IN THIS ISSUE MESSAGE FROM THE EDITOR. Winter 2014

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1 A publication of the Exemptions & Immunities Committee of the Section of Antitrust Law, American Bar Association IN THIS ISSUE CONTENTS Message from the Editor 1 Articles A Series of Shams: Should Professional Real Estate or California Motor Supply the Test? by Carrie Amezcua 3 Spring Training: The Baseball Exemption By Stephen M. Medlock 11 Regular Feature E&I Case Law Update 17 MESSAGE FROM THE EDITOR Welcome to the Winter 2014 edition of E&I Update. In this edition, you will find an excellent article by our frequent contributor, Carrie Amezcua, addressing the appropriate sham litigation test to employ when considering a series of lawsuits. The Fourth Circuit recently joined the Second and Ninth Circuits in holding that the analysis in California Motor provides the proper framework. While not every court to address the issue has come to the same conclusion, the article argues in favor of the California Motor approach, with a gloss of the analysis found in Professional Real Estate. Our Young Lawyer Representative, Stephen Medlock, has also prepared a great recap of our committee s recent program on the baseball exemption. Please send all submissions for future issues to: Gregory P. Luib Federal Trade Commission 600 Pennsylvania Avenue, NW Washington, DC gluib@ftc.gov This edition also includes case summaries circulated on our committee s list-serv and Facebook page since the last publication of E&I Update. Contributors Nathaniel Brower, Mario Richards, Carrie Amezcua, and Keith Klovers provide summaries of important recent cases in the areas DISCLAIMER STATEMENT E&I Update is published periodically by the American Bar Association Section of Antitrust Law Exemptions & Immunities Committee. The views expressed in E&I Update are the authors only and not necessarily those of the American Bar Association, the Section of Antitrust Law or the Exemptions & Immunities Committee. If you wish to comment on the contents of E&I Update, please write to the American Bar Association, Section of Antitrust Law, 321 North Clark Street, Chicago, IL

2 Page 2 of state action, the FTAIA, the filed rate doctrine, and the baseball exemption. Our committee is always interested in new volunteers to summarize important judicial and legislative developments, prepare articles for the newsletter, and assist with Section publications. If you are interested in contributing to the E&I Committee, please contact me or any of the other Vice Chairs. Greg Garrett

3 Page 3 A Series of Shams: Should Professional Real Estate or California Motor Supply the Appropriate Test? Carrie Amezcua, McDermott Will & Emery LLP A Fourth Circuit decision recently brought the sham exception to the Noerr-Pennington immunity doctrine to the forefront. The case highlights the lack of clear direction from the Supreme Court as to whether the two-part test articulated in Professional Real Estate for a sham lawsuit also applies to a pattern or series of lawsuits, leaving the lower courts to decide how to evaluate such a pattern. If, as most lower courts have found, the twopart test does not apply to a pattern of lawsuits, then only the party s subjective intent in bringing the lawsuits matters. However, courts are likely to continue to use an objective win rate to evaluate a party s subjective intent. Thus, winning some of those lawsuits will not immunize a party from antitrust liability but losing past lawsuits may weigh against the finding of Noerr-Pennington immunity. Only three federal courts of appeal have addressed this question, but more than a few district courts have grappled with it. The courts of appeal agree that the Supreme Court s decision in California Motor, rather than the two-part test from Professional Real Estate, is the appropriate test. However, there are at least two district courts that have disagreed. Moreover, even in those districts and circuits that have held that California Motor is the appropriate test, some courts draw from Professional Real Estate and apply an objective assessment of the alleged sham lawsuits. Noerr-Pennington and the Sham Exception The Supreme Court first established the doctrine of immunity from antitrust liability as a result of solicitation for government action in Eastern Railroad Presidents Conf. v. Noerr Motor Freight, Inc. 1 The Court reasoned that the right to petition the legislature is protected irrespective of whether the parties sought to promote or harm competition. 2 Four years later, the Supreme Court extended Noerr to apply to concerted actions before courts and administrative agencies. 3 The Supreme Court noted the possibility of a sham exception to immunity in Noerr itself, 4 and it elaborated on the contours of that exception in California Motor Transport Co. v. Trucking Unlimited, 5 where the Court held that [o]ne claim, which a court or agency may think baseless, may go unnoticed; but a pattern of baseless, repetitive claims may emerge which leads the factfinder to conclude that the administrative and judicial processes have been abused. 6 The Court held that this kind of conduct is not entitled to

4 Page 4 immunity from the antitrust laws, because it deprives competitors of meaningful access to the courts. 7 It would be twenty-one years before the Supreme Court addressed the sham exception again. In Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, 8 the Court set out a two-part test for sham litigation: First, the suit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits; second, the lawsuit must be subjectively baseless and an attempt to interfere with competitors. 9 Only if the suit is found to be objectively baseless does the court examine subjective intent. 10 The Court also held that if a litigation is successful, then by definition the lawsuit was not objectively baseless. 11 The fact pattern presented in PRE, however, involved only a single lawsuit. 12 Moreover, the Court has never explicitly overruled California Motor. Indeed, some Justices disagreed about whether a simple two-part test could practically be applied to every situation, especially when there is evidence that the judicial process has been used as a part of a larger program to control a market... without any interest in the outcome of the lawsuit itself. 13 The concurring Justices suggested that a more nuanced and fact-based analysis may be more appropriate. 14 Application of the Sham Exception to a Series or Pattern of Litigation Despite the two-part test the Supreme Court laid out in PRE, that decision left open the question of whether that test should apply to a pattern or series of litigation. If the PRE test does not apply, then a litigant s subjective intent in bringing the lawsuits will be the primary determining factor of whether the lawsuits were a sham, regardless of the number of successful, or unsuccessful, lawsuits. Courts of appeals and district courts have wrestled with how to evaluate a series or pattern of litigation for purposes of analyzing Noerr-Pennington immunity, and not all have come to the same conclusion, leaving parties and courts with an unclear standard. Circuit Courts Most recently, the Court of Appeals for the Fourth Circuit in Waugh Chapel South, LLC v. United Food & Commercial Workers Union 15 noted that the decision in PRE was unclear as to whether it distinguished or displaced the sham litigation test first propounded in California Motor. 16 The court went on to acknowledge that the Ninth Circuit and the Second Circuit applied California Motor where the defendant is accused of bringing a whole series of legal proceedings. 17 Concluding that PRE was ill-fitted to test whether a series of legal proceedings is sham litigation, the court reasoned that deciding whether one lawsuit is objectively baseless is relatively simple, but when a court is confronted with a series of lawsuits it is an entirely different undertaking to collaterally review--as here--fourteen state and administrative lawsuits for baselessness. 18 Rather, a court should conduct a holistic evaluation of whether the series of cases abused the judicial process. 19 Using this holistic evaluation, the court held that under the facts presented, there was a genuine issue of material fact as to whether the unions filed a series of

