In an early test of the legal fallout over minor league baseball’s planned contraction, Major League Baseball and the New York Yankees have filed a motion to dismiss the Staten Island Yankees’ lawsuit. MLB and the Bronx Bombers maintain that the minor league club, which last month sued them and Steinbrenner family trustee Charles Norman Stallings for $20 million, has offered “a grab bag of purported claims” that are devoid of merit.
The SI Yankees are a defunct single-A squad that previously played in the short-season New York-Penn League. They might seem like a mere inconvenience for two multi-billion dollar sports organizations. Yet in litigation, size doesn’t always matter. The case is quite threatening.
If a New York trial court denies the motion to dismiss, pretrial discovery—wherein the Yankees and MLB would need to share sensitive emails and their executives would likely be compelled to answer questions under oath—would soon occur, barring a settlement. Many, including Congresswoman Lori Trahan and other members of the bipartisan Save Minor League Baseball Task Force, would be watching the returns.
To that end, MLB and the Yankees have retained John Hardiman, a senior litigator at Sullivan & Cromwell. Hardiman represented MLB in defeating claims brought by DraftKings contestants over the impact of electronic sign stealing on game outcomes. He’s also litigated on behalf of AMC, AIG and other major companies. Stallings, for his part, has hired Jonathan Schiller, co-founder and managing partner of the famed law firm Boies, Schiller & Flexner. Schiller is familiar to both the Yankees and MLB: He represented the Yankees in litigation against MLB and StubHub in 2013. Not to be outdone, the SI Yankees have retained James Quinn of Berg & Androphy. Quinn is an accomplished sports litigator who served as lead counsel in McNeil v. NFL, where he proved that NFL free agency rules violated antitrust law. Joining Quinn as SI Yankees counsel is David Lender of Weil, Gotshal & Manges. Lender has litigated on behalf of ESPN, Credit Suisse, ExxonMobil and other major brands.
The SI Yankees seek to hold MLB and the Yankees “accountable for false promises.” They insist the duo unlawfully breached contractual obligations and illegally reneged on promises that the affiliation would continue in perpetuity.
Much of the case turns on last September’s expiration of the professional baseball agreement (PBA) between MLB and MiLB. The PBA set forth the legal relationship between the two leagues. Among many other things, the PBA required that there be 160 minor league teams. It also established restrictions on MLB clubs’ ability to swiftly change affiliated clubs—“regardless,” MLB asserts in the motion to dismiss it filed on Jan. 22, “of opportunities to improve facilities, working conditions, fan experiences, player compensation or geographic sensibility.”
With the PBA expired, the league and big league teams culled affiliations with 43 minor league clubs. This reorganization was intended to streamline player development and reduce costs. It also meant losses of jobs for affected clubs, diminishment of local tax revenue, possible breaches of sponsorship deals and dejected fans. Although ousted teams might explore possible opportunities to join independent leagues, the SI Yankees shut down operations.
From the perspective of MLB and the Yankees, the PBA’s expiration is the decisive fact.
“Each of [SI Yankees’] claims,” Yankees and MLB attorneys write, “is rooted in the erroneous premise that the SI Yankees had a right to maintain their affiliation with the NY Yankees in perpetuity, even after the PBA expired by its own terms.” Once the PBA expired, the attorneys maintain, any possible rights were “clearly extinguished.”
MLB and Yankees attorneys also counter SI Yankees’ claims that team officials were misled by, and relied on, false assurances that they’d be so-called “special partners.” The attorneys argue these assertions are “hopelessly vague” and suggest the phrase “special partners” lacks intrinsic meaning. They also contend the SI Yankees fail to clarify when or by whom certain assurances were made. Even if these promises were identifiable, MLB and the Yankees maintain, they are trumped by the PBA contractual relationship.
The SI Yankees insist the contractual relationship extends beyond the PBA. The complaint draws attention to the Player Development Contract (PDC), which each minor league team signs to formalize its affiliation, and to agreements signed by SI Yankees’ principal owners (Nostalgic Partners) when purchasing the team in 2011. The SI Yankees stress that, through trusts, the Yankees own five percent of the minor league club in order to ensure a continued affiliation.
From that lens, the PBA’s expiration didn’t extinguish the relationship or the responsibilities of each party. MLB and the Yankees dismiss this interpretation. Applicable language, they charge, spells out that rights did not continue beyond the PBA’s termination.
The case could serve as a harbinger for MLB’s legal exposure should other displaced minor league teams sue.