Law360, August 10, 2023
A Minor League Baseball team owner urged a New Jersey federal judge to throw out claims that he sold out the owners of the Salem-Keizer Volcanoes during the restructuring of Major League Baseball’s minor leagues, arguing the complaint fails to show how he had any connection to the loss of the Volcanoes’ MLB affiliation.
Marvin Goldklang and the Goldklang Group said in a Wednesday filing that the lawsuit brought by Sports Enterprises Inc., accusing it of using the negotiations between MLB and the minors’ previous operators to increase the value of its own teams at the expense of the Volcanoes and others, is “frivolous,” “threadbare” and “suffers from a host of incurable flaws.”
The language of SEI’s complaint “lays bare that Mr. Goldklang and/or the Goldklang Group had nothing to do with, and bear no conceivable responsibility for, the loss of SEI’s affiliation or its purported damages,” the Goldklang group said in its brief.
The Volcanoes, owned by SEI, were a Single A affiliate of the San Francisco Giants for 23 years. In 2021, MLB replaced its system of direct contracts between MLB teams and minor league teams, known as player development contracts, with a franchise-license system involving professional development licenses between major league clubs and select minor league club affiliates, according to court documents.
The restructuring resulted in 40 teams losing their MLB affiliations, including the Volcanoes.
SEI sued the Goldklang Group in April, claiming Goldklang, as a member of the negotiating committee of minor league baseball team owners formed during the restructuring of Minor League Baseball, withheld information from the other teams and secretly negotiated a system that stripped teams of their affiliations.
As a result of its alleged scheme, Goldklang Group kept its Charleston RiverDogs’ affiliation with the New York Yankees and sold the Hudson Valley Renegades at a higher price, while the St. Paul Saints became affiliated with the Minnesota Twins, SEI claimed. It alleged breach of contract, breach of fiduciary duties and unjust enrichment claims seeking $40 million in restitution and $14 million in damages.
On Wednesday, the Goldklang Group argued that minor league teams are not parties to the contract it allegedly breached, and even if they were, SEI’s claims are time-barred; the negotiating committee Goldklang was a member of only served in an advisory capacity and did not have decision-making authority; and MLB announced before the formation of the negotiating committee its plan to strip the affiliations of 40 teams, including the Volcanoes.
“SEI merely speculates, ‘on information and belief,’ that ‘all the members of the negotiating committee’ must have acted contrary to SEI’s interests because the Volcanoes were one of 43 minor league clubs to lose its MLB affiliation,” the Goldklang Group said in its brief.
Under the National Agreement, Minor League Baseball’s governing document that Goldklang allegedly breached, only professional baseball leagues — not teams or their owners — are members and parties, according to the Goldklang Group.
SEI had filed an antitrust suit against MLB in 2021 along with three other minor league teams after they were stripped of their affiliations, which was dismissed in October 2022 under the antitrust exemption granted to the MLB by the U.S. Supreme Court in 1922. The teams appealed to the Second Circuit, and in January the U.S. Department of Justice asked the court not to extend the antitrust exemption.
Counsel for the Goldklang Group, Christopher J. Gramiccioni of Kingston Coventry LLC, told Law360 in a statement on Thursday the motion speaks for itself in addressing SEI’s complaint. Counsel for SEI did not immediately respond to request for comment.
The plaintiffs are represented by Mohammad B. Pathan and John M. Magliery of Davis Wright Tremaine LLP, and Alexander Naito of Tarlow Naito & Summers LLP.
The defendants are represented by Christopher J. Gramiccioni of Kingston Coventry LLC, and Eric Kanefsky, Kevin Musiakiewicz, Martin Benjamin Gandelman and Richard Spatola of Calcagni Kanefsky LLP.
The case is Sports Enterprises Inc. v. Goldklang et al., case number 2:23-cv-2198, in U.S. District Court for the District of New Jersey.
–Additional reporting by David Steele, Dorothy Atkins and Nadia Dread. Editing by Adam LoBelia.
Update: This article has been updated to include comment from Christopher J. Gramiccioni.
By George Woolston on 8/14/2023 at 2:09 PM
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