San Jose Sues MLB To Get A’s, Charges Teams Conspire To Maintain Monopoly Power In Their Markets

After months of threats and saber-rattling, the City of San Jose sued Major League Baseball and its 30 constituent teams on Tuesday over MLB’s refusal to allow the Oakland A’s to move to San Jose.

The lawsuit, filed in federal district court in San Jose, is a direct challenge to MLB’s federal antitrust exemption. San Jose claims that MLB places unreasonable restrictions on competition by giving each team its own exclusive territory (or in the case of New York, Los Angeles, and Chicago, shared territory) and veto power to prevent any other team from moving into that territory. As I explained in this FanGraphs post last September, under MLB rules, a team can move into the territory of another team only when the following conditions are met: a vote of three-fourths of the owners approving the move; the two ballparks are located at least five miles apart; the move results in no more than two teams in a single territory; and the team moving compensates the team already in the territory.

In addition to the federal antitrust claims, San Jose also charged MLB with violations of California antitrust law and with state law claims for interference with prospective economic advantage based on San Jose’s agreement to allow the A’s to buy certain parcels of city land, if the A’s plan to move is approved by the league.

You can read the lawsuit in its entirety here.

San Jose is represented by Joe Cotchett and his law firm, Cotchett, Pitre & McCarthy. Cotchett is a nationally well-known and well-regarded attorney with experience in antitrust cases. In fact, Cotchett represented the National Football League and the (former) Los Angeles Rams when the Oakland Raiders sued the league for antitrust violations in 1982 when the league voted against allowing the Raiders to move to Los Angeles. The Raiders won that lawsuit, and paved the way for other professional sports franchises to move from city to city more easily.

Except, that is, in baseball.

The United States Supreme Court granted baseball an exemption from federal antitrust laws in the 1920′s. Several cases sought to chip away at that exemption over the ensuing 90-plus years, and while it has been carved up and narrowed, the exemption remains. In the Curt Flood Act of 1998, Congress specifically overturned the antitrust exemption as it applies to labor relations; by federal statute, major league baseball players have the right to be free of collusive and monopolistic conduct by the owners and the league.

But Congress left the remainder of baseball’s antitrust exemption intact. Or did it?

There’s a good deal of debate about how to interpret what Congress did and didn’t do when it debated and enacted the Curt Flood Act. This law review article analyzes the issues quite well. The question the judge in San Jose v. MLB will have to decide is whether baseball’s federal antitrust exemption as it applies to the location and relocation of franchises survived passage of the Curt Flood Act. If the exemption applies, then the two claims against MLB charging violations of the Sherman Act (one of the federal antitrust statutes) will be dismissed.

That brings us to the state law claims.

California has its own antitrust statute, known as the Cartwright Act. It operates independent of federal antitrust laws; that is, federal law does not preempt the operation of the California statute. And that’s where things get tricky and — frankly — a bit hazy to me. Sure, I practiced law in California for 18 years but handled very few matters involving the Cartwright Act. I just don’t have enough knowledge and experience to say at this point whether this claim carries any weight even if the federal antitrust claims are blocked by baseball’s antitrust exemption.

The Cartwright Act claim is the key to all of the state law claims. San Jose alleges that MLB interfered with its option agreement with the A’s. In November, 2011, San Jose granted an option to the A’s to purchase a five-acre tract of public land for $6.9 million. The option contains two conditions: (1) no public funds shall be used in the design, construction or operation of the new ballpark; and (2) city voters must still approve the construction of the new ballpark. The option cost the A’s $25,000 per year.

That sounds pretty nebulous — how can a party interfere with an option to do something in the future? — but California law does allow plaintiffs to sue claiming that another party interfered with an expected contractual interest if the defendant engaged in otherwise illegal contract. In other words, if MLB’s conduct violated the Cartwright Act, that could be a sufficiently wrongful act on which to base a claim for interference with prospective economic advantage.

San Jose also faces considerable challenges in proving real economic damage. The lawsuit outlines all manner of economic benefits the city would purportedly receive if the A’s were permitted to move and build a new stadium downtown: constructions jobs, related economic activity, tax revenue, etc. The complaint includes as an exhibit a economic study conducted for the city which claims all manner of economic benefits from a new ballpark. But as we’ve seen time and again, these kinds of studies don’t hold up to reality when new ballparks do get built.

In truth, there is a slim chance this case ever gets to the stage where experts are battling over future economic benefits to the city.

Why?

Because MLB will do whatever it can maintain its antitrust exemption, however narrow it may now be.

The key battle in this case will come early on. MLB will undoubtedly file a motion to dismiss the case on legal grounds — before documents are handed over and witnesses are required to give sworn deposition testimony. Such motions do succeed in federal court, particularly in antitrust cases where the standards for pleading a viable legal claim are high. But this is a complicated case with complex issues. I’m just not in a position now — before any motions are filed — to say which parties have the better of the argument. It looks like San Jose is on pretty shaky ground, but if the city can get past the motion stage of the case — and into discovery — the chances for a settlement that results in the A’s moving to San Jose go up.

