Noll: San Jose A’s lawsuit isn’t as crazy as you think

When news broke of the San Jose lawsuit over the Oakland A’s situation, I immediately reached out to Stanford economist Roger Noll, who has been observing and testifying on baseball legal matters since the suit over the Seattle Pilots‘ move to Milwaukee. We were finally able to have an email exchange last night, and in his view, San Jose’s chances are a fair bit better than what I presented yesterday:

  • San Jose does potentially have standing to sue here, thanks to the $50,000 option that A’s owner Lew Wolff paid the city for the stadium site. In any case, says Noll, “The issue is not really standing, but whether the business interest of a plaintiff is speculative (based on business that was not and may never be done).  Surely this will be part of a motion to dismiss, but the existence of an agreement and detailed stadium plans strengthens San Jose’s case.”
  • A quick dismissal on antitrust exemption grounds is unlikely, given that a case like this has never been litigated before, and “standard legal doctrine is that antitrust exemptions are read narrowly, applying only to issues that are litigated in that case.”
  • This is more than a federal antitrust case: There are also tortious interference claims, as well as state antitrust claims. It’s the latter where it gets really interesting: Since  the A’s move would be an intrastate one from Oakland to San Jose, “the basis for the complaint avoids the [Supreme Court’s] Federal League ruling [in 1922] that MLB was not engaged in interstate commerce.”
  • While I (and others) have been quick to note that leagues can do whatever they want with their franchises, just as McDonald’s can, a court may still require them to show an actual business reason for doing so, to prove that they’re not being capricious. “The interesting point here is that the amount of competition in the metro area will stay the same (two teams), although one (the A’s) would be a stronger, more effective competitor if located in a bigger, wealthier city within the area,” says Noll. “MLB will have a hard time making the case that the interest of the league is served by preventing the A’s from moving further away to a better location, which must be the rule-of-reason business justification that will come into play if the court decides that blocking the move caused harm to competition.”

So I’m going back to my initial reaction: Nobody knows what the hell is going to happen now, except that there’s going to be one hell of a knock-down legal battle that could end up going all the way to the Supreme Court. Or could end up with a negotiated settlement, or could just get dismissed. We’re in uncharted territory here — which, for advocates of the A’s moving to San Jose, is at least better than the all-too-charted territory that they were in before.

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34 comments on “Noll: San Jose A’s lawsuit isn’t as crazy as you think

  1. Any idea if he has given a legal opinion on whether Chris Hansen has a case against the NBA? I know that he has given general statements regarding move of franchises before, but not sure if he has specifically addressed the Seattle situation.

  2. Let’s compromise, Let the kings move to seattle, warriors to san jose and the A’s move to Sacramento.

  3. @ griffin – at first blush, I thought any potential suit that Seattle may have brought against the NBA would have more legs to it than this suit that San Jose is raising, but now I’m not so sure.

    IANAL, but I believe that MLB desperately needs to get this dismissed right the frak NOW, because if Mr. Noll is correct and Federal League does not hold in this case because we’re talking about an intrastate move, then things will move to discovery and the plaintiffs will find out all kinds of interesting tidbits that the MLB folks generally don’t want revealed.

  4. I’ve read in other places that the most likely outcome is an out of court settlement with the A’s paying the Giants for the right to move into “their territory”.

    I think if relocating the franchise is really the A’s primary motivation, then this would suffice, but I have a suspicion that the A’s owner has other motives here, making a large financial settlement difficult to achieve.

  5. This entire notion that sports leagues can control the location of teams like this is simply absurd. And yeah, that could mean 6 teams in New York, 5 each in LA, Chicago, Houston and the SF Bay area, and crazy situations like that… But that would not be able to last long. You’d end up with teams having 1,000 fans, while two of the cross-town rivals would have sellouts. Why draw 1,000 in NY if you think you might draw 14,000 in Dallas?

    The point being, the marketplace would ultimately dictate where the teams play. Someone, please, explain to me what’s wrong with that concept. What is fundamentally unfair about it?

