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Milwaukee Bucks Non-Relocation Agreement

by Martin J. Greenberg and Daniel S. MacMillan

Milwaukee Bucks Non-Relocation Agreement | Sport$Biz | Marting J. GreenbergMilwaukee Bucks Ownership | Sport$Biz | Martin J. Greenberg Sports AttorneyAfter Wesley Edens, Marc Lasry, and Jamie Dinan purchased the Milwaukee Bucks (Bucks) in 2014, they immediately laid the groundwork for a new arena to replace the Bradley Center. The National Basketball Association (NBA) took a firm stance that if the new owners failed to finalize a new arena plan, the NBA had the option to repurchase and relocate the Bucks.[1] It was estimated that a new arena would cost approximately $500 million, $150 million of which was committed by Bucks’ ownership and $100 million of which was committed by former owner, Senator Herb Kohl.[2] Therefore, there was a funding gap of approximately $250 million for which the Bucks were looking for public participation from the State of Wisconsin, Milwaukee County, and City of Milwaukee.[3] Any cost overruns are the responsibility of the Bucks.[4]

In July of 2015, Bucks President Peter Feigin requested $250 million in public funding on behalf of the Bucks for a new arena in downtown Milwaukee and made it clear that failure to fund a new arena might result in the Bucks departing for Las Vegas or Seattle.[5]

Milwaukee Bucks Peter Feigin | Sport$Biz | Martin J. Greenberg AttorneyA number of cities have expressed interest in obtaining an existing or expansion NBA franchise, including Baltimore, Kansas City, Louisville, Las Vegas, Seattle, Norfolk, Virginia Beach, Cincinnati, Pittsburgh, Nashville, and Vancouver,[6] to name a few.

The 2015 Wisconsin Act 60, enacted on August 12, 2015, was the enabling legislation to create the development and construction of new sports and entertainment arena facilities.[7] Wisconsin State Statute §229.461, entitled Development Agreement, Non-Relocation Agreement, Lease, further outlines the terms of the arena project as follows:[8]

(2) In consideration of the district, this state, a sponsoring municipality, and the most populous county in which the sponsoring municipality is located promising to commit $250,000,000 of financial assistance to the development and construction of the sports and entertainment arena facilities and granting a professional basketball team, or its affiliate, the right to operate and manage the sports and entertainment arena facilities, the professional basketball team shall enter into a non-relocation agreement with the district, before it or its affiliate enters into a development agreement with the district under sub. (1), that contains all of the following provisions and commitments during the term of the lease:

(a) The professional basketball team shall play substantially all of its home games at the sports and entertainment arena, once it is constructed.

(b) The professional basketball team shall maintain its membership in the National Basketball Association or a successor league.

(c) The professional basketball team shall maintain its headquarters in this state.

(d) The professional basketball team shall maintain in its official team name the name of the sponsoring municipality.

(e) The professional basketball team shall not relocate to another political subdivision during the term of the lease.

(f) If the professional basketball team is sold or ownership is transferred to another person, the professional basketball team shall ensure that any person who acquires the professional basketball team, including upon foreclosure, commits to acquire the professional basketball team subject to the team’s obligations under the non-relocation agreement.

(g) During the last 5 years of the original 30-year lease, and during any 5-year extension of the lease, the professional basketball team may negotiate, and enter into agreements, with 3rd parties regarding the professional basketball team playing its home games at a site different from the site to which the lease applies after the conclusion of the lease.[9]

As part of the approved legislation and as a quid pro quo for dedicating public money to the arena project, the Bucks were required to enter into a Non-Relocation Agreement with the Wisconsin Center District (the District) promising to utilize the new arena to be constructed as the exclusive venue for home games for the Bucks, and not to relocate the team.[10]

The preamble to the Team Non Relocation Agreement (the Agreement), by and between the Wisconsin Center District and Milwaukee Bucks, LLC dated April 13, 2016, finds that the sports and entertainment arena facilities to be erected fulfill a public purpose:[11]

The legislature of the State of Wisconsin (the “State”) has found and determined that (i) sports and entertainment arena facilities that are used as the home arena of a professional basketball team and for other sports, recreational and entertainment activities encourage economic development and tourism in the State, reduce unemployment in the State, preserve business activities within the State and bring needed capital into the State for the benefit and welfare of people throughout the State, and (ii) therefore, it is in the public interest and will serve a public purpose for the State to assist a local exposition district in the development and construction of such sports and entertainment arena facilities. In furtherance of the foregoing, pursuant to Section 229.461 of the Wisconsin Statutes, the District is authorized to enter into a development agreement, lease agreement and non-relocation agreement with TeamCo or its Affiliate with respect to the development, construction, financing, use, operation, maintenance and management of sports and entertainment arena facilities that will be located on up to nine (9) contiguous acres of land to be owned by the District in the City of Milwaukee (the “City”), serve as the home venue of the Team and be used for other sports, recreational and entertainment activities.[12]

