The Unexpected Cost of Removing an NFL Team from Its City
NFL, Rams and Owners Set to Pay St. Louis $790MM
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Executive Brief: The NFL and the L.A. Rams have agreed to a $790 million settlement with St. Louis, et al., after four years of litigation centred around the Rams’ relocation to L.A. from St. Louis. Today’s newsletter discusses the main issues that caused the litigation, tells the story of how it happened, discusses who’s responsible for payment, and provides some insights on interesting take-aways from the case. Enjoy!
The NFL and the L.A. Rams Settle with St. Louis Over Relocation
The National Football League (NFL) and the Los Angeles Rams (Rams) have agreed to a $790 million settlement in a four-year lawsuit over the NFL franchise’s relocation from St. Louis to L.A. in 2016. The agreement reaches an expensive conclusion to the lawsuit filed in 2017 against the NFL and all 32 teams by St. Louis, St. Louis County and the Regional Convention and Sports Complex Authority (St. Louis, et al.). The 2017 lawsuit alleged the NFL had violated its own relocation rules when the Rams left St. Louis for Los Angeles in 2016. The same rules were established decades ago to avoid antitrust liability.
A factor in the complaint leveraged by the complainant (St. Louis, et al.) was that before the 2016 relocation, St. Louis officials spent $17 million on designs and plans for a new stadium. Still, the league disregarded those efforts without explanation, and 30 of the 32 other team owners voted to allow the Rams to move to Los Angeles. This was important because the complainant also alleged that Rams executives, NFL officials and the other teams’ owners had encouraged the group to build a new stadium to keep the franchise in St. Louis. All the while, the move to L.A. continued to manifest.
The issue initially arose in 2013 when Rams owner Stan Kroenke bought the Hollywood Park Racetrack, which sat on 260 acres of land in Inglewood, California. People around the NFL and St. Louis County quickly started to notice the potential writing on the wall. So, the then-governor of Missouri, Jay Nixon, formed a task force and developed a plan for a new St. Louis-based outdoor stadium near the Mississippi River. The project included a naming rights partner and up to $400 million in public funding to cover construction costs—the final proposal expected the downtown stadium to cost $1.1 billion.
Around the same time, an NFL committee recommended that the league allow the then-San Diego Chargers and Oakland Raiders, who also sought venues, to build a stadium together in Carson, California. Despite that recommendation, in January 2016, the league’s team owners voted 30-2 to let the Rams move to Los Angeles. As a consolation, the Chargers were given the right to move into the Rams’ new home if they could not negotiate a new deal for a stadium in San Diego.
As a part of his responsibility for the relocation, Stan Kroenke initially paid a $550 million relocation fee to the NFL for the right to move to Los Angeles. Kroenke then spent nearly $5 billion to build SoFi Stadium in Inglewood, California, which the Rams now share with the Chargers. Sofi Stadium is also the site of the 2022 Super Bowl. Fortunately for Kroenke, his Rams are a Super Bowl contender, and he stands to generate significant revenue from them and Sofi Stadium for the next several years.
The Lawsuit
The crux of the case was not centred around Kroenke’s actions to move the team through the clause allowing him to do so in the St. Louis stadium lease, nor due to allegedly misleading comments by Rams executives. Instead, it was primarily based on the NFL’s insistency that a strict adherence to the league’s relocation guidelines, established in 1984 in response to court recommendations to the NFL to avoid antitrust liability, would give St. Louis, et al. a fair chance to keep its team.
Even though there are seldom ever successful lawsuits like the one filed by St. Louis, et al. against a relocating professional sports team, a couple of interesting circumstances arose from this lawsuit and settlement beyond St. Louis’ success, including:
The lawyers for St. Louis, et al. acted on a contingency basis, and their percentage was 35% of the total awarded amount. Meaning they did not receive hourly rates for their work; instead, they agreed with St. Louis, et al. in their original retainer that they would instead receive a percentage on the final amount awarded (i.e., on a contingency basis). That means Dowd Bennett LLP and Blitz Bardgett & Deutsch will receive $276.5 million of the payout.
The settlement does not include an expansion football team for St. Louis as some people expected.
It is still unclear how much of the $790 million will be paid solely by Kroenke versus the league and the other owners. This was a significant factor in Kroenke pushing for the settlement. Though, it is expected he will cover most of the settlement. Last week, Kroenke threatened to settle separately and leave the NFL on its own in the upcoming January 2022 trial, as per Sports Business Journal. Kroenke informed league officials and the other owners that he planned to settle the case for between $500 million and $750 million. His reasoning was interesting. He informed his co-defendants that he couldn’t risk a trial that would lead to a mega-verdict against all teams and the league as that award would likely have to be repaid by the Rams, or indirectly, him. He also couldn’t risk going to trial and the costs not being shared. Since 2017, Kroenke has covered most of the legal fees despite it including all 32 teams.
Ending Thoughts
The victory for St. Louis is bittersweet. Despite the significant financial award, this is the second time that the city has lost an NFL franchise. In 1988, St. Louis lost the Cardinals when they moved to Arizona. It took seven years for the city to obtain a new team when the Rams departed Anaheim, California for St. Louis because they constructed a domed stadium. The psychological and economic effects on a city of losing a professional sports team can be significant. However, this settlement provides hundreds of millions of dollars to the community of St. Louis, which will hopefully be used to develop those communities where they need it most.
With the January trial only a few months away, I am sure that the NFL’s lawyers were confident in their legal position that outside parties like St. Louis do not have the standing to bring a lawsuit like the present. However, in my opinion, an entity like the NFL always wants to avoid a trial. This sentiment is particularly so because the NFL was unable to move this hearing from the St. Louis courthouse despite numerous attempts. They likely believed the law was on their side, or they would win at appeal, but not before all their actions were dragged through the mud in court.
That said, the one thing the NFL loses here is the ability to set a precedent. They likely wanted to establish a legal principle that outside parties do not say how the NFL runs its business. They won’t get to do so here. However, with the Super Bowl slated for February 13th, 2022, at Sofi Stadium in L.A., and trial set to begin in January, the NFL, its owners, and Kroenke wanted this litigation over with so that it does not cloud their marquee end-of-year event at the stadium built because of this issue. Who knows what the potential financial ramifications could be?
It is unconfirmed who will be responsible for what portion of the settlement payment. However, payment is expected within 30 days of the settlement. It is also unconfirmed what St. Louis, et al. will do with the funds. City representatives will determine the next steps.
If you would like to see a copy of the Settlement Agreement and Mutual Release, see here:
Thank you for reading. Have a great day, and we’ll talk on Monday.
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Question of the Day
Do you think that the settlement is fair? Why or why not?
Games of the Weekend
NBA
Sat, November 27th: Phoenix Suns vs. Brooklyn Nets at 7:30 pm (E.T.) – Watch on TSN4 or NBA League Pass
NHL
Fri, November 26th: Winnipeg Jets vs. Minnesota Wild at 3:30 pm (E.T.) – Watch on Bally Sports North, Fox Sports North, TSN3, NHL Centre ICE, SN NOW Premium, TSN Direct
NFL
Sun, November 27th: L.A. Rams vs. Green Bay Packers at 4:25 pm (E.T.) – Watch on DAZN, Fox Sports, FuboTV.