This is the final installment of a three-part series looking back at what has been an unusually eventful year for Major League Baseball in the courtroom. Part One recapped the legal maneuvering surrounding Alex Rodriguez’s suspension and the Oakland A’s proposed move to San Jose, while Part Two looked at MLB’s 2014 minimum wage and gender discrimination issues. This part concludes the series by reviewing the status of various television-related legal proceedings for MLB and its teams, as well as covering an assortment of other legal developments.

Television

Television revenues are vital to MLB’s business, so it should be no surprise that the league was involved in a series of important TV-related legal proceedings in 2014. Perhaps the most significant of these cases is Garber v. Office of the Commissioner of Baseball, a suit challenging MLB’s television policies under federal antitrust law.

Wendy Thurm has previously discussed the Garber suit on several occasions. By way of a brief recap, the case alleges that MLB’s television policies violate the Sherman Act in two ways: first, by imposing unreasonable blackout policies on fans; and second, by selling only league-wide pay-per-view subscription packages (MLB Extra Innings and MLB.tv) rather than allowing teams to offer their own individual out-of-market plans. Read the rest of this entry »

This is the second in a series of posts looking back at the most significant events in what has been an unusually eventful year for Major League Baseball on the legal front. Part One reviewed the legal maneuvering surrounding Alex Rodriguez’s suspension and the Oakland A’s proposed move to San Jose. This part now looks at baseball’s minimum wage issues and two potentially embarrassing gender discrimination suits filed against MLB and its teams in 2014.

MLB Pay Practices

MLB’s allegedly unlawful pay practices were the subject of considerable legal scrutiny in 2014. Most significantly, in February the league was hit with the first of two class action lawsuits filed on behalf of former minor league baseball players, cases asserting that MLB’s minor league salary scale violates federal and state minimum wage and overtime laws.

In Senne v. Office of the Commissioner, the plaintiffs contend that MLB has violated the Fair Labor Standards Act (FLSA) by paying minor league players as little as $3,300 per year, without overtime, despite often requiring players to work 50 or more hours per week. Moreover, as the suit notes, minor leaguers typically are not paid at all for their participation in spring training, fall instructional leagues, or mandatory offseason workout programs. All told, then, the suit claims that most minor league players receive well below the federally guaranteed minimum wage of $7.25 per hour.

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Like any multi-billion dollar organization, Major League Baseball faces its share of lawsuits in any given year. Even by its standards, though, 2014 was a particularly busy and eventful year for MLB on the legal front.

This week I’ll be reviewing and providing updates for the most significant events of the last year. In this installment, we’ll look back at the legal wrangling surrounding Alex Rodriguez’s season-long PED suspension and the on-going saga regarding the Oakland A’s proposed move to San Jose. Read the rest of this entry »

Following yesterday’s historic announcement by President Obama that the United States will re-establish full relations with Cuba, many baseball fans have been speculating what impact this news is likely to have on Major League Baseball. Cuba, of course, is a baseball hotbed, producing a number of impact MLB players in recent years (Jose Abreu, Yasiel Puig, Yoenis Cespedes).

In the long-term, normalized relations with Cuba could potentially result in a significant influx of Cuban talent into U.S. professional baseball, while also opening up other lucrative business opportunities for MLB. In the short-term, however, yesterday’s announcement will likely have little immediate impact on professional baseball in the United States, and if anything, might even temporarily decrease the flow of players defecting to the U.S. from Cuba. Read the rest of this entry »

Another week, another development on the minor league salary front. Less than six days after a federal antitrust lawsuit was filed challenging the minor league salary structure, Minor League Baseball’s (MiLB) vice president, Stanley Brand, announced at the Winter Meetings on Thursday that his organization would launch a vigorous lobbying campaign in 2015, asking Congress to pass legislation protecting the industry from federal minimum wage and maximum hour laws.

Brand’s announcement comes in response to two other class action lawsuits filed earlier this year alleging that the minor league pay scale violates the Fair Labor Standards Act (FLSA) (Wendy Thurm previously discussed the first of these suits here). These cases – filed on behalf of two groups of former minor league players – contend that once all of the hours minor league players work each year are accounted for (including spring training, the regular season, and fall instructional leagues), most minor leaguers are effectively paid less than the federal minimum wage of $7.25 per hour. And despite often working more than 50 hours per week, minor league players do not receive overtime.

Interestingly, like the minor league antitrust lawsuit filed a couple weeks ago – which appears to be covered by baseball’s antitrust exemption – professional baseball is arguably already exempt from the FLSA as well under an exception covering “seasonal amusement and recreational establishments” (29 U.S.C. 213(a)(3)). Under the exception, any amusement-related business (theme parks, carnivals, circuses, and the like) that operates on a seasonal basis – basically seven months or less per year, although the law is a little more nuanced – is not required to pay its workers minimum wage or overtime. Read the rest of this entry »

In the latest in a series of legal challenges to the minor league salary structure, a new federal class-action lawsuit filed on Friday alleges that Major League Baseball’s treatment of minor league baseball players runs afoul of the Sherman Antitrust Act. In Miranda v. Office of the Commissioner of Baseball, four former minor league players (Sergio Miranda, Jeff Dominguez, Jorge Padilla and Cirilo Cruz) contend that MLB teams have violated federal antitrust law by illegally conspiring to fix minor league players’ salaries at below-market rates. Still, despite the merits of the players’ claims, the suit’s odds of success are relatively low.

