Can San Jose Win Its Lawsuit Against Major League Baseball?

On Tuesday, San Jose’s impatience with Major League Baseball’s inability to solve the seemingly intractable dispute pitting the A’s and San Jose against Major League Baseball manifested itself in the city filing a lawsuit against the league in federal court. The conflict stems from the Giants' refusal to cede the territorial rights to California's third largest city to the A's-- rights which the A's, believe it or not, actually granted to the Giants in the 1990s --thus preventing the relocation.

“This action arises from the blatant conspiracy by Major League Baseball to prevent the Athletics Baseball Club from moving to San Jose,” the federal complaint begins. "For years, MLB has unlawfully conspired to control the location and relocation of major league men’s professional baseball clubs under the guise of an 'antitrust exemption' applied to the business of baseball."

The lawsuit, which you can read here, claims San Jose has suffered losses in the millions of dollars related to direct spending and tax revenue.

Baseball's antitrust exemption, created in a 1922 U.S. Supreme Court ruling, is a cherished component of its business model. By challenging it, San Jose is putting into play a sort of worst-case scenario for the sport.

“It’s a core tenet of what baseball holds very near and dear to them,” said Maury Brown, president of the Business of Sports Network and a writer for Baseball Prospectus. “They have lobbied and spent millions of dollars over the years through their PACs to basically retain that. So I believe that they are probably scared.”

But the antitrust exemption has been unsuccessfully tested before, in 1953 and again in 1972 in the famous Curt Flood case. In that instance, the All Star baseball player challenged baseball's now-defunct "reserve clause," which bound players to a team as long as the club desired. ("A well-paid slave is nonetheless a slave," Flood said.)

In 1998 Congress passed the Curt Flood Act, which limited baseball's antitrust exemption in terms of its labor relations, said Michael McCann, director of the Sports and Entertainment Law Institute at the University of New Hampshire School of Law and a legal analyst for Sports Illustrated. This enshrined into law what had already been resolved in collective bargaining agreements. What that legislation did not do is end the league’s ability to block franchise relocation.

“Most scholars and courts would say because Congress declined to do anything about the exemption in 1998, it should continue to remain in place,“ said McCann.

McCann said the legal premise behind baseball’s antitrust exemption stems from the court’s nearly century-old view of the Constitution’s Commerce Clause.

“In order for [antitrust laws] to apply, there has to be interstate commerce,” he said. “And the court held that because baseball games are only played in one place, that’s not interstate commerce. The court today would never agree to that – that’s a very archaic view.”

Still, McCann thinks the odds of San Jose prevailing in the case are “very low.”

“I think it would take a very creative judge in terms of where the case is initially assigned to overlook precedent. But sometimes judges do their own thing and a judge may look at this more from a policy perspective than a precedent perspective. That’s certainly what San Jose is hoping for."

Other legal opinions expressed on the Web concur with McCann’s view that San Jose is unlikely to forge new ground here, no matter how just its cause. From the San Jose Mercury News on Tuesday:

University of Virginia law professor Gordon Hylton, who has studied the legal history of American sports, said he "never thought that the division of the Bay Area into two distinct areas made much sense." He added that organized baseball's monopoly is "almost certainly a violation of the federal antitrust laws."

But Hylton was skeptical a San Jose lawsuit against the baseball monopoly would succeed. "San Jose would probably be better off appealing to Congress than the courts," Hylton said.

And from Tom Van Riper's column in Forbes today, on the failure of the potential revocation of the exemption to solve San Jose's problem in any case ....

The league could certainly maintain a degree of control of its franchises, as does the NFL and other leagues,” says Joseph Bauer, a professor of law at the University of Notre Dame, who studies sports labor issues. “Removing the exemption doesn’t make it unlawful if it has merit.”

Merit would conceivably include optimizing business by spreading things out in a way that makes sense. “The league has a legitimate interest in where its franchises are located,” says Matthew Mitten, director of the National Sports Law Institute at Marquette University. “That includes being geographically disbursed for television and for sponsors.”

Maury Brown, of the Business of Sports Network, said there is some precedent for teams successfully challenging their leagues for the right to relocate. He pointed to the San Diego Clippers' move to Los Angeles in 1984, which it did without permission from the NBA. The Clippers and the league settled in 1987, with the team paying the league $6 million and formally agreeing that NBA rules on franchise location are binding.

In 1982, Al Davis sued for and won the right to move the Raiders from Oakland to Los Angeles against a unanimous veto of the relocation by NFL owners.

THE STADIUM ISSUE

That was another dispute that had its roots in displeasure over the Oakland Coliseum: City officials wouldn’t make improvements to the venue that Davis wanted. Leaving aside San Jose's legal case, I asked Maury Brown how much of the A's business problems have to do with the deficiencies of their stadium (now officially called O.co Coliseum, though, really, not by fans).

Brown, who grew up in the Bay Area and calls himself a “Finley kid,” said of the venue: "It is the last multipurpose stadium available. It is really not terribly conducive to the whole ballpark experience, which is wholly unique in all of sports.

"Ballparks have this historical element, especially since the advent of Oriole Park at Camden Yards and this throwback thing. People really experience ballparks in a different way. I would have to say the stadium is probably a very key element in trying to allow them to be competitive."

The promise of a new stadium in downtown San Jose is one thing that has tempted A’s ownership, though even if the move were approved tomorrow, that is not exactly a shovel-ready project and would require a referendum and the acquisition of additional land parcels.

Getting a new sports venue built is no easy trick, said Brown.

“Ballparks, there’s all these things that come into play – whether infrastructure has to be changed or modified to basically allow 20,000 to maybe 40,000 people to go into a certain area.

"There can be lots of individuals that say we want to have this happen, but when it really comes down to brass tacks, it can be exceptionally difficult.” “

The other thing that’s tempting the A’s is the lure of playing in the heart of Silicon Valley. As KQED’s Nina Thorsen reported in her series on the stalled San Jose move last year, "These relocations are inspired not so much by the fan base or the availability of land, but by the proximity to corporations who are an increasingly important source of revenue."

John Vrooman, a sports economist on the faculty of Vanderbilt University in Nashville, told Thorsen that corporate clients are the most important ticket buyers. "It's true for the Sharks, it's true for the Warriors, it's true for the Raiders, and it's going be true for the Athletics."

As for the non-corporate Oakland fan base of today, the uncertainty continues. As it does for the would-be fan base awaiting in San Jose.

As of Thursday, the A's were in first place.