Sergio Miranda, et al v. Allan Selig, et al

Filing

FILED OPINION (SIDNEY R. THOMAS, FERDINAND F. FERNANDEZ and MARY H. MURGUIA) AFFIRMED. Judge: SRT Authoring, FILED AND ENTERED JUDGMENT. [10487013]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

SERGIO MIRANDA; JEFFREY
DOMINGUEZ; JORGE PADILLA;
and CIRILO CRUZ, Individually
and on Behalf of All Those
Similarly Situated,
Plaintiffs-Appellants,

No. 15-16938
D.C. No.
3:14-cv-05349-HSG

OPINION
v.
ALLAN HUBER SELIG, Bud;
KANSAS CITY ROYALS
BASEBALL CORP.; MIAMI
MARLINS, L.P.; SAN FRANCISCO
BASEBALL ASSOCIATES, LLC;
BOSTON RED SOX BASEBALL
CLUB L.P.; ANGELS BASEBALL
L.P.; CHICAGO WHITE SOX
LTD.; ST. LOUIS CARDINALS,
LLC; COLORADO ROCKIES
BASEBALL CLUB, LTD.;
BASEBALL CLUB OF SEATTLE,
LLP; CINCINNATI REDS, LLC;
HOUSTON BASEBALL PARTNERS,
LLC; ATHLETICS INVESTMENT
GROUP, LLC; ROGERS BLUE
JAYS BASEBALL PARTNERSHIP;
CLEVELAND INDIANS BASEBALL
CO., L.P.; CLEVELAND INDIANS
BASEBALL CO., INC.; PADRES

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L.P.; SAN DIEGO PADRES
BASEBALL CLUB, L.P.;
MINNESOTA TWINS, LLC;
WASHINGTON NATIONALS
BASEBALL CLUB, LLC; DETROIT
TIGERS, INC.; LOS ANGELES
DODGERS HOLDING CO.;
STERLING METS L.P.; ATLANTA
NATIONAL LEAGUE BASEBALL
CLUB, INC.; AZPB L.P.;
BALTIMORE ORIOLES, INC.;
BALTIMORE ORIOLES, L.P.;
PHILLIES L.P.; PITTSBURGH
BASEBALL, INC.; PITTSBURGH
BASEBALL P’SHIP; NEW YORK
YANKEES P’SHIP; TAMPA BAY
RAYS BASEBALL LTD.; RANGERS
BASEBALL EXPRESS, LLC;
RANGERS BASEBALL, LLC;
CHICAGO BASEBALL HOLDINGS,
LLC; MILWAUKEE BREWERS
BASEBALL CLUB, INC.;
MILWAUKEE BREWERS
BASEBALL CLUB, L.P.; OFFICE OF
COMMISSIONER OF BASEBALL,
DBA Major League Baseball;
LOS ANGELES DODGERS, LLC,
Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of California
Haywood S. Gilliam, Jr., District Judge, Presiding

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Argued and Submitted April 18, 2017
San Francisco, California
Filed June 26, 2017
Before: Sidney R. Thomas, Chief Judge, and Ferdinand F.
Fernandez and Mary H. Murguia, Circuit Judges.
Opinion by Chief Judge Thomas

SUMMARY*

Antitrust
Affirming the district court’s dismissal of an antitrust suit
brought by minor league baseball players, the panel held that
professional minor league baseball is exempt from federal
antitrust laws.
The panel concluded that because it was bound by
Supreme Court and Ninth Circuit precedent upholding the
business of baseball’s exemption from federal antitrust laws,
and because Congress explicitly exempted minor league
baseball in the Curt Flood Act of 1998, the players failed to
state an antitrust claim.

*

This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.

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COUNSEL

Samuel Kornhauser (argued) and David Truong, Law Offices
of Samuel Kornhauser, San Francisco, California; Brian
David, Law Offices of Brian David, Chicago, Illinois; for
Plaintiffs-Appellants.
John W. Keker (argued), David J. Rosen, Thomas E. Gorman,
and R. Adam Lauridsen, Keker & Van Nest LLP, San
Francisco, California, for Defendants-Appellees.

