM .................................................................. 511

† J.D. candidate, May 2016, Wake Forest University School of Law. Staff

Member 2014-15, Managing Editor 2015-16, Wake Forest Journal of Business and

Intellectual Property Law. The author would like to thank friends, family, and

colleagues for their support and encouragement, with special thanks to Bruce

Marger, Erik Albright, Nathaniel Grow, David Shores, and the editors and staff of

the JBIPL.

476 WAKE FOREST J.

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I. INTRODUCTION

“Baseball is almost the only orderly thing in a very

unorderly world. If you get three strikes, even the best

lawyer in the world can’t get you off.”

—Bill Veeck1

When Dan Otero recorded the final out of a healthy 10-2 victory2

for the Oakland Athletics over the rival Seattle Mariners, life in O.Co

Coliseum was not going to get much better. This had been a

remarkably splendid afternoon for baseball—sixty-five degrees, a

breeze out to right field,3 and a hefty dose of California sun—and the

first-place Athletics headed into the locker room ready to celebrate a

win, pack up, and fly to Texas.4 Yet, deep in the bowels of the

Coliseum, something was very wrong, which both the Athletics and

Mariners were about to discover.

Sitting on the floor of both teams’ locker rooms, in all of its rank,

disgusting glory, was almost one foot of raw sewage.5

Had this been an isolated incident, it may have been written off as

the result of a pipe that needed repair. But this was more; this was just

the latest and grossest piece of evidence6

demonstrating that the

Athletics, also known as the A’s, needed a new stadium. For decades,

the A’s have shared the Coliseum with the NFL’s Oakland Raiders,

the only such arrangement remaining in Major League Baseball

(“MLB”) and the National Football League (“NFL”).7 The attendance

at Athletics games has been better in the last three years, but between

2006 and 2011, the A’s ranked in the bottom third of MLB attendance

1 RUSSELL SCHNEIDER, TALES FROM THE TRIBE DUGOUT 184 (2002).

2Jun 16, 2013, Mariners at Athletics Play by Play and Box Score, BASEBALL

REFERENCE.COM, http://www.baseball-

reference.com/boxes/OAK/OAK201306160.shtml (last visited Feb. 13, 2015). 3 Id.

4 Id. See also 2013 Schedule and Results, BASEBALL REFERENCE.COM,

http://www.baseball-reference.com/teams/OAK/2013-schedule-scores.shtml (last

visited Feb. 13, 2015) (showing the Oakland Athletics’ 2013 schedule and results

including the June 17th loss to the Texas Rangers). 5 David Brown, Raw Sewage at Coliseum Forces Athletics and Mariners to

Share Oakland Raiders Clubhouse, YAHOO! SPORTS (June 17, 2013, 2:59 AM),

http://sports.yahoo.com/blogs/big-league-stew/raw-sewage-coliseum-forces-

athletics-mariners-share-oakland-065912101.html. 6 Carl Steward, Oakland A’s Owner Lew Wolff Says Coliseum Sewage Mess Not

Unusual, INSIDE BAY AREA (June 18, 2013, 6:03 AM),

http://www.insidebayarea.com/athletics/ci_23478623/oakland-owner-lew-wolff-

says-coliseum-sewage-mess. 7 See Complaint at 5–6, City of San José v. Comm’r of Baseball, 2013 WL

2996788 (N.D. Cal. 2013) (CV 13-02787).

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in terms of percentage capacity filled.8 Even between 2012 and 2014,

the A’s ranked 27th, 23rd, and 24th in MLB,9 hardly numbers one

would expect from a team whose 278 wins over that span ranked

second in Major League Baseball.10

Aside from attendance issues, the Athletics are one of baseball’s

most economically disadvantaged franchises.11

MLB employs a

revenue-sharing device,12

requiring revenues from richer teams to be

distributed in various degrees to poorer teams. Interestingly, the San

Francisco Bay Area is a metaphor for the economic difference

between rich and poor teams. The San Francisco Giants are one of

baseball’s elite franchises, both on the field, in the stands, and

economically.13

Just sixteen miles away sits the Athletics, a team

whose economic situation has been so dire that Hollywood made a

movie about it.14

Beginning in 2004, the City of San José and its Redevelopment

Agency began to explore the possibility of building a new baseball

stadium to lure the Athletics to relocate to San José.15

Three years

later, a proposal for a 45,000 seat stadium in San José was certified.16

8 MLB Attendance Report – 2014, ESPN, http://espn.go.com/mlb/attendance

(last visited Feb. 9, 2015). 9 Id.

10Major League Baseball Team Win Totals, BASEBALL REFERENCE.COM,

http://www.baseball-reference.com/leagues/MLB (last visited Feb. 10, 2015). 11

Complaint, supra note 7, at 11. 12

See Daniel Jacobson, MLB’s Revenue-Sharing Formula, CBS NEWS,

http://www.cbsnews.com/news/mlbs-revenue-sharing-formula (last updated Aug. 19,

2008, 1:01 PM). 13

The Giants recently defeated the Kansas City Royals to win their third World

Series in five years. Ted Berg, The San Francisco Giants Just Won the World Series

Again, USA TODAY (Oct. 29, 2014, 11:21 PM),

http://ftw.usatoday.com/2014/10/san-francisco-giants-world-series-game-7-

bumgarner-mlb. They also have the ninth-richest regional television contract in

baseball, and have been in the top ten of MLB in terms of payroll in each of the last

five seasons. See Christina Settimi, MLB’s Most Valuable Television Deals, FORBES

(Mar. 26, 2014), http://www.forbes.com/sites/christinasettimi/2014/03/26/mlbs-

most-valuable-television-deals; MLB Salaries, USA TODAY,

http://www.usatoday.com/sports/mlb/salaries/2014/team/all (last visited Feb. 4,

2015). 14

MONEYBALL (Columbia Pictures 2011) (screenplay transcript available at

http://www.screenplaydb.com/film/scripts/moneyball-screenplay.pdf) was based on

a book of the same name by Michael Lewis and documents the cash-strapped

Athletics and their attempt to build a winning team through advanced statistics. In

one scene, Brad Pitt, portraying Oakland general manager Billy Beane, states, “[t]he

problem we’re trying to solve is that . . . there are rich teams, poor teams, 50 feet of

crap and then there’s us.” Id. at 21. 15

Complaint, supra note 7, at 14. 16

Id. at 15.

478 WAKE FOREST J.

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The project was eventually modified to reduce seating to 32,000 seats,

and an economic impact analysis, done by the city, concluded that the

development of this stadium would be substantially beneficial.17

In

the interim, the Athletics also explored the possibility of building a

stadium in Fremont, California.18

That project, however, gradually

fell through19

between 2006 and 2009, and the Athletics set their sights

solely on San José.

Over the years that followed, various entities within San José

expressed their support for the Athletics to relocate.20

The mayor of

the city wrote MLB commissioner Bud Selig a letter endorsing the

move.21

It seemed to be only a matter of time before the Oakland

Athletics would become the San José Athletics.

But there was something else at play: a provision in the MLB

Constitution that granted exclusive territorial rights within Santa Clara

County, which includes San José, not to the Athletics, but to the San

Francisco Giants.22

The Giants made clear, through their de facto veto

power23

under the MLB Constitution, that they would block any

potential move by the Athletics to San José.24

Without the Giants’

approval, there would be no San José Athletics. The Athletics want a

new stadium to enhance their revenue streams and end their

dependence on MLB’s revenue sharing.25

The Giants likely see a

move to San José as a threat to their spot at the table of MLB’s elite.

17

Id. at 15–16. 18

Id. at 14. 19

See David Goll, A’s Abandon Plans for Fremont Ballpark, SACRAMENTO

BUS. J. (Feb. 24, 2009, 10:57 AM),

http://www.bizjournals.com/sacramento/stories/2009/02/23/daily28.html. 20

This included the San José Silicon Valley Chamber of Commerce, the San

José Convention and Visitors Bureau, the San José Sports Authority, and Baseball

San José. Complaint, supra note 7, at 19. 21

Mayor Reed’s letter of April 2, 2013, tells Commissioner Selig, “[t]he A’s

ownership continues to express its desire to locate the team in San José and I

strongly endorse that outcome . . . .” See id. 22

See MAJOR LEAGUE CONSTITUTION, Art. VIII, § 8(A) (2005), available at

http://www.bizofbaseball.com/docs/MLConsititutionJune2005Update.pdf (stating

that Santa Clara County shall be included in the operating territory of the San

Francisco Giants). 23

See Complaint, supra note 7, at 2. 24

Id. at 21. 25

Statement by A’s Ownership Regarding A’s and Giants Sharing Bay Area

Territory, MLB.COM (Mar. 7, 2012),

http://m.athletics.mlb.com/news/article/27081248/statement-by-as-ownership-

regarding-as-and-giants-sharing-bay-area-territory.

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Major League Baseball is legally unique as the only professional

sports league in the United States exempt from antitrust law.26

This

exemption, over ninety years old, allows baseball to impose restraints

on competition that would otherwise be prohibited under the Sherman

Antitrust Act.27

The exemption has faced legal challenges many times since its

inception in 1922, and has reached the Supreme Court twice, with the

exemption being sustained both times.28

But the business of baseball

has changed drastically since 1922, and despite the Supreme Court’s

determination that baseball is now interstate commerce,29

no court nor

Congress has made any real effort to modify or abolish the exemption

to better adhere to the realities of the modern game of baseball.

The purpose of this Comment is to examine the roots of the

antitrust exemption for Major League Baseball, how it has developed

over the decades, present challenges against the exemption––

especially as it pertains to the Oakland Athletics’ proposed move to

San José––and to suggest possible legal challenges or legislation that

might modernize this archaic exemption.

II. BACKGROUND

There is no name more synonymous with antitrust law than that of

Senator and former Secretary of State John Sherman, a Republican

from Ohio. In the 19th century he authored legislation30

in response to

the growing problem of massive trusts and combinations of businesses

and their predatory practices in the burgeoning economic environment

of the United States. That legislation, enacted in 1890, is now among

the most recognizable names of any act in the country’s history: the

Sherman Antitrust Act.31

To properly understand the interaction

between MLB and antitrust law, one must first understand why the

Sherman Act was necessary.

26

Nathaniel Grow, Defining the “Business of Baseball”: A Proposed

Framework for Determining the Scope of Professional Baseball’s Antitrust

Exemption, 44 U.C. DAVIS L. REV. 557, 559 (2010). 27

See id. 28

See Flood v. Kuhn, 407 U.S. 258, 285 (1972); Toolson v. N.Y. Yankees, 346

U.S. 356, 357 (1953) [hereinafter Toolson II]. 29

Kuhn, 407 U.S. at 282 (“Professional baseball is a business and it is engaged

in interstate commerce.”). 30

John Sherman’s Life and Career, SHERMAN HOUSE MUSEUM 2,

http://www.shermanhouse.org/JohnSherman_bio.pdf (last visited Feb. 10, 2015). 31

Sherman Anti-Trust Act (1890), OURDOCUMENTS.GOV,

http://www.ourdocuments.gov/doc.php?flash=true&doc=51 (last visited Feb. 14,

2015).

