City of San Jose Loses Heart of Lawsuit Against Major League Baseball

A San Jose federal judge recently dismissed part of the City of San Jose’s lawsuit against Major League Baseball (MLB) over the league’s lack of action on a proposed move by the Oakland Athletics. The judge granted MLB’s motion to dismiss in part but also denied it in part. Most significantly, Judge Ronald M. Whyte held that the league’s antitrust exemption ultimately precluded San Jose’s claims against MLB under the Sherman Act.

The Athletics’ owner had been pushing to move the team out of Oakland for years and had been working with San Jose on a potential new ballpark. That move would have required approval from MLB, which the league had not provided because it was still studying the issue. In June, the city asserted federal and state antitrust law violations and tort claims (tortuous interference) against MLB relating to the league’s failure to approve the proposed relocation of the Athletics to San Jose. San Jose sued MLB to essentially challenge rules that require approval from three-fourths of the teams for a franchise to move within another team’s territory. The San Francisco Giants, whose territorial rights include Santa Clara County, have objected to the move. MLB then moved to dismiss the lawsuit on the grounds of its long-standing exemption from antitrust law.

In a lengthy opinion filed earlier this month, Judge Whyte concluded that although the league’s federal and antitrust exemption is questionable (the Supreme Court ruled in 1922 that the major leagues were not engaged in interstate commerce and therefore were not subject to antitrust laws), it could not be overturned by San Jose’s lawsuit. Judge Whyte adopted a broader view of the baseball exemption, concluding that it protected the sport from antitrust law including franchise relocation disputes. Judge Whyte also held that state antitrust and unfair competition claims should also be dismissed. He also noted that the alleged economic injury resulting from the Athletics not relocating to San Jose has not yet occurred and was therefore speculative.

Judge Whyte noted that the complaint sufficiently alleged a tortuous interference claim because the Athletics were unable to exercise the option agreement to develop a new stadium due MLB’s delay. He noted that the interference claims were separate from the antitrust laws because they were based on MLB’s delay in making a relocation decision. Thus, the city may proceed with that claim even in light of the antitrust ruling.

Judge Whyte’s decision is a significant victory for MLB. The most serious antitrust claims in the case were dismissed and the lone remaining claim is rooted in a damages award but does not entail the court ordering that the Athletics be allowed to move to San Jose. That is ultimately what San Jose wanted and why it essentially lost a significant issue at this phase pending an anticipated appeal to the Ninth Circuit.

For additional information, click here. San Jose v. MLB District Court Opinion

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