OPINION
THOMAS, Chief Judge:
In this case we consider whether professional minor
league baseball is exempt from federal antitrust law.
Applying controlling precedent, we hold that it is, and we
affirm the judgment of the district court.
I
Major League Baseball (“MLB”) is an unincorporated
association consisting of thirty MLB franchises, also known
as clubs or teams. Each franchise employs approximately
forty baseball players on its “40-man roster,” with up to
twenty-five players on its “active roster,” who play at the
major league level. As part of MLB’s “farm system,” each
franchise also employs 150 to 250 players who compete at the
minor league level. MLB franchises employ a high number
of minor league players hoping that a handful will develop
into major league players. Therefore, though minor league

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players train and play for minor league clubs, they are
nonetheless employed by an MLB club.
MLB requires all franchises to use its Uniform Player
Contract (“the Contract”) when hiring minor league players.
Any change to the Contract terms requires permission from
the MLB Commissioner. Once completed, all Contracts are
filed with the MLB Commissioner for approval. Under the
Contract’s so-called “reserve clause,” MLB franchises
receive exclusive rights to their minor league players for
seven championship seasons, approximately seven years.
This provision precludes players from playing for any other
baseball team during the contract period, whether or not the
team is an MLB franchise. However, MLB franchises have
the power to transfer amongst themselves their exclusive
rights to a player at the end of each contract season.
The Contract sets forth minor league players’ first-season
monthly salary rate. For each subsequent season, players and
clubs are supposed to negotiate a monthly salary. If a player
and club are unable to reach an agreement, the monthly salary
rate is determined in the same manner as the first-season
salary. Unlike major league baseball players, minor league
players do not belong to a labor union and therefore must
engage in negotiations independently.
Although MLB’s salary guidelines are not publicly
available, the plaintiffs, a class of minor league baseball
players (“the Players”) allege MLB requires that all first-year
minor league players earn $1,100 per month, Class-A minor
league players earn $1,250 per month, Class-AA minor
league players earn $1,500 per month, and Class-AAA minor
league players earn $2,150 per month. The Players allege
that most minor league players earn less than $7,500 per year,

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with some earning as little as $3,000. Minor league players
receive no salary for spring training, during which they work
fifty to sixty hours per week.
II
On February 5, 2015, the Players filed a complaint against
the Office of the Commissioner of Baseball, former
Commissioner Allan Huber “Bud” Selig, and MLB’s thirty
franchises (collectively, “the Owners”).
Each class
representative played minor league baseball at some point
between 2010 and 2012. While employed as minor league
players, the class representatives worked an average of fifty
to sixty hours per week and earned less than $10,000 per
year. Seeking declaratory and injunctive relief as well as
damages, the Players allege that MLB’s hiring and
employment policies have violated federal antitrust laws by
“restrain[ing] horizontal competition between and among” the
MLB franchises and “artificially and illegally depressing”
minor league salaries.
The Owners filed a motion to dismiss under Rule 12(b)(6)
of the Federal Rules of Civil Procedure, arguing that the
business of baseball has long been exempt from federal
antitrust laws, and Congress specifically declined to take
minor league baseball out of the scope of the exemption. The
district court granted the Owners’ motion to dismiss and the
Players timely appealed.
III
We have jurisdiction under 28 U.S.C. § 1291, and we
review the district court’s order de novo. See, e.g., ESG
Capital Partners, LP v. Stratos, 828 F.3d 1023, 1029, 1031

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(9th Cir. 2016). To survive a motion to dismiss under Rule
12(b)(6), a plaintiff must raise sufficient factual allegations,
accepted as true, to “state a claim to relief that is plausible on
its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007). Because we are bound by Supreme Court and Ninth
Circuit precedent upholding the business of baseball’s
exemption from federal antitrust laws, and because Congress
explicitly exempted minor league baseball in the Curt Flood
Act of 1998, the Players have not “state[d] a claim to relief
that is plausible on its face.” Id. We affirm.
A
The business-of-baseball exemption is best understood
within its historical context. In 1890, Congress passed the
Sherman Act “to protect trade and commerce against
unlawful restraints and monopolies.” Sherman Act, ch. 647,
26 Stat. 209 (1890). Under the Sherman Act, “[e]very
contract . . . in restraint of trade or commerce among the
several States, or with foreign nations, is declared to be
illegal.” 15 U.S.C. § 1. It is also a felony under the Sherman
Act to “monopolize any part of the trade or commerce among
the several States, or with foreign nations.” 15 U.S.C. § 2. In
1914, Congress passed the Clayton Act to supplement
existing federal antitrust law. Clayton Act, ch. 323, 38 Stat.
731 (1914). Section 4 of the Clayton Act establishes that
those injured “by reason of anything forbidden in the antitrust
laws may sue” in federal district court. 15 U.S.C. § 15(a).
The Supreme Court first exempted the business of
baseball from these federal antitrust laws almost a century
ago in Federal Baseball Club of Baltimore v. National
League of Professional Baseball Clubs, 259 U.S. 200 (1922).
In Federal Baseball, the Supreme Court held that the business

