Garber v. MLB - MLB Opposition to Motion in Limine Re Baseball Exemption

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

FERNANDA GARBER, MARC LERNER, DEREK RASMUSSEN, ROBERT SILVER, GARRETT TRAUB, and VINCENT BIRBIGLIA, representing themselves and all others similarly situated,

Civil Action No. 12-cv-3704 (SAS)

Plaintiffs,

v.

OFFICE OF THE COMMISSIONER OF BASEBALL, et al.,

Defendants.

DEFENDANTS’ RESPONSE IN OPPOSITION TO PLAINTIFFS’ MOTION IN LIMINE TO PRECLUDE ARGUMENT OR EVIDENCE

REGARDING THE BASEBALL EXEMPTION

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1285 Avenue of the Americas New York, New York 10019-6064 Telephone (212) 373-3000 Facsimile (212) 373-2758

Counsel for MLB Defendants DAVIS POLK & WARDWELL LLP 450 Lexington Avenue New York, New York 10017 Telephone: (212) 450-4000 Facsimile (212) 701-5800

Counsel for Comcast Defendants

KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900

Counsel for DIRECTV Defendants BOIES, SCHILLER & FLEXNER LLP 575 Lexington Avenue New York, New York 10022 Telephone: (212) 446-2300 Facsimile: (212) 446-2350

Counsel for New York Yankees Partnership WILLIAMS & CONNOLLY LLP 725 Twelfth Street, N.W. Washington, D.C. 20005 Telephone: (202) 434-5000 Facsimile: (202) 434-5029

Counsel for Yankees Entertainment and Sports Network, LLC

Case 1:12-cv-03704-SAS Document 485 Filed 12/30/15 Page 1 of 12

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Defendants respectfully submit this opposition to Plaintiffs’ Motion in Limine #3 (the

“Motion”), which seeks to preclude Defendants from “presenting at trial any evidence or

argument for the proposition that Defendants’ broadcasting restraints are encompassed” by

professional baseball’s exemption from the antitrust laws.1 (Mot. at 3.) Plaintiffs’ Motion is

meritless and therefore should be denied.

Defendants must be permitted to present evidence that relates to aspects of the business

of baseball, which other courts repeatedly have held is fully encompassed by the baseball

exemption. In the course of defending against Plaintiffs’ claims that MLB’s broadcast licensing

system violates the antitrust laws, Defendants may present evidence that not only is relevant to

the merits of the case, but also overlaps with the issue whether the baseball exemption applies to

broadcasting and distributing baseball telecasts via television and the Internet. Such overlap is

no basis for pretrial exclusion of relevant evidence on the merits. Although Plaintiffs purport to

seek preclusion of evidence that would “waste [] trial time” (id. at 1), their Motion actually seeks

to preclude evidence relevant to the Court’s analysis of issues central to this case. Plaintiffs’

Motion should be denied on this ground alone.

It is also proper, independently, for Defendants to develop a full factual record at trial

regarding the applicability of the baseball exemption to broadcasting and distribution of baseball

telecasts via television and the Internet. That is likely to be a central issue on any appeal in this

case from either side, no matter the outcome of trial. Given that the evidence on this issue

overlaps with evidence regarding the merits of the case, there is little, if any, cost to making the

1 Plaintiffs also seek to strike from the record certain deposition designations in which class

representatives acknowledge that they seek to challenge certain aspects of the business of baseball. (Mot. at 3.) But the question whether the class representatives are qualified to testify about such matters is entirely separate from whether Defendants should be precluded from presenting evidence or argument on the baseball exemption at trial and therefore is not appropriately considered in this Motion.


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factual record supporting the applicability of the baseball exemption. Thus, it is appropriate for

the Court to permit Defendants to present evidence regarding the applicability of the baseball

exemption, and Plaintiffs’ Motion therefore should be denied for this reason as well.