Scott Walker Wisconsin Professional Sports | Sport$Biz | Sports LawMilwaukeeans are no strangers to the reality of the relocation of professional sports franchises. There is a history that led to the creation of the Major League Baseball team known as the Milwaukee Brewers. Beginning in 1953, the Boston Braves moved their franchise to Milwaukee, only to see the team relocated to Atlanta in 1966.[13] Then, after four years, a coalition led by Commissioner Emeritus Bud Selig landed the bankrupt Seattle Pilots in Milwaukee and renamed them the Milwaukee Brewers.[14] After successfully securing the team for a 30-year period and following the execution of a Non-Relocation Agreement, Selig remarked, “[n]ow they don’t have to go through what people went through in ’64 and ’65, when the Braves were leaving Milwaukee . . . [w]hatever the controversy was about the ballpark or anything else, the Brewers are there. They’re secure, and they’re a marvelous asset.”[15]

Bud Selig | Milwaukee Sports | Sport$Biz | Martin J. Greenberg Sports AttorneyThe rules regarding relocation in the NBA are found in the League’s Constitution and Bylaws. The rules prevent teams from relocating without first obtaining the consent of the NBA Board of Governors. The NBA takes into consideration the proximity of other teams to the proposed relocation destination, the profitability of the new destination for the team and for the NBA, as well as any state or local laws or regulations that might inhibit or prohibit an NBA team’s success in a new location.[16] Article 7 of the NBA Constitution and Bylaws outline the procedure for a requested relocation, including the engagement of the NBA Relocation Committee. The question whether to approve the proposed relocation is decided by a majority vote of all the members, while a sale or transfer of a team requires a two-thirds vote.[17]

Relocation happens in the NBA, and since 2001 the following teams have relocated:

2001 – Vancouver Grizzlies relocated to Memphis, Tennessee.

2002 – Charlotte Hornets relocated to New Orleans, Louisiana. In turn, the NBA granted Charlotte a new expansion franchise, known as the Bobcats, in 2004. However, the Bobcats reclaimed the “Hornets” name before the start of the 2014-15 season.

2005 – New Orleans Hornets moved temporarily to Oklahoma City following Hurricane Katrina and became known as the New Orleans/Oklahoma City Hornets.

2007 – New Orleans/Oklahoma City Hornets returned to New Orleans full-time. The team was renamed the Pelicans in 2013.

2008 – Seattle SuperSonics relocated to Oklahoma City and became the Thunder.

2012 – New Jersey Nets relocated to Brooklyn and became Brooklyn’s first major professional sports franchise since 1957.[18]

History of NBA Team Relocation | Sport$Biz | Martin J. Greenberg Sports LawProfessional sports franchises have become cornerstone organizations in many of America’s largest cities, and non-relocation agreements have become an important contractual device for keeping teams at home in their respective cities as well as justifying a public contribution.[19] There are multiple policy reasons to contractually ensure that a professional franchise does not relocate.[20] Though there is the potential for expansion teams in American professional sports, expansions are rare and still add only a limited number of franchises. Moreover, because of the limited number of teams per league, only a few cities will receive the opportunity to host a professional sports franchise. Hosting a professional sports franchise is a valuable and limited right and governmental entities need to protect themselves by obtaining a firm commitment from the team to stay at home, especially before committing public dollars.

There are many incentives and associated justifications for a municipality to consider when working to retain a team and for insisting upon a non-relocation agreement, including:

  • Sports facilities and public infrastructures supporting sports facilities that are paid for primarily with public tax dollars and the public investment, which needs to be protected.
  • Tax-exempt bonds at government rates are used to finance sports facilities, and private sector recipients retain the economic benefits of government credit.
  • The statutory power of condemnation is often used to assemble real estate parcels in order to create the stadium facility.
  • The team receives the benefit of having to pay no real estate taxes in that most stadium facilities are owned by some form of public entity or District.
  • The team in many instances maintains management control and retains most of the revenues produced from the stadium, and the quid pro quo therefore is a covenant to play all home games at the stadium during the duration of the lease.
  • A community suffers a direct economic loss if its team relocates.
  • A community suffers the loss of intangible and non-economic benefits (psychic income) if the team relocates.[21]

NBA Team Contract | Sport$Biz | Martin J. Greenberg Sport LawAs is typical in most non-relocation agreements, the Agreement between the Bucks and the District has the following non-relocation covenants:[22]

            2.1(a)   Maintenance of Existence: At all times during the Term, TeamCo shall maintain its existence as an entity organized under the laws of the State of Wisconsin (or the State of Delaware) and shall not dissolve or liquidate without the prior written consent of the District.

            (b)        Maintenance of Franchise: At all times during the Term, TeamCo shall (i) maintain the membership of the Team in the NBA in good standing, (ii) hold, maintain, and defend the right of the Team to play basketball as a member of the NBA, and (hi) oppose the adoption of any NBA Rule that contradicts any of the terms of this Agreement; provided, however, that the foregoing shall not prohibit TeamCo from voting in favor of adoption of such an NBA Rule if it is (A) not specifically targeted at the Team and (B) bundled or packaged with any other NBA Rule that is unrelated to the subject matter of this Agreement (though in such a situation TeamCo shall register its objection to such NBA Rule if compliance with such NBA Rule would cause a default under this Agreement). Without limiting the generality of the foregoing, TeamCo shall not volunteer for contraction of the Team by the NBA or vote in favor of its contraction. In any event, contraction of the Team by the NBA shall be deemed to be a Non-Relocation Default.

