As a youngster I had, for the most part, been taught the notion that baseball was as American as apple pie, and that their owners and management were as pure as the driven snow. As a result, I did not pay much attention to the business aspect of baseball, nor did I give much thought to the relationship between the owners and players. Certainly, they would always do the right thing. This was the game of baseball after all.
Then, in 1966, the Dodgers’ 2 best pitchers, Sandy Koufax and Don Drysdale did not report to Spring Training, choosing instead to hold out as a means of negotiating a better contract. In 1965, Koufax had won 26 games and his second Cy Young Award in three years. He finished second to Willie Mays for the National League most-valuable-player award. The Dodgers paid Koufax $85,000 that season. They paid $80,000 to Drysdale, who had won 23 games, batted .300 with seven home runs, and finished fifth in the MVP race.
For 1966, the Dodgers offered $100,000 to Koufax and $85,000 to Drysdale. By way of comparison, the San Francisco Giants had signed Mays for two years, at about $125,000 per year. Koufax and Drysdale, apparently tired of the Dodgers’ playing one against the other, teamed up and asked the Dodgers for three years at a total of $1 million to be split equally between them, so each would earn $167,000 per year. All of a sudden, these pitching icons, certainly the best pitchers on the defending World Series champions and my heroes, were widely viewed as heretics in the context of their time. There was no free agency, no salary arbitration, and no power in the players’ union. If a player did not like the salary offered by management, he could stay home. So Koufax and Drysdale did, threatening by their absence to turn the Dodgers from the best team in the National League into an also-ran. Koufax and Drysdale had effectively became baseball’s first union, a union of two. The holdout was ultimately resolved, Koufax and Drysdale got raises (albeit, not what they asked for), and peace was restored.
Now, I will admit to not being a “union man,” however, with that said, my 15 year old self, just couldn’t fathom why the Dodgers would not pay Koufax and Drysdale what they were worth, knowing that without them, the team would be mere also-rans. Moreover, I didn’t understand why there was such a large public outcry against them. As Koufax wrote in his autobiography:
“It was astonishing to me, to learn that there were a remarkably large number of American citizens who truly did not believe we had the moral right to quit rather than work at a salary we felt — rightly or wrongly — to be less than we deserved. . . . Just take what the nice man wants to give you, get into your uniform, and go a fast 25 laps around the field.”
Over the years I began to wonder what it was about baseball that helped create situations like this. I came to learn that it was primarily due to MLB’s exemption from the federal antitrust laws and owner’s crowning jewel in that exemption, the reserve clause. In this article, and perhaps one or two to follow, I want to look at the history of the reserve clause and how the anti-trust exemption was applied to baseball by the courts. Forgive me if some of this sounds akin to a legal brief, it is unfortunately, the only way I know how to write. I also want to apologize to Jeff, I had promised him this article several weeks ago, but my personal life, work and then some new information that came to light on the subject, kept this from coming to fruition before now. My intentions were good, my execution was horrible. Also, to keep the readers somewhat interested, I will also throw in a Juan Soto or Shohei Ohtani trade proposal every couple of paragraphs or so.
In 1890, Congress enacted the Sherman Act. It was designed to prevent industrial monopolies from using their market power to disrupt and influence the national economy. Section 1 of the Act forbids contracts, combinations, and conspiracies that restrain trade. Section 2 prohibits monopolization as well as attempts and conspiracies to monopolize. While Congress intended that the antitrust laws would preserve free-market competition, the Act in fact outlaws only agreements or trade practices that unreasonably restrain trade and competition.
