Judge Ronald Whyte reached a decision in the Northern District of California wherein he upheld Major League Baseball’s (MLB) exemption holding that the power to relocate a baseball team franchise is within the business of baseball and that the business of baseball remains exempt from federal antitrust laws. The lawsuit brought by the city of San Jose claimed that the Oakland Athletics should be allowed to relocate from its current home in Oakland, housed at the Oakland Coliseum, to a new stadium in San Jose, Calif. The new stadium has not been built.
Under the MLB constitution, each baseball team is assigned a particular geographic area. In this case, the Athletics operate in the territory consisting of Alameda and Contra Costa Counties. In 2011, the A’s signed a 2-year option contract to purchase land in San Jose for the purpose of building a new stadium there. The stadium would be the new home of the Oakland A’s. In addition, there was an option for a third year on the contract for an additional $25,000. San Jose is outside of the Athletics’ operating territory. Allowing the A’s to relocate would require the majority approval by MLB’s team owners.
San Jose argued that MLB violated federal antitrust law by intentionally delaying the owners’ vote for four years, or until after the A’s option to purchase the land in San Jose had expired. This would effectively prevent the Oakland Athletics from moving to San Jose. In addition, another complication is the fact that San Jose is within the geographical territory of the San Francisco Giants.
The Giants interceded according to the San Jose complaint, preventing San Jose from moving the Oakland A’s because the relocation would undermine the Giants’ investment in its stadium in San Francisco.
San Jose contended that the territorial rights restrictions in the MLB constitution is a restraint of competition in the Bay Area baseball market and perpetuates the Giants’ monopoly over the Santa Claira market. MLB responded by relying on the MLB’s antitrust exemption.
In 1922, the U.S. Supreme Court established that baseball was exempt from federal antitrust laws. Fed. Base Ball Club of Baltimore, Inc. v. Nat’l League of Prof’l Base Ball Club’s, 259 U.S. 200 (1922).
The scope of the MLB’s antitrust exemption has been broadened by a series of cases, including the “Business of Baseball” case of Flood v. Kuhn, 407 U.S. 258 (1972). Major League Baseball is the only professional sport that has the benefit of an exemption under federal antitrust laws.
In this case, the district court judge dismissed San Jose’s federal and state antitrust claims without leave to amend while affirming, without constraining, MLB’s antitrust exemption. Although the case seemed to be final, there will likely be an appeal to the federal court of appeals. The judge did allow San Jose to continue to pursue the claim that MLB tortuously interfered with the city’s contract with the A’s, which involved the option to purchase downtown San Jose land for the new ball park.
Finally, the court found that MLB’s alleged interference with the Athletics’ relocation to San Jose is exempt from antitrust regulation. This court dismissed the city’s Sherman Act claims.
Lastly, the court considered the claims for tortious interference with prospective economic advantage and tortious interference with contract. The tort of interference with contract is a subset of a broader tort of interference with prospective economic advantage. Because these interference claims were not exclusively premised on the alleged violation of antitrust law, the court considered those claims independently of the antitrust claims. Accordingly, the district court judge found that the allegations in the complaint were sufficient to state a claim for tortious interference with contract, although the antitrust part of the lawsuit was dismissed. Therefore, the MLB’s motion to dismiss the Sherman Act claim and the state claims for violation of the Cartwright Act and for unfair competition were granted without leave to amend. MLB’s motion to dismiss the state claims for tortious interference with contrast and economic advantage was denied.
City of San Jose, et al. v. Office of the Commissioner of Baseball and Allan Huber “Bud” Selig, No. C-13-02787 RMW.
Kreisman Law Offices has been handling business litigation and commercial litigation for businesses, partnerships, individuals and families for more than 37 years in and around Chicago, Cook County and its surrounding areas, including Mount Prospect, Winfield, Hinsdale, Richton Park, Skokie, Evanston, Lincolnwood, Park Ridge, Schiller Park, Franklin Park, River Grove, Maywood, Brookfield, Oak Lawn, Robbins, Calumet Park, Chicago (Archer Heights, Brighton Park, Little Village, Lawndale, Garfield Park, Humboldt Park, Irving Park, Pulaski Park, Uptown, Rogers Park), Villa Park, Peoria and Prospect Heights, Ill.
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