            (c)        Maintenance of Corporate Headquarters: At all times during the Non-Relocation Term, TeamCo shall maintain its corporate headquarters and its principal place of business within the city limits of Milwaukee, Wisconsin.

            (d)        Maintenance of Name “Milwaukee:” At all times during the Non-Relocation Term, TeamCo shall cause the name “Milwaukee” to be included in the first part of the Team’s name (i.e., the “Milwaukee and TeamCo shall not include any other geographic, city, county, state or country reference in the Team’s name.

            2.2(a)   Play All Home Games in Arena: TeamCo covenants and agrees that, during the Non-Relocation Term, the Team will play all of its Home Games in the Arena, except that TeamCo may cause the Team to play, at an alternate site: (i) up to two (2) NBA Pre-Season Home Games during each Basketball Season; (ii) up to two (2) NBA Regular Season Home Games during each Basketball Season; and (iii) any number of NBA Playoff Home Games during any Basketball Season (A) so long as the Team’s opponent in any post-season series is scheduled to play an equal or greater number of its home games in such series outside of the city, municipality or similar local jurisdiction in which such opponent’s NBA regular season home venue is located (except as otherwise provided under NBA Rules applicable generally to all members of the NBA which are intended to deal with the different number of home games played by opposing teams in a post-season series (e.g., in a post-season series consisting of an odd number of games, the Team may be scheduled to play one more NBA Playoff Home Game at an alternate site than the number of games the Team’s opponent is scheduled to play outside of the city, municipality, or similar local jurisdiction in which such opponent’s NBA regular season home venue is located)) and (B) only if required by NBA Rules applicable generally to all members of the NBA; it being agreed, for the avoidance of any doubt, that TeamCo shall not have the right to elect or otherwise voluntarily decide to play any of its Post-Season Home Games at any alternate site under this Section 2.2(a).

            2.3 Prohibition of Team Relocation:

            (a) [Relocation] (i) Relocate, attempt to relocate or permit the relocation of the Team outside the boundaries of the City during the Non-Relocation Term, (ii) change or move the home territory of the Team set forth under NBA Rules in any manner that would exclude the City during the Non-Relocation Term, or (iii) permit or cause to occur any other event that could reasonably be expected to result in the occurrence of an event described in the foregoing clause (i) or (ii).

            (b) [Home Games-Away] (i) Enter into any contract that obligates the Team to play Home Games at any location other than the Arena after the Commencement Date or (ii) take any other action that could reasonably be expected to cause the Team’s right to play professional basketball causes or in the Arena after the Commencement Date and for the remainder of the Term to be lost or materially impaired; provided, however, that the foregoing shall not prevent TeamCo or any of its Affiliates from (A) enforcing its rights, and the applicable other party’s obligations, under the Team Agreement, (B) enforcing its rights, and the District’s obligations, under the Arena Agreement, the Finance Agreement and/or the Development Agreement, and (C) taking any action with respect to any strike, lockout, or other labor dispute (provided the Team is not playing Home Games elsewhere during any such period).

            (c) [Contravention] Solicit, enter into, or participate in any negotiations or discussions with, or apply for or seek approval from, third parties, including the NBA, with respect to any agreement, legislation, or financing that contemplates, or could reasonably be expected to result in, any action that would contravene or result in contravention of any Non-Relocation Covenant.

The prohibitions set forth in this Section 2.3 shall not apply to TeamCo’s, its Affiliates’ and their respective representatives’ actions, negotiations, discussions, applications, or agreements during the last five Operating Years of the Initial Term with respect to a proposed relocation, change or more that would not take effect during the Term.[23]

The term of the Bucks’ lease is thirty (30) years plus two extensions of five (5) years each, both extensions at the Bucks’ option.[24] The non-relocation term is co-terminus with the original term of the lease. While this language is not included in the Agreement, Wis. Stat. § 229.461(3)(a) authorizes the District to contract with a professional basketball team and to require that the team remain at the specified venue for a term of thirty (30) years with an option for the team to extend for two (2) additional five (5) year periods.[25]

The Agreement has a transfer covenant where with any transfer, the transferee must agree in writing, in form and substance reasonably acceptable to the District, to assume, in full and without qualification, the Buck’s obligations under the Agreement, specifically including the non-relocation covenants and any then-unperformed obligations of the Bucks under the Agreement whether accrued or due before or after the effective date of such transfer.[26]

4.1 Transfers and liens of Franchise.

Subject to this Article 4. TeamCo may, from time to time, make a Transfer or grant a Lien; provided, however, that any such Transfer or grant of a Lien shall be (A) conditioned on the Person who acquires the Team or holds any Lien being approved by the NBA in accordance with the NBA Rules as an owner of the Team or the holder of a Lien and (B) made or granted subject to the requirements and obligations of TeamCo under this Agreement, including compliance in all respects with the Non-Relocation Covenants, so that any Person who acquires the Team (including, if applicable, the NBA), either pursuant to any such Transfer or pursuant to any foreclosure or other action against any such Lien, shall acquire and take the Team therein subject to all of the Non-Relocation Covenants and the other terms of this Agreement. Such Person shall thereafter be deemed to be “TeamCo” for purposes of this Agreement. No Transfer (including, if applicable, to the NBA) or grant of a Lien shall change, limit, release or otherwise affect the obligations of TeamCo under this Agreement. Any Transfer made or Lien granted contrary to this Article 4 is void.[27]

