The Baseball Exemption: Timing is Everything

On the most recent episode of Conduct Detrimental, we spoke with Jim Quinn who is one of the attorneys for the Plaintiffs in the recently filed case Staten Island Yankees v. MLB.[1] This case is another attack on the nearly 100-year-old antitrust exemption that Major League Baseball was given in Federal Baseball.[2]

The complaint alleges that Major League Baseball orchestrated a horizontal agreement among its 30 MLB Clubs to eliminate their affiliation with – and thus to effectively destroy – 40 Minor League Baseball teams.[3] The Plaintiffs are four of the 40 teams that were stripped of their affiliations with their Major League parent Club: Staten Island Yankees, Tri-City Valley Cats, Salem-Keizer Volcanoes, and Norwich Sea Unicorns.

Quinn stated on the podcast, “in order for our case to succeed successfully to a trial, we’re going to have to undo the baseball antitrust exemption.” He continued, “is this a slam dunk? I don’t believe it’s a slam dunk by any means. We understand this is an uphill battle, but as I think we said in the complaint, it really is time to put the exemption back into the dustbin of history where it belongs.”

Quinn expressed his desire to expedite this case to the Supreme Court. He predicts the next step is for MLB to file a Motion to Dismiss in the Southern District of New York, which Quinn states they will grant because they cannot overrule the Supreme Court. This case will then elevate to the Second Circuit, and they will most likely follow precedent. Quinn emphasized the key issue at hand is: will the Supreme Court grant certiorari?

I. Trilogy of Cases

Let’s take a step back. Major League Baseball was granted an exemption from federal antitrust law, what is now referred to as “the baseball exemption.” The “trilogy of cases” involved are Federal Baseball, Toolson, and Flood.[4] Federal Baseball granted this exemption on the basis that “the business is giving exhibitions of baseball, which is purely state affairs,” and ruling “the business of baseball is not engaged in interstate commerce,” and further that “any interstate activities were merely incidental to the state exhibitions and thus would not be called trade or commerce in the commonly accepted use of those words.”[5] Major League Baseball was granted an exemption from federal antitrust law because it was not interstate commerce, as required by the Sherman Act.[6] Now that seems absurd, as baseball has 30 teams that span across 17 states, Washington D.C. and Canada. The complaint in Staten Island Yankees v. MLB stated that these 30 MLB Clubs had 160 affiliated MiLB teams, spanning across six MiLB leagues in the United States, Canada, and Mexico.[7] Looking back to Federal Baseball’s era, in 1922 there were 16 teams that spanned across seven states and Washington D.C. Yet, Federal Baseball still considered baseball an “exhibition” and crossing state lines was “merely incidental.”

The next time SCOTUS would take up the issue was in Toolson where there was a one-paragraph per curiam opinion upholding Federal Baseball.[8] This is where we see congressional deference when the Court stated, “[w]e think that if there are evils in this field which now warrant application to it of the antitrust laws it should be by legislation.”[9]

The next case was the attack of the reserve clause under Flood.[10] Curtis Flood was traded without previous knowledge or consent, and his request for free agency was denied by the Commissioner. As a result, Flood brought suit under the Sherman Antitrust Act. The Southern District of New York (which is the same venue Staten Island Yankees v. MLB has been brought) dismissed the federal antitrust claims pursuant to Federal Baseball.[11] The Second Circuit affirmed.[12] The Supreme Court granted certiorari and affirmed the dismissal of all claims.[13] However, SCOTUS held that “professional baseball is a business, and it is engaged in interstate commerce.”[14] Thus, Flood and its predecessors upheld the baseball exemption for two fundamental reasons: (1) loyalty to stare decisis[15] and fear of initiating a domino effect after upsetting the various interests relying on the exemption and (2) Congress's acquiescence in the holdings of Federal Baseball and Toolson.[16]

Since the trilogy of cases, lower courts and circuit courts have relied on stare decisis and congressional deference to avoid overturning Federal Baseball and the Supreme Court has denied certiorari. The Curt Flood Act was Congress’s chance to take action, but they only carved out the reserve clause and left everything else within the exemption (including Minor League Baseball, which is at issue here). Flood was a catalyst for free agency, and is the reason players like Max Scherzer can sign a three-year $130 million contract. However, the failure to remove the whole exemption is why we are in the present situation and the reason Staten Island Yankees v. MLB was filed.