5 Page 5 lawsuits without regard to the merits of their cases. 20 In doing so, however, the court analyzed the defendant s win-loss percentage and noted that winning only one out of fourteen lawsuits suggests that the defendants disregarded the merits of the cases that they had previously filed. 21 Thus, although the court did not engage in the strict twopart test set forth in PRE, the success rate of the alleged pattern of litigation was still part of the subjective analysis. 22 As the Fourth Circuit noted, only two other circuit courts have considered this issue the Ninth and Second Circuits. The Ninth Circuit addressed the issue in USS-POSCO Indus. v. Contra Costa County Building & Construction Trades Council, 23 in 1994, just one year after the Supreme Court decided PRE. In that case, the Ninth Circuit evaluated whether a series of twenty-nine lawsuits were merely a sham. 24 The court reasoned that the Supreme Court in PRE did not overrule California Motor, but rather the Court meant for the opinions to be applied to two different situations. 25 Thus, the court held that PRE applied to a single lawsuit, but California Motor applied to situations where the defendant is accused of bringing a whole series of legal proceedings. 26 The court went on to state that in these situations the question is not whether any one of them has merit - some may turn out to, just as a matter of chance - but whether they are brought pursuant to a policy of starting legal proceedings without regard to the merits and for the purpose of injuring a market rival. 27 After articulating that standard, the court noted that fifteen of the twenty-nine lawsuits that plaintiffs alleged were part of the pattern of baseless litigation had been successful. 28 The court could not reconcile this success rate with the allegation that the defendants had filed lawsuits without regard to potential success. 29 Therefore the court held that the defendants conduct did not fall within the sham exception. 30 In 2000, the Second Circuit in Primetime 24 Joint Venture v. National Broadcasting Co. followed USS-POSCO. 31 Although it agreed with the Ninth Circuit s reasoning, the court did not engage in any further, independent analysis of whether it should apply the test set forth in PRE or that described in California Motor. 32 The Second Circuit held that the allegation of simultaneous and voluminous challenges... without regard to whether the challenges had merit was sufficient to state a claim that the defendants had engaged in sham litigation. 33 District Courts Pro-California Motor Most district courts that have addressed claims involving patterns of litigation follow USS-POSCO and Primetime 24, and accordingly agree that PRE and California Motor apply to two different situations. 34 District courts in the Sixth Circuit appear to be the exception. 35 However, even in those courts that hold California Motor rather than PRE should apply to a series of lawsuits, the actual application of California Motor to the facts in the cases is not so clear cut.

6 Page 6 A year after Primetime 24, the U.S. District Court for the District of Louisiana confronted this issue in Livingston Downs Racing Ass n, Inc. v. Jefferson Downs Corp. 36 The plaintiffs alleged that the defendants engaged in repeated sham litigation only to prevent or delay [plaintiff s] entry into the market. 37 This sham litigation included four lawsuits that the defendants initiated and another five in which the defendants intervened or urged a regulatory agency to file. 38 The district court noted that only two circuits had addressed the issue and those courts had adhered to California Motor. 39 The court agreed that the proper test to apply was California Motor. 40 However, when analyzing the allegations, the court credited the defendants for the lawsuits that they had won, stating those suits in which the defendants prevailed do not support a finding that the judicial process was abused. 41 This is more akin to the two-step analysis articulated in PRE. But, despite the fact that the defendants had won several of the allegedly sham lawsuits, they were not immunized from antitrust liability. The court took into account other factors that suggested the defendants had a subjective intent to interfere with the plaintiffs and harm competition, including maintaining a lawsuit for two years after being denied a request for injunction, attempting to stay discovery and preventing deposition in its own lawsuits, and intervening in a lawsuit seeking to compel a racing commission ruling, then attempting to stay the lawsuit. 42 The court concluded that the defendants apparent temporizing, coupled with their seemingly overzealous pursuit of certain actions, gives rise to an inference that they were attempting to abuse the judicial process. 43 In another case, the U.S. District Court for the District of Puerto Rico agreed that PRE did not overrule California Motor and held that California Motor should apply to a pattern of litigation. 44 It also added its own spin. The court stated that the question in pattern cases is not only whether the suits have merit, but also whether they were instituted as part of or pursuant to a pattern, without regard to the merits. 45 Thus, the court looked at both prongs of PRE together the objective merits of the lawsuits, as well as the subjective intent. Using this standard, the court found that plaintiffs sufficiently alleged a pattern of sham litigation, in part because the defendant initiated or intervened in at least seven lawsuits, that several tribunals admonished the defendants regarding their claims, and that plaintiffs alleged the defendants brought the lawsuits solely to injure them. 46 Federal Trade Commission staff agree that California Motor is the proper test to apply to a pattern of allegedly baseless litigation as well. In 2006, the staff released a report on the application of the Noerr-Pennington doctrine. 47 The staff concluded that PRE left open the question of how the sham exception applies to a series of petitions, and endorsed the USS-POSCO approach. 48

7 Page 7 Pro-PRE Two opinions in district courts in the Sixth Circuit take the opposite approach and apply PRE to allegations of a pattern of baseless litigation. The district courts decided both of those cases after USS-POSCO but before Primetime 24. In Re/Max Int l v. Realty One, Inc., the U.S. District Court for the Northern District of Ohio faced a counterclaim allegation by Realty One that Re/Max had instituted, an uninterrupted program of meritless judicial proceedings against Realty One; and [had] incited a series of groundless government investigations without probable cause. 49 The court used the two-part PRE test, without an analysis of whether the California Motor test was more appropriate, and held that Realty One's allegations sufficiently allege claims that satisfy the objective prong of the sham litigation test. 50 The court held that the allegations satisfied the subjective prong of PRE as well. 51 When the district court later decided Realty One s summary judgment motion, the court cited the PRE test in support of its holding that there was a genuine issue of material fact as to whether Re/Max had conspired to instigate a series of baseless lawsuits. 52 However, the court did not address the first prong of PRE as it applied to the objective baselessness of the lawsuits. The U.S. District Court for the Eastern District of Michigan also applied the PRE test to an allegation regarding a series of baseless lawsuits in Christian Memorial Cultural Center v. Michigan Funeral Directors Association. 53 In that case, the plaintiffs alleged that defendants engaged in litigation designed only to drive plaintiff and other cemeteries out of the funeral goods market, including three state lawsuits and inducing others to bring class action lawsuits. 54 The court noted that it was objectively reasonable, based on a state attorney general opinion, for defendants to bring the lawsuits because they had a reasonable expectation of success. 55 Accordingly, Noerr-Pennington immunity protected the defendants conduct with regard to the lawsuits without inquiry into their subjective intent. 56 California Motor Is the Sensible Rule, But Difficult to Apply Most courts to address the issue have concluded that California Motor, rather than PRE, is the appropriate test when faced with an allegation that a defendant has engaged in a pattern of sham litigation, and in the author s view, for good reason. Following California Motor fits with general principles of the Noerr-Pennington immunity. On the one hand, individuals and companies have a First Amendment right to petition the courts, even if that petitioning is intended to harm competition, and courts should not chill the incentive to petition. On the other hand, as the Court in City of Columbia v. Omni Outdoor Advertising Inc. held, when the governmental process is used to [injure competition] as opposed to the outcome of that process that conduct should be considered anticompetitive. 57 Looking only retrospectively at the success or failure of any individual lawsuit could overlook the possibility that there is a holistic (anticompetitive) plan to interfere with a competitor s business. Some success in prior

