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Baseball's Reserve Clause and the "Antitrust Exemption"

In December 2021, upon the expiration of the collective bargaining agreement (CBA) between Major League Baseball (MLB) and the Major League Baseball Players' Association (MLBPA), MLB owners voted unanimously for a lockout, beginning the ninth work stoppage in MLB history. With the upcoming season in jeopardy, the lockout ended on March 10, 2022, as the sides resolved their differences and signed a new CBA. While all the sport's previous work stoppages—beginning with a 1972 players' strike— have occurred in the last half-century, labor disputes between professional baseball players and team owners have been a near constant since the advent of the sport.

This spotlight will explore two areas of controversy between players and owners that frequently brought baseball into the federal courts between the late nineteenth and late twentieth centuries: the enforceability of a standard contract provision known as the "reserve clause," and the related question of whether professional baseball was governed by federal antitrust laws. The resolution of these issues played a major role in shaping the "national pastime,” particularly in determining the balance of power between players and their employers.

From the earliest days of professional baseball in the 1870s until the creation of free agency in the 1970s, the reserve clause was a subject of controversy (as it became in other American professional sports leagues established in the twentieth century). The clause, first implemented by the National League after its fourth season in 1879, provided in essence that a team was entitled to reserve the services of a player in perpetuity. When a player’s contract expired, the team for which he played had the exclusive right to negotiate with him for a new contract. The player had little bargaining power, for his only alternative to reaching agreement with his team was not to play. The team to which the player was bound could also trade him or sell his contract to another team without his consent. By forbidding the voluntary movement of players to other teams, the reserve clause kept salaries artificially low and gave players no say over where they performed their work. Team owners justified the clause on the grounds that without it, the wealthiest teams would sign all the best players, destroying competitive balance and ruining the sport. At first, a league rule (which every player contract incorporated by reference) allowed each team to reserve five players of its choosing. By 1887, the reserve clause appeared explicitly in player contracts and permitted a team to reserve its entire roster, then consisting of fourteen players.

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Because the reserve clause was adopted by the mutual agreement of all teams, National League teams did not have to worry about losing their players to intraleague rivals. Friction with the rival American Association, a league existing from 1882 to 1891, was avoided with an 1883 "National Agreement" that prohibited the poaching of players subject to the reserve clause in either league. In the late nineteenth and early twentieth centuries, however, the professional baseball landscape was in constant flux. New leagues formed frequently, although most of them folded just as quickly. Some minor leagues—which did not field teams in the nation’s largest cities—attempted to expand to compete on the major league level. Wanting to draw fans to their ballparks with highly skilled, established players, teams in fledgling leagues often tried to lure away National League players by offering higher salaries. When the National League sued players to prevent them from switching teams, both state and federal courts generally found the reserve clause too indefinite to be enforceable under basic principles of contract law.


Metropolitan Exhibition Co. v. Ewing (U.S. Circuit Court for the Southern District of New York, 1890)

Ewing was the first federal court case to examine the reserve clause in a baseball contract. Catcher Buck Ewing of the New York Giants jumped to the New York team in the Players’ League, a new league founded by a group of star players. The Giants, claiming breach of contract, sought an injunction preventing him from playing for his new team. Circuit Judge William Wallace examined the reserve clause in Ewing’s 1889 contract, which entitled the Giants to reserve Ewing’s services for the 1890 season as long as they did not pay him less than he had earned the prior year. The clause did not define the “right to reserve,” however, nor did it contain any other specific terms and conditions of employment. Wallace therefore considered the reserve clause to be “a contract to make a contract.” The Giants had the exclusive right to negotiate with Ewing but could not force him to sign a new contract. Thus, the team could neither sue for damages if Ewing failed to sign a contract nor sue for specific performance, i.e., a court order compelling Ewing to play for the Giants. Although Ewing’s failure to negotiate with the Giants constituted a breach of contract, it was a breach without a remedy, and Wallace denied the request for an injunction. At about the same time, two other players won similar suits in New York and Pennsylvania state courts, also on the grounds that the reserve clause was too indefinite to be enforced.

