Lawsuit alleges minor league owners enriched themselves during MLB contraction
The legal fallout from MLB’s contraction of 25 percent of affiliated minor-league teams continues two years later.
The owner of the Salem-Keizer Volcanoes, a San Francisco Giants affiliate until it was booted out in 2021, this week alleged that another minor league owner, Marvin Goldklang, and other peers in ownership “destroyed” the Volcanoes and enriched themselves.
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Filed this week in federal court in New Jersey, this is the third lawsuit over contraction the Volcanoes have brought, and it comes after they reached an undisclosed settlement with Major League Baseball in another case. Now playing in an independent league, the Volcanoes are seeking at least $54 million of relief in the latest lawsuit.
In a statement, attorneys for Goldklang called the lawsuit “a baseless money grab” and said that Goldklang was “ultimately unable to persuade MLB that it should not have implemented its contraction plan.”
When MLB pursued a reduction in the number of minor league teams from 160 to 120, Goldklang was a member of an owners’ negotiating committee that worked with the commissioner’s office. The Volcanoes, owned by Jerry Walker, are accusing Goldklang and the committee of “secretly acquiescing to MLB’s proposal, to the detriment of the 43 minor league clubs that would be excluded.”
A fixture among minor league owners, Goldklang has owned several minor teams, including the Charleston River Dogs presently, a team he runs with actor Bill Murray. Goldklang also owns a small stake in the New York Yankees.
After contraction, Goldklang sold a pair of his minor league clubs, the Hudson Valley Renegades and the St. Paul Saints. The Saints were not affiliated with a major league team until after contraction. The change to representing a major league club increased the Saints’ value by more than $25 million, the lawsuit alleges.
“Goldklang profited from his self-dealing as a member of the Negotiating Committee by ensuring that his two minor league affiliated clubs were not part of the contraction,” the Volcanoes alleged.
Goldklang’s attorneys, in a statement, said: “Mr. Goldklang’s teams have had a well-earned reputation for excellence in the industry over a period of more than 30 years and have been among the most desired affiliate relationships in minor league baseball, none of which has had any relationship to the plaintiff’s team. Mr. Goldklang has never met or otherwise interacted with the plaintiff or its ownership, on any matter or at any time. We believe that the judicial process will expose this litigation as nothing more than a shakedown.”
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A key question is not only how the committee behaved, but what power it ultimately had in influencing which teams MLB retained in its new system, or the overall number of teams MLB settled on. The former president of minor league baseball, Pat O’Conner, told The Athletic in 2020 that “Major League Baseball came into the process determined” to get to 120, calling it “a fait accompli.”
“There’s levels to fiduciary responsibilities … even with an aggressive party on the other side of negotiations. Certainly, it’s our position that nothing was set in stone,” said Alex Niato, an attorney for Walker and the Volcanoes. “It’s inaccurate to say that this was a done deal and there was nothing to be done about it. Because there was leverage there — MLB couldn’t just not have a minor league system.”
The fiduciary responsibilities the Volcanoes believe were breached are prescribed in what’s known as the National Association Agreement. The National Association is the collection of affiliated minor leagues that for many years was referred to simply as “Minor League Baseball.”
Walker claimed in the suit that he twice asked to be on the negotiating committee, but was denied.
Attorneys for Goldklang noted that Walker “has sued a number of parties … and has been well compensated by MLB for the loss of its affiliation, and now, years later, is seeking even more from minor league representatives.”
According to Niato, the only compensation the Volcanoes have received from MLB is through litigation.
“There was not a sort of severance package given to the Volcanoes in any sense,” Niato said. “I believe some teams accepted money and signed some sort of agreement in doing so. But the Volcanoes did not.”
In Oregon state court in 2021, Walker sued MLB, the Giants, Minor League Baseball and two other Pacific Northwest owners on the negotiating committee, D.G. Elmore of the Eugene Emeralds and Tom Volpe of the Everett AquaSox, whose teams were not contracted.
The case has been stayed while the Volcanoes enter arbitration with the Emeralds and AquaSox. The Volcanoes and MLB have already settled on confidential terms, Niato said. MLB declined comment. The Giants were dismissed from the lawsuit.
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The Volcanoes are also one of four minor league teams that sued MLB over its antitrust exemption, a case that prompted the U.S. Department of Justice to weigh in. The Volcanoes and the teams lost in federal court. That case has been appealed, but the Volcanoes are withdrawing from that lawsuit, Niato said.
The Volcanoes continue to operate. When they were affiliated with the Giants, the Volcanoes played in the Northwest League, which was a short-season circuit at the time. After being cut out of MLB’s umbrella, the Volcanoes started an independent four-team league called the Mavericks League, which is scheduled to start its 2023 season next month.
(Photo: Rob Carr / Getty Images)
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