8 Page 8 lawsuits should not absolve a party of antitrust liability if the party did in fact have a scheme to use the governmental or adjudicatory process to harm competition and deprive competitors of meaningful access to the courts. 58 Courts need to be able to evaluate that factual situation with evidence that the judicial process has been used as part of a larger program to harm competition. 59 As FTC staff has pointed out, the PRE two-part test is a sensible rule when courts face only one data point. 60 However, when there is a pattern of petitioning or litigation, a court has more information to determine whether a party s conduct is legitimate petitioning or a sham that does not deserve Noerr-Pennington immunity. 61 Even if courts and agencies agree that it is appropriate to use California Motor for a pattern of litigation, courts still borrow from PRE. For example, the court in USS-POSCO was the first to hold that California Motor should apply. But when arriving at its decision that the defendants had not engaged in sham litigation, it analyzed the win rate of the twenty-nine lawsuits at issue in order to evaluate the defendant s subjective intent. 62 The court in Waugh Chapel, after suggesting that an evaluation of fourteen lawsuits would be difficult and unnecessary, did just that. 63 The court noted that the vast majority of [the unions ] legal challenges failed demonstrably. 64 Thus, looking at the success or failure of lawsuits can inform a court s conclusion as to whether there was an overall scheme to deny meaningful access to the judicial process. Until the Supreme Court, or a critical mass of federal courts of appeals, addresses the application of California Motor or PRE, or some combination of both, to a pattern of litigation, it seems safe to assume that courts that have not yet addressed the issue will follow the Second, Ninth, and now Fourth Circuits and apply California Motor to situations that could arguably be considered a pattern or series of sham litigation. But, the success or failure of the lawsuits in the pattern should and will be part of the analysis. Litigants should recognize that winning past lawsuits will not immunize them from liability, although it is certainly helpful to prove that there was no intent to interfere with a competitor. On the other hand, losing past lawsuits is likely to weigh against finding Noerr-Pennington immunity U.S. 127 (1961). 2 See id. at See United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965). 4 See Noerr, 365 U.S. at U.S. 508 (1972). 6 Id. at Id U.S. 49 (1993) (hereinafter PRE ).

9 Page 9 9 Id. at Id. 11 Id. at 61, n Id. at Id. at 73 (Stevens, O Connor, JJ. concurring). 14 Id. at 67-68, F.3d 354 (4th Cir. 2013). 16 Id. at Id. (citing USS-POSCO Indus. v. Contra Costa County Building & Construction Trades Council, 31 F.3d 800, (9th Cir. 1994) and Primetime 24 Joint Venture v. National Broadcasting Co., 219 F.3d 92, 101 (2d Cir. 2000)). 18 Id. at Id. 20 Id. 21 Id. at Id. at F.3d 800 (9th Cir. 1994). 24 Id. at Id. at Id. 27 Id. at Id. 29 Id. 30 Id F.3d 92, 101 (2d Cir. 2000). 32 Id. 33 Id. 34 See, e.g., Puerto Rico Tel. Co. v. San Juan Cable, LLC, 2012 U.S. Dist. LEXIS , at *6-7 (D.P.R. Sept. 13, 2012); Total Renal Care, Inc. v. Western Nephrology & Metabolic Bone Disease, P.C., 2009 U.S. Dist. LEXIS 80821, at *35-36 (D. Colo. Aug. 21, 2009); Livingston Downs Racing Ass n v. Jefferson Downs Corp., 192 F. Supp. 2d 519 (M.D. La. 2001). 35 See, e.g., Christian Mem. Cultural Ctr, Inc. v. Michigan Funeral Dir. Ass n, 998 F. Supp. 772, (E.D. Mich. 1998); Re/Max Int l v. Realty One, Inc., 900 F. Supp. 132, 161 (N.D. Ohio 1995) F. Supp. 2d 519 (M.D. La. 2001). 37 Id. at Id. at Id. at 537.

10 Page Id. at Id. at Id. at Id. 44 Puerto Rico Tel., 2012 U.S. Dist. LEXIS , at * Id. at *6 (emphasis added). 46 Id. at *8-9; see also Puerto Rico Tel. Co. v. San Juan Cable, LLC, 885 F. Supp. 2d 534, 538 (D.P.R. 2012). 47 FEDERAL TRADE COMMISSION STAFF, ENFORCEMENT PERSPECTIVES ON THE NOERR- PENNINGTON DOCTRINE, (2006), available at doctrine.pdf. 48 Id. at F. Supp. 132, 161 (N.D. Ohio 1995). 50 Id. 51 Id. 52 Re/Max Int l v. Realty One, Inc., 924 F. Supp. 1474, 1507 (N.D. Ohio 1996) F. Supp. 772, (E.D. Mich. 1998). 54 Id. at Id. at Id U.S. 365, 380 (1991) (emphasis in original). 58 See California Motor, 404 U.S. at PRE, 508 U.S. at ENFORCEMENT PERSPECTIVES ON THE NOERR-PENNINGTON DOCTRINE, supra note 47, at See id. 62 USS-POSCO, 31 F.3d at F.3d at Id.