Stop | Sport$Biz | Martin J. Greenberg Sports LawThe Agreement specifies that the non-relocation covenants shall be deemed to be restrictive covenants that attach to and bind the Bucks as property.[28]

Martin J. Greenberg and Bryan Ward discuss the importance of equitable remedies in non-relocation agreements in their article for the Marquette Sports Law Review entitled Non-Relocation Agreements in Major League Baseball: Comparison, Analysis and Best Practices Clauses.[29] They discuss as follows:

            The cornerstone remedies of non-relocation agreements are the equitable remedies of specific performance, injunctive relief, and the temporary restraining order.  These are the preferred remedies for the home city in virtually any situation; therefore they are present, in some form, in every MLB non-relocation agreement.

            Specific performance represents the ideal remedy for a city—a court order that requires a team to play out its lease in its current location.[30] If a suit for specific performance of a non-relocation agreement is successful, the court will enter an order requiring the team to fulfill its actual performance obligations under its agreement with the home city, rather than simply requiring the team to compensate the home city for damages caused by the breach.  Specific performance is one of the most common remedy provisions, appearing in twenty of twenty-two agreements.[31]

Temporary restraining orders (TROs),[32] preliminary injunctions,[33] and permanent injunctions[34]  bear some resemblance to specific performance as remedies.  Although none of these remedies will necessarily require a team to specifically perform its contractual obligations (as specific performance would), these remedies, if granted, will prohibit the team from proceeding with any plans to relocate.  TROs and injunctive relief are also common remedies, with at least one of these remedies appearing in all twenty-two agreements.[35]

A TRO or preliminary injunction, if granted, prohibits the team from relocating during court proceedings to enforce the non-relocation agreement.  A negative injunction would prohibit the team from playing in any other location for the remainder of the lease term, though it does not compel a team to play in the home city.[36]  Negative injunctions are the more common remedy for courts to grant, generally, because they do not require a court to closely monitor performance to ensure that a team performs its lease obligations in good faith.[37]  Because courts may be reluctant to compel specific performance of a stadium lease,[38] non-relocation agreements should also include negative injunctions and TROs as remedies.[39]

Financial Pie | Sport$Biz | Martin J. Greenberg Sports LawyerThe Agreement provides for equitable relief. Section 5.1 of the Agreement specifically indicates that the District and the Bucks acknowledge and justify the basis for equitable relief:[40]

5.1(a)   (i) TeamCo’s obligations under the Non-Relocation Covenants are required by the Act, are unique, are the essence of the bargain and are essential consideration for this Agreement and the other agreements being entered into by the District, the City, the County and the State in connection with the Arena, the related sports and entertainment arena facilities (including the Public Plaza) and the Parking Facilities; (ii) the Team is extraordinary and unique and under the organization of professional basketball by and through the NBA, the Team may not be able to be replaced with another NBA team in the City, the County or the State; (iii) the determination of damages caused by a Non-Relocation Default, the effects of which would be suffered by (x) the District, the City and the County, and their surrounding communities, and (y) the State, would be difficult, if not impossible, to ascertain; (iv) the District, the City, the County and the State are directly or indirectly committing $250 million to the Arena, the related sports and entertainment arena facilities (including the Public Plaza) and Parking Facilities; (v) but for the Team’s commitment to play its Home Games in the Arena as provided herein, the District, the City, the County and the State would not have agreed to directly or indirectly commit any funding for the Arena, the related sports and entertainment arena facilities (including the Public Plaza) and the Parking Facilities; and (vi) having the Team play its Home Games in the Arena as provided herein provides a unique value to the District, the City, the County and the State, including generating new jobs, additional revenue sources, economic development and increased tourism. Therefore, the Parties acknowledge and agree that there exists no adequate and complete remedy at law to enforce this Agreement against TeamCo, and that equitable relief by way of a decree of specific performance or an injunction (such as a prohibitory injunction barring the Team from relocating or playing its Home Games at any location other than the Arena in violation of this Agreement or a mandatory injunction requiring the Team to play its Home Games at the Arena in accordance with this Agreement) is the only appropriate remedy for the enforcement of this Agreement notwithstanding the provisions for liquidated damages set forth in this Agreement. Consistent with the Parties’ intent that the equitable relief of this Section is the preferred relief for a Non-Relocation Default, the District hereby covenants that, in the event of a Non-Relocation Default, or the threat of a Non-Relocation Default, the District shall seek equitable relief as provided by this Section 5.1 before attempting to avail itself of the liquidated damages provisions set forth in Section 5.2 (provided that equitable relief is a remedy available and enforceable at the time of such Non-Relocation Default). Furthermore, based on the foregoing, TeamCo and the District hereby agree as follows (and TeamCo shall not assert or argue otherwise in any action or proceeding):

            (i) Significant obligations are being incurred by the District, the City, the County and the State to make the Arena and Parking Facilities available for Home Games and any Non-Relocation Default shall constitute irreparable harm to the District, the City, the County and the State for which monetary damages or other remedies at law will not be an adequate remedy.

