With a trial against the city and county governments of St. Louis set for Jan. 10, 2022—in St. Louis—NFL owners appear uncharacteristically out of sync.
According to a report by ESPN’s Seth Wickersham, Los Angeles Rams owner Stan Kroenke might not honor an indemnification agreement. The agreement, as described by ESPN, has required Kroenke to pay tens of millions of dollars in legal expenses incurred by the league and the 32 ownership groups. The Rams, Los Angeles Chargers and Las Vegas Raiders signed the agreement as part of the Rams’ relocation six years ago.
The development could signal the league’s vulnerability in court. It could also portend a rare lawsuit wherein the NFL sues one of its owners and tests the league’s longstanding legal position that NFL teams operate as one.
In 2017, St. Louis’s city and county governments, along with the public entity that owns the Dome at America’s Center, sued the NFL and its franchises. They did so as third-party beneficiaries of the league’s relocation policy, asserting an enforceable legal interest in the policy’s execution.
As St. Louis sees it, the NFL and owners willfully chose to ignore Kroenke’s alleged failure to undertake good-faith efforts to remain in St. Louis. Owners are accused of fast-tracking the Rams’ relocation and clutching its accompanying riches. St. Louis Circuit Court Judge Christopher McGraugh, who ordered the league and teams to turn over financial records, emails and phone records, will preside over the trial. Local residents will be jurors.
The ESPN report describes owners as being “stunned” by the prospect of Kroenke reneging. He reportedly insists the lawsuit isn’t his fault, but several owners, including Jerry Jones and Robert Kraft, argue Kroenke must fulfill his commitment. John Mara stressed that owners wouldn’t have approved the relocation—which, per Article 4.3 of the NFL constitution, required at least three-fourths of owners’ approval—if they knew Kroenke would break his word.
The timing of the squabble couldn’t be worse.
Owners and league officials are two months away from potentially being called as witnesses in the trial. During cross-examination, they’d face difficult questions about whether they ignored their own policy and, in effect, betrayed St. Louis and the fan base. The ESPN report suggests these witnesses might not have their stories straight.
Any inconsistencies in testimony would become amplified through cross-examination and make it more likely St. Louis wins. Variations could also embarrass league officials and owners. Worse yet, if inconsistencies contradict earlier sworn testimony, they will raise the prospect of perjury.
A loss could also force the NFL to pay a civil judgment of more than $1 billion. In alluding to potential damages, the city cites the $550 million relocation fee, along with the increase in the franchise value and “additional profits and gain [that] will be proved in an amount to be determined at trial.” The Rams are the NFL’s third highest-valued franchise at $4.68 billion, with the first and second slots occupied by the Cowboys ($6.92 billion) and Patriots ($5.35 billion), respectively. The league and owners might internally debate whether each team ought to pay the same amount in a civil judgment or if Kroenke should pay a greater share or the whole amount.
Owners’ discord with Kroenke could spark its own litigation. Before that happens, the league would likely attempt to arbitrate to keep matters private and confidential. Goodell, as the arbitrator, serves as the de facto judge (or a Goodell-appointed hearing officer performs that role). A lawsuit, in contrast, involves public filings monitored by journalists. It is also overseen by a “real” judge whose interests are not aligned with either side.
Under Article VIII of the league constitution, Goodell is conferred “full, complete and final jurisdiction and authority to arbitrate … any dispute involving two or more [owners] of the League.” Goodell or his designate should have final authority to resolve a dispute between Kroenke, Jones, Kraft and other owners.
Kroenke might see it differently. He and his attorneys could insist the indemnity agreement falls outside the scope of the commissioner’s authority to arbitrate. The agreement is arguably less about league operations and competition matters—the constitution’s focal points—and more about contractual obligations related to a singular matter, the Rams’ relocation. The ESPN report indicates that Kroenke and the NFL have interpretative disagreements about the agreement, which would place Goodell, as head of the NFL, in a conflicted position as arbitrator.
If arbitration failed to resolve the matter, the league could sue Kroenke for such claims as breach of contract, unjust enrichment (Kroenke is the main beneficiary of the relocation) and detrimental reliance (since the league and owners relied, arguably to their detriment, on Kroenke’s word). In his defense, Kroenke could maintain that he complied with the indemnity agreement and assert the league and other owners have benefited handsomely by the relocation. The Rams moved to the country’s second-largest media market, which has aided the NFL in negotiating broadcasting contracts that generate revenue shared by owners.
If sued, Kroenke could counter-sue the NFL. But such a move would carry risk. Per a resolution incorporated into the constitution, any owner who initiates a litigation against the league and who fails to “obtain a judgment on the merits which substantially achieves . . . the remedy sought” is on the hook to reimburse the league for “legal fees, litigation expenses, and [other] costs.” The league and owners could also seek to expel Kroenke, which would require three-quarters of owners (at least 24) voting him out, on grounds that his conduct is detrimental to the league. Kroenke would surely challenge an expulsion.
The NFL has occasionally battled owners in court. In the early 1980s, the league lost to Raiders owner Al Davis, who moved the Raiders from Oakland to Los Angeles despite league objection. That case proved the relocation policy has triggered arbitrary outcomes; the NFL responded by adding criteria that St. Louis now says the NFL ignored.
In another league legal scuffle, in 1995, Jerry Jones and NFL Properties (the league’s licensing arm) sued one another over the Dallas Cowboys’ signing contracts with companies that competed with sponsors of NFL Properties. Jones claimed fellow owners had violated antitrust law by joining hands to limit competition, while NFL Properties maintained Jones had tortiously interfered with league operations. The two sides eventually settled their dispute, with Jones (and other owners) gaining the right to negotiate intellectual property agreements.
The Davis and Jones litigations contradicted the NFL’s legal argument that the league and teams operate as a single entity and thus should be exempt from Section I of the Sherman Antitrust Act. In 2009, the U.S. Supreme Court rejected the NFL’s single-entity defense in American Needle v. NFL. It did so mainly because NFL teams are individually owned, competing businesses. The dispute with Kroenke is the latest reminder that the NFL is not a single entity. Even if the NFL and St. Louis reach a settlement before trial (and owners figure out who is paying), the dispute with Kroenke could linger.