Articles Posted in Sports and Entertainment Law

Author: Luke Hasskamp

This article—the fifth in a series—addresses some of the aftermath of the Supreme Court’s decision in Toolson v. New York Yankees, in particular the litigation involving Curt Flood that ultimately led to the free agency era of professional baseball.

You can find the other parts to this series below:

Baseball and the Antitrust Laws Part 1: The Origins of the Reserve Clause

Baseball and the Antitrust Laws Part 2: The Owners Strike Back (and Strike Out)

Baseball and the Antitrust Laws Part 3: Baseball Reaches the Supreme Court

Baseball and the Antitrust Laws Part 4: Baseball’s Antitrust Exemption

Curt Flood takes on baseball

Curt Flood was immensely important in baseball’s labor movement, serving as the plaintiff in the last baseball lawsuit to reach the U.S. Supreme Court, and helping to usher in the current “free agency” era of baseball. He was also a star player, spending 15 years in the major leagues with the Cincinnati Red(leg)s, the St. Louis Cardinals, and the Washington Senators. He was a three-time All Star, a seven-time Gold Glove winner, and retired with a .293 batting average.

After twelve seasons in St. Louis, on October 7, 1969, the Cardinals traded Flood and several other players, including Tim McCarver, to the Philadelphia Phillies. Yet, Flood, who was still near the peak of his playing years, had no interest in going, citing Philadelphia’s terrible record, dilapidated stadium, and racist fans, at least in Flood’s eyes.

Flood refused to report to Philadelphia and sent a strongly-worded letter to baseball’s commissioner at the time, Bowie Kuhn, noting that he was not “a piece of property to be bought and sold irrespective of my wishes.” Flood added his belief that “any system which produces that result violates my basic rights as a citizen and is inconsistent with the laws of the United States and of the several States.”

Flood’s letter to Kuhn fell on deaf ears, and he filed suit against the League in the Southern District of New York, alleging that baseball’s reserve clause violated antitrust law. Flood, who was then making $90,000 per season, sought $1 million in damages. Flood retained former Supreme Court Justice Arthur Goldberg, who agreed to handle the matter without charge. Flood knew that the lawsuit, which could potentially (and did) take years, would effectively end his playing career.

Several former players testified at trial on behalf of Flood, including Hall of Famers Jackie Robinson and Hank Greenberg, as well as Bill Veeck, renegade owner of the Chicago White Sox. No current players testified in favor of Flood, however. Following a ten-week bench trial, the district court ruled against Flood and in favor Major League Baseball, finding that the reserve clause had beneficial aspects for the game and its players.

Flood appealed the ruling to the Second Circuit, which affirmed the district court, holding that Federal Baseball and Toolson were binding precedent and, thus, Major League Baseball was not subject to the Sherman Act because baseball did not constitute interstate commerce. The Second Circuit added that baseball was “so uniquely interstate commerce” as the league extended over many states that the “consequent extra-territorial effect of necessary compliance” with multiple state antitrust laws would be “far reaching.” Accordingly, federal law pre-empted the application of state antitrust laws.

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Author: Luke Hasskamp

This article—the fourth in a series—addresses some of the aftermath of the Supreme Court’s decision in Federal Baseball Club v. National League, where the Court unanimously held that federal antitrust laws did not apply to professional baseball. This includes the “birth” of baseball’s antitrust exemption in the Supreme Court’s 1953 decision in Toolson v. New York Yankees.

You can find the other parts to this series below:

Baseball and the Antitrust Laws Part 1: The Origins of the Reserve Clause

Baseball and the Antitrust Laws Part 2: The Owners Strike Back (and Strike Out)

Baseball and the Antitrust Laws Part 3: Baseball Reaches the Supreme Court

Baseball and the Antitrust Laws Part 5: Touch ’em all, Curt Flood.

The evolution of the Commerce Clause

It seems safe to say that it is widely known that baseball is exempt from antitrust laws. But that exemption did not arise in the Court’s 1922 ruling in Federal Baseball. Instead, there, the Court had concluded that the Sherman Act did not apply to baseball at all—because baseball was not a form of interstate commerce. This is an important distinction.

