In April 2017, the City of St. Louis, St. Louis County and St. Louis Regional Convention and Sports Complex Authority (the “plaintiffs”) filed a lawsuit against the NFL, all of its teams, Stan Kroenke (the Rams’ team owner) and other individual owners for breach of contract and other claims in connection with the Rams’ relocation from St. Louis to Los Angeles. The practice of relocating franchises is common in North American professional sports, and many believed the plaintiffs did not have a leg to stand on in this lawsuit. The most recent 16-page decision from Missouri Circuit Court Judge McGraugh says otherwise. Judge McGraugh denied the NFL’s motion for summary judgment in its entirety and set trial for January 2022.
While we await to see how this lawsuit will play out, including whether it will redefine relocation procedures in the NFL, this article provides a brief summary of this multi-billion-dollar legal battle and three primary takeaways for individuals and businesses.
How did we get here?
The Rams have a long history of relocations. The franchise was originally established in Cleveland, Ohio in 1936. Ten years later, the Rams moved to Los Angeles, before leaving again for St. Louis in 1995. There, the Rams picked “the Dome” as their home stadium and entered into a 30-year lease agreement, provided that the City of St. Louis made significant improvements to the quality of the stadium. Otherwise, the Rams could exercise the option to convert the lease into a year-to-year term. The Rams did exercise that option in 2015 after an arbitration panel found that the Dome had fallen below the necessary threshold. While the City of St. Louis was financing a new stadium project to keep the Rams in Missouri, the Rams announced their new relocation plan from St. Louis to Los Angeles.
The lawsuit
In a 52-page complaint, the plaintiffs alleged that they were third-party beneficiaries of the NFL Relocation Policy, an enforceable contract designed to protect home communities during relocations. They further alleged that the Rams, NFL and other owners breached that contract when they did not properly support the team in St. Louis and did not follow the procedures set forth in the Relocation Policy. They further claimed that the plaintiffs were misled into spending millions of dollars to improve the Dome, as well as financing the project of a new stadium, even though the NFL, Kroenke and other owners had no intention to keep the Rams in St. Louis. The final two claims were for unjust enrichment, i.e., the relocation unjustly enriched the defendants, and tortious interference, i.e., the defendants interfered with plaintiffs’ reasonable business expectancy by approving the Rams’ relocation petition.
At summary judgment, the defendants argued that the NFL Relocation Policy was not an enforceable contract because it did not contain any sufficiently definite promises. In the alternative, even assuming that the Relocation Policy was a contract, the defendants claimed that the plaintiffs did not have standing to enforce it because they were not third-party beneficiaries. The defendants next argued that the NFL and the other team owners were not unjustly enriched at the expense of the plaintiffs and, in any event, the state statute barred municipalities’ claims for unjust enrichment. Then, they argued that the fraud claims failed because the plaintiffs knew, as early as January 2015, about the Rams’ relocation plan. Lastly, the defendants moved for summary judgment in their favor on the tortious interference claim because the plaintiffs could not show that they had a reasonable business expectancy in an ongoing relationship with the Rams.
In a relatively black-and-white decision, Judge McGraugh held that the NFL, Kroenke and the other owners were not entitled to summary judgment as a matter of law as to any of the plaintiffs’ claims. The following are the three most significant takeaways from this lawsuit so far.
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Policies that contain sufficiently definite obligations and promises may be enforceable contracts.
Words matter, especially in a legal document. Judge McGraugh reviewed the entire NFL Relocation Policy and found that the document raised to the level of a binding contract. Specifically, the NFL Relocation Policy states, in pertinent part, that each NFL club’s “primary obligation…is to advance the interests of the League in its territory” and “clubs are obligated to work diligently and in good faith to obtain and to maintain suitable stadium facilities in their home territories, and to operate in a manner that maximizes fan support in their current home community.” Even though, at first glance, these provisions seem to lack specificity, Judge McGraugh found that the term “obligation” indicated a legal duty. Similarly, the word “must,” another term that expresses a duty, appeared in the Relocation Policy six times. The Court also considered statements made by Roger Goodell and Eric Grubman concerning the importance of meeting these relocation guidelines during the relocation process.
Individuals and businesses should be extremely careful when they deal with policies and procedures. While these documents are generally not binding contracts, this relocation lawsuit shows that, in very limited circumstances, and depending on how the obligations and promises are crafted, policies and procedures may be enforceable in a court of law. Policies and procedures are not as informal and inconsequential as they may seem.
2) Don’t create third-party rights under a contract if you don’t plan on dealing with the legal consequences.
Here, the expressed language of Relocation Policy was intended to benefit the club’s home territory (the City of St. Louis), including the governmental and business representatives of the home community, which are referred to as the “interested parties.” Yet, the defendants argued that the NFL Relocation Policy is “merely conduct which may inform a relocation vote” and does not grant any rights to the interested parties. The Court found the defendants’ argument unpersuasive and ruled that the plaintiffs had standing to contest the Rams’ relocation—even if the plaintiffs are not a party and did not sign the NFL Relocation Policy.
It is important to understand that there are circumstances where contracts can create third-party rights. In New York, courts typically consider whether the contract contains express language or clear evidence permitting a third party to enforce those rights. When the language is ambiguous or lacks provisions restricting these rights to third parties, individuals and businesses may set themselves up for major headaches and legal battles in the future.
3) Disrupting a probable future business relationship may give rise to a claim for tortious interference.
The doctrine that parties in an established business relationship should be permitted to derive economic benefits from that relationship without third-party interference is well-settled. But even the strongest business relationships can sour at any second, and parties are generally aware of this hard truth. Is it, then, reasonable for a party to expect a financial benefit in a probable future business relationship? Definitely yes.
According to Judge McGraugh, a probable future business relationship that gives rise to a reasonable expectancy of financial benefit is a property interest generally protected under state law. In most cases, like in the St. Louis v. NFL lawsuit, the key inquiry would revolve around the word “reasonable.” Here, for example, the defendants argued that because the plaintiffs were aware that the Rams’ relocation was “a distinct possibility,” it was unreasonable for the plaintiffs to claim a business expectancy in an ongoing relationship with the Rams. The plaintiffs, instead, insisted that it was reasonable for them to believe that specific future dealings with the Rams would have been economically profitable but for the defendants’ interference. Although the Court found that a probable future business relationship may give rise to a reasonable expectancy of financial benefit and, thus, a potential claim for tortious interference, it did not decide the issue of reasonableness, as too many material facts remained in dispute. The trier of fact (here, the jury) will make a final determination at trial.
Conclusion
The lesson here is simple: if you are an outsider aware of two parties’ established business relationship and intentionally affect that relationship to your benefit, you run the risk of committing a business tort. You can learn more about tortious interference claims and other business torts here.
If you have any questions, you should seek the advice of an experienced business attorney.
Photo by Dave Adamson on Unsplash
