By Jeff Birren
(Editor’s Note: Parts 1and 2 appeared in Vol. 16, Iss. 1 and Vol. 16, Iss. 2, respectively)
As discussed in the first of these articles concerning this litigation, the Rams entered into a settlement of much of its St. Louis PSL-related litigation (See, Sports Litigation Alert (“SLA”) “Rams Settle…” Vol. 16; #1, 1-18-19). The story of that complicated litigation continued in Part 2, (SLA ” St. Louis Rams’ PSL-Litigation, Part 2″ Vol. 16, #2, 2-1-19). This installment will look at the settlement process and proposed settlement that was filed in federal court on Dec. 5, 2018.
What is Not Included in the Settlement
However, before looking at the proposed settlement, it will be helpful to look at what is not included in it. The first is Pudkowski v. St. Louis Rams. As previously discussed, that case began in Missouri state court. The Rams removed it to federal court and it was sent back to state court last April. That case continues.
The second matter that is not included is the claim for indemnity brought by the Rams against the St. Louis Convention and Visitors Commission (“CVC”). The Rams-CVC stadium lease had an arbitration clause that reads in relevant part:
25. Arbitration. Any controversy, dispute or claim between or among any of the parties hereto . . . to this Amended Lease, related to this Amended Lease, including, without limitation, any claim arising out of, in connection with, or in relation to the interpretation, performance or breach of this Amended Lease . . . shall be settled by arbitration conducted before three arbitrators in St. Louis, Missouri, in accordance with the most applicable then existing rules of the American Arbitration Association… (McAllister, M&O, Doc. # 276, 11-17-18, at 2).
“As of the Execution Date, the Rams are still arbitrating their indemnification claims against the CVC to determine whether the CVC will be liable for Awards made the Fans Class” (McAllister, Mot. For Approval, Exhibit 1, Settlement Agreement (“SA”), Doc. # 394 and # 394-1,12-5-18, Paragraph S, at 6).
A third matter that is not included is the case brought by the CVC against the Rams, the NFL and the other member clubs following the move of the Rams from St. Louis back to Los Angeles. That case was recently described by the Missouri Court of Appeals as: “alleging five counts arising out of the Rams’ 2016 relocation from St. Louis to Los Angeles. Plaintiffs sued based on their alleged status as third-party beneficiaries of the NFL’s ‘Policy and Procedures for Proposed Franchise Relocations’ (the ‘NFL Policy’)” (St. Louis Regional Convention and Sports Complex Authority, et al. v. National Football League, et al, and the Rams Football Company, LLC and E. Stanley Kroenke, Missouri Court of Appeals, Eastern District, Division Two, Case # ED106282, August 21, 2018, at 1). The Rams and Kroenke moved to compel arbitration of the claim. The trial court denied the motion and the Court of Appeals affirmed (Id. at 2). That case also continues.
Finally, when the District Court certified the several classes and appointed the class representatives, it did not “appoint the Envision Plaintiffs as Class Representative of any class” and consequently, “the Envision Plaintiffs are not parties to this Settlement Agreement” (SA, Paragraph R, at 6).
The Settlement Agreement
The SA is 32 pages long with three more signature pages. It “encompasses three consolidated lawsuits pending in the United States District Court for the Eastern District of Missouri: McAllister, Envision and Arnold. All three lawsuits pertain to whether the Rams breached certain agreements when they relocated from St. Louis, Missouri, to Los Angeles, California, in 2016. The agreements are personal seat licenses (“PSLs”), which provide their owners certain rights to purchase season tickets to Rams home games. Two forms of PSLs are involved: The FANS PSL Agreement, originally sold by FANS, Inc., and the Rams PSL Agreement, originally sold by the Rams” (SA, Paragraph I (A), at 1).
