San Jose City Council approves taking antitrust case to Supreme Court

Despite losing handily twice in federal courts, the City of San Jose won’t relent, voting unanimously today to take its antitrust case against Major League Baseball to the Supreme Court. While its chances of overturning baseball’s antitrust exemption remain slim, the City’s game plan is simply to have the Supremes take the case, which could cajole MLB into settling. Even that outcome is a long shot, as Wendy Thurm explained at Deadspin two weeks ago. Regardless of the long odds, Mayor Sam Liccardo seems to be spoiling for a fight:

We may know the Court’s decision by summer.

49 thoughts on “San Jose City Council approves taking antitrust case to Supreme Court

  1. Question for one of our legal scholars- Assume SC agrees to hear case this summer- I assume mlb can settle to avoid SC getting involved or once they agree to hear case is it locked in?

    • Absolutely they could settle at that point, thereby making the case moot. And I believe that’s always been SJ’s endgame.

      • Thx Bartleby- so it seems there is no incentive for mlb to try and settle dispute before SC rules on cert this summer- guess if cert is granted than mlb would quickly resolve- in meantime there is no risk to them?

    • Well, I suppose there’s risk if SJ refused to settle. But this seems unlikely.

  2. Oh jeez. Is it really worth continuing to antagonize MLB on the less than 2% chance that the court will even hear the case? Particularly after the new commissioner just came out and more or less told you to drop it? I mean even if San Jose wins there’s no guarantee Wolff will even move the team to SJ if MLB doesn’t approve. He sure hasn’t seemed willing to upset the apple cart so far.

    • Just because the Supreme Court only hears 2% of all cases doesn’t mean there’s only a 2% chance they’ll hear this particular case. Just as the fact that Stanford only accepts 5.1% of applicants doesn’t mean they accept only 5.1% of applicants who are top quarterback prospects with 4.0 GPAs, perfect GPAs and fathers in the U.S. Senate.

      (No, I’m not predicting they’ll hear the case, just that the odds may well be better than 2%. A lot of cases that get appealed to the SCOTUS are dead bang losers).

      In any event SJ has everything to gain and absolutely nothing to lose. The case is on contingency and “antagonizing” MLB will not affect the chance of getting a voluntary MLB approval for the move. That decision will ultimately be made primarily on economics; secondarily on league politics. Major businesses don’t make decisions based on “We’re pouting and cutting off our nose to spite our face because you sued us.”

      “I mean even if San Jose wins there’s no guarantee Wolff will even move the team to SJ if MLB doesn’t approve.”

      San Jose doesn’t have to win, they just need the Supremes to grant cert. If that happens, there will likely be a negotiated settlement allowing the A’s to move. Wolff doesn’t have to go against the will of MLB, and MLB actually gets cover for the decision vs. the Giants.

      It would make no sense whatsoever to take the case this far then cut bait only months before finally getting an answer.

    • San Jose has literally nothing to lose.

  3. Going according to plan. I’m sure nobody thought they had a chance at the lower court level and would have to get this to the Supreme Court. And why not continue? Should San Jose “play nice” when MLB is not going to let the city compete for the team? Nope. What’s the incentive for San Jose to stop the court battle when MLB is offering nothing? MLB brought this upon itself. There’s nothing to lose here and much to gain for San Jose. It’s high time MLB loses its undeserved anti-trust exemption and hopefully the court will see it this way.

  4. “…which could force MLB to open its books and do all sorts of messy disclosures of information it would rather keep safely stored in The Lodge.”

    ML, where is this information coming from? I’m not aware of a scenario where the SCOTUS would conduct discovery. Typically they rely on the factual record developed by the trial court, decide questions of law, then remand to the trial court if there are questions of fact that require further development. I don’t see any mention of this in the Deadspin article either.