And at the end of the day, San Jose cares much more about getting an MLB franchise than about blowing up baseball’s antitrust exemption.




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Wendy also writes for Sports on Earth and Bay Area Sports Guy. She's written for ESPN.com, Baseball Nation and The Wall Street Journal. Wendy practiced law for 18 years before pursuing her passion for baseball. You can follow her writings and ravings on Twitter @hangingsliders.

93 Responses to “San Jose Sues MLB To Get A’s, Charges Teams Conspire To Maintain Monopoly Power In Their Markets”

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  1. just me says:

    Wendy,

    The one thing I keep coming back to in this is Lew Wolf and his “team” purchased the team knowing that Giants had been granted the rights to SJ. If I owned a franchise that was doing well and someone else purchased a poor performing franchise from the same company I wouldn’t expect the franchise owner to up and move into my territory because I owned that territory. The owner purchased (at a reduced rate) knowing what had been granted as territories.

    I grew up going to A’s games and I strongly feel if the management had stopped saying how horrible their location was and instead focused on trying to make the stadium better and working to build a new stadium somewhere in the Alameda/Contra Costa area this would be well past us and two Bay Area teams would be thriving.

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    • dmoas says:

      They (and the Giants ownership) also purchased their club knowing full well that all it would take is a 3/4 vote of the ownership groups to override those rights.

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    • David says:

      Alternatively, he purchased the team expecting to be able to move it based on the granting of territorial rights being an unfair restraint of trade. Buying in doesn’t mean you condone an illegal rule.

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    • Jason says:

      and the current owners of the Giants purchased the club at a higher value becuase of those rights. The current owners were not recipients of the “gift.”

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      • NSD says:

        Actually, the current owners got a discount. A group from Florida had bought the Giants from the previous owner, but Selig stepped in and encouraged Peter Magowan to quickly put together a new ownership group. Lurie was then forced to sell the Giants at a lower price than the Florida group bid for.

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    • sean says:

      The A’s do not own the Coliseum, they are merely tenants. It would not be a good idea for them to pay for renovations on a facility that they do not own.

      You might as well ask me to pay to remodel the kitchen of the apartment I rent.

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      • That Guy says:

        People who rent properties in order to conduct business pay to renovate those properties to fit their uses all the time. In your example, should you decide to run an in-home catering business, and decide you need a 6 burner Viking stove, your landlord might laugh at you if you ask him to pay for it, and it would simultaneously make sense for you to invest in such a renovation that benefits you.

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    • rageon says:

      I’m an A’s fan who can’t disagree that L.W. bought low and now wants to benefit from changing the rules. While it sucks that the A’s gave away the rights 20 years ago and can’t get them back, the fact remains that the A’s want to move to San Jose for a reason. They will obviously make way more money if allowed to do so.

      If they get a new stadium, that adds hundreds of millions to the overall value of the franchise. What may be worth $300M today might sell for $500M if it includes the ability to play in San Jose. So it’s not unreasonable to expect them to kick back some share of that benefit to the Giants. MLB should probably just tell the A’s and Giants to split 50/50 whatever a reasonable estimate of that increase would be. If it’s $100,000,000 and L.W. can’t afford to pay it, then I suppose he should jsut sell to someone willing to front the money.

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    • Rick says:

      It appears to me, that according the MLB Constitution, the Giants territorial claim to San Jose expired December 31, 2012. See the MLB Constitution here http://www.bizofbaseball.com/docs/MLConsititutionJune2005Update.pdf). If anyone knows of a different constitution, please let me know.

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      • Josh says:

        That article also says the Astros are in the NL Central. It has been updated since the 5 year old version linked

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  2. Tim_the_Beaver says:

    Great article Wendy. The whole thing is a mess and the losers at every turn have been the A’s fans. I have very little respect for Bud Selig and how he has handled this. Either articulate a reason why SJ is off the table and maybe Wolff and co. sell to somebody that figures out how to build in Oakland, or man up and help the teams resolve the issues in building in SJ. But don’t do nothing. That is the worst.

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    • Balthazar says:

      Wendy, I love it when lawyers talk shop about something that actually matters! Ultimately, San Jose will get a baseball team. Oakland is an untenable location for a baseball franchise at this point. MLB will have to be dragged kicking and screaming to that outcome, though.

      The crux of the problem isn’t the Giants per se but the fact the MLB granted the Giants territorial rights to San Jose yeah long ago when it was a podunk afterthought, and undoing those territorial arrangements raises the possibility of wrangling cropping up over _every other existing territorial arrangement_. This is a non-trivial problem, where, say, the Phillies might claim that their territorial rights _should, now_ extend relative to Baltimore. And so on. There are few live territorial disputes now, and most teams are anchored in place, unlike the situation of the Raiders. Any decision by MLB that gives wiggle room about territory though lets lots of worms loose, and raises the possibility that a franchise such as the Tampa Bay Rays might bolt for something, anything else since they can’t seem to make money in the Split-Brain Cities in FLA. This is why the Commish’s office refuses to make a decision: the status quo feels far safer and more familiar for everyone except Lew Wolff and Oakland’s fanbase. And most of the owners don’t want this stirred up either, they’re quite willing to let Wolff starve, he’s nobody to them. Add in that the Giants are operated by Very Important Moghuls around MLB, while the As . . . are not.

