Source: Sportico

Minors Sue MLB Over Antitrust Status in Wake of NCAA Alston Case

By: Michael McCann

Minors Sue MLB Over Antitrust Status in Wake of NCAA Alston Case

Should Major League Baseball still enjoy an antitrust exemption given the U.S. Supreme Court’s recent ruling that the NCAA isn’t owed preferential treatment under antitrust law?

That is the core question raised in a federal lawsuit filed Monday by four minor league baseball teams, stripped of their MLB affiliations. Their case against MLB will be heard by Judge Arthur Carter in the Southern District of New York.

The teams—the Staten Island Yankees, the Norwich Sea Unicorns, the Salem-Keizer Volcanoes and the Tri-City ValleyCats—are no strangers to litigation against MLB. As detailed on Sportico, the now-defunct SI Yankees are suing MLB and the New York Yankees in state court for breach of contract and related claims. Their suit contends that MLB’s culling of affiliations with 43 minor league clubs broke the law. The ValleyCats filed a similar lawsuit against MLB and the Houston Astros.

The newest lawsuit asserts that MLB and its 30 teams unlawfully conspired to “boycott” teams they stripped of affiliations. In a complaint authored by David Lender, a partner at Weil Gotshal who has successfully litigated on behalf of ESPN and other companies, the teams blast MLB’s reorganization as “nothing less than a naked, horizontal agreement to cement MLB’s dominance over all professional baseball.” Berg & Androphy’s James Quinn, who successfully represented NFL players in litigating for free agency in the 1990s, is also counsel.

The complaint argues that MLB severed ties with clubs “without regard to competitive merit,” instead valuing whether clubs “were already owned by MLB clubs” or “otherwise served MLB interests.” To illustrate, the Asheville Tourists, an Astros Single-A affiliate, were spared because—as the complaint tells it—they’re owned by a powerful political figure, Ohio Gov. Mike DeWine.

The complaint concedes the teams can only prevail if a longstanding understanding of the law is reinterpreted. For nearly 100 years, MLB has enjoyed an exemption from federal antitrust law.

In 1922, the U.S. Supreme Court held in Federal Baseball Club v. National League that MLB is not subject to federal antitrust law because federal antitrust claims require interstate commerce. Games are only played in one state, which led the court to conclude that interstate activity was not present.

That style of reasoning was consistent with the court’s strict conception of interstate commerce in the early 20th century. However, more contemporary analysis would stress that MLB teams travel across state lines and that equipment, broadcasts, Internet streams and other game-related business routinely cross states. To that point, the court would later refuse to exempt boxing (1955) and football (1957) from antitrust scrutiny despite the fact that, like baseball, their games/bouts are held in one state.

But as Curt Flood would discover in 1972, “stare decisis”—Latin for “to stand by things decided”—is a powerful legal principle. Flood argued that MLB and its clubs agreeing to use the reserve clause, which allowed teams to renew player contracts on a year-to-year basis, violated antitrust law. The Supreme Court was sympathetic to Flood but held against him on the basis that the court had already exempted MLB from antitrust claims. The court noted that if Congress wanted MLB to face antitrust scrutiny, it should pass a law saying as much.

Fast forward to 1998, a year after Flood passed away. Congress and President Bill Clinton heeded the Court’s advice. The Curt Flood Act was enacted, and it narrowed MLB’s antitrust exemption. The act clarified that “MLB players are covered under the antitrust laws [and] have the same rights under the antitrust laws as do other professional athletes.” In other words, when the issue at hand is MLB players’ salaries and other aspects of employment, MLB is no longer immune from antitrust scrutiny. To evade such scrutiny, MLB must collectively bargain workplace rules with MLBPA—a relevant point as MLB and MLBPA attempt to negotiate a new CBA amid a lockout.

The act, however, limits its scope to MLB players. It thereby leaves in place MLB’s antitrust exemption for minor league baseball, ownership sales, licensing of intellectual property, the amateur draft and franchise relocation.

Undaunted, the four minor league teams maintain the antitrust exemption has become a notorious “get-out-of-jail-free card” and is now ripe for challenge.

Writing on behalf of all nine justices in Alston, Justice Neil Gorsuch noticeably criticized Federal Baseball Club as illogical. “In Federal Baseball Club … the Court,” Justice Gorsuch wrote, “reasoned that ‘exhibitions’ of ‘base ball’ did not implicate the Sherman Act because they did not involve interstate trade or commerce—even though teams regularly crossed state lines (as they do today) to make money and enhance their commercial success.” He added that the court has since “acknowledged criticisms of the decision as ‘unrealistic’ and ‘inconsistent’” and “aberrational.”

The teams believe that Justice Gorsuch was all but inviting an opportunity to overrule Federal Baseball Club. “Plaintiffs,” the complaint surmises, “have objectively good reasons to believe that the Supreme Court would no longer apply the . . . baseball antitrust exemption if presented with a proper case for reconsidering it. This is that case.” The complaint also insists that while Flood’s loss “caused the Supreme Court to continue the baseball exemption,” the continuation only concerned player movement. “This case has nothing to do with the reserve clause.”

MLB will answer the complaint, deny the allegations and argue the teams have misread case law.

In Flood, the court did not say the exemption would only continue for player movement. The court invited Congress to act, and it did so—but in a way that MLB will cast in a favorable light. Congress preserved the exemption for matters related to minor league baseball. Further, although members of Congress have periodically introduced legislation to rescind the exemption, none has advanced. It would seem, MLB is poised to contend, that Congress has spoken and decided to maintain the exemption for minor league baseball.

MLB will also downplay Justice Gorsuch’s commentary about MLB as mere dicta, meaning commentary within a judicial opinion that is not essential to the holding and has diminished precedential effect. The court in Alston held the NCAA and member schools unlawfully conspired to restrict compensation for academic-related costs. Discussion of MLB’s exemption—a different legal construction than preferential treatment for the NCAA—was seemingly not essential.

The case is years away from landing at the Supreme Court, if it ever gets that far. The teams demand a jury trial, which wouldn’t be scheduled until well into 2022 or later, followed by a potential appeal to the U.S. Court of Appeals for the Second Circuit and, thereafter, a possible petition to the Supreme Court. Most likely the case will end before the Supreme Court considers taking it.

But in litigation, as in baseball, sometimes the unlikely happens.

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