Supreme Court Gets Chance Correct Law’s Greatest Anomaly

Legal Adviser January 16, 2015
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BaseballBaseball is now the winningest sport in all of physical competition, at least in the legal arena. The San Francisco 9th U.S. Court of Appeals upheld a decision in favor of the sport’s antitrust exemption, which the court described as “one of federal law’s most enduring anomalies”. A law with such a distinction, the court argued, is only subject to change by Congress or the Supreme Court.

Lawyers representing the city of San Jose will be taking the case to the Supreme Court next, which they hope will produce a more favorable result. This will be the first time in forty years that the High Court will have a chance to discuss the issue of the exemption, and perhaps change a ruling that has stood for nearly a century.

The Sherman Act

The main issue begins with the Sherman Antitrust Act, which is described in Title 15, Chapter 1, § 1-7 of the U.S. Code. The Act is a landmark statute for United States Antitrust law, and Congress passed it in 1890. To summarize the purpose of the Act, its tasks federal regulators to prohibit certain businesses from engaging in activities that are ‘anti-competitive’.

The most common use of antitrust laws have been to purge industries of entities, or groups that work to actively suppress competition, such as monopolies and cartels. The Supreme Court deftly expounded the reasoning behind the Act in its explanation of its opposition to the Lessig opinion, which reads:

“The purpose of the Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.”

Antitrust litigation has always been a constant threat to sports organizations, and provides a haven for those who feel they got the short end of the stick with their contracts. The latest example of this would be the three simultaneous class action antitrust lawsuits that former fighters are filing against the Ultimate Fighting Championship (UFC).

Baseball has the enviable distinction of being exempt from this rule, which is the reason why the City of San Jose is suing to have that exemption removed. This issue is more than a hundred years old; it first came into question with Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs (1922).

An Exemption is Born

The plaintiffs alleged that certain Federal League teams were bought out by other major leagues or received alternate compensation while they did not. The Supreme Court had a unanimous decision supporting the Appeal Court’s decision, ruling that baseball did not fall under the Sherman Act because:

“the business is giving exhibitions of base ball[sic], which are purely state affairs”

Even if teams travelled across state lines to compete, the Court explained, that the travel is not enough to change the character of the business. Using the precedent set by Hooper v. California, the transport is mere incident and not the essential thing in baseball.

The Supreme Court upheld this decision in Toolson v. New York Yankees, Inc. and Flood v. Khun in 1952 and 1972 respectively. Both cases made its own contribution to the issue, and the arguments that we still hear today.

Congress Do-Nothing

For example, the Toolson case argued that in the years between 1922 and 1952, Congress had a thirty-year window to correct the situation with legislation is they so wished. The lack of action by the legislative department can be taken as an implicit expression of their intent to keep the exemption intact. There were, however, dissenting opinions arguing that the MLBs revenue sources have changed enough since 1922 that the logic of the original case no longer applied.

Stare Decisis and Blackmum the Passionate Fan

Flood v. Khun upheld the first two decisions 5-3, but the Judges did start showing a change of heart when they admitted that the original grounds of the exemption were tenuous at best. Judge Harry Blackmum, celebrated for his part in Roe v. Wade, wrote in his history of baseball/decision that it was “appropriate to say that professional baseball is a business and engaged in interstate commerce” and that the exemption was “an aberration confined to baseball”.

Unfortunately, Blackmum also cited the principle of stare decisis, a legal doctrine wherein judges are obliged to respect precedent established by earlier decisions. This effectively upholds the rulings of the past two cases. Many criticized the decision, saying the strict application of the principle will make the exemption uncorrectable for future courts.

In a way, the criticisms hold true, because even though District and Appeals Courts of the current San Jose case agree that the exemption shouldn’t hold. But, they’re bound by precedent to rule in favor of baseball. Now, it’s up to the current Supreme Court to either correct a century old anomaly, or dig an even deeper hole for antitrust law in baseball.

Category: Of Two Minds
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