            (ii) The District is entitled to obtain injunctive relief prohibiting action, directly or indirectly, by TeamCo that causes or could reasonably be expected to cause a Non-Relocation Default, or mandating action that averts or will avert a Non-Relocation Default, or enforcing any covenant, duty, or obligation of TeamCo hereunder through specific performance. The District is further entitled to seek declaratory relief with respect to any matter under this Agreement.[41]

The Agreement indicates that the rights of the District to equitable relief as a result of a non-relocation default shall not constitute a claim pursuant to Section 101(5) of the United States Bankruptcy Code and shall not be subject to discharge or restraint of any nature in any bankruptcy, reorganization, or insolvency proceeding and that the Non-Relocation Agreement is not an “executory contract” as contemplated by Section 365 of the United States Bankruptcy Code.[42] The Agreement states:

            (c) That, in any proceeding seeking relief for a Non-Relocation Default, any requirement for the District to (i) post any bond or other security or collateral or (ii) make any further showing of irreparable harm, balance of harm, consideration of the public interest, or inadequacy of money damages, as a condition of any relief sought or granted is hereby waived, and TeamCo shall not assert or argue otherwise or request the same.

            (d) That TeamCo waives any right it may have to object to or to raise any defense to any actual or requested award of the remedy of specific performance or other equitable relief in any action brought by or on behalf of the District in respect of a Non-Relocation Default in accordance herewith, except (i) alleged unclean hands of the plaintiff or laches in the commencement of the proceedings and (ii) the defense that there has in fact not been a Non-Relocation Default in accordance with the terms of this Agreement.

            (e) That the obligations of TeamCo under the Non-Relocation Covenants are absolute, irrevocable and unconditional, except as expressly provided herein, and shall not be released, discharged, limited or affected by any right of setoff or counterclaim that TeamCo may have to the performance thereof

            (f) That the failure of the District to seek redress for violation of or to insist upon the strict performance of, any provision of the Non-Relocation Covenants shall not prevent a subsequent act, which would have constituted a violation, from having the effect of a violation.

No delay in the exercise of any remedy shall constitute a waiver of that remedy.

            (g) TeamCo understands and acknowledges that, by operation of the foregoing provisions, it is knowingly and intentionally relinquishing or limiting certain important rights and privileges to which it otherwise might be entitled, including the right to object to a grant of specific performance and injunctive relief, and that its relinquishment and limitation thereof is voluntary and fully informed.[43]

Bankruptcy | Sport$Biz | Sports Low | Martin J. GreenbergIn addition to equitable relief, the Bucks and the District have also agreed to liquidated damages. The definition provisions of the Agreement identify two types of non-relocation defaults: Type I and Type II.[44] A

Type I Non-Relocation Default [i]s any Non-Relocation Default involving (i) the dissolution of the Team, (ii) the contraction of the Team, (iii) the Team’s loss of its NBA membership, (iv) the relocation of the Team, (v) the Team’s failure to play at least fifty percent (50%) of the Team’s Home Games at the Arena during any Basketball Season (which for the avoidance of doubt shall not be deemed a Non-Relocation Default if such failure was due to Home Games being played at an alternate site in accordance with the provisions set forth in Section 2.2 ‘Covenant to Play’) or (vi) a breach of Section 2(d).[45]

A “Type II Non-Relocation Default [i]s any breach of Section 2.2 that is not a Type I Non-Relocation Default.”[46]

Broke the Piggy Bank | Sport$Biz | Martin J. Greenberg Sports AttorneyGreenberg and Ward also discussed in their article the need for liquidated damages provisions in non-relocation agreements: [47]

Barring unique and remote circumstances,[48] when faced with an actual or potential breach of non-relocation covenants, the home city’s preferred remedies will be equitable.[49]  However, the inclusion of equitable remedies in a non-relocation agreement does not guarantee that those remedies will be granted.  If an action seeking specific performance or other equitable remedies is unsuccessful, the home city could be left without a team and receive nothing as compensation.[50]  Acknowledging this possibility, modern non-relocation agreements contain remedies that provide for monetary compensation for the total anticipated losses the home city would incur following the loss of its team.  These additional monetary remedies not only provide the home city with greater protection from possible financial harm; they also serve as an additional disincentive to breach by a team—if team ownership were of the opinion that a home city’s suit for equitable remedies would fail, the monetary remedies would remain.

