L.A.

DODGERS Antitrust Exemption & Malpractice Suit

INN OF COURT PROGRAM FEBRUARY 2, 2012

Howard Fredman, Esq. Fredman/Knupfer/Lieberman LLP hsflawyer@aol.com

TAKEOVER POWERS OF MLB

Major League Baseball asserts it has the power and authority pursuant to its Constitution to revoke the ownership of any Major League Club . The MLB Constitution provides that the vote of three-fourths of the Major League Clubs may result in the involuntary termination of the rights, privileges and properties of a Major League Club. --Brief in Superior Court - Jamie McCourt v. Frank McCourt

MLBS CONSTITUTION
The rights, privileges and other property rights of a Major League Club hereunder may be terminated (ii) involuntarily, with the approval of three-fourths of all Major League Clubs, if the Club in question shall do or suffer any of the following: (f) Fail or refuse to comply with any requirement of the Commissioner; Major League Constitution Art. VIII, Sec. 4

What about the Antitrust Laws?

Federal Baseball Club v National League, 259 U.S. 200 (1922) (holding business of giving exhibitions of baseball is purely state affair and not interstate commerce). *Not Justice Holmes finest hour.+ Toolson v. New York Yankees, 346 U.S. 356 (1953) (per curiam decision upholding antitrust exemption based on baseballs reliance on Federal Baseball and Congresss failure to subject baseball to antitrust laws).

Flood v Kuhn,
407 U.S. 258 (1972).

Upheld antitrust exemption when Curt Flood challenged reserve clause after being traded from St. Louis to Philadelphia. Exemption upheld based on stare decisis and Congresss awareness of the exemption and subsequent inaction.

Supreme Court also held that baseball is a business engaged in interstate commerce.

Curt Flood Act of 1998

15 U.S.C. 1291

Limits scope of antitrust exemption: applies antitrust laws to MLB players the same way it applies to other professional athletes.

Antitrust exemption continues to apply to minor league players, umpires, broadcasting and franchise relocation issues, marketing or sales of entertainment products, licensing of IP, and the relationship between the Office of the Commissioners and franchise owners.

Antitrust Laws Apply to Other Sports

Boxing US v International Boxing Club, 348 U.S. 236 (1955)(The issue confronting us is not whethera previously granted exemption should continue, but whether an exemption should be granted in the first instance. And that is if for Congress to resolve.

Football Radovich v. NFL, 352 U.S. 445 (1957)(specifically limited Toolson to business of organized baseball).
Basketball Haywood v. NBA, 401 U.S. 1204 (1971)(Basketball does not enjoy exemption from the antitrust laws.)

American Needle, Inc. v. NFL,

130 S. Ct. 2201 (2010)
Overturned decision that enabled NFL to escape potential antitrust liability for its granting Reebok an exclusive merchandising license that prevented American Needle from making NFL-branded headware. In IP licensing, NFL teams acting collectively cannot be considered a single entity and are not immune from antitrust scrutiny. Rejected analogy of Copperweld Corp. v Independence Tube, holding parent and wholly owned subsidiary are incapable of conspiring. The key question was whether the alleged joint action was between separate economic actors pursuing separate economic interests such that the agreement deprived the marketplace of independent centers of decision-making, and therefore of diversity of entrepreneurial interests. Remanded for full rule of reason analysis: whether market activity enhances competition, which is ultimately good for the consumer, or hurts competition, which injures the consumer.

Malpractice Action
Bingham McCutchen, LLP v Frank H. McCourt, Suffolk, MA Superior Court declaratory relief action seeking declaration that the services performed by Bingham met the standard of care for professionals providing legal representation and did not cause loss with respect to ownership of Dodgers. McCourt had repeatedly threatened to sue Bingham for damages resulting from preparation of Marital Property Agreement.

Complaint dismissed on August 17, 2011.

Declaratory Judgment has never been used in MA to allow an entity accused of a tort to preemptively sue alleged victim because it upsets traditional right of injured plaintiff to choose when and where to litigate. McCourt still in midst of contentious divorce proceedings and disputes with MLB. Suit will necessarily require McCourt to waive his privilege as to attorney-client communications.