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.

General Fund projections for a San Jose ballpark

General Fund projections for a San Jose ballpark

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.

36 thoughts on “Pumping up the antitrust threat

  1. As a San Jose partisan, count me as not liking this development one bit. With the undercurrents suggesting that the San Jose will be a go for Lew Wolff/A’s, why muddy the waters with this threat? Maybe if Selig/MLB were still preaching the “sacrosanct” of T-Rights, or if Baer was still belligerent in the media towards the A’s/San Jose. But the aforementioned is no longer the case, so why stir shit up?!
    My theory is that Sam Liccardo is unofficially beginning his mayoral run for 2014, and what better way of getting a leg up then to puff out your chest in the media.
    ( disclaimer: I support Sam Liccardo and will vote for him next year, but threatening lawsuits this late in the game IMHO is not the way to go…patience.)

  2. I’ve said it for years without a lawsuit Selig will do nothing because he is too much of a coward to do the right thing. I thought by now despite my previous statement this would be resolved by now….goes to show how much of a coward Selig is.

    Selig wants to leave this to the next commissioner…..after the 2014 season.

    He won’t act because he knows what he has to do and won’t accept that fact. Problem is a lawsuit does nothing without Wolff supporting it.

    Frat buddies huh? Terrible….

  3. If Wolff doesn’t support legal action, then all is well. I again reference the developments and undercurrents of the past few months suggesting the A’s will get San Jose (just see Rhamesis’ thread from about a month ago re Larry Baer on MLB Network). I’m sure Wolff has already contacted Sam Liccardo and provided him with a pep talk.
    (As I type watching Spring Training on MLB Network. Will be awesome to get baseball in downtown San Jose! )

  4. Hopefully this lawsuit will make Selig and mlb come to a choice… i just want closure in all this… in a way.. what would happen if Selig says “no Lew… i know we are frat buddies” but i cant force the giants off san jose…. yikes… what would be the next move.. again for Oakland supporters we are PRAYING that San Jose gets rejected as well as San Francisco asking too much from the Warriors playing at the pier… can u imagine those 2 teams coming back to Oakland empty handed???? yikes

  5. @Berry,
    I believe Wolff/the A’s/MLB are done with Oakland. It also seems highly unlikely at this point that Selig would say no to San Jose (remember, Baer himself has now stated that this is MLB’s decision to make and that they would respect said decision).
    That said, IF San Jose can’t happen for some unforeseen reason, then Fremont would come back into play. Not as ideal as San Jose, but southern Fremont is still considered Silicon Valley and still viable for a privately financed ballpark.

  6. Up to now San Jose officials have been complaisant towards making any legal moves. As of now, San Jose may finally be getting ready to raise the threat level with, what I believe to be, Lew Wolff’s blessing. The lack of transparency from MLB, regarding the so called “guidelines” for approval of the A’s move to San Jose, was likely the last straw with San Jose city officials. Hopefully, the potential expectations for legal actions on the part of San Jose will be enough to force Selig to finally end this charade and allow the A’s to move to Santa Clara County.

  7. Or llpec,
    Worst case scenario, Selig tells San Jose “WOW! We were about to have a resolution in your favor but now that your threatening to sue us, we’ll, TERRITORIAL RIGHTS ARE SACRED AND SAN JOSE BELONGS TO THE GIANTS!” Again, I’m hoping that this story/development is more to raise Liccardo’s stature among San Jose citizens for next years election. IMHO, now is not the time to mess with MLB.

  8. MLB’s antitrust exemption is the big elephant in the room. It is also MLB’s Achilles’ heel in this situation. Much attention is given to what the Giants might lose if the A’s move to San Jose. But, San Jose has the most to lose if the move is rejected. San Jose will be effectively banned from having its own MLB team, no matter how big and successful it continues to be. Unless San Jose is willing to accept this outcome, I believe it must challenge MLB’s antitrust exemption if the move is blocked.