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In a 1940 U.S. Supreme Court Case, Apex Hosiery Co. v. Leader,32

Justice Harlan Stone discussed the legislative history of the Sherman

Act and noted its enactment came during an “era of ‘trusts’ and of

‘combinations’ of businesses . . . organized and directed to control . . .

the market by suppression of competition . . . .”33

Indeed, the late 19th

century was a time when immense trusts dominated the marketplace,

despite state laws limiting these companies’ power to do so.34

For

example, in 1882, the partners of Standard Oil agreed to combine their

business entities, located all over the country, under a single “trust”,

allowing the stock of the company to be held by trustees.35

Standard

Oil became so big and so powerful that it was able to engage in

territorial price discrimination, with tactics including undercutting

prices in one market to destroy competition while keeping prices high

and even raising them in other less-competitive markets.36

Justice Stone remarked in Apex Hosiery that the goal of the

Sherman Act was to prevent restraints to free competition.37

These

restraints, he said, tended to “restrict production, raise prices or

otherwise control the market to the detriment of purchasers or

consumers of goods and services.”38

Because many of these restraints

on competition crossed state lines, state statutes were no longer

sufficient to regulate these trusts and combinations.39

Faced with that

issue, Congress exercised its regulatory powers under the Commerce

Clause of the U.S. Constitution and enacted the Sherman Antitrust

Act.40

Antitrust law became the preferred method for restricting

companies that restrained trade in a particular market. Even Standard

Oil fell victim to the Sherman Act, as the Supreme Courty ordered that

it be disbanded and split into geographically separate and distinct

32

310 U.S. 469 (1940). 33

Id. at 491–93. 34

William Markham, Why Antitrust Laws Matter?: The True Purpose of

Antitrust Law, LAW OFFICE OF WILLIAM MARKHAM (2006),

http://www.markhamlawfirm.com/articles/Why-Antitrust-Laws-Matter.pdf. 35

See Standard Oil Company and Trust, ENCYCLOPEDIA BRITANNICA,

http://www.britannica.com/EBchecked/topic/562986/Standard-Oil-Company-and-

Trust (last visited Feb. 10, 2014). 36

See generally Kenneth W. Dam, The Economics and Law of Price

Discrimination: Herein of Three Regulatory Schemes, 31 U. CHI. L. REV. 1 (1963). 37

Apex Hosiery, 310 U.S. at 493. 38

Id. 39

See id. at 491. 40

See generally Sherman Antitrust Act, 15 U.S.C. §§ 1–7 (2012); see also U.S.

CONST. art. I, § 8, clause 3 (commonly referred to as the Commerce Clause).

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businesses.41

The same day the Supreme Court effectively dismantled

Standard Oil, it did the same to the American Tobacco Company,42

which had become the dominant tobacco company by acquiring over

200 rival companies.43

A. “The Baseball Trilogy”

In 1922, the Supreme Court faced yet another challenge under the

Sherman Act. This time, the business at issue was not an oil giant or

tobacco conglomerate. Instead, it was an entity vastly intertwined

with the fabric of American culture. This business, just half a century

old,44

did not produce automobiles or cigarettes or textiles. It

produced mystique, emotion, and entertainment unlike any business

this country had ever seen. It was Major League Baseball. The

landmark decision of Federal Baseball Club v. National League had a

simple message: Major League Baseball is exempted from the

Sherman Antitrust Act.45

In 1913, the Federal Baseball League was formed independent of

the still-fledgling Major League Baseball.46

The leagues differed in

the sense that Federal League players were not to be subject to the

reserve clause, a staple in Major League Baseball that gave teams

essentially perpetual rights to a player.47

While players in MLB were

bound to one team until the team traded or sold them, Federal League

players were free to bargain for services with a new team at their will,

allowing for salaries to be driven up through competition. The

Federal Baseball lawsuit, however, did not arise out of the reserve

clause. Instead, it came at a moment of desperation for the Federal

League, when the combination of interference from MLB teams and

the weakening financial situation of owners caused the league to

41

See generally Standard Oil Co. of New Jersey v. United States, 221 U.S. 1

(1911). 42

See generally United States v. Am. Tobacco Co., 221 U.S. 106 (1911). 43

History, AM. TOBACCO HISTORIC DIST.,

http://www.americantobaccohistoricdistrict.com/about/1 (last visited Feb. 7, 2015). 44

The first professional baseball team was the Cincinnati Red Stockings in

1869. Baseball Origins, Growth and Changes in the Game, The People History,

http://www.thepeoplehistory.com/baseballhistory.html (last visited Feb. 14, 2015). 45

See generally Fed. Baseball Club of Baltimore v. Nat’l League of Prof’l

Baseball Clubs, 259 U.S. 200 (1922). 46

See Emil H. Rothe, Was the Federal League A Major League?, SABR

RESEARCH J. ARCHIVE, http://research.sabr.org/journals/federal-league-a-major-

league (last visited Feb. 7, 2015). 47

See Richard B. Blackwell, Baseball’s Antitrust Exemption and the Reserve

System: Reappraisal of An Anachronism, 12 WM. & MARY L. REV. 859, 871–73

(1971) (describing the general effect of the reserve clause).

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fold.48

Of the eight Federal League teams, four were bought out by

the owners of MLB teams, two were merged with existing MLB

teams, and one went bankrupt.49

The remaining team was the Baltimore Terrapins.50

When the

Terrapins received no compensation upon the dissolution of the

Federal League, their ownership group, led by Ned Hanlon, sued the

National League under the Sherman Antitrust Act.51

The owners

alleged that Major League Baseball had engaged in a conspiracy to

monopolize professional baseball by essentially dismantling the

Federal League.52

Despite success in district court, the D.C. Circuit

reversed the decision and awarded a victory to the National League.53

On April 19th, 1922, the case was argued before the Supreme Court,

and on May 29th, Justice Oliver Wendell Holmes handed down a

decision that still stands to this day.54

“The business is giving exhibitions of base ball [sic], which are

purely state affairs[,]” Holmes stated.55

While he acknowledged that

state lines must be crossed to arrange and pay for these exhibitions,

crossing state lines was not enough to change the state character of the

business.56

“[A] firm of lawyers sending out a member to argue a case

. . . does not engage in such commerce because the lawyer . . . goes to

another State[,]” he said.57

In the five paragraphs that comprised his

opinion, Justice Holmes and the unanimous Court carved out an

exemption to all antitrust laws for Major League Baseball.58

Three decades later, in a 1953 decision, the Supreme Court faced a

challenge by George Toolson, a pitcher in the New York Yankees

organization. Toolson had pitched for the Yankees’ triple-A team, but

believed that he was good enough to pitch in the Major Leagues—if

not for the Yankees, then for another team.59

However, baseball’s

48

See generally Nat’l League of Prof’l Baseball Clubs v. Fed. Baseball Club of

Baltimore, 269 F. 681 (D.C. Cir. 1920). 49

See Rothe, supra note 46. 50

Nat’l League, 269 F. at 682. 51

Id. 52

Id. 53

Id. at 687–88. 54

See Fed. Baseball Club of Baltimore v. Nat’l League of Prof’l Baseball Clubs,

259 U.S. 200, 200 (1922). 55

Id. at 208. 56

Id. at 209 (“But the fact that in order to give the exhibitions the Leagues must

induce free persons to cross state lines and must arrange and pay for their doing so is

not enough to change the character of the business.”). 57

Id. 58

Id. at 207–09. 59

Toolson v. N.Y. Yankees, 101 F. Supp. 93, 93 (S.D. Cal. 1951) [hereinafter

Toolson I].

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reserve clause prevented him from seeking employment with other

teams without the Yankees trading or selling him.60

When the triple-A

team was dissolved and Toolson was reassigned to the Yankees’

single-A affiliate in Binghamton, he refused to report to the team and

subsequently filed a lawsuit alleging that baseball should not be

exempt from antitrust laws.61

When the case reached the Supreme

Court, the majority quickly dispatched Toolson’s challenge and, in a

seven-to-two decision, upheld baseball’s antitrust exemption.62

A result of the Toolson II case was that the Supreme Court showed

its hand regarding how it would decide challenges to baseball’s

antitrust exemption. In the per curiam opinion, the majority stated that

the business of baseball had been developing for three decades under

the presumption that it was exempt from antitrust laws,63

and any

change to that exemption would have to come from legislation.

Justice Harold Burton, writing for the dissent, framed the issue

differently, stating that Congress had expressly exempted several

activities from antitrust laws, including labor unions, farm

cooperatives, and insurance.64

Baseball had grown significantly since

the Federal Baseball decision in 1922, Burton argued, and many

aspects of the game had grown to encompass interstate commerce.65

As such, he said, “[Major League Baseball] is subject to the Sherman

Act until exempted.”66

The view of the dissent in Toolson II, especially the notion that

baseball was now interstate commerce, was a thorn in the side of the

supporters of baseball’s antitrust exemption. Nearly twenty years

later, that thorn was pressed deeply into the skin of those supporters in

the most recent and most notable challenge to the exemption.

Flood v. Kuhn is perhaps better known for being the singularity

from which the fall of MLB’s reserve clause and the rise of free

agency arose.67

The suit was brought by longtime St. Louis Cardinals

outfielder Curt Flood, who in 1969 was traded to the Philadelphia

Phillies without being consulted or notified.68

He complained to

60

See Petitioner’s Opening Brief on Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit at 5–6, Toolson II, 346 U.S. 356 (1953) (No.

18), 1953 WL 78316, at *4–*11. 61

Toolson I, 101 F. Supp. at 93. 62

Toolson II, 346 U.S. at 356. 63

Id. at 357 (“The business has thus been left for thirty years to develop, on the

understanding that it was not subject to existing antitrust legislation.”). 64

Id. at 364 & n.11 (Burton, J., dissenting). 65

Id. at 364–65 (Burton, J., dissenting). 66

Id. at 365. 67

See generally Flood v. Kuhn, 407 U.S. 258 (1972). 68

Id. at 265.

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Bowie Kuhn, the commissioner of Major League Baseball at the time,

and requested to become a free agent, allowed to sign a deal with any

of the teams in the league.69

When Kuhn refused, Flood brought a

lawsuit alleging multiple violations ranging from federal antitrust laws

to civil rights statutes and even a charge of imposition of involuntary

servitude.70

The Flood opinion is widely criticized71

for two reasons. The first

is revealed by reading the opinion of Justice Harry Blackmun, writing

for the majority.72

In what could be described as a romantic,

sentimental diatribe into the undeniable impact baseball has affected

on the United States, Blackmun listed nearly 100 names of famous

baseball players, recited a history of Major League Baseball, and

outlined the cultural impact baseball has had in America.73

After a

lengthy discussion of the parties, the issue, and the precedent,

Blackmun delivered a series of statements that comprise the second

criticism of the Flood decision—hyper-reliance on stare decisis.74

“Professional baseball is a business and it is

engaged in interstate commerce.”75

“Federal Baseball and Toolson [II] have become an

aberration confined to baseball.”76

When read in combination, these two statements seem to favor

Curt Flood’s position heavily. If baseball really was interstate

commerce, how could the Supreme Court not overturn Toolson II? In

the end, the Flood opinion seemed to set the stage—load the bases, if

you will—for the Court to finally overturn the antitrust exemption,

with Justice Blackmun acting as Babe Ruth, ready to hit a grand-slam

home run. Instead, the Court rested on stare decisis, reiterating that if

any action were to overturn this exemption, it would need to come

69

Id. 70

Id. at 265–66. 71

See, e.g., William N. Eskridge, Jr., Overruling Statutory Precedents, 76 GEO.

L.J. 1361, 1381 (1988) (Calling Flood a “comical adherence to the strict rule against

overruling statutory precedents . . . .”); David Greenberg, Baseball’s Con Game,

SLATE (July 19, 2002),

http://www.slate.com/articles/news_and_politics/history_lesson/2002/07/baseballs_c

on_game.html (“The opinion . . . included a juvenile, rhapsodic ode to the glories of

the national pastime . . . .”). 72

Flood, 407 U.S. at 260–64 (Blackmun, J.). 73

Id. 74

Greenberg, supra note 71 (criticizing Justice Blackmun for relying on stare

decisis despite evidence that such reliance was not appropriate). 75

Flood, 407 U.S. at 282. 76

Id.

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from Congress.77

“If there is any inconsistency or illogic in all this,”

Blackmun stated, “it is an inconsistency and illogic of long standing

that is to be remedied by the Congress and not by this Court.”78

And

so it stood—baseball was ruled to be interstate commerce, yet still

exempt from the Sherman Act.

