The contractual dispute between Washington Football Team majority owner Daniel Snyder and the team’s three limited partners has morphed into a legal controversy involving the NFL.
As first reported by The Athletic, the NFL has filed to intervene in a federal lawsuit that Robert Rothman, Dwight Schar and Frederick Smith brought against Snyder on Nov. 13. The Washington Post has also become involved by seeking an order that would grant public access to all materials and proceedings in the case.
Judge Peter Messitte of the U.S. District Court for the District of Maryland is presiding over the expanding litigation.
At its core, the case is a contractual dispute. Rothman, Schar and Smith together own 40.499% of Washington Football Inc. (WFI). Partially sealed court records obtained by Sportico indicate that each owns at least 10% of WFI stock and that each possesses a right to sell shares pursuant to a stockholders’ agreement.
The trio intend to accept an offer to sell their stakes to an unidentified buyer for approximately $900 million. Snyder has a right of refusal, which allows him to buy out the limited partners. He intends to exercise that right—in part. As explained by The New York Times, Snyder wants to purchase the stakes of Smith and Rothman, but not that of Schar.
The unresolved legal question is whether Snyder’s right of refusal permits him to buy out some, but not all, of the three minority owners’ stakes in response to a third party’s offer to buy out all three.
Enter the NFL.
Under the Federal Rules of Civil Procedure, an intervenor is a “nonparty” claiming an interest in a litigation. An intervenor can credibly maintain that the litigation impacts the intervenor’s rights and obligations and that exclusion of the intervenor would betray fundamental fairness. An intervenor can participate in hearings and alert the presiding judge of its interests.
The NFL has not explained why it seeks intervention. However, the league has at least five reasons.
First, the NFL’s legal relationship with Washington’s ownership is clearly impacted by both the trajectory and outcome of the case. The NFL is a joint venture of independently owned franchises. Those franchises, and their owners, owe contractual obligations to the league and to fellow teams and owners. The litigation could shed light on whether Washington’s owners have complied with these obligations. Meanwhile, the outcome of the case will impact whether and how Washington’s owners sell their equity. Any pending change in Washington ownership must be approved by the NFL. The league could maintain its ability to conduct due diligence if a pending sale is linked to the litigation.
Second, the league is already arbitrating a separate—though clearly related—dispute involving these same four litigants. As reported by The New York Times, Snyder removed the trio of limited partners from the team’s board over the summer. It occurred in the aftermath of a disagreement over payment of dividends and financial management. The NFL’s ability to fairly resolve that dispute could hinge on arguments, evidence and testimony produced in the litigation.
Third, the league has a fiduciary stake in maintaining the confidentiality of team matters, particularly when those matters might impact franchise value. Ownership disputes are usually resolved through league-run dispute resolution. A former counsel to an NFL team tells Sportico, “The NFL has a strong interest in enforcing the binding arbitration provisions of the NFL constitution and bylaws and keeping internal disputes behind closed doors in arbitration.” In a private forum, the NFL can more effectively shield sensitive information from disclosure to the public and media. While most of Rothman v. Snyder consists of sealed filings, a seal can eventually be lifted. Even when seals persevere, litigation is fundamentally a public matter. The further a litigation advances, the more likely it leads to sworn testimony and the sharing of confidential emails that could prove newsworthy.
Fourth, the league obtains greater access to court records as an intervenor than it would as an outside observer. This is important in Rothman v Snyder, where almost all of the filings are sealed.
Fifth, the NFL has a right to seek possible remedies against any and all of the litigants, depending on the outcome of the case. Such a right is arguably safeguarded by intervening into the matter.
In forthcoming proceedings, Judge Messitte will clarify the extent to which the NFL and The Washington Post can participate as intervenors. The 79-year-old judge, whom President Bill Clinton appointed to the bench in 1993, will hold a virtual hearing on Dec. 8 at 10 a.m. on whether to unseal the record in the case.