II. Is the Supreme Court prepared to overturn Federal Baseball?

If you are familiar with the above case precedent (among others in this sphere) then you are probably thinking this is another case that will get dismissed under stare decisis and denied certiorari by SCOTUS. However, this case’s complaint is using a recent SCOTUS ruling, Alston v. NCAA, as a backbone for their argument because it appears the bench is willing to reconsider the baseball exemption based on the analysis in Alston. The Court went out of its way to cite to Federal Baseball as an “aberration” and that the Court has failed to extend such exemptions to other sports leagues.[17]

Alston showed the world that the current SCOTUS bench may be willing to grant certiorari and hear a challenge to the baseball exemption if the right case presented itself. On Conduct Detrimental, when discussing the Alston opinion and how the Supreme Court created the baseball exemption when it didn’t have the power to, Jim Quinn stated that “they [the Supreme Court] pointed to baseball as an example of something that was created but they now realize was essentially non-sensible.” Quinn reasoned, “when you look at the Gorsuch opinion and Kavanaugh’s concurrence, you can see there was a real interest here on the part of at least some members of the Supreme Court.”

Quinn distinguished this case from the most recent failed attempts, Wyckoff[18] and Right Field Rooftops,[19] because this case has much broader implications than previous cases and the Court is more inviting of a challenge today than it was in 2018 based upon Alston. Quinn stated the Wyckoff case didn’t involve the baseball antitrust exemption per se because it was brought under the Donnelly Act. Rather, the issue was whether the Donnelly Act was so close to the antitrust exemption that the exemption preempted the Donnelly Act, and the courts ruled that it did, subsequently, the Supreme Court denied certiorari because it was too narrow of an issue. Quinn reasoned that the Supreme Court determined the Right Field Rooftops case was not the right case to take on this antitrust issue because the core issue was whether fans could sit on their rooftop and watch the Cubs games.

Quinn stated “if you look at what happened in our case, where a group of wealthy people get together and decide that they’re going to eliminate the business of 40 less-wealthy people…that has an impact not only on the 40 minor league teams, but it has an impact on all of the towns throughout the United States. In many of these cities and villages and small towns, the only sport available is minor league baseball and MLB owners decided they were just going to eliminate that for 40 towns and villages all over the country. Seems to me it has much broader implications than whether or not you can sit on a roof and see into Wrigley Field, or whether or not a different statute applies under the antitrust laws.”

a. Key Justices

Chief Justice Roberts, Justice Thomas and Justice Alito have shown interest in similar cases, which may indicate what their analyses might be here, should they grant certiorari. For example, in Leegin, the Court reversed a 96-year-old ban on price floors, making it an automatic violation of antitrust to have resale price maintenance agreements.[20] Three of the five Justices who joined in the Leegin majority opinion still sit on the bench today, namely Chief Justice Roberts, Justice Thomas and Justice Alito. Whereas only one of the four Justices who joined in the dissent is still on the bench, Justice Breyer. In Leegin, the Court found that stare decisis was not as significant when reviewing the scope of the Sherman Act, while also finding that congressional deference has less force regarding the Sherman Act.[21] The Court went on to state that when there was a “widespread agreement” that the precedent set out is different than what the original court analyzed, the precedent may be deemed inappropriate.”[22]

