City of San Jose v. Ofc of the Commr of Baseball , 776 F.3d 686 ( 2015 )


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  •                 FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    CITY OF SAN JOSE; CITY OF SAN JOSE        No. 14-15139
    AS SUCCESSOR AGENCY TO THE
    REDEVELOPMENT AGENCY OF THE                 D.C. No.
    CITY OF SAN JOSE; THE SAN JOSE           5:13-cv-02787-
    DIRIDON DEVELOPMENT                          RMW
    AUTHORITY,
    Plaintiffs-Appellants,
    OPINION
    v.
    OFFICE OF THE COMMISSIONER OF
    BASEBALL, an unincorporated
    association, DBA Major League
    Baseball; ALLAN HUBER SELIG,
    “Bud,”
    Defendants-Appellees.
    Appeal from the United States District Court
    for the Northern District of California
    Ronald M. Whyte, Senior District Judge, Presiding
    Argued and Submitted
    August 12, 2014—San Francisco, California
    Filed January 15, 2015
    Before: Alex Kozinski, Barry G. Silverman
    and Richard R. Clifton, Circuit Judges.
    Opinion by Judge Kozinski
    2        CITY OF SAN JOSE V. COMM’R OF BASEBALL
    SUMMARY*
    Antitrust / Baseball Exemption
    The panel affirmed the district court’s dismissal of the
    City of San Jose’s antitrust action regarding the Office of the
    Commissioner of Baseball’s delay in deciding whether to
    approve the Oakland Athletics’ move to San Jose, which is
    within the exclusive operating territory of the San Francisco
    Giants.
    The panel held that the baseball industry’s historic
    exemption from the antitrust laws, upheld in Flood v. Kuhn,
    
    407 U.S. 258
     (1972), barred San Jose’s antitrust claim
    regarding franchise relocation under the Sherman and
    Clayton Acts and state law. The panel held that under
    Portland Baseball Club, Inc. v. Kuhn, 
    491 F.2d 1101
     (9th Cir.
    1972), Flood is not limited to baseball’s “reserve clause.”
    Rather, antitrust claims against Major League Baseball’s
    franchise relocation policies are in the heartland of those
    precluded by Flood’s rationale.
    COUNSEL
    Joseph W. Cotchett (argued), Philip L. Gregory (argued),
    Frank C. Damrell, Jr., Anne Marie Murphy, Camilo Artiga-
    Purcell of Cotchett, Pitre & McCarthy, LLP, Burlingame,
    California, and Richard Doyle, Nora Frimann of the Office of
    the City Attorney, San Jose, California for Appellants.
    *
    This summary constitutes no part of the opinion of the court. It has
    been prepared by court staff for the convenience of the reader.
    CITY OF SAN JOSE V. COMM’R OF BASEBALL                        3
    John W. Keker (argued), Paula L. Blizzard, R. Adam
    Lauridsen, Thomas E. Gorman of Keker & Van Nest LLP,
    San Francisco, California, and Bradley I. Ruskin of Proskauer
    Rose LLP, New York, New York, and Scott P. Cooper, Sarah
    Kroll-Rosenbaum, Jennifer L. Roche, Shawn S. Ledingham,
    Jr. of Proskauer Rose LLP, Los Angeles, California for
    Appellees.
    OPINION
    KOZINSKI, Circuit Judge:
    The City of San Jose steps up to the plate to challenge the
    baseball industry’s 92-year old exemption from the antitrust
    laws. It joins the long line of litigants that have sought to
    overturn one of federal law’s most enduring anomalies.