    I don’t think Chris Hansen has a case, though, because he’s being a “good citizen” and isn’t rocking the boat. He could have one, though; the Sonics would inherently be more profitable than the Kings. But he’s not going to push this right now. If it was my personal $30M, I’d push the issue, but he was the one who was unwise enough to make that deposit unconditional. He removed all incentive for the Maloofs to push this case with him.

    No more MLB antitrust exemption. And the NBA really is watching this case nervously, because their rules that govern team movement really are on the line here.

  6. Gopal, the Giants would demand such a high payment for those rights that it makes it cheaper to move the A’s out of the area completely. It’ll probably either be Oakland, SJ (with a huge payment to the Giants — think hundreds of millions here), or somewhere else (probably not Sacramento — they’d never be able to afford a stadium).

    Honestly, I don’t think Vancouver, BC, can be ruled out at all.

  7. YES, this case has plenty of merit to go into Discovery, and a great legal team behind it to boot…not to mention, several angry high powered Silicon Valley CEO’s of Major US Corps with plenty of political clout to push this up the ladder.

    MLB has no chance to win in this battle, as do the Giants…the negative PR, as well as the dirty laundry that will come out against the both of them is going to give SJ their team.

    The Giants and MLB let greed get in the way of common sense, now the Bulls are pissed, and these guys are about to get the horns.

  8. As I said yesterday, if MLB can’t get this dismissed and fast, this puts them in a really tough bind: They *really* don’t want to so to discovery, for the reasons SierraSpartan raises, but they also *really* don’t want to set a precedent that cities can force them to change their territorial rights agreements by suing. I was only half-joking about New Jersey then suing to get the Rays.

    Yes, Gopal, the easy solution is Lew Wolff paying the Giants a whole lot of money for San Jose. But Wolff doesn’t want to do that, and he’s going to want to do that even less now that San Jose has a smidgen of leverage. And the Giants owners don’t have any added incentive to accept a lowball offer from Wolff, because they don’t care about discovery or teams moving to NJ or whatnot, they just want to keep the A’s the hell out of the South Bay unless they can get a huge cash payment. So unless MLB decides to chip in money itself – which would be a horrible precedent from their perspective as well – or Bud Selig decides this is finally going to be the impetus for him to lock Wolff and Larry Baer in a room and not let them out until they’ve settled on a price, this stalemate has just gotten even staler.

  9. I wasn’t aware the world needed an acronym for “I am not a Lawyer”…

    Mike: There’s nothing wrong with the actual marketplace deciding where businesses can be located – unless you happen to be a very small group of owners who benefit enormously from the false marketplace created by taxpayer funded stadium subsidies.

    Interesting info from Roger Noll, Neil. Thanks. He raises some very good points (a couple of which I hadn’t considered at all). It is still hard to see – no matter how much I support their action – how San Jose’s suit isn’t essentially a Ham n’ Eggs job. At worst MLB is preventing them from hosting a member club/franchise. That isn’t the same as “poisoning the (business) well” of an existing franchise in my book, which their suit appears to claim.

    That said, regardless of the sports league, there is something highly contradictory about leagues claiming they “own” every market in which their product is or might be played, yet simultaneously claiming that no market has any right to their product now or in future.

    Still, it turns out contradictions can be very profitable…

  10. RE: the “the franchise could be more valuable in the new location” argument:

    I’m just wondering why anyone thinks that is relevant?

    Businesses like to make as much money as possible, of course. But if you could make more money at your hotel if you rented rooms to/with underage girls by the hour (sorry to those I’ve just made physically ill… including myself…), would you be entitled to do so? Would you be obligated, under some mysterious unwritten “business rights code”, to do so?

    Lew Wolff isn’t entitled to move his franchise anywhere he wants just because he can make more money (even if he makes more money for himself and MLB). He bought and owns the Oakland A’s.

    If MLB chooses to keep one of it’s franchises in an underperforming market for any reason, it can certainly do so. Wolff isn’t entitled to move into an allegedly “open” market any more than he is entitled to move to New Jersey or Manhattan or Chicago. Sports leagues will tell you that there is no such thing as “free” territory.