Calculating a total amount of damages, to a city and its inhabitants, that would be caused by the relocation of a city’s MLB team, is an impossible task.  Damage to a city’s prestige, and the loss of psychic income for its resident fans, are inherently unquantifiable.  Ancillary economic benefits, such as potential revenues and growth of businesses near the stadium, may be quantifiable but are inherently uncertain.  As such, courts are reluctant to assign a value to these interests, yet the interests are certainly among those that the non-relocation agreement was designed to protect.  A liquidated damages provision establishes an agreed-upon value for the team’s performance of its obligations under a non-relocation agreement.  Liquidated damages are “an amount of compensation to be paid in the event of a breach of contract, the sum of which is fixed and certain by agreement.”[51]  Liquidated damages clauses are appropriate in situations where damages amounts may be difficult to determine.[52]  A liquidated damages clause, however, cannot impose a penalty for breach.[53]

Legal vs Financial | Sport$Biz Sports Law | Martin J. GreenbergWith a liquidated damages clause in the non-relocation agreement, there is no need for the home city to attempt to prove damages for breach, because the damages amount is included in the contract.  This amount is typically reduced for each year of performance, to account for the city’s receipt of the benefits of hosting the team for that year.  Liquidated damages provisions have been a relatively recent addition to non-relocation agreements, included in only five (5) current MLB team non-relocation agreements.[54]

The Team and the District have agreed that the amount of liquated damages as specified in the Agreement is fair and equitable:[55]

Dripping Money | Sport$Biz | Sports Law | Martin J. Greenberg Attorney(b) The District and TeamCo acknowledge and agree that in determining the amount of liquidated damages hereunder (i) they have exercised care to make a reasonable forecast of direct damages under Applicable Law that may arise from a Type I Non-Relocation Default or a Type II Non-Relocation Default, (ii) such reasonable forecast of direct damages is not an exact measure of damages given it would be infeasible to estimate such damages with precision, including due to the intangible nature of some of such damages and the number of citizens and businesses that rely upon the presence of the Team in the City, and (iii) they have considered (A) the substantial costs the District, the City, the County and the State have agreed to incur in connection with the design, development, and construction of the Arena, the related sports and entertainment arena facilities (including the Public Plaza) and the Parking Facilities, (B) the extraordinary involvement, covenants and expense of the public in securing TeamCo’s commitment to cause the Team to play its Home Games at the Arena during the Non-Relocation Term on the terms and conditions set forth herein; (C) the loss of taxes attributable to the Team’s operations; (D) the consequent reduction in value of the Arena and the Parking Facilities arising from the absence of the Team; (E) the substantial economic benefit conferred upon the Team, TeamCo and TeamCo’s Affiliates, expressly including ArenaCo and HoldCo; and (F) the detrimental effects of a Type I Non-Relocation Default or a Type II Non-Relocation Default, as applicable, on the City, the County and their surrounding communities, and the State, including the loss of (1) intangible civic, social, and quality of life benefits, (2) national and international exposure, and (3) revenues and other direct and indirect economic and fiscal benefits.[56]

The amount agreed to for liquidated damages in the Agreement for a Type I Non-Relocation Default is as follows:[57]

Exhibit A to Team Non-Relocation Agreement

Type I Non-Relocation Default Liquidated Damages

Date of Type I

Non-Relocation Default*

Liquidated Damages
Effective Date – Commencement Date $553,000,000
Operating Year 1 $553,000,000
Operating Year 2 $549,000,000
Operating Year 3 $543,000,000
Operating Year 4 $536,000,000
Operating Year 5 $530,000,000
Operating Year 6 $524,000,000
Operating Year 7 $518,000,000
Operating Year 8 $511,000,000
Operating Year 9 $505,000,000
Operating Year 10 $499,000,000
Operating Year 11 $493,000,000
Operating Year 12 $486,000,000
Operating Year 13 $482,000,000
Operating Year 14 $467,000,000
Operating Year 15 $452,000,000
Operating Year 16 $436,000,000
Operating Year 17 $420,000,000
Operating Year 18 $403,000,000
Operating Year 19 $375,000,000
Operating Year 20 $345,000,000
Operating Year 21 $314,000,000
Operating Year 22 $290,000,000
Operating Year 23 $263,000,000
Operating Year 24 $236,000,000
Operating Year 25 $208,000,000
Operating Year 26 $200,000,000
Operating Year 27 $200,000,000
Operating Year 28 $200,000,000
Operating Year 29 $200,000,000
Operating Year 30 $200,000,000

 

The Agreement also specifies the amount agreed to as liquidated damages for Type II Non-Relocation Defaults:[58]

 (ii) in the case of a Type II Non-Relocation Default, an amount equal to $1,000,000 multiplied by the number of Home Games that were played at an alternative site other than the Arena in breach of Section 2.2; provided, however, that the amount of liquidated damages payable for a Type II Non-Relocation Default shall in no event exceed the amount of liquidated damages that are payable for a Type I Non-Relocation Default in the applicable Operating Year. If the District shall receive any payment of liquidated damages in an amount in excess of the amounts set forth in this Section 5.2(a). the District shall remit any excess to TeamCo. To the extent that the District is required to refund or disgorge (as a result of the bankruptcy of TeamCo or otherwise) any amount paid in connection with the payment of the liquidated damages hereunder, TeamCo shall remain subject to the Non-Relocation Covenants until such amount required to be refunded or disgorged is paid in full.[59]

            The Agreement also provides other protection for the District:[60]

            (c) In the event of a Final Order, then TeamCo, for itself and its successors, assigns, and Affiliates, hereby waives any right, arising hereunder, at law, in equity or otherwise, to object to, or otherwise challenge the validity, amount, appropriateness or legitimacy of the liquidated damages set forth in Section 5.2(a) as the remedy for a Type I Non-Relocation Default or a Type II Non-Relocation Default.

