Category Archives: Arenas

Why The Raiders May Hold The Keys To The A’s Leaving Oakland

Earlier today, the NFL sent out a press release notifying members of the media that the October 6 San Diego Chargers versus Oakland Raiders game would be postponed by seven hours and begin at 11:35 p.m. ET.  Other than the obvious–that this move may make this week five match-up the latest game in NFL history–other implications possibly arise from this move by the NFL.

As the press release continued, the reason for the game delay was made known.  The NFL wrote, “The move was made in response to today’s announcement by Major League Baseball of its ALDS schedule which has the Oakland A’s hosting a game on Saturday, October 5 at 6:07 PM (PT).  The Raiders share the Coliseum with the A’s and the Coliseum requires time to convert back into a football stadium in order to host the game.”

What the NFL didn’t note in its release, is that the Raiders and the A’s are the only NFL and MLB teams respectively that share the same coliseum on a full-time basis.  What the release also didn’t note is the looming issue facing Oakland:  That one or both of its franchises may be hitting the road for new homes.

The Raiders’ current lease agreement is set to expire after the 2013 season.  To date, the Raiders have not announced where they will play beginning in 2014.  However, reports indicate that the team has expressed interest in building a new stadium on the current stadium’s site.  While this proposal is attractive to the city of Oakland, as it keeps the Raiders in town, it is problematic, as construction of a new coliseum could push the A’s out.

Like the Raiders, the A’s are in the last year of their lease with the coliseum.  It is no secret that the A’s wish to leave Oakland and relocate to San Jose.  However, territorial rights that the team previously ceded to the San Francisco Giants have prevented MLB from approving this move.  This, in turn, has resulted in litigation against MLB from parties including the city of San Jose.  Needless to say, from a legal and team perspective alike, the A’s way to San Jose is not clearly paved.

It is perhaps of no surprise that the Raiders desire to build a new stadium.  Originally opened in 1966 and most recently renovated over a decade ago in 1996, the Raiders and A’s have both recently raised concerns over the current state of the Oakland Coliseum.  The concerns were punctuated this season by sewage overflows the stadium’s visitor dugout and coaches’ bathroom.  Perhaps, though, the current state of the stadium was best described by current MLB commissioner, Bud Selig, when he referred to it as “a pit.”

The surprise, though, arguably lies in the Raiders’ willingness to rebuild on the current coliseum’s location.  In making the desire to move to San Jose known, the A’s have continuously lamented over the fact that the Oakland Coliseum is not surrounded by a vibrant downtown community.  The argument, from the A’s perspective, is that if the team played in a stadium surrounded by a downtown, ticket sales would increase, as fans would be more easily able to pop into the ballpark.

That argument aside, with the Giants’ territorial rights holding up a move to San Jose, reports indicate that the A’s have begun negotiating a new lease agreement with the Oakland Coliseum.  While some may see this move as the A’s waiving the white flag and succumbing to life in Oakland, the Raiders may slowly riding in as the A’s knight in shining armor.  The shield that the Raiders hold in this case, is that team’s desire to build a new facility on the current coliseum site.

The A’s have made it clear that they have no desire to rebuild or build a new stadium on the current coliseum site.  Thus, if the Raiders’ new stadium plan is approved the possibility exists that the A’s will be left without a place to play when construction is ongoing.  Thus, if this situation arises, might MLB be more inclined to allow the team to move to San Jose?

Who knew that the postponement of an NFL game could be the first move in a potential chain of events that may pave the way for an A’s move to San Jose?

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Filed under Arenas, Civil Lawsuits, Contracts, MLB, NFL

The Phoenix Coyotes Ownership Saga Almost Reaches An End

By:  Christian Deme, Ruling Sports intern (Twitter:  @TheSportingBiz)

The Phoenix Coyotes ownership saga that has dragged on for four years has finally seen a glimmer of light at the end of the tunnel.

The National Hockey League has owned the Coyotes since 2009 after former owner Jerry Moyes put the team into bankruptcy. Since 2009, various bids by potential buyers have fallen through, as recently as last week, leaving the team in the hands of the NHL.