  11. It’s interesting that the $50,000 option would be considered a door for San Jose to gain “standing” when his franchise agreement obviously doesn’t give him the option of moving there. If Wolff never had the ability to execute his side of the deal (move the A’s to San Jose) in the first place, can the city claim to be aggrieved by MLB’s “interference”?

  12. Mike, how would this impact the NBA? My understanding was that the limits on team movement in that league were contractual (ie: when purchasing a team the owners agree to abide by the movement restrictions as a condition of ownership).

  13. John B and Keith: If I’m understanding Noll correctly, I think the issue here is that courts have found that while corporations have a right to restrict their franchisees, they can’t do so capriciously. So while MLB can tell the A’s they can’t go to San Jose if it’s bad for their (MLB’s) business, they can’t tell the A’s they can’t go to San Jose just because Larry Baer sent Bud Selig a nicer Christmas card than Lew Wolff did.

    Again, that’s my understanding of what Noll is saying. IANAL, either.

  14. Fair enough, Neil. But who defines what is “bad for MLB’s business”?

    I cannot imagine a situation in which a court (even a California court…) would tell a business how to run itself. I am not aware of any precedent in which a business has been petitioned into relocation by a creditor, for example. Often they are petitioned into bankruptcy, but never into “moving to where the food is”.

    Did Noll offer any thoughts on how the plaintiff might force MLB into any answer (as to why they won’t approve a SJ move) other than “We took this action because, in our considered opinion as a professional sports league, our business is best served by maintaining historic franchises in the cities in which they have flourished, not pulling up stakes and moving to a new location every time the wind blows.”

    In bankruptcy proceedings, courts have the ability to set aside contracts that are considered obstacles to operation. I am not aware of any instance in which the court itself has begun renegotiating such a contract, which it seems to me would be the case if a court orders MLB to relocate a franchise to San Jose because “gee, it seems like it might be better for you”.

    It’s very, very difficult for me to believe any court would take such an action.

  15. Even if you’re right, John, the point here is that San Jose doesn’t actually have to win the case. It just has to get to discovery so it can frighten MLB into a settlement.

    Which still isn’t a sure thing, but hey, it’s worth a shot. And with Wolff playing good cop, it’s not like MLB can easily pull the “Drop the lawsuit or you’ll never get a team until the sun burns out” card.

  16. Keith:

    I agree. In fact, I respectfully disagree w Prof. Noll on that point. If it were true (and keep in mind that the legal system is an adversarial one, in which contradictory interpretations and representations are made before an independent adjudicator/arbiter. In other words, everybody has their own take on the facts… it’s the facts preferred by the judge that matter…), Wolff (and Sternberg) should immediately put down a $50k deposit with New York, Los Angeles, Chicago and D-FW. Then launch additional lawsuits against MLB. Hey, one of ’em’s got to stick…

    The comment Prof. Noll made about “speculative” business interests is, to me, the key salient point. MLB hasn’t interfered with any active and ongoing business in San Jose. They may have “unreasonably” interfered with the operation of the A’s (some clearly believe that), but then, it isn’t the A’s who are suing, of course…

  17. Very true, Neil. I agree that MLB does not, under any circumstances, want to enter into even the preliminary steps of an action relating to this claim.

    However, I think they could easily strong arm Lew Wolff into not supporting San Jose’s action (which, to be fair, he has already stated he is against in principle), and make a “mental note” that there will never, under any circumstances, be an MLB franchise in San Jose.

  18. Dan, it’s another restraint of trade. That’s all.

    If the Maloofs had said, “Fine, we’re keeping the team; See you in Seattle next year”, and just moved, I don’t think the league could have done a darned thing to stop it. They could have tried, but I think it would have taken years and cost a lot of money.

  19. Given that this site is devoted to the calculated way in which MLB and other leagues extract unnecessary subsidies, it would be hard to argue that they do anything capriciously.

    Even putting San Jose into Giants territory was a calculated business decision.

    I’m just a guy who believes in playing by the rules that you signed up for. You don’t go looking for handouts – in whatever form – just because you made a “bad” business decision (in quotes because Wolff & Co have only seen their team’s value go from $180 to $300 in 8 years).

