By Alexander Paterson – Thompson Rivers University JD Candidate
On January 5th 2015, a development group that included a company controlled by Stan Kroenke, owner of the St. Louis Rams of the National Football League (“NFL”), announced plans to build a new 80,000-seat stadium in Inglewood, California, a suburb of Los Angeles. At the time of the announcement, negotiations between the city of St. Louis and the Rams over funding for a new stadium had not been going well. Consequently, the announcement seemed like an implied threat to the city of St. Louis that the team would relocate if they did not agree to the Ram’s desired terms for stadium funding. Despite the reaction to the announcement, the NFL has been steadfast in their assurance that no team will move to Los Angeles without the NFL owners’ approval. However, the by-laws relied on by the NFL, requiring that three fourths of the owners support any relocation request, will likely be little re-assurance to St. Louis Ram’s fans based on past decisions of the courts regarding the relocation of NFL teams. As noted by Dallas Cowboys owner Jerry Jones, in the past “…teams have moved without the permission of the league…” because “…there are just certain things that clubs can do.”
Historically, (US) antitrust considerations for professional sports were first considered in the context of baseball, where, in Federal Baseball Clubs, Inc. v National League of Professional Baseball Clubs (1922), the US supreme court held that baseball activities were not inter-state commerce, and thus were not subject to federal antitrust laws (i.e. The Sherman Act). This decision was revisited in Flood v Kuhn (1972), where the Supreme Court declared that the antitrust exemption given to baseball was an exception, not the rule, and did not extend to other professional sports leagues. As a result, the stage was set for an antitrust challenge of Rule 4.3 of Article IV in the NFL constitution, which stated: “no NFL member club can relocate without the approval of three-fourths of existing league member clubs.”
Such a challenge commenced in 1980 with L.A. Memorial Coliseum Commission v NFL (“Raiders I”), where the Oakland Raiders and Los Angeles Coliseum alleged a breach of antitrust law following a 22-0 vote by NFL owners against allowing the Raiders to move to Los Angeles. Raiders I was decided on the basis of the Sherman Act, which prohibited “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among several states or with foreign nations.” To determine whether the NFL had engaged in such prohibited activity, the Court conducted a “rule of reason” analysis. The analysis required the court to determine unreasonableness based on (1) the nature or character of the contracts, or (2) on surrounding circumstances giving rise to the interference or presumption that they were intended to restrain trade and enhance prices.
Under that analysis, the key to determining if there had been a restraint of trade was the relevant market in question. In this case the relevant market accepted by the jury was Southern California, not the entire US, and it was concluded that no alternative forms of entertainment could adequately substitute for an NFL game. Consequently, the NFL was found in breach of antitrust law, and hugely onerous “treble damages” (triple times the allotted damages) were initially assessed against the NFL to the tune of over $50 million. Not surprisingly, NFL owners have subsequently been extremely hesitant to expose themselves to treble damages once again through attempts to prevent franchises from relocating.
The current situation involving the Rams, like Raiders I, involves a team owner wishing to move his team to Los Angeles because their current host city was unreceptive to their desires for a publically funded new stadium. Due to the striking parallels between Raiders I and the Rams’ current predicament, a legal battle between the NFL and Stan Kroenke seems likely to have the same result. So while the NFL continues to assert their control over any potential franchise relocations, Jerry Jones and St. Louis Rams fans know that, barring a sudden reversal of judicial opinion, it is powerless to stop the Rams from leaving St. Louis if Stan Kroenke truly wishes to. Which leaves the city of St. Louis with two distasteful options: agree to publically fund a new stadium the city probably can’t afford, or watch a team they have loyally supported for the last 20 years walk away for a better offer.