This was my final paper for HIST 414 at NMSU, The Constitution as History. It was a good class, especially because I took it during the Spring of 2025–there was no end to the constitutional issues we were able to tie back to current events at the time. The paper could have been much longer, but I had to keep it under the required page limit. Still, I think you’ll get the point. I’m a lifelong baseball fan and had never heard of these cases. The research and writing turned out to be super interesting.
Federal Base Ball Club of Baltimore, Inc. v. National League of Professional Base Ball Clubs was a 1922 Supreme Court case that granted Major League Baseball (MLB) an exception to the Sherman Antitrust Act, an 1890 act that was meant to stop companies from becoming monopolies or engaging in unfair business practices. The Federal Baseball League sued the National League and a host of other defendants for conspiring to monopolize professional baseball. The Federal League lost their case in 1922, which resulted in repercussions for players and team owners for decades. The original ruling seems suspect, but two subsequent cases upheld Federal, refusing to overturn the precedent. This paper looks at those cases, Toolson v. New York Yankees (1953) and Flood v Kuhn (1972), as well as other similar cases and discusses the factors that led to the suits and their results. It argues that the Toolson and Flood Courts had ample reasons to overturn the Federal verdict, that their reliance in stare decisis to follow precedent was misguided and that Federal itself was largely unnecessary.
The Federal Baseball League was created in 1913 by a group of investors hoping to cash in on the lucrative professional baseball market, which had been growing for decades. When the start-up began contracting players from the American and National Leagues–now Major League Baseball (MLB)–the competition raised labor costs for all three leagues. The expense caused the Federal League to flounder financially and, sensing blood in the water, and unhappy with their own rising labor costs, the MLB leagues colluded to buy out six of the eight Federal League teams. The remainder of the Federal League sued under the Sherman Antitrust Act, alleging an attempt by the MLB to monopolize professional baseball. The Sherman Act is meant to prevent unfair business practice by regulating interstate commerce, a power granted to Congress in Article 1 of the Constitution. In Federal, the Court exempted professional baseball from Sherman by ruling that the business of baseball did not constitute interstate commerce. Although teams had to travel and cross state lines to engage in sports exhibitions, the Court’s opinion was that the travel was incidental to the game itself, and that the exhibition of the game was “purely a local affair.”[1]
Opinions about the judgment are generally negative, but Justice Samuel Alito argues that it was not unusual reasoning at the time. The Court relied on the precedent set by Hooper v. California, which ruled that insurance contracts were not interstate commerce, and not subject to Sherman. A lower court used the common definitions of trade and commerce and looked at how each had been used in earlier cases, to find for the MLB. And, although there were two antimonopoly Justices on the Court, Justice Holmes, who wrote the unanimous decisions, was notoriously against Sherman on principle, once calling it “a humbug based on economic ignorance and incompetence.”[2] Earlier in the century progressive administrations were veritable trust busters, but by the early 1920s antitrust prosecutions were in decline, so much so that one antitrust attorney called Sherman “a dead letter.”[3] The fact that the MLB leagues colluded was clear, but the Court could put off deciding on the substantive result by first deciding if the Sherman Act applied in the first place. This was the same reasoning the lower court used in ruling against the Federal Baseball League, and an easy agreement for the laissez-faire Supreme Court of the time.[4]
Law professor and baseball historian Roger Abrams argues that the Court wanted to rule for the MLB. There was at least one baseball fan on the bench: Chief Justice William Howard Taft is part of baseball history for his inadvertent creation of the seventh inning stretch and was once offered the job of Baseball Commissioner. Baseball was wildly popular at the time and just beginning to recover from the infamous Black Sox Scandal of 1919. The Court had no intention of damaging baseball further by ruling against the MLB, which was already too big to fail. This is evidenced by the fact that a year later, the same Court ruled on a similar case involving interstate vaudeville acts, Hart v. B. F. Keith Vaudeville Exchange, but did not grant an antitrust exemption. Abrams points out that the lone difference was that one case involved baseball, and the other did not.[5]
