Madison - St. Clair Record

Thursday, November 21, 2019

NFL defeated St. Louis promoters’ lawsuit 20 years ago; New suit echoes the old one

By The Madison County Record | Apr 18, 2017


Titans of 20th Century government lured the Rams football franchise to St. Louis on desperate terms, and a suit filed in the ‘90s to cover the resulting losses failed.

Echoes of that episode ring through a suit that St. Louis city and county filed against the Rams and the National Football League in the city’s civil court last week. What may come of the new litigation remains to be seen, but the NFL came out the winner in a promoter’s lawsuit decided 20 years ago in federal court in St. Louis.

In 1997, U.S. District Judge Jean Hamilton granted judgment to the NFL, finding it had not caused St. Louis promoters to negotiate under duress.

She stopped a trial that featured former U.S. Sen. Thomas Eagleton, U.S. Rep. Dick Gephardt, and St. Louis County executive Buzz Westfall.

Eagleton led a group that organized to attract a team after the league rejected the city’s bid for an expansion franchise in 1993.

State and local government had committed $258 million for a stadium, but the league awarded franchises to Charlotte and Jacksonville instead.

Gephardt contacted Eagleton’s group after reading a newspaper report that the Rams might move from Anaheim to Baltimore.

He urged the group to contact then Rams owner John Shaw, and that contact resulted in an agreement for exclusive negotiation.

Talks stalled at first, because the St. Louis Convention and Visitors Commission did not control the rights to the stadium lease.

Two thirds of the rights belonged to Jim Orthwein and one third to Jerry Clinton, persons with no relation to the commission.

That arrangement had caused the failure of the city’s expansion bid.

The commission at last acquired control of the lease, and promoters quickly reached an agreement with Shaw.

The Rams would pay $25,000 rent per game and half of game day expenses. The team would get all ticket revenue, all profit from game day concessions, and a portion of profits from other events in the stadium.

Further, the Rams would get 75 percent of the first $6 million in advertising, and 90 percent of the remainder.

The commission would assume $28 million in obligations from bonds on the stadium in Anaheim, and it would build a $10 million training facility. The commission also would cover the cost of moving.

In 1995, Shaw applied to the league for permission to relocate.

He needed approval from three fourths of the owners, 24 of 32, and he didn’t get it on the first vote.

The commission then offered $7.5 million toward a voluntary relocation fee that Shaw could offer for the second vote.

The league had levied a fee of that amount on the former St. Louis Cardinals in 1988, when they moved to Phoenix.

Shaw offered the league almost four times that amount, $29 million, plus $12 million to indemnify extra television expenses.

He agreed to forego shares of any fees from the league’s next two relocations. He also agreed to share $17 million in seat licenses with the league.

Owners approved relocation on April 12, 1995.

In June, the commission paid $20 million of the relocation fee.      

In September, the Rams began playing in the Trans World Airline dome.

Almost immediately, the commission found it couldn’t keep up with obligations.

It sued the league and team owners, alleging conspiracy and monopoly under the Sherman Act as well as tortious interference.

The commission estimated its losses between $77 and $122 million.

At trial, the commission argued that the league’s relocation policy created an atmosphere against relocation.

The commission argued that the policy created a “one buyer market.”

Eagleton testified that the policy harmed cities and fans.

Marquette Sports Law Journal authors would later write that he testified in direct contradiction of the justification for the Professional Sports Community Protection Act, which he sponsored as Senate Bill 259 in 1985.

“Much of the language in Senate Bill 259 is virtually identical to the language in the NFL’s relocation guidelines which the St. Louis Convention and Visitors Commission was challenging,” the authors wrote.

After the commission closed its case, Hamilton dismissed the claims of monopoly and interference.

For the league, commissioner Pete Rozelle described a relocation fee as reflecting among other things the increased value of the team after moving.

After the league closed its case, Hamilton dismissed the conspiracy claim and directed a verdict in favor of the league.

Appellate judges of the Eighth Circuit in St. Louis affirmed her in 1998.

They found no evidence that the relocation policy caused other teams to refrain from competitive bidding.

The appeals court panel found that the commission made no effort to solicit other bids and consciously decided to negotiate with one team at a time. The judges held that the commission didn’t challenge the vote of the owners or the application of the rule.

Nor was St. Louis unable to obtain a team, they held.

Shaw couldn’t identify any other interested team, the judges found, and he wasn’t a disinterested witness.

St. Louis city and county sued the team and the NFL in St. Louis Circuit Court on April 12.  

In addition to damages to be determined at trial, the city, the county, and their regional sports authority want the league to turn over a $550 million relocation fee that the Rams paid.

The city, the county and the authority claim the Rams breached a contract by violating the league’s relocation policy.

They allege intentional false representations, interference with business expectations, and unjust enrichment. They further allege willful and wanton conduct, qualifying for punitive damages.

Robert Blitz and Christopher Bauman, both of Blitz, Bardgett and Deutsch in Clayton, represent the city, the county and the authority.

So do James Bennett and Edward Dowd, of Dowd Bennett in Clayton.

In their complaint they asserted that the city, the county and the authority paid expenses and interest on 30-year bonds to finance construction.

The complaint alleges that the city and the county both paid 25 percent of bond obligations including millions in maintenance.

The city and the county each incurred bond cost obligations of $180 million, according to the complaint, and collected hotel taxes to service obligations and pay obligations out of general revenue.

The lawyers wrote that plaintiffs installed a new playing surface and performed $30 million in renovations including end zone video scoreboards.

“The annual rent was such that the Rams could largely cover the annual cost of the lease with advertising they sold in the Dome,” they wrote.

Plaintiffs hired professionals and entered into contracts to plan, develop, finance and construct a new stadium complex, they claim.

They also began land assembly including option contracts on land.

“Contrary to the statements of the NFL, the relocation policy and relocation process are a sham meant to disguise the avarice and anti competitive nature of the entire proceeding,” the lawyers wrote.

“The relocation policy was adopted to avoid antitrust liability by circumscribing the members’ subjective decision-making but in reality, the policy is ignored whenever convenient to pursue a greater profit.”

They wrote that according to Forbes magazine, the value of the Rams doubled to $3 billion.

“This increase in value was at the expense of plaintiffs,” they wrote.

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