Thursday, May 29, 2008

Don't Count Cuban Out

The Sun-Times' Gordon Wittenmyer reports that, contrary to the assumptions of many (myself included), Mark Cuban could very well end up owning the Chicago Cubs:

The outspoken Cuban, considered a long shot to gain approval from baseball's conservative owners, suggested in a recent radio interview that some of those owners who also have NBA teams should help his cause, not hurt it. And he suggested Tribune Co. isn't likely to accept a lesser bid over a popularity contest.

So should Cubs fans believe Cuban is a more viable bidder than early reports suggested? ''They're all viable until the league tells us they're not,'' said Cubs chairman Crane Kenney, who is heading owner Sam Zell's efforts to sell. ''[Cuban] owns a professional basketball team, right? Somebody thought he was a suitable owner of a professional team. But it's not my job to say who's viable and who isn't.''
Like I often say, I tend to over analyze things. To read between the lines and find things that may not really be there. To infer multitudes from minutiae, as it were. I'm going to do it again by throwing this out there: Mark Cuban and Sam Zell are warning Bud Selig that he had better not stand in their way unless he wants some potentially disastrous litigation on his hands.

To get to that admittedly out-there conclusion, you have to understand that the basis for baseball being able to approve or disapprove of who owns teams is a really frickin' shaky one, legally speaking. Yes, there is an antitrust exemption, but the only court to ever consider the matter held that the exemption does not apply to the purchase and sale of franchises.

That came in Piazza v. Major League Baseball, 831 F. Supp. 420 (E.D. Pa. 1993), in which some gentlemen from Pennsylvania tried to buy the Giants and move them to Florida. Then-Giants' owner Bob Lurie was going to sell, but MLB stepped in and indicated that it would not approve the sale. The buyers sued, arguing (among other things) that baseball illegally restrained free trade in the market in which baseball teams are bought and sold. Baseball argued that it was allowed to do this pursuant to the antitrust exemption. The trial court agreed with the would-be buyers during the preliminary stages of that case, ruling that the antitrust exemption didn't apply to the purchase of teams. Granted, this wasn't a final decision on the merits. Rather, the court basically ruled that if the plaintiffs could prove that MLB wrongfully thwarted the sale -- say, that baseball had no legitimate business basis for excluding a potential ownership group --they could win.

Of course it never got that far. Having seen that its antitrust exemption was in peril, baseball settled with the plaintiffs, paying them $6 million for their trouble, and the case went away. Since that time, baseball has continued to approve or deny "ownership applications" as though they were country club memberships as opposed to the restraint of the sale of goods in a free market. It has been able to get away with this because, to my knowledge, no one since the Pennsylvania people in the Piazza case have raised a fuss over a team sale, and with no dispute, there can be no court case. Why no dispute? I'd guess it's because all existing owners since the Piazza case have, out of some sense of loyalty perhaps, taken MLB's temperature as to whether they approve of the buyer before actually accepting an offer to sell (if owner x doesn't accept, there is no deal in the first place). At the same time, there has been no self-respecting businessman who would want to sue his way into a club that acts in such a provincial, petty-ante fashion.

But . . . what would happen if you had the perfect storm in the form of (a) a current owner who doesn't feel loyal enough to Selig and Co. that he feels the need to pre-screen buyers; and (b) a determined enough buyer -- a maverick if you will -- that doesn't mind fighting his way into the club? In light of Piazza -- a non-binding case but one that is oh-so-ripe for citation -- wouldn't that cause major headaches for baseball? Would they dare put the antitrust exemption in peril in order to keep out an undesirable owner?

I think Sam Zell and Mark Cuban are testing that. When Cuban cites the fact that he's already an owner of a pro team, he's reminding baseball that it's going to have to search hard to find a legitimate basis for excluding him. More significantly, however, when Zell's subordinate underscores that it's the league -- and not the Tribune Company -- who will be rejecting bidders, he's making it clear that the defacto vetting system long in place is not going to happen here. In other words, he's highlighting the fact that Major League Baseball could very well have the nightmare scenario on their hands: a qualified buyer making the high bid and a willing seller accepting it, thereby requiring baseball to quash the deal. That, I believe, wouldn't hold up in court. Especially not in an Illinois court in a case in which the Tribune Company is a party.

Will it come to that? I seriously doubt it. For one thing, we don't really know that baseball really wants to keep Cuban out. We suspect it does because Selig and Co. have long preferred pliable ownership groups who feel they owe something to the league, but we don't know it for sure. Still, there is some degree of uncertainty on this point, and in light of that uncertainty, I think that Cuban and Zell are, to use a lawyer's phrase, making their record. If Selig and his lawyers are listening carefully -- and I'll bet they are -- they're probably realizing about now that there is simply no percentage in trying to keep Cuban out of the club.

What does this all mean? Call me crazy, but I think it means that Mark Cuban is going to be the next Cubs' owner.


Dan said...

Can the Tribune's Board even accept a lower offer if Cuban was high bidder? I don't know the shareholder makeup since it went private, but I gotta believe that the Board's fiduciary duties to minority shareholders would compel them to take the highest offer.

Maybe I'm missing something, but seems like another wrinkle in the analysis...

Jason said...

C3 (Crazy+CC): you might be crazy, but I also have to agree with you, making me a party to your craziness.

If there is a material difference in the bids (with Cuban's being higher), I think Tribune does indeed have a fiduciary obligation to its shareholders. However, if the difference in the bids are not material, or constructed in such a way to deem them immaterial (cash vs. debt financing, for example), then the Tribune can kowtow to MLB's wishes to keep Cuban out of their little club.

Or so I think...

If Cuban's offer trumps any others and offers comparable risk to the other offers, I can't see how that would hold up in court...but I'm not as well versed in antitrust, etc.

Mike said...

Mike Piazza is from PA and his old man was friends with Tommy Lasorda, implying, perhaps, other baseball connections. Does anyone know if the Piazza in the case cited is part of that Piazza family?

Anonymous said...


The other possibility is that MLB lines up a more "acceptable" ownership group, then provides them with "guidelines" for constructing a winning bid.

The Cubs are a jewel franchise, much like Boston. It wouldn't be hard to find other interested owners.

Remember the competition for the DC franchise? MLB's fingerprints were all over that, including the payoff to Angelos to buy his acceptance.

Mike Emeigh said...

Vince Piazza, the named plaintiff in the cited case, is Mike's father.

Pete Toms said...

I think Selig gets a bad rap for meddling in franchise sales ( i.e. Henry & Red Sox ). John Helyar in Lords of the Realm details how much of MLB's labor woes stemmed from a fractured / disunified group of owners. Selig has done a masterful job of unifying the owners. I see it like this; if you're lookin for a business partner do you pick the guy with the biggest cheque or the guy you can work with over the long term? This could be intersting though, Zell doesn't seem the type to take less than the max offer.

Diesel said...

Just wanted to say that was the most interesting baseball-related thing I've read in a long time. Makes me want to do another roundtable.

Craig Calcaterra said...

Thanks Diesel (and everyone else). Any time you want to fire up the round table again, just give me a shout.

Anonymous said...

Great insight. Now that Canning and Levin are out (they basically did not take the bid serious), Cuban is the front-runner! Zell could give 2 craps what Zelig thinks and finally we are going to put a dent in this good ole boys pattern that has hurt the MLB. Bring on Cuban!