Category Archives: Giants
Friday was the last day that the City of San Jose had to file a response to MLB’s filing from a month ago. And so they did, as Joe Cotchett went after baseball’s antitrust exemption. He also brought renowned sports economist Roger Noll to back him up.
The thrust of Cotchett’s argument is that the ATE is limited to the reserve clause and goes no further, citing the Flood, Piazza, and Federal Baseball cases. Naturally, that runs counter to MLB’s argument back in August that the exemption was enshrined by virtue of its long standing and couldn’t be changed except by an act of Congress. What view Judge Ronald Whyte takes when the first hearing is held October 4 is unclear. I’m eager to find out.
In addition to the attack on the ATE, Cotchett argues that the motion to dismiss the case should be denied, because the plaintiff’s claim is ” ‘plausible’ in light of basic economic principles.” Now remember that the original claim was that MLB colluded to prevent San Jose’s competitive bid to get the A’s. The case essentially rests on this particular argument. If Judge Whyte believes the argument is plausible, the case moves forward. If not, the City goes back to square one.
MLB claimed in its filing that the San Jose’s assertion that California’s Unfair Competition Law wasn’t violated because it the supposed violation was an antitrust violation, but because of the ATE, there is no violation. San Jose countered Friday that this ignores the UCL’s additional definitions of “unfair”. Historically, state courts have had difficulty properly codifying what “unfair” truly means, making this yet another test. It’s that very test that should push the case forward, according to Cotchett. Moreover, a chronology of actions/non-actions that have led up to this point was provided. They outline the various stalling measures MLB and the Commissioner’s office have taken to prevent a timely decision regarding an A’s relocation to San Jose, including Commissioner Bud Selig asking San Jose Mayor Chuck Reed to delay a stadium vote.
Cotchett also brought out California Business and Professions Code section 17204, which especially points out unfair competition against cities whose population is larger than 750,000. Of course, that means the statute only applies to four cities: Los Angeles, San Diego, San Jose, and San Francisco. All other California cities have less than 500k population. Does that mean anything? We’ll see.
Finally, Stanford professor emeritus Roger Noll provided a declaration of support for the lawsuit. While it probably won’t have any material bearing on whether or not the case will go to trial, Noll’s presence could become important as a witness if the case does go to trial. Noll’s quote:
“there is no pro-competitive justification for MLB’s refusal to allow the Athletics to San José…There is no conceivable economic justification for protecting the market for one of MLB’s most successful teams (the San Francisco Giants) at the expense of one of the MLB’s least successful teams (the Athletics).”
Noll is referring to the teams’ off-field and box office success, not their respective on-field exploits. I’d like to see which sports economists MLB brings out to argue for the preservation of the antitrust exemption. Then again, even if the case goes to trial, it seems more likely that MLB will be forced to make a deal, instead of the alternative of airing a bunch of dirty laundry and threatening the ATE in earnest. Whoever wins, I’m excited for October 4. It’s a step, even if it’s a halting one.
Armchair antitrust experts, have at it.
Earlier this week I added a section to the sidebar called Lawsuits so that people could easily find references to the ongoing legal battles among the City of San Jose, MLB, and the Giants. Little did I know at the time that the section would have to be expanded. Yet here we are with now a third lawsuit to keep track of. This time it’s between the same Giants-lawyered astroturf group that filed the first lawsuit, Stand for San Jose, and the City of San Jose.
Santa Clara Superior Court Case 1-13-CV-250372, filed Wednesday, seeks to challenge the transfer of the Diridon ballpark site [thanks John Woolfolk of the Merc] to the Successor Agency (SARA), whose oversight board is composed of San Jose and Santa Clara County representatives. In March, the State Controller ruled that the transfer of the Diridon parcels to the separate Diridon Development Authority was not allowed, which forced the City to hand over the properties to SARA. At the time, SARA had its own objections to the ruling, namely that it felt it had a deal with A’s ownership by virtue of the option inked in November 2011. The Controller ruled that the November deal came after the cutoff date proscribed by AB 1X26, whereas the City said that the date was meaningless. Naturally, the Controller stuck with its original ruling, which led to the June transfer of the land to SARA.