There is next a discussion of the specific claims of each of the separate lawsuits, and the claims by various individuals that are included in the settlement. The SA continues with a section that discusses the consolidated history of the litigation, with the usual statements that the parties have “engaged in extensive discovery” “including written interrogatories, requests for admission, requests for production, expert discovery, third-party subpoenas, and numerous Party and third-party depositions” (Id., O (1), at 4/5). It mentions “extensive motion practice” as well as the Rams and CVC arbitration. The parties participated “in three separate, face-to-face mediation sessions between the Honorable William Ray Price on April 21, 2017, June 21, 2018, and July 20, 2018” (Id., O (7), at 5). Judge Price served on the Missouri State Supreme Court from 1992 until 2012 and was that court’s longest serving judge.
The first session “broke off” “when it was clear that the cases could not be settled” (McAllister, Mot. For Approval, at 10). The second session “was unsuccessful” (Id.). The last face-to-face meeting was on July 20, 2018. The parties agreed on “a claims-made process, with a mandatory verified claim form for any Class Member seeking an award” (Id.).
On Nov. 26, 2018 the Rams filed a request for a 21-day stay in the District Court, “with consent of plaintiffs’ counsel,” because the “parties have recently come to an agreement on a settlement and are in the process of obtaining signatures on a finalized Settlement Agreement” (McAllister, Status Report And Consent Motion To Extend Stay Pending Continued Settlement Discussions,” Doc. # 391, 11-26-18, at 1). The general agreement was reached in July but the settlement papers were not ready to be presented to the court until Dec. 5, 2018.
The parties also agreed that if the Settlement Agreement is not finally approved, then the agreement would not serve as admission, waiver, or concession concerning any argument on the merits or class certification (SA, X, at 7). Page 8 of the agreement begins the definitions section and that continues to page 16. Only there does a discussion of the actual settlement terms begin.
The Payouts
The first payout will go to the PSL holders, whether FANS Class or Rams Class. The payouts will reimburse the PSL holders for the pro rata PSL payments corresponding to the years that the Rams did not play in St. Louis as contemplated in the original PSL contracts. The Rams will pay up to $12 million for each of the two classes, and the payouts will go to the PSL holders as follows:
PSL Price Payout for Qualified Claim
$250 — $75
$500 — $150
$1,000 — $300
$2,500 — $750
$3,000 — $900
$4,500 — $1,350
However, the Rams will be required to pay no more than $12 million for each of the two classes, and if more claims are made, then the individual payouts will be reduced in on a pro rata basis. Nevertheless, this is an exceptionally large payout. As stated by Plaintiffs’ counsel, for the FANS Class, this “is the entire amount of their claim for damages for breach of contract” (McAllister, Mot. For Approval, at 1/2). “It is exactly the damages their Complaint seeks for breach of the FANS Agreement. See Complaint ¶, 92. Thus, achieving this result at trial would have constituted a victory for the FANS Class. Obtaining the result without the expense, time and uncertainties involved in taking the case to trial is of significant value to the Class Members” (Id. at 22). There is also no deduction for attorneys’ fees that would happen if the case went to trial and the plaintiffs won damages.
As for the Rams Class, “their cash recovery closely tracks their damages as calculated by their damages expert. Moreover, the benefits to the Classes are enhanced because they will receive their payments with no deduction for attorneys’ fees, legal expenses, settlement administration or class representative service payments. The Rams have agreed to pay those fees and costs separately” (Id. at 2). It is harder to calculate the damages for the Rams Class, since it would involve tying to assess the value of a five-year (only) PSL in Los Angeles, consequently, and for a variety of reasons, “the amount that Rams Class Members would likely receive at trial is uncertain. The award from this settlement closely approximates the aggregate value of the PSLs and is therefore reasonable” (Id. at 25).
The Rams will also pay the expenses of a Claims Administrator and Judge Price, who will oversee the process. The Rams further agreed to not oppose the request by the four Class Representatives to receive incentive awards totaling $50,000. Messrs. McAllister and Arnold are slated to each receive $20,000; Mr. Cochran will receive $7,000; and Mr. Pearlman will receive $3,000 (Id. at 16). “These awards will compensate them for the substantial time and effort they devoted to this litigation” (Id.). If the District Court awards less, than the Rams will pay the lessor amount.