  5. It appears that Manfred could be attempting to get Wolff to commit to Oakland before the SC agrees to hear the case – MLB could be concerned about it. The Oakland mayor’s plan is to choose between the A’s and Raiders – there is a good chance the A’s could be booted out of the CC development plans by the Raiders, which would help their cause of moving to SJ. Manfred also declared (prematurely) that MLB “won the case” (it ain’t over till the fat lady sings though. The attorney representing San Jose, Cotchett, planned for the SC scenario all along – one his initial comments that that he would take the case to the SCOTUS if necessary, Judging by Cotchett’s comments and videos, he appears to be very convincing, and has a strong opinion (very anti MLB ATE – Cotchett appears to be a high-powered attorney)

    An actual time-frame as to when the SC may agree to hear the case may take as long as approximately a year. Cotchett may take 6 months or so to prepare his case to the SCOTUS. MLB may then need several months to prepare for a rebuttal. and the SC would possibly need a few months to decide whether to place the case in their docket.

    Judging by how the SC ruled on the 2010 American Needle vs NFL case, for example (the 7th Circuit Court of Appeals ruled in favor of the NFL – the SCOTUS overturned the 7th court’s judgement by a 9-0 margin – who knows what the SC will decide – this could be a roll of the dice.. Their chances of hearing the case are likely well over 2% though)

    • @duffer- seems to me that would be a huge mistake for MLB- get the A’s to committ to Oakland and then have the SC take the case- at that point there would be no reason for SJ not to take it all the way thru resulting in a good chance for MLB to lose their exemption. My sense is we are in limbo until after the SC decision on granting cert is made. The 10 year lease at the Coli makes more and more sense all the time-

      • True, that appears to be Manfred’s motive though. One would also believe Manfred would possibly want Oakland to commit to the A’s too. If the Raiders boot the A’s out of the CC project – Manfred might be more likely to ok the A’s for San Jose.

        You could be correct – even though Wolff is against the lawsuit, somehow it appears that the A’s won’t commit to Oakland before the SC makes a decision about hearing the San Jose vs MLB case.

      • What manfred and LW say publicly is more than likely 180 degrees different than what they would be satisfied with or hopeful of. hell if cert is granted to the SJ case then Manfred will have had SJ and the court do his dirty work. Bay Area gets restored to a 2 team shared territory, A’s get to decide where in that shared territory they want to build and the gints threats to sue would be eliminated. The relatively untaped SV market would be available. I don’t doubt for a minute that manfred would be thrilled with this outcome-

  6. Manfred has a golden opportunity, as he begins his new job, to show an assertive leadership quality and style that had been sorely missed under the Selig regime. Will Manfred be proactive to tackling the ongoing long-term problem for the A’s in getting their badly needed new Bay Area ballpark? I sure hope that will be the case; but history tells us that Manfred will likely take the same reactive approach as Selig, and to not take any action until the situation forces him to do so. The two quickest reactive scenarios for getting MLB to approve the A’s move to San Jose will be either for the Raiders do get a new Coliseum deal done, or for the SCOTUS to agree to hear the San Jose case against MLB. If neither one of those scenarios take place, Manfred could still play a proactive role in helping to get a new ballpark for the A’s, even if its Wolff’s plan B, Oakland. With the Coliseum site then becoming the only Bay Area option, then Manfred could push MLB to allow the A’s to permanently receive revenue sharing. This could be the only deal breaker for Wolff to be willing to build his own ballpark in the less desirable East Bay territory.

  7. I always felt that San Jose should have tried to get something started in Congress and the courts at the same time. Even if the A’s stay in Oakland maybe this lawsuit will help change the territorial rights in the Bay Area.

    • Congress? Forget it. I had the opportunity during a San Jose July 4 parade to shout out to a local Congress person “Let’s get rid of MLB’s anti-trust exemption!” This person was a few feet away from me and had to have heard me. The response? Silence. Congress is not going to touch this, I suppose.

    • This congress? The last congress? They can’t even pass legislation to name a post office.