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In Federal, the MLB’s attorneys told the Court that “the very existence of baseball depended upon its exemption from the antitrust laws.”[6] To keep the popular game viable, the MLB, and the Court, had to protect the reserve clause that was written in all player contracts after 1879. The clause restricted player movement, controlled player salaries, and was meant to “prevent unhealthy competition.”[7] Once a player signed with a team, they could not change teams of their own volition, and all contracts automatically renewed, unless the team invalidated them. Without an antitrust exemption, the reserve clause would constitute illegal restraint of trade under the Sherman Act. Players would be able to negotiate with other teams, which would have raised salaries, reduced profits, and threatened the survival of the popular sport. It was also important to the MLB to quash any competitor leagues, so that players would have no choice but to sign contracts that included the reserve clause if they wanted to play professional baseball.[8]
It was the reserve clause, and MLB’s exemption for Sherman’s labor protections, that would lead to future lawsuits, and the Courts’ questionable rulings. Toolson v. New York Yankees was the first such case to reach the Supreme Court, in 1953. Pitcher George Toolson sued after being demoted to the minor leagues, and then being refused, per the reserve clause, the chance to offer his services to a different team. In Toolson, the Court refused to overturn Federal, the majority writing that in the 30 years since Federal, Congress had not acted to change the earlier decision, so they felt they needed to observe the convention of stare decisis, letting the earlier decision stand “without reexamination of the underlying issues.” The second challenge was 1972’s Flood v Kuhn, in which center fielder Curt Flood sued after being traded from the St. Louis Cardinals to the Philadelphia Phillies without his consent. Flood sued on the basis of restraint of trade and under the prohibition of involuntary servitude guaranteed by the 13th amendment. The latter argument was denied outright by the Court, who ruled that his contract was not compulsory–he didn’t have to play baseball. On the antitrust claim, the Court admitted that Federal was out of date, but again ruled it a matter for Congress to decide. Since Congress still had not acted, Federal’s ruling was “entitled to the benefit of stare decisis.”[9]
Stare decisis is the concept that leads the courts to rely on precedent, but it should not be thought of as a mandate, and its narrow application regarding Federal was a mistake in both later cases. Meaning “to stand by things decided,” it is meant to increase both efficiency and consistency. In deciding whether to adhere to stare decisis, courts often look at reliance interests, or whether overturning a ruling will negatively affect those who have relied on a previous ruling. Baseball’s reliance on the reserve clause was noted in both the Toolson and Flood decisions. Writing in 1948, Supreme Court Justice William O. Douglas, who sat on the bench from 1939 to 1975, acknowledged the need for uniformity in the law, but cautioned against strict reliance on precedent. He points out that if a bad decision is upheld due to precedent, the decision has the chance to become institutionalized, which is what happened with baseball’s reserve clause. Stare decisis also does not insist that a court stand on precedent. The Supreme Court overruled 30 decisions between 1937 and early 1948, and Douglas cites examples of overturned rulings going as far back as the Marshall Court.[10]
The dissenting opinions in Toolson and Flood make clear that a strict adherence to stare decisis is not ideal. Justice Burton, in his dissent in Toolson, pointed out that even Holmes quickly softened on the “incidental” aspect in Federal. In his opinion in Hart, the vaudeville case, he wrote that “it may be that what, in general, is incidental in some instances may rise to a magnitude that requires it to be considered independently.”[11] Holmes opened the door to the idea that things change, and these types of suits should be decided on a case-by-case basis. In Douglas’s 1972 dissent in Flood v. Kuhn, he wrote that he “lived to regret” joining the majority in Toolson vote, and that the decision is Federal was “a derelict in the stream of the law that we, its creator, should remove.”[12]
Had the Justices wanted to rule for George Toolson in 1953 they could have found reasons to. By 1953 the MLB was making significant money by broadcasting games nationwide on radio and television. The broadcasts allowed the league to sell advertising, a lucrative revenue stream that crossed state lines through the air waves. By 1952 the MLB was comprised of “380 separate baseball clubs, operating in 42 different States, the District of Columbia, Canada, Cuba, and Mexico.”[13] The money from the advertising and broadcasts simply could not have been made had the teams not crossed borders to play one another. Hooper v. California, the 1895 precedent that Federal originally cited, no longer held either, as the Court ruled in 1944 that insurance contracts were subject to Sherman.[14] Beyond that, the reserve clause itself was interstate in nature, a fact alluded to by Justice Burton in his dissent in Toolson. While the player only signed a contract with one team, the clause included a provision that all other teams–including those in other states–had to honor the contract’s terms.[15] That provision is what created the ability for the MLB to blacklist players in the first place.