The Rams further agreed to not oppose a request by Class Counsel for attorneys’ fees of $7.2 million and costs of $200,000. The fees provision is “30% of the aggregate cap of $24 million and about 23% of the total amount that the Rams will make available to Class Members and Attorneys” (Id. at 17). The Eighth Circuit has a four-part test to determine if a settlement was “fair, adequate and reasonable” (Id. at 18). That requires weighing the merits of the case against the terms of the settlement, the defendant’s financial condition, the complexity and expense of further litigation and the amount of opposition to the settlement. Based on that test, it certainly appears that the settlement is very favorable to the plaintiffs. If the District Court awards less, then the Rams will pay the lessor amount.
Within 30 days of a preliminary approval the Rams will place the amount awarded by the court for incentive awards, attorneys’ fees and costs into an interest bearing account. Once the Claims Administrator submits a final claimant list “the Rams will deposit into an interest-bearing escrow account administered by the Claims Administrator the full amount set for in the Final Qualified Claimant List required to pay for all Qualified Claims” (Id. at 18).
The claims process is discussed from pages 18-23. The Claims Administrator will make the determinations and class members, Class Counsel, the Rams or CVC can challenge such a determination by giving written notice to Judge Price. After all of the paperwork related to such a challenge is submitted, Judge Price will make the final decision within 14 days. For its part, the Rams get a rather comprehensive release.
The Usual Procedural Hoops.
The rest of the agreement goes through the typical class action procedures, including submitting the settlement to the District Court (SA, at 24); provisions for giving notice to class members (Id. at 25); opt-out provisions (Id. at 26/27); the Rams agreement to not oppose the attorneys’ fees application (Id. at 27); and that if the District Court does not approve the settlement, then it is off to the races and no party has waived any rights (Id. at 28-30).
As part of the SA, the parties attached various exhibits, including the FANS PSL Agreement, the Rams PSL Agreement, a cancellation notice, a transfer form, a claim form, a proposed final order and judgment, a draft preliminary approval order, a postcard notice form for class members, a proposed e-mail notice for class member, a draft publication notice and a draft long form notice. Class members will have “75 days after the Preliminary Approval to opt out of their Class or object to the Settlement” (McAllister, Mot. For Approval, at 14).
This could be quite a process. The Rams have spread sheets that “contain a total of 25,047 names (some with duplicates), with postal addresses for all but six and email address for 21,255 or approximately 85% of the total” (Id. at 34). The Rams have no records for PSL holders who dropped the season tickets prior to 2006. One wonders how the Claims Administrator will deal with claims from alleged class members who claim to have only been PSL holders prior to 2006. As part of the notification process, there will be an advertisement in the St. Louis Post-Dispatch on three consecutive Sundays.
Counsel then signed the agreement and it was submitted to the District Court, where it awaits a hearing to approve the settlement. As of this writing, the hearing had not been scheduled. The Eighth Circuit then agreed to hold the Rams’ appeal of the class certification ruling “in indefinite abeyance” (McAllister, Order, Doc. #395, 12-27-18).
The Home Stretch
On Jan. 24, 2019 the District Court granted preliminary approval to the proposed settlement. The Order stated that the proposed settlement was “fair, reasonable and adequate” and was “entered in good faith, following arms length negotiation” (McAllister, Order For Preliminary Approval Of Settlement, at 1). The motion for final approval is to be filed on May 24, 2019 (Id. at 6) and the Final Approval Hearing is scheduled on June 24, 2019 (Id. at 3).
It is impossible for an outsider to know if the Rams took these costs into consideration when deciding to relocate to Los Angeles. There is also no way to predict the further losses that may come their way due to the unsettled litigation mentioned above. For Mr. Kroenke’s sake, one can only hope that in the long-term it was worth all of the litigation, settled and still pending, to move to Los Angeles.
