Baseball Beat: The Blog: Alternative Dispute Resolution & the History of Baseball: Part One

by Brent S. Gambill

I. INTRODUCTION

In the beginning, baseball started as a leisure sport for gentlemen. Soon the capitalist spirit of America took over as the enterprise of baseball made the wealthy wealthier and the talented famous. The origins of the game are easy enough, but as more financial gains were attained the lines were drawn between the owners and the players. The players started playing for leisure and soon found they could make money from their skills. Owners used the players’ desire and passion for the game to help make them wealthier.

The game grew along with the profits. Before long, the players began to organize and seek out the best offer for their services. The educated aspect of players had not taken a hold as there was minimal leadership in the ranks. Only a few truly realized the length of disservice the owners held over the players. These few would soon become the next owners or league bricklayers. In time, the owners devised a legal slavery upon the players called the reserve clause. Desiring to play and get better, the players signed on with minimal complaints. It took nearly a century before a savior and service would come to free the players from the chains of financial maltreatment.

The savior would be an arbitrator by the name of Peter Seitz and the service would be arbitration agreed to by the owners. The players had little chance of taking on ownership head on, but with the help of Marvin Miller and the Major League Baseball Players Association (hereafter “MLBPA”) the players chipped away at the owners’ vast power. Direct attack would provide little chance and only recourse, but collective bargaining led to arbitration which subsequently led to the players legal voice being heard. Baseball has a history of legal slavery in the past century, but baseball’s many forms of alternative dispute resolution (hereafter “ADR”) brought about drastic change in the baseball industry. The game will always be as pure as its inception in the 1860’s, but the business of baseball made its greatest strides in providing rights to the players through arbitration.

II. BASEBALL BEGINNINGS

Origins of Baseball

The National Association of Baseball Players (NABP) was established in 1858 as the first amateur organization.[1] Harry Wright realized the business potential of the game and formed the Cincinnati Red Stockings as the first professional team in 1869. He gathered the best players and sent them barnstorming across the nation playing exhibition games.[2] The following year nine additional professional teams were formed causing the establishment of the National Association of Professional Baseball Players (NAPBP) in 1871.[3] Five years later, William Hulbert, owner of the Chicago White Stockings, formed the National League of Professional Baseball Players (NL) in response to what he perceived were organizational deficiencies in the NAPBP.[4] The constitution for the new league was signed on February 2, 1876, and is the same National League present today.[5]

Reserve Clause

As salaries rose and profits fell, Arthur Soden, owner of the NL Boston club, proposed the idea of reserving five players per team at an owners meeting in Buffalo, New York on September 30, 1879. The reserve clause was the ability of teams to reserve players to their initial clubs for life.[6] The reserve clause had an immediate affect on the profits of owners. Salaries and benefits made up as much as 60 percent of revenue before the National League adopted the reserve system. The percentage gradually decline to below 15 percent on average for Major League clubs in the 1950’s.[7] In response to the reserve clause new leagues were formed allowing players free contracting. The American Association (AA) was established in 1882 as well as the Union Association in 1883[8], Brotherhood of Professional Base Ball Players in 1885, Players League (PL) in 1889[9], and the Western League in 1892.[10]

During the inception of the PL, the league went head to head with NL cities and bidding wars for players ensued. It was during this time that the first legal cases concerning players’ contract were heard in court. The standing of the courts was that the players’ contracts lacked mutuality and were thus unenforceable. In 1890, the New York Giants took star player and founder of the PL, Monte Ward, to court concerning his contract.[11] The New York Supreme Court wrote that granting an injunction “would permit the ball club to reserve a player in perpetuity while it also reserved the right to terminate a player’s contract on ten days’ notice. Such a concentration of power in one part could lead to its complete control over the terms of any future contract.”[12] The court went onto call the Giants’ construction of the player contract as a “spectacle.”[13] While it would appear the victories were substantial wins for the players, this was not the case as by the time the court decisions were handed down the PL was gone.

