Baseball isn’t unique only for being “America’s pastime.”1 It is also unique because activities involving the “business . . . of base[ball]” are exempt from federal antitrust laws on the ground that they are not interstate commerce.2 This “business of baseball” exemption, first introduced by the Supreme Court in Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs,3 has been criticized4 as “anomal[ous]”5 and “illogical” under modern Commerce Clause doctrine.6 Yet the Supreme Court has repeatedly upheld it, albeit narrowly, relying on stare decisis.7 Recently, in Cangrejeros de Santurce Baseball Club, LLC v. Liga de Béisbol Profesional de Puerto Rico, Inc.,8 the First Circuit held that baseball’s antitrust exemption applies to Puerto Rico’s top professional baseball league.9 In doing so, the court erroneously interpreted precedent to extend the baseball exemption beyond Major League Baseball (MLB) for the first time. This decision invites further expansion of the exemption to other baseball arrangements, in contravention of Supreme Court precedent restricting the exemption to a tightly confined anomaly.
Cangrejeros originated from a dispute between the Liga de Béisbol Profesional de Puerto Rico (“the ‘only top-tier professional baseball league in Puerto Rico’”10) and Thomas Axon, owner of the Cangrejeros de Santurce Baseball Club (a team that played in the league).11 The Cangrejeros play their home games at Hiram Bithorn Stadium, which the municipality of San Juan owns and operates.12 As alleged, the stadium was in disrepair13 and Axon lobbied the Mayor of San Juan, Miguel Romero, for a long-term lease in exchange for a $2 million investment by the team.14 Romero rejected the proposal, prompting Axon to criticize San Juan’s neglect of the stadium and announce his intention to relocate the team.15 Juan Flores-Galarza, President of the League, responded by accusing Axon of conduct “detrimental to baseball” and thus contrary to League rules.16 Flores met with the League Board, consisting primarily of investors with control over competing teams, and decided to suspend Axon from the League.17 Axon18 sued Flores and the League in the Superior Court of San Juan, seeking to stop the suspension.19 After the court ruled against Axon,20 the League seized Axon’s controlling interest in the team, stripping Axon of ownership.21 Axon sued the League and its constituent teams in the U.S. District Court for the District of Puerto Rico, asserting violations of federal and Puerto Rico antitrust laws, the Due Process Clause (suing under 42 U.S.C. § 1983), and Puerto Rico tort law.22
The district court dismissed the case in full.23 On the federal antitrust claims, the court concluded that it lacked subject matter jurisdiction because the business of baseball exemption — which “bars any federal antitrust claims” in organized baseball — also applies to the Puerto Rican league,24 marking the first time a federal court extended the exemption beyond MLB.25 It similarly dismissed the antitrust claims brought under Puerto Rico law on preemption grounds, concluding that Supreme Court precedent established that any “state [baseball] antitrust regulation would conflict with [the Sherman Act26].”27 The court lastly dismissed the § 1983 claim as precluded because Axon had lost on a substantively identical claim in state court,28 and it found that it lacked supplemental jurisdiction over a remaining state-law tort claim.29
The First Circuit affirmed in part, reversed in part, vacated in part, and remanded.30 Writing for a unanimous panel, Chief Judge Barron31 first affirmed that the business of baseball exemption applies to the League.32 Axon argued that, when the Supreme Court confined the exemption to the facts of Federal Baseball,33 it intended the exemption to cover only the parties to that case and their successors.34 Chief Judge Barron disagreed with that reading, emphasizing that Federal Baseball did not describe the exemption in terms of the specific leagues at issue or “any specific league at all.”35 He further reasoned that a strict limited-to-its-facts approach was foreclosed by Flood v. Kuhn,36 in which the Supreme Court recognized the exemption in the context of baseball’s reserve clause,37 even though that clause was not implicated in Federal Baseball.38 These precedents, Chief Judge Barron explained, defined the exemption “in terms of an activity — the activity being ‘the business [of] giving exhibitions of base[ball].’”39 Axon also argued that the exemption should not apply to the League because stare decisis protects only MLB’s reliance interests.40 Chief Judge Barron rejected that contention, explaining that Flood upheld the exemption not only on stare decisis grounds, but also due to tacit congressional acceptance41 and the sport’s “unique characteristics.”42 Finally, Axon argued in the alternative that even if the exemption did apply to the League, it did not apply here because ownership decisions by team owners were not “central” to the business of baseball.43 Chief Judge Barron disagreed, reasoning that rules governing franchise ownership shape player quality and team composition, and thus “the public display of baseball games”44 — making such conduct “central,” not “incidental,” to the business of baseball.45