On May 25, the NHL approved the sale of the Phoenix Coyotes to the Renaissance Sports & Entertainment Group, headed by Canadian businessmen George Gosbee and Anthony LeBlanc and American businessmen Avik Dey and Daryl Jones.

The complexity of the sale of the Coyotes lies in the necessary lease agreement with the City of Glendale, which owns Arena, the current home of the Coyotes.  While the Coyotes have enjoyed moderate success on the ice, the financial state of the team is in shambles.

Sports arenas can be a tremendous boost to a local economy in a number of ways. Namely, arenas hosting professional sports teams can attract fans that attend the games and generate revenue. This is the main reason the Coyotes are having trouble completing a sale. The City of Glendale fronts the hefty checks to the NHL to cover the Coyotes’ operating losses and to keep the team in Arena, while having to consistently battle one of the lowest attendance rates in the league.

Lease agreements in professional sports serve as a documentation of contractual rights between a sports franchise to use a facility in exchange for that franchise’s pledge to play their home games at the same facility. Professional sports lease agreements also serve as a contract to delineate the rights and responsibilities of the parties concerning the operation and upkeep of the facility, as well as their financial arrangements. In certain cases, a lease agreement will require a team to pay the facility owner a flat rate rental fee, while in others the fee will vary based on a percentage of revenue generated by the sports franchise.

When stadium financing agreements involve public funds, government authorities typically require teams to enter into a non-relocation agreement to prevent the franchise from moving to a different city. This is a way the owners of the arena protect the interests of the taxpayers to prevent injury to the welfare, recreation, prestige, prosperity, and trade and commerce of the community.[1] As Arena is owned by the City of Glendale, public funds are in the mix for a lease agreement with the potential new owners of the Coyotes and a non-relocation agreement could play an interesting role in determining the future of a team not able to draw fans.

Renaissance must reach an agreement with the City of Glendale to keep the Coyotes in the desert. Glendale Mayor Jerry Weiers is in a difficult predicament due to the amount of funds the city is pumping into efforts to keep the Coyotes in Glendale, while dealing with little fan interest in the Coyotes. Glendale could be on the hook for up to $15 million per year over a long-term lease for arena management fees, while also paying off the construction debts of their arena. Glendale has already felt the weight of the struggling Coyotes coupled with the downturn of the economy and has had to lay off public workers and has even considered using its city hall and police department as collateral for a loan. Mayor Weiers has gone on record stating that he has approximately $6 million budgeted for arena management fees, because he refuses to cut into the general fund of the city any more to support a failing hockey team.

It will be interesting to see what happens with Renaissance Sports and Entertainment Group’s bid on the Coyotes. The two sides are quite far apart from agreement on arena management fees, but a positive aspect about Renaissance’s bid is that they are a diverse group of investors coming from both Canada and the United States. This may help the financial viability of the franchise in the future. Regardless of what happens, NHL attendance figures don’t lie and the Coyotes have been near the bottom of the league, if not the very bottom, in attendance every operational year for the past decade.

It will take a savvy marketing miracle to turn the Phoenix Coyotes around and make them profitable, otherwise we may soon see the Coyotes’ survival skills tested in a cooler climate.

[1] “Successful Partnering Between Inside and Outside Counsel” by Lonn A. Trost, Irwin A. Kishner, and Daniel A. Etna

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No Slam Dunk: Memphis Seeks Legal Action Against the NBA for the Lockout

The first two weeks of the NBA season have been canceled, as both the NBA and NBPA continue to work toward reaching a settlement to end the lockout imposed by team owners after the parties’ most recent collective bargaining agreement expired.

As both sides bunker down for long hours with federal mediator George Cohen, third-parties are contemplating their own reactions to the fiscal effects of the NBA lockout.

This week, the Memphis City Council approved a resolution to allow the Memphis City Attorney to investigate what legal options the city has with respect to recouping the revenue it is expected to lose as a result of a shortened or potentially non-existent NBA season.