In addition to these factors, in 1948’s Gardella v. Chandler, a lower court had concluded that baseball might be interstate commerce after all. Danny Gardella was a centerfielder for the Giants in 1945. When he was demoted to Triple-A, instead of reporting to the minor league affiliate, he accepted a contract in the Mexican League. On attempting to return to the MLB, he found he had been blacklisted because, by refusing to accept the demotion, he had broken the perpetual nature of his contract under the reserve clause. Though initially dismissed on the basis of Federal, the Court of Appeals for the Second Circuit thought there was enough evidence to send the case back to trial to determine if the interstate nature of the baseball formed “a large enough part of the business to impress upon it an interstate character.”[16] The decision threatened the reserve clause, and the MLB settled out of court with Gardella rather than allowing the case to reach the Supreme Court.
Despite these facts, the Court did not find for George Toolson in 1953, nor did they find for Curt Flood in 1972, though in the intervening years, even more evidence came to light that showed that Federal was outdated. Just four years after Toolson, the Court ruled against the National Football League in a similar case. In Radovich v. National Football League, the Court did not see fit to grant the NFL a Sherman exemption.[17] In 1955’s United States v. International Boxing Club of New York, Inc., the Court ruled against the IBC, denying a similar exemption to boxing. The same year, an exemption was denied to a traveling theater company in United States v. Shubert.[18] Despite these findings, and the plain admission by the majority that baseball had grown to the point that it was interstate commerce, the Court did not find for Flood. Abrams called the decision “bewildering” and the majority opinion written by Justice Blackmun “an embarrassing display of sentimentality combined with rigid adherence to notions of stare decisis.”[19]
By falling back on stare decisis and claiming that overturning Federal was a matter for Congress, the Justices in both Toolson and Flood partook in some questionable reasoning. One concern was about the retroactive effects overturning Federal might introduce. The predicted the change would cause confusion if it came from the Courts, but not, they reasoned, if changed by Congress. Both cases cite the 1952 House Subcommittee on the Study of Monopoly Power, which found that Congress did indeed have jurisdiction over professional baseball. Congress took no action at the time, which the Courts then framed as tacit approval of the status quo. Both the Court’s insistence and the Subcommittee’s claim that Congress had the power to intercede would imply that baseball must be interstate commerce, under powers granted in Article 1 of the Constitution, and therefore subject to Sherman. If baseball was intrastate, each individual state it operated in would regulate the sport, and Congress would have no jurisdiction. Toolson said that the Congress’s inaction meant that they did not intend for baseball to be considered interstate commerce, but if Congress had the authority to decide one way or another, then baseball had to be interstate commerce.[20]
Eventually, it took the National Labor Relations Board (NLRB), the players’ union, and a clever lawyer to fix the reserve clause problem that the two branches would not. The NLRB was enacted in 1935, which gave professional baseball players the right to collective bargaining. Early versions of the baseball’s labor union attempted and failed to fix the players issues with the reserve clause, until 1970 when the Major League Baseball Players Association (MLBPA) successfully changed baseball’s arbitration system. Prior to 1970, the Commissioner of Baseball was the sole arbiter of player grievances, and he nearly always sided with the owners. In 1970, under pressure from the MLBPA, a panel of three arbiters was created–one chosen by the owners, one by the players, and one agreed upon by the first two. This brought impartial, fresh eyes to the bargaining table.[21]