It has been forty-two years since Flood, and no challenge has come

close to overruling MLB’s antitrust exemption. There have been

plenty of challenges, but none have reached the Supreme Court.79

This is where the story heads back out west to the Bay Area.

B. City of San José v. Office of the Commissioner

In 1990, the San Francisco Giants were considering being sold and

relocated to another Bay Area—Tampa Bay, Florida.80

The owner of

the Giants also looked into relocating the team to San José and, in

hopes of keeping the Giants in California, the former owner of the

Athletics, Walter Haas, gave his permission for the Giants to move to

San José, with no compensation going to Oakland.81

Shortly

thereafter, MLB amended its Constitution and gave the Giants

exclusive territorial rights to Santa Clara County, which includes the

City of San José.82

The Giants ended up staying in San Francisco and

building a gorgeous waterfront stadium, but to this day continue to

hold the sole rights to Santa Clara County.83

In November 2011, the City Council of San José entered into a

two-year option agreement with Athletics Investment Group, the

77

Id. at 284. 78

Id. 79

See e.g., Finley v. Kuhn, 569 F.2d 527, 541 (7th Cir. 1978), cert. denied, 439

U.S. 876 (1978); McCoy v. Major League Baseball, 911 F. Supp. 454, 457 (W.D.

Wash. 1995), aff’d by, 67 F.3d 1054 (2d Cir. 1995); Piazza v. Major League

Baseball, 831 F. Supp. 420, 438 (E.D. Penn. 1993). 80

Complaint, supra note 7, at 9. 81

Lester Munson, San José Suit Appears to Be Strong, ESPN (June 19, 2013),

http://espn.go.com/mlb/story/_/id/9403225/the-san-jose-legal-case-oakland-strong. 82

Id. Commenting on this gentleman’s agreement, Commissioner Bud Selig

said, “Walter Haas, the wonderful owner of the Oakland club who did things in the

best interest of baseball, granted permission . . . . What got lost there is they [the

A’s] didn’t feel it was permission in perpetuity.” Id. Records seem to show that the

Giants were given Santa Clara County provisionally, if the Giants were to actually

move to San José. See Ken Belson, In Tug of War over San José, A’s and the Giants

Remain at A Standoff, N.Y. TIMES (Apr. 2, 2012),

http://www.nytimes.com/2012/04/02/sports/baseball/as-and-giants-in-tug-of-war-

over-rights-to-san-jose.html?pagewanted=all&_r=0. Despite this seemingly limited

granting of consent to look into Santa Clara County for relocation, Santa Clara

County has remained the operating territory of the Giants. Id. 83

See Belson, supra note 82.

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partnership that owns and operates the A’s, and gave the team two

years to decide whether to purchase six adjacent parcels of land that

would be used to develop a 32,000 seat stadium in San José and serve

as the new home for the Athletics.84

With everything seeming to be

falling into place for the move, the San Francisco Giants exercised its

veto power85

under Article VIII, Section 8 of the MLB Constitution,86

which states that no relocation or expansion of a team within the

territory of another team will be approved without the pre-existing

team’s written consent.

Very shortly after the sewage incident at the Coliseum, on June

18th, 2013, the City of San José filed a forty-four-page complaint

against the Office of the Commissioner of Baseball.87

The complaint

alleges two instances of tortious interference, two violations of

California law, and violations of Sections I and II of the Sherman

Antitrust Act.88

The introduction to the complaint states that the city

challenges the antitrust exemption and that Major League Baseball has

engaged in a “blatant conspiracy” to prevent the Athletics from

moving to San José.89

The complaint further alleges that MLB has

similarly conspired for years “under the guise of an ‘antitrust

exemption’ applied to the business of baseball.”90

In particular, the complaint challenges two sections of MLB’s

Constitution—Article 4.2 and 4.3—as “unreasonable, unlawful, and

anticompetitive restraints under Section I of the Sherman Act.”91

Additionally, member teams of MLB had allegedly been conspiring to

acquire and maintain monopoly power within their particular

“operating territories,” a violation of Section II of the Sherman Act.92

According to the trial court, the dispositive issue in this instance

was whether the relocation of a franchise was a part of the “business

84

Complaint, supra note 7, at 3–4. 85

John Royal, San Jose Attempting to Out-Bully Bud Selig, HOUSTONPRESS

(June 24, 2013, 9:00 AM),

http://blogs.houstonpress.com/news/2013/06/bud_selig_bully.php (“[T]he San

Francisco Giants . . . [ha]ve vetoed the move of the A’s.”). 86

MAJOR LEAGUE CONSTITUTION, art. VIII, § 8 (2005), available at

http://bizofbaseball.com/docs/MLConsititutionJune2005Update.pdf. 87

See generally Complaint, supra note 7, at ii. 88

See id. 89

Id. at 1. 90

Id. 91

Id. at 2. This appears in Section VIII of the 2005 MLB Constitution. While

the cited version of the MLB Constitution is no longer in force, it is still valid in

reagards to the operating territories. 92

Id.

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of baseball” and therefore within the antitrust exemption.93

The

“business of baseball” is a somewhat abstract concept, because the

character of that business has changed so much since the 1922 Federal

Baseball decision.94

Indeed, baseball in 1922 was merely a shell of

what it is today. The economic issues that define the business of

baseball today—revenue sharing, luxury taxes, television rights,

merchandise licensing, and international scouting, among others—

simply were not present in 1922.95

Courts both at the highest levels, in

Toolson II and Flood, and lower levels, through a plethora of

decisions, have had to adapt over the decades to a changing definition

and scope of what exactly constitutes the business of baseball.96

In a 2010 law review article,97

Professor Nathaniel Grow proposed

a uniform standard for evaluating challenges as coming under the

scope of the “business of baseball.” He writes that the antitrust

exemption should be limited to those activities “directly related to

providing baseball entertainment to the public.”98

Included in that

standard would be decisions limiting franchise locations, which give

leagues the ability to sufficiently allocate teams throughout the

country, affecting competitive balance and the even distribution of

MLB’s product.99

This standard seems to be undeniably sensible, and the court in

City of San José struck the same chords as Professor Grow in its

opinion.100

The district court granted in part and denied in part Major

League Baseball’s motion to dismiss San José’s claims,101

and San

José subsequently filed an appeal to the Ninth Circuit.102

The court

expressed its desire to adhere to the precedent set forth in the so-called

93

See City of San José v. Comm’r of Baseball, No. C-13-02787, 2013 WL

5609346, at *11 (N.D. Cal. Oct. 11, 2013) (stating that “interference with . . .

relocation efforts presents an issue of league structure that is ‘integral’ to the

business of baseball . . . falls within the exemption.”). 94

See Toolson II, 346 U.S. 356, 357–58 (1953). 95

See Daniel Barbarisi, The Changing Economics of Baseball: Winter Meetings

End Without Yankees as Major Players, THE WALL STREET J. (Dec. 11, 2014),

http://www.wsj.com/articles/the-changing-economics-of-baseball-1418341551. 96

See generally Flood v. Kuhn, 407 U.S. 258 (1972); Toolson II, 346 U.S. 356. 97

See generally Grow, supra note 26. 98

Id. at 580. 99

Id. at 609. 100

City of San José v. Comm’r of Baseball, No. C-13-02787, 2013 WL

5609346, at *11 (N.D. Cal. Oct. 11, 2013) (“[T]he alleged interference with a

baseball club’s relocation efforts presents an issue of league structure that is

‘integral’ to the business of baseball, and thus falls squarely within the exemption.”). 101

See id. at *16. 102

See City of San José v. Comm’r of Baseball, No. 14-15139, 2015 WL

178358 (9th Cir. Jan. 15, 2015).

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“Trilogy” of Federal Baseball, Toolson II, and Flood.103

Interestingly,

it also discussed the Curt Flood Act, a 1998 statute104

that stood for the

proposition that baseball’s antitrust exemption did not apply to matters

directly affecting the employment of baseball players. However, the

court was careful to note that the language of the statute did not apply

to issues of franchise expansion, location or relocation.105

And this, as

the reasoning went, was evidence of the Congressional intent to keep

the antitrust exemption in place as it pertains to the issue of franchise

relocation.106

This Comment is not an attack on the antitrust exemption. It is not

a criticism of the Supreme Court for its refusal to overturn an archaic

rule. This Comment is, however, perhaps a blueprint—a plan of

attack—for the litigator who hopes to take this exemption to task and

reshape it in a way that will promote competition among MLB’s

constituent teams while holding the tune that has been stuck in the

heads of lawmakers and jurists alike for nearly 100 years: that baseball

is a unique business and deserves unique treatment.

III. ANALYSIS

The establishment has been challenged before in baseball. The

challenge to, and the eventual downfall of, the reserve clause is a

prime example.107

Even beyond that, the sabermetric revolution108

that has swept across Major League Baseball in the last fifteen years

has shaken baseball purists to their core and forced the architects of

baseball teams to rethink how teams are built.109

Baseball is no longer

America’s most popular sport,110

but no other sport is so closely

connected with the cultural heritage of modern America111

103

Id. at *10. 104

15 U.S.C. § 26b (2012). 105

Id. at § 26b(b)(3) (limiting the reach of the statute to exclude franchise

expansion, location, or relocation). 106

City of San José, 2013 WL 5609346 at *10. 107

See supra text accompanying notes 67–70. 108

See generally MICHAEL LEWIS, MONEYBALL: THE ART OF WINNING AN

UNFAIR GAME (2003) (discussing the Oakland Athletics’ use of sabermetrics to build

a winning roster). 109

See generally Matthew Futterman, Baseball After Moneyball, THE WALL

STREET J. (Sept. 30, 2011),

http://www.wsj.com/articles/SB10001424053111903791504576584691683234216. 110

See Darren Rovell, NFL Most Popular for 30th Year in Row, ESPN (Jan. 26,

2014) http://espn.go.com/nfl/story/_/id/10354114/harris-poll-nfl-most-popular-mlb-

2nd. 111

See generally Allen Barra, Sorry, NFL: Baseball Is Still America’s Pastime,

continued . . .

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Adaptation—acceptance of the realities of the marketplace and the

willingness to embrace them—has been the hallmark of both baseball

and America.112

While baseball interacts with the laws of the United

States, there should be continuing adaptation. This adaptation can

come in two forms, both of which will be discussed at length. First,

the scope of the antitrust exemption must be clarified—does it apply

only to the reserve clause, or in a broad sense to the business of

baseball? Second, the strength and nature of stare decisis must be

investigated as it pertains to this exemption to determine if the relevant

precedent remains applicable.

Analyzing baseball’s antitrust exemption is a difficult exercise.

The business of baseball is so broad, so powerful of a phrase that it

seems that, using Professor Grow’s standard, the exemption is

sacrosanct as it pertains to such issues as franchise relocation.113

The

battle that the City of San José has been fighting seems to be one of

futility, and Professor Grow himself remarked114

that there was a very

low—though nonzero—chance of City of San José being resolved in

favor of the plaintiffs. Regardless of how the case is decided, the

appellate briefs and applicable precedent raise interesting questions

that future challengers could raise, whether to a high court or

Congress.

A. Does MLB’s Antitrust Exemption Apply Narrowly to the

Reserve Clause or Broadly to the “Business of Baseball”?

One of the questions posed in the City of San José’s appellate brief

was to echo a point made in a previous lower court decision, Piazza v.