I. The Evidence That Plaintiffs Seek To Exclude Is Intertwined with Other Issues in the Case

In their Motion, Plaintiffs seek to exclude evidence concerning the connection between

MLB’s broadcast rules and the business of baseball. Such evidence is relevant not only to the

baseball exemption, but also to key issues in the case on the merits.

For example, Defendants are prepared to put forth evidence at trial of several

procompetitive effects that stem from the challenged broadcast licensing structure. These

procompetitive effects include, among other things, the fact that the structure increases output by

incentivizing Clubs to increase the availability of local baseball within their home television

territories, permits national broadcasts that are available to fans for free, and fosters the viability

of Clubs in smaller markets. Those local and national broadcasts promote ticket sales by

encouraging consumers to attend games, which accounts for the most significant source of

revenue for the business of baseball. Evidence regarding such procompetitive justifications will

inevitably implicate the importance and benefits of the challenged structure to the sustained

success of Major League Baseball, its Clubs, and the sport generally—i.e., the business of

baseball. Similarly, Defendants will present evidence of the importance of game exclusivity to

the current broadcast licensing structure. Game exclusivity is part of the business of baseball,

and it has created incentives that have led to the explosion of output and widespread availability

of game telecasts. And Defendants will show at trial that the broadcasting rules enhance the

ability of the League, the Clubs, and their telecasts of games to compete against other

entertainment programming. Facing that competition is part of the business of baseball, and


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understanding that fact is essential to an analysis of the procompetitive nature of the current

broadcasting rules.

All of the evidence described above—relating to the various procompetitive and output

enhancing effects of the current broadcasting license structure, the importance of game

exclusivity in the current system, and the extent to which the broadcasting rules help the League

and the Clubs compete against other entertainment providers—will be properly presented as a

key part of Defendants’ arguments against Plaintiffs’ claims on the merits. That merits evidence

is intertwined with evidence that relates to and supports application of the baseball exemption to

the broadcasting and distribution of game telecasts via television and the Internet.

Plaintiffs’ Motion thus asks the Court to preclude Defendants from offering evidence and

presenting arguments that will show the territorial system provides significant value—and is of

central importance—to the viability of the business of baseball. Such a limitation of Defendants’

case at trial would be improper and should be denied. See Thal v. Metro. Life Ins. Co., 2006 WL

3593408, at *2 (D. Conn. Dec. 8, 2006) (denying motion in limine to preclude evidence at trial,

in part, because such evidence “appears to be inextricably linked” to other issues in the case, and

concluding that “each side may present all admissible evidence relevant to these issues”). The

challenged evidence bears not only on MLB’s procompetitive justifications for the broadcast

licensing structure, but also on the extent to which the challenged rules relate directly to the

business of baseball. Part of Defendants’ presentation to the Court at trial will include a

demonstration that the broadcast licensing structure is necessary for the League and the Clubs to

exist as they do today. Defendants will further show that the rules and relationships that

undergird the broadcast licensing structure are a fundamental part of the business of baseball that


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cannot be modified without radical changes to, among other things, the governing agreements of

the League and the agreements between the Clubs and the regional sports networks (“RSNs”).

As the evidence that Plaintiffs seek to exclude is relevant to issues on the merits in the

case beyond the applicability of the baseball exemption, such evidence should not be excluded.

II. Defendants Are Entitled To Present Evidence Establishing the Connection Between MLB’s Broadcast Rules and the Business of Baseball

The Supreme Court has made clear that the baseball exemption applies to the entire

“business of baseball.” See Flood v. Kuhn, 407 U.S. 258, 275 (1972); Toolson v. N.Y. Yankees,

Inc., 346 U.S. 356, 357 (1953) (per curiam). The business of baseball includes the public

exhibition of games, see, e.g., Fed. Baseball Club of Baltimore v. Nat’l League of Prof’l Base

Ball Clubs, 259 U.S. 200, 208 (1922) (“Federal Baseball”), both live in-person and via telecasts

distributed over television and the Internet.