11 Page 11 Spring Training: The Baseball Exemption Stephen M. Medlock, Mayer Brown LLP Since 1922, the business of baseball has been exempt from antitrust scrutiny. 1 Since then, the rationale for this exemption has changed. 2 The Supreme Court has observed that the baseball exemption is unrealistic, inconsistent, or illogical, and indicated that if it were... considering the question of baseball for the first time upon a clean slate, the exemption would not exist. 3 Moreover, economists recognize that potentially anticompetitive agreements amongst professional baseball teams can result in welfare losses. 4 Despite these recognized flaws, the exemption endures. 5 Courts have held that the exemption applies to the structure of major league baseball, including the number of clubs, 6 compensation to minor league clubs, 7 contracts with umpires, 8 franchise relocation, 9 and player contracts. 10 On December 20, 2013, the Exemptions and Immunities Committee, in cooperation with the Trade, Sports & Professional Associations Committee, presented a panel discussion of the baseball exemption. After discussing the history of the exemption, the panel debated the scope and vitality of the exemption by focusing on two developments: (1) City of San Jose v. Office of Commissioner of Baseball, 11 and (2) Piazza v. Major League Baseball. 12 The panel was moderated by Karen Hoffman Lent, a partner at Skadden, Arps, Slate, Meagher & Flom LLP and counsel to NBA and four of its teams in litigation brought by the Spirits of St. Louis regarding Spirits rights to NBA television revenues. Two panelists contributed their view on the baseball exemption: Brad Ruskin, a partner at Proskauer Rose LLP, and counsel to Major League Baseball in City of San Jose; and Hon. Bruce Kauffman, counsel to the plaintiffs in Piazza. The History of the Exemption: The Supreme Court Trilogy Mr. Ruskin began by discussing the history of the baseball exemption. Succinctly stated, the baseball exemption is: [t]he business of baseball is exempt from the antitrust laws, as it has been since 1922, and as it will remain until Congress decides otherwise. Period. 13 The exemption was created by judicial fiat in Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs. 14 That case arose from the failure of the Federal League. In 1913, John T. Powers created the Federal League, a new minor league. 15 In 1914, the Federal League declared itself to be the third major league. 16 At its inception, the league included teams in Baltimore, Brooklyn, Buffalo, Chicago, Indianapolis, Kansas City, Pittsburgh, and St. Louis. 17 Like other upstart professional sports leagues, 18 the Federal League sued the National League and the American League, arguing that they monopolized professional baseball and conspired to destroy the Federal League. 19 Ultimately, the Federal League settled with the American and National Leagues. As a result of the settlement, the Federal

12 Page 12 League was disbanded. Two of the Federal League owners were allowed to buy major league teams, leading to the creation of the Chicago Cubs and St. Louis Browns. 20 The Baltimore Federal League team, the Terrapins, refused to take part in the settlement. 21 In 1916, they filed their own antitrust lawsuit, which challenged the National League s and American League s player contracts and the structure of major league baseball. 22 The case went to trial. 23 The Terrapins obtained a verdict of $80,000, which was trebled to $240, In 1916, the Court of Appeal for the District of Columbia overturned the verdict, holding that baseball was not interstate commerce. 25 In 1922, the Supreme Court decided Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs. 26 Writing for a unanimous court, Justice Holmes held: The business is giving exhibitions of base ball [sic], which are purely state affairs. It is true that in order to attain for these exhibitions a great popularity that they have achieved, competitions must be arranged between clubs from different cities and States. But the fact that in order to give the exhibitions the Leagues must induce free persons to cross state lines and must arrange and pay for their doing so is not enough to change the character of the business. 27 Despite the Lochner era logic of Federal Baseball, the Court continued to apply the exemption. In 1953, the Supreme Court revisited Federal Baseball in Toolson v. New York Yankees, Inc., 28 an antitrust challenge to minor league player contracts. 29 In a single paragraph per curiam opinion, the Court affirmed Federal Baseball. 30 The Court offered a new justification for the exemption, focusing on stare decisis concerns and positive inaction by Congress: Congress has had the [Federal Baseball] ruling under consideration but has not seen fit to bring such business under these laws by legislation having prospective effect. The business has thus been left for thirty years to develop, on the understanding that it was not subject to existing antitrust legislation.... We think that if there are evils in this field which now warrant application to it of the antitrust laws it should be by legislation. 31 The third case in the Supreme Court s baseball exemption trilogy was Flood v. Kuhn. 32 After being traded from the St. Louis Cardinals to the Philadelphia Phillies in 1969, Curtis Flood filed an antitrust suit challenging the reserve clause in Major League Baseball contracts. 33 Again, the Supreme Court upheld the exemption on the basis of stare decisis and Congressional inaction. 34 While the Court expressed doubt that it would have reached the same result as Federal Baseball if it were considering the case as a matter of first impression, it acknowledged that the slate with respect to baseball is not clean. Indeed, it has not been clean for half a century. 35 Therefore, the Court concluded, [w]e continue to be loath, 50 years after Federal Baseball and almost two decades after Toolson, to overturn those cases judicially when Congress, by its positive inaction, has allowed

13 Page 13 those decisions to stand for so long and, far beyond mere inference and implication, has clearly evinced a desire not to disapprove them legislatively. 36 The Future of the Exemption The panelists disagreed on the scope and continued vitality of the exemption. Drawing on the recent opinion in City of San Jose v. Office of Commissioner of Baseball, 37 Mr. Ruskin noted that, since Flood, courts have applied the baseball exemption in several cases. 38 According to Mr. Ruskin, the exemption has been distinguished or limited set of cases where the defendant sought to apply the exemption beyond the business of baseball. 39 Piazza v. Major League Baseball, 40 limited or distinguished the Supreme Court s holdings in Federal Baseball, 41 Toolson, 42 and Flood. 43 He observed that the Curt Flood Act of gives further credence to the exemption. In the Act, Congress determined that 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 as conduct in other professional sports leagues. 45 Judge Kauffman argued that, since its inception, the exemption has been bad law. While he acknowledged that the exemption presents a high burden at the motion to dismiss stage, Judge Kauffman stated that Federal Baseball is a derelict in the stream of law, an anomaly, and an aberration. He observed that judicial exemptions should be read narrowly. 46 He argued that Federal Baseball, 47 Toolson, 48 and Flood 49 could be distinguished because those cases exclusively dealt with the reserve clause in Major League Baseball player contracts. 50 Judge Kauffman pointed to Piazza as a case where the combination of this distinction and egregious facts could enable a plaintiff to avoid the baseball exemption. In Piazza, Vincent Piazza and Vincent Tirendi attempted to purchase the San Francisco Giants and move the team to Tampa, Florida. 51 Piazza and Tirendi alleged that after it became clear they planned to move the team, Major League Baseball officials made libelous comments about their Italian heritage, including statement that associated them with the Mafia and/or other criminal or organized criminal activity. 52 Assessing these facts at the motion to dismiss stage, the district court determined that Flood stripped from Federal Baseball and Toolson any precedential value those cases may have had beyond the particular facts there involved, i.e., the reserve clause. 53 After surviving a motion to dismiss, Major League Baseball and the plaintiffs reached a confidential settlement before the district court could rule on Major League Baseball s motion for summary judgment. 54