Major League Baseball.115

The court in Piazza said that Flood was

stripped of any precedential value beyond the facts of the case despite

THE ATLANTIC (Oct. 30, 2013)

http://www.theatlantic.com/entertainment/archive/2013/10/sorry-nfl-baseball-is-still-

americas-pastime/280985/. 112

Baseball has constantly changed and expanded in response to the social

landscape since its inception, much like America as a whole. See U.S. Department

of State, Baseball in America: A History, FACT MONSTER,

http://www.factmonster.com/ipka/A0875086.html (last visited Feb. 10, 2015). 113

See Grow, supra note 26, at 583–84. 114

Howard Mintz, San José Antitrust Case Against MLB at Crucial Stage,

MERCURYNEWS.COM (Aug. 11, 2014), http://www.mercurynews.com/crime-

courts/ci_26311761/san-jose-antitrust-case-against-mlb-at-crucial?source=infinite

(“‘San José’s odds of prevailing at the 9th Circuit are slim, I’d say under 10 percent,’

Grow said.”). 115

See Piazza v. Major League Baseball, 831 F. Supp. 420, 436 (E.D. Pa. Aug.

4, 1993).

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its express declaration that baseball was interstate commerce.116

Because Flood dealt only with the reserve clause, the plaintiffs argued

that the holding of the case was limited to the reserve clause.117

Combined with the recognition that baseball was a business engaged

in interstate commerce, the Piazza court seemed to imply that the

antitrust exemption applied only to the reserve clause.118

Professor

Grow is dubious of this claim,119

and upon closer examination of the

Piazza decision, he appears to be correct. “[H]ad the Court intended

to veer from the commonly understood meaning of its prior precedent,

it would have recognized the need to do so expressly[,]” he said,

referencing Flood’s facially narrow but implicitly broad holding.120

While the Piazza decision may have been incorrect regarding the

scope of Flood’s holding, it provides food for thought regarding the

future of the exemption. The question that keeps coming up, and one

that bears addressing, is the question of the scope of the exemption—

does it apply to franchise relocation? Is it really limited to the reserve

clause?

That question is important, but it should not be considered alone.

Perhaps the question should be reframed. The holding in Federal

Baseball framed the relevant business as the business of giving

exhibitions of baseball.121

Like Professor Grow’s proposed standard, a

direct relationship of activities related to the business of providing

baseball entertainment to the public,122

the Federal Baseball holding

seems to focus on the provision of entertainment to the public. So the

question becomes this: given the current state of Major League

Baseball, is franchise relocation directly related to providing

entertainment in the form of a baseball game? That is, does it really

matter where the games are played so much as how the games are

being played?

Given what has been discussed so far, the answer appears to be

yes. The trilogy of Supreme Court cases all appear to support a broad

construction of the antitrust exemption to cover the business of

baseball, generally.123

But perhaps the combination of the Supreme

116

Id. 117

Id. at 435. 118

See id. at 438. 119

Grow, supra note 26, at 591. 120

Id. at 595. 121

Fed. Baseball Club of Baltimore v. Nat’l League of Prof’l Baseball Clubs,

259 U.S. 200, 208 (1922) (“The business is giving exhibitions of base ball [sic] . . .

.”). 122

Grow, supra note 26, at 580. 123

See generally Flood v. Kuhn, 407 U.S. 258 (1972); Fed. Baseball, 259 U.S.

200; Piazza, 831 F. Supp. 420.

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Court’s recognition that the exemption was an aberration,124

lower

courts’ recent assertions that the Supreme Court trilogy should be read

narrowly,125

and a practical analysis of franchise relocation in

American sports provides enough backing to support the notion that,

whether by judicial or legislative action, baseball’s antitrust exemption

should not apply to franchise relocation and the Oakland Athletics

should be allowed to move to San José. But perhaps an answer may

be found in a concept much more elementary, a concept law students

are taught on their first day of law school—stare decisis.

B. Should “Rule Stare Decisis” or “Result Stare Decisis” Be

Applied to the Trilogy of Supreme Court Cases that Have

Addressed MLB’s Antitrust Exemption?

When answering the question of how broadly the antitrust

exemption should be construed, the Flood decision does not provide

much help. In Section V of Justice Blackmun’s opinion, he says that

the exemption applies to baseball’s reserve clause.126

He then goes on

to say that Congress “has had no intention to subject baseball’s reserve

system to the reach of the antitrust statutes.”127

Later in his opinion,

however, he quotes an excerpt from Toolson II, affirming Federal

Baseball “so far as that decision determines that Congress had no

intention of including the business of baseball within the scope of the

federal antitrust laws.”128

When considering the exemption as applied to the reserve clause

only versus the business of baseball, the question turns to a narrow

versus broad reading of the Federal Baseball decision. Erroneous as

the aforementioned Piazza decision may be, it does provide some

valuable guidance to this issue. In the Piazza opinion, Judge Padova

discusses the relevant market to which the exemption applies.129

Several aspects of Judge Padova’s analysis are useful here. He states

the “well settled” principle that “exemptions from antitrust laws are to

124

Flood, 407 U.S. at 282 (describing the antitrust exemption as an established

“aberration” that has been well-recognized in the Supreme Court). 125

See, e.g.,Piazza, 831 F. Supp. 420. 126

Flood, 407 U.S. at 282 (“With its reserve system enjoying exemption from

the federal antitrust laws, baseball is, in a very distinct sense, an exception and an

anomaly.”). 127

Id. at 283 (emphasis added) (“Congress as yet has had no intention to subject

baseball’s reserve system to the reach of the antitrust statutes.”). 128

Id. at 285 (emphasis added) (quoting Toolson II, 346 U.S. 356, 357 (1953)). 129

Piazza, 831 F. Supp. at 429–31.

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be narrowly construed.”130

In light of this, and in light of prior

readings of the exemption as extending to the business of baseball, he

takes it upon himself to determine “exactly how far the exemption

reaches,” and that the business of baseball does not adequately explain

the scope of the rule.131

Beyond that, his opinion is primarily

speculation, but he leaves open the question of the rule’s scope.132

After looking at the trilogy of Supreme Court cases which support

a broad reading of the antitrust exemption133

and two more recent

cases that support a much more narrow reading,134

the question

remains: is franchise location central to the business of baseball, and

therefore covered under the antitrust exemption?

Intuitively, the answer seems to be yes. Professor Grow’s article

gives two compelling reasons why the location of a franchise is

directly related to the provision of baseball exhibitions to the public,

including evenly distributing MLB’s product nationwide and allowing

for competitive balance by limiting the number of teams in a given

population center.135

As franchise location is an issue of league

structure, Professor Grow notes that “a majority of courts have

correctly concluded that decisions regarding baseball’s league

structure are integral to the business of baseball.”136

From a legal perspective, Professor Grow is spot-on. There is a

very close nexus between franchise location and the business of

baseball. Even beyond the cited reasons of even distribution and

competitive balance, franchise location plays an integral role in

determining how MLB is structured as far as geographic divisions and

natural rivalries, such as the Dodgers-Giants, Cubs-White Sox, or

Yankees-Mets, all of which originated from teams sharing one city.137

From a business perspective, regional television deals, which drive a

130

Id. at 438 (“It is well settled that exemptions from the antitrust laws are to be

narrowly construed.”) (citing Group Life & Health Ins. Co. v. Royal Drug Co., 440

U.S. 205, 231 (1979)). 131

Piazza, 831 F. Supp. at 439. 132

Id. at 438. 133

Flood v. Kuhn, 407 U.S. 258 (1971); Toolson II, 346 U.S. 356 (1953) (per

curiam); Fed. Baseball Club of Baltimore, Inc. v. Nat’l League of Prof’l Baseball

Clubs, 259 U.S. 200 (1921). 134

City of San José v. Comm’r of Baseball, No. 14-15139, 2015 WL 178368

(9th Cir. 2015); Piazza, 831 F. Supp. 420. 135

Grow, supra note 26, at 608–09. 136

Id. at 607. 137

See Bill Evans, It’s rivalry week in Major League Baseball. How “natural”

is your natural rivalry? NJ.COM (May 26, 2013, 12:03 AM),

http://www.nj.com/phillies/index.ssf/2013/05/its_rivalry_week_in_major_leag.html.

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huge portion of revenue for franchises,138

are a major money-making

activity which is directly affected by the location of a franchise.139

Because television deals and ticket sales, two of the most vital revenue

activities for franchises,140

are directly impacted by the team’s

location, the issues of franchise location or relocation are directly

related to the business of baseball and therefore within the antitrust

exemption.

Not surprisingly, many legal commentators believe that the City of

San José’s challenge of the exemption will fail.141

But before

considering the appeal and future similar cases “dead on arrival,” one

possible alternative interpretation should be raised.

In Piazza, the court discussed a distinction between “rule stare

decisis” and “result stare decisis” in criticizing the Flood majority.142

In the American legal system, the commonly-understood meaning of

stare decisis is to apply to the rule of a case—that is, a rule articulated

by the Supreme Court is binding on all lower federal courts until the

Supreme Court itself says otherwise.143

The English system of law,

however, has historically limited its concept of stare decisis to the

facts of the case—that is, only under substantially similar factual

circumstances must lower courts follow the high court’s ruling.144

The

138

See Christina Settimi, Baseball’s Biggest Cable Deals, FORBES (Mar. 21,

2012, 12:28 PM),

http://www.forbes.com/sites/christinasettimi/2012/03/21/baseballs-biggest-cable-

deals/; see also Maury Brown, MLB’s Billion Dollar TV Deals, Free Agency, and

Why Robinson Cano’s Deal With the Mariners isn’t “Crazy”, FORBES (Jan. 7, 2014,

10:13 AM), http://www.forbes.com/sites/maurybrown/2014/01/07/mlbs-billion-

dollar-tv-deals-free-agency-and-why-robinson-canos-deal-with-the-mariners-isnt-

crazy/ (noting the plethora of massive individual media rights deals that have been

recently signed by traditionally smaller market teams). 139

See Grow, supra note 26, at 609, 611 (explaining that broadcasts of baseball

games over television is a central facet of the provision of baseball entertainment,

and that the provision of baseball entertainment to the public is directly impacted by

franchise location). 140

Ticket sales accounted for 32.8 percent of estimated revenue in MLB in

2013, down from 38.2 percent in 2009, MLB saw gate receipts of $2.33 billion

during the 2013 season. See MLB gate receipts from 2009 to 2013, STATISTA,

http://www.statista.com/statistics/294185/mlb-gate-receipts (Last visited Oct. 14,

2014), and Regular Season ticketing revenue as a percentage of total revenue in

MLB from 2009 to 2013, STATISTA,

http://www.statista.com/statistics/193408/percentage-of-ticketing-revenue-in-the-

mlb-since-2006 (last visited Oct. 14, 2014). 141

See, e.g., Mintz, supra note 114. 142

Piazza v. Major League Baseball, 831 F. Supp. 420, 437–38 (E.D. Pa. Aug.

4, 1993) (quoting Planned Parenthood of Southeastern Pa. v. Casey, 947 F.2d 682

(3d Cir. 1991)) (distinguishing “rule stare decisis” from “result stare decisis”). 143

Id. 144

Id.

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Piazza court proposed that the Flood decision should be treated as the

latter and limited to its facts, since the “rule stare decisis” was so

obviously eroded.145

While this distinction has been seemingly brushed aside by legal

commentators and lower courts,146

the Supreme Court appears to

support it. In a 1997 case, State Oil Co. v. Khan,147

a vertical price-

fixing case, Justice Sandra Day O’Connor, writing for a unanimous

court, considered the application of stare decisis to antitrust law. This

case dealt with the termination of a contract between a gasoline

supplier and gas station operator; the operator argued that the

supplier’s vertical price fixing was a violation of the Sherman Act.148

The Supreme Court overruled the holding from Albrecht v. Herald

Co.,149

which ruled vertical price fixing to be a per se violation of the

Sherman Act, and stated that these cases should be examined under the

rule of reason analysis.150

According to Justice O’Connor, the policy underpinnings for stare

decisis—articulated as the idea that “it is more important that the

applicable rule of law be settled than that it be settled right”—have

promoted an evenhanded and consistent development of legal

principles.151

However, antitrust law does not necessarily fit into that

strict interpretation of stare decisis. The concept of stare decisis has a

competing interest in antitrust cases in the form of recognition and

adaptation to “changed circumstances and lessons of accumulated

145

Id. at 438 (stating that the Supreme Court’s departure from the rules of

Federal Baseball and Toolson II means that no rule from those cases binds the lower

courts). 146

In Professor Grow’s article, he dismantles the Piazza opinion. He states that

the court (1) misinterpreted the Flood decision, (2) failed to appreciate the

significance of Toolson II, and (3) misunderstood the facts of those cases.