Memphis is home to the NBA’s Memphis Grizzlies.  The Grizzlies play their home games at the FedEx Forum, an arena which opened in 2004 after municipal bonds in the amount of $250,000,000.00 were used to pay for its construction.  A municipal bond is a bond secured by a public entity–in this instance, the Memphis and Shelby County Sports Authority, Inc.  If certain revenues are not high enough to cover the bond payments, the City of Memphis and its taxpayers will be responsible to foot the difference.

Although other events are held at the FedEx Forum, including the University of Memphis’ home basketball games, generate revenue used to make the bond payments, a large chunk of the money used to make these payments is generated through the Grizzlies’ use of the facility.  In particular, per the parties’ Arena Use and Operating Agreement, the Grizzlies pay the City of Memphis a $1.15 “seat rental fee” for every ticket sold to home games.  Additionally, sales tax from items sold at the FedEx Forum are applied to the bond payments.

Thus, given its need to generate revenue to make its bond payment, the City of Memphis arguably has reason to be proactive in seeking out legal solutions to the cancellation of at least a portion of the Grizzlies’ season.  However, it is unclear if the city will find much legal success in recouping revenue lost as a result of the shortened season.

As noted above, the city and Hoops, LP–the limited partnership under which the Grizzlies are governed–entered into an Arena Use and Operating Agreement.  This agreement granted the Grizzlies the right to use the FedEx Forum in exchange for certain things, including the $1.15 “seat rental fee.”

Given the existence of this agreement, the City of Memphis may wish to assert a cause of action for breach of contract against Hoops, LP.  However, a review of the agreement does not demonstrate any provisions which are clearly breached as a result of the reduction of the NBA season by at least two weeks and subsequent reduced amount of seat rental fees the city will receive.  While Section 6 of the agreement requires Hoops, LP to pay the $1.15 “seat rental fee,” neither this section nor any other section in the agreement provides that Hoops, LP must collect a certain dollar amount of such fees.

Additionally, Section 13 of the agreement outlines acts constituting events of default.  While it is an event of default if Hoops, LP fails to pay the “seat rental fee” within the specified time period, as noted above, there is not a provision in the contract requiring that Hoops, LP obtain a certain dollar amount of such fees.

Should the City of Memphis nonetheless be able to assert that Hoops, LP is liable to it under the agreement, another provision in the agreement likely protects Hoops, LP contractually.

The agreement contains a force majeure clause.  A force majeure clause protects a party from liability when extraordinary events occur.  In relevant part, the agreement defines “force majeure” as,

“. . . any delay or failure by any Party to this Operating Agreement in the performance of any non-monetary obligations due to causes beyond its control (other than lack of funds), including but not limited to. . . suspension of NBA league play for all NBA franchises.”

The lockout and subsequent cancellation of the first two weeks of the NBA season likely constitute the “suspension of NBA league play for all NBA franchises.”  However, it is unclear whether the failure to obtain revenue by selling tickets and merchandise constitute a “non-monetary obligation,” as this term is not defined in the agreement.  Arguably, a non-monetary obligation is one which does not require the payment of money by Hoops, LP to the City of Memphis.  Because the agreement does not require Hoops, LP to earn a certain dollar amount of revenue through ticket and merchandize sales at the FedEx Forum, the present factual scenario likely constitutes a “non-monetary obligation.”  Therefore, Hoops, LP can assert that it is free from any liability under the agreement’s force majeure clause, as a result of the lockout.

However, because “non-monetary obligation” is not defined in the agreement, the City of Memphis can argue that failure to obtain revenue through ticket and merchandise sales does not constitute a “non-monetary obligation,” and as such Hoops, LP is not protected by the force majeure clause and thus can be found liable under the agreement.

There are many legal theories the Memphis City Attorney will have to sort through as a result of the resolution brought by the Memphis City Council.  However, one thing is certain:  obtaining legal relief will take longer than ending the NBA lockout.

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