By Jordan Kobritz
Not for lack of trying, the Oakland A’s are having a difficult time finding their way to San Jose. The team and the city have been waiting not-so-patiently for four years while a committee appointed by MLB Commissioner Bud Selig has “analyzed” the A’s relocation request.
In an effort to speed up the decision, San Jose recently filed a lawsuit against the league in U.S. District Court for the Northern District of California alleging, among other things, that by failing to make a decision MLB is “tortuously interfering with a contractual relationship” between San Jose and the A’s and is violating federal antitrust laws. Not surprisingly, MLB doesn’t think the lawsuit will be successful. Rob Manfred, MLB’s executive vice president for economics and league affairs, called the lawsuit “an unfounded attack on the fundamental structures of a professional sports league” and said “…the city has resorted to litigation that has no basis in law or in fact.”
Manfred was clearly upset, no doubt reflecting the feelings of Selig and other owners. Regardless of the ultimate legal merits of San Jose’s suit, if it gets to the discovery stage, MLB may be required to produce documents and disclose information related to its inner legal and financial workings that no outsider has ever seen. MLB would no doubt prefer to keep it that way.
While reasonable minds can differ — San Jose is being represented, reportedly at no charge, by the law firm of Cotchett, Pitre & McCarthy, LLP of Burlingame, California, so they obviously believe there is some merit to the city’s claims — in this view, Manfred’s comments weren’t far off the mark. An analysis of the city’s legal claims suggests they have an almost insurmountable burden in this case. In order to prove the claim of tortious interference with a contractual relationship, the city must first prove the existence of a contract. The only known contract between San Jose and the A’s is an option — for which the A’s are paying $25,000 per year – to purchase land upon which the parties “anticipate” — no contractual obligation exists – the team will build a ballpark. That hardly seems like a sufficient contract to overcome the city’s first hurdle.
The antitrust argument does have merit — sort of. But before San Jose can prevail on its claim that MLB is engaged in anti-competitive practices by preventing the A’s from moving to their city, they must prove they have “standing” to sue. While it’s clear the A’s have such standing, it’s much less clear that San Jose does. For arguments sake, let’s assume they do. Based on “independent studies” the city is claiming prospective economic damages of $1.8 billion consisting of direct and indirect revenues. Those damages are entirely speculative and history suggests they will be virtually impossible to prove in a court of law.
There’s no doubt the A’s are damaged by the refusal of MLB to grant them permission to move. Their home ballpark is in an unattractive location and is nothing short of a dump, thereby preventing the team from maximizing revenues. In addition, it’s a health hazard. During a recent home game against the Seattle Mariners, the pipes backed up, discharging raw sewage into both clubhouses. Furthermore, no one can dispute the attractiveness of the San Jose market as compared to Oakland. A move south would provide revenue streams that are unimaginable in Oakland and would surely allow the A’s to become a contributor under MLB’s revenue sharing model, rather than a recipient. Despite that, don’t expect the A’s to join San Jose’s lawsuit anytime soon. As a condition of league membership, every team must forfeit their right to sue MLB.
If MLB was concerned about the physical well-being of the players and the financial health of the A’s, the decision to allow the team to move would be a foregone conclusion. But under the league’s constitution and bylaws, the San Francisco Giants hold the territorial rights to the County of Santa Clara, which includes the city of San Jose. Territorial rights are one of the foundations — see Manfred’s comments – upon which professional leagues operate.
The story of how the Giants acquired the San Jose territory has become folklore which has even been perpetuated by Selig who has stated publicly that the grant of the Santa Clara territory to the Giants was never intended to be permanent. In 1990 when the Giants were in a similar situation to the A’s, Walter Haas, Oakland’s then owner, ceded Santa Clara County to the Giants with the understanding that the team would build a new facility there. After two failed referendums, the Giants elected to build a new ballpark in San Francisco. However, their claim to Santa Clara County was memorialized in the league’s constitution and bylaws.
Those “facts,” which were repeated in the complaint, are an oversimplification of how the Giants ended up with the San Jose territory. What got lost is that at the time the Giants were considering moving to Santa Clara, neither the Giants nor the A’s claimed the territory and neither team mined it for sponsorships and fans. The A’s were asked if they objected if the Giants claimed the territory and Haas said no. Now, any move by the A’s to San Jose requires either the consent of the San Francisco Giants or the vote of 75% of the teams in the league, neither of which will be forthcoming anytime soon.
The major issue of interest in the case of course is the antitrust argument. All professional sports leagues (don’t get me stated on the NCAA!) engage in anti-competitive practices which have been endorsed by the courts. However, no league enjoys the broad antitrust exemption that MLB holds, in part because baseball was the first sport to organize into leagues and was therefore the first to be a party to antitrust litigation. What may once have been a dubious distinction has proven to be of immense value to MLB over the years and needless to say, something that emits jealousy from other leagues.
In 1922 the Supreme Court decided that for the purposes of the Sherman Antitrust Act, baseball was not a business and did not engage in interstate commerce (Federal Baseball Club v. National League, 259 U.S. 200 (1922)). Of course, that decision is ludicrous when viewed in the context of today’s realities and even by the standards of 1922 the decision didn’t make much sense. Nevertheless, despite several opportunities to overturn the Federal Case (see Toolson v. New York Yankees, 346 U.S. 356 (1952) and Flood v. Kuhn, 407 U.S. 258 (1972)), the Supreme Court has refused to do so, stating that if a change in MLB’s antitrust exemption was warranted, Congress should take action. That position seems to contradict the separation of powers inherent in our system of government, under which it is the court’s responsibility to interpret the law (i.e., the Sherman Antitrust Act) that Congress has already passed.
Even if San Jose was to establish that MLB is subject to antitrust laws, there is no guarantee that the A’s would be free to move — anywhere. Franchise shifts can still be subject to reasonable league restrictions and approval by team owners. As an example, the NFL is currently controlling the relocation of a team to Los Angeles.
One other option available to Selig is to bypass the Giants and other owners by ruling in the A’s favor under his “best interests of baseball” authority. That authority has been repeatedly affirmed by the courts and would be virtually guaranteed to survive a legal challenge. But given the enormity of the stakes, and the precedent such a decision would establish, the ever-cautious and deliberate commissioner is loath to go down that road, understandably so. If he rules in favor of the A’s in the Bay Area, what would prevent him from allowing Tampa to relocate in Yankees and Mets territory? The greater New York market is the second best MLB market in the country after San Jose.
For now, the only thing we know for certain is that the A’s continue to languish in Oakland, the Giants rake in the dough in San Francisco, and San Jose is alienating MLB. The only reasonable result San Jose can hope for from the legal action is the possibility it may force a negotiated settlement among MLB, the Giants and the A’s. For the Giants and the A’s, it’s all about money, in some fashion. And MLB wants to keep the courts — and the prying public — out of its business and away from its internal documents. There’s a deal to be made here.
Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is a Professor and Chair of the Sport Management Department at SUNY Cortland and is a contributing author to the Business of Sports Network. He also maintains the blog: http://sportsbeyondthelines.com Jordan can be reached at jordan.kobritz@cortland.edu.
