The ongoing legal action between the city of San Jose and Major League Baseball is well beyond the pay grade of your average Getting Blanked editor, so we enlisted the help of Fraser MacKinnon Blair (@fmblair on Twitter) to help us wade through the legalese and make sense of the what’s going on by the Bay. Learn and enjoy!
In a somewhat surprising twist, the City of San Jose has sued Major League Baseball and Commissioner Bud Selig in relation to the contentious issue of franchise territorial rights in Northern California.
The suit, filed on Monday, alleges that the defendants have violated Federal and State anti-trust laws, have illegally interfered with the City’s contractual and economic relations with the Oakland Athletics and engaged in unfair competitive practices.
The City of San Jose has been trying to lure the A’s to the Capital of Silicon Valley for quite some time. Apparently frustrated with the way that MLB handles franchise relocation, the City has decided that litigation is its best option.
They make a pretty complicated set of allegations, and I’ll try and simplify the arguments as much as possible. To do that, lets analyze each of the claims separately.
The Anti-Trust Claim
Anti-trust law is designed to promote competition and limit anti-competitive behaviour amongst competitors in a market. In Canada, we call this competition law. Anti-trust laws include provisions that punish cartel-like behaviour, abuse of dominance, predatory pricing, refusing to deal, and the like.
In a nutshell, the City of San Jose is asking the court to declare that MLB’s policy regarding franchise relocation, which allows the league to dictate when and where a club can move, violates Federal and California anti-trust law. Generally, in these cases a plaintiff will have to prove that the defendant has “market power” over the “relevant market,” and that its exercise of market power is causing “anti-competitive effects.”
The quoted terms are very technical and I don’t think that there’s enough space on my hard-drive to properly define them. The basic argument is that MLB holds a monopoly (ie. “market power”) over the provision of major league professional baseball games (“relevant market”) and is creating anti-competitive effects through illegal and unreasonable means by refusing to permit the Athletics to move to San Jose. Bingo, bango, bongo.
It’s an interesting argument with serious implications, since it attacks a foundational piece of the North American professional sports structure. All major professional leagues impose some form of restraint on the ability of its franchises to change cities.
However, MLB (unlike the NBA, NFL and NHL) has and continues to operate under an exemption from anti-trust laws for almost a century. To really hammer it home, Congress passed the Curt Flood Act in 1998 which clarified that MLB’s decisions regarding franchise relocation are shielded from the application of anti-trust laws. In other words, there is nothing to see here. MLB is likely within its legal rights to act in an anti-competitive fashion in matters relating to relocation.
Tortious Interference with Contractual Relations
A claim like this boils down to the scenario where two parties are contractually bound to one another, and a third party comes along and induces one of the parties to breach the contract or does something that makes it impossible for a party to perform the contract.
To succeed, the City has to prove (1) the existence of a contract, (2) MLB’s knowledge of that contract, (3) MLB’s intentional interference with the contract, and (4) that it has suffered an actual loss relating from MLB’s interference.
Proving the contract and MLB’s knowledge of its existence won’t be hard. The City granted a 2-year option to purchase land to the Oakland A’s in November of 2011 in exchange for $50,000. Under the terms of the deal, the A’s also hold a right to renew the option (for the sake of confusion, we’ll call it an option to extend an option) for another year at the cost of $25,000. The land in question is the land upon which the hypothetical stadium would be built in San Jose. Presumably, they forwarded a copy of the agreement to the Defendants.
Since the City doesn’t allege that MLB has induced the A’s to breach the deal, the live issue is whether MLB’s interfered and rendered performance of the option impossible.
It gets a bit technical at this stage because of the nature of option contracts. As is the case with an option to extend a contract between a baseball player and his club, the party that holds the option can exercise it or not, and in either case have “performed” the contract. If the court accepts that an performance of the contract is still possible because Oakland can choose to not exercise its option to buy the land, then the City’s argument will fail.
The problem with that angle is that it would allow contractual rights to be interfered with so long as the ultimate performance of the contract is still possible. I’m not sure what the approach is in California, but the Supreme Court of Canada has held that the law is concerned with interference with rights under a contract. This creates a broader basis for liability and one that would likely catch the conduct of MLB. It’s also the right approach, in my view.
Lastly, the City will have to prove losses related to the interference. In their suit, they claim the value of the land as a loss as well as losses related to property and sales tax revenues, new direct spending, new jobs and economic output generated by the presence of the stadium. As an aside, it would be great to see a stadium economics argument in court.
Tortious Interference With Prospective Economic Advantage
As Jason Wojciechowski notes over at Baseball Prospectus, this claim is pretty similar to the contractual interference claim and it shares mostly the same elements. The main difference is that the City doesn’t have to prove the existence of a contract but must show that MLB’s interference was “independently wrongful.”
“Independently wrongful” conduct is that which can, on its own, be the basis for a lawsuit. This means that the City will have to prove that MLB could be sued solely on the basis of the interfering conduct. Unfortunately for the City, this argument runs into the same trouble as the anti-trust claim. Since MLB has been authorized to violate anti-trust laws by the Curt Flood Act, its hard to say that its conduct is independently wrongful.
Unfair Business Practices
The City also brings a claim for “unlawful, unfair and/or fraudulent business practices in violation of the California Business and Professions Code.” The City is arguing that the conduct of MLB amounts to acts of unfair competition.
I don’t know anything about this type of claim, but it seems logical that a claim for unfair competition is not possible where the alleged wrongful act is authorized by law. Much like the anti-trust claim, this one appears doomed as well.
The best shot that the City has is through the claim for Tortious Interference with Contract, but that’s almost by default since all the other claims are barred by the Curt Flood Act. Even still, I’m not sure it’s the strongest case, given my uncertainty with how options are treated by California courts.
Note: The contents of this article are not to be construed as legal advice. The author of this article is a recent graduate of law school, but is not a lawyer and is not competent to give legal advice.