14 Page 14 Conclusion The panel discussion left little doubt that the baseball exemption poses a significant obstacle at the pleading stage to antitrust claims regarding the business of baseball. However, the panelists were divided on the scope of the exemption and its continued vitality. 1 Fed. Baseball Club of Balt., Inc. v. Nat l League of Prof l Baseball Clubs, 259 U.S. 200, 208 (1922) (Holmes, J.) ( The business is giving exhibitions of base ball [sic], which are purely state affairs. ). 2 Compare Fed. Baseball, 259 U.S. at 208, with Toolson v. New York Yankees, Inc., 346 U.S. 356, 357 (1953) (per curiam) ( Congress has had the ruling under consideration but has not seen fit to bring such business under [the antitrust] laws by legislation having prospective effect. The business has thus been left for thirty years to develop, on the understanding that it was not subject to antitrust legislation. ). 3 Radovich v. Nat l Football League, 352 U.S. 445, 452 (1957). 4 See Stephen F. Ross, Antitrust Options to Redress Anticompetitive Restraints and Monopolistic Practices by Professional Sports Leagues, 52 CASE W. RES. L. REV. 133, 134 (2001) ( The result is an artificial scarcity of franchises, resulting from lower output as well as higher prices that communities must pay in order to persuade a league to expand or an existing owner to relocate or remain in the community.... [U]nchecked by quality competition, leagues can pursue profits at the expense of a number of business practices that would render their product more responsive to consumer demand. ). 5 City of San Jose v. Office of Comm r of Baseball, Case No. C RMW, 2013 WL , at *1 (N.D. Cal. Oct. 11, 2013) (analyzing prior baseball exemption case law); see also Flood v. Kuhn, 407 U.S. 258, 282 (1972) ( the aberration is an established one ). 6 See Major League Baseball v. Crist, 331 F.3d 1177, 1183 (11th Cir. 2003) (baseball exemption applies to team contraction). 7 See Portland Club, Inc. v. Kuhn, 491 F.2d 1101, 1103 (9th Cir. 1974) (citing Flood and holding that the plaintiff s claim for relief under the antitrust laws was properly dismissed. ). 8 See Salerno v. Am. League of Prof l Baseball Clubs, 429 F.2d 1003, 1005 (2d Cir. 1970) (holding that we continue to believe that the Supreme Court should retain the exclusive privilege of overruling its own decisions, and affirming dismissal of antitrust claims). 9 See City of San Jose v. Office of Comm r of Baseball, Case No. C RMW, 2013 WL , at *5-7 (N.D. Cal. Oct. 11, 2013) (dismissing antitrust claims related to Oakland A s planned relocation to San Jose, California). But see Piazza v. Major League Baseball, 831 F. Supp. 420, 433 (E.D. Pa. 1993) (distinguishing prior Supreme Court precedent and holding that the exemption either does not apply in this case, cannot be applied as a matter of law to the facts of this case, or should no longer be recognized at all. ). 10 Toolson, 346 U.S. at 357 (per curiam) (applying exemption to reserve clause in player contracts); Flood, 407 U.S. at 283 (same). But see 15 U.S.C. 26b (a) (repealing baseball exemption for 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 ).

15 Page Case No. C RMW, 2013 WL (N.D. Cal. Oct. 11, 2013) F. Supp. 420 (E.D. Pa. 1993). 13 Major League Baseball v. Butterworth, 181 F. Supp. 2d 1316, 1331 (N.D. Fla. 2001), aff d sub nom., Major League Baseball v. Crist, 331 F.3d 1177 (11th Cir. 2003) U.S. 200 (1922). 15 ROBERT PEYTON WIGGINS, THE FEDERAL LEAGUE BASE BALL CLUBS: THE HISTORY OF AN OUTLAW MAJOR LEAGUE 6-7 (2008). 16 Id. at Id. 18 See U.S. Football League v. Nat l Football League, 842 F.2d 1335 (2d Cir. 1988) (affirming jury verdict granting USFL $1 in damages). 19 Fed. Baseball, 259 U.S. at WIGGINS, supra note 15, at 305, Id. at Id. 23 Fed. Baseball, 259 U.S. at Id. 25 Nat l League of Prof l Baseball Clubs v. Fed. Baseball Club of Balt., Inc., 269 F. 681, 685 (C.C.D.C. 1920) (reasoning [s]uppose a law firm in the city of Washington sends its members to points in different states to try lawsuits; they would travel, and probably carry briefs and records, in interstate commerce. Could it be correctly said that the firm, in the trial of the lawsuits, was engaged in trade and commerce? ) U.S. 200 (1922). 27 Id. at U.S. 356 (1953). 29 See, e.g., Toolson v. New York Yankees, Inc., 101 F. Supp. 93, 93 (S.D. Cal. 1951) (discussing facts of one of three cases consolidated and heard by Supreme Court) U.S. at Id U.S. 258 (1972). 33 Id. at Id. at Id. 36 Id. at Case No. C RMW, 2013 WL (N.D. Cal. Oct. 11, 2013).

16 Page See supra notes See, e.g., Henderson Broad. Corp. v. Houston Sports Ass n, 541 F. Supp. 263, 271 (S.D. Tex. 1982) (in a dispute regarding the television rights to Houston Astros games, concluding that [t]o hold that a radio station contract to broadcast baseball games should be treated differently for antitrust law purposes than a station s contract to broadcast any other performance or event would be to extend and distort the specific baseball exemption, transform it into an umbrella to cover other activities outside baseball and empower defendants radio station and network to use that umbrella as a shield against the statutes validly enacted by Congress. ) F. Supp. 420 (E.D. Pa. 1993) U.S. 200 (1922) U.S. 356 (1953) U.S. 258 (1972) U.S.C. 26b. 45 Id. 46 Piazza, 831 F. Supp. at 438 ( It is well settled that exemptions from the antitrust laws are to be narrowly construed. ) U.S. 200 (1922) U.S. 356 (1953) U.S. 258 (1972). 50 Postema v. Nat l League of Prof l Baseball Clubs, 799 F. Supp. 1475, 1489 (S.D.N.Y. 1992) ( It is thus clear that the baseball exemption does immunize baseball from antitrust challenges to its league structure and its reserve system, the exemption does not provide baseball with blanket immunity for anti-competitive behavior in every context in which it operates. ); see also Piazza, 831 F. Supp. at 436 (holding that Flood stripped from Federal Baseball and Toolson any precedential value those cases may have had beyond the particular facts there involved, i.e., the reserve clause. ). But see Major League Baseball v. Butterworth, 181 F. Supp. 2d 1316, 1324 (N.D. Fla. 2001) ( The assertion that [Federal Baseball] was solely a reserve clause case is simply not true. Federal Baseball held that professional baseball, not just the reserve clause, was outside the scope of the antitrust laws. ). 51 Piazza, 831 F. Supp. at Id. at Id. at Although the terms of the settlement were confidential, several sources reported that Major League Baseball paid the plaintiffs $6 million and Bud Selig wrote a letter of apology to the plaintiffs. See, e.g., Michael Bamberger, Baseball Apologizes to Rejected Investors: The Two Valley Force Businessmen Also Got a Check for More than $6 Million in the Settlement, PHILA. INQUIRER, Nov. 3, 1994, available at