      But the territorial division of the Bay Area as set down is grotesquely unbalanced. Fifty years ago when two franchises moved there, Oakland was a solid, largely working class city, with still growing bedroom suburbs. Now, it’s shrinking, flirting with bankruptcy decade by decade. Alameda-Contra Costa is simply not a functional location for a baseball franchise at this point. It’s the smallest of the three regions around the Bay Area. It’s the poorest. Many folks there don’t care about baseball at all. It’s the hardest of the three regions to get to from the other locations. There is no way whatsoever that a major sports franchise would *move* to Oakland at this point. San Jose by contrast is the second largest city in California. Yes, it’s larger than San Francisco or San Diego. The income profile there has been radically changed also, both by Silicon Valey spillover and the increase in land valuations generally, as San Jose has a lot of area built up more recently while Oakland and its neighbors long ago became locked in in terms of development, to much lower value housing stock outside of the hills and in many places scarecely inhabitable property tracts. From a third tier city fifty years ago, San Jose has become probably the most desirable location in the US for a major sports franchise which doesn’t already have one. So why should the Giants continue to be allowed to preempt this simply because 29 baseball owners don’t want their yachts rocked without even the certainty that that would happen?

      The most natural territorial divisions at this point would be San Jose for one franchise, and San Francisco-Alameda County for another, and there is even public transit which facilitates this. But nothing logical ever comes out of the ‘consultations’ of major league baseball owners insofar as one can tell . . . . So it’s up to a judge to save baseball from itself. Again.

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      • Logic says:

        Should be “most folks don’t care”. Of course many folks don’t care. Many folks in Boston don’t care about the Red Sox.

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      • jac says:

        I don’t disagree that San Jose is a desirable place for a team to go because of it’s size and proximity to Silicon Valley wealth, but you are way off base with your description of the East Bay.

        The New York times just had an article on how Oakland’s rent and property values increased the second most of any city in the country. Where you’re getting this idea of “barely inhabitable” tracks of land I don’t know, sounds like the normal racist view of Oakland to me, and is totally wrong.

        Plus, the East Bay is much larger than Oakland, and ends up being bigger than San Francisco when you realize that Oakland, Berkeley, Emeryville, Albany, El Cerito, Richmond, Fremont, Lafayette and Walnut Creek are all contiguous. They’re incorporated as different cities buy are in a smaller metro area than most major league cities and with more population.

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        • Balthazar says:

          Jac bro . . . I’e lived there. And have relatives who still do, and I visit often. And spent eight years watching the As back time was.

          ‘Rate of increase’ is a slippery number which tells you nothing out of context. Many properties which were underwater bounching back to barely positive can make a great ‘rate of increase’ without necessarily being of significant value. Oakland itself includes the hills, which are very, very HIGH value properties, but whose inhabitants might as well be living in another county; same for Berkeley Hills, and Albany. Large parts of West Oakland, East Oakland, and Richmond are terrible wastelands of rotting bungalows and industrial contamination. I well understand that there is more to the East Bay and Contra Costa then Oakland, which is implied in my comment. That said, the housing stock of Alameda, San Leandro, Castro Valley, El Cerrito, and Union City is down market and aging, and barely offset by the values in Contra Costa over the ridge line. Is it a terrible place to live? Not overall. Probaly better than Syracuse, NY, Cleveland, or Winston-Salem . . . all of which are aging, early industrial milltowns whose main industries have declined or vanished. But compared to San Jose, to say nothing of any other part of the greater Bay Area? Bottom tier, and NEVER getting better, there is very little industrial investment interior Alameda County.

          The East Bay is definitely in cyclical demograhic decline, and the least desirable place in the Bay Area to operate a major sports franchise not least due to transportation accessibility. You can only get there half way easily from Contra Costa, and the present park is a rotting, out of date shell in an unsafe area not near the downtown core and transportation hub of Oakland. Any fool would want to operate in San Jose, and most folks in San Jose would like to have their own team. The only folks in the way are 29 rich guys and the Giants org, and it’ll take a judge to get them off of everyone else’s dime. Just how it is . . . .

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  3. Haemaker says:

    Is money the issue or do they want the courts to issue an injunction preventing MLB from interfering in the move? If they want the injuction, they only need to prove the damage was more than $1.

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  4. snoop LION says:

    great article. cheers

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  5. Because MLB will do whatever it can maintain its antitrust exemption, however narrow it may now be.

    Sometimes that means compromising before suffering the grave consequences of an adverse judgement, no matter how unlikely. Maybe MLB’ll finally let this one happen.

    Or maybe MLB will send Dan Mullin and Precise Protective Research to rough up some San Jose apparatchiks. (Do click the link, that Biogenesis story is good fun.)

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    • Train says:

      I think MLB will view letting this one happen likely to cause graver circumstances than fighting it. Once they let the threat of a lawsuit against their expemtion override their desires it would open up the floodgates. SJ must know this, so to get to this point they must have the sense that MLB is not going to let the A’s move.