  20. MLB has been blatantly violating antitrust laws for so long. Now it is time to take away A/T exemption. Can you imagine if Apple or HP refuses to let another company rent/buy a building next to theirs? The G’s are too greedy.
    BA can support both teams no matter where they play. There are plenty of cash for both teams.

    Hopefully, a federal judge will see the light here and let the suit proceed . me personally, I don’t want a settlement. I want this thing to go all the way to US Sup Ct. TRights are sh$t. just an excuse to eliminate competition.

  21. I think debating what you think is “fair” — whether that’s San Jose being able to get a team or Wolff having to live by the rules he signed up for — is an interesting rhetorical exercise but not likely to be what this case gets decided on. It’s going to come down to nuances of state and federal antitrust law, especially since in order to “win” San Jose really only needs to take this into the late innings.

    John, I think Wolff is *not* supporting San Jose’s position, and will continue to not do so. But how does MLB punish San Jose by telling them “No team now, sorry” without simultaneously punishing Wolff? I suppose they could tell Wolff, “Get your friends off our backs or you’re going to be stuck in the Coliseum for your next six lifetimes.” It’s going to be interesting, to say the least.

  22. @neil- great points- MLB is really in a bind- A’s continue to get revenue sharing until they get a new ballpark- so turning down SJ just means the A’s will be on welfare for a long time unless Oakland figures out how to throw a bunch of public dollars at a new stadium- and what they do for the A’s they must do for the Raiders and vice-versa.

  23. I don’t think the revenue sharing issue is as big as people expect – if the Giants’ revenues go down, then that’s less money being paid into the pool. If anything, other high-earning teams will be on the hook for more payments if neither the Giants nor the A’s are payors – and since both get to deduct stadium costs before figuring their revenue, that could well happen – so they’d be inclined to oppose a move.

  24. If you believe the premise that MLB fans come from a 30 mile radius than by and large SV is more of a untapped market so he odds of gints revenue declining significantly isn’t likely. Living here I agree with that premise- most in SV will go to a few games but 1 hour plus each way is just too far to do on a regular basis-

  25. Unless your Baer and you want the A’s out of the bay area and you have bs that isn’t willing to do anything to challenge them. That’s why discovery will be so awesome- it will prove the gints claims of a significant amount of SV revenue is false-

  26. “Can you imagine if Apple or HP refuses to let another company rent/buy a building next to theirs?”

    You’ve inadvertently hit the nail on the head: MLB hasn’t done anything to prevent another league from moving into San Jose – or anywhere else.

  27. Fair point, Neil. But even though Wolff’s position is “San Jose or Bust”, I’d argue that that isn’t his only option in improving his lot in life (which, as was noted above, really hasn’t been all that tough…). There are other locations he could explore, both locally and out of market.

    I don’t think they’ll ever ‘tell’ San Jose that they are out. No league ever formally tells an applicant for an expansion franchise (or relocation) “absolutely not”, as this tends to chill demand. If it comes to this point (which I doubt, frankly), they’ll carefully evaluate every submission and then give the proposed team to someone else.

    Definitely going to be interesting times in the next few months (or years, if MLB can’t get the suit dismissed, they can certainly delay it a decade or so…)

  28. The only reason they would tell San Jose “no” would be as a cease-and-desist tactic. Remember, MLB doesn’t actually want there not to be a team in San Jose – they just want to make sure that their territorial rights system stays intact, and to avoid going to trial.

    It’s going to be huge whether they can get this thing dismissed in the early rounds.

  29. I don’t know what it would take for Giants’ revenue to go down. Moving the A’s to San Jose opens up a new market for them, but the Giants are already having trouble meeting demand. I tried to buy some tickets for the July 6 Dodgers-Giants game, and “dynamic pricing is in effect.” $34.50 for SRO. $160 to sit behind third base.

    Moving the A’s to SJ concedes the North Bay (Marin County is, if I remember correctly, the richest county in the United States) and the Sacramento-Stockton-Modesto market to the Giants (2.3 million people).