Baseball’s antitrust exemption originated in 1922 when the Supreme Court held that professional baseball exhibitions did not constitute interstate commerce, thereby placing the sport outside the federal antitrust laws. (Federal Baseball Club, Inc. v. National League of Prof’l Baseball Clubs, 259 U.S. 200, 208-09, 1922) In these articles, I want to trace the history of the battles in the courts and legislature concerning the battle between players, owners and rival leagues concerning the reserve clause and how MLB’s antitrust exemption came into being and how it is being challenged today. I have borrowed from many different sources for these articles and have tried to attribute the source as I go along. For anyone that wants to research this on their own, in greater depth, I highly recommend a very readable book on baseball’s history with the legal system, written by Professor Stuart Banner called “The Baseball Trust: A History of Baseball’s Antitrust Exemption.”
From the earliest days of professional baseball in the 1870s until the creation of free agency in the 1970s, the reserve clause was a subject of controversy and tension between players and management. “The clause, first implemented by the National League in 1879, provided in essence that a team was entitled to reserve the services of a player in perpetuity. At the time, most National League teams were losing money and faced bleak financial prospects. To curb expenses, the teams agreed on a strategy to keep salaries down: each team would be allowed to “reserve” up to five players for the following season. This meant that no other team could sign a reserved player unless he received permission to do so. When a player’s contract expired, the team for which he played had the exclusive right to negotiate with him for a new contract. The player had little bargaining power, for his only alternative to reaching agreement with his team was not to play. The team to which the player was bound could also trade him or sell his contract to another team without his consent. By forbidding the voluntary movement of players to other teams, the reserve clause kept salaries artificially low and gave players no say over where they performed their work.”1
The owners justified the reserve clause on the dubious grounds that without it, the wealthiest teams would sign all the best players, destroying competitive balance and ruining the sport. As expected, each team elected to reserve their five best players, i.e., their most expensive players. With no market competing for players’ services, team owners were able to suppress salaries for elite talent and increase profits. Indeed, just two seasons after the adoptions of the reserve clause, most teams had become profitable, the first time that had happened.
Because of the success of the reserve clause, the owners thought, what the heck, let’s apply it to our entire roster. Thus, in 1987, the reserve clause appeared explicitly in player contracts and permitted a team to reserve its entire roster, then consisting of fourteen players. This clause has been described as follows:
“A singular part of the contract between the baseball clubs and their employees was the reserve clause. It gave the club an exclusive and perpetual option on the player’s services. Furthermore, every club in Organized Baseball agreed not to employ or try to employ any player reserved by any other club. They also agreed not to play any team that employed a player who had broken the reserve clause, or even to allow their ball parks to be used by such a team. Their agreement not to compete with each other for players enabled the employers to exercise monopoly control, that is, a buyer’s monopoly, over their men.”2
Initially, the reserve clause didn’t come under much attack, because the National League was the “only game in town” and all of its owners agreed to the clause. A rival American Association appeared on the scene from 1882 to 1891, but friction with them was avoided with an 1883 “National Agreement” that prohibited the poaching of players subject to the reserve clause in either league. From the player’s perspective, their contracts were decidedly one sided. Although teams effectively controlled a player for the entirety of his career, nothing bound the teams to their players, except for their contracts (and virtually all contracts had one-year terms). Any player could be traded or sold at any time, and they could be released on just 10-days’ notice.
John Montgomery Ward became an important early figure in challenges to baseball’s reserve clause. Known as Monte Ward, he not only had a pretty epic baseball card, he was a star player. Playing for the Providence Grays, in 1879, he went 47–19 with 239 strikeouts and a 2.15 ERA, pitching 587 innings. The following season Ward went 39–24 with 230 strikeouts and a 1.74 ERA pitching 595.0 innings. Ward also has the distinction of pitching the second perfect game in professional history as well as the longest complete game shutout, going 18 innings in a 1-0 win over the Detroit Wolverines 1–0 on August 17, 1882, a record that will never be broken.