The Sherman Act makes it unlawful to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States . . . .” The reason Congress included “among the several States” in the statute is because its authority to enact the Sherman Act flowed from Article I, Section 8, Clause 3 of the U.S. Constitution, also known as the Commerce Clause.

Specifically, the Commerce Clause gives Congress the power “to regulate commerce with foreign nations, and among the several states . . . .” If the conduct at issue did not affect commerce “among the several states,” Congress had no authority to regulate it. Thus, because the Court determined that baseball did not affect interstate commerce, Congress had no power to subject it to antitrust scrutiny.

The Federal Baseball decision has been widely criticized, both at the time and today. But when considered in context, it is somewhat understandable. For starters, the game in the 1920s was obviously much different than the multi-billion-dollar industry that we know today. There were fewer teams, lower revenues, and games were not yet watched on television—the first televised Major League Baseball game would occur on August 26, 1939, a doubleheader played at Ebbets Field between the Brooklyn Dodgers and the Cincinnati Reds.

Perhaps an even more understandable explanation for the Federal Baseball outcome was the Supreme Court’s interpretation of the Commerce Clause at the time and, specifically, its definition of interstate commerce, which was narrower than it is today.

Federal Baseball was decided during the Lochner era, which encompassed the three decades following the Supreme Court’s 1905 decision in Lochner v. New York, 198 U.S. 45 (1905). During this period, the Court struck down a number of federal and state laws relating to labor and working conditions, as the Court took a narrow view of states’ police powers and Congress’s powers under the Commerce Clause.

The Lochner era came to an end beginning in 1937, with a series of decisions from the Court upholding several federal and state statutes in this realm, and, importantly, recognizing broader grounds upon which the Commerce Clause could be used to regulate state activity. Instead of viewing the Commerce Clause as a limitation on congressional authority, it now marked one of the most effective means by which Congress could expand its regulatory reach. The narrow definition of interstate commerce was tossed out and activity was now viewed as commerce if it had a “substantial economic effect” on interstate commerce.

Baseball’s deft touch

The late 1930s to the 1950s marked an era of strategic litigation, settlements, and lobbying by baseball. With this expansion of the Commerce Clause, many predicted that it would not be long before the Supreme Court overruled Federal Baseball. Accordingly, baseball sought to avoid legal challenges that would give the Supreme Court an opportunity to do so, and it also worked to negotiate concerns in Congress that led some members to call for legislation clarifying that the Sherman Act should apply to baseball.

An interesting example of the threat faced by professional baseball, and its strategic response to it, arose from the emergence of professional baseball in Mexico soon after World War II. To attract top talent, the Mexican league offered lucrative salaries more than double what players were making in the U.S., causing several players to abandon their contracts and play south of the border. One such player was Danny Gardella, who had been offered $4,500 to play for the New York Giants but $10,000 to play in Mexico for the 1947 season. (The Mexican League was owned by Jorge Pasquel, another colorful character in the long roster of colorful characters in professional baseball, who allegedly used campaigned funds siphoned from the Mexican presidential election to pay for the substantial salaries.)

Perhaps as expected, Major League Baseball was not pleased with the defections, and Commissioner Happy Chandler banned the defecting players for five years, a remarkable penalty considering such strict penalties had only been imposed for violations that impugned the integrity of the game itself, such as gambling or cheating on games. When Gardella returned to the U.S. after the 1947 season—the year in Mexico had not been a success, especially for the Mexican league—he was unable to find a team willing to take him. Thus, he sued in federal court in New York.

The district court granted Major League Baseball’s motion to dismiss. The court recognized that Federal Baseball appeared to rest on a shaky foundation, but it also recognized that it was not its place to overturn the decision—the authority rested with the Supreme Court. Gardella appealed to the Second Circuit Court of Appeals, where it was heard by Chief Judge Learned Hand, Judge Harrie Chase, and Judge Jerome Frank.

