[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR TH E ELEV ENTH C IRCUIT FILED
________________________
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 02-10333 MAY 27, 2003
________________________ THOMAS K. KAHN
CLERK
D. C. Docket No. 01-00511-CV-4-RH
MA JOR L EAG UE B ASE BAL L,
ALL AN H . SEL IG,
TAM PA B AY D EVIL RAY S LT D,
FLO RIDA MA RLIN S BA SEB ALL CLU B LL C,
Plaintiffs -App ellees,
versus
CHA RLIE CRIS T,
Defen dant-A ppellant.
________________________
Appeal from the United States District Court
for the Northern District of Florida
_________________________
(May 27, 2003)
Before TJOFLA T and BLAC K, Circuit Judges, and GOLDBE RG*, Judge.
_______________________________________
* Honorable Richard W. Goldberg, Judge, United States Court of International Trade, sitting by
designation.
TJOFLA T, Circuit Judge:
For better or worse, professional baseball has long enjoyed an exemption
from the antitrust laws. 1 The sco pe of this exemp tion – a ju dge-m ade rule
premised upon dubious rationales2 and labeled an “aberration” by the Supreme
Court 3 – has been the subject of extensive litigation over the years. In this case, we
are called upon to address two key issues: (1) the effect of the federal rule upon
state antitrust law and (2) whether the exem ption extends beyond antitrust
prosecutions into the realm of mere investigations. With regard to the first issue,
we hold that the federal exemption preempts state antitrust law. As for the second
issue, we hold that the Florida Attorney General cannot proceed with the
investigation in this case. This holding is based upon the Fourth Amendment4 and
state law rather than the antitrust exemption. In this vein, our analysis differs
1
The exemption has been crystalized by three Supreme Court decisions. See Fed.
Baseball Club of Baltimore, Inc. v. Nat’l League of Prof’l Baseball Clubs, 259 U.S. 200, 42 S.
Ct. 465, 66 L. Ed. 898 (1922); Toolson v. New York Yankees, Inc., 346 U.S. 356, 74 S. Ct. 78,
98 L. Ed. 64 (1953); Flood v. Kuhn, 407 U.S. 258, 92 S. Ct. 2099, 32 L. Ed. 2d 728 (1972).
2
See part IV, infra.
3
See Flood, 407 U.S. at 282, 92 S. Ct. at 2112 (stating that “the aberration is an
established one”); Id. at 269, 92 S. Ct. at 2105 (“We granted certiorari in order to look once
again at this troublesome and unusual situation.”).
4
The Fourth Amendment, made applicable to the states by the Fourteenth Amendment,
see Mapp v. Ohio, 367 U.S. 643, 81 S. Ct. 1684, 6 L. Ed. 2d 1081 (1961), guarantees “[t]he right
of the people to be secure in their persons, houses, papers, and effects, against unreasonable
searches and seizures.” For convenience, we omit reference to the Fourteenth Amendment.
2
significan tly from th at of the d istrict cour t, althoug h we u ltimately aff irm its
decision.
I.
A.
Major Leagu e Baseb all (“ML B”) is an uninco rporated associatio n of thirty
major league baseball clubs. On November 6, 2001, a supermajority of the clubs
voted in favor of eliminating two teams from the league. The Florida Marlins and
the Tampa Bay Devil Rays voted in favor of contraction. The former Attorney
General of Florida, Ro bert Butterw orth, is a fan of b aseball, but not o f MLB ’s
contraction policy. According to one newspaper, Butterworth proclaimed that
“[i]t’s not go ing to be easy for b aseball to le ave the sta te of Flo rida . . . . W e
finally got a team in Tampa Bay, and we’re going to do all we can to keep it.” See
Joe Fo llick, State Starts Battle Over Contraction, The Tampa Tribune, Nov. 14,
2001. Similarly, Butterworth is reported to have said, “I’m out here to do whatever
I can do to keep [baseball] in Florida if at all possible.” See Lesley Clark & Clark
Spenc er, Baseball Cutback Plan Challenged, The M iami He rald, No v. 25, 20 01.
Makin g good on his p romise, th e Attorn ey Gen eral issued several civ il
investigative demands (“CIDs”) to Major League Baseball, Commissioner Allan H.
3
Selig, the Tampa Bay Devil Rays, Ltd., and the Florida Marlins Baseball Club,
LLC – all of w hom ar e plaintiffs in this case . The C IDs w ere issued pursua nt to
the Atto rney G eneral’s au thority un der Flo rida’santitr ust statute, F la. Stat. §
4
542.28.5 The CIDs were broad in scope, requiring that each recipient answer
5
The pertinent part of section 542.28 states as follows:
542.28 Civil investigative demand.—
(1) Whenever the Attorney General . . . has reason to believe that any
person may be in possession, custody, or control of any documentary material, or
may have any information, which documentary material or information is relevant
to a civil antitrust investigation authorized by s. 542.27(3), the Attorney General
or such state attorney may, prior to the institution of a civil or criminal proceeding
thereon, issue in writing and cause to be served upon such person a civil
investigative demand . . . .
