Background of the issue: how did we get here?
In January 2014, Stan Kroenke, owner of the then-St. Louis Rams, purchased a 60-acre parcel of land in Inglewood, CA. At the time, Kroenke refused to comment on his aspirations with the land and NFL Commissioner Roger Goodell publicly dismissed the idea that this land could or would be used for anything related to developing a new stadium. This parcel of land would become the future site of SoFi stadium, home to the Los Angeles Rams and the Los Angeles Chargers.
Author’s note: “St. Louis” refers to a collective that includes the City of St. Louis, St. Louis County, and St. Louis Regional Convention and Sports Complex Authority.
In 2015, the Rams’ lease on the Edward Jones Dome in St. Louis converted to a year-to-year lease. The conversion was triggered once the stadium was considered to no longer be among the top 25% of NFL stadiums. This important issue would be argued by both sides in the eventual lawsuit- Kroenke positioning the issue as St. Louis not meeting their obligations to give the Rams a suitable home in St. Louis, and St. Louis arguing that Kroenke and the Rams allowed the stadium to fall into a state of disrepair because they intended to move the team all along.
For years, NFL owners had operated a committee to monitor and look for opportunities to expand into the Los Angeles market (LA committee). In 2016, the LA committee was comprised of six owners: Robert Kraft (Patriots), John Mara (Giants), Jerry Richardson (Panthers), Robert McNair (Texans), Clark Hunt (Chiefs) and Art Rooney (Steelers). During this time, there were multiple viable prospects of putting an NFL team in Los Angeles. Kroenke, behind the scenes, was pushing for a relocation of his Rams franchise to the Inglewood site. However, there was also a Raiders-Chargers proposal that would see the two teams build a stadium in suburban Carson, CA.
At the owners meeting in 2016, the L.A. committee officially backed the proposal that would have sent the Raiders and Chargers to Carson, CA, a suburb of Los Angeles. However, at the behest of Cowboys owner Jerry Jones, the league would surprisingly snub the L.A. committee’s recommendation and instead approve the relocation of the Rams organization to Inglewood, CA where the mega SoFi stadium would be built.
The owners eventually approved the relocation with the two-thirds vote (24 teams) that was required under Article 4.3 of the NFL Constitution. However, the owners’ approval was conditioned upon Kroenke agreeing to indemnify the league and other owners from any potential legal fees they may incur from the relocation. St. Louis, shortly thereafter, filed a lawsuit against the NFL and all 32 clubs and owners.
Both the indemnification agreement and the St. Louis lawsuit are the main topics of this article and will be further explored below.
The St. Louis Regional Convention and Sports Complex Authority, The City of St. Louis, and St. Louis County (Plaintiffs or St. Louis) filed suit against the Rams, the NFL, all 32 teams, and all 32 owners (collectively, the Defendants). The lawsuit was commenced when St. Louis filed a 52-page complaint against the Defendants in 2017.
Per reports, an email from an official affiliated with the competing Carson proposal was discovered that outlined to St. Louis authorities all of the ways in which the Rams seemed to be in violation of the league’s relocation policy. This email provided the blueprint for St. Louis’ lawsuit.
Essentially, St. Louis’ main arguments are that the NFL broke its own relocation guidelines, interfered with the business expectations of St. Louis, made intentional misrepresentations to St. Louis, and cost the city millions in revenue. Specific claims plead in the complaint include breach of contract, fraudulent misrepresentation, unjust enrichment, and tortious interference with business expectancy, all of which caused substantial financial losses for St. Louis.
As the NFL’s relocation policy is at the forefront of this lawsuit, it is important to understand the policy and what it requires of the NFL and owners when teams are proposing a relocation.
The relocation policy was codified in the NFL Constitution in response to a 1984 lawsuit involving the Raiders and their attempt to relocate their franchise. A federal circuit court ruled that the NFL relocation policy was arbitrary and capricious and violated anti-trust statutes. Accordingly, the NFL set forth clear and objective criteria to be analyzed when considering a franchise relocation. (Los Angeles Memorial Coliseum Commission v. National Football League, et. al, 726 F.2d 1381, 1396-97 (9th Cir. 1984)). There are many factors and criteria to be considered in determining whether a franchise relocation is warranted. Further, any franchise relocation requires a two-thirds vote (24 teams) to be ratified.
The relevant factor in the relocation criteria at issue in the St. Louis lawsuit was the requirement that the franchise looking to relocate must support its proposal with a ‘statement of reasons.’ These reasons must articulate several key factors as it relates to the location and stadium authority from which the franchise is trying to leave. Some of these factors include the current authority’s willingness to renovate or replace the stadium, the amount of public funding that supports the current stadium, fan loyalty at the current location, and the degree to which there have been good faith negotiations between the franchise and current stadium authority, among others.
St. Louis claims that both the City and County incurred $180 million in bond expenses in supporting the stadium and had to increase and collect hotel tax in order to cover the costs. Further, St. Louis claims that the Rams decided to relocate confidentially and in the years leading up to the move made misleading public statements to the contrary, statements that St. Louis relied on. Included in these public misrepresentations is both the Rams’ ownership and the NFL Commissioner dismissing the notion of relocation once the Inglewood property was acquired.
Thus, the complaint alleges that all 32 owners and teams violated the NFL relocation policy by way of approving the relocation when the Rams did not meet the ‘statement of reasons’ requirement in the policy.