    Moving to SJ is better than staying in Oakland, but for me, it’s under 2 hours to AT&T, closer to 3 to SJ. That does make a difference to me. But, when I see “SRO, $35”, I’m going for a walk on the beach instead.

  30. Mike, I suspect the Giants revenues would see absolutely no impact from having the A’s move to SJ – much like the Toronto Maple Leafs revenues would not drop $1 if a second NHL team played in the GTA.

    However, it’s not about the impact on revenues for the Giants… it’s because “they can”. Baer may be concerned about having well funded local competition (as opposed to what he’s got now) as time goes on and the A’s start spending some of the money they’d earn in SJ (and maybe, possibly, someday, competing with the Giants for media attention in the region), but it’s not a legitimate concern from a revenue earning perspective.

    As you’ve noted, this isn’t a team moving in from NJ or Chicago. It’s already in the area. So, just as it was when Haas offered SJ to the Giants so they could “move there”, it’s a trade of market territories, not a gift.

  31. There is more than enough evidence to prove Lew Wolff tried his best in the East Bay.

    His 227 pages of information on all sites in the East Bay is evidence. The fact the BRC sat down and went through all the information with him over hours and hours shows Wolff was honest and working in good faith.

    Wolf spent 24M in Fremont for pretty much nothing. He has documented evidence on why the East Bay is not feasible and he also has Bud Selig’s letter that he could look at “other communities” if Fremont fell through.

    Remember, San Jose is last ditch for the A’s. The BRC not responding in 4 years with some sort of recommendation shows the BRC could not themselves find anything in the East Bay that would force them to bring Wolff to the table.

    In the case of Washington-Baltimore, the Nationals got a 100% free ballpark. Therefore they were in position to give up some TV revenue to the Orioles. Selig was able to broker a deal because of the free ballpark.

    New York, LA, Chicago are shared markets and they are each one big media market. Bay Area is the same,. people in SF, Oakland, and SJ all see the same local news…..Baltimore/Washington not the case. Makes MLB look bad and they have no good answer on why the market was not shared when the leagues combined in 1993 like the other 2-team markets were.

    The Bay Area being split was an accident, a major screw up by Selig years ago.

    In this case, the A’s are building privately in San Jose 100% outside of minimum infrastructure. Selig cannot broker any kind of deal here because the A’s cannot pay the Giants and build in San Jose on their own dime.

    This is 100% “torturous interference” because Selig cannot argue he needs a “free handout” from San Jose to make this happen. He will look foolish and make MLB look like a “cartel”. With TV shared already in the market, Selig has nothing to barter with between the teams……Hence the monumental delay.

    Selig is in major trouble and the owners I believe in the August meetings will force a vote to let the A’s try in San Jose and get this lawsuit settled quickly.

    Why would the other 28 owners on god’s green earth fight this for the Giants greed? No other team is going to move besides this so why fight it for one team? This with Selig on the way out after next year they have to take matters into their own hands or risk it all in a Anti-Trust lawsuit.

    MLB would then kick the can on compensating the Giants down the line once the A’s move to San Jose. If Wolff fails in San Jose, then paying the Giants anything becomes a moot point.

    MLB will have to compensate the Giants through revenue sharing and the A’s would become a big market team finally and off receiving payments year to year.

    This is the only solution, San Jose waiting for 4 years and abiding by the process shows they were acting in good faith. MLB has proven beyond a doubt they have been complicit restricting San Jose from getting a team based on “cartel” like behavior.

    The A’s are coming to San Jose…..this will be resolved fast. There is no benefit to anyone in MLB except the Giants to fight this.

  32. Just a reminder: The Nationals did *not* pay the Orioles for territorial rights, as D.C. was not within the Orioles’ territory. They *did* pay them for TV rights, as D.C. was within the Orioles’ TV market.

    These are two overlaid sets of territories, and they don’t particularly match up. The best way to remember it is that every part of every state is in someone’s TV (blackout) zone, but there are plenty of parts of the U.S. that aren’t claimed as team territories (Montana, for example).

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