* * *
(3) No such demand shall require the production of any documentary
material, the submission of any answers to written interrogatories, or the giving of
any oral testimony if such material, answers, or testimony would be protected
from disclosure under:
(a) The standards applicable to subpoenas or subpoenas duces tecum
issued by a court of this state in aid of a grand jury investigation; or
(b) The standards applicable to a discovery request under the Florida
Rules of Civil Procedure, to the extent that the application of such standards to
any such demand is appropriate and consistent with the provisions and purposes
of this chapter.
* * *
(5) Within 30 days after the service of an investigative demand upon any
person or at any time before the return date specified therein, whichever period is
longer, the person served may file in the circuit court . . . a petition for an order of
the court modifying or setting aside the demand . . . .
We know that the CIDs were based solely upon the Attorney General’s authority to
investigate antitrust violations for several reasons. First, each CID said on its face that it was
“issued pursuant to the Florida Antitrust Act of 1980, Section 542.28, Florida Statutes.” No
other authority was identified for their issuance. Second, the stated reason for issuing the CIDs,
as noted on the face of the CIDs, was “to determine whether there is, has been or may be a
violation of . . . the [state or federal antitrust laws] . . . by conduct, activities, or proposed action
of the following nature: possible contracts, combinations, or conspiracies in restraint of trade, or
monopolization, attempted monopolization, or combinations or conspiracies to monopolize trade
or commerce, relating to the proposed contraction and/or relocation of the Tampa Bay Devil
Rays and/or the Florida Marlins.” Third, the Attorney General acknowledged before this court
that the CIDs’ only purpose was to investigate a possible antitrust violation arising out of the
contraction agreement. When asked at oral argument whether the CIDs would have issued but
for the threatened contraction, the Attorney General answered in the negative.
5
several interrogatories6 and produce volum inous documents. 7
The recipients of the CIDs had several options available, but only one option
could yie ld the des ired resu lt. The m ost obv ious op tion wo uld hav e been to
comply with the terms of the CIDs. But this option was unattractive because the
CIDs were burdensome, and the recipients believed that the federal exemption
gave the m a “fede ral right” to be free n ot only fr om antitr ust prosecution, but also
from this investigation. Secon d, the recip ients of th e CID s could h ave filed s uit in
state court pursuant to Fla. Stat. § 542.28(3)-(5)8 under the theory that since the
business of b aseball is immu ne from an titrust prosecution , the Attorney G eneral’s
investigation is baseless and therefore flunks the “grand jury” and “Florida Rules
of Civil P rocedu re” tests esta blished b y subsec tions (3) (a) and ( 3)(b), re spectively .
This option was similarly unattractive because Commissioner Selig, MLB, and the
two Florida clubs would have found it impossible to convince a Florida trial court
6
For example, the plaintiffs were asked to identify all meetings, agreements, and
communications relating to contraction of the two Florida teams; describe the process by which
Major League Baseball attempts to obtain new stadia; detail the balance sheet for the two Florida
clubs; discuss alternatives to contraction; and identify how and why club owners voted on the
question of contraction.
7
The Attorney General requested the production of organizational charts; studies,
research, reports, and recommendations relating to contraction; bylaws, constitutions, and rules
that govern Major League Baseball; notes and documents concerning the contraction meeting;
profit and loss statements; revenue sharing agreements; and ownership applications and
documents assessing the anticipated viability of the Florida clubs.
8
See note 5, supra.
6
to adop t the first pr emise of the argu ment – n amely, tha t the “busin ess of ba seball”
is immune from antitrust prosecution. This is because the Supreme Court of
Florida held in an earlier decision that the antitrust exemption established by
federal law extends only to the reserve system9 rather than broadly exempting the
“business of baseball.” See Butterworth v. Nat’l League of Prof’l Baseball Clubs,
644 So.2d 1021 (Fla. 1994). 10 This left option three: an action in federal court, the
present la wsuit.
B.
The plaintiffs’ complaint is based upon tw o theories. Under the first theory,
the plaintiffs contend that (a) there is a “federal right” that exempts “the business
of baseball” as a proper subject of an antitrust enforcement suit and (b) this federal
9
In Flood, 407 U.S. at 260 n.1, 92 S. Ct. at 2100 n.1, Supreme Court described the reserve
system as follows:
The reserve system, publicly introduced into baseball contracts in 1887 . .
