In final pre-hearing response, San Jose takes full aim at MLB’s antitrust exemption

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.

45 thoughts on “In final pre-hearing response, San Jose takes full aim at MLB’s antitrust exemption

  1. a rule 12 motion doesn’t pivot on evidence such as Noll’s declaration. mlb doesn’t need to refute it now. At best, San Jose is begging for a chance to fix their complaint.

    As I said on the previous thread, look at the standing arguments at the end of the opposition brief. San Jose competes with FREMONT and Oakland for the A’s? That’s not plausible. This case still could go down on lack of standing with no decision whatsoever by Judge Whyte on the A/T exemption.

    After a quick read, I’m not surprised by the attempt to construe the A/T exemption narrowly, along with the Piazza rationale. But most cases go the other way, as do most commentators.

    But there is obviously some strong stuff in the opposition. It’s interesting. (Remember, mlb gets to file a reply brief, now.)

    • @xoot – San Jose wasn’t directly competing with Fremont because of the way Wolff conducted his search. But it can be argued that San Jose’s EIR timeline (first draft: 2005) was competing with Fremont and that currently San Jose and Oakland are competing, simply because MLB is keeping both cities in the game.

  2. Ok, if I’m a betting man, I’ll say this case gets dismissed. Xoot gets his wish! Then what? The A’s still need a new ballpark…the majority of owners still support a move to San Jose…the committee (“baseball” per Wolff) still rejected any East Bay sites for consideration…Roger Noll point still stands regarding the absurdity of the Bay Area market. Does this lawsuit, whether dismissed or continued, really matter at the end of the day?

  3. San Jose’s complaint asserted that SJ competes in the market of major cities all seeking mlb franchises. The new attempt to concoct a local competitive market with Oakland, Fremont and San Jose fighting like fans in the stands for a fould ball strikes me (if you’ll pardon the phrase) as pathetic after-the-fact retreat. Also, please note that the new argument does not square with the express market-definition allegations in the complaint.

    Many A/T cases pivot on market defenition. Ultimately, because San Jose has no ballpark and no enforceable contract with the A’s to play in such a ballpark, San Jose really cannot compete with anyone.

  4. Also, ML, the B&P sec. 17204 discussion your post really doesn’t make sense to me. Generally, public entities in Calif. can’t sue under the unfair biz practices statute, sec. 17200, et seq., because they aren’t “persons” w/in the meaning of that law. The AG can sue; and the section you cite gives the biggest cities in the state standing to sue, on theory, I believe, that they will represent the public interest as broadly as will the AG. But the 17200 claim is derivative of the A/T claims.

    The requirement that a 17200 claim based on A/T conduct must meet certain A/T requirements goes way back to the Cel-Tech case. I’ve said from the beginning that the complaint is drafted upside down, with the state-law causes of action asserted first, the federal A/T c/a’s last. Yet all of the state-law c/a’s have the alleged A/T violation at the core. The judge can dismiss the federal claims for lack of standing and dismiss the state-law claims by declining to exercise jurisdiction over them. San Jose then could go to state court to reassert the state-law claims. I still think that’s the most likely initial result. Maybe, just maybe, the judge will let SJ amend its complaint one time.

  5. “Roger Noll point still stands regarding the absurdity of the Bay Area market.” Yes!! The absurdity of one market having two distinctly separate territories. Unprecedented; not only with the three other MLB markets having more than one team, but with any of the other major team sports as well.

    MLB is very foolish to have picked the wrong example to fight for their sacred ATE.

  6. Having a judge, in a high profile case, dismiss on standing prior to knowing the facts, while hoping they totally ignore the essential issues, like A/T and “restraint of trade” claims that provide reasons for standing, seems like you’re hoping for a lazy judge who doesn’t want to get involved. Keep dreaming!

  7. Tony, if the suit gets thrown out the A’s are back to doing what they’ve been doing this whole time… waiting. But it looks like the Raiders may be giving them a boost out of town. Apparently the Raiders have made it clear to the city that their desired site for a new Oakland football stadium is the exact site of the current Coliseum. Not south of it, not north of it, but right where it currently stands. And they’re hoping to move forward with or without the A’s having a fallback location once the Coliseum is demolished. For their part the A’s are also writing in a lease escape clause into their proposed lease extension that would let them out of town in exactly that situation.

    Maybe the NFL in this case will save MLB from itself.

