Saturday, 12 October 2013

Judge Whyte Issues a Ruling in the San Jose v. MLB Lawsuit

imageLess than four months after the lawsuit was filed, a decision has already been issued in San Jose's case against Major League Baseball.  In June, the city asserted federal and state antitrust law and tort claims against MLBrelating to the league's failure to approve the proposed relocation of the Oakland Athletics (for earlier Sports Law Blog coverage of the dispute, click here).  MLB then moved to dismiss the suit in August in light of its long-standing exemption from antitrust law.  Following a hearing last week, Judge Ronald M. Whyte quickly issued a decision in the case on Friday.  

Primarily focusing on the antitrust issue, Judge Whyte's opinion (available here) granted MLB's motion to dismiss in part, but also denied it in part.  Specifically, although Judge Whyte was quick to criticize baseball's unique antitrust immunity, he concluded that the exemption ultimately precluded San Jose's claims under the Sherman Act.  Following a thorough review of the applicable case law, Whyte adopted a broad view of the baseball exemption, concluding that it protected the business of baseball -- including franchise relocation issues -- from antitrust law.  In the process, he rejected San Jose's claim that the exemption only applied to labor disputes.  As a doctrinal matter, I believe Judge Whyte reached the correct decision

Judge Whyte then held that San Jose's state antitrust and unfair competition claims also should be dismissed because the Supreme Court effectively preempted the application of state antitrust law to professional baseball in its 1972 decision in Flood v. Kuhn.  However, Whyte did conclude that San Jose had sufficiently pled its tortious interference claim under state law, insofar as MLB's delay in resolving the proposed relocation had, in and of itself, arguably harmed the city aside from any antitrust concerns.  However, the opinion was clear to note that the ultimate decision of whether to allow the Athletics to move was still MLB's alone, and that San Jose could only pursue damages arising from MLB's delay in resolving the dispute, not the potential rejection of the relocation itself.  

Interestingly, despite deciding the merits of the substantive legal claims, Judge Whyte opted not to resolve the issue of whether San Jose lacked standing to pursue the case.  Although one would typically expect a court to determine whether standing exists before ruling on the merits of the underlying case, Whyte instead concluded that the city could potentially possess standing under Section 16 of the Clayton Act, but that he need not decide the issue now in light of his ruling on the antitrust exemption issue. 

Consequently, although San Jose can proceed with one of the tort claims in its suit, Judge Whyte's decision is nevertheless a big win for MLB.  The most serious claims in the case were dismissed pursuant to the sport's antitrust exemption, and the lone remaining claim can only result in a damages award, and not a court order mandating that the Athletics be allowed to move to San Jose.

Moving forward, it appears that San Jose will seek an immediate, interlocutory appeal of Judge Whyte's ruling to the Ninth Circuit.  I would expect the appellate court to affirm the district court's decision in light of the exemption, given that the Ninth Circuit has previously affirmed the dismissal of a suit raising similar franchise location issues under baseball's antitrust immunity.  Portland Baseball Club, Inc. v. Kuhn, 491 F.2d 1101 (9th Cir. 1974).  Even so, San Jose could potentially pursue its appeal all the way to the Supreme Court.  If the Court were to grant cert in the case, then I believe that would be a strong indication that it intended to overturn MLB's long-standing antitrust immunity.  The threat of a Supreme Court appeal could give the city some leverage over MLB in any future settlement negotiations. 

Meanwhile, in addition to the continued threat to baseball's antitrust exemption, San Jose's remaining tort law claim could also give the city some leverage over MLB as the case moves forward.  MLB would undoubtedly prefer not to proceed with discovery in the case in order to avoid publicly airing the details of its internal deliberation process.  Therefore, should Judge Whyte let discovery move forward for the remaining tortious interference claim while the interlocutory appeal on the antitrust issue is pending, the tort claim could further help encourage MLB to resolve the Athletics' situation.  

All in all, though, MLB certainly has to be happy with Judge Whyte's decision.  

Update: Howard Wasserman wisely notes in the comments that Judge Whyte failed to certify the antitrust issues for an immediate, interlocutory appeal in his decision.  Therefore, under 28 U.S.C. 1292(b), San Jose is currently unable to appeal the decision immediately to the Ninth Circuit, pending any further action by the district court.

Update #2: As Howard (an expert in all matters civil procedure) further explains in the comments, the mere fact that many believe that baseball's antitrust exemption should be overturned would not constitute a "substantial ground for difference of opinion," and therefore would not warrant an immediate, interlocutory appeal under 28 U.S.C. 1292(b).  Even if Judge Whyte were to believe otherwise and certify the appeal, the Ninth Circuit would still have to agree to take the case in order for it to be appealed immediately under 1292(b).  So unless Judge Whyte were to decline to exercise his jurisdiction over the remaining tortious interference claim, and thus enter a final judgment in the case, San Jose may very well be unable to pursue an appeal on the antitrust exemption issue until the conclusion of a trial on the tort claim.  

Thus, San Jose appears to have a difficult decision to make in the case.  In order to pursue an immediate appeal on the antitrust issue, the city could presumably request that Judge Whyte dismiss the remaining tort law claim and issue a final judgment on the antitrust-related issues, but in the process temporarily forgo the opportunity to pursue discovery against MLB.  Alternatively, the city could press the tortious interference claim all the way to trial, but that claim would not result in an order forcing MLB to approve the Athletics' relocation, and would require San Jose to indefinitely postpone its appeal on the antitrust exemption issue.  In hindsight, San Jose may thus wish that it had requested a preliminary injunction in the case, because if it had, and Judge Whyte declined to issue such an order, then the city could have immediately appealed under 28 U.S.C. 1292(a).

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