The Justice Department is intervening in a case brought by a minor league baseball team from an Oregon community with fewer residents than could fill Yankee Stadium. However, the outcome could impact American businesses far and wide.
On Tuesday, the DOJ filed an amicus brief in the U.S. Court of Appeals for the Second Circuit in support of neither party in Nostalgic Partners et al. v. MLB. The owners of four MiLB teams—the now defunct Staten Island Yankees, the Norwich Sea Unicorns, the Tri-City ValleyCats and the Salem-Keizer Volcanoes, which play in Keizer, Ore., population roughly 40,000—allege that MLB violated federal antitrust law when ending those teams’ affiliations.
“Minor League Baseball,” several deputy and assistant attorneys general wrote, provides “a vital source of jobs, tourism and affordable entertainment” and “enjoys a special place in American life.” The DOJ highlighted that before losing its Houston Astros affiliation, the ValleyCats provided the approximately 50,000 Troy, N.Y., residents with $55 million in benefits and more than 700 jobs. The DOJ, which submitted a statement of interest when the case was before the Southern District of New York, wants the Second Circuit to appreciate how “the application of antitrust law to professional sports has proven workable.”
The litigation raises crucial issues about the scope of antitrust law, the durability of Supreme Court-crafted exemptions and the interpretation of federal legislation crafted by members of Congress. The DOJ’s move comes only a week after it sued Google for an alleged scheme to monopolize digital ads and as the agency more aggressively enforces antitrust law.
Last year, SDNY Judge Andrew Carter dismissed Nostalgic Partners’ case for a simple reason: MLB is exempt from applications of federal antitrust law to minor league baseball.
The Supreme Court created MLB’s exemption in the 1922 decision Federal Baseball Club v. National League. The Court’s logic—because games are only played in one state, the requisite interstate activity to impose federal law is lacking—is generally viewed by contemporary judges, lawmakers and legal scholars as unpersuasive. That was apparent in NCAA v. Alston, when Justice Neil Gorsuch described the exemption as illogical since “teams regularly crossed state lines (as they do today) to make money and enhance their commercial success.” Last summer, both Republicans and Democrats in the Senate criticized the exemption and demanded MLB commissioner Rob Manfred justify it (he offered a defense). Over the years, courts have refused to extend the exemption to other leagues.
But under the principle of “stare decisis,” which is Latin for “to stand by things decided,” Supreme Court precedent ordinarily stands unless Congress and the President use the legislative process to change the law. To that point, Congress passed, and President Bill Clinton signed, the Curt Flood Act of 1998. The act eliminated MLB’s exemption as it pertains to MLB players’ employment features but left it in place for certain other topics, including MiLB.
End of story for MiLB teams? Not necessarily.
Although Judge Carter dismissed the lawsuit, he concluded the teams had both established antitrust standing and plausibly pleaded an antitrust violation. The judge stressed that unaffiliated MiLB teams can’t play against affiliated ones, which leads to diminished competition in the pro baseball market. He also noted that unaffiliated MiLB teams can’t credibly compete against affiliated teams for the most talented players, and that MLB, like the NCAA and NFL when it comes to college and pro football markets, respectively, enjoys “complete control over the market for baseball.”
Through their attorneys from Weil, Gotshal & Manges and Berg & Androphy, three of the MiLB teams (Staten Island Yankees, Unicorns and ValleyCats) appealed and seized on Carter’s reasoning in their Jan. 9 petition of appeal to the Second Circuit. They chastised MLB for having “a get-out-of-antitrust-jail-free card,” insisting that Carter “was forced to dismiss the action” despite viewing MLB’s moves as problematic. The petition nonetheless acknowledged that the Second Circuit should apply the exemption—meaning, counterintuitively, rule against the MiLB teams. A defeat, the attorneys write, would then “permit Plaintiffs to petition for certiorari, so that the Supreme Court can correct its own mistake.”
MiLB teams thus believe they can convince the Supreme Court to not only take the case—the Court only grants about 1% of writs of certiorari—but rule for them. The petition said the exemption “stands only on the sunk costs fallacy,” and its beneficiary, MLB, “relies on it to the detriment of everyone else.”
The teams also belittled the exemption as created in a case about big league baseball when it no longer applies to big league players. While acknowledging that stare decisis is an important principle, the teams emphasized how the Court has been willing to reverse precedent when it is based on judges’ rulings, rather than a statute, and has been especially willing to reverse precedent in cases involving federal antitrust law.
In its brief, the DOJ picks up on some of these themes. “The United States,” the DOJ wrote, “does not take a position on whether the exemption applies here” because the MiLB teams concede it applies. The DOJ instead wants the Second Circuit—and potentially the Supreme Court—to “reaffirm” that courts should not extend the exemption. In articulating that viewpoint, the DOJ warns that the exemption’s scope is a matter of debate, with one possibility being it was limited to MLB player contracts (which would mean it no longer applies).
The DOJ also stressed that “relevant market realities,” such as TV revenue, “have changed dramatically” since 1922, and that the exemption “was not created to reconcile competing legal authorities or substantive policy goals,” such as when exempting certain state matters from federal laws.
As Sportico has previously explained, MLB is armed with defenses. One is that Congress has already spoken through the Curt Flood Act, which preserved relevant aspects of the exemption and which courts (arguably) should honor. Manfred also wrote that if MLB is subject to antitrust litigation over MiLB, it would result in fewer teams and players earning less.
Expect the Supreme Court to be more inclined to review the case now, given the DOJ’s involvement. Should it do so, the Court’s ruling would pose consequences well beyond baseball and sports. It could impact other industries that benefit from antitrust exemptions, such as insurance and farming. Along those lines, while Alston was an antitrust case about NCAA rules, the ruling has been used by attorneys in non-sports antitrust cases, such as fast food antitrust lawsuits.
Stare decisis has also sparked controversy of late. In last year’s Dobbs v. Jackson Women’s Health Organization decision, the Court, in a 5-4 ruling, overruled two decisions (Roe v. Wade and Planned Parenthood of Southeastern Pennsylvania v. Casey) that had recognized a federal constitutional right to abortion before fetal viability. Although a case about MiLB teams might seem trivial by comparison, it would nonetheless raise the same fundamental question about when the Court should reverse itself.