On the issue of stare decisis, Justices Roberts, Thomas, and Alito may have already shown their hand as well. In Kimble, based on stare decisis, the Supreme Court refused to overturn a 50-year-old precedent that a patent holder cannot charge royalties for the use of his invention after its patent term has expired.[23] In Kimble, the Court explained that to overrule a case, there needs to be a “special justification” that goes above and beyond the argument that the precedent was wrongfully decided, and without such a special justification the Court recommend the claim for congressional action.[24] Justices Roberts, Thomas, and Alito dissented in Kimble stating, “[s]tare decisis is important to the rule of law, but so are correct judicial decisions…Revisiting precedent is particularly appropriate where…a departure would not upset expectations, the precedent consists of a judge-made rule…and experience has pointed up the precedent’s shortcomings.”[25]

Dicta in Alston, written by Justice Gorsuch in which it was a unanimous decision, clearly implies there is a “widespread agreement” that the precedent in Federal Baseball is different than what the original court analyzed. Therefore, considering the Justices’ actions in Leegin, Kimble, and now Alston this bench may be prepared to deem Federal Baseball’s precedent inappropriate. The last time a near 100-year antitrust exemption fell, Chief Justice Roberts, Justice Thomas, and Justice Alito joined in the opinion for Leegin. In Alston, Justice Gorsuch wrote powerful dicta taking issue with the baseball exemption, and Justice Kavanaugh wrote a dissent that, besides completely destroying the NCAA model, gave a traditional analysis of antitrust law which may give some insight into his analysis for Staten Island Yankees v. MLB and the baseball exemption.

In the most recent episode of Conduct Detrimental, Quinn reminded listeners that Justice Sotomayor has some familiarity with baseball cases because when she was a District Court Judge in New York, she ruled in favor of MLB players to end the strike in 1995.

Chief Justice Roberts, Justice Thomas, and Justice Alito have shown they are willing to put stare decisis aside when judicial precedents have been wrongfully created. These Justices, along with Justice Gorsuch and Justice Kavanaugh, may be the proper bench for the next case challenging Federal Baseball and the baseball exemption to be heard in the Supreme Court of the United States. Perhaps the time has finally come for the Supreme Court to step up to the plate.

For more information on this topic, check out our most recent episode of Conduct Detrimental with Jim Quinn.

Mike Lawson is an Associate for O'Connell and Aronowitz in Albany, NY. He is the Producer of the Conduct Detrimental Podcast and can be reached on Twitter @Mike_sonof_Law.

[1] Staten Island Yankees et al. v. Major League Baseball, 1:21cv10876 (filed Dec. 20, 2021). [2] Fed. Baseball Club of Baltimore, Inc. v. Nat’l League of Prof’l Baseball Clubs, 259 U.S. 200 (1922). [3] Complaint at 1. [4] Fed. Baseball Club of Baltimore, Inc. v. Nat’l League of Prof’l Baseball Clubs, 259 U.S. 200 (1922); Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953); Flood v. Kuhn, 407 U.S. 258 (1972). [5] Fed. Baseball, 259 U.S. at 208-9. [6] The Sherman Antitrust Act, 15 U.S.C. § 1 (1890). [7] Complaint at 49. [8] Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953). [9] Id. at 356-57. [10] Flood v. Kuhn, 407 U.S. 258 (1972). [11] Flood v. Kuhn, 316 F.Supp. 271, 272 (S.D.N.Y. 1970). [12] Flood v. Kuhn, 443 F.2d 264, 267–68 (2d Cir. 1971). [13] Flood, 407 U.S. at 285. [14] Id. at 282. [15] Latin for “to stand by things decided.” [16] Flood, 407 U.S. at 282-83. [17] Alston v. NCAA, 141 S. Ct. 2141, 2159 (2021). [18] Wyckoff v. Office of the Com’r of Baseball, 138 S. Ct. 2621 (2018). [19] Right Field Rooftops v. Chicago Cubs Baseball Club, 138 S. Ct. 2621 (2018). [20] Leegin Creative Leather Products, Inc. v, PSKS, Inc., 551 U.S. 877 (2007). [21] Id. at 899. [22] Id. at 900. [23] Kimble v. Marvel Entertainment, LLC, 135 S. Ct. 2401 (2015). [24] Id. at 2402. [25] Id. at 2415.