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June 20, 2013

In A Pickle

The Sexy, Sultry San Jose vs. MLB Complaint

by Jason Wojciechowski

You've heard about it at this point: The City of San Jose sued Major League Baseball for not letting the A's move to their fair municipality. You can find the complaint, which was filed in federal court in San Jose, here (pdf). It's long, though I've seen longer. The PDF is 188 pages, but that's with exhibits. The text of the complaint itself is 46 pages. It's 203 paragraphs.1

One reason it's so long is that the first six pages (23 paragraphs) are essentially a narrative background of the case. The point of a complaint in the federal courts (warning: I'm about to vastly oversimplify a contentious area of law) is to notify the other party of the claims against it. That's what it boils down to. That does not mean that a complaint saying, "I'm suing you for breach of contract" would be sufficient. Which contract? How was it breached? When was it breached? In order to inform the other party of the claims, then, the complaint has to actually allege facts.

The issue with this narrative background is that the complaint is meant to contain only relevant facts, with relevance determined by the claims. It might be the case that the person I'm suing for knocking over my mailbox is eight feet tall and green, but unless those facts are somehow relevant to him knocking over my mailbox, there's no reason for that material to be in the complaint.

Additionally, the complaint is only supposed to allege facts. This is a rule that is widely disregarded and largely unenforced, but in the end, there is still some idea that the complaint, the document that begins a lawsuit and notifies everyone what the case is about, should not contain argument or legal conclusions or attempts to convince anyone of anything. It's supposed to contain facts.

The first six pages here, like you'll unfortunately see in many complaints, especially those of a public nature, contain citations to cases the plaintiffs consider precedential, narrative about the amount of money baseball makes every year, and even a quote from a book called Fans of the World Unite!. (The attorneys for the plaintiffs left off the subtitle: A (Capitalist) Manifesto for Sports Consumers.) None of it is very useful for the court, but much of it is useful for the press.

(So far, this article has been an elaborate piece of postmodern art—without spoiling the joke, note how I complained at far too much length about an issue that doesn't matter at all: the plaintiffs' complaint opening with far too much length about issues that don't matter at all. Where do I pick up my Guggenheim Fellowship?)


Once you dig through the 206 paragraphs, the essence of the complaint is simple: San Jose is courting the A's, baseball is preventing the A's from moving, and in so doing, baseball is violating a variety of laws.

We can grant the two core facts without much dispute: San Jose is obviously courting the A's and baseball is just as obviously preventing a move from happening (by operation of its rules on territory that give the Giants the exclusive right to Santa Clara County). The question is in the legal conclusion: does this violate all those laws? The answer is simple: "um, well, sure, maybe, maybe not, some claims ... I guess."


It's first worth noting that San Jose quite possibly does not care about winning. Court documents and proceedings are in large part public, so you can see this lawsuit as an organizing or agitating or move. To the extent San Jose thinks baseball will respond to public or quasi-public pressure2 and that this lawsuit will provide an impetus to get those people moving and lobbying, then it may not matter much how or when the case ends. It's, on that view, a means to a different end than a legal victory.3


The core of the complaint, the area on which most of the allegations focus, is that baseball is violating federal antitrust law by the other 29 teams banding together to make rules that prevent the A's from doing what it wants as an independent business. The obvious problem, the problem that I'm sure many of you know about whether you read my review of Stuart Banner's book on the topic or not, is baseball's antitrust exemption. The short version is this: because of a Supreme Court case in 1922, the federal antitrust statutes do not apply to baseball. The hope of every plaintiff's lawyer in these cases for basically the last 70 years is that because the doctrine was created by the Supreme Court, the Supreme Court will knock it back down when it comes to its senses and realizes that things have changed. To which I say: good luck.

It's not impossible, of course. The exemption was last passed upon by the Court in 1972 in the Curt Flood case, which was 41 years ago. Things are different now than they were in 1972!

