City of San Jose v. Office of the Commissioner of Baseball

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CITY OF SAN JOSE; CITY OF SAN JOSE No. 14-15139

AS SUCCESSOR AGENCY TO THE

REDEVELOPMENT AGENCY OF THE D.C. No.

CITY OF SAN JOSE; THE SAN JOSE 5:13-cv-02787-

DIRIDON DEVELOPMENT RMW

AUTHORITY,

Plaintiffs-Appellants,

OPINION

v.

OFFICE OF THE COMMISSIONER OF

BASEBALL, an unincorporated

association, DBA Major League

Baseball; ALLAN HUBER SELIG,

“Bud,”

Defendants-Appellees.

Appeal from the United States District Court

for the Northern District of California

Ronald M. Whyte, Senior District Judge, Presiding

Argued and Submitted

August 12, 2014—San Francisco, California

Filed January 15, 2015

Before: Alex Kozinski, Barry G. Silverman

and Richard R. Clifton, Circuit Judges.

Opinion by Judge Kozinski

2 CITY OF SAN JOSE V. COMM’R OF BASEBALL

SUMMARY*

Antitrust / Baseball Exemption

The panel affirmed the district court’s dismissal of the

City of San Jose’s antitrust action regarding the Office of the

Commissioner of Baseball’s delay in deciding whether to

approve the Oakland Athletics’ move to San Jose, which is

within the exclusive operating territory of the San Francisco

Giants.

The panel held that the baseball industry’s historic

exemption from the antitrust laws, upheld in Flood v. Kuhn,

407 U.S. 258 (1972), barred San Jose’s antitrust claim

regarding franchise relocation under the Sherman and

Clayton Acts and state law. The panel held that under

Portland Baseball Club, Inc. v. Kuhn, 491 F.2d 1101 (9th Cir.

1972), Flood is not limited to baseball’s “reserve clause.”

Rather, antitrust claims against Major League Baseball’s

franchise relocation policies are in the heartland of those

precluded by Flood’s rationale.

COUNSEL

Joseph W. Cotchett (argued), Philip L. Gregory (argued),

Frank C. Damrell, Jr., Anne Marie Murphy, Camilo Artiga-

Purcell of Cotchett, Pitre & McCarthy, LLP, Burlingame,

California, and Richard Doyle, Nora Frimann of the Office of

the City Attorney, San Jose, California for Appellants.

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

CITY OF SAN JOSE V. COMM’R OF BASEBALL 3

John W. Keker (argued), Paula L. Blizzard, R. Adam

Lauridsen, Thomas E. Gorman of Keker & Van Nest LLP,

San Francisco, California, and Bradley I. Ruskin of Proskauer

Rose LLP, New York, New York, and Scott P. Cooper, Sarah

Kroll-Rosenbaum, Jennifer L. Roche, Shawn S. Ledingham,

Jr. of Proskauer Rose LLP, Los Angeles, California for

Appellees.

OPINION

KOZINSKI, Circuit Judge:

The City of San Jose steps up to the plate to challenge the

baseball industry’s 92-year old exemption from the antitrust

laws. It joins the long line of litigants that have sought to

overturn one of federal law’s most enduring anomalies.

I. Background

Major League Baseball’s (MLB)1 constitution requires

that each of the league’s 30 member clubs play their home

games within a designated operating territory. For the

Oakland Athletics, that territory is comprised of two

California counties: Alameda and Contra Costa. Faced with

dwindling attendance and revenue, the Athletics want to

move to San Jose, which they consider a more profitable

1

The defendants in this case are the “Office of the Commissioner of

Baseball,” which is an unincorporated association of all 30 MLB clubs,

and Allan “Bud” Selig, whose individual job title is Commissioner of

MLB. For convenience, we refer to the defendants as “MLB.” The

plaintiffs in this case are the City of San Jose and the San Jose Diridon

Development Authority, which we refer to collectively as “San Jose.”

4 CITY OF SAN JOSE V. COMM’R OF BASEBALL

venue. But there’s a snag: San Jose falls within the exclusive

operating territory of the San Francisco Giants, and relocation

to another franchise’s territory is prohibited unless approved

by at least three-quarters of MLB’s clubs.

MLB has not rushed to grant this approval. In 2009,

MLB established a “special Relocation Committee” to

investigate the implications of the move for the league, but

four years later the committee was “still at work,” with no

resolution in sight. In the meantime, the Athletics moved

forward with their plan to build a stadium in San Jose by

entering into an option agreement with the city that gave them

the right to purchase six parcels of land the city had set aside.

