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Is the NFL’s Relocation Policy a Contract?

NFL chess - relocation

January 14, 2020
Sheilla Dingus

In the first three parts of this series, we took a deep-dive into three questions that will determine the City of Oakland’s antitrust standing.  In this, our final installment we’ll take a look at the NFL’s relocation policy and whether it constitutes a contract with Host Cities such as Oakland.

count2

In their original complaint, Oakland alleged four counts of antitrust violations based on the Sherman Act that were consolidated to one in their amended complaint.  In addition to the antitrust claims, the City of Oakland asserts a state-law breach of contract claim against the Raiders and NFL Clubs.  The NFL argues that their relocation policies are not a contract whereas Oakland views the policy in a different light.

The Arguments:

NFL
  • The Court previously cautioned Oakland that it should amend only if it “is able to cure the defects identified” in the Court’s Order granting the Defendants’ motion to dismiss. Oakland has not done so with its claim asserting a breach of the League’s Relocation Policy.
  • Oakland’s new allegations are almost exclusively about two completely different documents: a failed Senate bill and a “Statement of Principles” regarding relocation.
  • The City does not contend that either of these documents was a contract or breached.
  • In its Order, the Court recognized that the Relocation Policy on its face “repeatedly reinforces the conclusion that its overriding motivation is the NFL’s business interests . . . not the interests of host cities.
  • Relocation Policy fails two of the three requirements recently established by the California Supreme Court in Goonewardene v. ADP for third-party beneficiary status.
  • Opposition does nothing to address the Court’s legal conclusion that dismissal of Oakland’s contract claim likely would also be required by the Relocation Policy’s lack of a “sufficiently definite promise” to support either the existence of an enforceable contract or the allegation that the Policy was breached
Judge Spero
  • Oakland asserts that it can bring a claim for breach of the NFL’s relocation policy based on its status as a third-party beneficiary of the policy, a doctrine originating in common law and codified as section 1559 of the California Civil Code.
  • Defendants argue that the relocation policy is not a contract, although they do not dispute that the NFL’s bylaws constitute a contract.
  • The Court assumes for the sake of argument that, in vesting the Commissioner with authority to interpret the bylaws and “establish policy and procedure,” the bylaws are at least amenable to interpretation under which they bind member teams to the Commissioner’s interpretations and policies, such that breach of a policy established under article 8.5 can be enforced as a breach of the bylaws themselves.
  • Defendants’ stronger argument is that Oakland lacks standing as a third-party beneficiary.
  • In order to establish such standing, a plaintiff must establish all of the following elements:

elements

  • “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” Cal. Civ. Code § 1559
Oakland
  • The NFL Constitution and the Relocation Policies promulgated pursuant to Section 4.3 of the NFL Constitution are collectively a binding, enforceable contract among the NFL Clubs.
  • Oakland, as the Host City for the Raiders, is an express and intended beneficiary of the NFL Constitution and Relocation Policies.
  • It is clear from the drafting history of the Relocation Policies and Defendants’ public statements that a motivating purpose for the Relocation Policies was to protect the interests of existing Host Cities.
  • These statements, among others, demonstrate that one of the NFL’s objectives in promulgating the Relocation Policies was to protect the interests and investments of existing Host Cities.,
  • It would be reasonable to expect that existing Host Cities, like Oakland, would bring claims against Defendants for breaches of these Policies.
  • Defendants must have expected this lawsuit by Oakland, as it required full indemnification from the Raiders prior to voting for the relocation to Las Vegas.

Analysis:

Oakland went into great detail describing the policies that were allegedly breached, however at present the main objective is to satisfy the pleading stage, avoid dismissal and move to the discovery phase.

The prongs the court requires, to continue, based on California Supreme Court precedent are as follows:

  1. that it is likely to benefit from the contract
  2. that a motivating purpose of the contracting parties is to provide a benefit to the third party,
  3. that permitting the third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties. (Emphasis mine)

The NFL contends that the Relocation Policy that appends the NFL Constitution and Bylaws is not a valid contract between the league and its member clubs because it was adopted unilaterally by the Commissioner.  That argument should fail since “Article 8.5 of the NFL Constitution and Bylaws vests in the Commissioner the authority to ‘interpret and from time to time establish policy and procedure in respect to the provisions of the Constitution and Bylaws and any enforcement thereof.’”  This seems clear-cut.  The member clubs gave the commissioner the authority to unilaterally interpret and establish new policy.  While the commissioner serves the interest of and at the pleasure of the member clubs, he has been vested with the stated authority as well as authority to impose discipline on club owners, up to and including the forced sale of their franchise and ouster from the group of NFL owners.

In his analysis of the issues in his order dismissing the original complaint, Judge Spero conceded that the first prong, that Oakland is likely to benefit is a given.  There’s really no challenge in this respect—the considerations outlined in the Relocation Policy definitely, at least when followed, serve the interests of host cities.

We’ll next take a look at the third prong.  It seems very reasonable that the NFL would have reasonable expectations of being sued in regard to relocations unfavorable to host cities.  It’s happened in the past, and at present, Oakland isn’t the only rejected host city in the midst of a lawsuit against the NFL and its member clubs.  When the Rams rejected St. Louis and moved to Los Angeles, the city and county of St. Louis filed a lawsuit against the NFL for the exact breaches asserted by Oakland.  That case did not have antitrust claims or other counts that rely on federal law, therefore, it has remained in state court, which, perhaps is a friendlier venue.  Nevertheless, the filing of the St. Louis lawsuit should have at the very least, put the NFL on notice that Oakland might also sue.  Since, according to the FAC, the NFL required Raiders’ owner Mark Davis to indemnify the league.  It also seems noteworthy that the Minnesota legislature has posted a copy of the NFL’s Relocation Policy on their website.  In view of this, any reasonable person would probably be inclined to believe that Minnesota would sue if the Vikings were uprooted.