The problem is in the two periods: from 1922 to 1972, a lot changed, especially as to the Supreme Court's understanding of Congress's power to regulate business; from 1972 to 2013, some things have changed, but there's been very little movement on the breadth of Congress's power in that period.

Thus, I don't see a real reason to look at the Flood case and believe that circumstances are so different today that the Court would care to reevaluate its holding.4

If you're more optimistic than me that baseball will finally be brought in line with football and soccer and boxing and everything else in American life as regards it being subject to normal antitrust scrutiny, then I applaud your half-full glass. My glass is broken on the floor and there's no water for miles.


San Jose also accused baseball of violating California's antitrust statute. The problem is that state antitrust regulation of the business of baseball is preempted by the federal antitrust exemption—that is, the federal exemption is not merely a gap that the states are permitted to fill by their own regulation. Rather, the federal exemption represents a federal policy decision that baseball is to remain unregulated. On this point, the Supreme Court spoke in Flood v. Kuhn, approving of a lower court's statement that

as the burden on interstate commerce outweighs the states' interests in regulating baseball's reserve system, the Commerce Clause precludes the application here of state antitrust law.

Further, in a 2003 case arising from a challenge to baseball's contraction plan, the 11th Circuit Court of Appeals (covering Alabama, Georgia, and Florida) read the Supreme Court's language in Flood as holding that state antitrust law could not apply to the business of baseball.

I don't, then, see any reason to think the California antitrust law claims will pass muster, and I don't see any particular reason to do any deep analysis of how baseball would fare upon application of such laws. That claim should be dismissed in short order.


A note before moving on with the rest of San Jose's claims: a key goal for the city is probably simply to survive baseball's argument that the entire lawsuit should be thrown out because none of the claims are viable. If San Jose can get past that stage on at least some of its claims, it will gain access to the discovery process by which it can obtain all sorts of documents and information from baseball, can do depositions (under-oath, out-of-court interviews, for those who haven't watched legal TV shows), and can generally just annoy the hell out of a bunch of old billionaires. Sure, MLB can do the same to San Jose's mayor and city councilpeople and goodness knows who else, but the fact that San Jose was willing to sue at all is strong evidence that the city thinks this is worth it on balance.

As someone who loves it when embarrassing internal memoranda come to light, I'm rooting for discovery.


Back to the substance. The city brought three other state-law claims: interference with contract, interference with prospective economic advantage, and unfair business practices.

I'm going to beg your forgiveness and put aside the unfair practices claim—the concept of "unfair" is broad and not susceptible of easy definition or analysis in a short essay intended to explain the case to nonlawyers. (It might not be susceptible of definition or analysis anywhere.) Whether there's enough in the complaint to show prima facie that MLB's conduct was unfair is beyond my ken. There seems at least a reasonable chance, though, that MLB's defense to the unfair practices claim will be "nuh uh, it wasn't unfair." What this would mean is that it's a factual dispute: San Jose says "X Y and Z prove that it was unfair" and MLB says "A B and C prove it was not unfair." Factual disputes are not resolved early in cases, but after discovery. As I argued above, the very possibility of getting to discovery is probably a victory for San Jose.

The interference claims are very similar to each other: one is interference with contract, the other interference with "prospective economic advantage." The difference is exactly as it sounds: to prove interference with contract, you must prove that there is a contract, while no such thing is needed to prove interference with prospective economic advantage.

The contract/relation that San Jose alleges was interfered with is an option deal to buy land. San Jose essentially received $75,000 from the A's. In return, the team was given two years in which to exercise a right to buy land from the city for just shy of $7 million. (The contract is attached to the complaint. It's Exhibit 3.) The two hands:

One hand: an option giving a party the right to buy is not the same as agreeing to buy. There was no contract between the A's and San Jose—there was only the possibility of a future contract that perhaps the A's would have exercised or not, regardless of what MLB did.