17 Page 17 E&I CASE LAW UPDATE State Action Builders Flooring Connection, LLC v. Brown Chambless Architects, LLC, 2014 U.S. Dist. LEXIS 7359 (M.D. Ala. Jan. 16, 2014) In Builders Flooring Connection, LLC v. Brown Chambless Architects, LLC, the District Court for the Middle District of Alabama held that a state executive official was ipso facto entitled to Parker immunity from the plaintiff s antitrust claim. The Court therefore dismissed the plaintiff s antitrust claim, although it held that the state official was not entitled to Eleventh Amendment immunity or Alabama state-sovereign immunity from the plaintiff s state-law claim because the plaintiff had sued the defendant in her individual capacity. Although its opinion expressed sympathy for the plaintiff s attempt to overcome the immunity defense, the Court concluded that stare decisis required that the state executive official be afforded Parker immunity. The plaintiff, Builders Flooring, was a flooring contractor that had bid on contracts for flooring projects related to the renovation of facilities at Auburn University Montgomery ( AUM ), a public university. The defendants were Weiss Flooring, Inc. and its owner Robert Weiss, a competitor to the defendant, various architecture firms, and Wanda Blake, the vice-chancellor of financial affairs for AUM. Blake provided the bid specifications for the projects. The plaintiff alleged that the defendants, including Blake, conspired to rig the bidding process for these projects in violation of 1 of the Sherman Act. The plaintiff also brought state-law claims for interference with business relations and misrepresentation based on the same conduct. Blake, the university vice-chancellor, moved to dismiss the antitrust claim against her, arguing that because she was acting as an officer of AUM, an arm of the State of Alabama, she was entitled to Parker doctrine immunity. Relying on Saenz v. Univ. Interscholastic League, 487 F.2d 1026, 1027 (5th Cir. 1973), Blake argued that Parker immunity is not limited to legislative bodies or agencies, but also extends to executive officers or agents of the State, and thus the plaintiff s allegation that Blake had personally conspired to rig the bidding process did not overcome her Parker immunity. The plaintiff countered that Saenz was no longer good law, because subsequent precedents established that only states legislatures and highest courts are ipso facto entitled to immunity, and that all other government officials or bodies must make an additional showing of clearly articulated and affirmatively expressed state policy to qualify for Parker immunity. The Court expressed sympathy for the plaintiff s argument, and identified three subsequent precedents supporting the plaintiff s position. First, the Court noted that the Supreme Court has only granted ipso facto state-action immunity where the challenged action was undertaken by the state s legislature or highest court acting in a legislative capacity, citing Hoover v. Ronwin, 466 U.S. 558, (1984).

18 Page 18 Second, where Parker immunity is asserted with respect to action taken by private parties, the Supreme Court required in F.T.C. v. Phoebe Putney Health Sys., Inc. both that the challenged restraint... be one clearly articulated and affirmatively expressed as state policy, and that the policy... be actively supervised by the State. 133 S. Ct. 1003, 1010 (2013). Third, the Court noted that sub-state governmental units, such as municipalities and counties, are not ipso facto entitled to Parker immunity, citing City of Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 370 (1991), and that such a governmental entity must establish that its conduct is directed by a clearly articulated and affirmatively expressed state policy in order to qualify for immunity. The Court also noted that the Supreme Court has never decided whether state executive branch officials or agencies are entitled to ipso facto immunity, and has also cautioned that [c]loser analysis is required when the activity at issue is not directly that of the legislature or supreme court, but is carried out by others pursuant to state authorization, citing Hoover, 466 U.S. at 568. Notwithstanding these precedents, the Court noted that every Court of Appeals to address the issue has held that state-level executive officials and agencies are ipso facto entitled to Parker immunity, citing Saenz, 487 F.2d at 1027; Neo Gen Screening, Inc. v. New England Newborn Screening Program, 187 F.3d 24, 29 (1st Cir. 1999); Charley's Taxi Radio Dispatch Corp. v. SIDA of Hawaii, Inc., 810 F.2d 869, 876 (9th Cir. 1987); and Deak Perera Hawaii, Inc. v. Dep't of Transp., 745 F.2d 1281, 1283 (9th Cir. 1984). The Court concluded that because Saenz (which was decided while the Middle District of Alabama was still within the Fifth Circuit) was directly on point and had not been overruled by the Eleventh Circuit or the Supreme Court, it was bound to follow that decision. The cited cases that were in tension with Saenz had all been decided in different contexts involving assertion of immunity for either private individuals or sub-state entities, and thus could not have overruled Saenz s holding that state executive officials and agencies are entitled to ipso facto immunity. Although it dismissed the plaintiff s antitrust claim against Blake on the basis of Parker immunity, the Court upheld the plaintiff s state-law interference with business relations claim against Blake s asserted defenses of Eleventh Amendment and Alabama statesovereign immunity, finding that these immunities were not applicable because the plaintiff had sued the defendant in her personal capacity and thus had not effectively brought suit against the State. The Court additionally noted that with respect to the Alabama sovereign immunity defense, the Alabama Supreme Court has recognized that claims against a state official in his or her personal capacity alleging that the official had acted fraudulently or in bad faith were not suits against the state and thus not barred by immunity. [Thanks to Nathaniel Brower of Steptoe & Johnson]

19 Page 19 FTAIA Motorola Mobility, Inc. v. AU Optronics Corp., 2014 U.S. Dist. LEXIS 8492 (N.D. Ill. Jan. 23, 2014). Background The Foreign Trade Antitrust Improvements Act of 1982 ( FTAIA ) establishes a general rule that the Sherman Act does not apply to anticompetitive conduct involving trade or commerce with foreign nations. However, FTAIA also carves out a domestic injury exception to this rule. The exception subjects foreign anticompetitive conduct to the Sherman Act if (1) it has a direct, substantial, and reasonably foreseeable effect on domestic or import commerce, and (2) this effect creates a claim under the Sherman Act. In Motorola, Defendants are the major global manufacturers of liquid-crystal display ( LCD ) panels. Plaintiff is Motorola Mobility, Inc., a technology company based in Illinois that manufactures a number of electronic devices, including mobile phones. Plaintiff alleged that from , Defendants took part in a global conspiracy to raise the price of LCD panels. Plaintiff and its foreign affiliates purchase LCD panels from Defendants for use in their mobile phones. The purchases that form the basis of the claims in this case fall into three categories: (1) purchases by Plaintiff that were delivered directly to its facilities in the United States ( Category I ); (2) purchases by Plaintiff s foreign affiliates that were delivered to their facilities abroad and incorporated into mobile phones that were later sold in the United States ( Category II ); and (3) purchases by Plaintiff s foreign affiliates that were delivered to their facilities abroad and incorporated into mobile phones sold outside the United States ( Category III ). The question presented in Motorola, was whether Plaintiff could bring Sherman Act claims based on injuries suffered abroad by its foreign affiliates due to the Category II and Category III purchases. The issue was first addressed in the Northern District of California, where the case was transferred for MDL pretrial proceedings. That court granted Defendants motion to dismiss the first amended complaint, holding that the Sherman Act claim was barred by FTAIA, and that the domestic injury exception was unavailable for the alleged conduct. Plaintiff then amended its complaint, adding allegations that Defendants directed subordinates in the United States to collude with LCD manufacturers in the United States. Once the inflated price was established among the manufacturers, those subordinates entered negotiations regarding the purchase of LCD panels with the Plaintiff s United States-based procurement teams. Because the Plaintiff s United States procurement team set worldwide purchasing decisions for the entire company, Plaintiff alleged that the domestic effect of Defendants conduct was that Defendants caused Plaintiff to set an inflated worldwide price from its headquarters in the United States.