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      • Fred Barnes says:

        Well that wasn’t the case the previous times.

        The Mariners and the Rays both exist because of such lawsuits.

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      • Balthazar says:

        What is particularly heinous in this instance isn’t even that MLB is refusing to let the As move—which would be within their authority—but purportint to ‘study the issue’ while in fact doing nothing and waiting for Lew Wolff to bankrupt out and sell to another, greater fool. If they get to discovery and find that MLB hasn’t even set up staff or held a meeting to ‘study the issue,’ claims of conspiracy thicken considerably. I’m with Wendy in thinking that MLB will _NOT_ want to go through discovery on this, so the real fight is in motion to dismiss and on what grounds. It’s hard to say whether a judge will think that a third-party with a minor stake has traction to move on to discovery; may come down to who’s selected to hear the case. Interesting brangle, tho . . . .

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  6. Brendan says:

    Thank you Wendy. That is great info.

    The one question I still have is what can I do as a lonely, unattractive 30-year old male living in his mom’s basement in Berkeley feeding mainly on pretzels and various convenience-store-bought cake-like foods do to keep the A’s in Oakland? I fear that once the team moves to San Jose and mlb.tv stops hosting the video of game 4 of last year’s ALDS, there may be very little left for me.

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  7. Neil says:

    I haven’t followed the details of this, but what would the Giants lose by allowing this? The TV zones can overlap and it’s not like the Giants are starved for a fan base. Can’t they just take a check from the A’s and let everyone be happy? What am I missing?

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    • David says:

      Lew Wolffe doesn’t want to pay he wants them for free.

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      • baycommuter says:

        Wolff: T-rights worth nothing; if we move it won’t affect your business at all.
        Baer: T-rights have infinite worth and we built a stadium around having them.
        Wolff: OK, $20 million should do it.
        Baer: $200 million minimum.
        Wolff: Can’t pay anywhere near that and afford to finance a stadium.

        Solution: MLB grant Giants extra slice of forthcoming revenue increases out of its own revenue.

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        • Jamie says:

          The Giants make big money selling (very expensive) season tickets, luxury boxes, and advertising space to Silicon Valley-based corporations. A shiny new stadium in downtown San Jose would basically be in the back yard of those corporations. Which is why the A’s want to move there. No check from the A’s would be big enough to cover the loss of all that Giants revenue, year in and year out, even if the A’s agreed to split profits in perpetuity. Which they won’t.

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        • Richie says:

          What Jamie says x10. And having sorta-self-financed their own stadium (to a much greater extent than is the MLB-extorting-owner usual, anyway), don’t the Giants still have a huge bill to pay off?

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    • Jim says:

      The reason the Giants ownership is against this move is because a large percentage of their fan base comes from the San Jose area. They are afraid of losing that fan base based on convenience of location. Also, the A’s have proven over the last decade that you can field an extremely talented team on a shoestring budget. A move to San Jose would allow the A’s to increase their budget dramatically with higher quality ball players, due to the fact they would sell out every night. At that point the A’s and not the Giants would be the darlings of the Bay Area.

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      • Fred Barnes says:

        poppycock

        there’s no indication that much of their attendance is from SJ.

        In fact, they could win on average by eventually drawing more fans from the East Bay.

        No, the real reason is because the Giants know Oakland is not viable for the A’s, and they want to drive the A’s out of the Bay Area altogether and have the largest single-team market in the country. Their front office is on record saying that the Bay Area should only have 1 team. It is also why they have refused to negotiate re: a buy out.

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        • Balthazar says:

          This. It all comes down to the stronger team hoping to starve the other out and have sole ownership of the market. Boston, Philadelphia, and St. Louis had two teams; now they have one. New York had three teams; now they have two. MLB dragged it’s feet on putting a team in DC Metro exactly for this reason, despite the fact that DC Metro was bigger and much wealthier than Baltimore, exactly like San Jose is bigger and wealthier than adjacent locations.

          And frankly, MLB would rather like that outcome, the squeeze out of the Athletics, because it makes the remaining franchise more valuable. This is a significant part of why ‘do nothing’ is MLB’s approach. If Sacramento was a viable location, MLB might well say “You can have that,” but it isn’t. Nobody’s moving to Portland, OR, either. So I’m all for a functional resolution even if that doesn’t serve all established parties optimality.

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        • Laz says:

          Right, but the Bay area isn’t one city center, like many eastern cities. Is almost 50 miles between their centers, it should be able to support 2 teams because San Jose is far enough, while still having a big population.

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  8. baycommuter says:

    Legal question: How can San Jose make a claim under state law in federal court? Shouldn’t they have to file a separate suit in state court?

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    • Wendy Thurm says:

      Federal courts have exclusive jurisdiction over federal antitrust claims. State law claims can come along for the ride.

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      • Ron says:

        And even if the federal claims get dismissed early on, the federal court can continue to have jurisdiction over the state law claims and see them through. This doesn’t have to happen but can.

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      • rageon says:

        A law-school classmate of mine — who was a top 10 student, federal law clerk, and now works for a respected firm — answered a question about this for her civil procedure final by literally drawing a picture of a guy walking across state lines into federal court carrying a backpack of state law claims.