The other part of Prong 3 that the lawsuit is “is consistent with the objectives of the contract.”  The answer to that question rests in whom you ask.  It’s likely that almost any municipality that serves as a host city would agree with Oakland and St. Louis in saying that upholding their rights as host cities is in keeping with the objective.

The NFL and its clubs, on the other hand, will say, “no” the purpose of the policy was to further their own business interests.   Unfortunately for Oakland, the 3rd Prong was connected by the word “and” rather than the word “or.”  Generally, contract interpretation demands that if “and” is used as a qualifier between two statements, then both must be true in order for the provision to take effect.  The use of “or” would leave the parties in need of satisfying one requirement or another, whereas “and” demands that both requirements are met.

Prong 2 is closely related to the “objectives of the policy” requirement of Prong 3, and this will likely be the most difficult prong for Oakland to prevail on.

The NFL parties assert that the “motivating purpose” of the contracting parties [NFL member clubs] was not to provide a benefit to the third-party host cities, but rather, themselves.  Anyone who’s observed the inner workings of the NFL would have no trouble believing that this, along with just about every action the league has ever undertaken has a self-serving purpose.

Oakland asserts:

  • [T]he express contract language reflects an intent to benefit Host Cities. For example, the Relocation Policies repeatedly refer to “home territories” and “home communities” and “obligate” NFL Clubs “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.”
  • [T]he circumstances surrounding the adoption of the Relocation Policies provide significant and compelling evidence of an intent to benefit Host Cities… Defendants adopted the relocation Policies in an express effort to address Host Cities’ concerns about the relocation process.
  • The first iteration of the Relocation Policies was lifted directly from a bill drafted by
    Senator Slade Gorton to address his “paramount concern” of “the protection of our cities, both cities which have professional sports franchises and wish to keep them, and cities which do not now have a franchise and wish to gain one.”
  • When the Relocation Policies were amended in 1999 after the Statement of Principles was negotiated with the Mayors’ Conference, an NFL executive expressly stated that “the amended [Relocation Policies] protect the interest of the cities” and “establish an orderly process [for considering team relocations], ensuring that municipal interests will be heard and addressed.”
  • An NFL representative confirmed that the Relocation Policies were adopted to “balance and protect the interest of the cities, the League and individual teams ,” and “establish an orderly process, ensuring municipal interests will be heard and addressed, and that franchise moves occur only after exhausting all reasonable options in a team’s existing home territory.”
  • [I]n the Statement of Principles issued by the Mayors’ Conference and the NFL, the parties stated that the Relocation Policies “should recognize both the private interest of team owners . . . and public interest to enjoy the direct and indirect benefits of having a professional sports franchise.

defendants suggest

Verdict:

In my opinion, should Oakland fail to prove the first half of Prong 2 and Prong 3  it should not be fatal to their claims at this stage.  When considering a motion to dismiss, a judge is required to view the arguments in a light most favorable to the plaintiff, and the plaintiff need not prove every allegation at the pleading stage.  If the plaintiff presents a plausible argument, which I believe Oakland has done here, the allegations should survive a motion to dismiss.

In this instance, the “objective” of the relocation policy and its “motivating purpose” constitutes a material dispute of facts.  The NFL, in objection to Oakland’s mention of senate pressure and the agreement with the Mayors’ conference, argues that neither of these things amounts to a contract, however, this should be a subject of discovery.

If Oakland can produce evidence that the league made representations to the Mayor’s conference inferring that the Statement of Principles formed an agreement with the Mayor’s Conference, and the Relocation Policy was meant to be of mutual benefit then at least an oral agreement was made.

The NFL admits the policies were adopted to avoid antitrust liability and federal regulation, and Oakland states that the initial language was taken directly from a proposed Senate bill.  Discovery would need to take place in order to determine the facts, and what if any misrepresentations were made.

While Oakland’s suit took the language of the Relocation Policy at face-value and made a presumption of good faith that the Policy was purposed to serve the shared interests of host cities and the NFL, and to provide a path for host cities to avoid losing their teams, if the NFL made blatant misrepresentations that can be documented, Oakland should be able to assert standing and recover damages for the breach and/or assert fraudulent misrepresentation.

If Judge Spero isn’t satisfied after discovery and additional briefing and when material facts are agreed upon, then he might be inclined to grant summary judgment, but due to the disputed facts, this count should survive a motion to dismiss.

As to the antitrust argument, much will depend on Judge Spero’s interpretation of the law.  If he adopts a broad interpretation, the complaint should survive.  If he takes a narrow view, then the antitrust case could be in jeopardy, at least at the trial court level.  The next move is his.  If he denies the NFL’s motion, then he likely to pursue mediation purposed toward settlement.

Part 1
Does Oakland State a Proper Antitrust Claim?
Part 2
Is Oakland a Proper Antitrust Plaintiff?
Part 3
Did Oakland Suffer a Direct Injury

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Sheilla Dingus founded Advocacy for Fairness in Sports in October 2016, after a stint with Defenders of the Wall, a New England Patriots based blog where she dived deep into the legal aspects of Deflategate. Along the way, she observed many inequities in sports and felt a need to address some of the under-reported stories in sports law. She draws from her background as a former professional dancer, who like many of the athletes she writes about, took an early retirement due to orthopedic injuries. After a return trip to college she worked for a legal software company, with seven years as a Project Manager and Analyst. She brings her analytical skills to the table in breaking down complex lawsuits, and enjoys pursuing her longtime interest in journalism.

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