The McNally-Messersmith case marked the advent of free agency in Major League Baseball. Under the system of arbitration that had been implemented in Major League Baseball following the Curt Flood case six years previously, Dave McNally and Andy Messersmith argued before Peter Seitz that their relationship with their employers, the Montreal Expos and Los Angeles Dodgers, respectively, was over because each of them had played the entire 1975 season without a contract. Seitz held in favor of the players in his decision, which led to a large crop of free agents in the 1976 off-season, including such stars as Reggie Jackson.
The Curt Flood case, tried by the Supreme Court, had ruled that baseball's reserve clause was legal. This meant that Marvin Miller, who was the head of the MLBPA (the players' union) at the time, wanted to find another way to challenge the reserve system. The reserve clause in the labor agreement of the time stated the following in Section 10A:
"... the Club may tender to the Player a contract for the term of that year by mailing the same to the Player. If prior to the March 1 next succeeding said January 15, the Player and the Club have not agreed upon the terms of such contract, then on or before 10 days after said March 1, the Club shall have the right ... to renew this contract for the period of one year."
Upon this language, the entire reserve system of baseball, where a club retained the exclusive rights to a player in perpetuity if it so desired, rested.
Miller's contention was that, despite what was common practice, and despite what the owners claimed, that the reserve clause meant that a player's contract could be unilaterally renewed by his club for one year. Period. If the player did not sign a contract extension at any point during the season, he would become a free agent at the end of the year. The owners claimed that the clause meant that the club retained the unilateral right to extend a player's contract, one year at a time, in perpetuity. Miller based his argument on the wording of the clause and the fact that the clause was clearly one drawn up by the owners; the owners' argument was based on tradition and the radical changes to the game that would occur if the reserve clause's traditional interpretation were to be overthrown. American contract law indicates that when any clause in a contract is ambiguous, the ambiguity is to be resolved in the manner least beneficial to the party who placed that clause in the contract. In other words, if the owners had wanted an unassailable reserve system, it was incumbent upon them to spell out in detail what their rights were under such a system. Given the language of the labor agreement, it was hardly surprising that Seitz ruled in favor of Messersmith and McNally.
Sources: ESPN.com
The New Bill James Historical Baseball Abstract