Opening the Floodgates

Opening the Floodgates

By Jason Lese

In 2015, Giancarlo Stanton signed a 13-year, $325 million contract, which was not only the most lucrative contract in baseball history, but also the highest paying contract in the history of North American sports.

For some perspective, in 1920, the average baseball player’s salary was $5,000. By 1970, this average had climbed to $29,303, a modest increase to account for the growing popularity and commercialization of the sport. By 1990, the average salary had increased to $597,537, which later mushroomed to $3.15 million in 2009.

What is to account for this drastic increase in the salaries of baseball players?

Major League Baseball (MLB) of the past saw players’ salaries controlled by the owners. Before 1972, players had no right to enter free agency or arbitrate their salaries. Originally, all players’ contracts featured a Reserve Clause, which mandated that players were bound to the team that drafted them until their contract expired, or they retired. All team owners happily placed this clause in their players’ contracts to prevent players from going team-to-team seeking higher salaries.

No major league player challenged the legality of the Reserve Clause until St. Louis Cardinals outfielder Curt Flood sued the MLB in 1970. The previous year, Flood was traded by the Cardinals to the Philadelphia Phillies. He did not want to play in Philadelphia in front of fans the African-American Flood believed were racist.

Flood wrote baseball’s commissioner, Bowie Kuhn, a letter expressing his grievance. He wrote “I do not feel that I am a piece of property to be bought and sold… Any system which produces that result violates my basic rights as a citizen.”

Flood sued on the grounds that the Reserve Clause violated antitrust laws. He argued that players lacked the ability to trade their services, that they were stripped of all bargaining power and leverage. Flood went as far to say, and controversially so, that he and the other MLB players were “treated as slaves.”

Unfortunately for Flood, precedent was not in his favor. In 1922, the Supreme Court heard Federal Baseball Club v. National League, in which the Court determined the MLB is exempt from the Sherman Anti-Trust Act, an act prohibiting businesses from engaging in anti-competitive activities.

In Federal Baseball Club, Chief Justice Oliver Wendell Holmes declared that baseball is “purely state affairs,” and is therefore not interstate commerce for the sake of the Sherman Act.

In 1955, the Supreme Court decided Toolson v. New York Yankees, which affirmed the decision in Federal Baseball Club.

In Toolson, minor league pitcher George Toolson challenged the Reserve Clause on the basis that it violated the Sherman Act. The majority rejected his argument because Congress had failed to take any opposing action to the decision in Federal Baseball Club. They claimed if changes should be made to the existing precedent, they must occur through legislation, not the courts.

The method of using precedent to decide a present case is referred to as stare decisis. In Flood v. Kuhn, stare decisis was Flood’s downfall, as the Supreme Court decided 5-3 to uphold the decisions in Federal Baseball Club and Toolson.

Although the majority in Flood v. Kuhn acknowledged the flaw in the Reserve Clause, they were reluctant to contradict the decisions of the earlier courts.

Flood did not directly bring about free agency or salary arbitration, but he inflicted a wound that baseball’s owners would never heal. In the following years, multiple developments took place that would eventually break down the Reserve Clause.

In the 1973, salary arbitration was negotiated and agreed into MLB’s Collective Bargaining Agreement. This agreement mandates that after a player’s third accrued professional season, he becomes eligible for salary arbitration.

Just one year later, in 1974, the MLB saw its first free agent when the Oakland Athletics breached pitcher Catfish Hunter’s contract. Hunter brought his suit to an arbitrator and was subsequently awarded free agency. After meeting eleven teams, Hunter went on sign a $3.35 million contract, the most lucrative at the time.

In 1976, the Reserve Clause was effectively nullified as part of the Seitz decision. In this ruling, arbitrator Peter Seitz determined that baseball players would become free agents upon playing one year for their team without a contract. Owners argued that contracts automatically renew themselves as a result of the Reserve Clause, but Seitz disagreed.

Flood v. Kuhn is regarded by many as paving the way for Seitz’s ruling. As a result of Seitz decision, free agency became a right for every baseball player, thereby enabling the players to negotiate for the highest salary they could get, and forcing the owners to bid against each other.

Several legal experts have criticized the rulings in Flood, Toolson, and Federal Baseball Club, saying the latter two are examples of excessively strict adherence to stare decisis. Furthermore, these experts claim the decision in Federal Baseball Club was misread in Flood. They argue the congressional action called for in Toolson and Flood was a misinterpretation of Holmes’s holding in Federal Baseball Club.

Regardless of his failures in court, Flood may be credited with recognizing an unfair system that allowed owners to exploit players. Because of Flood and others who made similar arguments, the players were ultimately successful in liberating themselves from the control of their owners. Flood’s efforts helped to turn athletes in baseball and other sports into some of the highest paid individuals in the world.