The Circuit Courts likewise have repeatedly and consistently recognized that the entire

business of professional baseball is exempt from the antitrust laws. See, e.g., Flood v. Kuhn, 443

F.2d 264, 265 (2d Cir. 1971), aff’d, 407 U.S. 258 (1972) (holding that the Supreme Court in

Federal Baseball established the antitrust exemption for “the business of organized baseball”);

Salerno v. Am. League of Prof’l Baseball Clubs, 429 F.2d 1003, 1005 (2d Cir. 1970), cert.

denied sub nom. Salerno v. Kuhn, 400 U.S. 1001 (1971) (holding that “professional baseball is

not subject to the antitrust laws”); Charles O. Finley & Co. v. Kuhn, 569 F.2d 527, 541 (7th

Cir.), cert. denied, 439 U.S. 876 (1978) (“[T]he Supreme Court intended to exempt the business

of baseball, not any particular facet of that business, from the federal antitrust laws.”). In Flood,

the Second Circuit exempted MLB’s “reserve system” embodied in League rules and player-

employment contracts. 443 F.2d at 265. In Salerno, the Second Circuit exempted MLB’s


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employment relationship with umpires. 429 F.2d at 1005.2 In a case decided earlier this year,

the Ninth Circuit exempted MLB’s process for deciding requests for franchise relocation and

held that the antitrust exemption “clearly extend[s] . . . to the entire business of providing public

baseball games for profit between clubs of professional baseball players.” City of San Jose v.

Office of the Comm’r of Baseball, 776 F.3d 686, 690 (9th Cir. 2015) (internal quotations

omitted), cert denied --- S. Ct. ---, 2015 WL 1755762 (Oct. 5, 2015). And just a few months

ago, a district court ruled that the exemption encompasses a Club’s decision to set minimum

ticket prices and purchase rooftops near its stadium, holding that the “exemption protects the

general ‘business of baseball’ from antitrust laws, and the public display of baseball games is

integral to that business.” Right Field Rooftops, LLC v. Chi. Cubs Baseball Club, LLC, 2015

WL 5731736, at *2, *3 (N.D. Ill. Sept. 30, 2015).

At trial, Defendants intend to establish that the baseball exemption applies to the

broadcasting and distribution of game telecasts via television and the Internet, which are a

critical part of the business of baseball. In making this presentation, Defendants will show,

among other things, that local and national broadcasts collectively account for approximately

30% of baseball’s total revenues. Defendants will further establish that such broadcasts play a

critical role in driving demand for live in-person attendance at MLB games, which accounts for

an additional 49% of baseball’s total revenues.

2 Other Circuit Courts have held that the baseball exemption applies to the League’s decision

on relocating a Minor League club, see Triple-A Baseball Club Assocs. v. Ne. Baseball, Inc., 832 F.2d 214, 216 n.1 (1st Cir. 1987); the Commissioner’s veto of a player trade, see Charles O. Finley & Co. v. Kuhn, 569 F.2d 527, 541 (7th Cir.) cert. denied, 439 U.S. 876 (1978); the League’s decision to locate a Major League Club in Minor League territory, see Portland Baseball Club, Inc. v. Kuhn, 491 F.2d 1101, 1103 (9th Cir. 1974) (per curiam); the League’s process for eliminating a Club, Major League Baseball v. Crist, 331 F.3d 1177, 1183 (11th Cir.) pet. for reh’g denied, 82 F. App’x 224 (11th Cir. 2003); and the League’s Minor League franchise location system, see Prof’l Baseball Schs. & Clubs, Inc. v. Kuhn, 693 F.2d 1085, 1085–86 (11th Cir. 1982).


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Whether the baseball exemption applies ordinarily can be resolved as an issue of law, but

here, a determination of the factual predicate regarding MLB’s business—i.e., whether television

and Internet distribution of game telecasts falls within the ambit of the “business of baseball”—

may be helpful to assess the applicability of the baseball exemption to MLB’s broadcast rules.

See Flood, 407 U.S. at 275; Toolson, 346 U.S. at 357. Specifically, such evidence will make

clear that MLB’s broadcasting rules are part of the full business of baseball encompassed in the

baseball exemption.

