Oakland Sues NFL, Claims it Violated Own Rules in Approving Raiders' Move to Vegas
This season hasn’t been very kind to the Oakland Raiders. With a 3–10 record, the franchise is mired in last place in the AFC West. Jon Gruden, in the first season of a 10-year, $100-million coaching contract, has seen the team regress while under his watch. The team’s best player, linebacker Khalil Mack, was shockingly traded for mere draft picks. General manager Reggie McKenzie was fired.
This series of unfortunate events has gone on and on and, now, on once again: The city of Oakland has sued the Raiders, along with the 31 other franchises and the NFL itself, in the U.S. District Court for the Northern District of California. The city argues that Raiders owner Mark Davis, along with other NFL owners and league officials, have formed an illegal “cartel.” This so-called cartel is accused of violating federal antitrust law and California civil laws by attempting to facilitate the Raiders’ planned relocation to Las Vegas in 2020. The cartel’s members are allegedly motivated not by a desire to promote genuine competition for NFL franchises, but instead by the selfish prospect of receiving a cut of a massive relocation fee.
The city seeks unspecified damages that could amount to many millions of dollars. The possibility of a massive penalty is heightened by the fact that damages under antitrust law are automatically multiplied by three. To be clear, even if Oakland’s lawsuit is successful it would not block the Raiders’ planned move. However, it could make the move a lot more expensive for Davis and the NFL.
Raiders Owner Mark Davis Calls Relocation Lawsuit 'Meritless and Malicious'
Oakland’s lawsuit could also hasten the Raiders’ exodus from the city. The Silver and Black have spent the 2018 season in Oakland, but their plans for next year are up in the air. Along those lines, the last home game the Raiders will “ever” play in Oakland could occur on Christmas Eve when they host the Denver Broncos.
That said, as the Raiders’ nomadic history reveals, it’s never wise to say “ever” or “never” when it comes to the Raiders and the city of Oakland.
The Raiders as a vagabond NFL franchise
In the course of their lifespans, most NFL teams call only one region their home. Sometimes they build new stadiums nearby, but usually they remain in the same vicinity. Teams value continuity for a host of reasons, including that it helps to generate a loyal and diehard fanbase. As we know, fandom can span generations of families and friends.
There are, of course, exceptions to franchise continuity. The Rams moved from Cleveland to Los Angeles then to St. Louis, and most recently, back to L.A. The Chargers played their first season in L.A., then relocated to San Diego for 50 years, only to return to L.A. two years ago. Fans of the Baltimore Colts and the Cleveland Browns—the first iteration of the Cleveland Browns, that is—know all too well about franchise relocation.
Yet the Raiders are probably the NFL’s most roaming franchise. They played their first two years (1960 to 1962) in San Francisco, where they held games in two stadiums, then moved to neighboring Oakland, where they would stay until 1981. Al Davis, who owned the Raiders until his death in 2011, then decided to relocate his team to the Los Angeles Memorial Coliseum. Davis was attracted by the much larger media market in LA and a far more favorable stadium deal.
The NFL rejected Davis’s planned move on account of his failure to satisfy Article 4.3 of the NFL’s constitution and bylaws. Article 4.3 requires that at least three-fourths of teams’ principal owners approve any relocation of a franchise to a different city. Of the other 27 NFL teams’ principal owners at the time, 22 voted “no” and five abstained. Davis thus fell 21 votes short of the 21 he needed.
Davis reacted unlike any other NFL owner (perhaps save for Jerry Jones): he simply disregarded the league’s edict. Davis announced that the Raiders would relocate to L.A. This sparked an awkward and contentious two-year litigation between a league and one of its owners. Davis would ultimately prevail in federal court. A jury concluded that Article 4.3 constituted an antitrust violation. The jurors reasoned that a requirement of three-fourths of owners for approval of franchise relocation unreasonably prohibited the competitive movement of teams.
An appellate court, the U.S. Court of Appeals for the Ninth Circuit, agreed and noted that Article 4.3 offered little rhyme or reason as to when a relocation ought to be regarded as favorable or unfavorable. This absence of reasoning belied one of the antitrust law’s key purposes: ensure that rules and policies do not unduly interfere with competition. Davis’s attorneys persuaded the courts that denying a move to a larger market undermined competition, especially when those attempting to prevent the move—fellow NFL owners—were not required to follow any meaningfully objective or meritorious standard in reaching their decision.