Although the Players’ League folded quickly, the minor Western League rebranded itself as the American League and declared itself a major league, putting itself into competition with the National League beginning with the 1901 season. Once more, National League teams were faced with the prospect of having top players lured away by a rival league, and further litigation ensued.

Brooklyn Baseball Club v. McGuire (U.S. Circuit Court for the Eastern District of Pennsylvania, 1902)

In McGuire, a federal court in Pennsylvania refused to prevent Deacon McGuire from jumping from the National League’s Brooklyn Superbas (later called the Dodgers) to the American League’s Detroit Tigers. In denying a preliminary injunction to enforce the reserve clause in McGuire’s contract, Judge George Dallas pointed to the provision, standard in baseball contracts, that allowed the team to terminate the contract with ten days’ notice. Judge Dallas applied an 1870 Supreme Court decision denying a request for specific performance on the grounds of lack of mutuality when one party was entitled to abandon the contract with a year’s notice. Moreover, Dallas held that the plaintiff had not proven that McGuire’s services were so unique that the team could not adequately be compensated by monetary damages rather than the court order they had requested to keep McGuire from playing for the Tigers. The McGuire case continued the tendency of the federal courts to view the reserve clause with skepticism.

The same year McGuire was decided, the Pennsylvania Supreme Court became the first court to hold the reserve clause enforceable, in a case involving star player Napoleon Lajoie. Nevertheless, with most decisions going the other way, the National League in 1903 made a second National Agreement, this time with the American League. The agreement began a partnership between the two leagues that continued until they formally merged into a single organization in 2000. In addition to creating the World Series, the agreement provided for mutual respect of the reserve clause, avoiding litigation and ensuring that teams in both leagues would retain control over their players.

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The 1903 agreement removed the reserve clause issue from the courts for a decade, but the arrival on the scene of the Federal League in 1913 resulted in its resuscitation. The Federal League was founded as a minor league, but its owners soon decided to establish it as a third major league, which would require it to compete for the most talented players with the American and National Leagues. Predictably, once Federal League teams began offering higher salaries to star players, the established leagues threatened to seek injunctions to avoid having their top players lured away. The U.S. District Court for the Western District of Michigan continued the general trend of finding the reserve clause unenforceable in Weeghman v. Killefer (1914), a case between the Federal League team in Chicago and the National League’s Philadelphia Phillies, and the U.S. Court of Appeals for the Sixth Circuit affirmed. Despite the decision in favor of the Federal League, its owners were wary of the time and expense that would be required to litigate each case—of which there were sure to be many—individually. As a result, the upstart league decided on a more aggressive strategy: to have major league baseball declared an illegal monopoly in violation of the Sherman Antitrust Act of 1890. The strategy rested on the theory that the reserve clause, by forbidding players to sell their services to the highest bidder on the open market even after the expiration of their contracts, was an unlawful restraint of trade. If successful, this gambit would dissolve every player contract, freeing players to sign with any team, in any league, they wished.

Federal League of Professional Baseball Clubs v. National League of Professional Baseball Clubs (U.S. District Court for the Northern District of Illinois, 1915)

Although critics had frequently called professional baseball a “monopoly” or “trust” since the 1890s, the Federal League case was the first antitrust challenge to organized baseball brought in federal court. (In 1914, a New York state court ruled in American League Baseball Club of Chicago v. Chase that professional baseball could not be regulated by Congress because it was not interstate commerce, but that baseball nevertheless constituted a monopoly in violation of the state’s common law. That decision allowed star first baseman Hal Chase of the White Sox to jump to the Federal League’s Buffalo club.) After a hearing on the Federal League’s request for a preliminary injunction to stop the American and National Leagues from operating, Judge Kennesaw Mountain Landis (who would become major league baseball’s first commissioner in 1921) did not announce a decision for over a year. In dire financial straits, the Federal League agreed in 1916 to a settlement under which it would go out of business, but five of its teams located in major cities would be absorbed into the existing leagues. When the parties appeared before Judge Landis to inform him that the suit had been settled, the judge admitted that he had delayed a decision because he would have found in favor of the Federal League but feared that the result would have destroyed professional baseball.

