Antitrust Law Daily Two petitions ask High Court to weigh in on baseball antitrust exemption
Wednesday, January 31, 2018

Two petitions ask High Court to weigh in on baseball antitrust exemption

By Peter Reap, J.D., LL.M.

In two separate petitions filed recently with the U.S. Supreme Court, the owners of rooftop businesses outside Chicago’s Wrigley Field and major league baseball scouts, have asked the High Court to weigh in on baseball’s antitrust exemption. In Right Field Rooftops v. Chicago Baseball Holdings (Dkt. No. 17-1074), the owners of rooftop businesses overlooking Wrigley Field have asked whether monopolization or attempted monopolization of rooftop businesses by the owner of the Chicago Cubs baseball franchise is exempted from the Sherman Antitrust Act attack as "the business of professional Baseball" and whether the Supreme Court’s longstanding baseball antitrust exemption should be reversed. In Wyckoff v. Office of the Commissioner of Baseball (Dkt. No. 17-1079), two former baseball scouts who claim that Major League Baseball (MLB) illegally suppressed their wages also contend that the baseball antitrust exemption should be eliminated.

Rooftop businesses. The owners of businesses situated outside the grounds of Wrigley Field seek reversal of a Seventh Circuit decision holding that Major League Baseball’s antitrust exemption protected the Chicago Cubs from claims that renovations to Wrigley Field obstructed their views, despite a license agreement giving them the right to sell their views of live Cubs baseball games. In 2002, the Chicago Cubs Baseball Club sued the rooftop owners for misappropriating Cubs’ property in charging admission fees to watch Cubs games. Under a 2004 settlement to that lawsuit, the rooftop businesses agreed to license agreements under which they would pay the Cubs 17 percent of their gross revenues in exchange for views into Wrigley Field. The license agreements also contemplated future renovations and expansions to Wrigley Field which could obscure some of the rooftop views, in which case the rooftop owners would receive compensation from the Cubs under various formulations.

In 2009, the Ricketts family purchased the Cubs and Wrigley Field, subject to the existing license agreements. Subsequently, Ricketts-controlled entities purchased many, but not all, of the rooftop businesses. In 2014, after seeking and obtaining required approvals from City of Chicago, the Cubs began renovations to Wrigley Field, including new and expanded signage and video boards, some of which partially obscured the views from the rooftops. In 2015, certain of the remaining rooftop owners filed suit against the Cubs.

The rooftop owners alleged that the Cubs had engaged in monopolistic behavior in violation of the Sherman Act (1) by attempting to set a minimum price for tickets; (2) by attempting to purchase all rooftop businesses and successfully acquiring several of them; (3) by constructing a video board that blocked the rooftop's views; and (4) by using the City approval process to threaten remaining rooftop owners with blocking rooftop views as leverage to force a sale of the rooftop businesses to the Cubs at below market prices.

The federal district court dismissed the monopolization claims, finding that (1) Major League Baseball’s antitrust exemption applied to the Cubs; (2) the rooftop owners failed to establish a plausible relevant market; and (3) the Cubs could not be limited by antitrust law from distributing their own product. The Seventh Circuit affirmed the district court's dismissal of the rooftop owners' claims of attempted monopolization, basing its holding on baseball’s antitrust exemption.

In their petition, the rooftop owners contend that baseball’s "antitrust exemption is an accident of timing, an "anomaly" and "aberration" existing only because the question of the Sherman Act’s applicability to professional baseball first reached this Court in 1922, when the definition of "interstate commerce" was substantially more limited." They argue that there is a split among the circuits over how broadly to apply the antitrust exemption—either narrowly limiting it to structural and organizational issues and necessary control and coordination by MLB—or much more broadly interpreting "professional baseball" to apply to anything related to the game of baseball, when played by MLB teams. The High Court should step in and resolve this conflict among the circuits, the petition asserts.

In the alternative, the Supreme Court should abolish the exemption entirely, the rooftop owners contend. An antitrust exemption no longer serves any purpose today, in particular, one of the main reasons behind the antitrust exemption, baseball’s reserve system, no longer exists. Further, now that Congress has legislated that the antitrust laws do not apply to matters arising out of the employment of major league baseball players, the exemption is moot, and should have no further effect.

Baseball scouts. In a second petition, two former MLB scouts seek to overturn a ruling by the Second Circuit that baseball’s antitrust exemption barred their claims against the former Commissioner of MLB, the Office of the Commissioner of Baseball, and the clubs that comprise the MLB for conspiring to decrease competition in the labor market for professional baseball scouts. The appellate court refused to adopt a narrower reading of baseball’s antitrust exemption than what was established in U.S. Supreme Court and Second Circuit precedent.

The scouts contend that what makes the issue of baseball’s antitrust exemption so worthy of the Supreme Court’s attention is not so much a split among the circuits in how it should be applied, but rather a united chorus of lower courts decrying the exemption in one breath, but then applying it expansively in the next. They argue that the Second Circuit erred by not applying Supreme Court precedent requiring antitrust exemptions to be narrowly construed. They assert that the High Court should grant both their petition and the Right Field Rooftops petition because both present distinctive fact patterns under the exemption.

Attorneys: James R. Figliulo (Figliulo & Silverman, PC) for Right Field Rooftops, LLC d/b/a Skybox, Right Field Properties, LLC and 3633 Rooftop Management, LLC d/b/a Lakeview Baseball Club. Robert L. King (Korein Tillery LLC) for Jordan Wyckoff and Darwin Cox.

Companies: Right Field Rooftops, LLC d/b/a Skybox; Right Field Properties, LLC; 3633 Rooftop Management, LLC d/b/a Lakeview Baseball Club; Chicago Baseball Holdings, LLC; Office of the Commissioner of Baseball.

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