  8. MLB and the press have gone to great lengths to exaggerate their “exemption”. I’ve argued on several legal blogs prior to SJ’s rebuttal that MLB’s “exemption” has always been limited and confined to certain facts and issues from individual cases – it has never been wide reaching or ubiquitous as everyone in the media assumes. MLB’s initial rebuttal, even though strong in language, was LOL-hilarious. If you read all the cases relating to the exemption, you’ll see it does, like in SJ’s rebuttal, relate primarily to labor issues not re-location. The “exemption” has always been EXTREMELY limited! MLB pretty much admitted to violating the law for asking for exemption, giving SJ standing. How can you be exempt from something you do not do?

    Now, regarding standing, it all comes down to the judge. If you have a lazy judge, they’ll dismiss the case and ignore the anti-trust and “restraint of trade” claims. If you have a judge who wants to make history – why would any serious judge pass on the opportunity to challenge Oliver Wendell Holmes?!? – then they’ll ignore standing issues for now until they hear the facts.

    At the end of the day, I feel San Jose provided enough ammo to be heard in court.

  9. @Tony D. I agree with you, what happends if SJ vs MLB falls through? Nothing changes, the A’s still need a new home. It may be hard for some people to beleive, but MLB may need SJ more then SJ needs them. if they are not going to pay for half of a new parkball park and give Wolff revanue sharing (for saying in Oakland), what do they do?

  10. @Tony- Without this lawsuit the A’s would have never gotten to San Jose. Selig has shown his true colors as a coward and this will force his hand similar to the Rays in 1993.

    @Steven-I agree 100%, the exemption does not extend to relocation. MLB has been lucky on this as the other sports leagues have lost in similar cases.

    Vincent Piazza succeeded in a big way in 1993. MLB was about to lose big and they paid Piazza 16M and gave him an expansion team as a way to recoup the lawsuit money.

    In San Jose case, the A’s are 35 miles away and have made it very clear they to relocate to San Jose. It is on the internet everywhere including this site. The evidence is extremely clear MLB is colluding against San Jose because of these anti competitive “territorial rights”.

    “T-rights” are inherently on a fundamental level a violation of basic American Business and Anti-trust law. The rule of reason business justification also must be weighed fairly in this case. Roger Noll is right with his assessment.

    San Jose will easily win this case and fetch a hefty settlement and get the the A’s.

    San Jose will not only get a free ballpark but also 10M-40M from MLB for basic services for the city. The citizens of San Jose can thank Bud Selig for this extra money.

  11. If San Jose does not receive standing for the SJ vs MLB case, one would believe they would continue appealing the case, even if it were to go as far the SCOTUS. San Jose’s agreement with the Cotchett law firm is on a contingency basis. It won’t cost San Jose taxpayers a dime – until San Jose wins the case. Plenty of SJ politicians (past and present) are on board with the lawsuit – they are not likely to give up so easily.

    Also attorney Joe Cotchett evidently relishes high profile cases such as SJ vs MLB, one would believe Cotchett would continue representing San Jose during an appeals process if that were necessary. Even if San Jose were not to receive standing for the case and the Cotchett law firm decided not to appeal, San Jose politicians have already mentioned they have access to several attorneys who would take on the case pro-bono, and the appeals process would likely continue, all the way to the SCOTUS if necessary.

    San Jose city officials also know that Selig and MLB want to avoid a trial, where Selig would have plenty of explaining to do about why the giants continued to receive their territory rights to San Jose even after their failed bid of moving to SJ – Selig would look very foolish if required to testify in court and explain why MLB is favoring the giants. Also MLB would jeapordize their ATE MLB (evidently on shaky legal ground) if the SJ vs MLB case goes to trial. There are plenty of incentives for Selig to reach a settlement with the A’s before that occurs.

  12. @Steven, the high-profile high-octane arguments on both sides may not impress Judge Whyte all that much. Only a minority of courts have limited the A/T exemption to the reserve clause (which is what San Jose’s arguing) and none of those holdings are binding here. On the other hand, the SCt and Congress have been pretty coy about how far it should reach. The issue, really, is something of a mess. If A/T standing is absent, there’s no subject matter jurisdiction. A good judge would toss the case on that basis rather than grandstand with a provisional (Rule 12) decision on A/T basis. Laziness has nothing to do with it. Subject matter jurisdiction can be asserted and reasserted at every level. Getting reversed on that ground would not be good. A competent judge would avoid it.

    Despite ML’s hopeful headline, the opposition brief is not the final word. mlb will file a reply brief. Then we’ll have the oral argument. Personally, I’m enjoying the battle the way I would any excellent game that I don’t have a stake in.

