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Illegal Motion: The Breach of Contract Lawsuit over the Relocation of the Los Angeles Rams

When Stan Kroenke bought a majority share of the St. Louis Rams in 2010, he did so while making an assurance that he was going to do everything he could to keep the Rams in St. Louis. ((Complaint at 28, St. Louis Regional Convention and Sports Complex Auth. v. Nat’l Football League, (No. 1722-CC00976) (Mo. Cir. Ct. 22d 2017) available at http://www.stltoday.com/sports/football/professional/pdf-st-louis-st-louis-county-lawsuit-filed-against-nfl/pdf_b18dd730-f51b-5870-9bb4-09b80c74862c.html [hereinafter Complaint].)) And yet, less than six years after taking control, Kroenke and the Rams got league approval to move the team back to its historic home of Los Angeles.

On April 12, 2017, the stadium authority of St. Louis, along with the city of St. Louis itself, sued the Rams, Kroenke, and the thirty-one other owners of NFL teams, to recover damages resulting from the Rams’ move in the form of future revenue and costs incurred in the city’s attempt to keep the Rams in St. Louis. ((Id. at 38.)) The city’s attempt to keep the Rams in St. Louis, which was based on public representations from Rams officials and a reliance on league rules, never had a chance because the league violated its own relocation policy, failing to make a good faith effort to work with the city, according to the lawsuit. ((See id.)) In the suit, St. Louis seeks relief for four counts: breach of contract, unjust enrichment, fraudulent misrepresentation and tortious interference with business expectancy. ((See id. at 36-51.)) A fifth count alleging fraud against all the owners was dismissed by a judge back in December. ((Mike Faulk, St. Louis Lawsuit likely headed to trial after judge denies motion by Rams, NFL, St. Louis Post Dispatch (Dec. 28, 2107), http://www.stltoday.com/news/local/metro/st-louis-nfl-lawsuit-likely-headed-to-trial-after-judge/article_9637e3ee-b03d-5ddf-bf40-b26253c7ac0a.html.))

St. Louis contends that the League’s regulation policy constitutes a binding contract under the Constitution and Bylaws of the NFL, and that the city was a third-party beneficiary of the contract. ((Complaint at 36.)) The policy states that “clubs are obligated to work diligently and in good faith to obtain and maintain suitable stadium facilities in their home territories and to operate in a manner that maximizes fan support in their current home community.” ((NFL Relocation Guidelines at 1, https://bloximages.newyork1.vip.townnews.com/stltoday.com/content/tncms/assets/v3/editorial/5/00/5004ef19-dcf6-5d1d-b11a-db0874dea624/58ee5fe512ebb.pdf.pdf.))

By refusing to meet with the Mayor of St. Louis, the Governor of Missouri, and other community leaders to work towards a future in St. Louis, the plaintiffs contend that the Rams failed to meet their obligation to work towards a solution in the current market. ((Complaint at 35.)) The complaint suggests that any effort would’ve appeared like good faith, but the Rams’ leadership never once met with the Mayor of St. Louis or with other officials who were in charge of trying to keep the Rams. ((Id. at 35.))

One of the major keys to this argument is the plot of land Kroenke purchased in Inglewood, CA, back in 2014, where the Rams are currently building their new stadium. ((Id. at 44.)) That certainly looks bad for a defendant who is trying to show that he was acting in good faith all along and was honest in his dealings with the team. To support this allegation, St. Louis points to the statements of COO Kevin Demoff, who repeatedly denied that the land was useful for a future stadium. ((Id. at 29.)) Also used to support this claim are statements of coach Jeff Fisher, who coached the Tennessee Titans through their relocation from Houston, where he admitted that when he interviewed for the job in 2012, he was informed of the Rams intention to move. ((Id. at 32.))

In its second claim, St. Louis alleges that the league owners unjustly enriched themselves as a result of violating the relocation policy. For Rams owner Stan Kroenke, that enrichment was equal to the $700 million in immediate increased value of his franchise. ((Id. at 39.)) For the thirty-one other defendant-owners, the unjust enrichment was through the $550 million relocation fee they shared as compensation for loss of the opportunity to move to the LA market themselves. ((Id.))

