Baseball and the Antitrust Laws Part II: The Owners Strike Back (and Strike Out)

Baseball-Antitrust-Exemption-2-300x210

Author: Luke Hasskamp

This is the second of a series of articles examining some of the interesting intersections between the law and baseball, with a focus on baseball’s exemption from federal and state antitrust laws. (Though, like the first article, this one does not quite reach the antitrust issues, as the initial challenges were brought under contract law.)

The first article looked at some of the early conflict between professional baseball players and team owners of the National League, which largely originated from the owners’ adoption of the “reserve clause,” which effectively tied a player to a single team for the entirety of his career, subject to the team’s discretion (and ten-days’ notice). Naturally, this led to litigation, particularly as other leagues emerged that sought to compete with the National League. The National League sued several players who tried to jump to the Players League—and the players won resounding victories in those early cases, with courts refusing to find the one-sided contracts to be enforceable on the ground that they were indefinite agreements and/or lacked mutuality.

Thus, by the time the 1890 season ended—with the National League champion Brooklyn Bridegrooms and the American Association champion Louisville Colonels participating in a best-of-seven game “world” series that ended in a tie—it seemed that the reserve clause was doomed. But forces conspired to give the teams, yet again, the upper hand.

To begin, the Players League ended its first season as a financial failure, causing the League to disband. This relieved the National League of a major competitor. The National League received more good news following the 1891 season, when the American Association, another professional league, failed. This meant that, once again, there was only one professional league in town. Thus, even though the players had won important cases invalidating the reserve clause, they had nowhere else to play, which would remain the case for the next decade.

Things got a little more interesting in 1901 with the arrival of the American League, which emerged as a serious competitor. Indeed, the National League had instituted a per player salary cap of $2,400, while the American League offered salaries of up to $6,000, causing dozens of players to switch leagues.

One such player was Napoleon “Nap” Lajoie, a star player for the National League’s Philadelphia Phillies. Indeed, Lajoie was one of the first superstars of the game and was highly sought by the upstart American League. (Indeed, he refused to take a bad photo.) Despite his contract with the National League, Lajoie signed with the new American League team in town: the Philadelphia Athletics (which was to be managed by Connie Mack, who remained the manager of the Athletics for an incredible 50 years—the longest-serving manager in Major League Baseball history—amassing records for wins (3,731), losses (3,948), and games managed (7,755)).

As before, the National League sued to enjoin Lajoie from switching teams. And, as before, the trial court ruled against the League, relying on the previous reserve clause cases and finding that Lajoie’s contract lacked mutuality because he was bound to the team while the Phillies could release him on ten-days’ notice.

This time, however, the National League appealed to the Pennsylvania Supreme Court—the first reserve clause case to go beyond the trial court. (While the appeal was pending, Lajoie was able to play the 1901 season with the Athletics, where he led the American League in home runs (14), RBIs (125), batting average (.426), runs (145), on-base (.463), slugging percentage (.643), doubles (48), and total bases (350)—nearly a Triple Triple Crown.)

On appeal, the National League had two arguments in its favor. First, it argued that Lajoie was such a unique and exceptional player, distinguishable from the average ball player, that injunctive relief was appropriate. Lajoie’s incredible showing during the 1901 season bolstered this argument.

Second, the reserve clause in Lajoie’s contract was a bit different from the standard provision included in earlier cases. Instead of being bound to the Phillies indefinitely, Lajoie’s contract for the 1900 season included a reserve clause for the 1901 season and “two successive years thereafter.” This more limited period, the League argued, supported a finding that Lajoie’s contract no longer lacked mutuality.

In a surprising turn of events, the Pennsylvania Supreme Court agreed with the League and reversed the trial court, ordering that the injunction should issue—Philadelphia Ball Club, Ltd. v. Lajoie, 202 Pa. 210, 215, 51 A. 973, 973 (Pa. 1902).

The court first agreed that Lajoie was a particularly “meritorious” baseball player which “render[ed] his services of peculiar and special value to the [Phillies], and not easily replaced. Lajoie is well known, and has great reputation among the patrons of the sport, for ability in the position which he filled, and was thus a most attractive drawing card for the public.” The court reasoned that the loss of Lajoie “would produce irreparable injury, in the legal significance of that term, to the plaintiff.” The court added poetically that Lajoie “may not be the sun in the baseball firmament, but he is certainly a bright, particular star.”