The Federal League's suit was settled without a judicial resolution, but out of that settlement arose a 1922 opinion in which the Supreme Court of the United States declared that baseball was not interstate commerce and therefore not subject to federal antitrust laws. The first Supreme Court ruling regarding organized baseball and the antitrust laws spawned decades of controversy.

Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs (Supreme Court of the United States, 1922)

While the Supreme Court’s decision in Federal Baseball Club is often characterized as creating baseball’s antitrust exemption, the case created no special exemption. To the contrary, the Court held that professional baseball was neither interstate nor commerce and was therefore outside the scope of the Sherman Antitrust Act of 1890.

The owners of the Federal League’s Baltimore Terrapins were offered $50,000 to dissolve their team as part of the 1916 settlement of the league's lawsuit but turned it down. Not motivated by money, they remained focused on putting a major league baseball team in Baltimore. The owners of the American and National League teams refused, however, believing that major league baseball in Baltimore would be a financial failure. The following year, the Terrapins' owners filed suit against the American and National Leagues and their member clubs, alleging that they had conspired to monopolize the business of professional baseball. After a 1919 trial, Justice Wendell Phillips Stafford of the Supreme Court of the District of Columbia (now the U.S. District Court for the District of Columbia) ruled baseball an illegal monopoly. The jury awarded the Baltimore club $80,000 in damages, which became $240,000 under the Sherman Act’s treble damages provision.

On appeal, the Court of Appeals of the District of Columbia (now the U.S. Court of Appeals for the District of Columbia Circuit) reversed the judgment on the grounds that baseball did not constitute interstate commerce and was therefore outside the scope of the Sherman Act. The case then proceeded to the Supreme Court, which affirmed the appellate court’s ruling in 1922. “The business,” wrote Justice Oliver Wendell Holmes in the Court’s majority opinion, “is giving exhibitions of base ball, which are purely state affairs.” The interstate travel that was necessary to facilitate the games, Justice Holmes continued, was incidental to the games themselves, which occurred in a single location. Moreover, because the product being sold was the personal effort of the players, and not a commodity, the games “would not be called trade or commerce in the commonly accepted use of those words.” Justice Holmes’ opinion was subjected to criticism, both immediately and for decades afterwards, by those who believed that the Court misunderstood the nature of professional baseball or had engaged in sophistry to protect it.

As the business of baseball continued to grow, and its games were broadcast throughout the country, first on radio and later on television, the Court’s decision was increasingly seen as dubious. By the 1950s, it was difficult for anyone to deny that baseball had become interstate commerce, even if it had not been earlier. Two prominent judges of the U.S. Court of Appeals for the Second Circuit suggested as much in a 1949 case.

Gardella v. Chandler (U.S. Court of Appeals for the Second Circuit, 1949)

Danny Gardella played for the New York Giants of the National League in 1944–1945 before leaving to play professional baseball in Mexico. Because he had been under contract to play exclusively for the Giants, he was barred for several years from returning to the major leagues in the United States. Gardella sued the Giants and the National League, alleging that they had deprived him of his livelihood and monopolized baseball in violation of the Sherman and Clayton Antitrust Acts. The U.S. District Court for the Southern District of New York dismissed the complaint, holding that it lacked jurisdiction over the case in accordance with the Supreme Court’s decision in Federal Baseball Club.

However, the U.S. Court of Appeals for the Second Circuit voted 2-1 to remand the case to the district court for trial. Judge Harrie Chase voted to affirm the district court’s ruling, believing Federal Baseball Club required that result. Judge Chase added that even if Federal Baseball Club was distinguishable from the case at hand, Gardella’s services as a baseball player were not items of trade or commerce under the antitrust laws. Judges Learned Hand and Jerome Frank disagreed, however, on the grounds that circumstances had changed since 1922. Judge Frank believed that television and radio broadcasting of baseball games was an essential part of the business and sufficient reason to deem baseball interstate commerce. Judge Hand tentatively agreed but felt this was a factual matter that should be resolved at trial.