Other hand: the A's were never actually given a choice to exercise because MLB interfered with that choice by denying the right to move to San Jose. Putting aside legalistic terminology, what is the actual, on-the-ground difference between a third party standing in the way of exercising an option and a third party standing in the way of performing a contract? Either way, it's interference.

As to that second hand, if you'll forgive my sloppy legal research (it's harder than you'd think to do this using only Google), let me quote to you from a Tennessee case quoted here:

Interference with the exercise by a third party of an option to renew or extend a contract with the plaintiff is also included.

An option to renew or extend isn't quite the same thing as an option to purchase land, and Tennessee isn't California, but if you paid me enough, I have a feeling that I could perform the research and find cases supporting at the very least the notion that San Jose's claim shouldn't be thrown out simply because it was an option contract that was interfered with.

As to prospective economic advantage, while no contract is required, San Jose will, if it wants to win, have to prove that the alleged relationship "probably would have resulted in an economic benefit." Would the A's "probably" have exercised the option and commenced the building of a stadium in San Jose were in not for those meddling kids baseball owners? I don't know, but I will dream happily of Lew Wolff on the stand in open court saying to San Jose's attorney, "Yes, I fully intended to exercise that option, certainly," while Bud Selig, his fraternity brother back in antebellum Wisconsin, stares absolute bloody murderous daggers at him.

The difficulty with the economic advantage claim not present in the contract claim is that some "wrongful conduct" is required to prove interference. This means that baseball's conduct must have been independently wrongful, i.e. baseball must have failed to live up to a legal duty imposed by some other statute or law. It is not clear to me what that conduct would be, given that the collusive rules about where teams can move does not violate either state or federal antitrust laws.

Depending on the treatment of the option contract, the conduct here might fall in a weird no-man's land between the contract and economic advantage claims. That is, there may have been an economic relationship between San Jose and the A's, but there wasn't a contract; on the other hand, baseball interfered, but did not behave wrongfully in doing so. Since you either need a contract or you need wrongful behavior, San Jose might not have a good argument for either of the two claims.


The skinny? The antitrust claims, both state and federal, are dead by virtue of precedent nearing a full century of age. Without the antitrust claims establishing wrongfulness, I don't see the interference with prospective economic advantage claim holding up. The interference with contract claim boils down to whether interference with the execution of an option is enough under California law. And the unfair practice claim is a complete black box to me.

Questions? (Esp. ones I can't answer, I love those.)


  1. Complaints are written in numbered-paragraph style. Each paragraph is supposed to be limited to a single allegation. How you determine whether a paragraph has a single allegation or more than one isn't easy and, frankly, doesn't really matter, even to lawyers. The point is, as far as I can tell, to organize things well and make it easy for lawyers and the court later, when the volume of paper grows forest-like, to refer back to relevant portions of the complaint.

  2. By "quasi-public" I refer to prominent corporations, politicians, local leaders, and so forth, people that the CEO of a billion-dollar company, which is essentially how we can think of Bud Selig in this instance, might pay some attention to, as distinguished from the general mass of fans.

  3. Local politics also surely play a role. I'm not in San Jose and I don't follow the situation closely, but in general terms: A mayor or city council member has "keep my job"-related reasons to support popular policies. Becoming Big League, a book I've written about here, studies Seattle's fight to get a major-league team and is instructive on these points.

  4. An underrated difficulty in overturning the exemption, by the way, is noted by Banner and others: the Curt Flood Act in 1998 expressly made player-employment issues subject to antitrust law. The problem is that the statute says not a word about team movement, broadcast-rights sales, expansion, or any of those types of issues. By one possible rule of interpretation, then, Congress's decision to regulate one specific part of the game is an implied decision not to regulate the untouched parts. The Curt Flood Act made precisely zero changes to the existing order of things because employment of major league players was by that time already covered by collective bargaining and was thus immune from antitrust scrutiny under a different, far less controversial, exemption, so one could argue that the law was only intended to be symbolic and thus should not be taken to imply anything at all.