. centers in the uniformity of player contracts; the confinement of the player to the
club that has him under the contract; the assignability of the player’s contract; and
the ability of the club annually to renew the contract unilaterally, subject to a
stated salary minimum.
10
The Florida Supreme Court’s holding has scant support in the case law; the vast
majority of lower courts have held that the exemption created by the U.S. Supreme Court
extends more broadly to the “business of baseball.” Some of these cases were cited by the
district court. See Major League Baseball v. Butterworth, 181 F.Supp. 2d. 1316, 1322 n.4 (N.D.
Fla. 2001). Lest there be any doubt about the matter, the district court forcefully destroyed the
notion that the antitrust exemption should be narrowly cabined to the reserve system. Id. at
1322-1332. Given the persuasiveness of the district court’s reasoning, in conjunction with the
fact that the Attorney General no longer argues that the antitrust exemption should be so
narrowly construed, we see no need to expound upon the matter.
7
right extends to administrative investigations. We call this the “penumbra” theory
because, like Justice Douglas’s theory of the Bill of Rights, 11 the claim p osits that a
core fed eral right ( i.e., exemp tion from antitrust prosecution) has a shadow which
extends the right to encompasses m uch more (i.e., an exemption from antitrust
investigation). Having established this broad federal right, the plaintiffs argue that
this right precludes the Attorney General’s investigation. This is so even if the
state inves tigation is p remised solely up on state an titrust law , because state
antitrust law , to the exte nt that it is ap plied to th e busine ss of bas eball, is
preempted by federal law and violates the Commerce Clause. 12
The plaintiffs also invoke another model. Like the penumbra theory, the
second model c ontinue s to argu e that fede ral law ex empts th e busine ss of bas eball
from antitrust regulation, and that the Supremacy C lause and the Comm erce Clause
preclud e the app lication of state antitru st law to th e extent th at state law is
inconsistent with federal policy. Unlike the penumbra theory, however, the second
theory does not contend that an exemption from prosecution necessarily includes
11
See Griswold v. Connecticut, 381 U.S. 479, 484, 85 S. Ct. 1678, 1681, 14 L. Ed. 2d 510
(1965).
12
The plaintiffs claim that state regulation of baseball via antitrust litigation would
inevitably entail extensive extraterritorial effects and impose a heavy burden on interstate
commerce. Therefore, the plaintiffs contend that courts have erected a rare per se rule under the
Commerce Clause that, rather than balancing the burden on interstate commerce with legitimate
state interests, automatically precludes the application of state antitrust laws to the business of
baseball.
8
an exemption from investigation. Rather, law external to federal antitrust doctrine
preclud es the A ttorney G eneral’s in vestigatio n. Since the Atto rney G eneral co uld
not possibly bring a suit on the grounds that contraction constitutes anticompetitive
behavior in violation of federal or state antitrust laws, any investigation must be
premise d on the notion th at the Atto rney G eneral is fr ee to inve stigate per fectly
legal activity. The plaintiffs allege that this premise is incorrect in light of Florida
law 13 and the F ourth A mendm ent, 14 which prohibit baseless “fishing expeditions.”
Invoking both theories, the plaintiffs seek declaratory and injunctive relief
under 42 U.S.C. § 1983,15 in additio n to an o rder settin g aside th e CID s pursu ant to
Fla. Stat. § 542.28(3). The district court could have properly exercised federal
question jurisdiction 16 over the section 1 983 claim s, and it co uld hav e exercise d its
supplemental jurisdiction17 over the claims arising under Florida law.
13
See note 5, supra.
14
The Fourth Amendment, which protects against unreasonable searches and seizures, has
been held to limit the scope of administrative subpoenas. See Okla. Press Publ’g Co. v. Walling,
327 U.S. 186, 208-11, 66 S. Ct. 494, 505-07, 90 L. Ed. 614 (1946). See also Fed. Trade
Comm’n v. Am. Tobacco Co., 264 U.S. 298, 306, 44 S. Ct. 336, 337, 68 L. Ed. 696 (1924) (“It is
contrary to the first principles of justice to allow a search through all the respondents’ records,
relevant or irrelevant, in the hope that something will turn up.”).
15
Section 1983 provides that “[e]very person who, under color of [state law] subjects . . .
any citizen of the United States . . . to the deprivation of any rights . . . secured by the
Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or
other proper proceeding for redress. . . .”
16
See 28 U.S.C. § 1331.
17
See 28 U.S.C. § 1367.
9
The district court granted much of the requested relief, holding that the
antitrust exemption covers the business of baseball and that state antitrust laws do
not apply to the proposed contraction. The district court further held that “the
Attorney General had no authority to issue antitrust CIDs to investigate the
proposed contraction of Major League Baseball.” Major Leagu e Baseb all, 181 F.
