Flood v. Kuhn, 608

• Decision Date: 07 April 1971
• Docket Number: Docket 35424.,No. 608,608
• Citation: 443 F.2d 264
• Parties: Curtis C. FLOOD, Plaintiff-Appellant, v. Bowie K. KUHN et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

443 F.2d 264 (1971)

Curtis C. FLOOD, Plaintiff-Appellant, v. Bowie K. KUHN et al., Defendants-Appellees.

No. 608, Docket 35424.

United States Court of Appeals, Second Circuit.

Argued January 27, 1971.

Decided April 7, 1971.

Arthur J. Goldberg, Jay H. Topkis, Max Gitter, William D. Iverson, Paul, Weiss, Goldberg, Rifkind, Wharton & Garrison, New York City, for plaintiff-appellant.

Paul A. Porter, Victor H. Kramer, Douglas G. Robinson, Arnold & Porter, Washington, D. C., George S. Leisure, Jr., John E. Tobin, Donovan, Leisure, Newton & Irvine, New York City, for defendant-appellee Kuhn.

Louis L. Hoynes, Jr., Louis F. Carroll, Mark F. Hughes, Barry Rona, Robert J. Kheel, Willkie, Farr & Gallagher, New York City, Alexander H. Hadden, James P. Garner, G. Warren Daane, Sargent Karch, Baker, Hostetler & Patterson, Cleveland, Ohio, for all defendants-appellees except Kuhn.

Before WATERMAN, MOORE and FEINBERG, Circuit Judges.

WATERMAN, Circuit Judge:

Plaintiff and his able counsel have undertaken a comprehensive attack on professional baseball's "reserve system," which, pursuant to nationwide agreements among clubs, effectively restricts a baseball player, if he desires to play professional baseball at all, to contract negotiations with that club in organized baseball which first employs or "reserves" him or with that club's assignee club, and any subsequent assignee clubs, to which in the parlance of the baseball business he has been "sold" or "traded." After an extensive trial below the complaint was dismissed and, with the benefit of an all-inclusive record, this appeal followed. Four counts of plaintiff's complaint are here involved:¹ the first alleges that the reserve system and its boycott sanctions violate the Sherman Act, the second alleges violations of the antitrust laws of the states and the foreign country, Canada, where defendants conduct their business, the third alleges violations of the common law, and the fourth challenges the reserve system under the Thirteenth Amendment. Federal jurisdiction on the second and third counts is premised on diversity of citizenship. For the reasons stated below, we are compelled to affirm the district court's decision.

I.

In Federal Baseball Club v. National League, 259 U.S. 200, 42 S.Ct. 465, 66 L. Ed. 898 (1922), a unanimous Supreme Court speaking through Mr. Justice Holmes held that the business of organized baseball was not subject to the Sherman Act because it did not constitute interstate commerce, although it was explicitly pointed out in the opinion that the clubs composing the Leagues are in different cities and, for the most part, in different states, and that when the clubs meet to play against one another in public exhibitions for money the clubs cross state lines in order to make the meetings possible. In 1953 the Court, with two Justices dissenting, declined, without any reexamination of the underlying issues, to review its 1922 approach despite the considerable change the Court itself had fostered during the intervening thirty years in the definition of "interstate commerce." The Court indicated that, inasmuch as those interested in the business of organized baseball had relied for 30 years upon the ruling in Federal Baseball, remedial action was better left to Congress. Toolson v. New York Yankees, 346 U.S. 356, 74 S.Ct. 78, 98 L.Ed. 64 (1953). In 1957, in contrast, the Court held that the Sherman Act was applicable to professional football. Radovich v. National Football League, 352 U. S. 445, 77 S.Ct. 390, 1 L.Ed.2d 456 (1957).

Although faced with the seemingly inconsistent decisions in Toolson and Radovich, our court only last summer refused, in Salerno v. Amercan League, 429 F.2d 1003 (2 Cir. 1970), cert. denied, Salerno v. Kuhn, 400 U.S. 1001, 91 S.Ct. 462, 27 L.Ed.2d 452, 1971,² to depart from the Supreme Court's holding in Toolson. As we stated in Salerno:

We freely acknowledge our belief that Federal Baseball was not one of Mr. Justice Holmes\' happiest days, that the rationale of Toolson is extremely dubious and that, to use the Supreme Court\'s own adjectives, the distinction between baseball and other professional sports is "unrealistic," "inconsistent" and "illogical." Radovich v. National Football League, 352 U.S. 445, 452, 77 S.Ct. 390, 1 L.Ed.2d 456 (1957). * * * However, * * * we continue to believe that the Supreme Court should retain the exclusive privilege of overruling its own decisions, save perhaps when opinions already delivered have created a near certainty that only the occasion is needed for pronouncement of the doom. While we should not fall out of our chairs with surprise at the news that Federal Baseball and Toolson had been overruled, we are not at all certain the Court is ready to give them a happy despatch. 429 F.2d at 1005.

