By Jeff Birren
On Dec. 5, 2018 the Associated Press reported that the Los Angeles Rams, nee the St. Louis Rams, had agreed to settle litigation related to the sale of personal seat licenses (“PSLs”) in St. Louis (Salter, Jim, “Rams, St. Louis PSL holders’ reach $24 million settlement,” AP). Those PSL’s became worthless when the Rams moved to Los Angeles. Salter also reported that the details of the pending settlement were now released in St. Louis federal court. That same day, some of the plaintiffs’ counsel filed a motion for preliminary approval of the settlement, and attached the proposed settlement agreement as Exhibit 1 (“Plaintiffs’ Motion For Preliminary Approval Of Settlement And Incorporation Memorandum In Support, and Exhibit 1, Class Action Settlement Agreement, Ronald McAllister v. The St. Louis Rams, Case Nos. 4:16-cv-00172-SNJ; 4:16-cv-00262; 4:16-cv-00297, Consolidated, U. S. District Court for the Eastern District of Missouri, Eastern Division, 12-5-16 (“McAllister”) (“Motion For Preliminary Approval”), Doc. # 394 and 394-1). The settlement agreement is 35 pages.
The next day, one of the plaintiff’s law firms placed a press release on the law firm’s website announcing the settlement. The firm informed the public that the PSL settlement “provides a refund to each PSL holder of 30% of the PSL price, equal to the unused 9 years remaining on the PSL’s when the Rams moved to Los Angeles, following the 2015 season.” It also stated that the Rams had agreed to pay up to $24 million to the PSL holders as part of the settlement (“St. Louis Rams and PSL Owners reach $24 Million Settlement of Class Actions” Goldenberg, Heller & Antognoli website, 12-6-18). Not in the law firm’s press release, but in the settlement agreement, is that the Rams also agreed to pay plaintiffs’ counsel fees of $7.2 million and costs of $200,000 (McAllister Doc. 394-1 at 17, ¶ 4). Such amounts will undoubtedly bring holiday cheer to many in the St. Louis area, and particularly for some lawyers.
Contemporaneous media reports tended to overlook the fact that the announced settlement only included two pending cases, but did not include one of the McAllister classes, nor another case that had been filed in state court in Missouri, was removed to federal court by the Rams, then sent back to state court by the McAllister judge (McAllister, Doc. #329, 2012018) in early 2018. Thus the PSL-related litigation is not over.
This article will begin looking at the background leading up to the litigation and then the cases filed against the Rams related to the PSLs sold in St. Louis. The second installment will continue looking at the litigation, and the third will focus on the proposed settlement agreement and subsequent developments in the case.
The Rams Move From Southern California to St. Louis
In 1988 the St. Louis Cardinals left St. Louis for Phoenix, attributing the move to stadium problems in St. Louis. St. Louis spent years trying to get an NFL expansion team. When that failed, it approached the Los Angeles Rams about relocating to St. Louis. As part of that process, St. Louis was building a new indoor stadium and convention center. Eventually the Rams agreed, and in 1995, the NFL voted to allow the Rams to move to St. Louis, conditioned upon paying the NFL a $29 million relocation fee, representing a portion of the increased value of the franchise in St. Louis over its value in southern California. Later, St. Louis agreed with the Rams to pay $20 million of the $29 million fee.
After the move was completed, St. Louis sued the NFL. It claimed that the league had violated the antitrust laws so that it forced the city to overpay the Rams in order to secure an NFL team. At the close of the evidence, the District Court dismissed the case and the Eighth Circuit upheld the decision (St. Louis Convention Visitors Commission v. NFL, 154 F.3d 851 (8th Cir. 1998)).
Personal Seat Licenses Are Sold by FANS, Inc.
The Rams moved to St. Louis for the 1995 NFL season. An entity called “FANS, Inc.” sold PSLs to fans seeking to purchase season tickets. The PSLs cost between $250 and $4,500 per seat, and the PSL price was based on the ticket’s location. The term of the PSL was 30 years (FANS, Inc. Patron (Charter) PSL Agreement at ¶ 12 (FANS Agreement), attached to the McAllister Complaint as Exhibit A, 2-9-16, Doc. #1). The FANS Agreement also stated that although “the RAMS are not a party to this Agreement, the RAMS are a third party beneficiary under this Agreement and will directly and/or indirectly realize certain benefits under this Agreement” (FANS Agreement at ¶ 12B).
Furthermore, if the Rams “transferred” its games so that the team would “play any of the NFL games other than at the Stadium (e.g. Busch Stadium if the stadium is not completed on time), Licensor will use its best efforts to assure Licensee the right to purchase, on a pro rata priority basis, tickets for seats in the stadium where the transferred game are played” (Id. at 8).