  9. Tony- if you think Sam L would act independently without benefit of knowledge of the situation your seriously mistaken- keep in mind that LW talks regularly to Reed- and Liccardo and Reed are on the same page. It’s one thing to say you can move to SJ it’s another to figure out what that will cost- and if BS continues to show how weak he is it may just take a lawsuit to finish it-

  10. @GoA’s,
    I’ll just say that I don’t think lawsuits will be necessary to get the A’s to San Jose. Three years ago I would have been all for suing the Giants/MLB. Now? Let’s just let this play out. Remember, San Jose has acted independently in the past, only to be corrected by MLB (see referendum proposal from a few years back). It’s not to far fetched to conclude Sam acted on his own this time as well (just my opinion).
    BTW, I think the “delay” has more to do with San Jose/Lew Wolff than it does Selig (supposedly) not wanting to make a decision. Again, San Jose has yet to secure the entire ballpark site, Lew Wolff/A’s will not only pay for the ballpark but perhaps the entire site as well, and San Jose is still dangling the thought of a referendum. Selig/MLB probably want to make sure the ballpark will 100% happen and that the A’s won’t be saddled with to much debt before rendering a decision (see guideline discussion of a few weeks back)

  11. Tony D., I don’t believe that the recent rumblings out of San Jose would be happening without the OK from Lew Wolff. Both the A’s and San Jose officials are tired of Selig’s talking from both sides of his mouth. They have also come to the realization that pressure will have to be put on MLB for any likely chance of a near term favorable decision for the A’s and San Jose.

  12. @llpec,
    I respectfully disagree. Again, I’m confident that lawsuits won’t be necessary to get the A’s to San Jose. Heck, it was just February 22 that Liccardo’ was quoted saying he was confident that the A’s would get the green light to San Jose. 9 days later everything has suddenly changed!? We all wanted a decision yesterday…patience.

  13. @Tony D
    I didnt know Larry Baer backed off, man it was only yesterday he wanted the city of San Francisco all to himself… but its good that he has relaxed his stance on the A’s to San Jose…. you know its febuary, and the A’s lease ends in october.. (after the world series)… we only have 8 months and the A’s havent signed their extension… does this mean that MLB might have a plan in place to announce how the A’s can move to San Jose, but question is where do the A’s play during construction… Oakland is going to jack them on the rent… should we plan to see the Sacramento A’s for a couple years?

  14. “I didnt know Larry Baer backed off, man it was only yesterday he wanted the city of San Francisco all to himself… but its good that he has relaxed his stance on the A’s to San Jose”

    @berry, Thanks for pointing out that Larry Baer is the biggest culprit for speaking from both sides of his mouth. He is actually far worse than Selig in this area.

  15. Oh no, another yet another twist to this ongoing saga. Perhaps this latest news will force Selig to rule in the A’s favor since it is very apparent Selig fears any legal challenges against the MLB ATE. (Selig quickly, and likely not coincidently, awarded the Tampa Bay owners’ group the Rays franchise after the Tampa Bay owners pierced the MLB ATE twice in court)

    Also, the giant’s management likely doesn’t wish to challenge the anti-trust exemption (even if they were to able to overturn it – that would only pave the way for the A’s SJ move)

  16. If Selig was lining up MLB owners to approve SJ move, as has been rumored, why would Liccardo be so actively kicking up dust on this issue? Is he just out of the loop with Wolff or MLB? If the Giants are supposedly warming up to the idea of giving up San Jose to the A’s, why would he be implying so directly that he wants to bring the fight to them? Something just doesn’t seem to add up.

  17. re: 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

    …What have four years of being Mr. Nice Guy with MLB gotten San Jose? Zip, zero, zilch.

  18. Sounds like Liccardo is positioning for his race, just driving name recognition and hopefully attaching himself to a successful A’s transition.

    Don’t recall the TB lawsuit off the top of my head, but my understanding was it was an ownership group (i.e. standing) that wanted to move to TB. I doubt “theoretical” profits will have much standing in court.

    Hell, if SJ is able to go forward (i don’t think this is a serious move) and get a ruling, what would be stopping L.A. from suing the NFL over theoretical profits lost by not having a team come to SoCal?

  19. My take away from this is that Purdy wanted to do an article on this either on his own accord or based on an external source in order to keep the A’s issue on the forefront. He knew Liccardo had brought up a lawsuit in the past and again more recently and figured he’d get more details about it. There’s nothing there that suggests such a lawsuit is imminent, it just suggests that the city is getting their ducks in a row in case MLB decides against them and/or Wolff gives them the go ahead to move forward. At this point, all this is is puffery and playing politics. While it’s interesting, it’s nothing to get excited or worked up over.

  20. Totally agree with Ru155’s first paragraph and dmoas’ entire post on this “development.” The 2014 San Jose mayoral race is officially in full swing, with the A’s coming to San Jose as the big prize to show off to the electorate.

  21. You guys do realize that Liccardo represents the downtown district which encompasses Diridon, so of course he’s interested in the ballpark not only for himself but of course his constituents (what novelty in this day and age right). For the record, this is nothing new as he has been posturing this nuclear option for quite a while. I’ve had dialogue with him on ATE challenge for a couple of years now.