Concluding his analysis, Professor grow said that though Piazza correctly limited

those two cases to their facts, it incorrectly ruled that those cases dealt solely with

the reserve clause. Grow, supra note 26, at 591–600. See also McCoy v. Major

League Baseball, 911 F. Supp. 454, 457 (W.D. Wash. 1995). 147

State Oil Co. v. Khan, 522 U.S. 3 (1997). 148

Khan leased and operated his own gas station from State Oil. In the lease

agreement, it was provided that Khan would obtain gas from State Oil at a specified

price minus a margin of 3.25 cents per gallon. If the price charged at the gas station

was higher than the suggested retail price, the excess would be rebated to State Oil.

After Khan fell behind on lease payments, State Oil acted to evict him from the gas

station. Id. at 7–8. 149

Albrecht v. Herald Co., 390 U.S. 145 (1968). 150

Id. For a comprehensive overview of how the rule of reason operates, see

generally Phillip Areeda, The “Rule of

Reason” in Antitrust Analysis: General Issues (Federal Judicial Center 1981), availa

ble at http://www.fjc.gov/public/pdf.nsf/lookup/antitrust.pdf/$file/antitrust.pdf. 151

Khan, 522 U.S. at 20.

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experience.”152

In Khan, the court used previous decisions,

scholarship, and the purpose of antitrust law as protecting inter-brand

competition to invalidate the rule of Albrecht.153

The general presumption in antitrust cases before the Supreme

Court has been that changes to the Sherman Act should be left to

Congress.154

But Congress has expected the courts, not the legislative

bodies, to “give shape to the statute’s broad mandate by drawing on

common-law tradition.”155

And the Supreme Court itself has

commented on the Sherman Act, specifically the phrase “restraint of

trade,” as invoking the common law, rather than a static definition that

applied upon the Act’s passing in 1890.156

In at least three Supreme

Court decisions, the Supreme Court has reconsidered its previous

antitrust decisions when the “theoretical underpinnings of those

decisions” were “called into serious question.”157

In a 1977 case, Continental T.V. v. GTE Sylvania, Inc.,158

the

Supreme Court considered a challenge by Continental that Sylvania

had violated the Sherman Act by refusing to grant them a franchise in

Sacramento, California.159

The Court had articulated previously that

similar situations were to be analyzed as a per se violation,160

but the

Court in GTE Sylvania overruled its holding in U.S. v. Arnold,

Schwinn & Co., saying that rule of reason analysis should govern.161

The overruled precedent, the Court said, was an “abrupt and largely

unexplained departure” that “has been the subject of continuing

controversy and confusion.”162

The Court went on to discuss

economic scholarship that gave ample reason, in the Court’s opinion,

to overrule Schwinn.163

152

Id. 153

Id. at 4–5. 154

Id. at 20. 155

Id. (quoting Nat’l Soc. of Prof’l Eng’r v. United States, 435 U.S. 679, 688

(1978)). 156

The term “restraint of trade” as used in 1890, the Court explains, was not a

“static” definition. Id. at 21 (citing Bus. Elect. Corp. v. Sharp Elect. Corp., 485 U.S.

717, 732 (1988), and McNally v. United States, 485 U.S. 350, 372–73 (1987)

(Stevens, J., dissenting)). 157

Id. at 21 (citing three Supreme Court cases). 158

Cont’l T.V. Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977). 159

Id. at 39–41. 160

See United States v. Arnold, Schwinn & Co., 388 U.S. 365, 382 (1967)

(finding that vertical price restraint was a per se violation of the Sherman Act). 161

GTE Sylvania, 433 U.S. 36 at 58–59. 162

Id. at 47. Compare with Flood v. Kuhn, 407 U.S. 258, 279 (1972) (calling

MLB’s antitrust exemption “an aberration” that is to be regarded as “unrealistic,

inconsistent, or illogical”). 163

GTE Sylvania, 433 U.S. 36 at 47–49.

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Three decades later, and ten years after Khan, the Supreme Court

overruled a 96-year-old precedent in Leegin Creative Leather

Products, Inc. v. PSKS, Inc.164

In the 1911 case Dr. Miles Medical Co.

v. John D. Park & Sons Co.,165

the Supreme Court ruled that a rule of

per se illegality for vertical price restraints applied.166

Shortly after the

decision, the rule became quickly disfavored.167

The majority in

Leegin discussed that, were this issue one of first impression, they

would hold that the rule of reason, rather than per se rule, would

apply.168

The Court reasoned that because of the treatment of the

Sherman Act as a “common-law statute,” its prohibition on restraints

of trade “evolves to meet the dynamics of present economic

conditions.”169

Citing the Court’s history of overruling precedents

when subsequent cases have weakened their doctrinal underpinnings,

the Supreme Court overruled Dr. Miles.170

Perhaps these cases have demonstrated that stare decisis is not the

“inexorable command” that the majority in Flood recognized,171

especially in the antitrust context. Perhaps, then, the Piazza court had

a point. In fact, perhaps they had a very real argument to overrule

Flood in the broadest sense possible.

Flood stood for the proposition that baseball’s exemption from

antitrust laws continued to apply, both generally and in the specific

context of the reserve clause.172

The result stare decisis in the case

arguably requires future courts to rule that the reserve clause continues

to be subject to antitrust laws, in light of Curt Flood’s challenges to the

reserve clause system. That issue, however, is now moot—baseball

has since done away with the reserve clause in favor of free agency.173

164 Leegin Creative Leather Prod. v. PSKS Inc., 551 U.S. 877, 877 (2007).

165 See generally Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373

(1911) (holding a vertical price-fixing agreement to be per se illegal under the

Sherman Act). 166

See id. at 406–07. 167

The Supreme Court quickly distanced itself from Dr. Miles, namely because

it was decided so soon after the Sherman Act was enacted and at a time when the

Court had little experience with antitrust cases. The Supreme Court had, in more

recent years, limited or overruled similar decisions. Leegin Creative Leather

Products, 551 U.S. at 879. 168

Id. at 878. 169

Id. at 879. 170

Id. at 879–80 (citing Dickerson v. United States, 530 U.S. 428 (2000)). 171

“[MLB’s antitrust exemption] is an aberration that has been with us now for

half a century, one heretofore deemed fully entitled to the benefit of stare decisis . . .

.” Flood v. Kuhn, 407 U.S 258, 282 (1972). 172

Id. at 283–84. 173

History of the Major League Baseball Players Association, MLB,

http://mlb.mlb.com/pa/info/history.jsp (last visited Oct. 31, 2014) (describing the

move from the reserve clause to free agency).

2015] MODERNIZING MLB’S ANTITRUST

EXEMPTION AFTER CITY OF SAN JOSÉ

497

The rule stare decisis is that the business of baseball is broadly exempt

from the antitrust laws.

The Piazza court says that because of the express declaration of

the Flood majority that baseball is interstate commerce, the rules of

Federal Baseball and Toolson II are invalidated outside of their

facts.174

Both of those cases were decided under the assumption that

baseball was not interstate commerce and, because the underpinnings

of those decisions drastically changed, they carry no rule stare decisis

value.175

Because Flood relied upon those decisions to reach its broad

holding that the business of baseball remained exempt from antitrust

law, the Piazza court stated that it, too, had no precedential bearing.176

This argument is weakened, however, by the Supreme Court’s

declaration in Radovich v. National Football League that the rulings in

Federal Baseball and Toolson II—it should be noted that Radovich

was decided before Flood—should be limited to “the business of

organized professional baseball.”177

This language, in tandem with

Toolson II and Flood, lends support that the exemption of the business

of baseball was the intended precedent to be set, rather than the more

narrow holdings suggested by Piazza.

Though the Piazza court’s approach is not ironclad, it is the basis

for an avenue of attack on the antitrust exemption set forth in Federal

Baseball that can be potentially applied under the facts of City of San

José. The argument would be made, as follows: the theoretical

underpinnings of Flood do not apply to these facts, and the changed

circumstances and lessons of accumulated experience since the Flood

decision support the interpretation that MLB’s antitrust exemption

does not apply to franchise relocation. If the theoretical plaintiff filed

suit on these grounds, would he even survive a 12(b)(6) motion, much

less be able to sustain the challenge all the way up to the Supreme

Court of the United States? That is not for us to answer here—only to

propose.

The success of such an argument would depend on the underlying

facts—that is, how have the circumstances present when Flood was

decided or the theory behind applying the exemption changed? While

a factual determination would be essential, investigating these

questions raise interesting issues of public policy when discussing the

174 Piazza v. Major League Baseball, 831 F. Supp. 420, 436 (E.D. Penn. 1993)

(claiming that Flood stripped Federal Baseball and Toolson II of any precedential

value beyond the facts there involved). 175

Id. 176

Id. 177

Radovich v. Nat’l Football League, 352 U.S. 445, 451 (1957) (limiting the

ruling of Federal Baseball and Toolson II to the “business of organized professional

baseball”).

498 WAKE FOREST J.

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[VOL. 15

antitrust exemption. The inquiry becomes less about substantive law

than it does about recognizing the landscape of sports in the United

States.

C. Public Policy Concerns, Including Uniformity with Other

Professional Sports, Support a Change to Allow for Franchise

Relocation Free of the Antitrust Exemption

In 1985, the Kansas City Royals and St. Louis Cardinals faced off

in the World Series, with the Royals prevailing four games to three.178

Television ratings for that series were a very solid 25.3.179

In the most

recent World Series, the Kansas City Royals lost in seven games to the

San Francisco Giants.180

The television ratings were nearly one-third

of what they were in 1985, a paltry 8.2.181

Baseball may very well be America’s pastime, but it is no longer

America’s game. It is more entrenched in American culture than other

sports, perhaps, but in the current landscape of professional sports in

the United States, baseball is no longer king.182

In 1922, when

Federal Baseball was decided, the NFL was two years old, the

National Basketball Association (“NBA”) was 24 years from being

created, and the National Hockey League (“NHL”) would not add an

American team for another two years.183

Major League Baseball, on

the other hand, has operated in some capacity since 1876.184

By the

178

1985 World Series, BASEBALL REFERENCE, http://www.baseball-

reference.com/postseason/1985_WS.shtml (last visited Oct. 18, 2014). 179

World Series Television Ratings, BASEBALL ALMANAC, http://www.baseball-

almanac.com/ws/wstv.shtml (last visited Oct. 18, 2014). 180

Sara Bibel, 52 Million Viewers Tune-In to World Series Game 7, ZAP2IT

(Oct. 30, 2014), http://tvbythenumbers.zap2it.com/2014/10/30/52-million-viewers-

tune-in-to-world-series-game-7/322356. 181

Id. 182

Darren Rovell, NFL most popular for 30th year in row, ESPN (Jan. 14,

2014), http://espn.go.com/nfl/story/_/id/10354114/harris-poll-nfl-most-popular-mlb-

2nd. 183

Christopher Klein, The Birth of the National Football League, HISTORY

(Sept. 4, 2014) http://www.history.com/news/the-birth-of-the-national-football-

league (reporting that the NFL was founded in 1920). History of Basketball in

Canada, NBA (Mar. 8, 2002, 2:47 PM), available at

http://www.nba.com/canada/History_of_Basketball_in_Canad-

Canada_Generic_Article-18023.html (reporting that the first NBA game was played

on November 1, 1946). On October 11, 1924, the Boston Bruins became the first

American team to join the NHL. Bruins and Maroons Join the NHL, NHL,

http://www.nhl.com/history/101124.html (last visited Nov. 1, 2014). 184

The National League, one of the constituent leagues of Major League

Baseball, was formed in 1876. Reds Timeline, MLB, available at

http://mlb.mlb.com/cin/history/timeline.jsp (last visited Nov. 1, 2014).