20 Page 20 Defendants motion to dismiss the second amended complaint and motion for summary judgment were both denied by the MDL court, which held that Plaintiff presented evidence from which a jury could infer that final decisions regarding pricing of LCD panels took place in the United States. The case was then remanded to the Northern District of Illinois for trial, where Defendants filed a motion for reconsideration of the MDL court s order denying summary judgment under Federal Rule of Civil Procedure 54(b). Discussion The court reviewed the MDL court s denial of summary judgment under the clear error standard. Upon review the court held that Plaintiff s claims based on Category II and Category III purchases were barred by FTAIA, and the claims based on those purchases did not fall within the domestic injury exception. Accordingly, the court granted the Defendants motion for reconsideration and entered summary judgment for the Defendants. The court found that in determining the applicability of the domestic injury exception, the MDL court had improperly applied the proximate cause standard established by the D.C. Circuit in Empagran S.A. v. F. Hoffmann-LaRoche, Ltd., 417 F.3d 1267 (D.C. Cir. 2005) ( Empagran II ), and adopted by the Ninth Circuit in In re Dynamic Random Access Memory (DRAM) Antitrust Litigation., 546 F.3d 981 (9th Cir. 2008) ( Dram ). That proximate cause standard is used to evaluate the second requirement of the domestic injury exception; that is, whether the domestic effect was the proximate cause of the Sherman Act claim. Although, recognizing that proximate cause is not clearly defined in this context, the court ruled that when a plaintiff alleges the presence of a global price fixing scheme, it is insufficient to claim that higher prices in the United States were solely the proximate cause of the higher prices abroad. Rather, in this setting, the overall conspiracy itself is the proximate cause of higher prices abroad. The court also disagreed with the MDL court s characterization of the case as distinguishable from Empagran II and Dram; namely, the MDL court distinguished this case on four grounds: (1) Plaintiff s domestic roots; (2) the locale of the transactions at issue; (3) the fact that Defendants targeted Plaintiff in the United States; and (4) Defendants anticompetitive conduct occurred in the United States. First, the court held that it was irrelevant that Plaintiff was a domestic company. The claims belonged to the Plaintiff s foreign affiliates and were assigned to the Plaintiff. Therefore the purchases were properly viewed as foreign transactions made by independent subsidiary entities. The court ruled that the fact that the parent entity was a United States corporation did not make it any more likely that the effect of Defendants conduct on the United States, and not the global nature of the overall conspiracy, gave rise to the Sherman Act claim.

21 Page 21 Second, the Northern District of Illinois found that the MDL court mischaracterized the locale of the transactions. The fact that purchasing decisions were made in the United States did not establish a proximate cause of the claim. For Sherman Act purposes, the injury occurred when the purchase was made abroad. Domestic approval was not the proximate cause, the court noted; instead, the conspiracy itself was the proximate cause. Evaluating grounds three and four together, the Northern District of Illinois held that the fact that Defendants targeted Plaintiff in the United States and that the anticompetitive conduct took place in the United States was irrelevant to the proximate cause analysis. The domestic effect of the anticompetitive conduct, not the conduct itself, must give rise to the Sherman Act claim. Because the court found that Plaintiff s claims did not qualify for the domestic injury exception, it revisited whether the claim was barred by the FTAIA s general rule. Plaintiff claimed that because the FTAIA does not bar Sherman Act claims based on imports, the FTAIA import exclusion should apply to its injuries because Defendants knew that price-fixed LCD panels would be incorporated into devices sold in the United States. The court held that the MDL court was correct in rejecting this claim because Plaintiff alleged that its own affiliates, and not Defendants, brought the goods into the United States, so there was no import conduct. The court further held that the MDL court was correct in rejecting Plaintiff s argument that the Defendants intent should be a factor in determining whether the goods were imports, because an intent-based standard would be difficult to apply and was unsupported by precedent. [Thanks to Mario Richards of Miles & Stockbridge]

22 Page 22 Filed Rate Royal Mile Co. v. UPMC, 2013 U.S. Dist. LEXIS (W.D. Pa. Sept. 27, 2013). In Royal Mile Co., Inc. v. UPMC, the District Court for the Western District of Pennsylvania held that the filed rate doctrine barred all of the Plaintiffs antitrust claims. The Court accordingly granted the Defendants motion to dismiss, but permitted the Plaintiffs an opportunity to amend. The Plaintiffs were purchasers of group health insurance from Highmark. The Defendants were Highmark, Inc. ( Highmark ), a health insurance provider, and the University of Pittsburgh Medical Center ( UPMC ), a health services provider. The Plaintiffs generally asserted that Highmark and UPMC conspired to protect their respective market shares by refusing to deal reasonably with each other s competitors, among other things. The alleged agreement allowed UPMC to impose monopoly rents upon the market by overcharging Highmark, knowing that Highmark would in turn abuse its monopoly status and pass on the excessive monopoly rents to its subscribers, the Plaintiff class. In their motions to dismiss the Plaintiffs second amended complaint, Highmark and UPMC argued that the Plaintiffs did not plead a proper measure of damages... because Plaintiffs measure of damages is barred by the filed rate doctrine because Highmark filed the rates it charged to Plaintiffs with the Pennsylvania Insurance Department ( PID ). The Court found that the Plaintiffs were requesting damages calculated by the difference between the approved rates they paid to Highmark and the rates they would have paid absent the alleged conspiracy. The Court held that the filed rate doctrine as set out in Keogh v. Chicago & Northwestern Ry. Co., 260 U.S. 156 (1922) barred the Plaintiffs claims because the Plaintiffs relied merely on the difference between the approved rates and hypothetical rates the PID would have approved. Such calculation, the Court held, is prohibited under Keogh and its progeny. The Plaintiffs also argued that the filed rate doctrine did not bar their claims, at least against Highmark, because they purchased group health insurance policies for which Highmark was not required to file rates with the PID. Highmark, on the other hand, argued that the law required existing hospital plan corporations, professional health services plan corporations and HMOs to file their initial base rate with PID, and that law applied to Highmark. The Court agreed, taking judicial notice of a certification from the PID, which stated that Highmark was a hospital plan and professional health organization; therefore the Court found that the PID required Highmark to file its initial base rate for group policies with the PID. The Plaintiffs further argued that even if the PID required Highmark to file group rates, the filed rate doctrine did not apply because the Pennsylvania statute at issue allowed