            (d) Upon any Type I Non-Relocation Default that results in the contraction, dissolution or relocation of the Team during the Term, TeamCo shall transfer, to the extent it has the rights thereto (and shall use its commercially reasonable efforts to cause the NBA to cooperate in the transfer of), the Team’s heritage and records to the District, including the Team’s name, logo, colors, history, playing records, trophies and memorabilia.

            (e) If the District collects liquidated damages hereunder for a Type I Non-Relocation Default or a Type II Non-Relocation Default, the District hereby waives the right to collect, and shall not seek to collect, any additional monetary or other damages from TeamCo or its Affiliates with respect to such Non-Relocation Default (whether under this Agreement, the Development Agreement, the Arena Agreement, the Finance Agreement or any other agreement with TeamCo or its Affiliate to which the District is a party).

            (f) Upon a Non-Relocation Default, if the equitable relief provided for in Section 5.1 and, with respect to a Type I Non-Relocation Default or a Type II Non-Relocation Default, the liquidated damages provided for in Section 5.2(a) are unavailable for any reason, the District shall be entitled to pursue all other legal and equitable remedies against TeamCo, whether or not such other remedies are specifically set forth in this Agreement; provided, however, that any damages or money judgment obtained in any such legal or equitable proceedings shall not exceed the amount of liquidated damages that the District would have been entitled to receive pursuant to Section 5.2(a) but for such unavailability. All such other legal and equitable remedies are cumulative and may be exercised concurrently, successively or in any order.[61]

            Both former Bucks owners and new owners commented on the Agreement:

Herb Kohl Milwaukee Bucks Former Owner | Sport$Biz | Martin J. Greenberg Attorney“When I sold the team, I did it with one thing in mind: to keep the team in Milwaukee,” Kohl said in a statement. [62] “Now, almost exactly two years later, I am pleased that we have all the pieces in place that will make that happen.”

Milwaukee Bucks Wesley Edens | Sport$Biz | Martin J. Greenberg“Personally I know we’re very proud to fulfill the commitments that we made to Sen. Kohl when we bought the team, to keep it in Milwaukee, to the people that are here,” said co-owner Wesley Edens.[63] “It’s an amazing day.”[64]

“Keeping the Bucks in Milwaukee makes me tremendously proud, and I’m happy to be a part of it,” Edens said. “The Bucks have such an incredible legacy. I’m so happy they’re the Milwaukee Bucks, not the Las Vegas Bucks or Seattle Bucks.”[65]

 


Daniel S. MacMillan is currently a second-year student at Marquette University Law School and is pursuing a Certificate in Sports Law in addition to his Juris Doctor. MacMillan serves as a Staff Editor for the Marquette Sports Law Review (Volume 27), as the Clerk for the LaFollette Chapter of Phi Alpha Delta, and is a member of the Sports Law Society. Prior to his time at Marquette, Daniel earned his bachelor of arts in Political Science from the University of Kansas, with minors in Public Policy and Economics.

 

[1] Brian Windhorst & Marc Stein, Arena Construction Key to Owner Deal, ESPN (Apr. 21, 2014), http://www.espn.com/nba/story/_/id/10818521/nba-buy-milwaukee-bucks-no-arena-construction-2017.

[2] Robert J. Bauman, Bucks Funding Package Explained, Bauman Newsletter (Summer 2015), http://city.milwaukee.gov/ImageLibrary/Groups/ccCouncil/2015-PDF/Bauman_Newsletter_Summer_2015_WEB.pdf.

[3] Id.

[4] A.J. Bayatpour & Myra Sanchick, Milwaukee Bucks, Wisconsin Center District Finalize 30-year Lease for New Arena, Fox6Now (Apr. 13, 2016), http://fox6now.com/2016/04/13/milwaukee-bucks-arena-costs-rise-30-year-lease-carries-hefty-penalties-for-leaving-city/.

[5] Mark Kass, Bucks’ Feigin: If Arena Deal Not Approved, NBA Will Move Team to ‘Las Vegas or Seattle,’ Mil. Bus. J. (July 6, 2015), http://www.bizjournals.com/milwaukee/blog/2015/07/bucks-feigin-if-arena-dealnot-approved-nba-will.html.

[6] Matt Moore, With NBA Expansion Rumored, A Look at the Pros, Cons and Prospective Cities, CBS Sports (Oct. 13, 2016), http://www.cbssports.com/nba/news/with-nba-expansion-rumored-a-look-at-the-pros-cons-and-prospective-cities/; Aneela Khan, Top 10 Cities the NBA Should Consider for Expansion or Re-Location, The Sportster (Feb. 1, 2015), http://www.thesportster.com/basketball/top-10-cities-the-nba-should-consider-for-expansion-or-re-location/; Joseph Deutschmann, 15 Cities that Should Have NBA Teams, Bleacher Report (July 20, 2010), http://bleacherreport.com/articles/422657-15-cities-that-should-have-nba-teams/page/14.

[7] 2015 Wisconsin Act 60 (2015).

[8] Wisconsin Senate Bill 209, § 229.461 (2015).

[9] Id. at § 229.461(2)(a)–(g).

[10] Id. at § 229.461(1)–(2).