But, because MLB hadn’t yet approved the move, the

Athletics were unable to perform on the agreement, and the

land sat idle.

Believing that the delay was MLB’s attempt to stymie the

relocation and preserve the Giants’ local monopoly, San Jose

filed suit. It alleged violations of state and federal antitrust

laws, of California’s consumer protection statute and of

California tort law. Relying on the baseball industry’s

historic exemption from the antitrust laws, the district court

granted MLB’s motion to dismiss on all but the tort claims.2

San Jose appeals, arguing that the baseball exemption does

not apply to antitrust claims relating to franchise relocation.

We review de novo. See Colony Cove Props., LLC v. City of

Carson, 640 F.3d 948, 955 (9th Cir. 2011).

2

The district court subsequently declined to retain supplemental

jurisdiction over those state law tort claims and dismissed them without

prejudice.

CITY OF SAN JOSE V. COMM’R OF BASEBALL 5

II. Discussion

Our analysis is governed by three Supreme Court cases

decided over the course of half a century; taken together, they

set the scope of baseball’s exemption from the antitrust laws.

See generally Stuart Banner, The Baseball Trust: A History

of Baseball’s Antitrust Exemption (2013). First, in Federal

Baseball Club of Baltimore v. National League of

Professional Baseball Clubs, 259 U.S. 200 (1922), the Court,

reflecting the era’s soon-to-be-outmoded interpretation of the

Commerce Clause, held that the Sherman Act had no

application to the “business [of] giving exhibitions of base

ball” because such “exhibitions” are a “purely state affair[].”

Id. at 208.

Next up, in Toolson v. New York Yankees, Inc., 346 U.S.

356 (1953), the Court, in a short per curiam, affirmed Federal

Baseball, albeit on a different ground. Federal Baseball’s

Commerce Clause underpinning was no longer good law, but

the Court recognized that “Congress [] had the [Federal

Baseball] ruling under consideration [and had] not seen fit to

bring [baseball] under the [antitrust] laws by legislation.” Id.

at 357. As such, “[t]he business [was] left for thirty years to

develop, on the understanding that it was not subject to

existing antitrust legislation,” and the Court determined that

even if there were circumstances that “warrant[ed]

application [] of the antitrust laws[, such laws] should be

[applied] by legislation.” Id. “Without re-examination of the

underlying issues,” the Court reaffirmed Federal Baseball’s

central holding that “the business of providing public baseball

games for profit between clubs of professional baseball

players was not within the scope of the federal antitrust

laws.” Id.

6 CITY OF SAN JOSE V. COMM’R OF BASEBALL

Finally in Flood v. Kuhn, 407 U.S. 258 (1972), the Court

once again upheld the baseball exemption, this time in a

lengthy, reasoned opinion.3 The Court noted “the confusion

and the retroactivity problems that inevitably would result

with a judicial overturning of Federal Baseball” and again

stated its “preference that if any change is to be made, it come

by legislative action.” Id. at 283. In particular, the Court

stressed that Congress had acquiesced in the baseball

exemption and thus “by its positive inaction . . . clearly

evinced a desire not to disapprove [it] legislatively.” Id. at

283–84. Flood and its progenitors, therefore, upheld the

baseball exemption for two fundamental reasons: (1) fidelity

to the principle of stare decisis and the concomitant aversion

to disturbing reliance interests created by the exemption; and

(2) Congress’s apparent acquiescence in the holdings of

Federal Baseball and Toolson.

San Jose first argues that Flood applies only to baseball’s

“reserve clause”4—the particular provision at issue in that

case—and not to other facets of the baseball industry, like

franchise relocation. In other words, San Jose urges that we

limit Flood to its facts. Such a drastic limitation on Flood’s

scope is foreclosed by our precedent. Under the baseball

exemption, we have rejected an antitrust claim that was

wholly unrelated to the reserve clause. See Portland Baseball

3

Some thought, too lengthy. See 407 U.S. at 285.

4

The “reserve clause” was a provision in baseball contracts that

prevented players from signing with other clubs, even after their contracts

had expired, without the express consent of the club they played for.

CITY OF SAN JOSE V. COMM’R OF BASEBALL 7

Club, Inc. v. Kuhn, 491 F.2d 1101, 1103 (9th Cir. 1974). In

Portland Baseball, a former minor league franchise owner

brought suit against MLB. The owner argued that MLB

failed to comply with the terms of an agreement it struck with

minor league teams to provide compensation in the event a

major league franchise moved into a minor league franchise’s

territory. Id. at 1102. One of the plaintiff’s claims was that

MLB’s monopolization of the baseball industry rendered

minor league teams unable to negotiate on fair terms.