    I. Background
    Major League Baseball’s (MLB)1 constitution requires
    that each of the league’s 30 member clubs play their home
    games within a designated operating territory. For the
    Oakland Athletics, that territory is comprised of two
    California counties: Alameda and Contra Costa. Faced with
    dwindling attendance and revenue, the Athletics want to
    move to San Jose, which they consider a more profitable
    1
    The defendants in this case are the “Office of the Commissioner of
    Baseball,” which is an unincorporated association of all 30 MLB clubs,
    and Allan “Bud” Selig, whose individual job title is Commissioner of
    MLB. For convenience, we refer to the defendants as “MLB.” The
    plaintiffs in this case are the City of San Jose and the San Jose Diridon
    Development Authority, which we refer to collectively as “San Jose.”
    4        CITY OF SAN JOSE V. COMM’R OF BASEBALL
    venue. But there’s a snag: San Jose falls within the exclusive
    operating territory of the San Francisco Giants, and relocation
    to another franchise’s territory is prohibited unless approved
    by at least three-quarters of MLB’s clubs.
    MLB has not rushed to grant this approval. In 2009,
    MLB established a “special Relocation Committee” to
    investigate the implications of the move for the league, but
    four years later the committee was “still at work,” with no
    resolution in sight. In the meantime, the Athletics moved
    forward with their plan to build a stadium in San Jose by
    entering into an option agreement with the city that gave them
    the right to purchase six parcels of land the city had set aside.
    But, because MLB hadn’t yet approved the move, the
    Athletics were unable to perform on the agreement, and the
    land sat idle.
    Believing that the delay was MLB’s attempt to stymie the
    relocation and preserve the Giants’ local monopoly, San Jose
    filed suit. It alleged violations of state and federal antitrust
    laws, of California’s consumer protection statute and of
    California tort law. Relying on the baseball industry’s
    historic exemption from the antitrust laws, the district court
    granted MLB’s motion to dismiss on all but the tort claims.2
    San Jose appeals, arguing that the baseball exemption does
    not apply to antitrust claims relating to franchise relocation.
    We review de novo. See Colony Cove Props., LLC v. City of
    Carson, 
    640 F.3d 948
    , 955 (9th Cir. 2011).
    2
    The district court subsequently declined to retain supplemental
    jurisdiction over those state law tort claims and dismissed them without
    prejudice.
    CITY OF SAN JOSE V. COMM’R OF BASEBALL                5
    II. Discussion
    Our analysis is governed by three Supreme Court cases
    decided over the course of half a century; taken together, they
    set the scope of baseball’s exemption from the antitrust laws.
    See generally Stuart Banner, The Baseball Trust: A History
    of Baseball’s Antitrust Exemption (2013). First, in Federal
    Baseball Club of Baltimore v. National League of
    Professional Baseball Clubs, 
    259 U.S. 200
     (1922), the Court,
    reflecting the era’s soon-to-be-outmoded interpretation of the
    Commerce Clause, held that the Sherman Act had no
    application to the “business [of] giving exhibitions of base
    ball” because such “exhibitions” are a “purely state affair[].”
    
    Id. at 208
    .
    Next up, in Toolson v. New York Yankees, Inc., 
    346 U.S. 356
     (1953), the Court, in a short per curiam, affirmed Federal
    Baseball, albeit on a different ground. Federal Baseball’s
    Commerce Clause underpinning was no longer good law, but
    the Court recognized that “Congress [] had the [Federal
    Baseball] ruling under consideration [and had] not seen fit to
    bring [baseball] under the [antitrust] laws by legislation.” 
    Id. at 357
    . As such, “[t]he business [was] left for thirty years to
    develop, on the understanding that it was not subject to
    existing antitrust legislation,” and the Court determined that
    even if there were circumstances that “warrant[ed]
    application [] of the antitrust laws[, such laws] should be
    [applied] by legislation.” 
    Id.
     “Without re-examination of the
    underlying issues,” the Court reaffirmed Federal Baseball’s
    central holding that “the business of providing public baseball
    games for profit between clubs of professional baseball
    players was not within the scope of the federal antitrust
    laws.” 
    Id.