MCCANN: Five Key Legal Points Surrounding Kareem Hunt’s Situation
The Raiders’ stay in L.A. would only last a dozen years. In 1995, Davis ordered his franchise back to Oakland, where they would resume play in Oakland-Alameda County Stadium. Davis and the NFL once again battled in court. This time Davis argued that the NFL, because of an alleged vendetta against Davis, interfered with Davis’s negotiations with L.A. officials for a new stadium. The lawsuit proved unsuccessful.
As the 2000s rolled around and revenue for NFL teams and their owners soared, Davis and the league would mend fences. That mending would only continue after Mark Davis fully took over the team upon his father’s death in 2011. Eyeing greater revenue opportunities for his team and frustrated by the dated qualities of the Oakland-Alameda County Stadium, Davis aggressively sought a new stadium in Oakland. He wanted one that would be funded at least in part by taxpayer dollars, much like other teams had enjoyed over the previous two decades. Unsuccessful in those efforts, he then explored possible options in other cities.
In March 2017, Mark Davis borrowed a page from his father’s playbook and announced the latest Raiders’ relocation: the team will move to Las Vegas. The move, which was approved by an owners’ vote of 31 to 1 (Miami Dolphins owner Stephen Ross voted “no”), is planned for the 2020 season. As Robert Raiola and I have explained in an SI article, Raiders players, coaches and relocating employees stand to benefit financially by the move. This is because Nevada does not have a state income tax while California has the highest state income tax.
Prior to the planned 2020 relocation, the city of Las Vegas will construct a new stadium. The $1.9 billion stadium (and an accompanying practice facility) project is financed through a mixture of public and private money. Richard Velotta of the Las Vegas Review Journalreports that the city will contribute $750 million through revenue generated by a local hotel tax, with the remainder of funding arriving from other sources, including Davis and the Raiders.
Until the move, the Raiders will play elsewhere. During this 2018 season, the Raiders have continued to host home games in Oakland. But 2019 stands to be a different story. According to Jason Cole of FanSided.com, a “high ranking” Raiders official told him that because of the city’s lawsuit, there is “no way” the team will play in Oakland. Reid reports that five or six cities are in contention to host the Raiders in 2019, “including some that already have NFL teams.” The team and Oakland had been negotiating a potential lease agreement for 2019 where the team’s rent to play in Oakland-Alameda County Stadium would more than double from $3.5 million to $7.5 million, but those discussions have reportedly ended in light of the lawsuit.
Key arguments in the city’s lawsuit
Oakland’s complaint centers on the contention that the league and its teams unlawfully conspired to harm the city in order to secure illegitimate profits. The 49-page complaint was written by 14 attorneys, including James Quinn of Berg & Androphy, Clifford Pearson of Pearson, Simon & Warshaw and Oakland City Attorney Barbara Parker. Quinn is highly-regarded in the sports law community and, of particular relevance to Oakland’s lawsuit, he has defeated the NFL in court. In 1992, Quinn served as lead counsel for a group of players in McNeil v. NFL, where Quinn proved that NFL-imposed restrictions on free agency were unreasonable and in violation of antitrust law.
Oakland’s complaint attempts to shine light on what the city depicts as inside dealing among NFL owners on matters of franchise relocation. For instance, the complaint stresses that the Raiders have paid $378 million to the 31 other franchises as part of a relocation fee. The complaint insists that this fee “served no legitimate process” and was in reality designed to bribe owners into voting yes on relocation.
The complaint also stresses that the NFL failed to follow its own procedural requirements as set forth in Article 4.3 of the NFL constitution and bylaws. As discussed above, Article 4.3 stipulates that relocation requires the support of three-fourths of owners. It played a crucial role in litigation between the Raiders and the NFL in the early 1980s, and the legacy of that role is now crucial to Oakland’s lawsuit.
ORR: Coaches We Wish Owners Would Consider for NFL Jobs
Namely, back in the 1980s, the league responded to its loss in court by modifying Article 4.3 so it appeared more reasonable and predictable. As worded prior to the Al Davis litigation, the rule essentially let the NFL and owners do whatever they want. The Ninth Circuit questioned why Article 4.3 didn’t contemplate relevant considerations for franchise relocation—such as population, economic projections, facilities, regional balance, fan loyalty and team rivalries. Sensitive to the possibility of other future loses in court over franchise location, the NFL amended Article 4.3. The amended language expressly states that the league favors keeping a team in its current home territory, rather than relocating it, and that demographics, television markets and other quantifiable factors must be weighed by NFL owners who would vote. Here is one of the key amendments—notice the emphasis on advantaging the “home territory” (which in the current legal dispute refers to Oakland):
Each club’s primary obligation to the League and to all other member clubs is to advance the interests of the League in its home territory. This primary obligation includes, but is not limited to, maximizing fan support, including attendance, in its home territory.
