Court Opinion

ID: 2770321
Source: CourtListenerOpinion
Date Created: 2015-01-15 19:01:11.95084+00
Date Added: 2024-06-11T11:26:26.864978
License: Public Domain

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.