Keep in mind that the land wasn’t transferred or sold to the A’s. It was only moved from one governmental body to another as defined by the new law. The option was signed by the A’s, with the only obligation within the first five years being that the A’s pay a nominal annual fee.
S4SJ’s argument is that the option isn’t valid at all because of the ruling. It’s a strange set of circumstances because in the other lawsuit, S4SJ is challenging the entirety of the ballpark deal on three issues:
- The EIR was “incomplete” (despite having been certified for two different-sized stadia and with updated traffic studies)
- The deal would take funds away from schools and city services (hard to argue because per the terms of the AB 1X26, city/county/schools have to be made whole)
- The deal was done without a public vote (City was dissuaded from holding a referendum by Bud Selig).
Now S4SJ is going after the SARA transfer, but what they’re really after is the option. The option is a basic tenet of San Jose’s lawsuit against MLB, and if S4SJ can disarm that threat the antitrust suit would take a big hit. The argument is that there’s no option because the Controller ruled against the transfer to DDA. But that’s as far as the Controller’s power goes. Once the land ends up in SARA’s hands, it can dispose of it as it sees fit, including to the “late” A’s. The Controller and SARA went back and forth after the final ruling. From the Controller’s final ruling:
The City feels that this finding is “simply form over substance and wastes valuable time, energy and resources to arrive at the same result;” however, the legislation is clear that the oversight board shall have the authority to dispose of all assets and properties of the former redevelopment agency (Health and Safety Code Section 34181 (a)). Any attempt to deny the oversight board its rights would be thwarting the intent of the legislation.
SARA’s argument is that the deal with the A’s was going to happen with either DDA (transfer upheld) or SARA (transfer rejected). Which is exactly what happened. San Jose Mayor Chuck Reed telegraphed the strategy at the time. Did the deal not count because the Controller ruled it was late? Is it a deal because of the technicality the City is trying to argue? Or is it a deal regardless?
The real question is, How quickly can S4SJ get a ruling on this? I have no idea how this lawsuit would proceed through the system, especially because it has a related case just starting its trial phase in the fall. S4SJ attorney Ronald Van Buskirk indicates that the two S4SJ lawsuits will be combined, likely creating further delay. Importantly, the new suit names SARA as a party. SARA didn’t exist when the original lawsuit was filed.
Woolfolk notes that the San Jose Giants aren’t a plaintiff/petitioner, which would presumably protect the lawsuit from the discovery actions taken by the City last summer. Still, it’s clear that the SF Giants are behind the whole thing since this move was timed a few weeks after the antitrust lawsuit – just as the S4SJ lawsuit was filed a month after the A’s option deal was struck. At this point, all of the players must have a good idea what moves can and will be played by their counterparts.
Armchair legal experts, have at it.
P.S. – I have a request or two. Please try to stay on topic, and also try to stay away from the usual “XXXX Sucks” type of discourse. If all you’re going to do is vent, I’ll probably delete it. Bite a towel or something.
I’ve spent much of the last week in transit, as my job requires a lot of travel all over the country. Some of the pictures and posts you’ve seen since the beginning of the season have been a byproduct of little side jaunts taken at the end of business trips or cashed in frequent flyer miles. It’s allowed me to visit a lot of the parks I’ve wanted to see fairly cheaply, though the downside is that it has severely reduced my attendance at A’s home games.
Another byproduct of near-constant travel is that I can’t get into a good writing rhythm. I’m already a rather deliberate writer, and I’m envious of the pros who can toss out 500 words constructed in cogent manner in only 15 minutes. Instead I’ve preferred to shift my writing to ever longer pieces, 1000-1500 words, eliminating many of the peripheral “busy” posts that I used to do.
