The city of St. Louis and St. Louis County recently filed a lawsuit against the National Football League and all of its teams, claiming the league violated its own bylaws, and breached its own contractual commitments, when it approved the relocation of the Rams to Los Angeles. Allegations in the complaint include breach of contract, unjust enrichment, fraudulent misrepresentation and business interference.
St. Louis claims that in approving the move, the NFL enriched itself at the expense of the community it left and defrauded the city of more than $100 million in lost profits after renovations to the Rams facilities.
The plaintiffs request that the court impose punitive damages as well as the disgorgement of the NFL’s profits that have been generated by the relocation. Forbes estimates that the value of the Rams has doubled to $3 billion in light of the franchise’s move to Los Angeles.
This is not the first NFL franchise relocation to trigger litigation. St. Louis claims the Rams failed to meet the league’s relocation guidelines that were originally adopted in 1984 during litigation surrounding the Raiders’ move from Oakland to Los Angeles. See Los Angeles Memorial Coliseum Commission v. National Football League, 726 F.2d 1381 (9th Cir. 1984).
During the 1984 litigation, the 9th U.S. Circuit Court of Appeals ruled the NFL violated antitrust statutes, criticizing the league for failing to employ measurable criteria when determining whether a team’s petition to relocate is necessary.
The 9th Circuit suggested that the NFL become more transparent with its relocation process and utilize objective factors when presented with a relocation petition.
In response, the NFL implemented the Policy and Procedure for Proposed Franchise Relocations, pursuant to Article 8.5 of the NFL Constitution and Bylaws. The relocation policy provides that, prior to any relocation, franchises 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.
As part of the policy, a team wishing to relocate must first submit a proposal detailing certain factors within the team’s current market including the extent to which the team has served the fans, the willingness of the stadium authority to replace a deficient stadium and the degree to which the club has engaged in good faith negotiations with the community.
St. Louis claims that they paid $30 million for renovations to the Rams’ facilities and made substantial investments in the Edward Jones Dome with expenses and interest coming from public funds. St. Louis asserts that it made these expenditures in light of the NFL’s standing relocation policy.
The complaint alleges that Rams’ officials confidentially and pre-emptively decided to move the team and then made public statements to the contrary with knowledge that the statements were false and that the plaintiffs would rely on such statements.
St. Louis claims that the NFL approved the relocation to Inglewood, Calif., without first attempting to work in good faith, or at all, with the city and county.
The plaintiffs contend that the NFL did not satisfy obligations articulated in the relocation policy by failing to require the Rams to advance the interests of the league in its home territory, allowing the team to move when their viability in their home market was not threatened, failing to require the Rams to work in good faith with their home market and failing to provide notice in a timely fashion such that the city and county could adequately respond to the proposed transfer.
While the Rams have not yet commented on the lawsuit, NFL spokesman Brian McCarthy responded to the allegations claiming there was “no legitimate basis” for the lawsuit.
The NFL will likely attempt to rebut many of the allegations expressed by the plaintiffs as well as seek to remove the lawsuit to the federal district court for the Eastern District of Missouri, where the judge and jurors are more likely to run more conservative and less likely to be clouded by Rams fandom.
The NFL tried a similar tactic in 1984 and moved for a change of venue arguing it was impossible to secure an impartial jury in the Central District of California, but the league’s motion in that case was denied.
Several of the statements made by Rams officials that are referenced in the complaint may have been disingenuous and misleading, but the statements may not rise to the level of unlawful conduct.
It may be difficult for the plaintiffs to prove that all of the NFL and Rams’ officials knew their statements were false and that they intended for St. Louis to rely on them and spend considerable time and money financing and working on a new stadium complex. See Droz v. Trump, 965 S.W.2d 436 (Mo. Ct. App. 1998) (holding ignorance of truth is not sufficient to prove fraudulent misrepresentation, it is necessary to show that a defendant had knowledge of its falsity).
For instance, in 2011, Kevin Demoff, Rams chief operating officer and executive vice president of football operations, said, “[o]ur entire focus is on building a winner in and for St. Louis. The lease issue isn’t what we are focused on.”
While St. Louis argues this was a fraudulent misrepresentation, the statement took place years before St. Louis chose to move to Los Angeles. It would be incredibly difficult to prove that, at that time, Demoff knew the team might move and still intended for St. Louis to rely on those statements for the next few years.
Expect the NFL to also challenge the alleged damages, assuming the league cannot obtain an outright dismissal. The plaintiffs state they lost more than $100 million due to the defendants’ actions including ticket tax collections, hotel and property tax revenue, sales tax revenue and lost jobs.
The complaint points to the Missouri Department of Economic Development estimates to back up these numbers, however, the NFL will likely object to this methodology and propose a more reliable alternative or argue the league is not liable for any damages at all.
The NFL will likely seek dismissal of the claims, but if the motion to dismiss is denied, expect the league to try to settle the case before the pretrial discovery begins to avoid lengthy litigation and public disclosure of conversations surrounding the relocation.
In any event, other cities that recently lost teams, like San Diego and Oakland (again), will likely keep a very close eye on how St. Louis’ claim plays out before pursuing a suit of their own. Also, to be taken into consideration is whether the NFL failed to follow its own policies in those instances as well.