23 Page 23 Highmark to increase its rates by up to 15% without an additional filing with the PID. The Court disagreed, finding that the PID retained control over the rates charged by Highland, because the PID s approval of the base rate operated as an inherent approval of the statutorily permitted range of rates. Accordingly, the Court held that it could not engage in ratemaking to determine the rates the PID would have approved but for the alleged UPMC-Highmark conspiracy. Rather, the nonjusticiability strand of the filed rate doctrine required the Court to defer to the PID. Even though the Court found that the Plaintiffs sufficiently alleged certain facts that would support their 2 claims at this stage and that some indirect purchases may have standing, the Court found that the filed rate doctrine barred all of the Plaintiffs Sherman Act claims. The Court nonetheless granted the Plaintiffs leave to file an amended complaint. In so doing, the Court cautioned that any measure of damages that would require the court to engage in the ratemaking process or to second guess the determination of the PID with respect to approved legal rates likely would run afoul of the filed rate doctrine. [Thanks to Carrie Amezcua of McDermott Will & Emery]

24 Page 24 Baseball Exemption City of San Jose v. Office of the Comm r of Baseball, 2013 U.S. Dist. LEXIS (N.D. Cal. Oct. 11, 2013). In City of San Jose v. Office of the Commissioner of Baseball, the District Court for the Northern District of California held that baseball s exemption from the federal antitrust laws barred all of the Plaintiffs antitrust claims but not a related state tort claim. The Court accordingly granted the Defendants motion to dismiss federal and state antitrust and unfair competition claims, but denied Defendants motion to dismiss Plaintiff s tort claim. The Plaintiffs were the City of San Jose and two associated agencies focused on redevelopment efforts in the City of San Jose. The Defendants were the Office of the Commissioner of Baseball, the unincorporated entity that does business as Major League Baseball ( MLB ), and Commissioner Allan Bud Selig. Plaintiffs alleged that (i) MLB s policy of allocating exclusive team territories and (ii) its failure to act on a territorial dispute between the San Francisco Giants and the Oakland Athletics restrains competition in the bay area baseball market, perpetuates the Giants monopoly over the Santa Clara market, and creates anticompetitive effects that lead to consumer harm. Plaintiffs also brought state antitrust and unfair competition claims related to the same conduct and state tortious interference claims related to purported interference with Plaintiffs development contract with the Oakland Athletics. Defendants moved to dismiss all claims, arguing that Plaintiffs claims are barred by Federal Base Ball Club of Baltimore, Inc. v. National League of Professional Base Ball Clubs, 259 U.S. 200 (1922), and its progeny. Citing Major League Baseball v. Butterworth, 181 F. Supp. 2d 1316, 1331 (N.D. Fla. 2001), Defendants asserted that the longstanding exemption for the business of baseball extends to relocation decisions. In contrast, Plaintiffs argued that the baseball exemption applies only to the reserve clause and the other player employment arrangements specifically addressed in Federal Baseball, Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953), and Flood v. Kuhn, 407 U.S. 258 (1972). In support, Plaintiffs cited two decisions, one from a federal district court and the other from the Florida Supreme Court, related to the San Francisco Giants abortive plan to relocate to Tampa in the 1990s. See Piazza v. Major League Baseball, 831 F. Supp. 420 (E.D. Pa. 1993); Butterworth v. Nat l League of Prof l Baseball Clubs, 644 So.2d 1021 (Fla. 1994). Plaintiffs also argued that, because the Supreme Court s most recent decision on the baseball exemption Flood was limited to the reserve clause issue, stare decisis only required the Court to adhere to the exemption when the challenge concerned the reserve clause or similar arrangements. The Court rejected Plaintiffs argument, holding that the baseball exemption encompassed a broad range of conduct that includes relocation decisions. In doing so, the Court concluded that the great weight of decisions since Flood have interpreted the

25 Page 25 business of baseball exemption to extend to team relocation decisions. The Court found that [a]ll federal circuit courts that have considered the issue (the Eleventh, Seventh, Ninth, and Second Circuits) have not limited the antitrust exemption to the reserve clause, but have adopted the view that the exemption broadly covers the business of baseball. In doing so, the Court declined to follow the two relocation cases cited by Plaintiffs. Instead, the Court credited a subsequent federal district court decision, Major League Baseball v. Butterworth, 181 F. Supp. 2d 1316 (N.D. Fla. 2001), in which the district court read baseball s exemption broadly, and found that the Commerce Clause preempts associated state antitrust claims. The Eleventh Circuit affirmed that decision on appeal. Major League Baseball v. Crist, 331 F.3d 1177 (11th Cir. 2003). Because the Court held that baseball s exemption extends to encompass relocation decisions, the Court dismissed Plaintiffs federal antitrust claims. The Court also dismissed Plaintiffs state antitrust and unfair competition claims as preempted. Finally, the Court declined to dismiss Plaintiffs tortious interference claims, finding that Plaintiffs allegations rested on additional MLB actions not related to those underlying the antitrust claims. [Thanks to Keith Klovers of Kirkland & Ellis]

26 Page 26 Committee Leadership Chair: Gregory P. Luib Federal Trade Commission 600 Pennsylvania Avenue, NW Washington, DC Council Representative: Edward D. Cavanaugh St. John s University School of Law 8000 Utopia Parkway Queens, NY cavanage@stjohns.edu Vice Chairs: Vittorio E. Cottafavi Shearman & Sterling LLP 599 Lexington Avenue New York, NY vcottafavi@shearman.com Gregory M. Garrett Tydings & Rosenberg LLP 100 East Pratt Street Baltimore, MD ggarrett@tydingslaw.com Katherine Phillips Covington & Burling LLP 1201 Pennsylvania Avenue, NW Washington, DC kphillips@cov.com Edward B. Schwartz Steptoe & Johnson LLP 1330 Connecticut Avenue, NW Washington DC eschwartz@steptoe.com Young Lawyer Representative: Stephen M. Medlock Mayer Brown LLP 1999 K Street, NW Washington, DC smedlock@mayerbrown.com COPYRIGHT NOTICE Copyright 2014 American Bar Association. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. To request permission, contact the ABA s Department of Copyrights and Contracts via