City of San Jose v. Office of the Commissioner of Baseball

Court of Appeals for the Ninth Circuit
2015 WL 178358, 776 F.3d 686, 2015 U.S. App. LEXIS 675 (2015)

ELI5:

Sections

Rule of Law:

Major League Baseball's historic exemption from federal antitrust laws extends to the entire business of providing public baseball games, specifically including regulations regarding franchise relocation.

Facts:

The Constitution of Major League Baseball (MLB) assigns specific operating territories to each of its 30 member clubs.
The Oakland Athletics' designated territory consists of Alameda and Contra Costa counties, while the City of San Jose falls within the exclusive operating territory of the San Francisco Giants.
Seeking increased revenue, the Oakland Athletics wished to relocate to San Jose, but league rules prohibit moving into another team's territory without approval from three-quarters of MLB clubs.
In 2009, MLB formed a committee to study the proposed move but delayed making a decision for several years.
Meanwhile, the Athletics entered into an option agreement with the City of San Jose to purchase land for a new stadium.
Because MLB failed to grant the necessary approval for relocation, the Athletics could not perform on the option agreement, and the land deal expired.

Procedural Posture:

San Jose filed suit against the Office of the Commissioner of Baseball in the U.S. District Court for the Northern District of California alleging violations of state and federal antitrust laws.
MLB filed a motion to dismiss the complaint based on the antitrust exemption.
The District Court granted MLB's motion to dismiss the antitrust claims.
San Jose appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit.

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Issue:

Does the historic antitrust exemption established by the Supreme Court in Flood v. Kuhn extend beyond the player reserve clause to include league rules governing franchise relocation?

Opinions:

Majority - Kozinski

Yes, the baseball industry's exemption from antitrust laws encompasses franchise relocation policies. The court reasoned that Supreme Court precedent, specifically Flood v. Kuhn, Federal Baseball, and Toolson, established an exemption for the 'business of providing public baseball games for profit.' The court rejected the argument that Flood was limited solely to the 'reserve clause' (player contracts), noting that Ninth Circuit precedent had already applied the exemption to other aspects of the industry. Furthermore, the court highlighted that when Congress passed the Curt Flood Act of 1998 to repeal the exemption regarding labor relations, it explicitly stated that the antitrust laws would not apply to franchise relocation. This demonstrated clear Congressional acquiescence to the exemption in this specific area. Consequently, because federal antitrust laws do not apply, parallel state antitrust claims are also preempted to ensure national uniformity.

Analysis:

This decision reaffirms the breadth and durability of baseball's unique anomaly in American law: its exemption from antitrust regulation. By explicitly rejecting the argument that the exemption is limited to player contracts (the reserve clause), the Ninth Circuit solidified the protection of MLB's organizational structure, specifically its ability to control geographic markets. The ruling places significant weight on the Curt Flood Act of 1998, using the text of the statute to prove that Congress affirmatively chose to leave the exemption for relocation intact. This creates a very high bar for future challenges, essentially signaling that only the Supreme Court or new legislation from Congress can alter MLB's antitrust status regarding team movement.

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