NFL Franchise Controversies
With the 2021-2022 NFL season underway, there is no shortage of storylines: players, teams, fantasy football, and the league as a whole. Interestingly, the ongoing lawsuit of the City of St. Louis against the NFL and individual franchise owners is seldom among the myriad news and articles, notwithstanding billions of dollars in potential damages against the league and team owners.
In 2016, the St. Louis Rams announced their relocation to Los Angeles after twenty-one years in St. Louis. Per the NFL’s relocation policy, a franchise does not possess an absolute right to relocate and must go through various steps, including negotiations and league-wide votes before a proposed relocation can be approved by the League. The policy requires franchise owners to engage in “good faith” efforts to remain in their current market.
In 2017, the City of St. Louis, County of St. Louis, Missouri, and the operators of the Ram’s then-stadium (“plaintiffs”) filed a lawsuit against the NFL, each NFL franchise, and each franchise’s respective owner (“defendants”), alleging that the NFL and its franchises committed breach of contract by failing to satisfy the league’s relocation policy obligations. The plaintiffs allege the breach harmed them as third-party beneficiaries of the relocation policy. Additionally, the plaintiffs allege that the defendants made intentionally false representations regarding the relocation and unjustly enriched themselves. St. Louis is seeking compensation via disgorgement of profits earned through relocation as well as punitive damages.
Even for a financial powerhouse like the NFL, which had a total annual revenue of nearly $10 billion in 2020, the potential damages in this case are staggering. Per the complaint, the plaintiffs allege a loss of over $100 million in net proceeds, and request that the $1.45 billion increase in the Ram’s franchise value that resulted from the relocation be considered in damages calculations. Additionally, the plaintiffs also seek recovery of over $500 million that the Rams paid to the NFL as a relocation fee, alleging this was the product of unjust enrichment. If the court allows for jury consideration of punitive damages, the NFL and its franchises could owe billions of dollars in damages.
Over the past four years, the defendants have made multiple unsuccessful attempts to get the suit dismissed, most recently in September when the Missouri Circuit Court for the Twenty-Second Judicial Circuit denied the defendants’ motion for summary judgment.
In addition to the defendants’ attempts to get the case dismissed, the defendants have failed to comply with discovery orders. The court ordered multiple NFL franchise owners to turn over information regarding their own and their franchise’s finances. However, the owners have repeatedly failed to comply with the court’s orders, to the point that the court issued monetary sanctions against the owners and warned that continued failure could lead to the defendants being held in contempt of court.
As the NFL and its franchise owners continue to exhaust avenues to avoid litigation and discovery, the January 10, 2022 trial date approaches, and the likelihood of a settlement in this case increases. However, if this were to go to trial, it could have significant ramifications for the future of NFL franchises and their ability to relocate out of smaller markets in an attempt to increase revenue.