Jason Wojciechowski is an author of Baseball Prospectus. 
Click here to see Jason's other articles. You can contact Jason by clicking here

Related Content:  Oakland Athletics,  News,  Business

16 comments have been left for this article. (Click to hide comments)

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Ken Arneson

The Supreme Court said that federal antitrust overrided state antitrust on the reserve clause. But this isn't about the reserve clause. Why would state antitrust law be overridden because of interstate commerce on an intrastate business move?

Jun 20, 2013 09:40 AM
rating: 0
 
frampton
(870)

The basis of all of the baseball antitrust decisions was, that Congress was free to subject baseball to the antitrust laws, and that Congress's failure to do so meant that the Court wouldn't. I don't think there is any distinction regarding a team move. (In any event, the commerce clause argument would be that a move would affect all of baseball, not just the A's.)

I do have to think the option is in fact a contract -- if the city sold to someone else, the A's could certainly sue for breach.

Jun 20, 2013 09:59 AM
rating: 0
 
Ken Arneson

Maybe I'm just being dense here, but I thought the basis of baseball's antitrust exemption was that the Supreme Court in the 1920s ruled that baseball was not a form of interstate commerce. Except that Congress was free to rule that elements of baseball, such as the reserve clause, were interstate commerce, and it could regulate it if it wished. Which it did with the Curt Flood Act in 1987.

Which sounds to me like, unless Congress specifically says it's interstate commerce by passing a law, then it's all intrastate commerce. So why wouldn't state laws apply?

Jun 20, 2013 10:41 AM
rating: 0
 
BP staff member Jason Wojciechowski
BP staff

Congress doesn't have the power to determine which things are in interstate commerce -- they have the power to regulate things that are in interstate commerce. They can make findings to that effect, essentially bolstering their own ability to regulate (IIRC the Violence Against Women Act is replete with these) in case of a challenge in court, but they are not the arbiter.

What happened from the 1920s to the Curt Flood Act is that the Supreme Court accepted a new, broader definition of what interstate commerce is. In 1922, the Court held that Congress did not have the power to regulate. By the time of the Curt Flood Act, the basis of that holding was so long gone as to be laughable and thus Congress's passage of the Act is uncontroversial.

What this has morphed into as to state antitrust law, though, is a sort of hardening of the 1922 decision into a quasi-fictional "federal policy not to regulate baseball under antitrust law" and given that federal policy and the Supremacy Clause, local (state) policy cannot apply.

Jun 20, 2013 11:05 AM
 
Pat Folz

Thanks for the primer, this makes a lot more sense now.

A couple fact clarifications:
*"The hope of every plaintiff's lawyer in these cases for basically the last 70 years..." should be 90 years, right? Or did something happen in 1943 that I don't know of?

*The NFL (and I assume the other major American sports leagues) has an anti-trust exemption, but it's less strong than MLB's for reasons I don't understand. So it's also not subject to "normal antitrust scrutiny"? Or do mean specifically with regards to relocation?

And then a question that you possibly can't answer:
Say, hypothetically, that the court sides with San Jose on the sustainable claims. What, exactly, do they win? (besides another court date on appeal) I somehow don't believe that this is the only thing holding back the A's move...

Jun 20, 2013 10:43 AM
rating: 0
 
BP staff member Jason Wojciechowski
BP staff

I chose 70 because the new era of the Commerce Clause essentially kicked off about 70 years ago. It's really only ever since then that there's been an "exemption" in the law that was both difficult to attack (Supreme Court precedent!) but also worthy of attack (it's stupid precedent!).

No other sports, as I understand it, have an antitrust exemption, at least not to the degree that MLB has. NFL has a specific exemption allowing them to do national TV deals. There may be other small carve-outs I don't know about.

I think the ultimate victory for San Jose is an injunction requiring baseball not to enforce its rules regarding franchise relocation. Maybe at that point the A's do move and maybe not, but if they don't, it wouldn't be because they didn't have 3/4 support from the other owners and it wouldn't be because the Giants "own" Santa Clara.

