Federal Baseball Club of Baltimore v. National League. In a unanimous decision authored by Justice Oliver Wendell Holmes Jr. (pictured), the Court held that the "business of base ball" was neither interstate in nature, nor commerce, and thus was not subject to the Sherman Act. The case was brought by the Baltimore Terrapins of the Federal League of Professional Baseball Clubs, after the team was dissatisfied with a peace settlement between the rival circuit and the American and National Leagues in December 1915. After being presented with unfavorable testimony during an abbreviated trial in Philadelphia, the Baltimore franchise voluntarily withdrew its case in 1917, only to refile it a few months later in Washington, D.C. This latter suit proceeded to trial in 1919, with a jury awarding Baltimore an $80,000 verdict(subsequently trebled to $240,000). Organized baseball prevailed on appeal, however, and the Supreme Court affirmed on May 29, 1922. Although the relatively narrow view of interstate commerce relied on in Federal Baseball soon became outdated, the Court has nevertheless affirmed the decision on two separate occasions, giving rise to baseball's infamous antitrust exemption.
For analysis of the Supreme Court's decision in Federal Baseball, check out Kevin McDonald's 1998 article from the Journal of Supreme Court History, "Antitrust and Baseball: Stealing Holmes," as well as Justice Alito's 2008 commentary considering the case (also published in the Journal of Supreme Court History), along with the thoughts of Sports Law Blog's Ed Edmonds. Meanwhile, for more on the Federal League generally, be sure to read Daniel Levitt's excellent, recently-released history, The Battle that Forged Modern Baseball: The Federal League Challenge and Its Legacy.