M.L.B.’s Favorite Loophole Finally Faces Extinction

Rob Manfred
M.L.B. commissioner Rob Manfred. Photo by Julio Aguilar/Getty Images
Eriq Gardner
June 6, 2022

Baseball is a slow game. So is litigation. But this season, something unusual is happening. Four minor league baseball teams are attempting to get to the Supreme Court as quickly as the judicial system will allow. That means that these four teams have invited a federal judge to reject a lawsuit they filed late last year against Major League Baseball. No oral hearing requested. Go ahead and dismiss our claims because you must, they recently told the judge. Afterwards, these four teams will take their case to the 2nd Circuit Court of Appeals, but only because that’s a necessary pit stop. The teams don’t have expectations to win there either. Indeed, it might be like the 1989 Charlie Sheen classic, Major League, where the team’s owner purposely engineers a losing effort. Only after defeat at the intermediate appellate level will the real action begin. 

This case features the Staten Island Yankees, the Norwich Sea Unicorns, the Salem-Keiser Volcanoes, and the Tri-City Valleycats taking on Major League Baseball and Commissioner Rob Manfred after the teams’ affiliations with big-league clubs were eliminated as part of a 2020 restructuring of the minors. Now represented by the prestigious law firm of Weil, Gotshal & Manges, along with former players’ union attorney James Quinn, the plaintiffs allege that M.L.B.’s decision to “artificially reduce” the number of major-minor affiliations “in order to cut expenses” is “nothing less than a naked, horizontal agreement to cement M.L.B.’s dominance over all professional baseball.”

In response to the suit, M.L.B. argues these teams don’t have any antitrust standing and haven’t plausibly made a case that the 30 big league clubs (such as the Los Angeles Dodgers and St. Louis Cardinals) truly conspired to “boycott” them. “Of course Plaintiffs have standing,” replied plaintiffs’ attorneys in a May 27 memorandum. Then, in the very next paragraph, the plaintiffs pitch a fat fastball down the middle for the judge to crush: “M.L.B.’s only real defense in this case is an ill-conceived antitrust exemption that is long past its expiration date. Plaintiffs recognize that the Court is currently bound by that exemption and will need to dismiss on that basis.”

Thus sets the stage for a decision that will awkwardly celebrate the 100th anniversary of one of the most obviously stupid decisions in Supreme Court history. That would be Federal Baseball Club v. National League, the 1922 opinion that many legal observers ridicule today but, quite amazingly, has never been overturned. The absurd argument from the otherwise legendary Justice Oliver Wendell Holmes was that, despite the fact that baseball players from around the nation travel from state to state to play each other for money, the business of exhibiting baseball is “purely state affairs,” that the transportation is incidental, and so there’s really no “interstate commerce” for purposes of the Sherman Antitrust Act. Fortunately, Holmes’ unpersuasive reasoning hasn’t been adopted elsewhere. It’s been M.L.B.’s antitrust exemption to enjoy—and M.L.B.’s alone.

As for why it’s lasted so long, well, that’s a crucial part of this story that often goes overlooked. And it mostly comes down to inertia. Lawmakers have looked to the courts to unwind what they wrought; courts, in turn, have waited for lawmakers. While politicians sometimes talk a big game about repealing the exemption—Ted Cruz, for example, yelled that it would happen when “woke” M.L.B. pulled the 2021 All Star game from Atlanta over a G.O.P. election reform bill—those efforts for legislative change have predictably failed.

Indeed, should M.L.B. again have to trot to the Supreme Court to defend itself from antitrust scrutiny, the league will point to Federal Baseball and two follow-up events. First, Toolson v. New York Yankees, in which the high court had its first opportunity, in 1953, to reverse its Babe Ruth-era mistake, but instead passed the buck to lawmakers. “Congress has had the ruling,” the court stated, pointing to three decades of legislative torpidity. “[T]hus, it can be said that Congress had no intention of including the business of baseball within the scope of the federal antitrust laws.” And second, I expect the league to point to the passage of the 1998 Curt Flood Act, Congress’s one successful endeavor to at least carve out labor matters from M.L.B.’s hallowed antitrust exemption. M.L.B. will argue this means lawmakers recognized and preserved the antitrust exemption for everything else. (M.L.B.’s glovework is foreshadowed in early briefings in the case over the restructuring of the minor leagues.)

Unfortunately for Rob Manfred and the M.L.B. owners, there’s good reason to believe that circular arguments about what has and hasn’t happened in the past century won’t work at the Supreme Court this time around. Why not?

Well, for starters, look at what happened last year when the N.C.A.A. took a shot at scoring its own antitrust exemption. In NCAA v. Alston, the collegiate sports league held up its “revered tradition of amateurism” to explain away its cap on student-athlete academic benefits. All nine justices unanimously rejected the N.C.A.A.’s argument, with the opinion from Justice Neil Gorsuch highlighting M.L.B.’s success a century ago. “But this Court has refused to extend Federal Baseball’s reasoning to other sports leagues—and has even acknowledged criticisms of the decision as ‘unrealistic’ and ‘inconsistent” and ‘aberration[al],’” he wrote.

That caused antitrust lawyers to sit up and recognize a veiled invitation to bring a good case that would challenge M.L.B.’s antitrust exemption. The attorneys at Weil, Gotshal who are now pressing the lawsuit over M.L.B.’s minor league affiliations are forthright about the impact that Gorsuch’s words had on their latest endeavor and make no secret of their wish to get their case to the Supreme Court as quickly as judicially possible. (I spoke to them in advance of writing this.) 

If M.L.B.’s exemption were to be overturned, it’d be big news for the sport. Such a development might complicate efforts by the league to transfer teams from one city to another—the Oakland Athletics to Las Vegas, for example, or the Tampa Bay Rays to Montreal. It could also create a headache on the broadcasting and streaming fronts too. The N.F.L. is currently contending with an antitrust lawsuit over how it coordinates teams’ rights and then licenses a package of out-of-market football games, and surely, M.L.B. could expect to defend similar litigation over its own deals and rules propping up a TV empire. 

But even if the Supreme Court decides to torch M.L.B.’s exemption just as Congress is heeding tech lobbyists and failing to enact a much-teased larger antitrust reform package, this story is more than about the rules we have (or lack) ensuring fair competition.

This is also a narrative concerning the way our judicial sphere revisits the past. The specter of a reversal for Roe v. Wade looms over much of what’s coming in courts. Once these justices become free to no longer pretend that stare decisis matters, what comes next? How will the system deal with the fallout? Will there be more and more cases brought—some good, others terrible—with hopes of enticing justices suddenly dripping with scorn for precedent? I’m not sure of the answer, but I do know that the game is changing.