    6             CITY OF SAN JOSE V. COMM’R OF BASEBALL
    Finally in Flood v. Kuhn, 
    407 U.S. 258
     (1972), the Court
    once again upheld the baseball exemption, this time in a
    lengthy, reasoned opinion.3 The Court noted “the confusion
    and the retroactivity problems that inevitably would result
    with a judicial overturning of Federal Baseball” and again
    stated its “preference that if any change is to be made, it come
    by legislative action.” 
    Id. at 283
    . In particular, the Court
    stressed that Congress had acquiesced in the baseball
    exemption and thus “by its positive inaction . . . clearly
    evinced a desire not to disapprove [it] legislatively.” 
    Id.
     at
    283–84. Flood and its progenitors, therefore, upheld the
    baseball exemption for two fundamental reasons: (1) fidelity
    to the principle of stare decisis and the concomitant aversion
    to disturbing reliance interests created by the exemption; and
    (2) Congress’s apparent acquiescence in the holdings of
    Federal Baseball and Toolson.
    San Jose first argues that Flood applies only to baseball’s
    “reserve clause”4—the particular provision at issue in that
    case—and not to other facets of the baseball industry, like
    franchise relocation. In other words, San Jose urges that we
    limit Flood to its facts. Such a drastic limitation on Flood’s
    scope is foreclosed by our precedent. Under the baseball
    exemption, we have rejected an antitrust claim that was
    wholly unrelated to the reserve clause. See Portland Baseball
    3
    Some thought, too lengthy. See 
    407 U.S. at 285
    .
    4
    The “reserve clause” was a provision in baseball contracts that
    prevented players from signing with other clubs, even after their contracts
    had expired, without the express consent of the club they played for.
    CITY OF SAN JOSE V. COMM’R OF BASEBALL                7
    Club, Inc. v. Kuhn, 
    491 F.2d 1101
    , 1103 (9th Cir. 1974). In
    Portland Baseball, a former minor league franchise owner
    brought suit against MLB. The owner argued that MLB
    failed to comply with the terms of an agreement it struck with
    minor league teams to provide compensation in the event a
    major league franchise moved into a minor league franchise’s
    territory. 
    Id. at 1102
    . One of the plaintiff’s claims was that
    MLB’s monopolization of the baseball industry rendered
    minor league teams unable to negotiate on fair terms.
    Portland Baseball Club, Inc. v. Kuhn, 
    368 F. Supp. 1004
    ,
    1009 (D. Or. 1971). Even though the antitrust claim in
    Portland Baseball had nothing to do with the reserve clause,
    we cited Flood in upholding the claim’s dismissal. Portland
    Baseball, 
    491 F.2d at 1103
    . Portland Baseball may not
    define precisely the boundaries of the baseball exemption, but
    it fatally undercuts San Jose’s attempt to restrict Flood to the
    reserve clause.
    San Jose next contends that if we are to hold that the
    baseball exemption extends beyond the reserve clause, we
    must remand to the district court to determine whether
    franchise relocation is sufficiently related to “baseball’s
    unique characteristics and needs” to warrant exemption. This
    argument appears to be derived from a single sentence in
    Flood, which states that the baseball exemption “rests on a
    recognition and an acceptance of baseball’s unique
    characteristics and needs.” Flood, 
    407 U.S. at 282
    . From this
    line alone, San Jose argues that the Flood Court intended a
    fact-sensitive inquiry whenever the antitrust exemption is
    challenged. But, aside from the isolated language San Jose
    quotes, nothing in Flood suggests that the reserve clause was
    exempted based on some fact-sensitive analysis of the role
    the clause played within the baseball industry.