Supp. 2d at 1335. The legal basis for the latter conclusion is unclear, because no
authority was cited by the district court. However, we have two clues that lead us
to suspect that the court adopted the penumbra theory. First, the court’s final order
completely ignored the plaintiffs’ claims based on Fla. Stat. § 542.28(3) and made
no mention of the Fourth Amendment. Second, the final order declared that “the
federal and state antitrust laws do not apply to the proposed contraction of Major
League Baseball from 30 to 28 and do not authorize investigation of that proposed
contraction by the Attorney General.” That is, the district court appears to have
believed that the right to be exempt from an antitrust investigation inherently flows
from th e exemp tion itself.
As we discuss below, we believe that the district court made an analytical
mistake and that the court should have considered the plaintiffs’ claims based upon
the Fourth Amendment and Fla. Stat. § 542.28(3). But the court’s instincts were
correct: the law prohibits baseless “fishing expeditions,” and so an exemption from
10
prosecution necessarily would have required the district court to prohibit the
Attorn ey Gen eral’s inve stigation. W e therefo re affirm the cour t’s judgm ent in
favor of the plaintiffs.
C.
We ordinarily review a district court’s decision to grant or deny an
injunctio n for clea r abuse o f discretio n. See United States v. Gilbert, 244 F.3d 888,
908 (11th Cir. 2001). Underlying questions of law, however, are reviewed de
novo. See United States v. P ruitt, 174 F.3d 1215, 12 19 (11th C ir. 1999) (“A
district court by definition abuses its discretion when it makes an error of law.”)
(citation o mitted); Manning ex rel. Manning v. School Bd. of Hillsborough
County, Fla., 244 F.3d 927, 940 (11th Cir. 2001). The decisions of the district
court that the Attorney General challenges in this app eal were all reached as a
matter of law. A ccordin gly, de novo review is appro priate.
II.
A.
The “business of baseball” is exempt fro m the federal antitrust laws. See
Fed. Baseball Club of Baltimore, Inc. v. Nat’l League of Prof’l Baseball Clubs, 259
11
U.S. 2 00, 42 S . Ct. 465 , 66 L. E d. 898 ( 1922) ; Toolson v. New York Y ankees, Inc.,
346 U .S. 356 , 74 S. C t. 78, 98 L . Ed. 64 (1953 ); Flood v. Kuhn, 407 U.S. 258, 92
S. Ct. 20 99, 32 L . Ed. 2d 728 (1 972); Prof’l Baseball Schools and Clubs, Inc. v.
Kuhn, 693 F .2d 108 5 (11th Cir. 198 2). The district court persuasively established
this fact, and the Attorney General no longer contends that the federal exemption
extends only to the player reserve system. Instead, the Attorney General argues
that the exemption has limits. Specifically, the Attorney General contends that the
exemption might not be triggered if the facts established by the impending
investiga tion sho w that th e plaintiffs engage d in non -exemp t condu ct.
The A ttorney G eneral’s p osition is n o doub t correct, b ut wha t condu ct could
possibly be non -exemp t? It is true that the an titrust exem ption ha s not bee n held to
immunize the dealings between professional baseball clubs and third parties. This
case, however, does not involve third parties. Rather, the issue of contraction
concerns a matter that is central to baseball’s league structure – specifically, the
numb er of club s that may participate in league play. W e agree th at the decis ion to
contract is obviously part of the “business of baseball”; the number of clubs, and
their organization into leagues for the purpose of playing scheduled games, are
basic elements of the production of major league baseball games. Moreover, the
number of clubs necessarily affects the number of clubs sharing in national
12
revenues. As the district court stated, “It is difficult to conceive of a decision more
integral to the busin ess of m ajor leagu e baseba ll than the n umber of clubs that will
be allowed to compete.” Major Leagu e Baseb all v. Butte rworth , 181 F. Supp.2d
1316, 1332 (N .D. Fla. 2001). Wh en the applicability of baseball’s exemption is so
apparen t, no factu al develo pment is necessar y. See Prof’l B aseball S chools, 693
F.2d at 1085-86 (affirming, as a matter of law, a motion to dismiss where the
dismissa l was ba sed upo n an app lication of the exem ption to a ntitrust ch allenges to
a minor league franchise location system and game scheduling rules).