Yet when the San Jose-vs.-MLB lawsuit was filed on Tuesday, I was left at a loss as to how I was going to cover it. While I get a lot of advice from lawyers and legal experts, I still went through the week uncomfortable about touching the legal issue with any real depth. I wasn’t sure I could do it justice (pun intended). Instead I sat back and read all of the great writing by many lawyers-turned/cum-baseball writers like Jason Wojciechowski, Wendy Thurm, and Craig Calcaterra. ESPN legal analyst Lester Munson covered the lawsuit in the broadest manner possible, but the effect of his piece was greater than most because of the wide audience. And we have plenty of lawyers who read and comment on this site. Judging from the last post, they’ve been waiting for this moment for a long time. I’m glad that they may have a chance to sink their teeth into something juicy like this. As for me, I’m glad that at long last the A’s plight is getting the attention it deserves (and San Jose to a lesser extent). (While I was in Phoenix on Thursday, the local ESPN affiliate did a wide-ranging interview with Tim Kurkjian, and the A’s/San Jose/Sewergate were one of the main topics!)
However, let’s be clear about what we should expect from this potential circus. While many can’t agree on what the outcome will be, let’s understand what’s really at stake.
1. San Jose isn’t really trying to overturn baseball’s antitrust exemption.
Attorney Joe Cotchett’s initial bluster aside, San Jose would be perfectly fine with territorial rights being modified, their basic structure left intact. That could mean sharing Santa Clara County or the Bay Area at large, or something in between. As long as they have the right to host the A’s, they’d be fine with territorial rights maintaining monopolies (or duopolies as the case may be) here and elsewhere.
2. San Jose didn’t decide to do this on a whim.
Mayor Chuck Reed told Lew Wolff last week that the City was planning to sue baseball. Councilman Sam Liccardo had been talking up the lawsuit threat since spring 2012. From what I hear Cotchett has been involved for nearly as long. What they’ve been doing during that time is strategizing the particulars. What they came up with is arguably weak from the standpoint of trying to overturn AE, but if the goal is shake up baseball, there’s a chance it could work. SewerGate became a most serendipitous event PR-wise – as serendipitous as rising floods of sewage can be.
3. MLB is not concerned… yet.
MLB knows San Jose’s strategy, and they will certainly push hard to get the case thrown out for lack of standing. If they succeed, we go back to the status quo and San Jose is at the mercy of baseball. That doesn’t mean that San Jose is done, it just means the City can’t force the issue. All parties, including the A’s, know this. The important thing for MLB is that San Jose remains an option, however slight, because if the only option is Oakland and a scramble for extremely limited public funds, the option is poor. Of course, the City could decide at that point that it would give up the seemingly quixotic quest for a MLB franchise. Knowing how the current mayor and leading mayoral candidates operate, that’s highly unlikely. The lawsuit is costing them nothing and giving the City a ton of press and awareness. None of it is bad except that it annoys Bud Selig, who is supposedly in his lame duck period anyway.
On the other hand, if the federal judge finds that the City does have standing, then MLB has to decide what it’s willing to risk during the pre-trial discovery phase, when pertinent documents are exchanged between the two sides. As we saw in the Stand for San Jose case, one side made the blunder of providing privileged information, which the opposing side tried to use in its case. S4SJ’s attorneys, who didn’t disclose or return the confidential docs until they were caught, then were dressed down by two separate judges and nearly thrown off the case. The Lodge has demonstrated in the past that they are very fearful of any releases of team or league financial data, forced or leaked. I wouldn’t expect them to fold like cheap tents, but if enough pressure is applied, the pendulum could swing in the City’s direction as the owners simply prefer the quickest exit to the fiasco. The quick exit won’t come cheap or easy because the issue is complex, as Selig has said (but never properly articulated).