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of baseball does not constitute “trade or commerce among the
several States,” 15 U.S.C. § 1, and therefore is not bound by
antitrust laws, because the “business is giving exhibitions of
base ball, which are purely state affairs.” Federal Baseball,
259 U.S. at 208. Comparing the baseball league to a law firm
sending a lawyer to another state to argue a case, the Court
reasoned that the need for baseball teams to cross state lines
to attend competitions was “mere[ly] incident[al]” to the
business itself. Id. at 209.
The Court revisited the baseball exemption thirty years
later in Toolson v. New York Yankees, Inc., 346 U.S. 356
(1953) (per curiam). In a one-paragraph per curiam opinion,
and over Justice Burton’s dissent, the Court declined to
overrule Federal Baseball, reasoning that the business of
baseball had “been left for thirty years to develop, on the
understanding that it was not subject to existing antitrust
legislation.” Toolson, 346 U.S. at 357. Therefore, “if there
are evils in this field which now warrant application to it of
the antitrust laws it should be by legislation.” Id.
In the years after deciding Toolson, the Supreme Court
considered antitrust claims brought against defendants
engaged in the business of traveling theater companies,
United States v. Shubert, 348 U.S. 222 (1955), professional
boxing, United States v. Int’l Boxing Club of N.Y., 348 U.S.
236 (1955), professional football, Radovich v. Nat’l Football
League, 352 U.S. 445 (1957), and professional basketball,
Haywood v. Nat’l Basketball Ass’n, 401 U.S. 1204 (1971). In
each case, the Supreme Court held that the exemption
articulated in Federal Baseball did not extend to sports or
entertainment beyond baseball. See Shubert, 348 U.S. at 228;
Boxing Club, 348 U.S. at 243; Radovich, 352 U.S. at 452;
Haywood, 401 U.S. at 1205. Adopting the reasoning from

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Toolson, the Court also stated in Shubert, Boxing Club, and
Radovich that it was the role of Congress—not the courts—to
create additional exceptions to federal antitrust laws. See
Shubert, 348 U.S. at 230 (“If the Toolson holding is to be
expanded—or contracted—the appropriate remedy lies with
Congress.”); Boxing Club, 348 U.S. at 243 (“The issue
confronting us is, therefore, not whether a previously granted
exemption should continue, but whether an exemption should
be granted in the first instance. And that issue is for Congress
to resolve, not this Court.”); Radovich, 352 U.S. at 451 (“As
long as the Congress continues to acquiesce we should adhere
to—but not extend—the interpretation of the Act made in
[Federal Baseball and Toolson].”).1
The Supreme Court once again upheld the baseball
exemption in Flood v. Kuhn, 407 U.S. 258 (1972), and, unlike
1
These holdings were not without controversy. Justice Frankfurter
dissented in Boxing Club and Radovich, arguing that the doctrine of stare
decisis required the Court to exempt boxing and football from antitrust
laws as well. Boxing Club, 348 U.S. at 248–51 (“It would baffle the
subtlest ingenuity to find a single differentiating factor between other
sporting exhibitions . . . and baseball insofar as the conduct of the sport is
relevant to the criteria or considerations by which the Sherman Law
becomes applicable to a ‘trade or commerce.’”) (Frankfurter, J.,
dissenting); Radovich, 352 U.S. at 455–56. Justice Harlan, joined by
Justice Brennan, dissented in Radovich for similar reasons. Radovich,
352 U.S. at 456 (“Since I am unable to distinguish football from baseball
under the rationale of Federal Base Ball and Toolson, and can find no
basis for attributing to Congress a purpose to put baseball in a class by
itself, I would adhere to the rule of stare decisis and affirm the judgment
below.”) (Harlan, J., dissenting). Justice Minton dissented in Boxing Club
based on his belief that boxing is neither trade nor commerce. Boxing
Club, 348 U.S. at 251–53 (“What this Court held in the Federal Baseball
case to be incident to the exhibition now becomes more important than the
exhibition. This is as fine an example of the tail wagging the dog as can
be conjured up.”) (Minton, J., dissenting).