Jun 20, 2013 11:11 AM
 
Pat Folz

Thanks for the detailed and thoughtful reply!

Jun 21, 2013 00:42 AM
rating: 0
 
nyyfaninlaaland

It seems San Jose's ultimate goal here is to get MLB to move on modifying the assignment of Santa Clara County as being in the market of the Giants.

This seems the key holdup on progress - and the Giants have no interest in a revision, at least not without a significant financial consideration such as occured when the Nats relocated to DC requiring a payoff to the O's.

As in most things, it likely comes down to who pays (the Giants in this case) and how much. A completely separate issue from this case.

It seems possible that San Jose may have had firmer legal grounds to sue the Giants as an intrastate commerce issue rather than MLB. But that's is at least as complicated an argument if not more so.

Jun 20, 2013 17:32 PM
rating: 0
 
LynchMob

Fantastic, thanks!

You had me up to "antebellum" ... good word :-)

http://dictionary.reference.com/browse/antebellum?s=t

Jun 20, 2013 10:55 AM
rating: -1
 
ddufourlogger

Love this article Jason. Thanks for summing it up very nicely and offering perspective.

Jun 20, 2013 13:55 PM
rating: 2
 
BP staff member Jason Wojciechowski
BP staff

Thank YOU. And LynchMob too, while I'm here.

Jun 20, 2013 17:19 PM
 
abcjr2

I am going to respectfully disagree with the conclusion that the antitrust laims is "dead" on arrival. This is from the 9th circuit opinion affirming Al Davis's successful suit against the NFL:


It is true, as the NFL argues, that competition among stadia for the tenancy of professional football teams is presently limited. It is limited, however, because of the operation of Rule 4.3. Prior to this lawsuit, most teams were allowed to relocate only within their home territory. That is why Carroll Rosenbloom could move his team to Anaheim. This is not to say the potential for competition did not previously exist. There was evidence to the effect that the NFL in the past remained expressly noncommitted on the question of team movement. This was done to give owners a bargaining edge when they were renegotiating leases with their respective stadia. The owner could threaten a move if the lease terms were not made more favorable.


The NFL claims that it is places, not particular stadia, that compete for NFL teams. This is true to a point because the NFL grants franchises to locales (generally a city and a 75 mile radius extending from its boundary). It is the individual stadia, however, which are most directly impacted by the restrictions on team movement. A stadium is a distinct economic entity and a territory is not.


It is also undoubtedly true, as the NFL contends, that stadia attempt to contract with a variety of forms of entertainment for exhibition in their facilities. In the case of the L.A. Coliseum, this includes college football, concerts, motorcycle races and the like. An NFL football team, however, is an especially desirable tenant. The L.A. Coliseum, for example, had received the highest rent from the Rams when they played there. We find that this evidence taken as a whole provided the jury with an adequate basis on which to judge the reasonableness of Rule 4.3 both as it affected competition among NFL teams and among stadia.


We conclude with one additional observation. In the context of this case in particular, we believe that market evidence, while important, should not become an end in itself. Here the exceptional nature of the industry makes precise market definition especially difficult. To a large extent the market is determined by how one defines the entity: Is the NFL a single entity or partnership which creates a product that competes with other entertainment products for the consumer (e.g., television and fans) dollar? Or is it 28 individual entities which compete with one another both on and off the field for the support of the consumers of the more narrow football product? Of course, the NFL has attributes of both examples and a variety of evidence was presented on both views. In fact, because of the exceptional structure of the League, it was not necessary for the jury to accept absolutely either the NFL's or the plaintiff's market definitions. Instead, the critical question is whether the jury could have determined that Rule 4.3 reasonably served the NFL's interest in producing and promoting its product, i.e., competing in the entertainment market, or whether Rule 4.3 harmed competition among the 28 teams to such an extent that any benefits to the League as a whole were outweighed. As we find below, there was ample evidence for the jury to reach the latter conclusion.