    8       CITY OF SAN JOSE V. COMM’R OF BASEBALL
    Rather, Flood’s stare decisis and congressional
    acquiescence rationales suggest the Court intended the
    exemption to have the same scope as the exemption
    established in Federal Baseball and Toolson. After all, it
    would make little sense for Flood to have contracted (or
    expanded) the exemption from the one established in the
    cases in which Congress acquiesced and which generated
    reliance interests. And Federal Baseball and Toolson clearly
    extend the baseball exemption to the entire “business of
    providing public baseball games for profit between clubs of
    professional baseball players.” Toolson, 
    346 U.S. at 357
    ; see
    also Radovich v. Nat’l Football League, 
    352 U.S. 445
    , 451
    (1957) (noting that the antitrust exemption articulated in
    Federal Baseball and Toolson applies to “the business of
    organized professional baseball.”); Charles O. Finley & Co.,
    Inc. v. Kuhn, 
    569 F.2d 527
    , 541 (7th Cir. 1978) (“Despite the
    two references in the Flood case to the reserve system, it
    appears clear from the entire opinions in the three baseball
    cases, as well as from Radovich, that the Supreme Court
    intended to exempt the business of baseball, not any
    particular facet of that business, from the federal antitrust
    laws.”) (footnote omitted).
    It is undisputed that restrictions on franchise relocation
    relate to the “business of providing public baseball games for
    profit between clubs of professional baseball players.”
    Toolson, 
    346 U.S. at 357
    . The designation of franchises to
    particular geographic territories is the league’s basic
    organizing principle. Limitations on franchise relocation are
    designed to ensure access to baseball games for a broad range
    of markets and to safeguard the profitability—and thus
    viability—of each ball club. Interfering with franchise
    relocation rules therefore indisputably interferes with the
    public exhibition of professional baseball. See Prof’l
    CITY OF SAN JOSE V. COMM’R OF BASEBALL                9
    Baseball Sch. & Clubs, Inc. v. Kuhn, 
    693 F.2d 1085
    , 1086
    (11th Cir. 1982) (rejecting an antitrust challenge to baseball
    franchise relocation because it is “an integral part of the
    business of baseball”).
    That doesn’t necessarily mean all antitrust suits that touch
    on the baseball industry are barred. In Twin City
    Sportservice, Inc. v. Charles O. Finley & Co., Inc., 
    512 F.2d 1264
     (9th Cir. 1975), for example, we assessed an antitrust
    claim by a baseball franchise against stadium concessionaires
    without any reference to the baseball exemption. Nor does it
    mean that MLB or its franchises are immune from antitrust
    suit. There might be activities that MLB and its franchises
    engage in that are wholly collateral to the public display of
    baseball games, and for which antitrust liability may therefore
    attach. But San Jose does not—and cannot—allege that
    franchise relocation is such an activity. To the contrary, few,
    if any, issues are as central to a sports league’s proper
    functioning as its rules regarding the geographic designation
    of franchises.
    Flood’s congressional acquiescence rationale applies with
    special force to franchise relocation. In 1998, Congress
    passed the Curt Flood Act, which withdrew baseball’s
    antitrust exemption with respect to the reserve clause and
    other labor issues, but explicitly maintained it for franchise
    relocation. See Pub. L. No. 105-297, § 3(b)(3), 
    112 Stat. 2824
     (1998) (codified at 15 U.S.C. § 26b(b)(3)) (“This
    section does not create, permit or imply a cause of action by
    which to challenge under the antitrust laws, or otherwise
    apply the antitrust laws to . . . franchise [] location or
    relocation”).
    10      CITY OF SAN JOSE V. COMM’R OF BASEBALL
    In an ordinary case, congressional inaction “lacks
    persuasive significance because several equally tenable
    inferences may be drawn from such inaction.” Pension
    Benefit Guar. Corp. v. LTV Corp., 
    496 U.S. 633
    , 650 (1990)
    (internal quotation marks omitted). But when Congress
    specifically legislates in a field and explicitly exempts an
    issue from that legislation, our ability to infer congressional
    intent to leave that issue undisturbed is at its apex. See, e.g.,
    Kimbrough v. United States, 
    552 U.S. 85
    , 106 (2007)
    (congressional inaction is probative when Congress “fail[s]
    to act on a proposed amendment . . . in a high-profile area in
    which it had previously exercised its [] authority”). The
    exclusion of franchise relocation from the Curt Flood Act
    demonstrates that Congress (1) was aware of the possibility
    that the baseball exemption could apply to franchise
    relocation; (2) declined to alter the status quo with respect to
    relocation; and (3) had sufficient will to overturn the
    exemption in other areas. Flood’s clear implication is that the
    scope of the baseball exemption is coextensive with the
    degree of congressional acquiescence, and the case for
    congressional acquiescence with respect to franchise
    relocation is in fact far stronger than it was for the reserve
    clause at issue in Flood itself.