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  9. dt says:

    So how long before the other 28 owners tell the Giants we aren’t going to court for you to have a few extra sponsors from a neighboring city.

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    • Train says:

      A long, long time. You think the other owners want to set a precedecnce of giving in under threat of a lawsuit?

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      • sean says:

        That precedence already exists. See how the Tampa Bay Devil Rays came about.

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        • Fred Barnes says:

          Or the Mariners.

          In fact, this is “less bad” than those, since the A’s have been in the market for 45 years already rather than coming into it, and are actually trying to move 30 miles farther AWAY from the Giants.

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      • Worm Turner says:

        Also setting the precedent that any team is free to move into an others ‘market’.
        Random example- say the Rays want move to Hoboken?

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        • Baltar says:

          They want to move to Brooklyn. New Jersey would also be high on their list.
          Since the people of central Florida don’t support the team, and the NY area should have another team, I hope this happens.
          Even more do I hope the A’s and San Jose defeat the Giants and the MLB, just because the latter two are arrogant jerks.
          I know squat about the legal issues except for what Wendy, thank God, reports.

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        • dmoas says:

          Except in this case they’re moving further away from the team. No one’s actually moving *into* their market.

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        • Worm Turner says:

          @ dmaos
          Not a ‘claim’ per se, but SF does have a A+ team there.

          Also, I think it’s safe to say the Giants look at SV and its riches as ‘theirs’, without the corporate sponsorships I doubt the Giants would care much what the A’s did.

          The whole issue is a major clusterf_ck.

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        • dmoas says:

          Worm, minor league teams have never been given any care when it comes to MLB territory.

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      • Tim A says:

        They only settle if they think there is a decent chance they lose, this effects nothing because anyone moving forward will know what they already should, if you have leverage you can negotiate. MLB wouldn’t just cowtow too every suit filed moving forward.

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  10. MikeS says:

    Wendy Thurm is just fracking awesome. Fangraphs is lucky to have her and so are we.

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  11. astrostl says:

    I don’t see why the MLB (or any other private business) shouldn’t be able to decide who does or doesn’t get a franchise, for any reason at all.

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    • The Fallen Phoenix says:

      In this case, it’s less about who does and does not get a franchise, and more about whether an individual who already owns a franchise can relocate said franchise to a place of his or her choosing.

      It might seem a subtle difference, but it’s a difference nonetheless.

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    • Basil Ganglia says:

      IIRC – one of the key issues in the Oakland Raiders against the NNFL was the question of whether the NFL was a single business entity with multiple owners of whether it was an association of independent business entities. The NFL argued the single entity issue, because if that were the case conspiracy would be impossible – an entity can’t conspire against itself. The Raiders, of course, argued the opposite position – that the teams were independent business entities that were illegal hindering the business activities of the Raiders.

      The court decided quite firmly in favor of the Raiders. That’s why the antitrust exemption is critical to MLB. The antitrust exemption is their only real defense against the Raiders case being used as precedent.

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    • Fred Barnes says:

      Well, what you are suggesting is that Apple should be able to unilaterally decide to restrict Google from moving to Cupertino, just by fiat.

      They can’t.

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  12. Sandy Kazmir says:

    Thank you, Wendy. This was incredibly informative for us laymen and it’s really appreciated where you didn’t misrepresent your own knowledge. This is surely a sticky wicket, but it’s always difficult to see the city having much success going up against a multi-billion dollar corporation that fully expects to get their way. As more become clear I’ll look forward to reading your updates. Are there any prior cases that show any sort of precedence here for either Act?

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  13. Different Colin says:

    This seems like MLB’s comeuppance for their bullying in the Biogenesis case.

    I would love to hear MLB’s argument that stadiums don’t bring economic gains to cities…

    Really, it helps MLB (and the non-A’s or Giants owners) do what is in baseball’s economic best interest. For the other 28 owners, the antitrust exemption is too valuable to worry about how exactly the Bay Area money is divided between the two teams.

    Perhaps this is the kick MLB needs to settle this issue. Maybe they’ll get around to resolving the O’s/Nat’s MASN mess while they are at it…

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  14. Douglas Broda says:

    If the As were the plaintiff, I don’t think there’d be much trouble proving harm. Selig’s own statements would be usable (MLB consistently states that a new ballpark is needed, as recently as this week), as would the decrepit state of the stadium and the economic data. Also helpful would be that the As did seek to move within the East Bay territory (Fremont) and could not get approval and that there’s no realistic options in Oakland. (In fact, the harm to the As is actually alleged in the city’s complaint.) It’s iffier for the city of San Jose to show harm… I could easily see arguments that in many other cities, a ballpark costs the city money when one looks at costs such as police and related infrastructure and uses a lower-end estimate of economic benefit. That issue has been debated amongst economists and in City Halls for decades. Wolff’s been very unwilling indeed to be the one who litigates this issue so far. If this action seems to head in the direction that the Court thinks there is a basis under the California statute (which I don’t know, but certainly would not be issue-precluded per se by the Federal exemption), but it looks like harm may be an issue, would Wolff jump in and join the action or commence a related one as a party plaintiff or its equivalent, notwithstanding his hesitancy?