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Author: Luke Hasskamp

This article—the third in a series—focuses on the Supreme Court’s decision in Federal Baseball Club v. National League, in which the Court unanimously held that federal antitrust laws did not apply to professional baseball. It is a curious decision, indeed, preceded by two prior decisions that helped to set the table.

Despite the focus of this series of articles on baseball’s unusual treatment under the antitrust laws, the first two articles did not actually address antitrust law. Instead, the focus was, primarily, contract law. Despite the clear anticompetitive implications of baseball’s reserve clause, which owners used to tie players to a team in perpetuity and to suppress player salaries, the initial challenges to these provisions were based on the law of contracts. And the initial lawsuits did not involve affirmative litigation brought by players but were instead brought by the owners, with the players raising these arguments in their defense.

Now the stage was set for the antitrust laws to enter the picture full force, and not just as a shield to protect players from teams’ requests for injunctions, but also as a sword to affirmatively attack professional baseball as an unlawful trust.

You can find the other parts to this series below:

Baseball and the Antitrust Laws Part 1: The Origins of the Reserve Clause

Baseball and the Antitrust laws Part 2: The Owners Strike Back (and Strike Out)

Baseball and the Antitrust Laws Part 4: Baseball’s Antitrust Exemption

Baseball and the Antitrust Laws Part 5: Touch ’em all, Curt Flood.

The antitrust laws and baseball finally intersect: the Hal Chase case

The first antitrust baseball case fully litigated on the merits was American League Baseball Club v. Chase, 149 N.Y.S. 6 (N.Y. Sup. Ct. 1914), a dispute involving Hal Chase, a star first baseman who moved from the Chicago White Sox of the American League to the Buffalo Buff-Feds of the Federal League.

The suit was brought in New York by the White Sox, who sought to enjoin Chase from playing for Buffalo. At the conclusion of the matter, Judge Bissell rejected Chase’s “novel argument . . . presented with much earnestness” that baseball violated federal antitrust laws. The Sherman Act makes it unlawful to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States . . . .” Judge Bissell had no doubt that baseball was a monopoly, but he concluded that it was not involved in interstate trade or commerce. Instead, he reasoned: “Baseball is an amusement, a sport, a game that . . . is not a commodity or an article of merchandise subject to the regulation of congress . . . .” (Congress is constrained by the Commerce Clause of the U.S. Constitution. Thus, the connection to interstate commerce was essential. If baseball did not affect interstate commerce, Congress had no power to regulate it.)

Interestingly, Judge Bissell did rule that baseball had violated New York state law, meaning that the preliminary injunction initially granted could no longer be maintained. And his reasoning suggested that he also would have found baseball to have violated federal antitrust laws had it affected interstate commerce:

“A court of equity insisting that ‘he who comes into equity must come with clean hands’ will not lend its aid to promote an unconscionable transaction of the character which the plaintiff is endeavoring to maintain and strengthen by its application for this injunction. The court will not assist in enforcing an agreement which is a part of a general plan having for its object the maintenance of a monopoly, interference with the personal liberty of a citizen and the control of his free right to labor wherever and for whom he pleases; and will not extend its aid to further the purposes and practices of an unlawful combination, by restraining the defendant from working for any one but the plaintiff.”

Thus, with his legal victory, Chase was able to play with Buffalo for 1914 and 1915. While it was not a devastating blow for organized baseball—because “the question of the dissolution of this combination on the ground of its illegality” was not before the court—it must have seemed like an ominous conclusion to the ruling.

Chase ended up having a remarkable career for several reasons. Many players, including Babe Ruth and Walter Johnson, considered him the best first baseman ever, and he is sometimes considered the first true star of the franchise that would eventually become the New York Yankees. But Chase was also ultimately exposed as a notorious cheater, betting extensively on games and paying and receiving money to fix games. Indeed, he was indicted as part of the Chicago “Black Sox” scandal (though his role is disputed), but the State of California refused to extradite him due to a problem with the arrest warrant. He was ultimately blackballed from professional baseball and spent his remaining years on the west coast.

