Author: Luke Hasskamp
It’s one of the best times of the year—opening day in Major League Baseball!
Now, there has been a lot of professional baseball news lately, with the MLB lockout and acrimonious negotiations between the MLB players union and team owners, before they finally resolved the dispute and got back to baseball. But somewhat lost in the hubbub has been a dispute between MLB and several minor league baseball teams that has been in the works for years.
Specifically, four minor league teams have sued MLB under federal antitrust laws, alleging MLB unlawfully conspired to eliminate 40 minor league affiliates in violation of Section 1 of the Sherman Act.
Those teams (the Staten Island Yankees, the Tri-City Valley Cats, the Salem-Keizer Volcanoes, and the Norwich Sea Unicorns) were among the 40 teams that MLB stripped of their affiliations in major league clubs. This followed a plan announced in 2020 by MLB to reduce the number of affiliated minor league teams from 160 to 120. MLB’s move was, unsurprisingly, highly criticized by the teams, as well as their communities and political representatives.
In the lawsuit, the four minor league teams accused MLB’s actions as “nothing less than a naked, horizontal agreement to cement MLB’s dominance over all professional baseball and to reduce output and boycott” the 40 teams stripped of their MLB affiliation.
What is interesting about the lawsuit is that the four minor league teams expressly acknowledge that their claim is currently barred by existing Supreme Court precedent—baseball’s antitrust exemption that emerged 100 years ago, in the Supreme Court’s 1922 decision in Federal Baseball Club v. National League, 259 U.S. 200 (1922). (We have written a series of articles about baseball’s antitrust exemption which detailed the history of baseball and its legal disputes over the decades.)
In essence, in Federal Baseball Club, the Supreme Court held that federal antitrust laws do not apply to the game of baseball. That now notorious decision, written by Justice Oliver Wendell Holmes, Jr., consisted of just three paragraphs of reasoning. The Court’s ultimate reasoning: the Sherman Act did not apply because baseball did not have an impact on interstate commerce: “The business is giving exhibitions of baseball, which are purely state affairs.” The Court reasoned that, even if individuals did cross state lines for baseball games, “the transport is a mere incident, not the essential thing.” According to the Court, “personal effort not related to production is not a subject of commerce. That which in its consummation is not commerce does not become commerce among the states because the transportation that we have mentioned takes place.”
(Notably, this year marks the centennial anniversary of baseball’s antitrust exemption as Federal Baseball Club was decided 100 years ago, on May 29, 1922.)
Now, when we wrote our articles about 18 months before this one, we anticipated future disputes specifically between MLB and minor league teams. We noted, “[i] n 1998, Congress enacted the Curt Flood Act of 1998, which declared that the antitrust laws apply to Major League Baseball’s employment practices . . . . An interesting aspect of the law, however, was that only Major League Baseball players were given standing to sue—minor league [players and teams] remain subject to the reserve clause, which is an interesting wrinkle . . . .”
That “interesting wrinkle” became the full-blown lawsuit in December 2021 filed by these four minor league teams in the Southern District of New York. As we said, the minor league teams recognized the significant impediment that the Federal Baseball Club precedent created. They are asserting a federal antitrust claim against MLB, and the Supreme Court has exempted major league baseball from such claims. But the minor league teams insist that the Supreme Court is primed for a change of course. Indeed, they suggest that the Supreme Court’s recent antitrust ruling in NCAA v. Alston, 141 S. Ct. 2141 (2021), portends a likely reversal of the baseball exemption if the issue again reaches the Court.
Alston was a high-profile dispute between the NCAA and several college athletes challenging NCAA compensation restrictions under antitrust laws. The NCAA had tried to overcome the lawsuit by arguing it too was entitled to a similar protection from antitrust scrutiny that baseball enjoyed, at least for its amateurism rules, stemming from a nearly 40-year-old decision in NCAA v. Board of Regents, 468 U.S. 85 (1984). But, in Alston, the Supreme Court unanimously rejected that argument, concluding that whatever special protection from the antitrust laws that the Board of Regents decision had provided to the NCAA no longer applied.
Perhaps even more ominously, the Supreme Court specifically addressed the Federal Baseball Club decision and cases applying it in Alston. The Court wrote, “To be sure, this Court once dallied with something that looks a bit like an antitrust exemption for professional baseball.” 141 S. Ct. at 2159. And it noted that “this Court has refused to extend Federal Baseball’s reasoning to other sports leagues—and has even acknowledged criticisms of the decision as ‘unrealistic’ and ‘inconsistent’ and ‘aberration[al].’” Id. In noting that criticism, the Court cited an amicus brief that had been submitted by minor league baseball. Id. Thus, the minor league teams may be correct that the high court is inclined to at least revisit the Federal Baseball Club decision.
Even so, before the Supreme Court can revisit that decision, it needs a case to bring the issue before it. And that’s what the minor league teams aim to do. Recognizing that they are barred by existing precedent, the minor league teams have written to the judge presiding over their matter—Judge Andrew L. Carter, Jr.—noting that they “seek an expeditious appeal and resolution of that central issue, as it is clear that absent the ‘exemption,’ MLB’s conduct would plainly violate the Sherman.”
In the Southern District of New York, some judges hold a pre-motion conference before deciding whether to permit parties to file proposed motions, such as MLB’s proposed motion here. Here, the presiding judge, Judge Andrew L. Carter, Jr., denied the request for the pre-motion conference, and instead granted MLB leave to move to dismiss. MLB’s motion is due at the end of April 2022, with the minor league’s opposition due at the end of May 2022, with a decision coming potentially later this year.
Notably, MLB—perhaps reading the tea leaves a bit—challenges the minor league’s antitrust law on multiple bases, not just the antitrust exemption. They’d likely prefer to get a dismissal on one of those other bases, to avoid having the antitrust exemption up for renewed scrutiny. We will see.