2015] MODERNIZING MLB’S ANTITRUST

EXEMPTION AFTER CITY OF SAN JOSÉ

499

time Federal Baseball was decided, baseball had been developing for

46 years and was in the midst of a massive spike in popularity,185

due

in no small part to the emergence of great players such as Ty Cobb,

Walter Johnson, and, most notably, Babe Ruth. Baseball was unique.

1. Baseball is facially similar in a business sense to every

other major American professional sport

Perhaps in 1922, baseball did have unique characteristics and

needs. Even in 1953, baseball was considered to be in a unique

position. In the amicus curiae brief filed by the Boston Red Sox in the

Toolson II case, baseball was painted as a “unique enterprise.”186

Why? For baseball to be successful, the brief stated, a paramount

consideration must be a player’s undivided allegiance, and the only

way to assure this allegiance was to safeguard the system by which

players were trained and developed for a team.187

This was baseball’s

unique characteristic, and it was compared to professional soccer in

England.188

But this unique characteristic—the brief was describing

the reserve clause189

—no longer exists, not just in baseball, but in any

American professional sport.

What does it mean, then, as to the statement in Flood that

baseball’s antitrust exemption rests on the sport’s unique

characteristics and needs? If the unique characteristic on which the

courts have relied truly is the reserve clause, there is definitively

nothing to differentiate MLB from its siblings, the NFL, NBA, and

NHL.

Even if the alleged unique characteristics and needs are broader, is

there any aspect of the business of baseball so unique to the sport as to

justify receiving preferential treatment under antitrust laws?

All of the “Big Four” sports (MLB, NFL, NBA and NHL) have

free agency for players.190

All of the Big Four have revenue sharing

185

Peter Panacy, Major League Baseball Finds its Roots in Progressive

America, BLEACHERREPORT (Apr. 11, 2011),

http://bleacherreport.com/articles/661802-major-league-baseball-finds-its-roots-in-

progressive-america. 186

Brief for Boston American League Base Ball Co. as Amicus Curiae

Supporting Respondents at 2, Toolson II, 346 U.S. 356 (1953). 187

Id. at 2. 188

Id. at 15. 189

MLBPA Info, History of the Major League Baseball Players Association,

MLBPA, http://mlb.mlb.com/pa/info/history.jsp (last visited Feb. 6, 2015). 190

See e.g., MAJOR LEAGUE CONSTITUTION, (2005), available at

http://www.bizofbaseball.com/docs/MLConsititutionJune2005Update.pdf; MAJOR

LEAGUE BASEBALL PLAYERS ASSOCIATION, COLLECTIVE BARGAINING AGREEMENT

continued . . .

500 WAKE FOREST J.

BUS. & INTELL. PROP. L.

[VOL. 15

programs.191

All of the Big Four have national television deals, and all

but the NFL allow teams to have accompanying regional television

deals.192

All of the Big Four are governed by a commissioner, split

into two conferences, and split into divisions within the

conferences.193

All of the Big Four have championship events—three

use a “series” to decide the champion, and one uses a single game.194

All of the Big Four utilize amateur drafts from some combination of

high school, college, and international talent pools.195

All of the Big

Four have seen franchises relocate within the last decade.196

All of the

Big Four teams play in designated home facilities, draw from a large

base of season ticket holders, and rely on many of the same revenue

streams.197

All of the Big Four have designated television networks,

websites, and mobile phone applications.198

Beyond that, any

differences are minor, with the obvious exception being baseball’s

exemption from antitrust law.

This is to say that, in a general sense, the thesis that the business of

baseball is unique from any other professional sport is an invalid one.

The rules of baseball, the style of play, the viewing experiences, the

vast history—these are all unique to baseball, but nothing on the

business side clearly distinguishes it from any of the other Big Four

sports.

(2012), available at http://mlb.mlb.com/pa/pdf/cba_english.pdf; Constitution and

Bylaws of the National Basketball Association (2012), available at

http://mediacentral.nba.com/media/mediacentral/NBA-Constitution-and-By-

Laws.pdf; CONSTITUTION AND BYLAWS OF THE NATIONAL FOOTBALL LEAGUE

(2006), available at

http://static.nfl.com/static/content/public/static/html/careers/pdf/co_.pdf;

CONSTITUTION OF THE NATIONAL HOCKEY LEAGUE (2014), available at

http://sportsdocuments.com/2013/11/13/nhl-constitution/; NATIONAL HOCKEY

LEAGUE PLAYERS’ ASSOCIATION, COLLECTIVE BARGAINING AGREEMENT (2013),

available at

http://cdn.agilitycms.com/nhlpacom/PDF/NHL_NHLPA_2013_CBA.pdf . 191

See id. 192

See id. 193

See id. 194

See id. 195

See id. 196

Recent Professional Sports Teams that have Relocated, AZCENTRAL (July

3, 2013, 12:59 PM),

http://archive.azcentral.com/sports/coyotes/articles/20130701recent-professional-

sports-teams-that-have-relocated.html. 197

See generally Danette R. Davis, The Myth & Mystery of Personal Seat

Licenses and Season Tickets: Licenses or More?, 51 ST. LOUIS U. L.J. 241 (2006). 198

See, e.g., www.mlb.com; www.nfl.com; www.nba.com; www.nhl.com.

2015] MODERNIZING MLB’S ANTITRUST

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501

2. MLB’s antitrust exemption has been found to be illogical

and flawed by many sources over the years

The illogic behind baseball’s antitrust exemption has been well-

documented. In 1976, just four years after the Flood decision, the

exemption was examined in great detail by the House Select

Committee on Professional Sports, known as the Sisk Committee.199

After hearing testimony in favor of the exemption from Commissioner

Bowie Kuhn and the owners of various MLB teams, and in opposition

to the exemption from MLB Players Association President Marvin

Miller; economist Roger Noll; and lawyer Steven Rivkin; the Sisk

Committee determined that adequate justification for the antitrust

exemption does not exist.200

No legislation was produced as a result,

and the motivations of the Sisk Committee seemed to be self-

serving.201

Regardless, the record shows a strong opposition to the

exemption.

In 1981, Deputy Assistant Attorney General Tad Lipsky testified

before the House Judiciary Committee that the Antitrust Division of

the Department of Justice had a firm position that “baseball’s antitrust

exemption is an anachronism” that should be eliminated.202

With a

special House committee and the Department of Justice supporting

elimination of the antitrust exemption within a decade of Flood,

support for baseball’s exemption appeared to be waning. Yet in the

time since these discussions, Congress has not addressed the

exemption aside from the Curt Flood Act.203

The Act, which makes

all matters relating to employment of major league baseball players

subject to antitrust law, has a very narrow scope and simply states that

the act does not create a cause of action to challenge the antitrust

exemption as it otherwise pertains to the business of baseball.204

In the law review article by Professor Grow cited earlier,205

over

one dozen pieces of legal scholarship were introduced, many casting a

skeptical eye towards, if not vehemently opposing, the exemption.206

So many pieces of legal scholarship have been written on this topic,

199

Professional Sports Antitrust Immunity: Hearing on H.R. 2784 and H.R.

2821 Before the S. Comm. on the Judiciary, 97th Cong. 381 (1982) (statement of

Donald M. Fehr, General Counsel, Major League Baseball Players Association). 200

Id. at 388. 201

JEROLD J. DUQUETTE, REGULATING THE NATIONAL PASTIME: BASEBALL AND

ANTITRUST 71–72 (Greenwood Publ’g Grp. 1999). 202

See Professional Sports Antitrust Immunity, supra note 199, at 381. 203

Curt Flood Act, Pub. L. 105-297, Oct. 27, 1998, 112 Stat. 2824. 204

15 U.S.C. § 26(b) (2012). 205

Grow, supra note 26. 206

See id. at 261 n.8.

502 WAKE FOREST J.

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and so many in staunch opposition to the exemption,207

that it becomes

baffling to decipher just why the “tipping point” has yet to be reached.

For a rule that has been described by the Supreme Court as illogical

and an aberration, that has been opposed by Congress and the

Department of Justice, and has been continuously attacked by legal

and economic commentators, it seems that MLB’s antitrust exemption

simply cannot be struck out.

3. Franchise relocation free of significant restraints promotes

the economic interests of leagues and teams

The crux of the public policy discussion as it pertains to franchise

relocation, however, is the effect of limiting the ability of teams to

relocate. Between 1960 and 1971, Oakland received three

professional sports franchises. In 1960, the Oakland Raiders, then in

the American Football League, began playing at what is now O.Co

Coliseum, and continued to do so after joining the NFL in 1970.208

In

1968, the former Kansas City Athletics were moved to Oakland by

owner Charles O. Finley and also made their home in the Coliseum.209

In 1971, less than a decade after moving from Philadelphia to San

Francisco, the San Francisco Warriors of the NBA moved into what is

now Oracle Arena, becoming the third major professional team in

Oakland.210

The three franchises likely thought little of Flood v. Kuhn, which

was decided one year after the Warriors’ move, and rightfully so. At

the time, relocation of professional sports franchises was surging.

Between 1950 and 1980, across the United States’ four major

professional sports leagues and franchises were relocated 32 times,

including nine times in Major League Baseball.211

The westward expansion of baseball is perhaps the most notable

example of franchise relocation. Beginning with the Brooklyn

207

See e.g., id.; see generally Colleen Ganin, With San Jose at Bat, Federal

Baseball is in the Bottom of the 9th

, 56 ARIZ. L. REV. 1129 (2014); Mark T. Gould,

Real Fantasy Baseball – Will the Antitrust Exemption Ever End, 11 ENT. & SPORTS

LAW. 3 (1993-1994). 208

Timeline—Raiders Historical Highlights, OAKLAND RAIDERS,

http://www.raiders.com/history/timeline.html (last visited Nov. 2, 2014). 209

JOHN E. PETERSON, THE KANSAS CITY ATHLETICS: A BASEBALL HISTORY,

1954-1967, 260 (McFarland 2003). 210

Warriors History, NBA,

http://www.nba.com/warriors/team_history_index.html (last visited Nov. 2, 2014). 211

Relocation of Professional Sports Teams, WIKIPEDIA,

http://en.wikipedia.org/wiki/Relocation_of_professional_sports_teams (last visited

Nov. 3, 2014).

2015] MODERNIZING MLB’S ANTITRUST

EXEMPTION AFTER CITY OF SAN JOSÉ

503

Dodgers and New York Giants, who in 1958 simultaneously moved to

Los Angeles and San Francisco, respectively, MLB saw an

unprecedented period of franchise relocations.212

Between 1950 and

1980, MLB relocations occurred between Washington, D.C. and

Minneapolis; Milwaukee and Atlanta; Seattle and Milwaukee;

Washington, D.C., and Arlington, Texas; and, of course, Kansas City

and Oakland.213

Interestingly, many of these relocations were not accompanied by

a change in ownership. Economic factors, such as the desire to protect

baseball nationally from competition and the potential for television

revenue in large markets led teams to relocate like never before.214

Because relocation is and has been subject to league approval215

—the

degree of approval being a pertinent issue here—many of the moves

that shaped MLB into what it is today were done with league-wide

interests in mind.

Across the other major sports in the United States, relocation is

also a controversial topic. The competing interests are the same

regardless of the sport.216

On one hand, the league and owner of the

franchise want to advance the interests of the league and team.217

On

the other hand, the interests of the communities involved must be

considered—can the new city economically support a team?218

Will

the old city be left in the dark and crippled economically?

