Pumping up the antitrust threat
Today’s Merc has a column by Mark Purdy which talks up the possibility of San Jose filing an antitrust lawsuit against the Giants (and perhaps by extension, MLB) to force the team to come to the table regarding territorial rights.
Leading the charge is San Jose District 3 Councilman Sam Liccardo, who also happens to be a leading candidate in the city’s 2014 mayoral race. Liccardo has sounded the alarm before and has now provided a peek into the City’s potential legal strategy. The question is one of whether San Jose has standing in a case against the Giants. Liccardo argues that it does based on taxes that can never be collected because the privately-financed ballpark wasn’t built. Assuming the City wins and is awarded treble damages, the City could be awarded $90 million.
The clever thing about this argument is that it’s essentially the same one the City of San Francisco has used in defense of the Giants’ territorial rights: the Port/SF are at fiscal risk in terms of reduced rent and tax payments if T-rights are given up. The difference is that the Giants-SF arrangement is contractual, while the A’s-San Jose arrangement is a projection based on its negotiating principles and a 2009 economic impact report. How seriously should a court take economic projections? When I dissected the report in 2009, I found that the projections of tax revenue were realistic, even conservative, whereas the projections of economic growth via multipliers were far less credible. That aside, if the tenets of the Giants’ and A’s arguments are essentially the same, and SF’s argument has merit because of a contractual obligation, should SJ’s argument also have merit due to restraint of trade? Again, I’m not a legal expert, and those I’ve talked to haven’t found a precedent for this kind of case, but on the surface there could be something to it. From what I’ve heard, the City has been exploring different avenues to pursue a lawsuit for over a year, so it’s not as if they haven’t done their homework.
This is different from attacking the sacrosanct nature of territorial rights, which is probably a more difficult task. If they’re using “direct economic impact” as a narrow framework for the case, MLB and the owners may be less inclined to worry about T-rights as an institution being threatened as opposed to the Giants having to fight their own battle. On the other hand, the case could set a precedent for other cities trying to lure teams, but in their case they’d also have to have the combination of a willing ownership group and a ballpark deal basically set, compared to a purely speculative matter. Besides, in many other cities’ cases they’re offering up large loans and other public funds, which upends the argument of a City making money from the deal.
Of course, the flipside of pursuing a case in this manner is that it more-or-less names the price for Santa Clara County: $30 million over 30 years or $40 million over 50 years. When you think about the financial impact to the Giants, that’s extremely cheap. If a hypothetical lawsuit were to proceed to trial, what’s to stop the Giants from whipping out their checkbook to simply pay for San Jose? For San Jose that would be a terrible outcome because then T-rights would become a matter contract between the Giants and the City for very little money. On the other hand, MLB owners might frown upon that because doing that would actually name a price for a territory, when the owners have thrived over the past few decades from not having a price named on any specific territory.
One of the frequent arguments against the lawsuit is that it would cost taxpayers money. If Liccardo’s right, a very prominent trial lawyer (not Skadden’s Allen Ruby, someone else) would take the case on contingency, in which case it wouldn’t cost the City anything unless the City won or forced a settlement. Such an arrangement would eliminate the concerns about taxpayer funds, though it should be pointed out that Mayor Chuck Reed, himself a lawyer, hasn’t been shy about going to court (Measure B pension reform, redevelopment, City vs. County) in the last year. I figure that Reed’s and Lew Wolff’s restraint in pushing the case with Bud Selig have prevailed over more aggressive maneuvers. If Liccardo won the 2014 Mayor’s race or if Reed suddenly felt less gunshy, this whispered threat could transform into a real threat very quickly, especially if MLB were named in the suit. Now, that’s no way to make friends in MLB, but forces in Tampa Bay sued and they eventually got a team out of it. Strange then, that all these legal problems were precipitated by a move by the Giants. They don’t call it hardball for nothing.
Bonus reading: While doing research for this post, I came across two old Chronicle articles about the development of AT&T Park. First is an article titled “How Will Team Pay Off Debt” by Edward Iwata and Lance Williams (yes, that Lance Williams) and “Giants’ Pricey New Park May Lower Team Quality” by Jon Swartz. The second article includes quotes from the late Walter Shorenstein, who split from the Giants’ ownership group when he felt that AT&T Park was considered too risky.