Fight of the Year at MSG

Madison Square Garden has a history of big fights. Some notable fight cards include Muhammad Ali v. Joe Fraizer, Connor McGregor v. Eddie Alvarez, and even Hulk Hogan v. The Iron Shiek. The next big opponent seems to be the state and local governments of New York.

MSG is facing New York bureaucracy on all fronts. The iconic arena is up for permitting renewal with the New York City Planning Commission this year. It’s also facing a threat to its liquor license from the New York State Liquor Authority and a push from the legislature to repeal its property tax exemption.

The liquor license challenge seems to be an issue of MSG’s own making. Last year, MSG and its executives chose to punish lawyers who represented clients in matters against MSG by banning them from all its facilities. The move was met with resistance and continues to be challenged.[1] To help enforce the ban, MSG invested in facial recognition software to identify the many banned lawyers and keep them from attending events. The investment prompted concerns from the New York Attorney General’s office, which wrote a letter to MSG asking for an explanation of the policy.[2] MSG’s response was not made public. However, company executive James Dolan has defended the decision and continues to stand by it.[3]

MSG executive James Dolan watches during the second quarter against the Minnesota Timberwolves at Madison Square Garden. Brad Penner-USA TODAY Sports

New York’s inquiry into Dolan’s attorney ban hasn’t ended with the Attorney General. The Liquor Authority has moved to weigh in as well. The Liquor Authority received tips that MSG was not in compliance with its liquor license and launched a subsequent investigation. The investigation resulted in charges being levied against MSG for banning members of the public for reasons not related to its duties as a liquor provider.[4] MSG has responded by filing an Article 78 challenge to the Liquor Authority’s decision, arguing that the Liquor Authority cannot revoke a license based on discrimination, and even if it can, MSG has not discriminated by banning attorneys from its venues.[5] In a more pointed statement, Dolan explained he was standing up to the “gangster-like governmental organization” and that MSG is “taking a stand on behalf of our fans and the many small businesses who have long been subject to the SLA’s corruption.”[6]

The timing of the ban couldn’t be worse. With hockey and basketball season in full swing, losing the ability to sell liquor would be an embarrassment to MSG. Nonetheless, management remains committed to keeping opposing attorneys out despite being challenged by the state.

MSG is also engaged in an approval process with the city. New York City zoning law requires that arenas with a capacity of over 2,500 persons have a permit to operate.[7] MSG has renewed this permit multiple times. It was most recently granted a 10-year permit and cautioned to find a new venue in that time. Now, 10 years later, MSG is seeking an indefinite permit for the same location. [8] At the same time, and in the same location, is the $7 billion redevelopment of Penn Station. The project is one of the largest redevelopment real estate projects in the United States.[9] As Penn Station looks to potentially rise above ground, MSG is keeping it down.

The company suggested it’s open to moving the arena across the street. However, MSG is clear it’s not willing to pay to be forced from its own property.[10] Moving the Garden is projected to cost the State over $8 billion, of which $5 billion is the cost to buy new land for the arena.[11]

Rendering of a redeveloped Penn Station – From the MTA

MSG is also fighting for valuable legislation. Forty years ago, New York passed a special law exempting certain stadiums from paying property tax. The law applies to stadiums that have both professional hockey and basketball teams in cities with over one million people.[12] The law effectively exempts only MSG from paying property taxes on the Madison Square Garden property. Now, legislatures are looking to repeal the law and use the tax money for updates to the MTA.[13] The legislature may have been pushed in this direction by the attorney ban.[14]

MSG has found itself pitted against New York on many sides. The arguments MSG is using to defend itself seem to overlap each other. MSG argued it is unfair and targeted that the Liquor Authority is investigating them. In response, MSG hired its own investigator to follow the Liquor Authority.[15] MSG has argued it is unfair it is the only sports arena that has to go through the special permit process. However, it is the only venue that owns its land that has a property tax exemption. MSG argues that “millions of fans and thousands of employees love and rely on our location and proximity to public transportation”, but it is unwilling to pay taxes to improve those services.[16]

The situation is difficult to reconcile. MSG continues to crusade against New York bureaucracy on one side, and benefit from it on the other. It doesn’t want to be singled out for special permits, but it does for tax exemptions. It doesn’t want to be targeted arbitrarily by the state, but it wants to specifically ban attorneys it doesn’t like from its events.

The fight at MSG will continue. Unlike other events at MSG, attorneys won’t be banned from watching this one unfold.

[1] https://ublawsportsforum.com/2022/11/04/a-lawyer-walks-into-a-sports-arena/

[2] https://ag.ny.gov/sites/default/files/nys_oag_letter_to_madison_square_garden_entertainment_corp.pdf

[3] https://sports.yahoo.com/knicks-owner-james-dolan-defends-msgs-use-of-facial-recognition-after-letter-from-ny-attorney-general-220509913.html

[4] See State of New York Division of Alcoholic Beverage Control, Notice of Pleading, https://iapps.courts.state.ny.us/nyscef/ViewDocument?docIndex=zpEjdRRSVh8TVZQuW7lvMA==

[5] MSG Article 78 Petition https://iapps.courts.state.ny.us/nyscef/ViewDocument?docIndex=EhVmncfLwOZxpI2ehPAWCQ==

[6] https://plus.lexis.com/newsstand#/law360/article/1585096

[7] https://zr.planning.nyc.gov/article-vii/chapter-4/74-41

[8] https://zr.planning.nyc.gov/article-vii/chapter-4/74-41

[9] https://www.nytimes.com/2022/07/21/nyregion/penn-station-redevelopment.html?

[10] https://nypost.com/2023/02/25/madison-square-garden-willing-to-relocate-across-street-official/

[11] https://www.sportsbusinessjournal.com/Daily/Issues/2021/11/22/Facilities/MSG.aspx