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    • Anton Sirius says:

      “That issue has been debated amongst economists and in City Halls for decades.”

      It will never get that far, though, which Wendy alluded to. Even setting the antitrust exemption aside for a moment, do you really think MLB wants to go on record saying there’s no economic benefit to a community from building a new stadium? No way they spoil their own racket like that. No club would ever see another taxpayer dime for stadium construction again.

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  15. Hank says:

    This is an interesting baseball fan dilemna… in theory it would seem you would want a team/owner to be able to move wherever they wanted (especially if they are privately financing the stadium/land/etc)

    But in the extreme it could mean a migration of teams out of small markets to large markets. If you get the stadium privately financed but kick in the right incentives, cities might view this as a means of expanding the tax base/local revenue. And at the very least it could allow teams to leverage their existing cities under threat of movement elsewhere.

    At first glance it would seem like you want the A’s (/SJ) to win this, so they can move where they want, but this could setup a potentially dangerous precedent and some significant long term effect including a long term migration of baseball out of small markets.

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    • Ron says:

      It might not mean a migration of teams away from small markets. Aside from Oakland and Tampa all the current markets have solid ballparks. Kansas City is old but they just hosted the ASG so how bad can it be? What it could spark is more teams.

      A third league would have less barriers to entry. Maybe sparking competition in big markets, which would help small markets. The key to making small markets more successful is to break up the big markets into smaller ones.

      As for talent there is more than enough to go around.

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      • That Guy says:

        In reference to Kaufmann stadium, $200+ million went into a recent renovation and the stadium shows no age, at least not the casual fan. In terms of team migration from “small markets” the Royals would be far down that list.

        The Royals problems (financially, if they have any) would be solved almost completely by putting a winning product on the field.

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  16. JG says:

    Any Wendy article is a must-read for me. Thanks.

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  17. kiss my GO NATS says:

    San Jose should be allowed to root for whatever team they wish!

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  18. Ron says:

    Another reason why baseball needs the exemption is to continue MLB’s control over the minors. In many of the congressional hearings about the exemption both Milb and MLB have stressed that the minors would be a disaster if the exemption is not upheld.
    The success of indy baseball and college summer ball teams (which exist in mostly tougher markets and without talented prospects) seems to debunk this myth. If a teams are run well they will be able to succeed without the MLB paying salaries.

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  19. rhd says:

    Thanx for the article, Wendy. It should be interesting to see what happens w this case.

    But re: MLB’s supposed anti-trust “exemption”, a recent BP article discusses a book that indicates that MLB doesnt really have an anti-trust exemption in the way that most people think. The book, by Stuart Banner, apparently says that the Supreme Court decision that is thought of as representing the court-made exemption (Federal Baseball Club v. National League) actually was decided on a different basis. The case said that MLB did not represent interstate commerce for purposes of the Sherman Anti-Trust Act and it apparently didnt actually reach the anti-trust issue itself. So this book would seem to say that the “exemption” MLB has is not actually an anti-trust exemption but rather an “interstate commerce exemption”. I myself have read neither this book, nor the case.

    Link to the BP article: http://www.baseballprospectus.com/article.php?articleid=20895.

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    • PillsburyFlowboy says:

      If I remember correctly from law classes, interstate commerce is one of the first requirements to having an anti-trust case, so without that no other factor matters legally?

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    • Fred Barnes says:

      basically correct.
      “Exemption” is a misnomer.

      The Court ruled in 1922 that baseball is not interstate commerce, and therefore doesn’t fall under the antitrust laws. This isn’t technically an exemption, which would mean “yes, it falls under those laws, but was given an exemption anyway”.

      Meanwhile, Commerce Clause jurisprudence changed dramatically in the 1930′s (Wickard v. Filburn), and there is no way, zero, zip, nada, no chance whatsoever that a modern court would say that MLB wasn’t interstate commerce. Any attorney even arguing that today would be laughed right out of the courtroom.

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  20. LondonStatto says:

    I think it’s fairly clear that SJ has been considered Giants territory since at least 1988, that being the first season of the city’s current baseball club, which is not the San Jose A’s.

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  21. Owen says:

    I can’t comment on the legal issues, but I was wondering about the “economic damage” aspect of the article. I’ve never read an article claiming that the construction of stadiums, in and of themselves, has a negative impact on a city’s economy. It’s just that for publicly-funded projects, the costs far outweighs the benefits. Now, most stadiums aren’t actually *built* with public funds, but they get tax-free bonds, property-tax exemptions, etc., so these are effectively costing the city money. From Wendy’s link, however, the only way I can see public money being “spent” in San Jose is that they’re getting a little bit of a sweetheart deal on land. San Jose bought a bunch of land for $25 million and are selling part of it for the stadium for $7 million, so that’s an $18 million subsidy/investment. By contrast, Yankee Stadium and Citi Field cost New York $362m and $138m, respectively. (http://usatoday30.usatoday.com/sports/baseball/2009-04-02-baseball-palaces_N.htm?imw=Y). An $18 million investment in a ballpark seems more reasonable–the city will get almost $2 million in direct revenue annually, the city and other public agencies will get $3.5m, and then there are the indirect economic impacts of the stadium, which are almost impossible to measure. I will add, however, that there may be more tax exemptions in this deal, which the article does not mention.