Following prior leagues financial failure, the Western League, renamed the American League (AL) following the 1899 season,[14] was able to use much of the strategy of the PL to truly challenge the NL for the first time. A key legal disposition during this time was the Napoleon Lajoie case. Lajoie, nicknamed the “Big Frenchman”,[15] was the second baseman for the NL Philadelphia club and received the league maximum salary of $2,400 per year. He soon signed with the AL Philadelphia Athletics franchise in 1901 for the sum of $25,000 over three years.[16] The NL club, Philadelphia Phillies, moved for an injunction. The NL lost the injunction on grounds of lack of mutuality, but the Pennsylvania Supreme Court overturned the decision citing the $2,400 salary as the establishment of mutuality.[17] The Court stated that mutuality did not mean that each party had to have precisely the same rights or remedies. The parties held markedly different rights, but each side could seek judicial enforcement of those rights and the court deemed this sufficient. The Court completely ignored the precedent set in New York in the Ward case and ruled that unequal terms do not void a contract.[18] In 1901, Lajoie set the all-time batting record of .422 in the AL only to be ordered to return to the NL following the season.[19]

In 1914, the Lajoie case was overturned by the Hal Chase decision. Hal Chase defected to the Federal League (FL) which was formed in 1913. The New York State Supreme Court ruled that Major League Baseball was not subject to antitrust laws because “as complete a monopoly…as any monopoly can be made…baseball is an amusement, a sport, a game…not a commodity or an article of merchandise.” The court reversed the mutuality precedent set in Lajoie and refused to enjoin Chase to the AL Chicago franchise.[20]

Another case involved pitcher Jack Harper, who left the St. Louis NL club for the cities AL team in May, 1902. The NL sought an injunction, but the courts upheld Harper issuing “a blistering condemnation for the entire baseball industry for its restrictive labor practices.” Judge Jon A. Talty cited the Fourteenth Amendment to the Constitution in preventing involuntary servitude.[21]

In 1902, the AL outdrew the NL by 500,000 fans. As competition and player salaries grew, a compromise was reached in January of 1903 establishing the organization of Major League Baseball under the 1903 Agreement.[22] The establishment of baseball is basically the same establishment today as it was in 1903.

Other issues arose during the next sixty years such as the forming of the Federal League (FL), Antitrust Exemption, fixing of the 1919 World Series, Mexican League and formation of the Players Guild, 1950’s franchise relocation, expansion through the Continental League, and soon the activity of the Major League Baseball Players’ Association (MLBPA).

A common misperception about the reserve system was that it had the approval of the United States Supreme Court. The Supreme Court has never reviewed the reserve system, and never approved or disapproved of it. The only baseball question it has ever considered is whether baseball is engaged in interstate commerce within the meaning of the Sherman and Clayton antitrust laws.[23] The Court ruled in favor of antitrust protection in the Federal League case in 1922[24], the Toolson case in 1953[25], and the Flood case in 1972.

END NOTES:
[1] Andrew S. Zimbalist, Baseball and Billions 1, Princeton University Press (1999).
[2] Roger I. Abrams, Legal Bases: Baseball and the Law 14, Temple University Press (1998).
[3] Zimbalist, at 2.
[4] Abrams, at 10.
[5] Zimbalist, at 3.
[6] Zimbalist, at 4.
[7] Abrams, at 46
[8] Zimbalist, at 4.
[9] Abrams, at 18.
[10] Zimbalist, at 6.
[11] Abrams, at 19.
[12] Metropolitan Exhibition Company v. Ward, 9NYS 779 (NY Sup Ct 1890).
[13] Abrams, at 20.
[14] Zimbalist, at 7.
[15] Abams, at 29.
[16] Abrams, at 27, 32.
[17] Philadelphia Ball Club, Ltd. v. Lajoie, 202 Pa. 210, 51 A 973 (Pa. 1902).
[18] Abrams, at 35.
[19] Zimbalist, at 7.
[20] Zimbalist, at 9.
[21] Zimbalist, at 203.
[22] Zimbalist, at 7.
[23] Red Smith, Homework for Chub and Lee, N.Y. Times, Dec. 30, 1975, at 17.
[24] Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922).
[25] Toolson v. New York Yankees, 346 U.S. 356 (1953).

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