We adhere to the sentiments we expressed in Salerno and are compelled to affirm the dismissal of plaintiff's first count.³

II.

We treat together plaintiff's second and third counts, alleging violations of state antitrust laws and violations of the common law.⁴ At the threshold we find nothing in Federal Baseball or in Toolson which would indicate, as defendants urge, that the Supreme Court exempted baseball. from all antitrust regulation. Nor, on the other hand, do these cases hold, as plaintiff urges, that state antitrust laws apply to baseball. These cases speak only to the applicability of federal antitrust policies: whether state antitrust laws might apply was not directly decided. Thus, we are faced with a question of first impression, and we must consider whether application of state antitrust law to professional baseball is barred by a federal pre-emption of the field under the Commerce Clause.

It appears to be without question that, today, professional baseball, with its complex web of franchises, farm teams and recruiters, and its multi-million dollar contracts with television and radio networks, is interstate commerce. Our difficulty lies in determining to what extent, if at all, the states are precluded from antitrust regulation of interstate commerce. See Note, The Commerce Clause and State Antitrust Regulation, 61 Colum.L.Rev. 1469 (1961). The Supreme Court has not, to our knowledge, expressed any opinion as to the outer limits of state antitrust policy, although it has clearly held that state antitrust policy is not ousted from the regulation of local matters which may also be affected by federal laws. See Watson v. Buck, 313 U.S. 387, 403-404, 61 S.Ct. 962, 85 L.Ed. 1416 (1941); Giboney v. Empire Storage & Ice Co., 336 U.S. 490, 495, 69 S.Ct. 684, 93 L.Ed. 834 (1949). Therefore, we turn for guidance to cases involving other areas of state regulation.

Plaintiff argues that recent Supreme Court decisions have evidenced a trend toward the requiring of an actual conflict, as opposed to a potential conflict, resulting from differing state regulation if state action is to be precluded under the Commerce Clause.⁵ He asserts that, with reference to control over baseball's reserve system, there is no actual conflict among the requirements of state antitrust laws. While we recognize this trend, we do not consider this distinction between actual and potential conflicts to be the sole criterion for finding an impermissible burden on interstate commerce. For example, in taxation cases, there is no conflict between two states taxing the same property, but there may well be a burden on interstate commerce. Norfolk & W. R. Co. v. Missouri State Tax Comm., 390 U.S. 317, 323-325, 88 S.Ct. 995, 19 L.Ed.2d 1201 (1968). Also, where the nature of an enterprise is such that differing state regulation, although not conflicting, requires the enterprise to comply with the strictest standard of several states in order to continue an interstate business extending over many states, the extra-territorial effect which the application of a particular state law would exact constitutes, absent a strong state interest, an impermissible burden on interstate commerce. Southern Pacific Co. v. Arizona, 325 U.S. 761, 774-775, 65 S.Ct. 1515, 89 L.Ed. 1915 (1945).

Professional baseball clubs, although existing as separate legal entities, are organized into so-called leagues for competitive play and are dependent on the league playing schedule to further the ends of their sports competition. Therefore, it is the league structure at which any state antitrust regulation must be aimed if organized professional baseball is not to be severely fragmented. On the one hand, it is apparent that each league extends over many states, and that, if state regulation were permissible, the internal structure of the leagues would require compliance with the strictest state antitrust standard. The consequent extra-territorial effect of necessary compliance would be considerably more far-reaching than that in Southern Pacific Co. v. Arizona, supra. On the other hand, we do not find that a state's interest in antitrust regulation,⁶ when compared with its interest in health and safety regulation, is of particular urgency. Hence, as the burden on interstate commerce outweighs the states' interests in regulating baseball's reserve system, the Commerce Clause precludes the application here of state antitrust law.

We readily acknowledge that plaintiff is caught in a most frustrating predicament, a predicament which defendants have zealously seized upon with great perspicacity. On the one hand, the doctrine of stare decisis⁷ binds the plaintiff because of an initial holding that baseball is not "interstate commerce" within the Sherman Act, and, on the other hand, after there have been significant changes in the definition of "interstate commerce," he is now told that baseball is so uniquely interstate commerce that state regulation cannot apply.⁸ However, in our own defense, we do not consider our decision to be internally inconsistent. In disposing of the Sherman Act count in plaintiff's complaint, we are bound by Supreme Court dec...