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in Toolson, it provided a lengthy explanation for its holding.
The Court discussed in detail the cases described above.
Flood, 407 U.S. at 274–80. It also noted that numerous bills
had been introduced in Congress regarding the applicability
or nonapplicability of antitrust laws to baseball, yet none
passed both houses of Congress. See id. at 281. Furthermore,
it noted that bills that passed one house of Congress expanded
rather than restricted the exemption. Id. at 281–82. In light
of the case law and legislative history, the Court
acknowledged that (1) “[p]rofessional baseball is . . . engaged
in interstate commerce”; (2) “baseball is . . . an exception and
an anomaly” with regard to its exemption from federal
antitrust laws; (3) though it may be considered “unrealistic,
inconsistent, or illogical,” this exemption is well-established
and does not extend to boxing, football, basketball, and,
presumably, other sports; (4) the Supreme Court has
previously emphasized that Congress allowed professional
baseball to develop and expand unhindered by federal
antitrust laws, even in the advent of radio and television; and
(5) the Court has also “expressed concern about the confusion
and retroactivity problems that inevitably would result with
a judicial overturning of Federal Baseball” and its progeny,
and, therefore, any change should be made by Congress and
not the courts. Flood, 407 U.S. at 282–83. Thus, the Flood
Court declined to overrule Federal Baseball and Toolson,
holding, once again, that professional baseball is exempt from
federal antitrust laws. Id. at 284–85.
B
In 1998, Congress passed the Curt Flood Act, taking longawaited action on the business-of-baseball exemption. Curt
Flood Act of 1998, Pub. L. No. 105-297, 112 Stat. 2824
(codified at 15 U.S.C. § 266). The Curt Flood Act

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established that “the conduct, acts, practices, or agreements
of persons in the business of organized professional major
league baseball directly relating to or affecting employment
of major league baseball players . . . are subject to the
antitrust laws.” 15 U.S.C. § 26b(a). However, it explicitly
maintained the baseball exemption for anything related to the
employment of minor league baseball players—including the
use of reserve clauses—and the relationship between
organized professional major and minor league baseball.
15 U.S.C. § 26b(b)(1)–(2).
C
In City of San Jose v. Office of the Commissioner of
Baseball, 776 F.3d 686 (9th Cir. 2015), cert. denied, 136 S.
Ct. 36, 36 (2015), we held that restrictions on franchise
relocation fall squarely within the “business of baseball” and
are therefore exempt from federal antitrust laws under Flood.
We reasoned that this was particularly evident because the
Curt Flood Act “withdrew baseball’s antitrust exemption with
respect to the reserve clause and other labor issues [for major
league players], but explicitly maintained it for franchise
relocation.” Id. at 690.
Considering the case law and the Curt Flood Act, it is
undeniably true that minor league baseball—particularly the
employment of minor league baseball players and the
requirement that they sign a uniform contract containing a
reserve clause—falls squarely within baseball’s exemption
from federal antitrust laws. Even more than the franchise
relocation rules at issue in San Jose, the employment
contracts of minor league players “relate to the ‘business of
providing public baseball games for profit between clubs of
professional baseball players.’” San Jose, 776 F.3d at 690