  13. @Xoot: Your blog post was a review of events, not a legal review. Again, I disagree from a legal point of view. It may not matter if a minority, as you argue, limited A/T to the reserve clause or not. It’s the fact MLB is asking for a ruling on stare decisis when there is no strong record of precedent on relocation. MLB has NEVER had a limitless exemption, period. It’s the biggest myth in baseball promoted by MLB lobbyists like yourself. In your analysis, you’ve completely ignoring the issues hurting SJ, while hoping a judge looks for a technicality to remove themselves from the case by not granting standing and then running into subject matter jurisdiction. I would love to see MLB tell the judge his opinion is powerless! Again, you’re dreaming of a judge who doesn’t want to examine the issues hurting SJ, which you even admit are “something of a mess.” 50/50 the judge proceeds to hear the case in a limited form for now.

  14. @steven, my “review” from the beginning has been legal analysis. Adios.

  15. @ML–Prof. Grow is making his name as an expert on the mlb A/T exemption. He has developed a view of what it should amount to, now, but he’s not partisan. He’s an academic commentator. Good guy, too. Read his stuff. You’ll see.

    And the fact that he and I and every competent evaluator called the standing problem years ago doesn’t factor into my opinion here. 😉

    • @xoot – Hmmm. Grow’s positions advocate for single entity league structures. He minimized the impact of the American Needle decision. Not partisan? You sure about that? Seems like he a staunch status quo defender through and through.

      BTW – I don’t think agreeing with Grow makes you or him any more objective. In the end, that doesn’t matter.

  16. and by contrast, Noll is being paid by San Jose for his opinion.

    • @xoot – I’ve read Grow’s paper. It’s well argued. As a non-legal person I can’t argue case law. That said, I think he’s guilty of the same issues he takes with the Piazza case – he interprets previous case law to suit his argument rather freely. That’s fine. Grow admits he’s a contrarian when it comes to the ATE. Let’s not make it out to be that he’s non-partisan, however.

      Hold on. You hope I “bother to post the reply brief”? Oh thanks. This is why people generally hate lawyers as an institution. Pretty damn smug there.

  17. @ML, you’re quibbling. The discussion in Grow’s main article about the way Congress handled the A/T exemption the last time they touched it is one of the best, most balanced, accounts of that strange event I’ve read. The fact is Prof. Grow reviews comprehensively. It’s not really about what’s right or wrong; it’s about where the confused law sits, now, and where it’s likely to go. Prof. Grow gives a good description of that circumstance.

    You’re in way over your head. But you can swim. I know that. I hope you bother to post the reply brief, and I hope you attend oral argument and report on it.

  18. As an academic commentator, as opposed to a well-paid testifying whore in litigation, Grow is not partisan. He has reached a view based on his analysis of history and precedent. You may disagree with his conclusion, but the scholarship he employs, and lays out for your review, in getting there is excellent. His criticism of Piazza isn’t warped to help him reach his conclusion. It’s valid.

    Fact is, Piazza’s a suspect and somewhat weak decision. That doesn’t mean that Judge Whyte will ignore it, or refuse to rule similarly. But if that’s the best San Jose’s lawyers have, then they may be glad to get dismissed on standing grounds and head off to state court to fight out the lesser torts there. But judges do surprise you sometimes. So who knows.

  19. People don’t hate lawyers when they need them. Believe me, I know.

    I was simply combining a comment I made earlier (your headline says the opposition brief is the final pre-hearing response, when it’s not) with a genuinely respectful request that you continue to follow and write about the lawsuit in detail. You know damn good and well that I think your blog is terrific.

    • @xoot – You have a funny way of showing respect. Do you honestly think I’ll stop reporting on this? Who do you think you’re dealing with here?

      You have your view on Grow, and many others have theirs. We’ll have to agree to disagree.

  20. Grow’s legal review hinges on his dislike of Piazza, a District Court ruling. He doesn’t even acknowledge Butterworth vs. National League of Professional Baseball Club. In Butterworth, the Florida Supreme Court held the baseball “exemption” does not apply to franchise relocation, affirming Piazza. Grow believes Piazza, over the years, is limited. It may not matter how much Grow dislikes Piazza. The key here is that Piazza, a District Court ruling, contradicts precedent, challenging stare decisis. At large, Grow writes a decent sentence, but he cherry picks his cases to fit his argument.