    So while I generally abhor city politicians who crow about the economic benefits of their shiny new stadium, the fact that this is almost entirely privately-funded makes me think it will probably be a net plus in the medium term. That would make it a lot easier to make the economic-damage argument which San Jose wants to make.

    Is there anything I’m missing here?

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  22. Sarge6 says:

    “A pleading that states a claim for relief must contain: . . . a short and plain statement of the claim showing that the pleader is entitled to relief[.] * * * Each allegation must be simple, concise, and direct. No technical form is required.” Fed. R. Civ. P. 8(a)(2) & (d)(1).

    Pleading fail. Really, as an example of legal craftmanship in this profession, that complaint is truly awful. Unfortunately, the blog comment format doesn’t really lend itself to why. Which is to say, I wouldn’t be getting paid by the hour like the drafter of that pleading, and the attorney(s) responsible for writing the motion to dismiss it.

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  23. maqman says:

    Wendy was’t San Jose originally part of the A’s territory and they ceded it to the Giants at no cost? That’s the most egregious part of the Giant’s behavior to me.

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  24. David says:

    For MLB’s sake I really hope the A’s are allowed to move to SJ. It would impact the Giants negatively, but it really needs to happen. I understand it was different owners of the Giants and A’s that made the territory change that allocated SJ as Giants territory, but there has to be some flexibility. If the A’s stay in Oakland they will be a bottom 5 team in revenue, the Giants will be top 7 (NYY, LAD, BOS, CHC, LAA, PHI). It would be even better for the Giants if the A’s left the market all together. But this really wouldn’t be best for the league. If the A’s did move to SJ, they’d both end up with above avg revenue.

    I’m wondering if Selig is waiting for a sale of the Giants with the assumption that he’ll put conditions into the sale. Ie, similar to the Astros sale and being put in the AL West, I believe in order to make that change the new owners had 50 million taken off the sale price. (I think MLB covered it).

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  25. Hurtlockertwo says:

    This all seems so petty. I grew up in the SF bay area and baseball fans there generally align either with the Giants or the A’s. (I rarely saw a fan that liked both teams equally) This territory stuff seems contrived.

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  26. ponderingfool@gmail.com says:

    maqman

    The A’s did give the Giants the rights to Santa Clara around 1988. The territorial rights were enshrined into the MLB constitution.

    Haas (A’s owner at the time) wasn’t being altruistic though. At the time the A’s were the dominate team in the Bay Area not the Giants. If the Giants moved to San Jose, his A’s would benefit by being able to leverage their strength & proximity to San Francisco to pick up new fans and more importantly SF-based corporate sponsors. Basically, if the Giants did move to San Jose, the A’s would have gained more than they lost. Haas was also betting the Giants wouldn’t be able to build a stadium in San Jose and would have to move out of the Bay Area. The latter scenario almost happened. If it had gone through, the A’s would be one of the richest franchises, owning the Bay Area market to themselves. The unlikely scenario at the time was the Giants staying in San Francisco. Haas was basically betting he would get at least most of the Bay Area.

    Of course MLB intervened in moving the Giants and set-up the owners who eventually built PacBell(AT&T) Park without public funds. Those owners bought after the current territorial rights had been established. The Giants are now the dominant team thanks to the new stadium.

    For the Giants, the A’s moving would end up being a net loss as they would get less support from the South Bay than they would get from gains in the East Bay.

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  27. Calbear949 says:

    Excellent analysis Wendy.

    I think there will be one more motion, motion to change venue. No way MLB wants this thing heard in San Jose. Oakland is probably out so SF, interestingly enough, is probably the court that will end up with it.

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  28. Oakland Dan says:

    Can I ask a basic question? I might be naive here, but I always wondered why surrendering territorial rights in the South Bay would be such a big deal. Wouldn’t the Giants losses there be at least somewhat offset by gaining all those other fans in the East Bay and eastward, all the way out to Sacramento? It seems to me that most of the people throwing money around out here are transplants, and no one I know ever goes to San Jose for any reason whatsoever. It’s just a pain. So wouldn’t the exclusivity of Oakland, Berkeley, Walnut Creek and all those suburbs in Contra Costa County and beyond make losing rights in the South Bay at least less than the prospective disaster it’s made out to be?

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  29. Harjit says:

    All of this leaves out the multiple attempts at extorting a free stadium this billionaire has tried to act out against the people of Alameda County, then saying it’s not a profitable place to be.
    As someone who lives in and works for Alameda County, and someone who grew up in and family lives in Santa Clara county, I feel like there is a mistaken perception. Santa Clara and Alameda counties both have major problems of which public funds are needed to solve (general funds dollars for mh services, education, infrastructure). Wolf’s goal is to get a near freebie stadium wherever it is he goes. He could have built one on his own dime a while ago, and even all those sweetheart offers the board of supe’s made him where not good enough which much of the tax base opposed. I know some of you may see this as beside the point, but we can’t have a discussion about a team moving without talking about city finances/realities of public financing that occur. Just ask the city of Miami how they feel about getting fleeced by Loria:-)
    #payforityourself

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    • Fred Barnes says:

      you are kidding, right?

