History of Labor Struggles in MLB: The Supreme Court and Baseball’s Antitrust Exemption

photo: Judge Kennesaw Mountain Landis

The Cardinal Nation’s series highlighting the history of labor struggles in MLB continues with various attempts to challenge baseball’s antitrust status in the early 1900’s. The author is Marilyn Green, a retired attorney with background in employment law.

Part 2 of this History of Labor Struggles series concluded with the rise and demise of the Fraternity of Professional Baseball Players and the Federal League. Though the Federal League’s impact on the operation of baseball in the brief time of its existence was minimal, its long-term impact on the game into the future was massive.

Prior to the emergence of the Federal League, courts had only been involved in labor disputes as they pertained to interpretation and enforcement of contracts. The Sherman Antitrust Act was passed by Congress in 1890, the year the Players’ League came into existence. As early as 1887, the leader of the Brotherhood, John Montgomery Ward, accused the National League of using the reserve clause as the means to become a monopoly. With the passing of the Sherman Act, the legal means existed to test this theory, but the Brotherhood did not, nor did either of the succeeding players organizations. Neither of the competing leagues, the Players’ League and the American League, made a move in that direction either. The reason was simply that they didn’t need to. The players had been winning in the courts in suits over the reserve clause. The Players’ League failed quickly, and the American League successfully maneuvered their way into equal footing with the National League by other means.

It wasn’t until the Federal League made its unsuccessful run that any party had a reason or the means to use the Sherman Act to challenge the reserve clause. An argument of sorts in the direction of antitrust accusations occurred prior to the Federal League challenge in one of the numerous injunctions by National League teams to prevent a player from jumping.

In 1902, the St. Louis Cardinals filed suit to prevent pitcher Jack Harper from signing with the St. Louis Browns of the American League. The suit was decided in the same manner as all others had (excepting the Napoleon Lajoie case – see Part 2) – against the Cardinals. Harper had made an additional argument to the court in his case that the reserve clause was against public policy because of a conspiracy involving the Cardinals and the league to fix player salaries. The argument was not explicitly addressed by the judge as a violation of the Sherman Act because other reasons were present to deny the injunction.

Noises were also made by various entities and individuals in the public sphere over the years prior to 1912 complaining about the monopolistic nature of Major League Baseball. Though no serious threats in that direction came to fruition, the issue was kept active in the minds of the public for years. The first serious incident came in 1912 when members of Congress made the threat via a resolution to investigate baseball as a trust in restraint of trade. Congress never voted on the resolution and the matter died for the time. The resolution was revived in 1913 and briefly frightened the leagues enough that they took action to stave off any investigation by bribery in the form of free season passes to influential members of Congress. The second resolution died a similar death to the first.

Hal Chase

In July 1914, the antitrust question was fully litigated for the first time. The case involved the first baseman of the Chicago White Sox, Hal Chase, who jumped to the Federal League Buffalo Buff-Feds. The case came to trial in Buffalo and the White Sox presented their case. When it was the turn for Chase, his attorney argued for five hours on the applicability of the Sherman Act to not only Chase’s case but to baseball as an organization. The attorneys for the White Sox were surprised by the argument and submitted briefs on the issue arguing that baseball was not covered by the Sherman Act because it was not operating in interstate commerce. The Judge ruled in favor of Chase but did not rule that that the Sherman Act applied because of the interstate commerce argument. He did however rule that baseball was in fact a monopoly that violated the common law of the State of New York. The injunction was denied, and Chase was free to sign with the Buff-Feds.

The Federal League was operating in the red by the end of the 1914 season. As such, the League determined that their only recourse was to file an antitrust suit against the National and American Leagues, all individual clubs in both leagues and the President of each league. The suit was filed in the Federal court in Chicago in January 1915 and requested as relief the dissolution of both leagues and a ruling that major league baseball was a monopoly in violation of the Sherman Act.

The case was brought before Federal judge Kennesaw Mountain Landis, a noted trust buster who had imposed a fine of $29 million against Standard Oil in 1907 for violations of the Elkins Act. Landis was also a rabid baseball fan, and the defendants were confident he would protect their interests.

The Federal League attorney was Keene Addington, who had been the attorney for Hal Chase against the White Sox. Charles Wharton Pepper was the defendants’ lead counsel. Throughout the four-day hearing, the main issue argued was whether baseball was commerce covered by the Sherman Act. Pepper argued that the labor of the players was not commerce, and that baseball was a game the purpose of which was to provide amusement that was a matter of local concern, not interstate commerce. Addington in opposition argued that baseball was a national game that regularly transported players and equipment across state lines and was most definitely interstate commerce. The hearing was over quickly and both sides hoped for a resolution before the 1915 season started.