Portland Baseball Club, Inc. v. Kuhn, 368 F. Supp. 1004,

1009 (D. Or. 1971). Even though the antitrust claim in

Portland Baseball had nothing to do with the reserve clause,

we cited Flood in upholding the claim’s dismissal. Portland

Baseball, 491 F.2d at 1103. Portland Baseball may not

define precisely the boundaries of the baseball exemption, but

it fatally undercuts San Jose’s attempt to restrict Flood to the

reserve clause.

San Jose next contends that if we are to hold that the

baseball exemption extends beyond the reserve clause, we

must remand to the district court to determine whether

franchise relocation is sufficiently related to “baseball’s

unique characteristics and needs” to warrant exemption. This

argument appears to be derived from a single sentence in

Flood, which states that the baseball exemption “rests on a

recognition and an acceptance of baseball’s unique

characteristics and needs.” Flood, 407 U.S. at 282. From this

line alone, San Jose argues that the Flood Court intended a

fact-sensitive inquiry whenever the antitrust exemption is

challenged. But, aside from the isolated language San Jose

quotes, nothing in Flood suggests that the reserve clause was

exempted based on some fact-sensitive analysis of the role

the clause played within the baseball industry.

8 CITY OF SAN JOSE V. COMM’R OF BASEBALL

Rather, Flood’s stare decisis and congressional

acquiescence rationales suggest the Court intended the

exemption to have the same scope as the exemption

established in Federal Baseball and Toolson. After all, it

would make little sense for Flood to have contracted (or

expanded) the exemption from the one established in the

cases in which Congress acquiesced and which generated

reliance interests. And Federal Baseball and Toolson clearly

extend the baseball exemption to the entire “business of

providing public baseball games for profit between clubs of

professional baseball players.” Toolson, 346 U.S. at 357; see

also Radovich v. Nat’l Football League, 352 U.S. 445, 451

(1957) (noting that the antitrust exemption articulated in

Federal Baseball and Toolson applies to “the business of

organized professional baseball.”); Charles O. Finley & Co.,

Inc. v. Kuhn, 569 F.2d 527, 541 (7th Cir. 1978) (“Despite the

two references in the Flood case to the reserve system, it

appears clear from the entire opinions in the three baseball

cases, as well as from Radovich, that the Supreme Court

intended to exempt the business of baseball, not any

particular facet of that business, from the federal antitrust

laws.”) (footnote omitted).

It is undisputed that restrictions on franchise relocation

relate to the “business of providing public baseball games for

profit between clubs of professional baseball players.”

Toolson, 346 U.S. at 357. The designation of franchises to

particular geographic territories is the league’s basic

organizing principle. Limitations on franchise relocation are

designed to ensure access to baseball games for a broad range

of markets and to safeguard the profitability—and thus

viability—of each ball club. Interfering with franchise

relocation rules therefore indisputably interferes with the

public exhibition of professional baseball. See Prof’l

CITY OF SAN JOSE V. COMM’R OF BASEBALL 9

Baseball Sch. & Clubs, Inc. v. Kuhn, 693 F.2d 1085, 1086

(11th Cir. 1982) (rejecting an antitrust challenge to baseball

franchise relocation because it is “an integral part of the

business of baseball”).

That doesn’t necessarily mean all antitrust suits that touch

on the baseball industry are barred. In Twin City

Sportservice, Inc. v. Charles O. Finley & Co., Inc., 512 F.2d

1264 (9th Cir. 1975), for example, we assessed an antitrust

claim by a baseball franchise against stadium concessionaires

without any reference to the baseball exemption. Nor does it

mean that MLB or its franchises are immune from antitrust

suit. There might be activities that MLB and its franchises

engage in that are wholly collateral to the public display of

baseball games, and for which antitrust liability may therefore

attach. But San Jose does not—and cannot—allege that

franchise relocation is such an activity. To the contrary, few,

if any, issues are as central to a sports league’s proper

functioning as its rules regarding the geographic designation

of franchises.

Flood’s congressional acquiescence rationale applies with

special force to franchise relocation. In 1998, Congress

passed the Curt Flood Act, which withdrew baseball’s

antitrust exemption with respect to the reserve clause and

other labor issues, but explicitly maintained it for franchise

relocation. See Pub. L. No. 105-297, § 3(b)(3), 112 Stat.

