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Law360 (May 24, 2021, 10:03 PM EDT ) Major League Baseball, the New York Yankees and the Houston Astros told a New York state judge Monday that they had the legal right to cut minor league clubs after an affiliate agreement with Minor League Baseball expired last year, urging the court to toss lawsuits by a pair of New York-based minor league clubs that say Major League Baseball and big league teams reneged on deals to keep their major league affiliations.
The minor league affiliates, the Staten Island Yankees and the Tri-City Valleycats, knew their player development contracts, or PDCs, expired with MLB's agreement with the minor leagues under MLB rules, MLB officials, the Yankees and the Astros told a Manhattan state judge during a hearing held remotely.
"The only thing that matters is ... those affiliations were contractual, and those terms expired last year," an attorney for the Yankees and MLB, Benjamin Walker of Sullivan & Cromwell LLP, told the court. "Contracts with terms that all sides agreed to."
The cases stem from MLB's controversial decision to contract Minor League Baseball last year from 160 to 120 teams after the expiration of the Professional Baseball Agreement with the minor leagues. The PBA was then replaced by a new system under a new agreement dubbed the professional baseball license agreement.
Nostalgic Partners LLC, owners of the Yankees' former Staten Island affiliate, and the Tri-City Valleycats, located in Troy New York, hit MLB and its former affiliated big league clubs with lawsuits in December and January alleging that the clubs breached their contracts or other agreements to continue their relationships, that they breached fiduciary duties to the minor league clubs and that MLB tortiously interfered in their deals.
Walker said that while some think it is shame that the minor league system was restructured, MLB had economic reasons for doing so and MLB and that its clubs were completely within their legal and contractual rights to end their minor league affiliate relationships.
He said that the player development contracts between the Yankees, the Astros and their affiliates expired in September and August of last year, respectively, and that the minor league teams knew there was no obligation to renew those agreements because they were tied to the professional baseball agreement, which also expired last year, under MLB Rule 56.
"PDC is a creature of the PBA … The ability for clubs to enter into a PDC was inexorably tied to the PBA," he said.
But Nostalgic has called it a "takeover" of Minor League Baseball by the big leagues. Nostalgic specifically alleged that the Yankees had promised it that they would continue their affiliation perpetually when they purchased the Staten Island Yankees in 2011 and that trusts from the Steinbrenner family, which controls the Yankees, purchased a 5 percent interest in the minor league club.
"The Yankees had no authority under [MLB Rule 56] to do so, and any such promise would have been null and void," a lawyer for the trusts, Thomas H. Sosnowski of Boies Schiller Flexner LLP, told the court. "We believe that this provision of the major league rules is dispositive here.
Judge Barry Ostrager pressed the plaintiff minor league teams' on whether allowing the claims to continue would uncover more facts or evidence to support their claims.
"We think it is clear that they breached the contract," James Quinn of Berg & Androphy, an attorney for the plaintiffs, told the court. "There would be some discovery with regard to what was said and what was understood. … That is clearly a question of fact; What the parties were or were not aware of."
"Lawyers are lawyers and will always find something to discover," he added.
David Lender of Weil Gotshal & Manges LLP further argued for the plaintiffs that discovery would show that the Astros and Tri-City frequently talked of their "partnership," suggesting that would be evidence of a joint venture that the Astros went against in choosing to keep another Class A team, which happens to be owned by the Astros.
"They are being unjustly enriched because their teams that they own are keeping that incremental value," Lender said.
The Staten Island Yankees and Tri-City played in the now defunct New York-Penn League and were two of seven teams left without an affiliate agreement with a MLB club following the contraction.
Staten Island, which played in Richmond County Bank Ballpark overlooking the New York harbor and Lower Manhattan, were forced to fold. Tri-City has since joined the independent Frontier League but say the team had violated its lease and had to refund money to season ticket holders since it is no longer an "affiliated" minor league team.
More than 100 congressional lawmakers decried MLB's plans to eliminate minor league teams after it first came to light several years ago, though some have reversed course as local teams have found new roles outside the Major League Baseball affiliate system.
For instance, former NYPL teams such as the Mahoning Valley Scrappers and the West Virginia Black Bears joined new college player development leagues.
An attorney for the plaintiffs declined to comment further on the case Monday. Counsel for the defendants did not immediately respond to requests for further comment.
Nostalgic Partners is represented by James W. Quinn, Michael M. Fay and Emily Burgess of Berg & Androphy; and David J. Lender and Zachary A. Schreiber of Weil Gotshal & Manges LLP.
The Tri-City Valleycats are represented by David J. Lender and Zachary A. Schreiber of Weil Gotshal & Manges LLP.
The New York Yankees and the Office of the Commissioner of Baseball are represented by John L. Hardiman, Benjamin R. Walker and Tyler M. Dato of Sullivan & Cromwell LLP.
The Steinbrenner family trusts are represented by Jonathan D. Schiller and Thomas H. Sosnowski of Boies Schiller Flexner LLP.
The cases are Nostalgic Partners LLC v. New York Yankees Partnership et al. and Tri-City Valleycats Inc. v. Houston Astros Inc., case numbers 656724/2020 and 650308/2021, in the Supreme Court of the State of New York, County of New York, Commercial Division.
--Editing by Peter Rozovsky.
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