In 1983, he suffered an arm injury (not related to his pitching load), and was then sold to the New York Gothams (later the Giants . . . boo). Among other things, this sale placed Ward close to Columbia Law School, where he enrolled and graduated in 1885. Using his legal training, Ward organized and led the first labor union in professional sports, the Brotherhood of Professional Baseball Players. The principal goal of the Brotherhood was to raise player salaries, which had remained stagnant even though baseball’s popularity (and revenues) had risen considerably. A chief target of the Brotherhood’s effort was the reserve clause, which continued to suppress players’ salaries and limit their mobility. In 1890, the Brotherhood announced plans to start their own league, the Players League which included a profit-sharing plan for the players and, importantly, no reserve clause in the contracts. Many of the National League’s top players announced their intention to sign with Players’ League team, despite the reserve clause in their contracts with the National League.
The National League team owners responded by filing lawsuits against the defecting players, suing them for breach of contract and seeking to enforce the reserve clause of their contracts. They filed suits against three players at the end of 1889, including one against Monte Ward.
Typically the goal in a breach of contract lawsuit is to recover the damages suffered as a result of the breach. However, the National League owners did seek to recover their damages, instead they wanted the players to play in their league. Thus, the owners sought injunctive relief, not money damages. Yet, as labor & employment attorneys will tell you, courts typically do not order one party to an employment contract to go work for the other (i.e., specific performance). Money damages are typically the only remedy available when one party refuses to perform. But, instead of seeking an order getting the players to play for their National League teams, the owners sought to bar them from the Players’ League.
The case against Monte Ward; (Metropolitan Exhibition Co. v. Ward, 9 N.Y.S. 779 (N.Y. Sup. Ct. 1890), was decided first, and it went in favor of the players. The New York court denied the owners’ requested injunction, concluding the contract was unenforceable because it lacked key material terms, such as salary. The court also denied the request because the reserve clause lacked of mutuality. Namely, “A contract, to be specifically enforced by the court, must be mutual . . . . Whenever . . . the contract is incapable of being enforced against one party, that party is equally incapable of enforcing it against the other.” A recurring reserve clause meant that a player would be chained to his current team for as long as the team wished, but the team could release the player at any time for any reason, as long as it provided ten-days’ notice. The court found this outcome and its gross imbalance to be outrageous.
Another of the cases brought by the National League was, Metropolitan Exhibition Co. v. Ewing (U.S. Circuit Court for the Southern District of New York, 1890) Catcher Buck Ewing of the New York Giants jumped to the New York team in the Players’ League. The Giants, claiming breach of contract, sought an injunction preventing him from playing for his new team. Circuit Judge William Wallace examined the reserve clause in Ewing’s 1889 contract, which entitled the Giants to reserve Ewing’s services for the 1890 season as long as they did not pay him less than he had earned the prior year. The clause did not define the “right to reserve,” however, nor did it contain any other specific terms and conditions of employment. Wallace therefore considered the reserve clause to be “a contract to make a contract.” The Giants had the exclusive right to negotiate with Ewing but could not force him to sign a new contract. Thus, the team could neither sue for damages if Ewing failed to sign a contract nor sue for specific performance, i.e., a court order compelling Ewing to play for the Giants. Although Ewing’s failure to negotiate with the Giants constituted a breach of contract, it was a breach without a remedy, and Wallace denied the request for an injunction. At about the same time, two other players won similar suits in New York and Pennsylvania state courts, also on the grounds that the reserve clause was too indefinite to be enforced. Unfortunately, the Players League folded within a year, and no further attack could be built on the Ewing case.
In 1901, the Players League was replaced by the Western League, who rebranded itself as the American League and started to compete with the National League. Once again the National League was faced with losing its star players and litigation ensued. One such case was, Brooklyn Baseball Club v. McGuire (U.S. Circuit Court for the Eastern District of Pennsylvania, 1902). In McGuire, a federal court in Pennsylvania refused to prevent Deacon McGuire from jumping from the National League’s Brooklyn Superbas (later called the Dodgers) to the American League’s Detroit Tigers. In denying a preliminary injunction to enforce the reserve clause in McGuire’s contract, Judge George Dallas pointed to the provision, standard in baseball contracts, that allowed the team to terminate the contract with ten days’ notice. Judge Dallas applied an 1870 Supreme Court decision denying a request for specific performance on the grounds of lack of mutuality when one party was entitled to abandon the contract with a year’s notice. Moreover, Dallas held that the plaintiff had not proven that McGuire’s services were so unique that the team could not adequately be compensated by monetary damages rather than the court order they had requested to keep McGuire from playing for the Tigers. The McGuire case continued the tendency of the federal courts to view the reserve clause with skepticism.