Evidence establishing that the broadcasting and distribution of game telecasts via

television and the Internet are part of the business of baseball thus is relevant to the Court’s

analysis of whether the baseball exemption applies. For this additional reason, such evidence

should not be excluded.

CONCLUSION

The relief sought by Plaintiffs would inhibit Defendants from presenting probative

evidence relevant to critical issues in the case, and would unduly limit Defendants’ ability to

present their defense. Defendants’ presentation of the challenged evidence will not waste trial

time. To the contrary, that evidence is central to the Defendants’ defense on the merits against

Plaintiffs’ claims, regardless of whether the Court considers the applicability of the baseball

exemption. Defendants therefore respectfully request that the Court deny Plaintiffs’ Motion.


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Dated: December 30, 2015 Respectfully submitted,

/s/ Arthur J. Burke Arthur J. Burke David B. Toscano Andrew N. DeLaney Katherine A. Marshall DAVIS POLK & WARDWELL LLP 450 Lexington Avenue New York, New York 10017 Telephone: (212) 450-4000 Facsimile: (212) 701-5800 [email protected] [email protected]

Attorneys for Defendants Comcast Corporation, Comcast SportsNet Philadelphia, L.P., Comcast SportsNet California, LLC and Comcast SportsNet Chicago, LLC


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/s/ Beth A. Wilkinson Beth A. Wilkinson Alexandra M. Walsh PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 2001 K Street, N.W. Washington, D.C. 20006 Telephone: (202) 223-7300 Facsimile: (202) 223-7420 [email protected] [email protected] Daniel J. Toal PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1285 Avenue of the Americas New York, New York 10019 Telephone: (212) 373-3000 Facsimile: (212) 757-3990 [email protected] Attorneys for Defendants Office of the Commissioner of Baseball, Major League Baseball Enterprises Inc., MLB Advanced Media L.P., MLB Advanced Media, Inc., Athletics Investment Group, LLC, the Baseball Club of Seattle, L.P., Chicago Cubs Baseball Club, LLC, Chicago White Sox, Ltd., Colorado Rockies Baseball Club, Ltd., The Phillies, L.P., Pittsburgh Baseball, Inc., and San Francisco Baseball Associates, L.P.


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/s/ Tammy A. Tsoumas Joseph Serino, Jr., P.C. John C. Vazquez KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 [email protected] [email protected] Melissa D. Ingalls Tammy A. Tsoumas KIRKLAND & ELLIS LLP 333 South Hope Street Los Angeles, California 90071 Telephone: (213) 680-8400 Facsimile: (213) 680-8500 [email protected] [email protected] James H. Mutchnik, P.C. KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, Illinois 60654 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 [email protected] Attorneys for Defendants DIRECTV, LLC, DIRECTV Sports Networks, LLC, DIRECTV Sports Net Pittsburgh, LLC a/k/a Root Sports Pittsburgh, DIRECTV Sports Net Rocky Mountain, LLC a/k/a Root Sports Rocky Mountain and DIRECTV Sports Net Northwest, LLC a/k/a Root Sports Northwest


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/s/ John Schmidtlein John Schmidtlein William Vigen Joelle Perry WILLIAMS & CONNOLLY LLP 725 Twelfth St., N.W. Washington, D.C. 20005 Telephone: (202) 434-5000 Facsimile: (202) 434-5029 [email protected] [email protected] [email protected] Attorneys for Yankees Entertainment and Sports Network, LLC


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/s/ Christopher E. Duffy Jonathan D. Schiller Alan B. Vickery Christopher E. Duffy BOIES, SCHILLER & FLEXNER LLP575 Lexington Avenue New York, New York 10022 Telephone: (212) 446-2300 Facsimile: (212) 446-2350 [email protected] Attorneys for Defendant New York Yankees Partnership


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Garber v. MLB - MLB Opposition to Motion in Limine Re Baseball Exemption