The First Circuit next vacated the district court’s holding that Puerto Rico’s antitrust laws were preempted by the Sherman Act under the Supremacy Clause,46 which constituted the district court’s grounds for dismissing the state antitrust claims.47 Chief Judge Barron explained that Supreme Court precedent has implied that the Commerce Clause may bar state antitrust regulation of baseball where it would impermissibly burden interstate commerce but has not indicated, as the district court did,48 that the Sherman Act could preempt state antitrust law as applied to baseball.49 Accordingly, the court remanded for further fact-finding on whether state antitrust law governing a league operating solely within Puerto Rico imposes an impermissible burden on interstate commerce.50
Finally, the First Circuit reversed the district court’s dismissal of the § 1983 claim on preclusion grounds, concluding that the district court relied on outdated law for its preclusion standard.51 And because the plaintiffs’ federal civil rights claim remained viable, the court held that the district court also lacked authority to dismiss the related tort claim.52
The First Circuit’s extension of baseball’s antitrust exemption to an independent league in Puerto Rico departs from precedent. Since the Supreme Court created the exemption in 1922,53 the Court has exclusively applied it to MLB and its affiliated minor league system.54 Despite the Supreme Court’s admonition that further extensions should come through Congress,55 the court here truly “[went] where no [other] court has gone before.”56 In so doing, the decision both invites further extensions by lower courts and risks making Puerto Rico an anomaly within baseball — where a professional league could end up both shielded by the federal exemption and exposed to local antitrust law.
Organized baseball’s antitrust exemption traces back to the Supreme Court’s 1922 decision in Federal Baseball. Writing for the majority, Justice Holmes held that the Sherman Act did not apply to “[t]he business [of] giving exhibitions of base[ball].”57 He reasoned that professional baseball was a “state affair[]”58 and that any interstate travel required for games was a “mere incident” to the exhibition itself.59 Thus, because the Court held that baseball was not “commerce among the [s]tates,” Congress’s Commerce Clause authority — under which the Sherman Act was enacted60 — did not reach baseball.61 By the time the Court revisited the issue in Toolson v. New York Yankees, Inc.,62 Commerce Clause doctrine had shifted markedly,63 yet the Court upheld Federal Baseball on stare decisis grounds, citing reliance interests and the absence of any legislative override.64
Two years later, in United States v. Shubert,65 the Court explained that the exemption preserved baseball’s unique reserve system66 — a contractual provision that bound a player to his team by granting the club exclusive, indefinite control over his services.67 Chief Justice Warren explained that the Court had upheld baseball’s antitrust exemption for over thirty years, including “the validity of the so-called ‘reserve clause.’”68 The Court’s reference to the reserve system reflected a widespread belief — shared by Congress69 — that baseball’s economic viability depended on preserving competitive balance among teams.70 The reserve clause, the argument went, prevented wealthier clubs from hoarding talent and allowed organized baseball to avoid a chaotic market in player contracts.71 By grounding the exemption in that system, the Court demonstrated that the exemption inhered not in baseball as a sport but in the institutional structure of organized baseball.72 The Court reaffirmed that understanding in Radovich v. National Football League,73 emphasizing that the exemption applied only “to the facts” of Federal Baseball and Toolson — that is, to “organized professional baseball.”74 It cautioned that courts should “not extend” those interpretations further.75 Finally, in Flood, the Court acknowledged Federal Baseball’s tension with then-current Commerce Clause doctrine,76 but nonetheless reaffirmed the “anomal[ous]” exemption based “on a recognition . . . of baseball’s unique characteristics and needs”77 — characteristics that flow from the reserve-clause system central to organized baseball.78
The House Committee on the Judiciary also affirmed this understanding of the exemption in a 1952 report.79 The report identified the “so-called reserve clause” as “[t]he keystone of the entire structure of organized . . . baseball” and acknowledged that “[o]rganized baseball ha[d] for years occupied a monopoly . . . in the business of selling professional baseball exhibitions.”80 This language confirmed what had been clear since Federal Baseball: The exemption arose in the context of organized baseball — now known as MLB and its affiliates81 — and any legislative acquiescence on the issue was acquiescence to an exemption for MLB’s reserve system. Indeed, Congress rejected a proposal for blanket antitrust baseball immunity, concluding that legislation was “premature” until “the reasonableness of the reserve rules ha[d] been tested by the courts.”82