The suit also alleges fraudulent misrepresentation on the part of Stan Kroenke and the Rams, citing numerous public statements from Kroenke. The suit cites claims from Demoff, like, “[I am] going to attempt to do everything that I can to keep the Rams in St. Louis,” and, “Our entire focus is on building a winner in and for St. Louis.” ((Id. at 42.)) The suit uses these statements to show the outward representations that the city relied upon, believing they still had a chance to keep the team, in contrast with the actual actions taken by the Rams, like purchasing the land in Inglewood, while keeping the League informed and updated about the purchase. ((Id. at 30.)) Yet the Rams publicly insisted that the site was “not a piece of land that’s any good for a football stadium.” ((Id. at 43.)) If that was the case, then why did the league need to be informed at all?

Relying on these representations, the stadium authority spent $17 million developing plans for a new stadium to keep the team in St. Louis. ((Id. at 37.)) How did the league respond to these efforts? Commissioner Goodell described the financing plan as “fundamentally inconsistent with the NFL’s program for stadium financing” even though this deal was structured similarly to two other financing deals the NFL had demanded for new stadiums for their teams. ((Id. at 34.))

This inconsistency provides the groundwork for the last claim, tortious interference with a business opportunity, alleging that the League intentionally interfered with the city’s efforts to keep the rams. The suit specifically cites these discussions as far back as 2013 regarding the suitability of the Inglewood site for a stadium. Added to this claim was the fact that after the initial removal proposal was rejected by the owners, Cowboys owner Jerry Jones persuaded the owners to re-vote, solely based on the amount of money that could be made by moving to LA. ((Id. at 48.))

With the case now moving into discovery, it will be interesting to see what information comes to light, especially to the extent it reveals any involvement of other owners or of League Commissioner Rodger Goodell. Given that the League made Kroenke give up his ownership interests in the Denver Nuggets and Colorado Avalanche (to his wife) to satisfy its own cross ownership rules, it is quite possible that information may come to light regarding potential deals struck or promises made by Kroenke.

For those keeping score at home, the timeline goes: 2010 bought the team, 2012 hired the coach for the move, 2014 bought the land, and then in 2016 gets approval to move the Rams. This approval came despite the relocation committee choosing a different proposal than the one put forward by the Rams. ((NFL L.A. committee recommends Raiders and Chargers joint bid, Sports Illustrated (Jan. 12, 2016), https://www.si.com/nfl/2016/01/12/los-angeles-rams-raiders-chargers-carson-stadium-site.))

From a purely economic perspective, this was an incredible business opportunity and a huge win for Stan Kroenke and the NFL. The Rams increased in value by $700 million overnight. Seeing dollar signs, it’s not surprising that the League approved the Raiders’ and Chargers’ move to Las Vegas and LA in 2017, after their own struggles over stadium funding in their home markets. ((See Vincent Bonsignore, Oakland Raiders Stadium plan in motion, but obstacles Remain, Los Angeles Daily News (Aug. 28, 2015), https://www.dailynews.com/2015/03/23/oakland-raiders-stadium-plan-in-motion-but-obstacles-remain/; see Brent Schrotenboer, San Diego Voters Overwhelmingly Reject Chargers Stadium Plan, USA TODAY (Nov. 9, 2016),  https://www.usatoday.com/story/sports/nfl/chargers/2016/11/09/san-diego-voters-overwhelmingly-reject-chargers-stadium-plan/93531020/.))

No matter what happens in this lawsuit, one thing is certain: St. Louis is not getting back the Rams. They’re in LA to stay. It’s tempting to classify this lawsuit as another potential relocation fee the Rams would have to pay to get what they want. It may very well be how this case ultimately plays out. That would appear to ultimately make this case inconsequential, if it were not for the antitrust implications at stake.

In 1978, Raiders then-owner Al Davis sued the NFL over the league’s refusal to allow him to move his team to LA. A jury found that Section 4.3 of the NFL of the Constitution, which requires a 75% vote of the owners to approve a franchise move, violated the Sherman Antitrust act by unreasonably prohibiting competitive movement of teams ((Mark Asher and Leonard Shapiro, Jury Finds Against NFL in Raiders Antitrust Suit, Washington Post (May 8, 1982),  https://www.washingtonpost.com/archive/politics/1982/05/08/jury-finds-against-nfl-in-raiders-antitrust-suit/8b34f54f-10bc-43b0-951c-71867635987a/?utm_term=.834a122e6615.)) While this case was about the league not allowing a team to move, the Raiders also won on a lessor count of violation of implied faith and fair dealing. ((Id.)) This charge has major implications for St. Louis’ suit, setting the precedent that the league policy comes into the purview of antitrust law. If the league is found to have violated the policy, it could very well open the door for more litigation against the league, with a far greater impact than initially anticipated.