Oakland’s complaint charges that NFL owners unlawfully conspired to disregard this language so that they could pocket a cut of the relocation fee. The complaint argues that owners simply didn’t care that the Raiders have a diehard fanbase. Instead, the owners craved selfish gain from “an NFL-rigged process.” Such a process, as the complaint asserts, acts in violation of its own rules by promoting relocations “in order to further line the pockets of NFL Club owners with millions of dollars paid by their billionaire competitors.” This all occurs, Oakland insists, “to the sole detriment of the host cities that are unwilling or unable to pay.”
To that end, the complaint insists that the NFL’s “monopoly power” over premium professional football in the U.S. allows the league and its owners to turn host cities into opportunities for exploitation: the so-called cartel “extracted value from municipalities through an auction that ignores the court-mandated objective relocation procedures.” Here, at least as depicted by the complaint, “Oakland was unable to pay Defendants’ cartel fee, so the Raiders are moving and paying a bogus $378 million relocation fee.”
In addition, Oakland’s complaint contends that NFL owners and league officials acted in bad faith. To advance that point, the complaint notes that Mark Davis “publicly stated” a “desire to stay in Oakland” while he directed the team to “move anywhere else,” including making overtures to San Antonio, San Diego, Los Angeles and, of course, Las Vegas. The complaint maintains that Davis and league officials were “just stringing Oakland along” while knowing they would soon announce a move to Las Vegas. Meanwhile, Mark Davis would “continue to reap massive profits at the expense of Raiders fans and the citizens of Oakland.”
City of Oakland’s alleged damages
Oakland identifies a number of alleged injuries caused by the defendants but focuses on two types: injury to economic competition, and injury to Oakland and its citizens.
As to injury to economic competition, Oakland notes that the NFL and its owners intentionally limit the number and location of NFL franchises. In other words, even if a city and local investors could clearly build a state-of-the-art stadium and run a team, they can’t join the small club of NFL teams without the blessing of the NFL. As Oakland contends, this arrangement advances the selfish interests of the cartel’s members: by artificially limiting the number of teams and means in which a team can be created, NFL teams and the NFL itself gain considerable leverage over cities. They can hold them hostage unless and until they offer an attractive stadium deal.
This leverage is only enhanced by the prospect of a relocation fee, the amount for which is determined by the non-relocating owners and is shared by those owners. After all, cities with NFL teams know that other NFL owners have a built-in incentive to support relocation: they would each pocket a portion of a relocation fee worth hundreds of millions of dollars. This closed arrangement, Oakland contends, harms fans in cities that would otherwise seem capable of hosting an NFL team—cities such as St. Louis, San Diego, San Antonio, Portland, Oklahoma City, Toronto and others.
Oakland also emphasizes how it believes it has been hurt by the defendants’ alleged conspiratorial misconduct. Oakland notes that it has “invested and borrowed significant sums of money, totaling over $240 million,” in relying on the assurance that the NFL would, in good faith, apply Article 4.3. The city also charges that it stands to lose millions of dollars in tax revenue and other income because of the loss of the Raiders as well as the accompanying losses absorbed by companies whose business is heavily reliant on the Raiders (such as sports bars, restaurants, apparel stores, etc.). These losses further extend to “significant diminution in property value” since property near the stadium will presumably be worth less without the Raiders in town.
Key legal claims in the city’s lawsuit
The above arguments and claims of damages serve as the basis for Oakland’s seven-count complaint. The first four counts allege violations of the Sherman Antitrust Act of 1890, a law that was created without sports in mind and was instead designed to curb the monopolistic business practices found in the oil, steel, railway and other industries. At its core, the Sherman Act was intended to ensure legitimate economic competition, which in turn benefits consumers through lower prices and greater innovation.
Oakland’s complaint raises claims under Section 1 of the Act. Section 1 requires that economic competitors actually compete and refrain from conspiring in ways that unreasonably harm competition. To that end, the complaint argues that the cartel defendants—meaning NFL teams, who are supposed to be competitors—remember, NFL teams compete not only on the field, but also for players, coaches, staff and for various other forms of human capital and economic recourses—have engaged in a group boycott of Oakland and other cities. The cartel has done so through a franchise allocation process that, in light of relocation fees and other measures, promotes inside dealing. As a result, the city argues the NFL offers host cities “a Hobson’s choice: pay the enormous demands associated with new and renovated stadia or lose your NFL Club.”