But what if club owners agreed not to eliminate the two clubs slated for
elimination in the event that a locality chooses to subsidize a team, such as by
paying for its stadium? Surely such a scheme, the Attorney General argues, is not
covered by the exemption. We disagree. Nobody disputes the notion that money
is at the core of the contraction issue. While the most die-hard baseball fans might
fancy the sport as a mere pa stime, mo st people unders tand that p rofessio nal spor ts
is big bu siness an d that pro fits matter m ost. So it w ould no t be surp rising if
unprofitable baseball clubs were permitted to remain in otherwise unattractive
markets in the event of a public bail-out. But this does not mean that a decision
regarding the number of teams that may participate in league play is somehow
unrelated to the “business of baseball.” Federal antitrust law exempts the
13
contraction issue from judicial scrutiny, and no inquiry into MLB’s motives or
desires could possibly change the fact that contraction implicates the heart of the
“busines s of base ball.” 18
B.
The Attorney General of Florida next contends that even if the business of
baseball is immunized from federal antitrust prosecution, state enforcement
agencies can still invoke state antitrust law. The argument is that the federal
exemption is not really an “exemption” as such, but merely a realm where the
federal antitrust laws do not operate. The federal exemption, the Attorney General
says, is merely a “gap in, rather than an exemption to, federal antitrust law.” What
is meant by this crafty wording is not entirely clear, but we get the drift: the
business of baseball should be viewed as an area in which Congress has refrained
from fe deral antitr ust regu lation, and therefor e states sho uld hav e free reig n to
apply their antitrust laws so long as states are mindful of the Com merce Clause
balancing test enunciated in Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.
18
The Attorney General contends that the investigation was “by no means limited to the
mere act of contraction itself”; rather, the CIDs “requested information relating to the proposed
contraction.” We are unimpressed by this word game. No matter how the Attorney General
characterizes the investigation, the CIDs were focused on contraction – a matter that is well
within the business-of-baseball exemption.
14
Ct. 844 , 847, 25 L. Ed. 2 d 174 ( 1970) (“Whe re the statu te regulate s even-h andedly
to effectu ate a legitim ate local pu blic interes t, and its eff ects on in terstate
commerce are only incidental, it will be upheld unless the burden imposed on such
commerce is clearly excessive in relation to the putative local benefits.”) (citations
omitted). The Attorney General argues that the Pike balancing test can be applied
only after an inves tigation is c omplete d and a m ore dev eloped r ecord em erges.
The pla intiffs resp ond by arguing that Flood, in conjunction with the
Supre macy C lause, ma kes the b usiness o f baseba ll immun e from in consisten t state
laws. Moreover, the plaintiffs contend that the S upreme Court’s Co mmerce Clause
jurisprudence, when applied to professional baseball, must be read to establish a
unique per se rule that prohibits the application of state antitrust laws when the
federal exemption is triggered. Since balancing is unnecessary, a developed record
is also unnecessary.
Any discussion of whether Congress meant to immunize the business of
baseball from all antitrust law (as opposed to federal antitrust law) is, of course,
fanciful b ecause C ongres s never c onveye d its prefe rence on e way o r the othe r.
The ex emption is entirely ju dge-m ade, altho ugh so me decis ions hav e attempte d to
15
cloak this disturbin g fact in th e langua ge of C ongres sional inte nt. Our analysis
must turn to the critical language utilized by the Supreme Court in Flood:
The petitioner’s argument as to the application of state antitrust laws
deserves a word. [The district court] rejected the state law claims
because state antitrust regulation would conflict with federal policy
and because national “uniformity (is required) in any regulation of
baseball and its reserve system.” The Court of Appeals, in affirming,
stated, “[A]s the burden on interstate commerce o utweighs the states’
interests in regulating baseball’s reserve system, the Commerce
Clause precludes the application here of state antitrust law.” As
applied to org anized baseb all, and in the light of this Court’s
observations and holding in Federa l Baseba ll, in Toolson, in Shubert,
in International Boxing, and in Radovich, and despite ba seball’s
allegedly inconsistent position taken in the past with respect to the
application of state law, these statements adequately dispose of the
state law claims.
Flood, 407 U.S. at 284-85, 92 S. Ct. at 2113 (citations omitted).
Hardly a mode l of clarity, th e passag e forces th e reader to ask two question s.
First, was this passage a holding? We answer in the affirmative, even though the
declaration that “these statements adequately dispose of the state law claims” is far
from the forceful language characteristic of most holdings. The context of the
opinion makes clear that the Court was rendering a decision with respect to an
important issue in the case. Indeed, the very next sentence after the quoted passage
states: “The conclusion we have reached makes it unnecessary for us to consider
the respondents’ additional argument . . . .” Id. at 285, 92 S. Ct. at 2113.
16
Second, what were the Court’s grounds for precluding the application of
state antitrust law? A careful reading of the passag e yields two differen t theories.