      The current A’s owners are, perhaps, the first owners in decades trying to build a park in their region entirely on private money. Even the Giants got about $90 million in public help.

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      • Josh says:

        Entirely on private money…except that the city of SJ sold this billionaire some land for $12 million below market value, while at the same time they were laying off 300 police officers. Please don’t make it seem like the A’s owners aren’t greedy, money hungry men trying to make sure the hotels they own in downtown SJ stay full during baseball season

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  30. Rick says:

    From what I can gather, the MLB Constitution granting the Giants their territorial rights has expired (click this link for the MLB Constitution http://www.bizofbaseball.com/docs/MLConsititutionJune2005Update.pdf).
    This seems to me that the Giants have no territorial claims at the moment, so the A’s could move to San Jose without any of this territorial debate.

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    • Fred Barnes says:

      there was not a new Constitution posted on their website.

      That does not mean that a new one doesn’t exist.

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      • Rick says:

        Thanks

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        • Fred Barnes says:

          no problem.

          It also might mean that a new one doesn’t exist. I have no idea. All I know is that the Complaint filed by SJ just says that the old one expired and a new one is not on the website.

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  31. Bob M says:

    Isn’t it going to be hard for MLB to simultaneously argue that:

    1) territorial rights are essential to protect the business interests of individual teams

    AND

    2) territorial rights do not impact interstate commerce, given that they extend beyond state boundaries?

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    • Fred Barnes says:

      it would be next to impossible for them to argue that it is not interstate commerce, as interstate commerce has been interpreted since the 1930′s, when the Court radically changed the interpretation.

      There is no question about that, and MLB will not really argue that point. They will argue instead that the have an exemption (well, if they lose their REAL argument which is lack of standing).

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  32. SBSJ says:

    The Curt Flood act is being misinterpreted when it comes to franchise relocation. This act was meant to repeal MLB’s A/T exemption not strengthen it in anyway.

    (a) Major league baseball subject to antitrust laws

    Subject to subsections (b) through (d) of this section, the conduct, acts, practices, or agreements of persons in the business of organized professional major league baseball directly relating to or affecting employment of major league baseball players to play baseball at the major league level are subject to the antitrust laws to the same extent such conduct, acts, practices, or agreements would be subject to the antitrust laws if engaged in by persons in any other professional sports business affecting interstate commerce.

    ABOVE IT STATES ANYTHING BETWEEN SECTIONS

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  33. Mark says:

    I wonder if the Giants regret giving Bill Neukom the boot after the 2011 season. Seems like they could use his weight right about now.

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    • Josh says:

      He actually attended the 2012 winter meetings even though the Giants had just canned him. Maybe he is still consulting for MLB or the Giants on the issue

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  34. SportsFan8888 says:

    The A’s and the Giants had “shared territorial rights”
    to the Bay Area including Santa Clara County…

    The A’s ownership “stepped up” and gave the Giants
    Santa Clara County contingent on the Giants building a stadium and moving there
    (to help stop the Giants from moving to Tampa Bay).

    The Giants were “saved” for SF and decided to stay in SF
    and not move to Tampa or Santa Clara County.

    The territorial rights should have reverted back to the “shared territorial” status (before the Giants planned move to Tampa Bay)
    since the entire reason for the A’s giving the Giants Santa Clara County territory was to keep the Giants in the Bay Area
    (Giants elected to stay in SF and not move to San Jose)….

    The A’s should just forcefully assert their economic rights and by moving the A’s to San Jose and by
    occupying the territory like Al Davis has done with the Raiders
    in LA and Oakland(Davis won his lawsuits against the NFL)
    and like Charlie Finley did when he moved the A’s from Kansas City to Oakland.

    The A’s should just get tough with MLB and do what is right
    for their ballclub and franchise.

    A’s ownership should just sign a 1 or 2 year lease to play at the new 49ers Stadium in Santa Clara County while the San Jose baseball stadium is being built.

    MLB and Bud Selig have been stalling the A’s and costing them millions of dollars per year in revenues for over a decade…decisive action is needed.

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    • SportsFan8888 says:

      A’s would thrive in San Jose as the third largest city in California behind Los Angeles (3.5 million), San Diego (1.4 million),
      San Jose (974,000) San Jose, California – Wikipedia, the free encyclopedia
      en.wikipedia.org/wiki/San_Jose,_California?
      San Jose is the third-largest city in California, the tenth-largest in the United States

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  35. Between the franchisor (the one who originally owns the business) and the franchisee (the one who intends to open a branch of the same business name under his personal ownership) exists the contract called Franchise Disclosure Document (FDD) and within certain terms, both parties come to agree on various business points. Nick Heimlich recommends a thorough attorney review of any FDDs before it is offered or signed into a binding contract. When you are in San Jose, California, Nick is just a dial away for your professional and legal needs.

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