MLB’s lawyers will argue that there is no contract, hence no standing. The City’s lawyers will argue that there could’ve been a contract if MLB hadn’t dillydallied. It’s not mentioned in the lawsuit, but they could easily point to…
4. The Earthquakes
Lew Wolff and San Jose have a contract in place to build a stadium. In San Jose. On land sold by the City to Lew Wolff that started with an option. While the stadium has been delayed due to financing and general economic problems, it’s getting done. Without tortious interference – the real issue in this case. The bar for some antitrust complaints may be lower in California than the federal standard, thanks to the Cartwright Act. Whether this passes muster is up for a judge to decide.
5. The A’s are a defendant
In suing MLB, San Jose is suing all 30 member clubs in the process. So even though Lew Wolff wants to move the A’s to San Jose, he isn’t joining the lawsuit. Wolff’s public statement indicates, yet again, that he doesn’t want any part of the legal process, fiddle-dee-dee. And it sort of makes sense given that teams are bound by the MLB Constitution not to sue baseball or each other. Except that…
6. MLB’s Constitution expired?
According to Cotchett, the last Major League Constitution expired at the end of 2012. Baseball hasn’t posted a new one, so it appears that they aren’t operating with one. It sounds crazy to think that baseball could operate without a Constitution for even a brief period, as the document lays out all manner of league and team business, in conjunction with the CBA. The most recent version dates back to 2005, as part of the Expos’ move contraction-and-expansion to DC. It outlines everything from banal matters such as the timing of the owners meetings to how the leagues and divisions are constructed, and pertinent to our ongoing discussion, club operating territories. You’d think that the document would at least be amended to include the Astros’ switch to the American League West. Right?
Then again, if the league is operating without a Constitution, does it mean that there’s a loophole? If there is no binding Constitution then are territories no longer assigned? I doubt it, there’s too much at stake. The New York teams aren’t going to allow Stuart Sternberg that kind of loophole to move the Rays. Prior to the gag order, the Giants pointed to the Constitution every chance they got to back up their T-rights claims. You think they’d let the document lapse? Even if there technically isn’t a Constitution, the clubs are certainly operating within the spirit of the legacy document, which is probably good enough for a judge. The Lodge is the Lodge is the Lodge, after all. Now, if MLB intentionally let the document expire so that no one can point to the constraints of T-rights, then we’ve just devolved into anarchy within the Lodge. Which probably isn’t a bad thing.
In all likelihood, MLB does have a new Constitution and simply needs to produce it. Issue rendered moot.
7. Where does Oakland fit into all of this?
Oakland is not a party to the lawsuit. That’s just as well, since there’s a good chance San Jose will fail and the A’s will have no choice but to deal with the East Bay. The “tail-between-legs” scenario is what they’ve been hoping for all along, not that they’re presenting realistic options should that happen (remember Victory Court?). The real problem for Oakland is simple: no one’s fighting over Oakland. The clubs are fighting over San Jose, and they’d fight over San Francisco if it came to that. No one outside of the Oakland-only holdouts and Larry Baer is talking about Oakland as anything more than a short-term solution. Have you heard any other owners talk about Oakland in terms of a permanent home for the A’s? Of course not, because it isn’t even entering their minds. The only thing helping Oakland at the moment is each owner’s self-interest. In this scenario Oakland is the safety school of cities, the girl from work you go out with because she’s accessible. And that’s what really hurts. Whether the neglect is benign (Coliseum deterioration, deprioritizing the A’s) or more “sinister” (ownership motivations), Oakland’s status as a baseball town is at best tentative. If San Jose comes out of this with the A’s, no other existing teams are going to start looking to Oakland as a viable MLB home. Expansion is out of the question. The best Oakland could hope for is a minor league club of some sort, either AAA (Pacific Coast League) or high-A (California League). If Oakland is truly afforded the opportunity to keep the A’s, they’ll be ransomed like many other cities have been. MLB will bring in the consultants (just like Miami) to say that a franchise there isn’t viable without a publicly-financed stadium. Then what?