However, the agreement remained “valid only as long as NFL football is played at the stadium by the Rams, up to a maximum of thirty (30) years,” that the licensee would have “no claim against the RAMS with respect to this CPSL” and that if the RAMS were to not play its home games at the stadium during the thirty-year term of the agreement, “licensee expressly agrees to not sue the RAMS for damages or injunctive relief related to this CPSL, including, without limitation should the RAMS not play its home games in the Stadium or St. Louis for any reason” (Id. at ¶12A). First-year law students would have realized that this provision was never going to stand up if challenged.
The Rams Sell PSL’s
In April 1996 the Rams took over the sale of PSL’s in St. Louis. They also made changes to the PSL contract. Gone was the provision that allowed PSL purchasers the right to purchase tickets to “transferred games” that seem to only include the St. Louis area. In its place was language that the Rams were required to use “Best Efforts” to allow the PSL holders to purchase “tickets for seats in the stadium where the transferred games are played” (Rams PSL Agreement ¶ 7 (“Rams PSL”) McAllister Complaint Exhibit B).
The new agreement gave the Rams the right to terminate the agreement “for any other reason” but in that case the Rams had to “refund part or all of Licensee’s deposit” (Rams’ PSL ¶6 A). However, the Rams’ PSL Agreement did not contain the language in the FANS Agreement that “Licensee acknowledges that this Agreement remains valid only as long as NFL Football is played at the Stadium by the RAMS, up to a maximum of thirty years.”
Both PSL agreements were for a term of 30 years. Neither the FANS Agreement nor the Rams PSL Agreement reserved the right to the Rams to end the PSL contract early and retain the unused portion of the initial payment. The St. Louis Rams’ fans were rewarded with several great seasons, including a win in Super Bowl XXXIV following the 1999 NFL season, and a close loss to the New England Patriots two years later in Super Bowl XXXVI.
LA or Bust: The Rams Announce Their Move to Los Angeles
The team’s majority owner, Georgia Frontiere passed away in January 2008. The following year her heirs announced that Ms. Frontiere’s 60 percent ownership share would be sold. Ultimately minority interest holder Stan Kroenke purchased it. At the time, Kroenke held the other 40 percent share of the club, and the NFL approved his purchase of the remaining 60 percent in August 2010. Kroenke took over and entered into negotiations with St. Louis concerning possible improvements to the stadium.
The Rams’ stadium lease gave the club the right to terminate the lease without penalty if the stadium did not remain in the top tier of NFL stadiums. By 2012 it clearly was not, as Time Magazine rated it as one of the worst in the NFL (Carbone, Nick “Edward Jones Dome, St. Louis/Top 10 Worst Stadiums in the U.S.” May 10, 2012). The process wore on and improvements were not forthcoming. The Rams invoked the non-binding arbitration clause in their lease, and won a pyrrhic victory. They won, but major improvements were not made.
In January 2015 it was public knowledge that the Rams were negotiating to move back to the Los Angeles area. The San Diego Chargers and Oakland Raiders also announced their intent to return to Los Angeles. The Chargers originated in Los Angeles in 1960 before moving to San Diego in 1961. The Raiders had played in the Oakland/San Francisco Bay Area from 1960-82, in Los Angeles from 1983-94 and back in Oakland again starting in 1995. The Rams originated in Cleveland in 1935, moved to the Los Angeles Coliseum in 1946, and then moved to Anaheim in the greater Los Angeles area in 1980.
On Jan. 12, 2016 the NFL voted to approve the Rams’ relocation request. The club would play at the Los Angeles Coliseum for several years while it built a new stadium in Inglewood. The Rams were also required to pay the NFL a $550 million relocation fee. It is ironic that the NFL made the club pay to leave the greater Los Angeles area to move to St. Louis and then made it pay to return to the greater Los Angeles area. And then came litigation.
Let The Litigation Games Begin
Pudkowski — The first case against the Rams was filed the very next day, Jan. 13, 2016. James Pudkowski v. St. Louis Rams, LLC et al. was filed in Missouri state court in St. Louis, Case No. 1622-CC0083 (“Pudkowski”). It was based on state law, the Missouri Merchandizing Practices Act Rev. Stat. § 407.010 et seq (“MMPA”) that makes it illegal to sell merchandise under false promises, misrepresentations or concealment, suppression or omission of any material fact. The theory is that the Rams made public statements that they were focused on staying in St. Louis, and that as a result, the team sold tickets and merchandise in the St. Louis area.
The Rams removed the case to federal court on Feb. 11, 2016. The plaintiffs then made a motion to remand the case back to state court. That was granted by the District Court on May 10, 2016 (Pudkowski v. The St. Louis Rams LLC, E.D. MO, Case No. 4:16-cv-189 RLW (9-29-16))(Pudkowski District Court”). The Rams appealed that order to the Eighth Circuit. During that appeal, the District Court stayed the remand pending the appeal, (Pudkowski District Court, June 20, 2016 at 2).