The Federal League takes on Organized Baseball: Round 1

In 1913, the Federal League emerged as a serious competitor to the National and American Leagues. And it intended to do so in court, as well as on the field, where it would wield the threat of a serious antitrust challenge. Indeed, in January 2015, the Federal League finally filed its affirmative suit against the National and American Leagues in federal court in Illinois, alleging that they amounted to a combination in violation of federal and state antitrust laws.

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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.

The third part of the series is Baseball Reaches the Supreme Court.

The fourth part of the series is baseball’s antitrust exemption.

The fifth part of the series is Touch ’em all, Curt Flood.

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)).

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Author: Luke Hasskamp

This is the first of a series of articles intended to address some of the interesting intersections between the law and baseball, particularly baseball’s curious exemption from federal and state antitrust laws. More generally, it’s about the struggle between team owners and players since the dawn of professional baseball, and some of the quirks to emerge along the way.

You can read the second part of the baseball and antitrust series here: The Owners Strike Back (And Strike Out).

The third part of the series is Baseball Reaches the Supreme Court.

The fourth part of the series is baseball’s antitrust exemption.

The fifth part of the series is Touch ’em all, Curt Flood.

This article starts at the beginning with a fledgling set of teams in the National League in the late 19th century—with team owners trying to turn consistent profits and players beginning to emerge as stars, and the tension between the two.

The trouble started in 1879, when the owners of the teams in the National League agreed on the “reserve clause” which was a provision included in player contracts that effectively bound the player to his team for his entire career. (Here’s an example of such a reserve clause.)

At the time, most National League teams were losing money and faced bleak financial prospects. To curb expenses, the teams agreed on a strategy to keep salaries down: each team would be allowed to “reserve” up to five players for the following season. This meant that no other team could sign a reserved player unless he received permission to do so.

As expected, each team elected to reserve their five best players, i.e., their most expensive players. With no market competing for players’ services, team owners were able to suppress salaries for elite talent and increase profits. Indeed, just two seasons after the adoptions of the reserve clause, most teams had become profitable, the first time that had happened.

 Due to this success, the owners saw no reason to limit the reserve clause to the top five players. They steadily increased the reserve limit until, by 1887, a team was permitted to reserve its entire roster, 14 players at the time. 1887 is also the year that the reserve clause became an explicit provision in players’ contracts; until then, it had at first been a secret agreement between the owners and then, after it leaked, simply become a league rule that all players were required to abide by. Importantly (for the owners), the reserve clause crept beyond the National League into other competing leagues that would emerge during that time, including the American Association and the American League, which both agreed to honor National League’s reserve lists.

At this time, the contracts were decidedly one sided. Although teams effectively controlled a player for the entirety of his career, nothing bound the teams to their players, except for their contracts (and virtually all contracts had one-year terms). Any player could be traded or sold at any time, and they could be released on just 10-days’ notice.

John Montgomery Ward became an important early figure in challenges to baseball’s reserve clause. Known as Monte Ward during his playing days, he began his career at 19 as a pitcher for the Providence Grays. In 1879, he went 47–19 with 239 strikeouts and a 2.15 ERA, pitching 587 innings. The following season Ward went 39–24 with 230 strikeouts and a 1.74 ERA pitching 595.0 innings. Ward also has the distinction of pitching the second perfect game in professional history as well as the longest complete game shutout, going 18 innings in a 1-0 win over the Detroit Wolverines 1–0 on August 17, 1882, a record that will never be broken. (He also has a pretty epic baseball card.)

Following an injury to his pitching arm that, remarkably, was not attributed to his workload but to a mishap while sliding, Ward’s performance as a pitcher began to diminish, so the Grays sold him to the New York Gotham before the 1883 season (they were renamed the New York Giants in 1885.) The move was fortuitous for several reasons, including the fact that it enabled Ward to enroll at Columbia Law School, where he graduated in 1885.

Using his legal training, Ward organized and led the first labor union in professional sports, the Brotherhood of Professional Baseball Players. The principal goal of the Brotherhood was to raise player salaries, which had remained stagnant even though baseball’s popularity (and revenues) had risen considerably. A chief target of the Brotherhood’s effort was the reserve clause, which continued to suppress players’ salaries and limit their mobility.

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