  8. What is MLB/Manfred’s list of priorities? Here’s my guess, though some are more trade-offs than priorities:
    First, protect MLB Anti-trust exemption – much bigger than Bay Area baseball.
    Second, avoid major territorial litigation between Giants and A’s
    Third, ideally keep team in Oakland to avoid perception of league-sponsored abandonment of community in need of renewal
    Fourth, be mindful of setting new precedents about team relocation (keep it hard with league in full control)
    Fifth look at broader picture of expanding fan base, perhaps international locations
    Sixth, try to placate/ keep club members Fisher/Wolff happy
    Seventh, if OAK/Alameda Co dysfunctional behavior prevent new stadium, figure out other “brokered” solutions through negotiations with Giants, SJ, other East Bay
    Eighth, allow A’s to move out of area (Montreal? Portland?)
    Ninth, encourage team to be sold to different owners (not sure this is realistic)

    Thoughts?

  9. re: Third, ideally keep team in Oakland to avoid perception of league-sponsored abandonment of community in need of renewal

    …I also see this as a priority of MLB – which doesn’t want to look like it’s abandoning Oakland for greener pastures. That being said, Oakland has done nothing to help out the A’s. We can cite the usual proof, ranging from ruining the Coliseum to bashing the A’s owners to offering $0.00 for a new ballpark. Oakland is making it very hard for MLB to stay.

    • Sorry- don’t buy into this factor- if there is money to be made and they can figure out how to get there over the gints objections they will do it- oakland is not a distressed area- just not a very good area for building a ballpark for all the economic reasons cited by others- note they had no problem changing territories with the nats- it all comes down to economics-

  10. Besides wanting to avoid looking like the bad guy and show that he’s on the side of MLB, I wonder how much of Wolff’s stance on the case is in relation to the potential impact of revenue sharing.

    While most folks think SJ is Wolff’s priority, I don’t think it’s out of the question that he would prefer the Coli site, with development rights, plus guaranteed revenue sharing over San Jose, with no development and no revenue sharing. Even in San Jose, the A’s won’t get the TV money that the Giants get. Revenue sharing can help guarantee the long term financial success of the team.

    Even if SJ is the ultimate goal, if the Coli site presents itself Wolff has to make a play on it. Worst case though is he gets the Coli site, SJ gets SCOTUS to hear the case and MLB buckles returning the Bay Area to a 2 team market. Wolff’s argument for revenue sharing now goes away and he’s potentially stuck at the Coli site with no revenue sharing.

    Wolff might want SJ, but I bet he wants it on his terms to keep all of his options open.

    • Wolff wants what ever makes the most financial sense long term for the team and your right- Coli site plus development rights plus revenue sharing might be better than SJ- CBA in 2017 addresses rev sharing- my sense is that nothing happens until SC decision is made and new CBA is signed that guarantees rev sharing if Bay Area territories do t change.

    • I haven’t seen anything suggesting MLB would be open to continuing revenue sharing for the A’s while they inhabit a new park in Oakland. The A’s might want it, and it’s certainly true that an Oakland park would be less lucrative than an SJ park, but that doesn’t mean MLB will go along with it.

      • Agree nothing has been stated publicly but how do you classify the A’s as playing in a big market when they are restricted to 2 of 9 counties- hardly fair like all other shared territories. What we do know is A’s get $30M+ welfare while they currently play in the o.co- taking $30M annually off of revenues and then paying for a new stadium on top of that makes it tough to come up with an economically proposal in Oakland-

      • @ GoA’s you ask how can we classify the A’s as a big market….

        Well, that doesn’t matter. What matters is that MLB does, in fact, officially classify them that way (see the current CBA, which classifies the A’s as a big-market team which loses revenue sharing if it gets a new stadium).

      • @jdd….And the CBA also gives the A’s an exemption for as long as they play in o.co and the CBA re-opens in 2017. Bottom line MLB can’t force an owner who is paying for his own ballpark to make an uneconomic investment decision- if the numbers don’t work in Oakland without revenue sharing and MLB/courts lit them to Oakland then if they want a new ballpark built they (mlb) may have to contribute to make it more economic and one way to contribute is via extending revenue sharing for the A’s.

