May 22, 2015 by peterott
Finley v. Kuhn (1978)
This is the first post in a series about landmark sports law cases.
Charlie O. Finley was the owner of the Oakland Athletics, originally purchasing a controlling interest in the team when it was located in Kansas City in 1960. He was a colorful and involved baseball owner, serving as the team’s effective general manager from 1961 onward. He even changed team’s mascot from a traditional elephant to a live mule named Charlie-O, named after himself of course. Finley moved the team to California in 1968, just as new talent came up and matured. The team won three straight World Series, from 1972 to 1974.
Due to efforts by the MLBPA, free agency emerged as a new part of MLB’s salary structure near the end of 1975. With the advent of free agency came the potential for a significant increase in the cost of major league salaries. Traditionally, player salaries were controlled virtually unilaterally by team owners with rights to certain players bound under the reserve clause. Charles Finley immediately grasped the impact that free agency would have on player salaries and he decided to dismantle his team by trading away players eligible for free agency to other teams in return for cash payments.
Finley traded pitcher Vida Blue to the Yankees for $1.5 million and traded pitcher Rollie Fingers and outfielder Joe Rudi to the Red Sox for $1 million apiece. Given the fact that in 1975, these players made $80 thousand, $89 thousand, and $84 thousand respectively, the value that other teams were willing to pay for them indicates how their salaries had been depressed under the reserve clause. It seemed like a shrewd business move by Finley to “sell high” on these players rather than to pay increased salaries to retain their rights in free agency.
However, Finley’s plan did not progress smoothly. MLB Commissioner (and UVA Law alumnus) Bowie Kuhn vetoed the assignment of these players contracts “as inconsistent with the best interests of baseball, the integrity of the game and the maintenance of public confidence in it.” To the modern reader, this action follows similar reasoning as NBA Commissioner David Stern’s veto of the Chris Paul-Lakers trade. Kuhn maintained that allowing the sales to go through would have upset “competitive balance.” Critics, such as the MLBPA asserted that this was an attempt by the Commissioner to prevent rapid escalation of player salaries. Either way, Commissioner Kuhn’s action prevented Finley from trading these players’ contracts, understandably upsetting the owner. Finley sued the commissioner to overturn his decision.
The district court found in favor of the Commissioner, and Finley appealed to the Seventh Circuit Court, which issued the binding opinion in the case. There were two important issues raised by the appeal:
1) “Whether the Commissioner of baseball is contractually authorized to disapprove player assignments which he finds to be “not in the best interests of baseball” where neither moral turpitude nor violation of a Major League Rule is involved.”
2) “Whether the provision in the Major League Agreement whereby the parties agree to waive recourse to the courts is valid and enforceable.”
In answering the first question, the appellate court gave consideration to the history of the creation of the commissioner’s office, the contractual language about the power of the commissioner found in the MLB Agreement (Constitution), and the interpretation of that language over time.
The Commissioner’s office was established in the wake of the Chicago “Black Sox Scandal.” The first MLB Commissioner, federal judge Kenesaw Mountain Landis, agreed to take to office on the condition that he would have broad “control over whatever and whoever had to do with baseball.” This fact weighed in favor of allowing the Commissioner to have broad power to prevent actions not in the best interests of baseball.
The Court looked at the language of the Major League Agreement, which said “the functions of the Commissioner shall be . . . to investigate . . . any act, transaction or practice . . . not in the best interests of the national game of Baseball” and “to determine . . . what preventive, remedial or punitive action is appropriate in the premises, and to take such action. . . .” Although this language had been modified over time, the then-current language was very wide-ranging and again weighed in favor of allowing the Commissioner to take broad action to prohibit any action not in the best interests of baseball.
The court also found that this language had been interpreted to allow broad commissioner power throughout its existence. Courts routinely gave wide latitude to the Commissioner of baseball in determining how to deal with issues not in the best interests of baseball.
Based on all of these factors the court determined that the Commissioner did have authority to invalidate these contract assignments specifically and to deal with all matters not in the best interest of baseball generally. This oft-cited case has become become one used to justify actions taken by commissioners to regulate their sports, both on and off of the court/field.
The court answered the second question by saying that there is a general rule of non-reviewability for Commissioner decisions. The only exceptions this court allowed were for situations where league rules are in opposition to the law (illegal) or where a Commissioner failed to follow rudimentary principles of due process. This means that commissioners actions in the “best interests” of their sports are rarely overturned. Although commissioner decision are sometimes overturned, it is generally a rare occurrence as a high standard must be met to overturn them.
As a result of the Finley v. Kuhn case and those like it, we are left in a world where professional sports league commissioners have very broad authority to regulate the leagues they work for. This provides many benefits, but also represents a potential invitation to arbitrariness. Do you think commissioner power generally should be more broad or narrow?
For additional reading on this court case and the facts surrounding it, see these resources which I found to be very helpful:
- A publicly accessible copy of the court decision
- A look back at the court proceedings by a journalist who was there
- A great New York Times piece looking at the atmosphere surrounding the sale
- A short, entertaining biography of the colorful Charles Finley
- This website about Athletics history, filled with interesting pictures