The district court, as characterized by the Supreme Court, held that federal policy
exempts the business of baseball from antitrust scrutiny, and that state antitrust
regulation inherently conflicts with this policy. That is, the district court advanced
a preem ption the ory. Th e district co urt’s hold ing is in co nsiderab le tension with
the usua l standard for pree mption – a feder alism-ba sed doc trine that re quires co urts
to “assum[e] that the historic police powers of the States [are] not to be superseded
by . . . [federal laws] unless that [is] the clear and manifest purpose of Congress.”
Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S. Ct. 1146, 1152, 91 L. Ed.
1447 (1947). After all, the exemption is entirely judge-made, so one would be
hard-pressed to find a clear statement from Congress in favor of preemption. Even
so, the Supreme Court endorsed the district court’s statement, and we are bound by
the Court’s holding.19
The Second Circuit Court of Appeals, by contrast, relied upon the
Commerce Clause. There is an interesting question as to whether Commerce
19
At least one other court has similarly concluded that federal antitrust policy, as
established in the Flood decision, precludes the application of state antitrust law to the business
of baseball. See In re Brand Name Prescription Drugs Antitrust Litigation, 123 F.3d 599, 611
(7th Cir. 1997) (“Antitrust law, for example, with an isolation exception, Flood v. Kuhn . . . is a
field in which Congress has not sought to replace state with federal law.”) (first emphasis added;
citations omitted).
17
Clause doctrine, when applied to the business of baseball, precludes the application
of state antitrust law per se, or wh ether the tr aditional Pike balancing test must be
invoked on a case-by-case basis. The plaintiffs argue that some courts have
erected a per se rule, even though the Second Circuit decision endorsed by the
Flood Court employed the Pike balancing test. Fortunately, we need not answer
this question because our Supremacy Clause analysis disposes of the question at
hand: federal law establishes a universal exemp tion in the name of uniformity. 20
C.
So far, we have established two key points. First, contraction is an issue that
is at the heart of the “business of baseball”; therefore, contraction cannot be the
subject of an antitrust enforcement action predicated upon federal law. Second, the
plaintiffs are also immune from state antitrust laws by virtue of the Supremacy
Clause. Confronted with these two legal conclusions, the Attorney General
respon ds by arg uing tha t even if fe deral law preclud es an antitr ust prosecution, this
20
Notably, a Florida statute provides that Florida antitrust law does not apply to conduct
exempted from federal antitrust law. See Fla. Stat. § 542.20. It is perhaps misleading to say that
Florida law is “preempted” by federal law when both laws should be read coterminously.
However, federal courts may not enjoin state actors to comply with state law, see Pennhurst
State School & Hosp. v. Halderman, 465 U.S. 89, 106, 104 S. Ct. 900, 911, 79 L. Ed. 2d 67
(1984), and so the district court wisely declined to base its decision on Fla. Stat. § 542.20.
18
does not mean that a mere investigation cannot be conducted. We agree, but our
agreement with the Attorney General on this point does not end the matter.
1.
First, it is far from ax iomatic th at exemp tions fro m pros ecution n ecessarily
entail a concomitant right to be free from investigation. The Second Circuit, for
example, held that a company could not invoke the Noerr-Pennington antitrust
exemption21 as a basis for withholding materials sought through a CID issued by
the U.S . Depar tment of Justice. See Associated Container Transp. (Aus.) Ltd. v.
United States, 705 F.2d 53, 59 (2 d Cir. 1983). The cou rt emphasized that there is a
distinction between a prosecution, from which a business could be protected by the
judge-m ade antitru st exemp tion, and a mere in vestigatio n into co rporate c onduc t:
[T]he ap pellees are not resistin g form al antitrust c harges a nd cann ot,
therefore, simply rely on a doctrine which p rotects from prosecution
busines ses seekin g to influ ence the e nforcem ent of law s. To pr evail
on this appeal, appellees must demonstrate not that their conduct may
be immune from prosecution, but rather that their communications
with the Federal Maritime Commission are beyond the scope of
legitimate inquiry.
21
The cases of Eastern R.R. Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127,
81 S. Ct. 523, 5 L. Ed. 2d 464 (1961), and United Mine Workers v. Pennington, 381 U.S. 657, 85
S. Ct. 1585, 14 L. Ed. 2d 626 (1965), establish an exemption from antitrust liability for certain
petitioning activities.
19
Id. In a simila r vein, the Fourth Circuit h eld that Noerr-Pennington petitioning
immun ity “is by def inition an exemp tion from antitrust liab ility, and no t a bar to
discovery of evidence.” North Carolina Elec. Membership Corp. v. Carolina
Power & Light Co., 666 F.2d 50, 53 (4th Cir. 1981).
