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San Jose Gets Beaned By Baseball Antitrust Exemption In Case Against Major League Baseball

Posted  October 29, 2013

The City of San Jose may have gotten beaned by a ruling that its federal and state antitrust claims against Major League Baseball (“MLB”) should be dismissed under baseball’s nearly century-old antitrust exemption, but it still gets to dust itself off and proceed to first base on its contract interference claims.

San Jose is alleging in City of San Jose et al. v. Office of the Commissioner of Baseball et al. that MLB and baseball commissioner Bud Selig conspired to foil the Oakland Athletics Baseball Club’s (“the A’s”) proposed relocation from Oakland to San Jose.

Judge Ronald M. Whyte of the U.S. District Court for the Northern District of California has granted MLB’s motion to dismiss San Jose’s federal and state antitrust claims, finding that club relocation is part of the business of baseball subject to the antitrust exemption that baseball has enjoyed since 1922, under the Supreme Court decision of Federal Baseball Club v. National League of Professional Baseball Clubs.  However, the court denied MLB’s motion to dismiss San Jose’s state law claims for tortious interference with contract, allowing the City to proceed with its case.

San Jose had argued that the 1922 Supreme Court decision and its progeny only applied to baseball’s now defunct “reserve clause,” which generally confined players to the clubs that had them under contract.  Judge Whyte, however, found that the City’s position was contrary to the holdings of most courts that have considered the issue.

The court held that under controlling Supreme Court precedent, the antitrust exemption for the “business of baseball” is not limited to the reserve clause, and that “the alleged interference with a baseball club’s relocation efforts presents an issue of league structure that is ‘integral’ to the business of baseball, and thus falls squarely within the exemption.”  Although the court acknowledged “the reasoning and results of those cases seem illogical today, they have survived for many years and are precedent that the court must follow.”

While the court threw out the City’s antitrust claims, it denied MLB’s motion to dismiss the City’s state law claims for tortious interference with prospective economic advantage and tortious interference with contract, finding that they were not wholly premised on the alleged antitrust violations.  These contract interference claims are based on an allegation that MLB engaged in stalling tactics that frustrated a contract that gave the A’s an option to purchase real estate in the San Jose area for the club’s proposed relocation.

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