St. Louis also claims that the Rams and Kroenke were enriched at their expense. St. Louis cites reports that the value of the franchise nearly doubled to $3 billion based simply off the relocation to LA. As of this writing, the Rams are now valued at $4.8 billion by Forbes.
At a minimum, St. Louis is claiming a loss of $100 million in revenue based on the Rams’ move to Los Angeles. Further, they are claiming that the $550 million relocation fee that the Rams paid to the other NFL teams (as part of the relocation policy) should be disgorged and made payable to St. Louis. In total, St. Louis is said to be seeking at least $1 billion.
The NFL’s position is that the relocation fee and any damages related to the increase in franchise value after the move are completely unsupportable. However, even for a massive organization like the NFL, and 32 billionaire owners, this is a significant amount of damages sought by St. Louis.
A contentious issue that has recently come to the forefront in the lawsuit is the issue of indemnification. As a condition to the approval of the relocation, Kroenke agreed to indemnify the league and the other owners for legal costs incurred in an eventual lawsuit. However, Kroenke’s position on the indemnification agreement has taken an unexpected turn.
The Crux of the Indemnification Issue
NFL owners met at the owners meeting on October 26th, 2021. This was the first in-person owners meeting in the last 22 months. At one point during the meetings, NFL general counsel Jeff Pash asked team executives (those who were in attendance but not owners or representatives of the owners) to leave the room. He then proceeded to update the owners on the lawsuit stemming from the Rams’ relocation from St. Louis.
Pash informed the owners that Kroenke’s attorneys are now claiming that the indemnification agreement that he, and other owners vying for relocation to Los Angeles, signed in January 2016 is limited in scope. The understanding from the league and the other owners’ point of view is that the indemnification agreement was not limited in scope and would cover all legal fees associated with the relocation.
As part of the lawsuit by St. Louis, some teams have incurred legal fees in the eight-figures range and have had to comb through and turn over years’ worth of records and internal communications. Kroenke reportedly believes that he has done his part and the costs of the lawsuit shouldn’t solely lay with him (he has paid legal fees up to this point). Since Kroenke claims to have gone through the proper league channels and processes, he is taking the position that, accordingly, he should not have to cover the entirety of the legal expenses.
As previously mentioned, the LA committee recommended a rival Raiders-Chargers stadium project in Carson, California, by a 5-1 vote over Kroenke’s project in Inglewood. Mark Davis, owner of the Raiders, reportedly brought this up once the owners learned of Kroenke’s new position on the indemnification agreement. The owner of the Giants, John Mara, reportedly reminded other owners that the indemnification agreement was pivotal to the approval of the Rams’ move.
This past summer, St. Louis Circuit Judge Christopher McGraugh ordered Kroenke and five other owners to provide financial records to help a jury determine potential damages. Earlier in October (prior to the owners meeting), Judge McGraugh fined Clark Hunt of the Kansas City Chiefs, John Mara of the New York Giants, Robert Kraft of the New England Patriots and the Cowboys’ Jerry Jones for failing to provide full records. Kroenke has been footing almost all the legal bills. The owners were fined nominal amounts of money, around $5,000. However, a contempt hearing is now set for December 3rd due to the owners’ continued refusal to turn over their books and financial records.
The news of Kroenke’s about-face on his indemnification agreement is massive. This is a report which the league and owners likely didn’t want circulating. This is affirmed by the fact that representatives from both the NFL and the Rams declined comment on the issue, according to reports. Any reports of financial discrepancies amongst billionaires all belonging to the exclusive club that is NFL ownership is sure to be intriguing. Even more intriguing is the owners’ battles to keep their books and financial records from the public eye. Nominal penalties and civil contempt may not be enough to persuade some owners to open up their books.
Trial is Quickly Approaching
The NFL has lost motion after motion in this case thus far. Notably, the NFL lost its motion for summary judgment recently. In denying the NFL’s motion, Judge McGraugh noted that NFL Commissioner Roger Goodell had gone on record in the past saying that the NFL relocation policy and its processes for relocation were mandatory. Further, the Judge also noted that St. Louis likely had a probable expectation of a future business relationship with the NFL that led to an expectation of financial benefit. Neither of these statements looks positive for the NFL and the owners.
On November 2nd, the Missouri Court of Appeals ruled that the suit will not be removed to a different venue outside of St. Louis. The original complaint states the grounds for personal jurisdiction over the Defendants is based on the fact that defendants knowingly caused injury to the Missouri-based plaintiff. Further, the NFL and its teams are subject to Missouri jurisdiction, based on St. Louis’ argument, because the Chiefs and Rams played home games in the state and the NFL marketed and broadcast its product in the state of Missouri; the revenue generated from these Missouri-based home games and television rights were shared by all 32 teams. Thus, the NFL’s latest attempt to remove the case from Missouri courts in hope of a more favorable venue have been defeated.
As far as settlement talks are concerned, there have been reports that St. Louis was offered a settlement agreement. There have been some reports that peg the figure at less than $1 billion, however, other reports indicate that NFL general counsel Pash told owners that the settlement offer was ‘more than the net worth of some of those in the room.’
The trial is set for January 10th, 2022. This is sure to be an ongoing story with a lot of NFL information, data, and records to be revealed and argued about at trial. Even more intriguing, the lawsuit will likely drag on into the NFL’s playoff season. Whether or not the case actually goes to trial, the rest of the season will certainly be an interesting one both on and off the field.
Former college lacrosse player, professional business development experience, current third-year law student, looking to create content that intersects both the legal and business aspects of the sports world.