MLB Aims to Strike Out Minor League Teams’ Antitrust Lawsuit

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Attorneys for Major League Baseball have described a federal lawsuit brought by four former affiliates as “patently frivolous,” a “futile quest” and a means for “boasting in the press” that their case could upend MLB’s limited antitrust exemption. The description came in a 37-page motion to dismiss filed last Friday by John Hardiman and other attorneys from Sullivan & Cromwell.

Four months ago, the Staten Island Yankees, the Norwich Sea Unicorns, the Salem-Keizer Volcanoes and the Tri-City ValleyCats sued in the Southern District of New York, arguing that MLB and its 30 teams violated Section 1 of the Sherman Antitrust Act. MLB’s reorganization of MiLB in 2020, the former affiliates charge, constituted an unlawful “boycott” of the more than 40 teams that lost MLB affiliations. The lawsuit depicts the termination of affiliations as “nothing less than a naked, horizontal agreement to cement MLB’s dominance over all professional baseball.”

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For supportive precedent, the former affiliates rely on the U.S. Supreme Court’s 9-0 ruling in NCAA v. Alston, where last year the NCAA and its members were found to have violated the Sherman Act. They had conspired to unlawfully prohibit individual colleges from reimbursing athletes’ academic-related costs. In the opinion, Justice Neil Gorsuch panned the Court’s 1922 ruling in Federal Baseball Club v. National League, where Justice Oliver Wendall Holmes had reasoned that MLB is exempt from federal antitrust law since games are played in one state, whereas federal antitrust law requires interstate activity. Gorsuch saw this deduction as flawed since MLB teams “regularly crossed state lines (as they do today) to make money and enhance their commercial success.”

The former affiliates view Gorsuch’s analysis in Alston, even if dicta (not essential to the holding against the NCAA), as supportive of their case. There are “objectively good reasons,” the four clubs wrote, “to believe that the Supreme Court would no longer apply the . . . baseball antitrust exemption if presented with a proper case for reconsidering it. This is that case.”

In its motion to dismiss, MLB blasts the former affiliates’ logic as flawed and misguided.

The Supreme Court, the league stresses, has consistently upheld MLB’s exemption over the last 100 years, including in Curt Flood’s famous 1972 case, Flood v. Kuhn. In Flood, the Court sided with MLB on account of stare decisis, a Latin term for “to stand by things decided” and a legal principle which holds that the Court will honor precedent. Writing for the Court, Justice Harry Blackmun acknowledged that it was anomalous, even nonsensical, for MLB to enjoy an exemption that other leagues were denied. Nonetheless, he wrote, “if there is any inconsistency or illogic in all this, it is an inconsistency and illogic of long standing that is to be remedied by the Congress, and not by this Court.”

As MLB sees it, Congress accepted Blackmun’s invitation three decades later and “effectively codified” MLB’s exemption through the Curt Flood Act of 1998. The Act, signed into law by President Bill Clinton, significantly narrowed the exemption to exclude MLB players’ compensation and other MLB labor matters. Yet the Act preserved the exemption for minor league baseball—the topic at issue in this litigation—as well as for ownership sales, licensing of intellectual property, the amateur draft and franchise relocation.

In other words, MLB contends, a federal statute enshrines relevant aspects of the exemption and therefore MLB can’t be held to have violated the Sherman Act.

That dynamic is also different from the one at issue in Alston. The NCAA lacked an antitrust exemption (either from the Supreme Court or Congress) and instead enjoyed only a deferential form of antitrust review via a 1984 Supreme Court decision, NCAA v. Board of Regents.

Even if MLB were subject to antitrust claims, MLB insists the former affiliates’ claims must fail under antitrust scrutiny. As MLB sees it, the reorganized system for MiLB promotes, not harms, economic competition—a central consideration in antitrust analysis.

For example, MLB attorneys write that “plaintiffs allege that the reorganized system violates the antitrust laws because the number of affiliations between MLB clubs and minor league clubs is limited to four per MLB club, but Plaintiffs acknowledge that in the old system, the number of affiliations was also limited; the limit was just six instead of four.” MLB further maintains the new system promotes competition, because “in the old system, unlike in the new system, the minor league clubs that historically had affiliations were effectively guaranteed to keep them, regardless of competitive merit.”

Judge Andrew Carter is presiding over the case. According to the court’s docket, the former affiliates will file a response to the motion to dismiss by May 27 and MLB will file its reply in support of the motion by June 17.

If Judge Carter dismisses the case, the former affiliates could appeal to the U.S. Court of Appeals for the Second Circuit. Doing so would constitute the next step in a potential plan to petition the Supreme Court to weigh in.

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