  11. I hope they come up with a better argument than they’ve put out so far. The Circuit Court arguments were utterly pathetic. There’s a genuine argument there to be made that the last time the SCOTUS ruled on the Anti-Trust, MLB has gone on to significant business changes that make the original AT ruling no longer valid. But the SJ legal team doesn’t seem to be willing or capable of making that argument and instead have made themselves look completely inept.

  12. For people thinking that the A’s could build a new stadium and still get revenue sharing, this is what the current CBA says (which shows you what MLB thinks of that):

    http://mlb.mlb.com/pa/pdf/cba_english.pdf

    Page 223

    MARKET DISQUALIFICATION
    MARKET REVENUE SHARING
    RANK DISQUALIFICATION
    Rank Club 2012 2013 2014 2015 2016
    1 NYY 0% 25% 50% 75% 100%
    1 NYM 0% 25% 50% 75% 100%
    3 LAD 0% 25% 50% 75% 100%
    3 LAA 0% 25% 50% 75% 100%
    5 CHI 0% 25% 50% 75% 100%
    5 CWS 0% 25% 50% 75% 100%
    7 SF 0% 25% 50% 75% 100%
    7 OAK Exempt until new stadium
    9 TOR 0% 25% 50% 75% 100%
    9 PHI 0% 25% 50% 75% 100%
    9 BOS 0% 25% 50% 75% 100%
    12 WSH 0% 25% 50% 75% 100%
    13 ATL 0% 25% 50% 75% 100%
    13 TEX 0% 25% 50% 75% 100%
    15 HOU 0% 25% 50% 75% 100

    • And guess who ultimately gets to control when a new stadium is built…LW… He is not going to make an uneconomic decision- and as I have pointed out this CBA expires at the end of 2016. If MLB and the courts Limit the A’s to Oakland then either Oakland or MLB will need to make it economically viable or we could see the A’s playing in the o.co beyond the next 10 years.

      • you are confusing the point.

        The point is that MLB thinks that the A’s should stop getting revenue sharing if they get a new stadium. I was responding to people’s assertions that they could get a new stadium AND get revenue sharing.

        That’s a different question about whether the A’s owners should actually build one.

      • Agreed that ultimately it’s MLB’s decision and logic and MLB don’t necessarily go together.

        That being said, would anyone in their right mind actually think the A’s have more revenue potential in Oakland than any of the teams below them in the list?

      • @ Slacker Because they are just doing it by market size rather than revenue potential. which would take into account other thing.

        For example, they haven’t been taking potential corporate support into account when deciding who pays into or receives revenue sharing. It’s only been market size. This isn’t theoretical – it’s how they’ve been doing it for years.

      • @Jeopardydd – Agreed. My point is just how idiotic MLB’s approach is to all of this. They’re saying that the A’s are on even footing with the Giants, never mind the fact that they’re also saying the A’s are restricted to 1/3rd of the area in terms of population and probably less than that in terms of wealth.

  13. @jdd- nope not confusing the point—we have no idea why MLB defined the large v. small territories and why they gave the A’s an exemption until a new ballpark is built. Perhaps it was all part of the strategy to get the A’s to SJ. I have heard LW say many times that he was willing to go off of revenue sharing in SJ. I have yet to hear him say that about Oakland. Its all about economics—you are asking an owner to privately finance a ballpark in a limited territory where corporate support cannot justify the private investment. Eliminating revenue sharing and paying the mortgage on a new ballpark will be a swing of revenuen equaling nearly $50M per year. Thats a tough economic nut to crack for the A’s in Oakland. So once again, if mlb wants a new ballpark for the A’s in Oakland then they and Oakland will need to contribute on some level—and we will see in 2017 whether or not revenue sharing continues for the A’s or not. Question to ask yourself is yes the coli is a shit house but Toronto’s stadium isn’t that good either—why did they give the A’s an exception and no one else? maybe because the shared territory issues hasn’t been resolved?

    • @GoA’s

      They did it because the Bay Area is the 7th largest market. That’s why. It states it on the document.

