Eight Major League Baseball teams won an initial victory on Wednesday in two federal lawsuits contesting MLB’s minor league pay practices under the minimum wage and overtime laws. At the same time, however, the judge denied the league a potentially more sweeping victory in the cases.
The two lawsuits were filed in California last year by former minor league players who allege that they received as little as $3,300 per year, without overtime, despite routinely being required to work 50 or more hours per week during the playing season (in addition to mandatory off-season training). MLB and its thirty teams responded to the suit by challenging the plaintiffs’ claims on a variety of grounds. Wednesday’s decision considered two of these defenses in particular.
First, 11 of the MLB franchises argued that they were not subject to the California court’s jurisdiction and therefore must be dismissed from the lawsuit. Second, all 30 MLB teams argued that the case should be transferred from California to a federal court in Florida, which they argued would be a more convenient location for the trial. In its decision on Wednesday, the court granted MLB a partial victory, agreeing to dismiss eight of the MLB defendant franchises from the suit due to a lack of personal jurisdiction, but refusing to transfer the case to Florida.
With respect to the jurisdiction issue, 11 MLB teams (Atlanta, Baltimore, Boston, the Chicago White Sox, Cleveland, Detroit, the New York Yankees, Philadelphia, Pittsburgh, Tampa Bay, and Washington) all contended that they did not have any physical presence in California, and therefore were not subject to the California court’s jurisdiction. As I noted on Tuesday, courts will generally only force a party to defend itself in a particular state if it maintains a permanent presence or a sufficient level of business operations in the jurisdiction. This prevents parties from having to defend themselves in far away states that have little to do with the dispute.
The 11 teams each argued in particular that they do not have any offices located in California, do not affiliate with any California-based minor league teams, employ only a handful of scouts in the state, and travel to California at most only a few times per season to play a dozen or so MLB games. Taken together, the teams argued that these contacts were insufficient to force the clubs to defend themselves in California, pointing to a number of prior court decisions holding that professional sports teams are not subject to jurisdiction in a different state simply because they play a few games there each year.
In response, the minor league plaintiffs argued that jurisdiction did exist over these teams in light of the fact that they each, on average, employ six scouts in California, while also each employing roughly 25 minor league players from the state. Moreover, they noted, because MLB teams share 34% of their local revenues, all franchises profit from games played in California. Along these same lines, the plaintiffs pointed out that every MLB franchise receives over $113,000 each year in revenue generated in California by MLB Advanced Media – the company that runs the MLB.tv streaming service – and another $52,000 per year in California-based profits from the MLB Network.
The presiding judge in the case – Judge Joseph C. Spero – largely sided with the MLB defendants on the jurisdiction issue in his decision on Wednesday. Specifically, he ruled that his court did not have jurisdiction over eight of the teams due to their lack of a sufficient presence in California. However, he determined that three of the teams – Detroit, Pittsburgh, and the Yankees – had each subjected themselves to jurisdiction in the state by specifically scouting and communicating with one or more of the plaintiffs in California (the other eight teams had not been shown to have scouted any of the minor leaguers named as plaintiffs in the suit in the state). As a result, Atlanta, Baltimore, Boston, the White Sox, Cleveland, Philadelphia, Tampa Bay, and Washington were all dismissed from the case.
With regards to the motion to transfer the case to Florida, however, Judge Spero ruled in favor of the plaintiffs, opting to keep the suit in California. MLB had argued that Florida would be a more convenient location for the case, citing the fact that 15 MLB teams hold spring training in Florida, while another 30 minor league teams are located in the state (compared to just 12 in California). In reality, though, MLB was undoubtedly hoping to take advantage of favorable legal precedent in Florida, as courts in the state have previously held that minor league baseball teams are seasonal operations immune from the federal minimum wage and overtime requirements.
The plaintiffs, meanwhile, asserted that California was the most convenient location for the suit since many more minor leaguers hail from the state than anywhere else (including Florida), with 40% of the named plaintiffs in the case living in or around California. Judge Spero agreed with the minor leaguers, concluding that California was at least an equally, if not more, convenient state for the parties on the whole.
Ultimately, neither of Judge Spero’s ruling were unexpected, as he had previously suggested back in February that he was inclined to dismiss several of the defendants from the suit on jurisdiction grounds, but deny MLB’s motion to transfer the case.
Moving forward, although the plaintiffs are undoubtedly disappointed that the court dismissed eight of the teams from the case, winning the right to keep the suit in California was certainly the more important of the two issues decided by the court. Indeed, in light of the legal precedent discussed above, had the case been moved to Florida, MLB would likely have succeeded in having all of the plaintiff’s federal legal claims dismissed, forcing the minor leaguers to rely on a hodge-podge of different state-level minimum wage laws. This would have made it more difficult for the plaintiffs to achieve their goal of changing MLB’s minor league pay practices nationwide.
Meanwhile, despite seeing eight MLB teams released from the case, the minor league plaintiffs can still proceed in the suit against the other 22 clubs. And should they succeed in proving that these remaining franchises have violated the law, then any ruling in the case would almost certainly result in all MLB teams modifyisng their pay practices. So the plaintiffs’ goal of reforming the minor league salary scale is still very much alive despite Wednesday’s ruling. Moreover, the plaintiffs could still pursue their claims against the eight teams that were dismissed from the suit by filing new cases against them in different states.
That having been said, although the eight dismissed teams could still potentially see new cases filed against them elsewhere, for the time being Wednesday’s decision was an important victory for these franchises. Not only are they no longer at risk of being found to have violated the law in the existing suit, but they also will not need to provide any additional information to the plaintiffs during the discovery phase of the case. This means that they will not have to make their executives available for depositions, for instance, nor collect and produce the thousands of pages of evidence the plaintiffs will likely request from the remaining defendants.
All in all, though, the two minor league minimum wage lawsuits continue to pose a significant threat to MLB’s current minor league pay practices. One can thus expect that MLB will continue to pursue every possible legal avenue in defense of its existing minor league pay scale. Indeed, just earlier this week MLB filed a different motion to dismiss some of the plaintiffs’ claims on the grounds that various teams should not be subject to particular states’ minimum wage laws in the suit. Whether these efforts by MLB will be enough to preserve the existing system, however, remains to be seen.
Nathaniel Grow is an Associate Professor of Business Law and Ethics at Indiana University's Kelley School of Business. He is the author of Baseball on Trial: The Origin of Baseball's Antitrust Exemption, as well as a number of sports-related law review articles. You can follow him on Twitter @NathanielGrow. The views expressed are solely those of the author and do not express the views or opinions of Indiana University.