Secon d, antitrus t exemp tions mu st be strictly c onstrue d. See Square D Co.
v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 421, 106 S. Ct. 1922, 1929,
90 L. Ed. 2d 413 (1986). This rule has its roots in the principle that the antitrust
laws form the bedrock of our capitalist system premised upon competition, and that
anticompetitive conduct harms consumer welfare. For this reason, judge-made
exemptions, no less than statutory exemptions, must be closely cabined. We are
hesitant to read the “business of baseball” exemption broadly – especially since the
Supre me Co urt has ca lled the ex emption an “aberr ation.” 22 Therefore, we reject
the penu mbra th eory pro ffered b y the plain tiffs and a dopted by the dis trict court.
2.
In advancing the penum bra theory, the plaintiffs point out that the business-
of-baseball exemption is not riddled multiple exceptions, distinguishing it from
Noerr-Pennington petitioning immunity. It makes no sense, the plaintiffs contend,
22
See note 3, supra.
20
to allow an investigation into conduct that we know is perfectly legal before the
investigation commences. We agree with this sentiment, although we find it more
approp riate to loca te the righ t to be free from b aseless inv estigation s (comm only
referred to as “fishing expeditions”) in other sources of law rather than the
antitrust ex emption itself.
The Fourth Amendm ent has been held to limit the scope of investigatory
power exercised by federal and state agencies. In See v. C ity of Sea ttle, 387 U.S.
541, 544, 87 S. Ct. 1737, 1740, 18 L. Ed. 2d 943 (1967), for example, the Court
described the constitutional limits on administrative subpoenas:
It is now settled that, when an administrative agency subpoenas
corporate books or records, the Fourth Amendment requires that the
subpoena be sufficiently limited in scope, relevant in purpose, and
specific in directive s o that com pliance w ill not be u nreason ably
burdensome.
See also United States v. Morton Salt Co., 338 U.S. 632, 652-53, 70 S. Ct. 357,
368-69, 94 L. Ed. 401 (1950); Fed. Trade Comm’n v. Am. Tobacco Co., 264 U.S.
298, 305-06, 44 S. Ct. 336, 337, 68 L. Ed. 696 (1924). To be sure, Congress and
state legislatures may permissibly grant broad investigative authority to regulatory
agencies . See Okla. Press Publ’g Co. v. Walling, 327 U .S. 186 , 204-0 5, 66 S . Ct.
494, 503, 90 L. Ed. 614 (1946). But investigations premised solely upon legal
21
activity are the very type of “fishing expedition” that were the target of Justice
Holmes’s assault in American Tobacco.
Like federal constitutional law, Florida law prohibits the Attorney General
from co nductin g baseles s investig ations. See Fla. Stat. § 542.28 (3); cf. Check ‘N
Go of Florida, Inc. v. Florida, 790 So. 2d 454, 457-58 (Fla. Dist. Ct. App. 2001)
(“The level of proof required of the investigative agency must suggest something
more than a fishing expedition, and something less than probable cause.”). Section
542.28 establishes two standards that CIDs must meet. First, CIDs must be set
aside if they fail to meet the “standards applicable to subpoenas or subpoenas
duces tecum issued by a court of [Florida] in aid of a grand jury investigation.”
Fla. Stat. § 542.28(3)(a). Second, CIDs must be set aside if they fail to meet the
“standard s applicab le to a disco very req uest und er the Flo rida Ru les of Civ il
Procedure, to the extent that the application of such standards to any such demand
is appropriate and consistent with the provisions and purposes of this chapter.”
Fla. Stat. § 542.28(3)(b). It is clear that under either standard, the Attorney
Gener al must h ave mo re than a m ere intuitio n that illega l activity is afo ot. 23 This
23
The Attorney General’s brief reveals his broad (and incorrect) view of the investigatory
discretion vested in his Office: “Enjoining the Attorney General’s civil investigation at the outset
is foreclosed by the possibility that investigation of the events surrounding the proposed
contraction would have revealed antitrust activity involving non-baseball entities that could not
properly hide behind baseball’s Federal Baseball immunity. Such persons would not be
permitted to evade the antitrust laws, and yet without any investigation, their existence will
never be known.” See Brief of Atty. Gen. at 19. In other words, the Attorney General has no
22
position is further advanced by the language of Fla. Stat. § 542.27(3), which
requires that the Attorney General “suspect” that a violation has taken place before
an investigation may commence, and Flat Stat. § 542.28(1), which requires that the
Attorn ey Gen eral have “reason to believe” th at a perso n “may b e in poss ession . . .
of any documentary material” that is “relevant to a civil antitrust investigation”
prior to the issuance of any CIDs. In short, it is clear that an investigation
predicated solely upon legal activity does not pass muster under any standard.
III.