      You are engaging is some serious fantasy-land wishful thinking if you think there’s more than a tiny chance that the A’s could build a new stadium and still get revenue sharing. MLB has put it officially in writing that that’s not the case.

      The A’s ownership therefore will only build in Oakland if it makes sense to do so given that reality.

      • @jdd- let’s revisit fantasy land after CBA is signed in 2017- 7th largest market that limits a team to less than 1/4 of that doesn’t equate to the 7th largest market for the A’s

      • @GoA’s

        “fantasy land”?

        The only fantasy land is the one you are in where you ignore everything MLB has explicitly, and officially, stated… because you think that it’s unfair.

        Since when has MLB seemed to be about “fairness” to you, especially in terms of the A’s? Has that seemed to be their chief concern?

      • @jdd- I am looking at real data- why did MLB provide an exception to the A’s in the current CBA to be a welfare collector than contributor? Toronto also plays in a large market as defined by MLB and they could use an updated ballpark- why didn’t MLB give them special consideration. Once again your fantasy land might be a lever the MLB will use to determine whether SJ or Oakland is more economically feasible going forward

      • The A’s are tenants in a 48 year-old stadium that is owned by the City/County. The Blue Jays bought their stadium from the City/Province for a song. Blue Jays are completely in control of their stadium future. A’s are not.

  14. Why are we assuming the only financial benefit to Fisher/Wolff (not just LW) is from just the team? Isn’t there more money to be made from retail/housing/office space that could be housed at the CC site? Isn’t LW some type of developer?

    Second, if the team’s long term value moves from $500MM to even 75% of the Giants value, let’s say $750MM by 2020, doesn’t this gap make up for the $30MM in revenue lost?

    • The A’s actual valuation is probably around $800-$900 million as it currently stands. Possibly more.

      I can’t remember who said it, but the WSJ conducted an interview with a sports economist several years ago who said “the era of sports teams being sold for 3 times their yearly revenue is now over. It’s 5 times at minimum.”

      That goes for all sports. So far it’s spot on. A’s revenue will be over $200 million this year. The stadium situation may (currently) keep the A’s below the 5 times average, but once a new venue is built, they’ll certainly be in the 5 times the yearly revenue category.

      The A’s, obviously, aren’t for sale. But I bring this up because it means the Raiders could probably afford to offer more than what they’ve stated publicly. But it’s on them to make that effort. So far, crickets…

      If Santa Clara county is permanently closed off to the A’s, there is a legitimate argument to be made by Wolff that the A’s market should only be judged by the counties available to them. That would require the A’s standing up to MLB. Given Wolff’s actions so far, I wouldn’t hold my breath on that. I tend to agree with all of you who think a new venue means no more revenue sharing no matter what.

      • it will be interesting how LW handles this- my sense is it is an ace in the hole for him. Ultimately it is MLB who is accountable for establishing unique territorial rights in the Bay Area that provide a huge competitive advantage for the gints. This has to be factored into the discussion if this unfair advantage isn’t changed.
        Since valuation of a team won’t play into revenue streams and the fact that building a new privately financed ballpark and losing revenue sharing are going to create a $50M swing in terms of decreasing revenues/increasing expenses it makes building in Oakland that much more difficult economically which needs to be factored into the discussions with oakland/JPA and MLB. If Oakland steps up and offers a kick ass development rights deal then I agree with you- he won’t be able to request continuation of revenue sharing- but if not I would expect it to be a bargaining chip within the lodge to get him to build in Oakland while allowing the gints to retain competitive advantage within the Bay Area territory. Of course this all assumes that SJ stays off limits-

    • Steve,
      Your assuming there’s money to be made on a retail/housing/office development in East Oakland. You’re also assuming there’s a need for such a huge glut of new retail/housing/office in East Oakland. Further, perhaps assuming that said development in East Oakland will provide serious coin for a new Coli Stadia? See $10 million for Avaya Stadium from massive iStar development in $outh $an Jo$e…

  15. I agree about the difficulties and risks in re-development efforts in East Oakland. However, look at what has happened in NYC with Brooklyn. Perhaps a better analogue is Hoboken/ Jersey City / Weehawken. A lot of re-development of old mixed neighborhoods. The fact that SF is for the uber rich is creating opportunities outside the city.