    Second, standing may be an issue, but it depends on temperament of judge. It could go 50/50. It’s often judges use standing only when they don’t want to give an opinion. It wouldn’t hurt if Lew Wolff announced in an official statement that he plans, with some legal form of officialdom, to move to San Jose – he wouldn’t even need to join the case. Making his desire to move official, then having MLB preventing the move, would go a long way in showing everything is real and not resting on an “option”.

  21. If the case is tossed on standing due to the “option” oddness of it all, Wolff could try and actually move testing MLB’s response. If he did this, the case would come up again. So it’s not over even if standing is not granted, depending on Wolff.

  22. OR the judge could find the option agreement IS an official agreement between both parties being blocked by MLB so they have standing. With Wolff’s correspondence, phone calls, media events, public declarations, interviews – all statements private and public – affirming Wolff’s desire to move to San Jose, could be enough. In discovery, MLB could be shown to be blocking and/or sabotaging the option agreement and thus the move. Regardless of an official agreement between Wolff and San Jose, MLB is still interfering with a contract, regardless of it being an option. It’s the interfering with any agreement in relations to relocation that’s up for debate with regards to standing. This with anti-trust and restraint of trade claims make for a hefty suit that could go either way. 50/50 based on judges temperament.

    To be honest, I don’t trust Grow’s assessment. As I said, he writes a solid sentence and paragraph – I enjoy reading his perspective. However, his entire argument rests on holes in Piazza, which you must buy his book or his paper to find out those exact holes. He doesn’t list them on his blog, anywhere I could find. And he doesn’t address Butterworth’s affirmation of Piazza.

  23. Take a look at the 11th Circuit case that followed Butterworth. the Fla. case was decided under Fla. state law, too, wasn’t it?

    Anyway, the critique of Prof. Grow’s analysis is all hot air. If you know of some actual commentator with expertise who counters his arguments, I’d be pleased to look at his or her work. But this discussion has turned into a mindless ping-pong game.

    And ML, I think you’re the guy who wrote the headline that starts: “In final pre-hearing response . . . .” I was just trying to help.

    • “But this discussion has turned into a mindless ping-pong game.”

      Which you persist on playing. You’re the guy who calls Grow objective, non-partisan. Whatever, dude.

      BTW – ever stop to think that the phrasing is “San Jose’s final pre-hearing response”? Or do you want to say that the headline is a hack job? Again, whatever. Dude.

  24. yeah, whatever, dude. Look, I clerked for an appellate judge. I have souvenir reporters on my shelf here that contain decisions published exactly as I drafted them for the full court. Many years later, I’m busy working on an appellate brief today. I appreciate your architectural, engineering and, often, economic insights, ML. But you should strive for the same standards when you venture into the legal realm. Again, if you are aware of any scholar who has covered recent mlb A/T issues as thoroughly as Prof. Grow has, cite him or her. Otherwise, the discussion degenerates into internet fluff.

    • @xoot – I’ve been careful not to render opinions in my coverage of the various lawsuits. I’m here to inform. It’s you who chooses to make citations, render opinions, claim certain things are objective when they are in fact opinions, and so forth. I don’t have a problem with that. I have a problem with you conflating my coverage with some kind of crusade when I’ve made it abundantly clear that I have no serious frame of reference to go on such a crusade.

      As for Grow, he’s seen fit to make ATE and related matters his cause célèbre. If he wants to carve out a niche with his writing on the topic, it’s cool with me. He’s a legal scholar facing off against economists. Not exactly the same game we’re talking about. The fact that this bothers you enough that you’re playing down to my level – well, that’s your problem, not mine. Talking about working on other cases and briefs only further proves that.

  25. Xoot’s response can be summed up as, “Yeah, I wear penny loafers. So what?”

  26. @Steven,
    Thank you so much for putting Xoot in his place and countering his ultra-Giants point of view. Talk about blatantly bias!
    Let me ask you something straight up: do you feel you’re a better attorney than Crotchett? And if you were representing San Jose, how would you argue against the ATE (yes, I’m asking you to put your Giants bias aside just for once)?

  27. We all need to keep in mind that this attack on MLB’s ATE will not end should Judge Whyte grant MLB’s motion to dismiss. Cotchett and his partners have made it clear that they intend to take this issue to the US Supreme Court, if necessary. If the motion is granted, San Jose will likely appeal to the Ninth Circuit. Experience tells me that the Ninth Circuit will have no problem “reexamining” US Supreme Court precedent, as they so often are willing to do. MLB should be concerned. Keep in mind, MLB’s ATE no longer turns on whether baseball is engaged in interstate commerce, the Court has already acknowledged it does. This issue now turns on a very unusal application of stare decisis (i.e., precedent), which the Supreme Court itself has described as a legal “aberration” and an “anomaly.” Any objective lawyer analyzing the exemption should have serious reservations about its continued application. Having read Nathaniel Grow’s work, I question his objectivity. He strikes me as a young “Assistant Professor” at a business school looking to curry favor with MLB.