Similarly, the city charges that the cartel defendants have engaged in an unlawful refusal to deal. While the NFL isn’t automatically obligated to “deal” with Oakland, Article 4.3 makes clear that home territories are supposedly preferred. Oakland insists that the NFL never preferred Oakland but instead used it to extract leverage for negotiations with Las Vegas. Because of this dynamic and scarcity of NFL teams, Oakland claims it “lost not only the Raiders, but also any chance to host an NFL team in the future.”
The city also argues that the cartel defendants priced fixed. The purported price fixing reflects the NFL’s demands from cities to publicly fund new stadiums or else they lose their franchise. Thus, the “price” of keeping a team is fixed at a level that isn’t competitive but is instead a reflection of an alleged anti-competitive conspiracy among NFL owners who eye relocation fees. Bargaining demands by the NFL, Oakland charges, have forced cities like itself “that will pay the supra-competitive price of the NFL’s demands for new and renovated stadia—out of the market for NFL franchises”
Lastly, the complaint features breach of contract, quantum meruit restitution (which pleads for compensation to reflect the actual value of services rendered) and unjust enrichment claims under California law. Taken together, these claims charge that the cartel members all stand to profit unless their supposedly illegal and unethical conduct is recognized by the court.
Likely NFL defenses
In the coming weeks, NFL attorneys will answer Oakland’s complaint. Their answer will offer repeated denials. It will also allude to the types of defenses the defendants will offer.
One core defense will be that NFL owners and league officials fully adhered to Article 4.3 and all other applicable rules. The league will insist that each and every criterion required of Article 4.3 was satisfied and that no decision to approve the Las Vegas relocation was made until such due diligence was performed. The NFL will consistently stress that it took its own rules seriously and followed them, and that it repeatedly gave Oakland’s political and business leaders genuine opportunities to make their best pitch.
To bolster this narrative, the league would be aided by showing that it retained neutral experts to conduct studies on optimal franchise locations for NFL teams. Also aiding the NFL would be the presence of minutes from meetings where NFL owners substantively debated the topic of the Raiders’ optimal location. Likewise advantageous for the NFL would be the existence of recordings and emails that confirm league officials performed objective and empirical research on questions of franchise relocation.
To that end, the NFL will probably argue that its collective broadcast and merchandise interests, as well as those of its owners, would be enhanced by the placement of a team in Las Vegas—especially when the NFL already has a team in San Francisco. Basically, the NFL would want to show that it did its homework. Further, the league will want to make clear it didn’t permit NFL owners to make a decision about the Raiders based only on the relocation fee. The league, it will content, instead required each and every owner to weigh questions of competition.
Another core defense will be that the NFL, like other pro leagues, are unique business models and ought to have the freedom to make decisions as they see fit. The league caps the number of teams because it finds it in the best interests of the league to do so. Along those lines, while other cities may be able to host an NFL team, that doesn’t give them a legal right to an NFL team. Similarly, the NFL doesn’t “have to” keep a team in Oakland; stated differently, Oakland doesn’t have a guaranteed legal right to a team.
NFL may be fearful of pretrial discovery and thus seek to settle
Of concern to the NFL, if the lawsuit isn’t dismissed, it would lead to pretrial discovery. During pretrial discovery, attorneys representing Oakland could aggressively question not only Raiders officials, but also officials and owners from other NFL teams, as well as Commissioner Roger Goodell. They would all be forced to answer questions under oath. Likewise, pretrial discovery could compel the NFL to turn over sensitive emails and documents related to how it determines divisive questions of franchise location.
The NFL has shown a willingness to settle when faced with the prospect of pretrial discovery. This was readily apparent in the league’s decision to settle more than 99% of the legal claims brought by retired NFL players and families over concussions and long-term neurological harm. Even though the NFL may have powerful legal defenses, including labor preemption (i.e., the players agreed to arbitrate claims before suing and their failure to arbitrate means the cases should be dismissed) and uncertain causation (players suffered head trauma playing football long before their first NFL practice), the league negotiated a 65-year, approximately $1 billion settlement. It stands to reason that part of their motivation was to avoid turning over sensitive documents related to how the NFL valued player health. That same motivation could return with Oakland’s litigation.
The MMQB will keep you updated on key case developments.
Michael McCann is SI’s legal analyst. He is also Associate Dean of the University of New Hampshire School of Law and editor and co-author of The Oxford Handbook of American Sports Law and Court Justice: The Inside Story of My Battle Against the NCAA.
