SAN DIEGO HAS CLEAR PATH TO COMPENSATION FROM NFL
St. Louis lawyer Robert D. Blitz has obtained a $790 million settlement from the NFL to pay damages the NFL inflicted on St. Louis and its sports authority by moving the Rams football team from St. Louis to Los Angeles — a settlement that may open the door for San Diego to recover the hundreds of millions of dollars the city lost when NFL owners approved relocating the Chargers in Los Angeles.
What is remarkable about the St. Louis case against the NFL is that it was based on the wellestablished “third-party beneficiary” principle of contract law and the NFL’s own constitution and bylaws regulating team transfers. St. Louis and its sports authority’s attorney argued they were thirdparty beneficiaries of the NFL relocation policy and could sue to enforce the policy. San Diego perforce is also a third-party beneficiary of the NFL policy.
The NFL relocation policy states the NFL favors stable team-community relations, and obligates the clubs to work diligently and in good faith to obtain and to maintain suitable stadium facilities in their home cities, and to operate in a manner that maximizes fan support in their current home community.
The NFL policy requires a club to submit a proposal for transfer to the NFL before it may transfer its franchise or playing site outside its current home city. The club must give the NFL commissioner written notice of its proposed transfer and a “statement of reasons” to support the proposed transfer. The NFL policy provides that the commissioner will evaluate the proposed transfer and report to the members.
Following the commissioner’s report, the proposal is presented to the members for a vote. In considering a proposed relocation, the clubs may consider several factors, but must address the degree to which the club has engaged in good faith negotiations, and enlisted the NFL to assist in such negotiations about terms and conditions under which the club would remain in its current home city and afforded that community a reasonable amount of time to address proposals.
The NFL policy states that if a club’s proposal to relocate to a new home territory is approved, the relocating club will ordinarily be expected to pay a transfer fee to the NFL. The transfer fee will compensate other NFL team owners for losing the opportunity appropriated by the relocating club and the enhancement in the value of the franchise resulting from the move. This payment unjustly enriches the other team owners.
St. Louis filed suit as result of the Rams’ 2016 relocation to Los Angeles, alleging the NFL violated the obligations and standards governing team relocations by seeking and approving the relocation of the Rams from St. Louis to Los Angeles, despite defendants’ failure to satisfy the obligations imposed by the NFL policy. St. Louis alleged 1) the NFL breached the NFL policy’s obligation of diligence and good faith based on St. Louis’ and its sports authority’s status as third-party beneficiaries of the NFL policy; 2) unjust enrichment for violating the NFL policy and relocating to Los Angeles, resulting in the Rams’ alleged $550 million relocation fee payment to the other NFL team owners; 3) fraudulent misrepresentation based upon false and misleading statements that induced St. Louis to spend considerable time and money financing and working on a new stadium complex; and 4) tortious inference with business, based upon the NFL’s intentional interference with St. Louis and its authority’s reasonable business expectancy by approving the Rams’ relocation. The NFL approved the Chargers’ move to Los Angeles at the same time it approved the Rams’ move there.
What the NFL did to St. Louis, it did even worse to San Diego. The team owners and the NFL forced the city of San Diego to spend over $92 million for stadium expansion and renovation in 1997, plus $68 million in bond interest rate costs. Under the infamous ticket guarantee, the city had to spend $36.4 million to buy unsold game tickets. In addition, fans spent millions to attend games for 32 years under Spanos family ownership.
Supported by revenues from the city and fans, the value of the team had increased from its $40 million purchase price in 1984 to over $1 billion by 2015. The team was profitable, it did not need to move to Los Angeles.
On Dec. 10, The San Diego Union-Tribune sports columnist Bryce Miller uncovered a key fact that would support San Diego’s case. Miller reported a former key NFL executive admitted the San Diego team owner decided to move the team to Los Angeles as early as 2006: “I think [owner] Dean Spanos made up his mind to move in 2006,” Jim Steeg said. “It just took him 10 years to do it.”
We need our business and labor communities and our mayor, city attorney and City Council to take swift effective action to pursue San Diego’s claim to recover the losses the NFL caused our city by the unconscionable moving of the Chargers to Los Angeles. St. Louis lawyer Robert D. Blitz has provided the path to a successful case. We simply need to follow it. A reasonable jury could conclude the team did not comply with the good faith requirements of the NFL relocation policy.
Aguirre