Antitrust Law Daily Wrap Up, TOP STORY—N.D. Cal.: Baseball league immune from antitrust claims in dispute over relocation of Oakland A’s, (Oct 14, 2013)

By Jeffrey May, J.D.

The antitrust exemption for the “business of baseball” barred Sherman Act claims brought by the City of San Jose against Major League Baseball (MLB) for blocking the proposed relocation of the Oakland Athletics to San Jose, the federal district court in San Jose, California, has decided. MLB’s motion to dismiss Sherman Act, California Cartwright Act, and California unfair competition law claims was granted without leave to amend. A motion to dismiss state claims for tortious interference with contract and economic advantage was, however, denied (City of San Jose v. Office of the Commissioner of Baseball dba Major League Baseball, October 11, 2013, Whyte, R.).

The city filed a six-count complaint against MLB in June, seeking to eliminate the territorial restrictions that MLB used to keep the Oakland A’s from moving to San Jose. According to the city, the owners of the Oakland A’s had expressed a desire to construct a ballpark in downtown San Jose; however, the relocation had been stalled for years. Because San Jose is not within the operating territory of the A’s, the relocation required approval by three-quarters of the 30 MLB clubs. San Jose alleged that the move had been blocked by the San Francisco Giants’ claim of “territorial rights” to Santa Clara County.

MLB’s alleged interference with the relocation efforts was immune from antitrust regulation under the judicially-created antitrust exemption for the business of baseball, the court concluded. The alleged conduct presented an issue of league structure that was “integral” to the business of baseball.

The court noted its agreement with the other courts that had found the exemption to be “unrealistic, inconsistent, or illogical.” However, it applied the exemption and rejected the city’s argument that the antitrust exemption should be limited to baseball’s “reserve clause,” or contracting issues between teams and players.

Because the court dismissed the antitrust claims on the basis of the federal antitrust exemption for the business of baseball, it did not decide whether the city lacked standing to pursue its antitrust claims, as the league contended. However, the court noted that the city had set aside a parcel of land for an A’s stadium and that there was a question as to whether the city’s claimed injury to that property would sufficiently state an injury in the relevant market.

California Cartwright Act claim. The court dismissed the city’s Cartwright Act claims under the Commerce Clause. Allowing the state claims to proceed would “prevent needed national uniformity in the regulation of baseball,” the court reasoned.

California Unfair Competition claims. The city also alleged claims under California’s Unfair Competition Law (UCL) based on both “unlawful” and “unfair” conduct. The unlawful or unfair conduct alleged was the same conduct underlying the city’s antitrust claims. Because the antitrust allegations were held insufficient to state a claim under the Sherman Act, the unlawful competition claims failed.

Tortious interference claims. The court did not, however, dismiss claims for tortious interference. These claims were not exclusively premised on the alleged violation of antitrust law, but were also based on MLB’s alleged delay in rendering a relocation decision. The city alleged that MLB intentionally delayed approving the A’s relocation for over four years, effectively preventing the A’s from exercising its option to purchase land set aside by the city under an option agreement and resulting in damages to the city in the form of lost revenue.

This is Case No. 5:13-cv-02787-RMW.

Attorneys: Joseph W. Cotchett (Cotchett, Pitre & McCarthy, LLP) for City of San Jose. John Keker (Keker & Van Nest LLP) for Major League Baseball.

Companies: City of San Jose; Major League Baseball

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