Exhibit 3 in the filing is the CSL-written economic impact report commissioned by San Jose in 2009. Normally we roll our eyes at how these things are written, because they’re designed to convince mayors and city councils, not judges. The use of such a document against baseball is more than a little ironic.
During the first press conference, Cotchett trotted out the SVLG letter and list of companies as signed-on supporters of the lawsuit. He quickly backtracked on that. The letter is Exhibit 2.
As I finished this post the plane descended over the Peninsula. I saw the lights on at AT&T Park while Candlestick Park sat silent and lonely. I wanted to get a good look at the Coliseum, but the view across the bay was obscured by a scratched up plane window and the encroaching marine layer. We landed at SJC and the plane was held on the tarmac because a computer malfunction at Southwest Airlines’ headquarters kept all other planes at their respective gates. How appropriate, I thought.
The Merc’s Internal Affairs folks probably got a chuckle last week when Dan Orum, the San Jose Giants’ CEO since 2012, sent the paper an email criticizing them for their coverage of the Stand for San Jose lawsuit. After Orem’s missive, IA decided to look into the case to confirm Orum’s suggestion that the team was not a plaintiff in the suit. Turns out that the Giants were an original plaintiff in the lawsuit, which has everyone scratching their heads about what Orum’s intent was.
Orum became CEO of the Giants only six weeks after the lawsuit was filed, so unless someone forgot to give him a memo or two, he should be well acquainted with the basics of the case. He was brought in to beef up sponsorships, and he may be running into resistance by local South Bay companies who are rightly confused about the little Giants’ role in the case. If Orum could somehow distance the team from the lawsuit, companies could be less reticent to commit. Of course, the paper had to go and muck that up. The SJ Giants are already in a tough spot trying to get breaks on a lease extension at Municipal Stadium, similar to the A’s current situation in Oakland.
Thankfully the lawsuit will be underway shortly, so there’s hope that much of the confusion (and frankly, obfuscation) will be cleared up through the normal legal process. As the teams and public entities continue talks into the offseason, we’ll see which parties want to be partners and which ones prefer to be adversaries.
While we’re watching the A’s fight for the division title this summer, we’ll also watch the Giants and A’s duke it out in court. Santa Clara County Superior Court Judge Joseph Huber has released a hearing schedule for the Stand for San Jose-vs.-City of San Jose trial:
- June 6 – Petitioners Opening Brief
- July 8 – Respondents & Real Party Opposition
- July 29 – Petitioners Reply
- October 4 – Hearing on the Merits
Unless the sides decide to settle out of court, chances are that the case will drag on through the end of the year.
The Chronicle’s John Shea confirmed something I had heard about the reasoning for the Giants’ AT&T Park debt refinancing.
The Giants’ plan to pay off their stadium debt by 2017? No longer in the works, we hear. There have been steps to refinance the $170 million loan to help fund their proposed development on parking lot A across from McCovey Cove. There was a time the Giants said they had to limit their payroll because of the $20 million annual mortgage.
Remember how, in 2009, SF City Attorney Dennis Herrera threatened to sue baseball over the perceived financial threat posed to the City if the A’s were granted territorial rights to the South Bay? Well, I’m glad for everyone’s sake that the Giants feel it’s safe enough to take on even greater debt to grow their empire. I was so worried for a while there.
Meanwhile, a group of East Bay mayors including Oakland’s Jean Quan and Berkeley’s Tom Bates are trying to upend legislation introduced by SF assemblyman Phil Ting that would help smooth (or bypass) some of the environmental review and approval process for the Warriors’ arena. It’s not strange that they would pursue this route, since it is local politics at work. The irony is that whatever new law helps the W’s arena could provide a blueprint and pave the way for an A’s ballpark at Howard Terminal, which makes sense because both are on waterfront sites and face the same restrictions.
Of course, if Howard Terminal never gets past the talking points stage no one ever has to find out how expensive it’ll be to build there.