    In short, antitrust claims against MLB’s franchise
    relocation policies are in the heartland of those precluded by
    Flood’s rationale. San Jose’s claims under the Sherman and
    Clayton Acts must accordingly be dismissed.
    And San Jose’s state antitrust claims necessarily fall with
    its federal claims. Baseball is an exception to the normal rule
    that “federal antitrust laws [] supplement, not displace, state
    antitrust remedies.” California v. ARC Am. Corp., 
    490 U.S. 93
    , 102 (1989). In Flood, the Court affirmed the dismissal of
    CITY OF SAN JOSE V. COMM’R OF BASEBALL                      11
    the plaintiff’s state law claims because “state antitrust
    regulation would conflict with federal policy and because
    national uniformity is required in any regulation of baseball.”
    Flood, 
    407 U.S. at 284
     (internal quotation marks omitted). In
    other words, the Court in Flood determined that state antitrust
    claims constitute an impermissible end run around the
    baseball exemption. San Jose can point to no case that has
    ever held that state antitrust claims continue to be viable after
    federal antitrust claims have been dismissed under the
    baseball exemption. See, e.g., Major League Baseball v.
    Crist, 
    331 F.3d 1177
    , 1179 (11th Cir. 2003) (holding that
    state antitrust claims are preempted if they mirror federal
    claims that fall within the baseball exemption). That suffices
    to reject San Jose’s state antitrust claims, which entirely
    duplicate its claims under the federal antitrust laws.
    San Jose also alleges a violation of California’s unfair
    competition law (UCL). However, under California law, “[i]f
    the same conduct is alleged to be both an antitrust violation
    and an ‘unfair’ business act or practice for the same reason—
    because it unreasonably restrains competition and harms
    consumers—the determination that the conduct is not an
    unreasonable restraint of trade necessarily implies that the
    conduct is not ‘unfair’ toward consumers.” Chavez v.
    Whirlpool Corp., 
    113 Cal. Rptr. 2d 175
    , 184 (Ct. App. 2001).
    An independent claim under California’s UCL is therefore
    barred so long as MLB’s activities are lawful under the
    antitrust laws.5
    5
    MLB also argues that San Jose lacks antitrust standing to bring this
    challenge. However, “[u]nlike Article III standing, the question of
    standing to sue under the antitrust laws does not go to subject matter
    jurisdiction, and thus need not be considered” before addressing the
    merits. Datagate, Inc. v. Hewlett-Packard Co., 
    60 F.3d 1421
    , 1425 n.1
    12         CITY OF SAN JOSE V. COMM’R OF BASEBALL
    *                *                 *
    Like Casey, San Jose has struck out here. The scope of
    the Supreme Court’s holding in Flood plainly extends to
    questions of franchise relocation. San Jose is, at bottom,
    asking us to deem Flood wrongly decided, and that we cannot
    do. Only Congress and the Supreme Court are empowered to
    question Flood’s continued vitality, and with it, the fate of
    baseball’s singular and historic exemption from the antitrust
    laws.6
    AFFIRMED.
    (9th Cir. 1995). Because we affirm on the basis of the baseball
    exemption, we need not reach the question of San Jose’s standing.
    6
    In light of our disposition, all pending motions are denied as moot.