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From Antitrust Law Daily, June 26, 2017

Baseball’s antitrust exemption applies to minor league contracts

By Jody Coultas, J.D.

Minor league baseball falls squarely within the nearly century-old business-of-baseball exemption from federal antitrust laws in light of U.S. Supreme Court and Ninth Circuit precedent and the Curt Flood Act. Thus, claims raised by minor league baseball players against the Commissioner of Baseball and 30 major league baseball clubs, alleging a conspiracy to monopolize and restrain competition for the acquisition of and compensation paid to minor league professional baseball players, were properly dismissed (Miranda v. Selig, June 26, 2017, Thomas, S.).

A federal district court in San Francisco determined that the suit was barred under baseball’s historic antitrust exemption. The U.S. Court of Appeals in San Francisco affirmed.

In City of San Jose v. Office of the Commissioner of Baseball, the Ninth Circuit determined that the baseball antitrust exemption applies to "the entire ‘business of providing public baseball games for profit between clubs of professional baseball players.’" The district court found that there was no reasonable dispute that the alleged restriction on the pay and mobility of minor league baseball players falls into the articulation of the exemption recognized by the Ninth Circuit. Further, the court found that this understanding is confirmed by the Curt Flood Act of 1998, in which Congress expressly declined to modify the antitrust exemption with regard to practices concerning or affecting the employment of minor league baseball players. Noting that the plaintiffs had a persuasive policy argument that the defendants should not be given free rein to restrict the pay and mobility of minor league baseball players without being subject to the federal antitrust laws, the court concluded that such a policy argument had to be made to Congress or the U.S. Supreme Court.

The Supreme Court first exempted the business of baseball from federal antitrust laws in 1922 in Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922). In Flood v. Kuhn, 407 U.S. 258 (1972), the Court found that (1) professional baseball is engaged in interstate commerce; (2) "baseball is . . . an exception and an anomaly" with regard to its exemption from federal antitrust laws; (3) the exemption is well-established; (4) the Supreme Court has previously emphasized that Congress allowed professional baseball to develop and expand unhindered by federal antitrust laws; and (5) the Court has also "expressed concern about the confusion and retroactivity problems that inevitably would result with a judicial overturning of Federal Baseball" and its progeny, and, therefore, any change should be made by Congress and not the courts.

Furthermore, the Curt Flood Act established that "the conduct, acts, practices, or agreements of persons in the business of organized professional major league baseball directly relating to or affecting employment of major league baseball players . . . are subject to the antitrust laws."

Finally, in San Jose, the court held that restrictions on franchise relocation fell squarely within the "business of baseball" and were therefore exempt from federal antitrust laws under Flood, and the Curt Flood Act "withdrew baseball’s antitrust exemption with respect to the reserve clause and other labor issues [for major league players], but explicitly maintained it for franchise relocation."

Given the above analysis, minor league baseball and the employment of minor league baseball players and the requirement that they sign a uniform contract containing a reserve clause falls squarely within baseball’s exemption from federal antitrust laws, according to the court. Minor league baseball was not separate and distinct in a meaningful way for the purposes of the Sherman Act, and the employment of minor league players falls within the antitrust exemption for the business of baseball. While the minor league players argued that the court should not "blindly apply[] outmoded, erroneous reasoning to an antitrust case," especially in light of economic changes, the court was bound by prior decisions. Also, both the Supreme Court and the Ninth Circuit had repeatedly upheld the business-of-baseball exemption. Congress clearly intended to maintain the baseball exemption for anything related to the employment of minor league players, the reserve clause as applied to minor league players, and the relationship between major and minor league baseball.

The case is No. 15-16938.

Attorneys: Samuel Kornhauser and David Truong (Law Offices of Samuel Kornhauser), Brian David (Law Offices of Brian David) for Sergio Miranda. John W. Keker, David J. Rosen, Thomas E. Gorman, and R. Adam Lauridsen (Keker & Van Nest LLP) for Allan Huber Selig, Kansas City Royals Baseball Corp., Miami Marlins, LP, San Francisco Baseball Associates, LLC, Boston Red Sox Baseball Club LP, and Angels Baseball LP.

Companies: Major League Baseball

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