Ninth Circuit Rejects San Jose’s Bid to Overturn Baseball’s Antitrust Exemption

2/27/2015 Articles

Published in The State Bar of California Antitrust and Unfair Competition Law Section’s Antitrust E-Brief
February 2015

Baseball is the only national sport that is exempt from the antitrust laws.  The baseball exemption has existed for 92 years and withstood both court and Congressional challenges, despite the United States Supreme Court’s acknowledgement that the exemption may be described as “unrealistic, inconsistent, or illogical” (see Radovich v. Nat’l Football League, 352 U.S. 445, 451-52 (1957)).  The exemption was created in 1922, when the Supreme Court first held that Major League Baseball (“MLB”) was not subject to the federal antitrust laws because it was not involved in interstate commerce.  Over the years, the federal courts have adopted the view that baseball is exempt from the antitrust laws, even though it is undisputedly engaged in interstate commerce.  Since 1953, the Supreme Court has addressed baseball’s antitrust exemption from federal antitrust laws several times and each time explicitly refused to overturn it, stating repeatedly that baseball’s exemption could only be altered through legislation.  Then, in 1998, Congress passed the Curt Flood Act, which revoked baseball’s antitrust exemption with respect to employment issues but did not disturb it for other matters.

Given this history, it is not surprising that on January 15, 2015, the Ninth Circuit rejected San Jose’s appellate arguments for overturning baseball’s antitrust exemption.  See City of San Jose v. Office of the Comm’r of Baseball, _ F3d. _, No. 14-15139, 2015 WL 178358 (9th Cir. Jan. 15, 2015) (“San Jose v. MLB”).  The appeal arose as a result of the Oakland Athletics’ effort to relocate their baseball franchise to San Jose.  When the A’s asked MLB for permission to move to San Jose, the league shelved the request in a committee.  San Jose then sued MLB, claiming that the refusal was an agreement among MLB team owners to preserve the San Francisco Giants’ local monopoly in violation of the federal and state antitrust laws.  Judge Ronald Whyte of the Northern District of California dismissed San Jose’s action on grounds that “MLB’s alleged interference with the A’s relocation to San Jose is exempt from antitrust regulation.”  City of San Jose v. Office of the Comm’r of Baseball, 2013 WL 5609346, at *11 (N.D. Cal., Oct. 11, 2013).  San Jose appealed to the Ninth Circuit.

Judge Kozinski, writing for the Ninth Circuit, affirmed the dismissal of San Jose’s antitrust claims stating “San Jose has struck out” on its effort to overturn baseball’s antitrust exemption.  San Jose v. MLB, 2015 WL 178358, at *5.  After reviewing the Supreme Court case law assigning responsibility to Congress to make any necessary changes to the exemption, the Ninth Circuit concluded that congressional acquiescence to the baseball antitrust exemption was evident through the 1998 Curt Flood Act.  The Court explained:

[W]hen Congress specifically legislates in a field and explicitly exempts an issue from that legislation, our ability to infer congressional intent to leave that issue undisturbed is at its apex.

The exclusion of franchise relocation from the Curt Flood Act demonstrates that Congress (1) was aware of the possibility that the baseball exemption could apply to franchise relocation; (2) declined to alter the status quo with respect to relocation; and (3) had sufficient will to overturn the exemption in other areas.

Id. at *4.  The Ninth Circuit also affirmed the dismissal of San Jose’s state antitrust claims because “[b]aseball is an exception to the normal rule that ‘federal antitrust laws supplement, not displace, state antitrust remedies.” Id. Baseball’s special status under the antitrust laws was thus, once again, affirmed in full.

San Jose has indicated that it will appeal the Ninth Circuit’s ruling to the Supreme Court.  Counsel for the City of San Jose, Joseph Cotchett, said: “We argued to the Ninth Circuit Court of Appeals that, no matter which way they held, this case was going to the Supreme Court.  We believe the Supreme Court will treat baseball like any other business in America and find MLB’s supposed exemption does not apply to the A’s proposed move.  The A’s should be allowed to relocate to San Jose.”

The issue is what can the Supreme Court do?  Some argue that if Congress addressed the franchise relocation issue in the Curt Flood Act, the Supreme Court can only find the Curt Flood Act unconstitutional, it cannot rewrite a statute with which it does not agree.  Others argue that the Curt Flood Act addressed only the reserve clause not the franchise relocation issue and furthermore, having created the exemption, the Court has the power to abrogate the exemption.