Article interlude: The Dodgers will not trade for Juan Soto or Shohei Ohtani. Additionally, the Chris Martin trade should not be looked at by asking if Martin will be the bullpen savior (he won’t). All he needs to do is perform better than Morontes, Cleavinger, Reed and, perhaps Bickford. Viewed that way, it’s not a bad deal.
Back to our regularly scheduled article. Later in 1902, the Pennsylvania Supreme Court became the first court to hold the reserve clause enforceable, in a case involving star player Napoleon Lajoie. To say Nap Lajoie’s case was bizarre would be a major understatement. In 1896, Lajoie batted .326 as a 21-year-old rookie for the Phillies. In the next four seasons, Lajoie’s average would never dip below .324, which cemented him as a bona fide star in major league baseball.
After the 1900 season, Lajoie’s five-year contract expired. Lajoie was making the league maximum of $2,400 per year in addition to a $200 under-the-table yearly payment by Phillies owner Colonel John Rogers. Lajoie’s roommate was Ed Delahanty, the Phillies star outfielder. Delahanty was being paid $600.00 over the minimum, and when Lajoie learned of this, refused to sign with the Phillies for the 1901 season unless Rogers paid him $400 to make up the difference for the prior year. In steps the new American League, who had a team in Philadelphia, the Athletics, managed by the venerable Connie Mack. Mack learned of the trouble between Lajoie and Rogers and quickly offered Lajoie a 4-year-contract worth between $16,000 and $24,000. In February of 1901, Lajoie signed a contract with the A’s and became their starting second baseman.
Based on the reserve clause, Rogers immediately sought an injunction to bar Lajoie and two other players he lost to the American League from playing for the A’s. The court denied his request for an injunction, thus allowing the defectors to play in their new American League homes. In 1901, Lajoie had one of the best single seasons in baseball history. In addition to setting the still unbroken record for highest batting average in the American League, he led the Athletics in runs, hits, doubles, home runs and runs batted in. He won the Triple Crown and led the American League in 8 offensive categories.
Rogers appealed the lower court’s decision and the case was finally decided by the Pennsylvania Supreme Court in April of 1902, one day after opening day. The court sided with Rogers and granted the injunction. In doing so, it determined that the reserve clause was lawful and agreed that Lajoie was an irreplaceable player. The result of the injunction was that Lajoie was banned from playing baseball in Pennsylvania for any team other than the Phillies, who still had ownership of Lajoie’s services. As talented as Lajoie was, the Athletics couldn’t keep a player who was barred from playing home games. Therefore, Mack allowed Lajoie to negotiate with his good friend Charles Somers, owner the Cleveland Bronchos (aka Blues, later known as the Indians). Lajoie signed with Cleveland and played out the majority of his HOF career for them, save for a small caveat. Whenever the Bronchos came to Philly to play the Athletics, Rogers would ensure law enforcement was there to board the train in Philadelphia to serve Lajoie with citations for contempt. However, he was never caught. Each time, Lajoie would miss the games in Philly, staying in Atlantic City while his team played in Philadelphia, then rejoin the team immediately afterwards. That was a nutty outcome, in a very nutty case. Nutty is a highly complex legal term that you’ll have to look up on your own.