The parties’ hopes were dashed. Landis sat on a decision for a full year. The Federal League was so broke that a 1916 season was impossible. The two sides entered into an agreement in January 1916 to dissolve the Federal League with the National League and American League buying out Federal League teams in cities with major league teams. In turn the Federal League would drop the antitrust suit pending before Landis. The Federal League teams in Kansas City, Buffalo, and Baltimore were excluded in the settlement. Baltimore attempted to purchase a major league franchise for their city, but the owners turned them down.

In February 1916, the parties went before Judge Landis to terminate the lawsuit. Baltimore was the sole club to object to the termination. Landis dismissed the suit but without prejudice to the Baltimore club, leaving them free to pursue their own antitrust suit. Landis then explained his reasons for delaying his decision. He stated that he delayed his decision because he felt compelled to rule for the Federal League and he did not want to destroy the game he loved. Major League Baseball rewarded Landis by making him their first commissioner four years later.

In March 1916, the Baltimore Terrapins filed an antitrust suit against Major League Baseball in federal court in Philadelphia. The Terrapins named all the same defendants as the Federal League suit plus three additional defendants. They were Federal League president James Gilmore, and the Federal League owners of the teams in Chicago and Newark. These three men were responsible for the settlement that excluded Baltimore. The suit sought treble damages of $900,000 under the Sherman Act but did not seek the dissolution of Major League Baseball.

The trial was postponed several times due to attempts at a settlement but finally was scheduled for trial in June 1917. Four days after the trial began, Baltimore dropped the suit with no explanation. It was rumored that a settlement was imminent. In September 1917, the Terrapins refiled the suit, this time in Federal court in Washington D.C. After more than a year of lengthy delay due to various complications, the case came to trial before a jury in March 1919.

During the trial, Major League Baseball felt uneasy. The lawyers for the Terrapins put on a strong case, and the new President of the National League feared the D.C court judge, unlike Landis, was not friendly to their cause. This turned out to be correct. When after all the evidence and testimony was presented, the judge instructed the jury in a manner that gave them no choice but to find that Major League Baseball was indeed an illegal monopoly. The jury awarded the Terrapins $240,000 in damages, less than they requested, but the ruling itself was the most important.

Major League Baseball appealed the case to the D.C. Court of Appeals. The case was argued in October 1920, the same time in which the Black Sox Scandal broke over the alleged fixing of the 1919 World Series. Baseball had a lot on its plate. Once again Major League Baseball argued that the game of baseball was not interstate commerce. In December 1920, the D.C. Court of Appeals unanimously agreed. The Court remanded the case back to the District Court for a new trial on the issue of whether Major League Baseball violated common law, a separate claim that the Terrapins had raised but which had not been decided.

Judge OIiver Wendell Holmes

The Terrapins asked the Court of Appeals to change the order to a simple reversal of the District Court decision to enable them to go directly to the Supreme Court. The D.C. Court of Appeals granted their request.

Federal Baseball Club of Baltimore, Inc v. National League of Professional Baseball Clubs, et al, 259 U.S 200 (1922) was argued on April 19, 1922, before the Supreme Court of the United States and decided on May 29, 1922. In a unanimous decision written by Justice Oliver Wendell Holmes the Court ruled that Major League Baseball was not interstate commerce for the purposes of the Sherman Antitrust Act. Holmes wrote:

“The business is giving exhibitions of baseball, which are purely state affairs. It is true that, in order to attain for these great exhibitions the great popularity that they have achieved, competitions must be arranged between clubs between different cities and states. But the fact that, in order to give the exhibitions, the League 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.”

The Court in Federal Baseball Club, did not, as believed, grant baseball an antitrust exemption. The Court merely ruled that Congress lacked the power to apply the Sherman Act to baseball.

Thirty-one years later, in 1953, the Supreme Court decided Toolson v. New York Yankees 346 U.S 356 (1953). In that case the Supreme Court ruled that since Congress failed to act since Federal Baseball Club to bring baseball under the purview of antitrust laws by legislation, Congress implicitly intended to grant baseball an antitrust exemption.

Since Federal Baseball Club and Toolson were decided, both decisions have been roundly criticized, more so for Toolson.

Neither case was the end for baseball’s antitrust exemption. It would be revisited two decades later.

To be continued…

Prior articles in this series

History of Labor Struggles in Major League Baseball: The Early Years

History of Labor Struggles in MLB: The Rise of the AL and Road to Antitrust Exemption

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