The court also found mutuality in the contract, as Lajoie clearly understood that he was binding himself to the Phillies for a period of three years, and he received a large salary for so doing: “[T]he fact of this concession to the plaintiff is distinctly pointed out as part of the consideration for the large salary paid to the defendant, and is emphasized as such.” Nor was the court disturbed by the fact that the Phillies could terminate Lajoie’s contract on ten-days’ notice: “It is true that the terms make it possible for the plaintiff to put an end to the contract in a space of time much less than the period during which the defendant has agreed to supply his personal services; but mere difference in the rights stipulated for, does not destroy mutuality of remedy.” The court concluded: “The defendant sold to the plaintiff for a valuable consideration the exclusive right to his professional services for a stipulated period, unless sooner surrendered by the plaintiff; which could only be, after due and reasonable notice and payment of salary and expenses until the expiration. Why should not a court of equity protect such an agreement until it is terminated?”

Thus, the Phillies had an injunction to bar Lajoie from playing for the Athletics, the first time a team had successfully enjoined a deserting player. It was major news in the sporting world: The New York Times declared that the National League “had won a great victory” that served as a great “Blow to the American League.”

But the National League’s victory turned out to be largely symbolic, at least with respect to Lajoie. Despite the setback, the Athletics and the American League devised a work around. They realized that the injunction may only be enforceable in Pennsylvania, so they quickly moved to trade Lajoie out of the jurisdiction—to Ohio and, specifically, to the Cleveland Bluebirds, informally referred to as the Bronchos. The National League sued to enforce the Pennsylvania injunction in Ohio, but a judge in Cleveland—perhaps a Bronchos fan—declined to enforce the injunction, concluding, on somewhat questionable reasoning, that it only prohibited Lajoie from playing for other teams in Pennsylvania and had no force outside of the state.

Lajoie arrived in Cleveland to much fanfare, so much so, in fact, that the team ultimately renamed themselves the Cleveland Naps. (That name would stick for the duration of Lajoie’s tenure with the team. After he departed, the team adopted its current name: the Cleveland Indians.) Lajoie would star for Cleveland for 13 years, ultimately reaching 3,000 hits during his time and even serving a stint as a manager. Notably, when Cleveland travelled to Pennsylvania for games, Lajoie travelled separately to Atlantic City, where he, presumably, found other things to occupy his time while he avoided the reach of Pennsylvania’s courts.

Following the 1903 season, things swung back in favor of the team owners. The rival National League and American League reached a truce whereby they agreed to respect each other’s reserve clauses. This meant that, yet again, the players had few other options for their services and few opportunities to challenge the reserve clause.

In the years that followed, the National League and American League took steps to modify their contracts, in the hopes that they would survive future legal scrutiny. First, they began to merge the reserve clause with the salary clause. Previously, the two provisions had been separate, but by combining the two, and apportioning the salary between agreeing to play for the current season (75%) and agreeing to the reserve clause (25%), the teams hoped that future courts would find sufficient consideration given for the reserve clause.

Teams also started specifying salaries for reserve clause years. Previously, the contracts only specified salaries for the current year, while the reserve years remained undefined. The teams hoped that by including salaries for subsequent seasons as well, the agreements would be more likely to be found enforceable.

Ultimately, it would not be until 1914 that another rival league emerged: the Federal League. The Federal League convinced 81 players from the American and National League teams to switch to their teams. Of those, 18 players left during their contract years, while the other 63 jumped clubs during the year covered by the reserve clause. The American and National Leagues decided to sue only the 18 players to leave during their contract years, to avoid judicial scrutiny of the reserve clauses. Yet again, the players won most of those legal challenges.

Still, the victories were somewhat short-lived for the players, as the Federal League would fold after the 1915 season, a familiar refrain for the players. Yet, as we will see, the Federal League had set in motion a series of actions that would lead to the major antitrust challenges that would soon confront professional baseball and its reserve clause.

(For a great, in-depth, and highly readable book on baseball’s history with the legal system, I highly recommend Professor Stuart Banner’s The Baseball Trust: A History of Baseball’s Antitrust Exemption.)

//ws-na.amazon-adsystem.com/widgets/q?_encoding=UTF8&ASIN=0199930295&Format=_SL160_&ID=AsinImage&MarketPlace=US&ServiceVersion=20070822&WS=1&tag=suchealif01-20&language=en_UShttps://ir-na.amazon-adsystem.com/e/ir?t=suchealif01-20&language=en_US&l=li2&o=1&a=0199930295

 

Image at top by Karen Arnold from Pixabay

Contact Information