    Valuations
    On the team valuations, @muppet151 raises an interesting question. Forbes put the A’s at $495MM in 2014 on revenues of $187MM which is 2.6 times revenues. Some teams at the top of the list are getting a valuation in the 4-5x revenues range. However, most of the teams below the median team value are in the 3x range (according to the Forbes methodology).

    Also note that the Cubs were sold for $845MM in 2009 on a revenue base of $239MM – a multiplier of 3.6 (Forbes had estimated this multiple at 2.9 back in 2009 prior to the sale). In 2014, Forbes says the Cubs are worth $1.2B on a revenue base of $266M, so the Cubs estimated multiple has gone up from 3.5 to 4.5 in just 5 years. Back in 2009 the A’s were valued at $319MM on revenues of $160MM – a multiple of 2.0.

    So the A’s multiple has gone up by .6 or 30%. The Cubs has gone up by 1.0 or 29% (over last sales multiple) – a similar percentage. If you use the Cubs example of selling for a multiple that is 25% higher than the Forbes estimate, this would raise the “likely sales” A’s multiple from 2.6 to 3.25 or ~$600MM team value. However one could argue that the Cubs were likely to command a higher premium than the A’s, so a lower multiple seems somewhat likely to me.

    • With regards to the Cubs, point taken. My only counter argument is that that was 2009 and much has changed since then. A better example for the A’s is the Padres.

      The Padres were sold in 2012 for $800 million. They had revenues of $163 million and were valued by Forbes at $458 million. The $800 million sale brought them pretty darn close to the 5 times the yearly revenue theory. Keep in mind the Padres do not own PETCO Park. They did get a new media deal that year but not owning their venue cuts into revenues, and they still sold for $800 million.

      A’s ownership has always maintained they want to be in control of their own destiny and the issue of stadium ownership is non-negotiable. The Coliseum City financing plan that has floated around that the A’s would develop a new stadium only to end up leasing it from either the public sector or a 3rd party is a no go from the A’s perspective. It’s also why I think their “actual” value is much higher than the Forbes estimates.

      Back on topic (I think)

      Whatever the franchise value is in Oakland, I don’t think any amount of development could bring in the revenue to match what it would be in San Jose.

      I’m someone who wished San Jose sued years ago (just to get it out of the way). But as much of a long shot as it is for SCOTUS to take the case, the odds would almost certainly be longer had the judge in the Garber case not ruled against MLB’s exemption and given it a much narrower scope.

      That case has nothing to do with franchise relocation, but San Jose’s legal Hail Mary might rely on SCOTUS wanting to clarify the exemption issue now, rather than let it continue to play out in case after case in lower courts. So, albeit accidentally, San Jose was better off waiting. Even if it’s still a very unlikely scenario.

      • Good point about San Diego – I forgot about that sale. Perhaps the A’s could get a bit higher than $500-$600MM. It’s funny that Forbes has the Padres still at $615MM in 2014 even though they sold for more than that in 2012. It’s like the distortion that happens on Zillow when it says your house is worth less than the last sales price in an increasing market.

        I don’t disagree about the the development opportunities in San Jose. My point is simply that the Oakland opportunity is not just two stadiums. There’s more that can be done to increase the short term and long term value.

  16. I believe there is a very good chance (certainly much greater than 2%) of SCOTUS taking the case, if only because it gives them an excuse to kill the antitrust exemption once and for all. Comments by Justice Sotomayor at a recent mock re-argument of the Flood case suggest she would be willing to kill the exemption in an appropriate case; San Jose only needs three more justices to agree to get it on their docket. If that happens, Commissioner Manfred would have no choice but to settle; most assume MLB would be much better off letting the A’s move to San Jose than risking the uncertainty of losing its antitrust exemption, even if (as some legal scholars have argued) they may actually end up better off without it.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s