The de ath of the busines s-of-ba seball exe mption would likely be m et with
considerable fanfare, save for the club owners who benefit from the rule. The
exemption was founded upon a dubious premise, 24 and it has been up held in
subsequent cases because of an equally dubious premise.25 Moreover, the welfare
idea what illegal conduct might have occurred, or who might have engaged in this conduct.
Even so, the Attorney General believes he has the power to commence a full-blown
investigation. Although the Attorney General need not have absolute proof of a violation prior
to commencing an investigation (otherwise, what would be the point of conducting an
investigation in the first place?), Florida law and the Constitution clearly require that the
Attorney General have something.
24
Federal Baseball, which was typical of the Supreme Court’s cramped Commerce Clause
jurisprudence during the pre-New Deal era, held that “[t]he business [of] giving exhibitions of
baseball” is a “purely state affai[r].” Federal Baseball, 259 U.S. at 208, 42 S. Ct. at 466. The
result of this conclusion was that the Sherman Act did not apply to Major League Baseball.
25
In Toolson, the Court retreated from its cramped view of interstate commerce and
instead rested its decision on what it perceived as congressional intent. See Toolson, 346 U.S. at
23
losses stemming from the potentially anticompetitive agreements among
profess ional spo rts clubs h ave been well do cumen ted. See, e.g., Stephen F. Ross,
Antitru st Optio ns to Re dress A nticomp etitive Res traints and Mon opolistic
Practices by Professional Sports Leagues, 52 Cas e W. R es. L. Re v. 133 ( 2001) .
Finally, antitrust law has significantly changed since Federa l Baseba ll was decided;
per se rules have often been jettisoned in favor of the “rule of reason” – a
357, 92 S. Ct. at 78-79. This was another shaky holding, because the Court usually declines to
infer an intention of Congress merely because of congressional inaction. In Helvering v.
Hallock, 309 U.S. 106, 119-21, 60 S. Ct. 444, 451-52, 84 L. Ed. 604 (1940), for example, the
Court said:
Nor does want of specific Congressional repudiations . . . serve as an implied
instruction by Congress to us not to reconsider, in the light of new experience, . . .
those decisions . . . . It would require very persuasive circumstances enveloping
Congressional silence to debar this Court from re-examining its own doctrines . . .
. Various considerations of parliamentary tactics and strategy might be suggested
as reasons for the inaction of . . . Congress, but they would only be sufficient to
indicate that we walk on quicksand when we try to find in the absence of
corrective legislation a controlling legal principle.
One might also question the propriety of basing a rule of law on a perceived intention alone,
without any textual hook whatsoever. To be sure, the antitrust laws, which have been read as a
delegation to the courts to craft the law of competition in the common law tradition, might
present a unique case where the Court’s judge-made exemption is more palatable; however, one
must wonder why the Court was so intent on casting the baseball exemption as a rule ordained
by Congress in the first place.
Responding to criticisms that the Court’s jurisprudence has been schizophrenic in
granting an exemption to baseball but not to other professional sports, the Court’s analysis in
Flood boiled down to this puzzling language: “If we were to act otherwise, we would be
withdrawing from the conclusion as to congressional intent made in Toolson and from the
concerns as to retrospectivity therein expressed. Under these circumstances, there is merit in
consistency even though some might claim that beneath that consistency is a layer of
inconsistency.” Flood, 407 U.S. at 284, 92 S. Ct. at 2113. So the reasoning behind the present
rule seems to be a rigid notion of stare decisis, coupled with a hesitancy to render a decision that
would operate prospectively only.
24
balancing exercise that would uphold conduct that, while appearing
anticompetitive at first blush, proves to be essential for maintaining a successful
league-based enterprise. In this vein, we do not fault the position taken by some
courts, and the arguments proffered by the Attorney General, that the exemption
should be extremely narrow. Even so, we believe that a good faith reading of
Supreme Court precedent leaves us no choice but to reach the following
conclusions: First, contraction is a matter that falls within the “business of
baseball” and therefore cannot be the subject of a prosecution based upon federal
antitrust law. Second, when the business-of-baseball exemption is triggered,
baseball c lubs are e qually im mune f rom pr osecutio n unde r state antitru st law.
Finally, because the act of contraction (or an agreement to contract) cannot
possibly violate state or federal antitrust laws, an investigation based solely upon
contraction is baseless and therefore violates the Fourth Amendment and Florida
law – both of which limit the scope of the Attorney General’s authority to issue
investiga tive subp oenas. It is up to the Supre me Co urt or C ongres s to over rule
Flood outrigh t, or perh aps dev ise a mor e cabined exemp tion. As an interm ediate
appellate c ourt, w e have n o choice but to ho ld that the d istrict cour t was co rrect in
granting judgment in favor o f the plaintiffs.
25
AFFIRMED.
26