The dark side of relocation reared its ugly head in 1967 when

Kansas City, Missouri, was making an effort to keep their major

league team, the Athletics.219

Owner, Charlie Finley, had been

publicly exploring options elsewhere, including Seattle, Washington;

Milwaukee, Wisconsin; and Oakland, California.220

In an effort to

212

Id. 213

Id. 214

See Daniel E. Lazaroff, The Antitrust Implications of Franchise Relocation

Restrictions in Professional Sports, 53 FORDHAM L. REV. 157 (1984). 215

Tim Hull, San Jose’s Appeal Over Oakland A’s Struck Out, COURTHOUSE

NEWS SERVICE (Jan. 15, 2015, 6:12 PM),

http://www.courthousenews.com/2015/01/15/san-joses-appeal-over-oakland-as-

struck-out.htm. 216

Taylor F. Brinkman, Confronting the Problems of Professional Sports: A

Public Policy Response to Franchise Relocation and Stadium Subsidization, 1

VAND. UNDERGRADUATE RES. J., no. 1, Spring 2005, at 1. (starting from the premise

that all sports league relocations pose the same fundamental challenges.). 217

Ken Woolums, The Next MLB City: “The Top 10,” SB NATION (June 21,

2013, 4:09 PM), http://www.beyondtheboxscore.com/2013/6/21/4452550/the-next-

mlb-city-the-top-10. 218

Id. 219

See Peterson, supra note 209, at 252. 220

Id. at 258.

504 WAKE FOREST J.

BUS. & INTELL. PROP. L.

[VOL. 15

keep the Athletics in Kansas City, voters approved a bond issuance of

$43 million to build a sports complex including a new stadium.221

But, when Oakland promised a hefty stake in multiple revenue

streams, Finley decided on October 11 of that year to move the

Athletics there.222

Where baseball had to be “force-fed” in Kansas

City, it was presented with a very attractive option in Oakland for the

franchise to prosper.223

Kansas City was hung out to dry, and that did not sit well with

people, from local officials all the way up to United States Senators.

When faced with the prospect of being without a MLB team for up to

three years, Kansas City turned to U.S. Senator Stuart Symington, who

threatened to introduce legislation that would upset MLB’s antitrust

exemption if Kansas City was not granted a franchise within a year.224

In the end, the city got its wish—the Kansas City Royals began

playing in 1969 and eventually moved into newly-constructed

Kauffman Stadium in 1973.225

But, the manner in which Finley and

the Athletics left showed the dark side of relocation.

The pertinent discussion here, however, is not just one of franchise

relocation. The Oakland Athletics are attempting to move into another

team’s territory. This sort of move is far from unprecedented,for

example, the Seattle Supersonics moving to Oklahoma City, and the

Atlanta Thrashers moving to Winnipeg.226

Those moves involved

teams moving into markets that were completely unsaturated.227

But

the proposed move of the A’s to San José is controversial primarily

221

Id. at 252. 222

Id. at 257. 223

Id. at 258. 224

Id. at 260. 225

Kansas City Royals History, CBSSPORTS.COM,

http://www.cbssports.com/print/mlb/teams/history/KC/kansas-city-royals (last

visited Feb. 7, 2015). 226

See, e.g., Percy Allen, NBA Approves Sonics’ Move to Oklahoma City, THE

SEATTLE TIMES (Apr. 19, 2008, 12:00 AM),

http://seattletimes.com/html/sports/2004358405_websonivote18.html; Thrashers

Headed to Winnipeg, ESPN (June 1, 2011, 11:16 AM),

http://sports.espn.go.com/nhl/news/story?id=6610414. 227

Peter Keating, No. 1: Oklahoma City Thunder, ESPN THE MAGAZINE, (Sept.

17, 2012), available at http://espn.go.com/espn/story/_/id/8339695/oklahoma-city-

thunder-ranked-best-franchise-sports-ultimate-standings-espn-magazine; see also

NBA Expanded Standings – 2007-2008, NBA,

http://espn.go.com/nba/standings/_/type/expanded/year/2008 (last visited Feb. 5,

2015); see Brad Lendon, NHL’s Atlanta Thrashers set to Move to Winnipeg, CNN

NEWS BLOG (May 31, 2011, 1:45 PM),

http://news.blogs.cnn.com/2011/05/31/report-move-of-nhls-atlanta-thrashers-to-

winnipeg-set/; 2009-2010 Regular Season Team Schedules, NHL,

http://www.nhl.com/ice/page.htm?id=37787 (last visited Feb. 5, 2015).

2015] MODERNIZING MLB’S ANTITRUST

EXEMPTION AFTER CITY OF SAN JOSÉ

505

because of its potential to adversely impact the incumbent franchise’s

finances.228

There are only five markets in the United States where multiple

teams from one sport play.229

In the New York City market, there are

two MLB teams, two NFL teams, two NBA teams, and two NHL

teams.230

In Los Angeles, there are two MLB teams, two NBA teams,

and two NHL teams.231

In Chicago, there are two MLB teams.232

In

the Baltimore-Washington corridor, there are two NFL teams and two

MLB teams.233

And then there is the San Francisco Bay Area, with its

two baseball teams, the Giants and Athletics, and its two football

teams, the 49ers and Raiders.234

Strangely enough, the exact situation that City of San José

confronts has already occurred in the San Francisco area. On July 17,

2014, a new stadium in Santa Clara County opened for a Bay Area

team, despite there being another team in close proximity.235

State-of-

the-art Levi’s Stadium, a $1.2 billion project that had been in the

works since 2007, would play host to a variety of sporting events but

its primary tenant was a National Football League team—the San

228

Terra Hittson & Deirdre A. McEvoy, Oakland A’s May Not Move, Ninth

Circuit Says, THE ANTITRUST LAW BLOG OF PATTERSON BELKNAP WEBB & TYLER

LLP, (Jan. 26, 2015), http://www.antitrustupdateblog.com/blog/oakland-as-may-not-

move-ninth-circuit-

says/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-

Original; Mike Rosenberg, San Jose Appeals A’s Lawsuit Against MLB to U.S.

Supreme Court, THE REPORTER, (Feb. 4, 2015),

http://www.thereporter.com/sports/20150203/san-jose-appeals-as-lawsuit-against-

mlb-to-us-supreme-court. 229

See The Mag’s Ultimate Standings 2014, ESPN,

http://espn.com/sportsnation/teamrankings (last visited Feb. 5, 2015). 230

Michael Leboff, The State of New York Sports, THE ROCKAWAY TIMES (Feb.

2, 2015), http://rockawaytimes.com/2015/02/02/state-new-york-sports/. 231

Team-by-Team Information, MLB, http://mlb.mlb.com/team/ (last updated

June 30, 2014); Teams, NBA, http://www.nba.com/teams/ (last visited Feb. 5, 2015);

Teams, NHL, http://www.nhl.com/ice/teams.htm (last visited Feb. 5, 2015). 232

Andy Schmidt, Which Chicago Team has Better 2015; Cubs or White Sox?,

SPORTSBLOG (Jan. 29, 2015),

http://sportsinferno.sportsblog.com/posts/1716816/which_chicago_team_has_better_

2015__cubs_or_white_sox_.html. 233

Teams, NFL, http://www.nfl.com/teams (last visited Feb. 5, 2015); Team-by-

Team Information, supra note 231. 234

Jamie Jarvis, Best of the Bay: Sports, BAY AREA KID Fun,

http://www.bayareakidfun.com/best-of-the-bay-sports/ (last visited Feb. 5, 2015). 235

See Goodell: Levi’s Might Fit Raiders, ESPN (July 18, 2014),

http://espn.go.com/nfl/story/_/id/11229559/roger-goodell-floats-san-francisco-49ers-

levi-stadium-oakland-raiders-option.

506 WAKE FOREST J.

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Francisco 49ers.236

The stadium will see college football conference

championship games, outdoor hockey games, a wrestling match, and,

on February 7 of 2016, will be host to Super Bowl L.237

Before

moving to Levi’s Stadium, the 49ers played in Candlestick Park, a

mere twenty-two miles away from O.Co Coliseum where the

neighboring Oakland Raiders play its home games.238

The Raiders did not block the 49ers move to Santa Clara.239

In

fact, many commentators have noted that, rather than build a new

stadium themselves, the Raiders may end up sharing Levi’s Stadium

with the 49ers,240

just like the New York Giants and Jets share

MetLife Stadium in East Rutherford, New Jersey.241

The 49ers’ move

to Santa Clara reinforces two salient points—first, that MLB is unique

in its enabling of teams to unilaterally block other teams’ moves, and

second, that Santa Clara County, the “South Bay,” is an attractive spot

for Bay Area teams to build stadiums.

In the Major League Baseball Constitution, Article V, Section

2(b)(3), franchise relocation is subject to approval by three-fourths of

all teams—in a thirty-team league, that amounts to approval by at least

twenty-two teams.242

This is similar to relocation rules in the NBA,

which requires a majority vote,243

and in the NFL, which also requires

three-fourths majority.244

But baseball differs from the NBA and NFL in the unique “veto

power” possessed by individual teams. In the rules of Major League

Baseball, Rule 52 contains the procedural requirements for relocation,

236

Matt Niska, Niska: Examining the History Behind the Construction of Levi’s

Stadium, STANFORD DAILY (Aug. 10, 2014) available at

http://www.stanforddaily.com/2014/08/10/niksa-examining-the-history-behind-the-

construction-of-levis-stadium/. 237

10 Biggest Upcoming Events At Levi’s Stadium That Don’t Involve The

49ers, CBS SF BAY AREA (Aug. 18, 2014, 1:26 PM),

http://sanfrancisco.cbslocal.com/2014/08/18/biggest-upcoming-events-at-levis-

stadium-pac-12-super-bowl-mexico-chile-football-nhl-outdoor-wrestlemania/. 238

Goodell: Levi’s Might Fit Raiders, supra note 235. 239

See id. 240

See id. 241

Id. 242

MAJOR LEAGUE CONSTITUTION, art. V, § 2(B)(3) (2005) available at

http://www.bizofbaseball.com/docs/MLConsititutionJune2005Update.pdf. 243

See CONSTITUTION AND BYLAWS OF THE NATIONAL BASKETBALL

ASSOCIATION (2012), available at

http://mediacentral.nba.com/media/mediacentral/NBA-Constitution-and-By-

Laws.pdf. 244

See CONSTITUTION AND BYLAWS OF THE NATIONAL FOOTBALL LEAGUE

(2006), available at

http://www.nfl.com/static/content/public/static/html/careers/pdf/co_.pdf.

2015] MODERNIZING MLB’S ANTITRUST

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507

detailing a strict, difficult process for obtaining approval to relocate.245

If a franchise wants to relocate into the operating territory of another

franchise—like the Athletics moving into the Giants’ territory—the

most significant hurdle is obtaining the consent of both the franchise

controlling the territory, and the league.246

The de facto veto ability

possessed by franchises is argued to be a significant restraint of

trade,247

and is probably a major reason that, since the flurry of

relocations between 1950 and 1980 in the MLB, there has only been

one subsequent relocation—and even that relocation is the subject of

controversy.248

Is Major League Baseball promoting its own economic interests by

restricting relocation in this manner? This is certainly an arguable

point. Ultimately, owners of baseball teams are in a for-profit

endeavor. When Lew Wolff and his ownership group bought the

Oakland Athletics in 2005, they paid $180 million.249

Today, the

Athletics are valued at $495 million, despite the economic challenges

faced by the team.250

Were Mr. Wolff to sell the team tomorrow, he

would likely realize a profit of at least $300 million.