The text of the reserve clause says that contracts renewed for the following year at the team’s discretion, what is today known as a team option. The players’ new representative, Marvin Miller, noticed the reserve clause said nothing about subsequent years, something that had not been brought up before by any court. This meant that if a player completed his option year without signing a subsequent contract, he would not have breached the original contract and could not be punished or blacklisted by the league. At the end of the second year, the contract would simply expire, and the player would be free to sign a new contract with another team. In other words, he would become a free agent. Debate and test cases lasted several years before the players were successful, and their success was not achieved in court. The decision was made by the panel of arbiters, due to the previous collective bargaining agreement. When the owners lost in arbitration and pitcher Andy Messersmith entered the new free agent market, both sides went back to the bargaining table.[22] Effectively, arbitration abolished the historic reserve clause in 1975, and ever since, contract terms are decided through collective bargaining. There are still elements of baseball contracts that work similarly to the reserve clause, but they can be negotiated and changed by the MLBPA. Finally, in 1998, the Curt Flood Act officially removed the antitrust exemption as it pertained to labor issues.[23]
Successful arbitration did not get Federal, Toolson, or Flood off the hook. The agreement invalidated the reserve clause but left other aspects of the exemption intact. Toolson said the antitrust exemption applied to the “business of baseball,”[24] a broad term that was not defined by the Court. This led to the exemption being chipped away at piece by piece. For example, in 1990 the New York District Court ruled in against the MLB in Postema v. National League of Professional Baseball Clubs in a dispute with umpires, saying that “anticompetitive conduct towards umpires is not an essential part of baseball,” a nod towards the ambiguous statement in Toolson [25] In 1993, an investment group secured a contract to move the San Francisco Giants to Tampa, FL. The move was blocked by the MLB, and the group sued in Piazza v. Major League Baseball. The Piazza group argued that the exemption should not allow the MLB to limit which cities could be included in the baseball market. They cited two points in the Flood decision. First, the Court had admitted that baseball was indeed interstate commerce. Then, importantly, the opinion states that “with its reserve system enjoying exemption from the federal antitrust laws, baseball is, in a very distinct sense, an exception and an anomaly.”[26] In their analysis, Piazza argued that the Flood decision applied only to the reserve system, and not to other aspects of baseball. The Florida Supreme Court agreed, and the MLB, not willing to gamble further, settled out of court. Although it did not overturn Federal, and the MLB still controls team movement, it did represent a potential change that Holmes alluded to in the vaudeville decision.[27]
Slowly, the antitrust exemption has narrowed, which makes the case that it may have never been necessary. Congress exempted unions from antitrust laws in 1914, before Federal, to protect unions from big business, whether it be baseball or any other business. The strength of the MLBPA achieved free agency for baseball players 16 years before football, even though the NFL has always been subject to Sherman. Baseball owners may have also felt compelled to bargain on labor, rather than testing the courts and risk losing the other advantages of their exemption.[28] Still, overall results have been largely similar. By 1995, an MLB attorney pointed out that “baseball is under the same laws as football, basketball and hockey in its labor negotiations.”[29] Both leagues have strong unions, enjoy vast popularity, and own profitable advertising and broadcast rights, but the NFL gained these rights by lobbying Congress, one by one, as the issues arose,[30] while the MLB relied on their exemption. The one advantage baseball has held over other leagues has been relative stability when it comes to team movement. The MLB wisely headed that threat off at the pass as well, granting Tampa an expansion team in 1998.