The Miranda suit alleges that MLB unlawfully suppresses minor league players’ salaries in a variety of ways. By subjecting North American amateur players to the first-year player draft each June, Major League Baseball prevents draftees from selling their services to the highest bidder — instead forcing them to negotiate with only a single team. MLB then artificially reduces the size of the signing bonuses that entry level players receive through its domestic and international signing bonus pool restrictions.

Once players have entered the minor leagues, their annual salaries are then largely dictated on a take-it-or-leave-it basis by their teams in accordance with MLB-imposed, minor league salary “guidelines.” And because MLB teams retain the exclusive rights to their minor league players’ services for seven years, many players go their entire careers without ever being able to sell their services in a competitive market. As a result, the suit asserts that most minor league players earn as little as $3,000 to $7,500 per year. Read the rest of this entry »

When deciding who will represent them in contract negotiations, professional baseball players can choose from hundreds of certified agents. There are big shops like Boras Corporation, Excel Sports Management (Casey Close) and Wasserman Media Group (Arn Tellum), and smaller agencies like Frye McCann, Sosnick Cobbe and Jet Sports Management. Whatever their size, most agencies charge a commission between four and five percent of the value of the player’s pro contract. For that commission, the agency does everything: negotiate the contract, arrange for equipment endorsement deals, and advise the player on financial planning and taxes. It’s a concierge approach: the player is cared for 24/7 in all aspects of his life, whether at home or on the road.

Proformance Baseball is trying a different approach. The Richmond, Virginia agency was created by Jeff Beck and Bean Stringfellow more than 20 years ago. The two met in Virginia Tech’s baseball program in the 1980’s. Stringfellow was drafted by the New York Yankee in 1984 (didn’t sign) and then re-drafted by the Atlanta Braves in 1985 but never made it to the majors. Beck started his career in the capital markets.

Proformance dropped its commission to one-and-a-half percent and will stick to what Stringfellow calls “the business of baseball” — negotiate the player’s contract and equipment deals, advise him on baseball rules, and answer questions when the player reaches out. No more flying to have lunch with the player six times a season. No more marketing efforts to land local appearances and commercials. No more financial planning and taxes.As Beck and Stringfellow see it, most agencies charge four to five percent commission to cover the costs of all the other services, whether a player wants or needs them.

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A three-judge panel of the U.S. Court of Appeals for the Ninth Circuit heard arguments today on the existence and scope of Major League Baseball’s exemption from federal antitrust law. The arguments arose in the city of San Jose’s federal antitrust lawsuit against MLB over the league’s failure to allow the Oakland Athletics to build a new ballpark in, and move to, San Jose.

San Jose sued MLB last summer claiming that the league’s rules creating exclusive operating territories for teams — and requiring a three-fourths vote of owners for an existing team to move into another team’s territory — violate federal antitrust law. Upon MLB’s motion, the federal district court in San Jose dismissed the city’s claims on the grounds that MLB enjoys an exemption to federal antitrust law dating to the U.S. Supreme Court’s 1922 decision in the Federal Baseball Club case. That decision was based on a view that baseball was a game, and not a business, and thus not subject to antirust law.

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Bud Selig has been giddy watching baseball teams attract bigger and bigger local television deals. More local TV revenue to a team means more money for the league to spread via revenue sharing and greater competitive balance. And Bug Selig sure loves competitive balance. On a recent visit to PNC Park, Major League Baseball’s commissioner told Pittsburgh Pirates broadcasters that he got “goosebumps” watching the Reds and Pirates square off in last year’s postseason.

But big local TV contracts aren’t all Skittles and puppies. Certainly not for fans who are forced to pay higher and higher cable and satellite TV bills to watch their home team. Nor for cable and satellite TV customers who don’t care about baseball but have to pay the higher prices as part of their bundled programming.

It turns out that big local TV contracts aren’t always good news for teams either. That has turned Selig’s mood quite sour.

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Sports Business Journal published an article on Monday sounding the alarm about the Los Angeles Dodgers’ plummeting local TV ratings. Last season, the Dodgers averaged 226,000 households per game telecast. This season, the average is 40,000 households.

Of course the Dodgers’ ratings have plummeted. The team’s new regional sports network — SportsNetLA — isn’t available to fans who don’t subscribe to Time Warner Cable, because the network has been unable to reach distribution deals with the other cable and satellite companies like DirecTV and DISH. Only 30% of households in Los Angeles have Time Warner Cable and, thus, access to SportsNetLA. But the Dodgers lead the majors in attendance with 2,277,891 tickets sold through 49 home games, for an average of 46,487 per game.

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