Baseball officials decided not to appeal the court’s ruling to the Supreme Court for fear that Federal Baseball Club would be overturned. Gardella received a settlement, and the suspensions of other players who had jumped to the Mexican League were rescinded. Gardella was the first case in which a federal court suggested that professional baseball might be subject to the antitrust laws.

There was much at stake when the Supreme Court next had an opportunity to review its earlier decision in Federal Baseball Club—a decision many considered outmoded. A Court ruling that the 1922 case was decided wrongly could open baseball to thirty years of retroactive antitrust liability, potentially threatening the viability of the sport. To the relief of professional baseball owners, the Court left it to Congress to decide whether or not professional baseball would be subject to federal antitrust laws. Even if Congress were to pass legislation, it would apply only prospectively, and baseball would not suffer harm for having relied on the earlier Court decision.

Toolson v. New York Yankees (Supreme Court of the United States, 1953)

Toolson, decided more than thirty years after Federal Baseball Club, is the Supreme Court decision that can properly be described as carving out from the antitrust laws an "exemption" for professional baseball. George Toolson was a pitcher for a minor league team in Newark, New Jersey, that was affiliated with the New York Yankees. When the Yankees assigned Toolson to a lower-level team in Binghamton, New York, he refused to report. Pursuant to the terms of his contract, the Yankees then declared him ineligible to play professional baseball. Toolson sued the Yankees, claiming that they were violating the antitrust laws by refusing to let him play for another team.

The U.S. District Court for the Southern District of California dismissed the case, ruling in accordance with Federal Baseball Club that baseball was not subject to the antitrust laws. The U.S. Court of Appeals for the Ninth Circuit affirmed after which Toolson was argued before the Supreme Court along with two similar cases. The Court affirmed the ruling below on the authority of Federal Baseball Club “so far as that decision determines that Congress had no intention of including the business of baseball within the scope of the federal antitrust laws.” Some criticized the ruling as ascribing to the Federal Baseball Club decision a proposition that Justice Holmes had not expressed in his opinion. On the contrary, critics asserted, Holmes had written that because baseball did not constitute interstate commerce, Congress had no authority to regulate it.

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In framing the issue as it did in Toolson, the Court based its holding that antitrust laws did not apply to baseball not on the Constitution’s Commerce Clause but instead on congressional intent, noting that Congress had been aware of the Federal Baseball Club decision for thirty years and had done nothing to counter it. The Court suggested that any change would have to come from Congress: “We think that if there are evils in this field which now warrant application to it of the antitrust laws it should be by legislation.”

The Court’s rationale, that Congress could have regulated baseball but had chosen not to, was the source of baseball’s “exemption” from federal antitrust law. Although Congress subsequently held hearings on the issue and considered several legislative proposals, it took no action. Baseball remained an anomaly as other major sports were subjected to antitrust litigation throughout the second half of the twentieth century. (Federal court decisions of 1955, 1957, 1971, and 1972 established that antitrust laws applied to professional boxing, football, basketball, and hockey, respectively, despite what many saw as the lack of a meaningful distinction between those enterprises and major league baseball.)

The next major federal court challenge to baseball's antitrust exemption and the reserve clause came in 1972 and while it received a great deal of attention, it resulted in no change in the law. The case, brought by star outfielder Curt Flood, joined Federal Baseball Club and Toolson to conclude what some have called the Supreme Court's "baseball trilogy."

Flood v. Kuhn (Supreme Court of the United States, 1972)

Outfielder Curt Flood of the St. Louis Cardinals was one of major league baseball’s best players during the 1960s. In 1969, as Flood neared the end of his career, the Cardinals informed him that they had traded him to the Philadelphia Phillies. Not wishing to go to Philadelphia, Flood appealed to Commissioner Bowie Kuhn to declare him a free agent and allow him to sign a new contract with another team. “After 12 years in the Major Leagues,” he wrote, “I do not feel I am a piece of property to be bought and sold irrespective of my wishes.” When his request was refused on the basis of baseball’s reserve clause, Flood filed an antitrust suit in federal court in New York City, naming Kuhn, the presidents of the American and National Leagues, and all major league teams as defendants. (Flood brought other claims as well, including one for involuntary servitude in violation of the Thirteenth Amendment, which the courts found without merit.)