Baseball historian Stuart Banner writes that if Federal had never happened and the antitrust issue was first heard by the Gardella Court in 1949 baseball would have been ruled interstate commerce.[31] In Gardella, Judge Jerome Frank called Federal “an ‘impotent zombie’ void of vitality in light of the Court’s more recent decisions.”[32] The change in the nature of the business of baseball by the addition of radio, television and national advertising make it obvious that stare decisis should not have applied in Toolson. The circular logic and the admission that baseball engaged in interstate commerce in Flood show that both Federal and Toolson should have been overturned.Despite the fact that today there are dozens of antitrust exemptions that have been granted by the courts and Congress,[33] baseball would have likely survived without one, just as other professional sports have. Even giving the Federal decision the benefit of the doubt, first Toolson, and certainly Flood, dropped the ball by upholding the original ruling. Oliver Wendell Holmes was right when he predicted that baseball might change enough to be revisited, and when it did subsequent Courts did not give the new facts enough consideration.
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Bibliography
Abrams, Roger I. “Before The Flood: The History of Baseball’s Antitrust Exemption.” Marquette Sports Law Review 9, no. 2 Spring (1999): 306–13.
Alito, Samuel. “The Origin of the Baseball Antitrust Exemption.” Society for American Baseball Research, 2009. https://sabr.org/journal/article/alito-the-origin-of-the-baseball-antitrust-exemption/.
Banner, Stuart. The Baseball Trust: A History of Baseball’s Antitrust Exemption. New York: Oxford University Press, 2013.
Douglas, William O. “Stare Decisis.” Columbia Law Review 49, no. 6 (1949): 735–58. https://doi.org/10.2307/1119147.
Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922).
Flood v. Kuhn, 407 U.S. 258 (1972).
Klobuchar, Amy. Antitrust: Taking on Monopoly Power from the Gilded Age to the Digital Age. New York: Alfred A. Knopf, Inc, 2021.
Lafferty, Latour Rey. “The Tampa Bay Giants and the Continuing Validity of Major League Baseball’s Antitrust Exemption: A Review of Piazza v. Major League Baseball.” Florida State Law Review 21, no. 4 (Spring 1994).
Robbins, William S. “Baseball’s Antitrust Exemption – A Corked Bat for Owners?” Louisiana Law Review 55, no. 5 (1995).
Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953).
[1] Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922).
[2] Alito, “The Origin of the Baseball Antitrust Exemption”
[3] Klobuchar, Antitrust: Taking on Monopoly Power from the Gilded Age to the Digital Age, 122.
[4] Klobuchar, 122.
[5] Abrams, “Before the Flood: The History of Baseball’s Antitrust Exemption,” 308–9.
[6] Abrams, 309.
[7] Banner, The Baseball Trust: A History of Baseball’s Antitrust Exemption, 5.
[8] Robbins, “Baseball’s Antitrust Exemption – A Corked Bat for Owners?” 959.
[9] Flood v. Kuhn, 407 U.S. 258, Syllabus (1972).
[10] Douglas, “Stare Decisis,” 742–43, 747.
[11] Toolson v. New York Yankees, Inc., 346, 361 U.S. 356 (1953)
[12] Flood, 407 U.S. 258 at 286-287.
[13] Toolson, 346 U.S. 356 at 358.
[14] Alito, “Origin.”
[15] Toolson, 346 U.S. 356 at Footnote 10.
[16] Banner, 101.
[17] Klobuchar, 128.
[18] Banner, 130–31.
[19] Abrams, 311.
[20] Lafferty, Latour Rey. “The Tampa Bay Giants and the Continuing Validity of Major League Baseball’s Antitrust Exemption: A Review of Piazza v. Major League Baseball.” Florida State Law Review 21, no. 4 (Spring 1994).
1277–78.
[21] Banner, 220.
[22] Banner, 220–31.
[23] Abrams, 313.
[24] Toolson, 346 U.S. 356 at 346.
[25] Banner, 242–43.
[26] Flood, 407 U.S. 258 at 282. Emphasis mine.
[27] Lafferty, “Tampa Bay” 1290.
[28] Robbins, “Corked Bat” 962, 964.
[29] Robbins, “Corked Bat” 971.
[30] Banner, 166.
[31] Banner, 98.
[32] Alito, “Origin.”
[33] Klobuchar, 127.