Despite their victory, the National League began to see the writing on the wall, and in 1903 the National League made a second National Agreement, this time with the American League. The rival National League and American League reached a truce whereby they agreed to respect each other’s reserve clauses. This meant that, yet again, the players had few other options for their services and few opportunities to challenge the reserve clause The agreement began a partnership between the two leagues that continued until they formally merged into a single organization in 2000. In addition to creating the World Series, the agreement provided for mutual respect of the reserve clause, avoiding litigation and ensuring that teams in both leagues would retain control over their players. As a result of this agreement between the two leagues, there was peace in the valley for about a decade.
Article interlude #2: The Dodgers will trade for Juan Soto and Shohei Ohtani in a seven team trade, that caused the trade simulator to blow up and will take an individual with a doctor’s degree in path to weeks two unravel. Players coming to the Dodgers will be Soto, Ohtani, Drury and Scott Barlow. Players leaving the Dodgers will be Bellinger, Muncy, Cartaya, Stone, Keith, Busch, Hoese, Ferguson, Bickford, Knack, Pages, Jose Ramos, and several 18 year old pitchers I’ve never heard of. James Outman is not going to be traded!!!
Back to the article: It would not be until 1914, when the Federal league emerged as a rival to the National and American leagues. The Federal League convinced 81 players from the American and National League teams to switch to their teams. Of those, 18 players left during their contract years, while the other 63 jumped clubs during the year covered by the reserve clause. The American and National Leagues decided to sue only the 18 players to leave during their contract years, to avoid judicial scrutiny of the reserve clauses. Yet again, the players won most of those legal challenges. Unfortunately, the victories were short lived, as the Federal League folded in 1915.
The first antitrust baseball case fully litigated on the merits was American League Baseball Club v. Chase, 149 N.Y.S. 6 (N.Y. Sup. Ct. 1914), a dispute involving Hal Chase, a star first baseman who moved from the Chicago White Sox of the American League to the Buffalo Buff-Feds of the Federal League. The White Sox sought to enjoin Chase from switching leagues.
In his defense, Chase argued that baseball violated federal antitrust laws. The Judge however, while agreeing that baseball was a monopoly, he decided that baseball was not involved in interstate trade or commerce. Instead, he concluded, “Baseball is an amusement, a sport, a game that . . . is not a commodity or an article of merchandise subject to the regulation of congress . . . .” Interestingly, the Court did rule that baseball had violated New York state law, meaning that the preliminary injunction initially granted could no longer be maintained. And its s reasoning suggested that the Court also would have found baseball to have violated federal antitrust laws had it affected interstate commerce:
“A court of equity insisting that ‘he who comes into equity must come with clean hands’ will not lend its aid to promote an unconscionable transaction of the character which the plaintiff is endeavoring to maintain and strengthen by its application for this injunction. The court will not assist in enforcing an agreement which is a part of a general plan having for its object the maintenance of a monopoly, interference with the personal liberty of a citizen and the control of his free right to labor wherever and for whom he pleases; and will not extend its aid to further the purposes and practices of an unlawful combination, by restraining the defendant from working for any one but the plaintiff.”
This decision was basically like kissing your sister, Chase was able to go on and have a great career, that is until he was part of the Black Sox scandal and banned from baseball for life. The owners on the other hand did not have to worry about having their “protections” stripped away.
The next great battle came, when the Federal League decided to take on the National and American Leagues in court. This will have to wait until the next article as this one has become far too long.
Final trade interlude: No matter what happens at the deadline with the Dodgers, if any of the star players are traded to other teams, it won’t take long for fans to moan that Andrew Friedman doesn’t even try; the Dodgers could have easily matched the trade made by the other teams and whoever we acquire will not be enough to take us to the promised land!
1 Baseball’s Reserve Clause and the “Antitrust Exemption”, Federal Judicial Center
2 James R. Devine, Baseball’s Labor Wars in Historical Context: The 1919 Chicago White Sox as a Case Study in Owner-Player Relations, 5 Marq. Sports L.J. 1, 46 (1994)