The U.S. District Court for the Southern District of New York found for the defendants, and the U.S. Court of Appeals for the Second Circuit affirmed. In his opinion affirming the Second Circuit, Justice Harry Blackmun acknowledged that baseball was a business operating in interstate commerce, and that the Federal Baseball Club and Toolson cases “have become an aberration confined to baseball.” Nevertheless, he wrote, “[i]t is an aberration that has been with us now for half a century, one heretofore deemed fully entitled to the benefit of stare decisis, and one that has survived the Court’s expanding concept of interstate commerce. It rests on a recognition of baseball’s unique characteristics and needs.”

Because Congress had considered several bills regarding the application of the antitrust laws to baseball but never enacted one, Blackmun concluded that legislators still had no intent to alter the result of the earlier baseball cases. And, as the Court had done in Toolson, he expressed concern about the retroactive nature of a decision overturning those cases. Justices William Douglas and William Brennan dissented from the Court’s ruling, as Douglas called Federal Baseball Club “a derelict in the stream of law that we, its creator, should remove.” Although Douglas had joined the Court’s opinion in Toolson, he admitted that he had “lived to regret it” and wished “to correct what I believe to be its fundamental error.”

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By the time Curt Flood lost his case before the Supreme Court, he had already retired from professional baseball. Within a very short time, however, labor relations between players and owners began to undergo dramatic changes spurred by the recent arrival in baseball of modern labor practices—unionization, collective bargaining, and arbitration. In 1966, players unionized, forming the MLBPA, and in 1968 the union negotiated its first CBA with the owners of the major league franchises. The 1973 CBA vindicated Flood's position that a veteran player should not be traded against his will, providing that a player with ten years of experience who had played with the same team for five years was entitled to veto a trade.

The CBA allowed the MLBPA to file grievances on behalf of players over contract disputes, which would be submitted to arbitration. In 1975, the arbitration process led to the demise of baseball's nearly century-old reserve system. This momentous legal change resulted from an arbitration panel's decision that the reserve clause applied for only one year after the expiration of a contract and not in perpetuity. The federal courts upheld the decision, ushering in a new era in professional baseball.



Kansas City Royals v. Major League Baseball Players Association (U.S. Court of Appeals for the Eighth Circuit, 1976)

In 1975, two pitchers, Andy Messersmith of the Los Angeles Dodgers and Dave McNally of the Montreal Expos, played under 1974 contracts that were renewed pursuant to the reserve clause. At the season’s end, both filed grievances claiming that they had no further contractual obligation to their teams and should be considered free agents. The clubs countered that the reserve clause entitled them to renew the players’ contracts in perpetuity, not only for one year beyond the contract term, as the players argued.

Pursuant to the CBA then in effect, a panel of three arbitrators—one chosen by the owners, one by the players, and the last agreed upon by the other two—heard the dispute. In December 1975, arbitrator Peter Seitz (a lawyer with broad experience arbitrating labor disputes), the independent member of the panel, broke a tie by ruling in favor of Messersmith and McNally’s interpretation of the reserve clause. The owners challenged the award in court, but the U.S. District Court for the Western District of Missouri upheld the panel's ruling, finding that it “draws its essence from the collective bargaining agreement,” and ordered that it be enforced. The U.S. Court of Appeals for the Eighth Circuit affirmed the judgment below. The case established free agency as a prominent feature of major league baseball, the parameters of which became a subject of future CBAs. As of 2022, a team could renew a player's contract unilaterally only if the player had less than three years of service. After three years, players gained the right to have salary disputes determined by arbitration, and after six years, became entitled to free agency.