2824 (1998) (codified at 15 U.S.C. § 26b(b)(3)) (“This

section does not create, permit or imply a cause of action by

which to challenge under the antitrust laws, or otherwise

apply the antitrust laws to . . . franchise [] location or

relocation”).

10 CITY OF SAN JOSE V. COMM’R OF BASEBALL

In an ordinary case, congressional inaction “lacks

persuasive significance because several equally tenable

inferences may be drawn from such inaction.” Pension

Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 650 (1990)

(internal quotation marks omitted). But when Congress

specifically legislates in a field and explicitly exempts an

issue from that legislation, our ability to infer congressional

intent to leave that issue undisturbed is at its apex. See, e.g.,

Kimbrough v. United States, 552 U.S. 85, 106 (2007)

(congressional inaction is probative when Congress “fail[s]

to act on a proposed amendment . . . in a high-profile area in

which it had previously exercised its [] authority”). The

exclusion of franchise relocation from the Curt Flood Act

demonstrates that Congress (1) was aware of the possibility

that the baseball exemption could apply to franchise

relocation; (2) declined to alter the status quo with respect to

relocation; and (3) had sufficient will to overturn the

exemption in other areas. Flood’s clear implication is that the

scope of the baseball exemption is coextensive with the

degree of congressional acquiescence, and the case for

congressional acquiescence with respect to franchise

relocation is in fact far stronger than it was for the reserve

clause at issue in Flood itself.

In short, antitrust claims against MLB’s franchise

relocation policies are in the heartland of those precluded by

Flood’s rationale. San Jose’s claims under the Sherman and

Clayton Acts must accordingly be dismissed.

And San Jose’s state antitrust claims necessarily fall with

its federal claims. Baseball is an exception to the normal rule

that “federal antitrust laws [] supplement, not displace, state

antitrust remedies.” California v. ARC Am. Corp., 490 U.S.

93, 102 (1989). In Flood, the Court affirmed the dismissal of

CITY OF SAN JOSE V. COMM’R OF BASEBALL 11

the plaintiff’s state law claims because “state antitrust

regulation would conflict with federal policy and because

national uniformity is required in any regulation of baseball.”

Flood, 407 U.S. at 284 (internal quotation marks omitted). In

other words, the Court in Flood determined that state antitrust

claims constitute an impermissible end run around the

baseball exemption. San Jose can point to no case that has

ever held that state antitrust claims continue to be viable after

federal antitrust claims have been dismissed under the

baseball exemption. See, e.g., Major League Baseball v.

Crist, 331 F.3d 1177, 1179 (11th Cir. 2003) (holding that

state antitrust claims are preempted if they mirror federal

claims that fall within the baseball exemption). That suffices

to reject San Jose’s state antitrust claims, which entirely

duplicate its claims under the federal antitrust laws.

San Jose also alleges a violation of California’s unfair

competition law (UCL). However, under California law, “[i]f

the same conduct is alleged to be both an antitrust violation

and an ‘unfair’ business act or practice for the same reason—

because it unreasonably restrains competition and harms

consumers—the determination that the conduct is not an

unreasonable restraint of trade necessarily implies that the

conduct is not ‘unfair’ toward consumers.” Chavez v.

Whirlpool Corp., 113 Cal. Rptr. 2d 175, 184 (Ct. App. 2001).

An independent claim under California’s UCL is therefore

barred so long as MLB’s activities are lawful under the

antitrust laws.5

5

MLB also argues that San Jose lacks antitrust standing to bring this

challenge. However, “[u]nlike Article III standing, the question of

standing to sue under the antitrust laws does not go to subject matter

jurisdiction, and thus need not be considered” before addressing the

merits. Datagate, Inc. v. Hewlett-Packard Co., 60 F.3d 1421, 1425 n.1

12 CITY OF SAN JOSE V. COMM’R OF BASEBALL

* * *

Like Casey, San Jose has struck out here. The scope of

the Supreme Court’s holding in Flood plainly extends to

questions of franchise relocation. San Jose is, at bottom,

asking us to deem Flood wrongly decided, and that we cannot

do. Only Congress and the Supreme Court are empowered to

question Flood’s continued vitality, and with it, the fate of

baseball’s singular and historic exemption from the antitrust

laws.6

AFFIRMED.

(9th Cir. 1995). Because we affirm on the basis of the baseball

exemption, we need not reach the question of San Jose’s standing.

6

In light of our disposition, all pending motions are denied as moot.