    Also, this threat to MLB’s ATE is not necessarily contingent on the standing issue. If it is finally determined that San Jose does not have standing to sue MLB on this issue, nothing is stopping a party with standing to bring an action against MLB. Who would have such standing? The A’s for one, but more likely a potential new ownership group who wants to move the team to San Jose. Why would A’s ownership sell to a SJ group? Because they could sell the team for more money. Why would a SJ group buy the A’s knowing the territorial restrictions? Because the team will be cheaper than without the territorial restrictions. Essentially, an SJ group would be hedging their bet that MLB will ultimately approve the move. Why wouldn’t A’s ownership sell to an Oakland group? Because the stadium situation in Oakland depresses the value of the team too much, and it’s better to just hold on. Wolff has never admitted it, but “Plan B” would be to sell the team for the most money possible, whether that be in San Jose, Portland, San Antonio, or anywhere else but Oakland at this point. It’s the unfortunate truth. As A’s fans, we need to be focused on keeping the team in the Bay Area.

  28. @Mike: If San Jose does not win standing, the best alternative (instead of selling) is for Wolff to enter into an official agreement to play on a temp field in San Jose. MLB would block or interfere with the agreement, preventing the A’s from moving, giving San Jose merits to sue again. Damages are real, not dependent on an option agreement in this situation. Why this strategy works so well: Wolff keeps his word of not suing MLB, as he leaves the lawsuit to San Jose. He also wins the publicity war if Oakland Raiders push the A’s out of Oakland.

    Again, the No. 1 person in control is Wolff, not MLB, not the Giants, and not a judge (for now). Regardless of the legal dynamics in the current lawsuit, Wolff can maneuver in such a way to get the A’s to San Jose if push comes to shove. He’s played the nice guy for now. The question: What’s his tipping point?

  29. @Steven: You raise an interesting idea, but why not just enter into a straight agreement (no option involved) with the A’s to sell the Diridon land for the new ballpark. No need for a temp field. Besides, I can’t think of a City-owned site for a potential temporary ballpark in San Jose. I know this issue has been discussed before on this blog, but I don’t recall a specific temporary site being identified. It would be great if there was one.

  30. @Mike421 – There’s additional land to assemble for a ballpark site. What the City owns now is not enough. Besides, if you build a temporary ballpark there how are you going to stage the construction of the permanent ballpark?

    One thing to consider is that if the A’s and San Jose were considering a temporary ballpark, it doesn’t have to be on City land. Some landowner sitting on unused or underused property may be happy to lease it out temporarily.

  31. Would you still need to go through the same environmental process to build a temporary stadium as a permanent site? Or something similar?

  32. @ML: Right, I understand that there are a few additional parcels needed to complete the Diridon site for the ballpark. The straight agreement I suggested above was for a permanent ballpark site at Diridon to address the issue of standing and the option agreement. My point was that there is no need to have a temporary site in order for the A’s and San Jose to enter into a straight purchase agreement (for the parcels the City does own) for purposes of establishing standing. Now, I’m not saying that San Jose currently does not already have standing. But if it were a problem, it could easily be addressed.

    The private landowner idea is an interesting one. If there were private land available for a temporary site in San Jose, and MLB were to intervene to prevent a move to that site, then the private landowner would certainly have standing to sue the league. The problem is, I can’t think of any land public or private in San Jose appropriate for a temporary MLB ballpark. Maybe you have a site in mind? I think the more likely “Plan B” scenerio is for the team to be sold to an ownership group intending to move the team to San Jose. No special land required, just money – something Silicon Valley is not lacking.

  33. @muppet151 – Temporary structures can be CEQA-exempt if they they don’t make any major and/or permanent changes to the land on which they sit. Traveling shows and carnivals fall into this category, as do some seasonal uses.

    @Mike421 – That’s for a future post.

  34. @Mike421: I would argue having the temp field built and move in ready is a good solution to solve standing because it is an actual case and controversy to resolve, not a case hinging on future plans of a future stadium not currently built. The case with a field already built is more real. It’s a bit late for me to explain correctly, but I hope some this makes sense.

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