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After the reserve system was replaced by free agency, several legal disputes hinged on the scope of baseball's antitrust exemption: did it apply only to cases involving the now-dead reserve clause, or to all matters concerning the operations of professional baseball? In the late 1970s, Oakland Athletics owner Charles O. Finley brought an antitrust suit against Commissioner Kuhn for invalidating his sale of three players’ contracts to the Boston Red Sox and New York Yankees. (Kuhn did so on the grounds that the deals would leave the Athletics too weak to compete effectively and were thus not in the best interests of baseball). In Charles O. Finley & Co. v. Kuhn (1978), the U.S. District Court for the Northern District of Illinois found for Kuhn on the basis of the baseball exemption. Finley argued that the Supreme Court's decision in Flood had limited the antitrust exemption to the reserve clause, but the U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s ruling, holding that the exemption covered the entire business of baseball. A few later decisions, such as that of the U.S. District Court for the Eastern District of Pennsylvania in Piazza v. Major League Baseball (1993), were decided in favor of Finley’s more narrow interpretation. That case settled before it could be appealed, however, and the weight of authority continued to rest on the side of a broad exemption.

Baseball experienced an especially contentious players' strike in 1994–1995, resulting in the cancellation of a large part of the 1994 season and, for the first time since 1904, the World Series. When the parties signed a new CBA, ending the dispute, the agreement included a clause providing that MLB and the MLBPA would jointly petition Congress to pass a law specifying that MLB players were protected by the antitrust laws to the same extent as players in other sports. Players wanted assurance that free agency would always have legal protection so that its existence would not be entirely dependent on the collective bargaining process. Owners, who assumed that free agency was a permanent feature of baseball, did not object as long as the statute made clear that it effected no other legal change with respect to baseball's status under the antitrust laws. In 1998, Congress granted the joint request by enacting the Curt Flood Act. The act explicitly excluded from its scope matters relating to minor league teams and players; franchise expansion, relocation, and ownership; broadcasting; umpires; and the conduct of people not directly employed in major league baseball. The antitrust status of the business of baseball as a whole thus remained unaddressed by federal legislation, leaving the scope of the exemption to the interpretations of federal and state courts. 

Jake Kobrick, Associate Historian
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Related FJC Resources:
Read the biographies of the judges mentioned in this spotlight: William Wallace, George Dallas, Kennesaw Mountain Landis, Wendell Stafford, Oliver Wendell Holmes, Harrie Chase, Learned Hand, Jerome Frank, Harry Blackmun, William Douglas, and William Brennan.

Further Reading:
Abrams, Roger I. “Before the Flood: The History of Baseball’s Antitrust Exemption.” Marquette Sports Law Journal 9, no. 2 (Spring 1999): 307–314.

Banner, Stuart. The Baseball Trust: A History of Baseball’s Antitrust Exemption. New York: Oxford University Press, 2013.

Martindale, Jeff. “Two Strikes: A History and Analysis of Major League Baseball, its Antitrust Exemption, and the Reserve Clause.” Journal of Legal Aspects of Sport 7, no. 3 (Fall 1997): 174–180.

Neufeldt, Christian L. “Redeeming the Supreme Court: The Structure Behind the Baseball Trilogy and the Scope of the Baseball Antitrust Exemption.” Journal of Intellectual Property Law 27, no. 1 (Fall 2019): 21–96.

Rudkin, Sven C. “Legal Implications of the Reserve Clause in Professional Sports.” Glendale Law Review 3, no. 1 (1978–1979): 63–80.

Wolohan, John T. “The Curt Flood Act of 1998 and Major League Baseball’s Federal Antitrust Exemption.” Marquette Sports Law Journal 9, no. 2 (Spring 1999): 347–377.


This Federal Judicial Center publication was undertaken in furtherance of the Center’s statutory mission to “conduct, coordinate, and encourage programs relating to the history of the judicial branch of the United States government.” While the Center regards the content as responsible and valuable, these materials do not reflect policy or recommendations of the Board of the Federal Judicial Center.