Business decisions by franchise owners are economically

motivated, with a particular emphasis on increasing franchise value.251

While there are many justifications for the strict view on relocation

articulated by the MLB, the profit-seeking motives of owners are a

compelling justification for allowing less-regulated relocation. In the

example of the Athletics, a move to San José likely would allow the

245

See MAJOR LEAGUE RULES (2008),

http://www.bizofbaseball.com/docs/MajorLeagueRules-2008.pdf. 246

Id. 247

See Complaint, supra note 7, at 2. 248

When the Montreal Expos moved to Washington, D.C., to become the

Washington Nationals, a television rights dispute with the neighboring Baltimore

Orioles began to develop. This dispute has entered the legal system. See Dayn

Perry, Report: Nationals-Orioles TV rights dispute getting uglier, CBS SPORTS (July

29, 2014, 4:27 PM), http://www.cbssports.com/mlb/eye-on-

baseball/24641928/report-nationals-orioles-tv-rights-dispute-getting-uglier. 249

Oakland Athletics Team Valuation, FORBES,

http://www.forbes.com/teams/oakland-athletics/ (last visited Feb. 14, 2015). 250

Id. 251

Cf. Mike Ozanian, Baseball Team Values 2014 Led By New York Yankees At

$2.5 Billion, FORBES (March 26, 2014, 9:54 AM),

http://www.forbes.com/sites/mikeozanian/2014/03/26/baseball-team-values-2014-

led-by-new-york-yankees-at-2-5-billion/; Travis Waldron, Forbes: The Average NFL

Franchise Is Now Worth $1.4 Billion, THINKPROGRESS (Aug. 22, 2014, 1:00 PM),

http://thinkprogress.org/sports/2014/08/22/3474584/the-average-nfl-franchise-is-

now-worth-14-billion/; Cork Gaines, Why NBA Franchise Values Are Skyrocketing,

BUSINESS INSIDER (Jun. 10, 2014, 4:26 PM), http://www.businessinsider.com/why-

nba-franchise-values-are-skyorcketing-2014-6.

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team to become so much stronger economically that the team’s

dependence on revenue sharing could end.252

The long-term value of

the Athletics in a new, baseball-friendly stadium in a burgeoning

market, such as the South Bay, should be significantly higher than

what it would be in the decaying, multipurpose Coliseum in the

economically-disadvantaged market in Oakland. In 1998, for

example, the San Francisco Giants were worth $213 million while

playing in multipurpose, outdated Candlestick Park.253

Sixteen years

later, playing in beautiful AT&T Park, the Giants are reportedly worth

$1 billion.254

Even adjusting for inflation, the team’s value has

increased by 237 percent.

This is not to say that a team’s stadium and location are the sole

determinant of franchise value—that could not be further from the

truth. However, the Giants are a clear illustration in a relevant market

that long-term value does appear to be positively impacted by

“modernizing” the ballpark. The Athletics are profit-seekers, just as

the Giants were when they threatened to move to Tampa Bay in the

early 1990s, and just as the 49ers were when they moved to Santa

Clara, and just as the Golden State Warriors are by agreeing to move

back to San Francisco from Oakland in 2018.

For as much as Oakland experienced a great influx of professional

sports franchises decades ago, the city is facing the prospect of losing

all three of its teams—and likely all to other municipalities within the

Bay Area. If the Raiders end up sharing Levi’s Stadium with the 49ers

and with the Athletics almost certainly heading for San José if the

move is approved, Oakland could go from having three professional

teams to zero in less than a decade.

The 49ers’ move to Santa Clara County is, if nothing else,

recognition of the economic value the South Bay possesses. San José,

the centerpiece of the South Bay, had the second-highest increase in

economic output among major urban areas between 2012 and 2013.255

Continuing efforts by local business leaders and politicians to improve

the infrastructure and housing situations in the South Bay are leading

toward San José blossoming into “the urban heart of Silicon

252

See Complaint, supra note 7, at 17. 253

Forbes Valuations of the 30 Clubs in MLB, BUSINESS OF BASEBALL,

http://www.bizofbaseball.com/index.php?option=com_wrapper&Itemid=126 (last

visited Nov. 2, 2014). 254

San Francisco Giants Team Valuation, FORBES,

http://www.forbes.com/teams/san-francisco-giants/. 255

Richard Florida, Houston and San José are Leading U.S. Economic Growth,

CITYLAB (Sept. 17, 2014), http://www.citylab.com/work/2014/09/houston-and-san-

José-are-leading-us-economic-output-growth/380360/.

2015] MODERNIZING MLB’S ANTITRUST

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509

Valley.”256

While Oakland is not necessarily in dire straits

economically,257

it is clear that the grass is greener in the South Bay.

The corporate environment in San José and its surrounding

communities promote a large season ticket base, including a likely

high demand for luxury boxes, a major sub-source of revenue for

teams.258

Whatever reasons the Giants have for exercising their veto power

to prevent the Athletics from moving south, there are strong policy

reasons to prevent them from doing so. The Athletics have the ability

to revitalize their franchise and end their dependence on revenue

sharing, all without any significant threat to the Giants, who, ironically

would not even have these territorial rights had former A’s owner

Walter Haas not agreed to let the Giants move to San José in the early

1990s.259

MLB’s antitrust exemption provides a means for the league and a

team to control franchise location beyond any reasonable degree.

Conversely, the league profits as a whole when its constituent teams

are in sound financial condition—the league becomes more

competitively balanced, and MLB does not have to expend resources

to help flailing franchises.260

Yet the exemption persists, and as long

as it persists, the Athletics will likely be handcuffed into a suboptimal

resolution of its situation.

IV. CONCLUSION

On July 22, 2014, the Oakland Athletics announced that they had

signed a new 10-year lease to stay in Oakland and continue playing at

256

George Avalos, Will housing and traffic woes jeopardize South Bay

economy?, SAN JOSÉ MERCURY NEWS (May 30, 2014, 2:36 PM),

http://www.mercurynews.com/business/ci_25852564/housing-and-traffic-woes-may-

jeopardize-south-bay. 257

Fitch Affirms Oakland, CA’s GOs at ‘A+’; Outlook Stable, BUSINESSWIRE

(July 28, 2014, 4:19 PM),

http://www.businesswire.com/news/home/20140728006165/en/Fitch-Affirms-

Oakland-CAs-GOs-Outlook-Stable#.VHOVPovF-So. 258

Mark Koba, Luxury Suites Rule in Professional Sports Revenue, USA

TODAY (Feb. 4, 2012),

http://usatoday30.usatoday.com/money/economy/story/2012-02-04/cnbc-super-

bowl-suites/52948968/1; Fact Sheet: History & Geography, CITY OF SAN JOSE, at 6,

https://www.sanjoseca.gov/DocumentCenter/View/780 (last visited Feb. 5, 2015). 259

A’s Seek Territorial Rights Resolution, ESPN (March 7, 2012, 9:39 PM),

http://espn.go.com/mlb/story/_/id/7658699/oakland-athletics-san-francisco-giants-

odds-territorial-rights. 260

See Jacobson, supra note 12.

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the Coliseum.261

Upon signing the lease, the Athletics said in

statement that, “Most of all, we are happy for our great fans who . . .

will know that the Oakland Athletics will continue to play its games at

O.Co Coliseum.”262

Yet within the lease is a provision stating that if the Athletics leave

Oakland at least two years into the lease, they face a penalty of $1.6

million per year.263

Further, the Athletics agreed to engage in good-

faith discussions about building a new stadium in Oakland.264

Whether or not the 2017 Oakland A’s or 2020 Oakland A’s play

their home games at O.Co Coliseum will likely be decided behind

closed doors, in discussions between team ownership, local leadership,

and MLB authorities. Perhaps the team will not partake in the exodus

from Oakland and stay, whether in the Coliseum or in a new stadium.

Maybe the Athletics and Giants can strike a “gentleman’s agreement,”

much like the one Walter Haas made to grant Santa Clara County to

the Giants,265

which would allow for the A’s to move to the South

Bay. Maybe MLB will simply amend its constitution, stripping the

Giants of their right of refusal and clearing the path for a move to San

José.

Or maybe, at some point in the near future, MLB’s antitrust

exemption will cease to exist in its current form. It could come by

Supreme Court ruling. It could come by legislative action. However

it would happen, it would be a welcome move. A move away from the

antitrust exemption is a move towards a more modernized professional

sports league. The time has come for baseball to join its counterparts

in the 21st Century and not rely on the outdated declarations of the

courts that baseball is an anomaly that must stay an anomaly.

The blueprint is here. The cards are on the table. The runners who

will end Major League Baseball’s antitrust exemption as we know it

are in scoring position. The only question that remains to be answered

is this:

Who will drive them in?

261

A’s Reach Deal to Stay in Oakland, ESPN (July 22, 2014, 11:13 PM),

http://espn.go.com/mlb/story/_/id/11250085/oakland-athletics-agree-10-year-lease-

stay-town. 262

Id. 263

Id. 264

Id. 265

A’s Seek Territorial Rights Resolution, supra note 259.

2015] MODERNIZING MLB’S ANTITRUST

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V. ADDENDUM

“If only Casey could but get a whack at that—We’d

put up even money now, with Casey at the bat.”

—“Casey at the Bat” by Ernest Thayer266

On January 15th, 2015, nearly five months after the Ninth Circuit

Court of Appeals heard oral arguments, its decision in City of San José

v. Office of the Commissioner of Baseball was filed.267

As expected,

the three-judge panel affirmed the district court’s dismissal of the City

of San José’s antitrust lawsuit,268

and once again, Major League

Baseball’s exemption from antitrust laws stood tall. As the opinion

stated, inspired by the iconic baseball poem, “Like Casey, San José

has struck out here.”269

Well-meaning as Judge Kozinski’s hat tip to Mr. Thayer may be,

the reference was perhaps misplaced. Casey was never at bat here,

because this was not the situation for Casey to bat. As the court points

out, “Only Congress and the Supreme Court are empowered to

question Flood’s continued vitality.”270

This decision was

unremarkable, if for no other reason than its deference to precedent

and Congressional inaction,271

the same justifications that Toolson II

and Flood used in upholding Federal Baseball.272

In short, for Casey

to “get a whack at that”,273

and for the loyal patrons of Mudville to

like their odds, Mighty Casey would have to go to bat either before the

Supreme Court or Congress.

In the Ninth Circuit’s decision, special attention is given to the

Curt Flood Act of 1998.274

Where ordinarily, congressional inaction

lacks significance, specific legislation in a field that explicitly exempts

an issue from that legislation is dispositive of congressional intent.275

The Ninth Circuit found that, by explicitly exempting franchise

relocation from the Curt Flood Act, Congress made clear its intention

to keep franchise relocation firmly within the grasp of the antitrust

266

Ernest L. Thayer, Casey at the Bat (1888), available at

http://www.poets.org/poetsorg/poem/casey-bat. 267

City of San José v. Comm’r of Baseball, No. 14-15139, 2015 WL 178358

(9th Cir. Jan. 15, 2015). 268

See id. 269

Id. at *5. 270

Id. 271

Id. at *2–4. 272

Id. at *3. 273

Thayer, supra note 266. 274

See 15 U.S.C. § 26(b) (2012). 275

Office of the Comm’r of Baseball, No. 14-15139, 2015 WL 178358 at *4

(9th Cir. Jan 15, 2015) (citing Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S.

633, 650 (1990) and Kimbrough v. U.S., 552 U.S. 85 (2007)).

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exemption.276

Combined with a continued affirmation of the

principles of stare decisis articulated in Flood, the court made it

abundantly clear that San José’s challenge would hardly make a dent

in the antitrust exemption.

The outlook wasn’t brilliant for Casey’s Mudville nine, and it is

not brilliant for the City of San José either. Perhaps the Supreme

Court will decide it is time to make another ruling on MLB’s antitrust

exemption, but given the Ninth Circuit’s rapid and strong takedown of

the appellants, that seems unlikely. Rather, the Oakland Athletics are

likely stuck without a legal remedy for their failed attempt to relocate

to San Jose.

As for the exemption, it remains as strong as ever. Perhaps the

next challenge will attack its shaky, outdated foundation. For now,

there appears to be no real threat to the exemption. Perhaps Judge

Kozinski was correct—maybe Casey did strike out.

Or maybe Casey is back in the dugout, sitting on the bench,

waiting for the chance to face the right pitcher.

276

See id.