  22. @anon,
    Isn’t Diridon officially in Pierluigi Oliverio’s district (boundary of hwy 87)? Just curious; Sam definitely has the downtown core, which will benefit tremendously from Cisco Field.

  23. Somehow the Merc writers, many who are big time giant homers, (TK, etc.)seem out of touch about the A’s move to San Jose, Purdy included. Their views appear to be a few years behind the times. They don’t acknowledge that the momentum towards the SJ move has tilted in the A’s favor in the past year.

  24. @Tony D/Anon – As I’ve said in the past, Liccardo’s district literally borders the ballpark site and actually includes one or two parcels SJRA acquired for the project. The main site is in Oliverio’s district.

  25. I’m just glad someone in the city counsel has a pair and will actually fight the Giants. Don’t get me wrong I’ve been a Giants fan since the 1960’s. But the arrogance that Larry Baer and the Giants brass treat SJ is sickening. Over 40% of the Giants fanbase is from the San Jose and the south bay and the Giants will continue to do well in the future. But the opportunity for San Jose to finally become a major league city and a destination instead of San Francisco’s ugly step sister would be nice. San Jose is the 10th largest city in America, let’s finally put our big boy pants and teach the Giants a lesson.

  26. talked about this on chron live a few minutes ago. not going to get into detail but the most prevelant thing ratto said is that the a’s owners haven’t done enough of a job and or pressuring the other owners in making the case to move down to sj and until they start doing that, nothing is going to happen.

  27. Something tells me that MLB is having a hard time with Oakland over the short term lease at the coliseum before san jose…wonder of A’s might have to play out of state again…

  28. Ratto? Really? (As much credence as dog droppings in a backyard)

  29. @Leonard – Well said.

  30. @ Leonard – “Over 40% of the Giants fanbase is from the San Jose and the south bay” I don’t think Baer or anyone from the Gnats has ever stated that their STHs were from SJ / SB specifically. If you noticed their press releases on the matter, they’ve always lumped San Mateo with Santa Clara Counties to cite their fan base and never segregated it.

  31. @Leonard, I think the Giants ownership should be greatly concerned about how Giants fans from San Jose feel towards their team’s continuing and ongoing approach to prevent and deny the A’s from moving to their hometown. Are the Giants so insecure to foolishly believe that most Giants fans from Santa Clara County will switch their allegiance if the A’s move to San Jose? I think not! It’s very difficult to change ones team loyalty, and it usually passes from one generation to the next generation. However, if a team interferes with ones civic pride, then team loyalty can be changed. Raider fan allegiance and intensity in the Bay Area was not the same after the team returned to oakland from LA. In my opinion, the Giants want to at least maintain dominance over the A’s in this two team market. At best, the Giants would like to see the A’s move from the Bay Area, so that the Giants can get an exorbitant Bay Area local cable deal similar to what the Dodgers and Angels have gotten for themselves.

  32. @IIpec – To your point, I grew up a Dodger fan living in Orange County (near Anaheim) before I moved to the Bay Area and became an A’s fan. That’s my perspective having come from another two team market, which was shared and not divided into antiquated and uneven territories. I think the Giants are over exaggerating the impact the A’s move to San Jose will have on them. They will operate the same as all the other teams located in shared, two team markets. I agree with you, South Bay Giants fans will remain Giants fans after the A’s move to San Jose. In fact, I think the Giants may end up ahead of the game with continued growth of their East Bay fanbase, which is bigger than we’d like to admit.
    .
    Your point regarding civic pride is an interesting one. Perhaps if the Giants weren’t winning the World Series every other season we would see more outrage from San Jose baseball fans regarding the Giants behavior regarding this issue. It’s a good time to be a Giants fan and feelings are high for the team, whether you live in SF or San Jose. Ultimately, MLB should do what is best for the League financially as a whole, which is why an A’s move to San Jose needs to happen.

  33. @Mike421, Thanks for giving us your perspective from your own two team market experience. I would like if the Giants could ever explain why the Bay Area is uniquely two territories within the same market, as compared to the other two team MLB markets of LA, NY, and Chicago whose teams share the same territory within the same market. I don’t believe the Giants can give an explanation, other than the fact that former A’s owner Wally Haas foolishly handed the Giants territorial exclusivity to the South Bay. Even if Mr Haas had made this foolish blunder, the fact that the Giants never did move to Santa Clara County should have made the territorial division of the Bay Area null and void. This would have automatically returned the entire Bay Area rightfully to being as before, a shared territory and Market for both the A’s and Giants.

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