- Lester Munson, Legal Analyst
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San Jose's lawsuit against Major League Baseball could easily become commissioner Bud Selig's worst nightmare.
Unless the Lords of Baseball voluntarily pave the way to San Jose for the Oakland A's, they could find themselves facing MLB's most radical restructuring since the late Marvin Miller destroyed the owners' revered reserve clause, thereby establishing free agency and changing the economics of the game forever.
Frustrated and angry after four years of inaction on the A's request to move to their thriving and growing market, San Jose officials have aimed their legal attack at the most vulnerable corner of baseball's foundation: the territorial rights of the 30 MLB teams and their minor league affiliates.
Under the rules that govern MLB, each of the 30 teams enjoys a monopoly in its market. No other team is permitted to intrude upon the home team's territory. In the markets with two teams (New York, Chicago and Los Angeles), the two teams share control of the market.
The same rule applies to minor league affiliates. No other MLB-affiliated minor league enterprise is permitted, for example, to open for business within the territory claimed by the Dodgers' Triple-A team, the Albuquerque Isotopes, in the New Mexico market.
Total control of the market is, of course, a major factor in teams' income and profits.
MLB's territorial protections of team monopolies are obvious violations of the nation's antitrust laws, a series of rules established early in the 20th century to protect consumers and fans against the predatory practices and prices of cartels and monopolies. Those territorial rights remain in effect because MLB has enjoyed a slowly diminishing exemption from the application of antitrust laws.
The San Jose lawsuit, masterfully drafted by the San Jose firm of Cotchett, Pitre & McCarthy, is aimed directly at the last vestige of the antitrust exemption established in a bizarre opinion by Oliver Wendell Holmes in 1922. The exemption is unlikely to survive the San Jose attack if the lawsuit is not settled and proceeds to a trial.
And if that happens, MLB will find itself facing a new form of free agency. Any owner of any franchise will be able to move the team anywhere the owner wishes. Under the current structure, any move of a team requires a three-fourths vote of the owners. If, for example, the Miami Marlins or the Tampa Bay Rays decide they can produce greater profits as a third team in New York or a first team in Las Vegas, they would be free to move.
The higher courts of the U.S. have been demonstrating an increasing unwillingness to grant MLB or any other sports league further exemptions from the antitrust laws. The clearest indication of the trend came in the decision of the U.S. Supreme Court in American Needle vs. NFL, in which the NFL sought such an exemption. The NFL suffered an embarrassing 9-0 defeat in its effort to obtain the kind of exemption that MLB has enjoyed for generations. An opinion by John Paul Stevens in that case offers MLB little hope of preserving its exemption on market territories.
In addition to the facts, the antitrust laws and current developments in American jurisprudence, the officials of San Jose and their attorneys have other powerful arguments.
The primary obstacle confronting the A's in their move to San Jose is the territorial right of the Giants over Santa Clara County, a potentially lucrative market that includes San Jose.
As the San Jose lawsuit explains, the Giants' right to Santa Clara County came to the Giants as the result of a gentlemanly move by the late Walter Haas when he owned the A's. When the Giants expressed an interest in moving to San Jose to escape Candlestick Park, Haas could have vetoed the move under baseball rules. But instead, he consented to the move and did not demand anything in return.
At the time of the Haas action, according to the lawsuit, Selig said, "Walter Haas, the wonderful owner of the Oakland club who did things in the best interests of baseball, granted permission."
In a statement that will become critical in any trial of the San Jose lawsuit, Selig continued, "What got lost there is they [the A's] didn't feel it was permission in perpetuity."
The last place Selig wants to be is on a witness stand in a courtroom in San Jose trying to explain what he meant in this discourse on the best interests of baseball. If it was in the best interest of baseball for Haas and the A's to allow the Giants into San Jose, then how is it in the best interests of baseball to allow the Giants now to veto an A's move into San Jose? In contrast to Haas, the Giants not only object to an A's move into San Jose, they have filed litigation against San Jose in an effort to interfere with any move.
The San Jose attorneys also assert that the grant of San Jose territorial rights to the Giants was "subject to their moving to Santa Clara County." With the Giants now thriving in AT&T Park, the San Jose officials will argue that the Giants' rights to San Jose are dead.
In addition to the Giants' arguably accidental control of the San Jose market, the San Jose officials will argue that in all other areas with two teams, the teams share the market. If it works in New York, Chicago and Los Angeles, why wouldn't a shared market work in the Bay Area of California?
It should be easy to grasp that this lawsuit is the last thing anyone in the commissioner's office wanted to see. Rob Manfred, the MLB executive vice president, was clearly unhappy, and quickly asserted that the "lawsuit is an unfounded attack on the fundamental structures of a professional sports league."
Manfred is right about the attack on fundamental structures. But he's wrong when he says the attack is "unfounded." San Jose's "attack" is based on compelling facts and the applicable law.
Selig has a few weeks before MLB must respond to the lawsuit. It would be a good idea to use that time to find a solution. If he and his team of attorneys can't, there very well could be a new set of "fundamental structures" for MLB and the team owners.
Major League Baseball's longstanding antitrust exemption is in serious jeopardy if the league doesn't settle San Jose's lawsuit aimed at acquiring the Oakland A's.