Congress finally addressed baseball’s anomalous antitrust status with the Curt Flood Act of 1998,83 eliminating the exemption for MLB’s reserve system as to major league players.84 However, the Act cautioned that “[n]o court shall rely on” it to alter the application (or nonapplication) of antitrust law to other conduct, including minor league player agreements, franchising, and broadcasting.85 Those provisions might imply that Congress recognized that the antitrust exemption could apply outside MLB’s reserve system, particularly given that some lower courts have applied the exemption to such other aspects of MLB’s business.86 However, Congress stated the Act does not “chang[e] the application of the antitrust laws”87 with regard to anything but the reserve system — that is, whatever law existed prior to the Act would remain unchanged, punting the question back to the courts.88 If anything, the Act confirms that Congress, like the courts, has understood baseball’s exemption to be tied to MLB rather than to the sport in general, given that the Act’s illustrative list of conduct not affected by the Act appears cabined to the major-minor league system of organized baseball.89 Even if an exemption for other aspects of the baseball business survives the Act, its scope remains confined to MLB; lower courts since the Act have applied the exemption exclusively in that context.90
The First Circuit made two interpretive errors in extending the business of baseball exemption beyond MLB. First, it lifted the phrase “business of baseball” from Federal Baseball out of context. Federal Baseball endorsed the D.C. Circuit’s framing of the case,91 which characterized the issue narrowly as “the giving of exhibitions of baseball, under the circumstances disclosed in the record.”92 But the record did not refer to baseball at large.93 Instead, at the time of Federal Baseball, “professional baseball” was widely understood as inseparable from the reserve system94 — a system unique to organized baseball. Indeed, the controversy in Federal Baseball stemmed specifically from the Federal League’s (a would-be competitor to MLB) collapse due to its inability to sign high-quality players95 — a consequence of the reserve system.96 Federal Baseball concluded that the reserve clause’s contractual restrictions did not implicate interstate commerce.97 Because Justice Holmes tethered the exemption to the D.C. Circuit’s narrow characterization, the scope of that holding should be read in light of the record’s circumstances, including the reserve system.98
Second, the First Circuit misinterpreted Radovich’s statement that the exemption is confined “to the facts”99 of Federal Baseball and Toolson. By the First Circuit’s account, those “facts” could not mean the major league apparatus and reserve system because neither case squarely addressed the reserve clause.100 Instead, the First Circuit relied on Flood, which did confront the reserve system,101 and treated that discussion as evidence that the Court intended the exemption to apply more broadly than the circumstances in Federal Baseball and Toolson.102 In doing so, the panel read precedent as endorsing a sport-wide conception of “baseball” that encompasses any professional arrangement.103 But that interpretation overlooks the reality that the underlying dispute in all three cases — Federal Baseball, Toolson, and Flood — involved MLB’s reserve system and the major-minor league structure it sustained.104 Interpreting Radovich’s “to the facts” limitation as a blanket rule for professional baseball misstates those cases and untethers the doctrine from the organized baseball framework that both the Court and Congress had in mind.
These interpretive errors introduce nonuniformity into baseball’s antitrust law in two ways. First, the First Circuit’s preemption holding creates an anomaly within an anomaly: Courts have held that the federal antitrust exemption preempts state antitrust regulations (that is, organized baseball is exempt from both federal and state antitrust law) on the theory that national uniformity in baseball’s governance is essential.105 But a finding against preemption on remand would make Puerto Rico stand alone as the only jurisdiction in which a professional baseball league is simultaneously exempt from federal antitrust law and subject to local antitrust regulation.106 Second, by being the first court to extend the exemption beyond MLB, the decision invites further expansion. Taken to its logical extreme, if courts can extend the exemption to an independent Puerto Rican league on the basis of functional similarity — paid baseball exhibitions — little doctrinal barrier would prevent its application to any system of professionalized baseball, including, conceivably, National Collegiate Athletic Association (NCAA) baseball in a world where college athletes are recognized as employees.107 Once the exemption is severed from the reserve clause origins that defined its scope, there is no principled way to exclude other professional baseball arrangements.
The Court’s cases counsel the opposite: Treat the exemption as a tightly confined anomaly and decline to extend it beyond MLB absent congressional action.