Ninth Circuit Rules That Major League Baseball Remains Exempt from Antitrust Laws
The U.S. Supreme Court has said that the doctrine of stare decisis reflects a “policy judgment that in most matters it is more important” that a “rule of law be settled than that it be settled right,” and that the static nature of settled law usually is strongest when the question is one of statutory interpretation. It stressed in 1978, however that “the general presumption that legislative changes should be left to Congress has less force with respect to the Sherman Act,” adding in 1997 that “this Court has reconsidered its decisions construing the Sherman Act when the theoretical underpinnings of those decisions are called into serious question.” Most recently, in 2007, the Court overruled a 96-year-old precedent that minimum resale price maintenance—or vertical price-fixing, in plaintiffs’ parlance—is per se unlawful under the Sherman Act, largely on the ground that its doctrinal underpinnings had been undermined.
Nevertheless, according to a decision last month by a Ninth Circuit Panel, the Supreme Court has determined to let stand its 1922 decision declaring that the Sherman Act has no application to the “business of baseball,” even though the decision is based on an outmoded interpretation of the Commerce Clause, and even though the Supreme Court has applied the antitrust laws to other professional sports. Accordingly, the appellate panel affirmed dismissal of the district court’s decision that the Sherman Act did not apply to matters involving the relocation of a team’s franchise to a city within the territory of another franchise.
The Ninth Circuit decision involved an antitrust suit against the Commissioner of Baseball (Bud Selig) by the City of San Jose, California concerning the City’s failure to obtain approval of a move by the Oakland Athletics to San Jose. The Major League Baseball (MLB) constitution requires approval of at least three-quarters of the 30 MLB clubs before a team can relocate within another franchise’s territory, and the move from Oakland to San Jose would place the Athletics within the exclusive operating territory of the San Francisco Giants. MLB has not acted on the relocation request since 2009. Believing the delay in effect constitutes rejection of the request, the City filed suit claiming, in major part, a violation of the Sherman Act. The district court dismissed the claim, relying on the baseball industry’s 92-year exemption from the antitrust laws (which, it recognized was aberrational). The City appealed to the Ninth Circuit.
Baseball’s antitrust exemption was created by the Supreme Court’s 1922 ruling in Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, that baseball games are a “purely state affair” and therefore exempted from the Sherman Act by the Commerce Clause. This view of the limitations of the Commerce Clause became outmoded within the next 20 years, but the exemption survived. In 1953, in Toolson v. New York Yankees, Inc., the Court reaffirmed Federal Baseball on the basis of stare decisis, observing that Congress had “not seen fit” for 30 years to bring baseball under the antitrust laws despite its knowledge of the Federal Baseball Club decision. In 1972, in Flood v. Kuhn, the Court approved the exemption a third time, relying again on the doctrine of stare decisis and Congress’s seeming acquiescence in the two earlier holdings by not doing anything to overturn them.
The Ninth Circuit Opinion
Relying on these precedents, the Ninth Circuit effectively told San Jose, “three strikes and you’re out.” The appellate panel noted that the City “joins the long line of litigants that have sought to overturn one of federal law’s most enduring anomalies.” The court rejected the City’s argument that the 1972 Flood decision applied only to the “reserve clause” at issue in that case (a provision in baseball contracts at that time preventing players from changing clubs without the express consent of the club for which they played). The panel also observed that the Supreme Court had declared in its 1953 Toolson decision that the antitrust exemption applied to the entire “business of providing public baseball games for profit,” and, here, to disturb franchise relocation rules “indisputably interferes with the public exhibition of professional baseball.” Additionally, according to the panel, limiting the scope of the exemption would create “confusion and retroactivity problems.”
Perhaps most importantly, the Ninth Circuit stressed that congressional acquiescence applies with special force to MLB franchise relocation. In 1998, Congress passed the Curt Flood Act, which withdrew baseball’s antitrust exemption with respect to the reserve clause, but specifically maintained it for franchise relocation, stating that the statute “does not create, permit or imply a cause of action by which . . . to apply the antitrust laws to . . . franchise location or relocation.” Therefore, although congressional inaction ordinarily lacks persuasive significance, here it did not, according to the Panel, because Congress explicitly exempted franchise relocation issues from the baseball statute it enacted in 1998.
The Ninth Circuit panel did emphasize, however that despite the breadth of its ruling, it did not necessarily mean that all antitrust suits that involve the baseball industry are barred. Collateral issues outside the “heartland” of the business of baseball remain subject to antitrust challenge. As an example, the Ninth Circuit referred to an earlier decision in which it had allowed an antitrust claim by a baseball franchise against stadium concessionaires to go forward without any reference to the baseball exemption. But it declared that few, if any, issues are as central to a baseball league’s proper functioning as its rules regarding the geographic designation of franchises. The court (or, at least, Judge Kozinski, who authored the opinion) could not keep from concluding: “Like Casey, San Jose has struck out here.”
Unlike other instances in which the Supreme Court has not hesitated to disregard the doctrine of stare decisis and to overturn discredited or outmoded antitrust principles, and in contrast to the rule that antitrust exemptions must not be liberally interpreted by the courts, it clearly is otherwise with respect to the unique exemption for professional baseball. Indeed, the Ninth Circuit in this case did not even suggest that the Supreme Court should revisit the baseball exemption, despite the fact that all other professional sports are subject to the antitrust laws. For that reason, and in the absence of any conflict within the circuit courts, it seems extremely unlikely that the Supreme Court would entertain a certiorari petition if one were filed. In this contest, there likely will be no extra innings.