The Eighth Circuit agreed with the Rams. It reversed the order granting remand and sent the case back to the District Court “for further proceedings consistent with this order” (Pudkowski, Docket No. 16-8009, (Eighth Circuit, 7-19-16)). After it went back to the District Court, that court determined that, at least for the moment, “remand is not appropriate in this case” (Pudkowski District Court, at 2).
Next Game Envision — A week later, a second-class action was filed against the Rams for alleged breach of the PSL Agreement, Envision, LLC et al v. The St. Louis Rams, LLC. It was also filed in Missouri State Court. It was a class action filed on behalf of PSL holders who claimed that the PSL’s had “granted them the right to purchase season tickets for specific seats in the Edward Jones Dome (the stadium in which the former St. Louis Rams played their home games ‘for each and every football season through the year 2025′” (Envision LLC et al v. the St. Louis Rams, LLC, Case No. 4:16-cv-00262-CDP, Notice of Removal, Document at 2, #1, 2-26-16 (“Envision”).
Plaintiff Envision stated that it purchased six PSLs for a total of $27,000 (Id.). The Envision plaintiffs sought a declaration “from this Court that they, and all other persons who hold Rams PSLs, are entitled to: (1) purchase tickets to any venue in the Los Angeles area in which Rams games will be played that are comparable to their seats at the Edward Jones Down (sic); (2) transfer said tickets and/or their PSLs to others; and (3) retain any remuneration from such transfers” (Id. at 2/3). They also alleged that the Rams would not allow the St. Louis PSL holders to acquire such tickets in Los Angeles or to make the requested transfers, (Id.).
The Rams responded by removing the Envision case to federal court on Feb. 26, 2016 (Id.). The case was initially assigned to Judge Catherine D. Perry.
Then There Was Arnold — ess than a week after that, on Jan. 29, 2016, plaintiffs Arnold and Cochran also sued the Rams in Missouri State Court. That class action included a claim for breach of contract under both the FANS Agreement and the Rams PSL Agreement. They later amended their complaint to add a claim, like Pudkowski, for breach of the MMPA, and to limit their PSL-based claims to the Rams PSL Agreement.
Specifically, they alleged that the Rams breached Paragraph 7 of the Rams PSL Agreement, which required the Rams to use its best efforts to ensure that the PSL holders had the right to purchase tickets wherever the Rams played the home games. They sought damages, attorneys’ fees and interest.
On March 4, 2016 the Rams removed the Arnold case to federal court, where it became Arnold, et al v. The St. Louis Rams, LLC, No. 4-16-cv-00297-SNLJ (McAllister, Motion For Preliminary Approval at 10/11).
McAllister — Not to be left behind, Ronald McAllister filed his class action on Feb. 19, 2016, but in federal court. The complaint was 30 pages and attached the FANS, Inc. PSL Agreement as Exhibit A and the Rams PSL Agreement as Exhibit B. It was based on the same conduct alleged in the other cases, but it went further. It had a claim for declaratory judgment that the purported contracts were illusory, for unjust enrichment, for money received, for breach of the “Purported FANS, Inc.” contract, for breach of the “Purported Rams Partnership” contract, for breach of the implied covenant of good faith and fair dealing related to the Rams’ PSL Agreement, and violation of the MMPA (McAllister Complaint, Doc. #1, 2-9-16).
The complaint sought damages, restitution (of the unused portion) of the PSL Agreements, punitive damages, costs and reasonable attorneys’ fees, certifying the class and a subclass and appointing the firm that filed the McAllister case as class counsel, and any other remedy the court could create (Id. at 26). The case was assigned to District Court Judge Stephen N. Limbaugh, Jr.
The Envision, Arnold and Pudkowski cases were all subsequently assigned to Judge Limbaugh. McAllister was the first case that was filed in federal court, so it was the low-numbered case. The Rams then made a motion to consolidate all four cases. Judge Limbaugh granted in part and denied in part the motion. He granted the consolidation for both the Envision and Arnoldcases, so they were joined to McAllister, and determined that all documents in the three cases would be filed in the McAllister case. He did not order consolidation with the Pudkowski case because at the time the appeal of the order granting remand was pending before the Eighth Circuit (McAllister Doc. # 33, July 6, 2016).
The same day, the Rams filed a motion for leave to file a counterclaim against Ronald McAllister. The counterclaim was for declaratory relief, and sought an order that it was the St. Louis CVC that was potentially liable to McAllister and not the Rams. It also contained a third-party complaint against the CVC for indemnity on the claims of the FANS, Inc. class. The motion was unopposed and Judge Limbaugh signed it on July 21, 2018 (McAllister Doc. #148). And with the cast complete, the parties were off and running.
Note: This is not the only case related to the Rams’ departure from St. Louis. In April 2017 St. Louis sued the NFL, the Rams and the other member clubs for various state law torts. It was filed in state court, unlike the CVC v. NFL case discussed supra. Although interesting, these articles will not include a discussion of that case.
Birren teaches Sports Law at Southwestern University School of Law in Los Angeles.