Los Angeles Mem'l Coliseum Comm'n v. Nat'l Football League, 726 F.2d 1381, 1394 (9th Cir. 1984)

Jun 21, 2013 13:25 PM
rating: 0
 
BP staff member Jason Wojciechowski
BP staff

But that doesn't defeat MLB's "exemption," does it?

Jun 21, 2013 13:31 PM
 
abcjr2

Excellent question and that's at the heart of the case. The Flood case affirmed the draft and reserve clause, as necessary to league structure and competitive balance, issues which have been since been affected also by modifications in collective bargaining agreements. The question is whether and to what extent the exemption applies to restrictions on franchise moves. Here's one author's opinion:

"Despite the seeming lack of rhyme or reason to its holding in Federal Baseball (1922), the Court has continued to staunchly clutch to its ruling in subsequent decisions (Ross & Dimitroff, 1997). This is true because baseball's antitrust exemption has proven to be remarkably resistant to challenge despite the suspect reasoning behind its creation (Moorad, 1997). On the other hand, a district court opinion in 1993, took at least a chink out of the exemption's protective armor. The federal district court in Pennsylvania held that the exemption applies only to the reserve clause in Piazza v. Major League Baseball, 831 F. Supp. 420, 422 (E.D. Pa. 1993), (Ross & Dimitroff, 1997).

"In this case, several investors (including Vincent Piazza, father of New York Mets’ all-star catcher Mike Piazza) sued Major League Baseball when it refused to approve the sale and relocation of the Giants from San Francisco to Tampa Bay. Major League Baseball filed a motion to dismiss, citing the antitrust exemption. The federal district court denied the motion on the ground that the exemption is restricted to the reserve clause, even though Piazza analyzed the exemption in terms of stare decisis. The court also pointed out that the Supreme Court itself had acknowledged that the trilogy between the cases of Federal Baseball, Toolson, and Ford was limited to the reserve system because professional baseball’s reserve system is within the reach of the antitrust laws” (Ross & Dimitroff, 1997) and did not apply to teams’ attempts to move from city to city (Moorad, 1997). Basically, the holding in Piazza signaled that the current restrictions on the sale or transfer of major league baseball teams were not included because this action may not be insulated from the Sherman Act by baseball’s antitrust exemption (Ross & Dimitroff, 1997).

http://www.thesportjournal.org/article/role-antitrust-laws-professional-sports-industry-financial-perspective

Jun 21, 2013 14:54 PM
rating: 0
 
TGT969

MLB has always been penny-wise and pound-foolish. Not only are the A's hurt by these rules, but Tampa is also. Why do they have to stuck in a terrible
stadium but attendance is awful also. Why shouldn't they move, say to New
Jersey where there would be an audience. If it is good enough for football,
hockey, and hoops why not baseball?

MLB is always shortsighted.

Jun 22, 2013 13:00 PM
rating: 1
 
AWBenkert

1) A move by the Rays (or any other team) to New Jersey would not be a good idea. While there is a large population in the Garden State, most fans have already formed an allegiance to one of the existing teams, most likely the Yankees or Mets. It would take about 20 years for the newcomers to develop a sufficiently large fan base to make the move worthwhile. Additionally, no adequate facility presently exists, so where would the team play while a suitable facility is constructed? (I'm sure NJ taxpayers are giddy at the prospect of having to fund a new baseball stadium.)

2) With regard to the Giants/A's/San Jose situation, how about some attempt at a creative solution? Here's mine: the Giants allow the A's to move. In return, the A's agree to give the Giants 5% of their gross revenues for 15 years and first-round draft picks in their 5th, 10th and 15th years of operation in San Jose. This seems to me an arrangement that should satisfy both teams.

Dec 29, 2013 10:29 AM
rating: 1
 
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