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(quoting Toolson, 346 U.S. at 357). Indeed, MLB’s reserve
clause, albeit as applied to major league players, is precisely
what was challenged in Flood, where the Supreme Court
determined, once again, to uphold the baseball exemption.
Flood, 407 U.S. at 259, 284.
The Players argue that the baseball exemption does not
apply to minor league baseball because Federal Baseball,
Toolson, and Flood did not decide the issue of “whether
major league baseball and its constituent clubs could conspire
to fix the salaries paid to minor league players.” However,
MLB’s farming structure belies the claim that major and
minor league baseball are separate and distinct in a
meaningful way for the purposes of the Sherman Act. Minor
league baseball players are employed and paid by MLB, and
MLB employs minor league players with the hope that some
of them will develop into major league players. Therefore,
the employment of minor league players is precisely the type
of activity that falls within the antitrust exemption for the
business of baseball.
Citing Leegin Creative Leather Products, Inc. v. PSKS,
Inc., 551 U.S. 877 (2007), the Players insist that we can
“refuse[] to apply stare decisis” and decline to follow Federal
Baseball, Toolson, and Flood. Specifically, the Players argue
that we, like the Supreme Court in Leegin, should not
“blindly apply[] outmoded, erroneous reasoning to an
antitrust case,” especially in light of economic changes that
have occurred since Federal Baseball.
The Players misapprehend the doctrine of stare decisis,
particularly as it applies to intermediate federal appellate
courts. Courts of Appeal must adhere to the controlling
decisions of the Supreme Court. See Hutto v. Davis, 454 U.S.

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370, 375 (1982) (“[U]nless we wish anarchy to prevail within
the federal judicial system, a precedent of [the Supreme]
Court must be followed by the lower federal courts no matter
how misguided the judges of those courts may think it to
be.”); Nunez-Reyes v. Holder, 646 F.3d 684, 692 (9th Cir.
2011) (“‘we are bound to follow a controlling Supreme Court
precedent until it is explicitly overruled by that Court.’”)
(quoting United States v. Weiland, 420 F.3d 1062, 1079 n. 16
(9th Cir. 2005)).
Further, under the law-of-the-circuit rule, “[w]e are bound
by decisions of prior panels’ [sic] unless an en banc decision,
Supreme Court decision, or subsequent legislation
undermines those decisions.” Baker v. Delta Air Lines, Inc.,
6 F.3d 632, 637 (9th Cir. 1993) (internal quotation marks and
citation omitted).2
The Supreme Court may, of course, overrule its own prior
precedent. See Payne v. Tennessee, 501 U.S. 808, 827–28
(1991) (“Nevertheless, when governing decisions are
unworkable or are badly reasoned, ‘this Court has never felt
constrained to follow precedent.’”) (quoting Smith v.
Allwright, 321 U.S. 649, 665 (1944)). Nonetheless, even at
the Supreme Court, “[s]tare decisis is the preferred course
because it promotes the evenhanded, predictable, and
consistent development of legal principles, fosters reliance on
judicial decisions, and contributes to the actual and perceived
integrity of the judicial process.” Id. at 827.
Both the Supreme Court and our Court have repeatedly
upheld the business-of-baseball exemption, and as recently as
2

The exceptions to the rule, as noted in Miller v. Gammie, 335 F.3d
889, 900 (9th Cir. 2003), are not applicable here.

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2015. See Flood, 407 U.S. at 284; Toolson, 346 U.S. at 357;
Shubert, 348 U.S. at 228; Boxing Club, 348 U.S. at 243;
Radovich, 352 U.S. at 452; Haywood, 401 U.S. at 1205; San
Jose, 776 F.3d at 692. We are bound by these decisions.
Indeed, even if the Supreme Court had not spoken on this
issue, the Players are unable to point to any of the narrow
circumstances that would justify departure from our own
circuit precedent.
Moreover, Congress has made clear its intent to maintain
the baseball exemption for anything related to the
employment of minor league players, the reserve clause as
applied to minor league players, and the relationship between
major and minor league baseball. 15 U.S.C. § 26b(b). As we
recently stated in San Jose, “when Congress specifically
legislates in a field and explicitly exempts an issue from that
legislation, our ability to infer congressional intent to leave
that issue undisturbed is at its apex.” San Jose, 776 F.3d at
691 (citing Kimbrough v. United States, 552 U.S. 85, 106
(2007)). “The exclusion of [organized professional minor
league baseball] from the Curt Flood Act demonstrates that
Congress (1) was aware of the possibility that the baseball
exemption could apply to [minor league baseball];
(2) declined to alter the status quo with respect to [minor
league baseball]; and (3) had sufficient will to overturn the
exemption in other areas.” Id.
IV
In light of Supreme Court precedent, the decisions of our
Court, and the Curt Flood Act, minor league baseball falls

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squarely within the nearly century-old business-of-baseball
exemption from federal antitrust laws.
AFFIRMED.