[11] Team Non-Relocation Agreement between Wisconsin Center District and Milwaukee Bucks, LLC, rec. B (Apr. 13, 2016).

[12] Id.

[13] Braves Timeline, Atlanta Braves, http://atlanta.braves.mlb.com/atl/history/timeline.jsp (last visited Aug. 26, 2016). The relocation year listed above–1953–is the year that the team played its first home game in the new city. Milwaukee Braves: 1953 Season and History, Milwaukee Braves, http://www.milwaukeebraves.info/1953.htm (last visited Dec. 2, 2016). The Braves’ move to Milwaukee in 1953 was the first MLB relocation in fifty years. March 18th in Baseball History: 1st Franchise Move in 50 Years, Today in Baseball, http://www.todayinbaseball.com/cms/03181953-braves (last visited Dec. 2, 2016).

[14] Brewers Timeline, Milwaukee Brewers, http://milwaukee.brewers.mlb.com/mil/history/timeline.jsp (last visited Aug. 26, 2016). The Pilots were a one-year-old expansion team at the time of their move, and this made the move controversial. Jim Caple, Seattle Pilots Barely Remembered, Except Through Brewers, ‘Ball Four,’ ESPN (Aug. 24, 2016), http://www.espn.com/mlb/story/_/id/17083888/seattle-pilots-now-milwaukee-brewers-barely-remembered-ball-four. Most leagues since then have made a ruling that expansion teams cannot move until they are at least five years old. Sports Teams That Moved, Kerrera House Press, http://kerrerahousepress.com/?page_id=307 (last visited Dec. 2, 2016).

[15] Don Walker, A Tight Grip on Brewers, Mil. J. Sentinel, Jan. 20, 2004, at 3C.

[16] What process does the NBA follow when deciding whether to allow a city without a team to get one? Is it different for the NFL, NHL, and MLB? Answer by Mohit Kumar, June 4, 2014, http://www.quora.com/What-process-does-the-NBA-follow-when-deciding-whether-to-allow-a-city-without-a-team-to-get-one-Is-it-different-for-the-NFL-NHL-and-MLB

[17] Martin J. Greenberg, NBA Relocation, GreenbergLawOffice (Feb. 20, 2015), http://www.greenberglawoffice.com/nba-relocation/.

[18] Id.

[19] Martin J. Greenberg & Bryan M. Ward, Non-Relocation Agreements in Major League Baseball: Comparison, Analysis, and Best Practice Clauses, 21 Marq. Sports L. Rev. 7 (2010).

[20] Id. at 13.

[21] Id.

[22] Team Non-Relocation Agreement, supra note 11.

[23] Id. at § 2.1–2.3.

[24] Wisconsin Senate Bill, §229.461(3)(a) (2015).

[25] Id.

[26] Team Non-Relocation Agreement, supra note 11, at § 4.1.

[27] Id.

[28] Id. at § 4.3.

[29] Greenberg & Ward, supra note 19, at 34–35.

[30] See id. at 34; see also Black’s Law Dictionary at 1407 (7th ed. 1999) (Defining specific performance as “[a] court-ordered remedy that requires precise fulfillment of a legal or contractual obligation when monetary damages are inappropriate or inadequate, as when the sale of real estate or a rare article are involved.”); see, e.g., Bali v. Christiana Care Health Servs., 1999 Del. Ch. LEXIS 128 (Del. Ch. June 16, 1999).

[31] Greenberg & Ward, supra note 19, at 35; See chart at Section VIII, id. at 60.

[32] A temporary restraining order is a “court order preserving the status quo until a litigant’s application for a preliminary or permanent injunction can be heard.”  Greenberg & Ward, supra note 19, at 35; Black’s Law Dictionary, supra note 30, at 1477.

[33] A preliminary injunction is “a temporary injunction issued before or during trial to prevent an irreparable injury from occurring before the court has a chance to decide the case.”  Greenberg & Ward, supra note 19, at 35; Black’s Law Dictionary, supra note 30, at 358.

[34] A permanent injunction will be granted only at the end of a trial or hearing on the merits of a case.  Greenberg & Ward, supra note 19, at 35; see Black’s Law Dictionary, supra note 30, at 358.

[35] See chart at Section VIII, Greenberg & Ward, supra note 19, at 60.

[36] Technically, the team could refuse to play anywhere, however unlikely that may be. Id. at 35, n. 110.

[37] Id. at 35; Bruce W. Burton & Matthew J. Mitten, New Remedies for Breach of Sports Facility Use Agreements: Time for Marketplace Realism, 99 Iowa L. Rev. 809, 821–22 (2003).

[38] Courts may be reluctant to grant specific performance because of, among other reasons, the administrative burdens of supervising the parties to make sure each side is fulfilling its obligations over the full term of the contract, which could be 20+ years in the case of an MLB team non-relocation agreement.  Greenberg & Ward, supra note 19, at 35, n. 112. See also id. at 71, Section X.A.1.

[39] Greenberg & Ward, supra note 19, at 34–35.

[40] Team Non-Relocation Agreement, supra note 11, at § 5.1(a).

[41] Id. at § 5.1(a)(i)–(ii).

[42] Id. at § 5.1(b). See 11 U.S.C. § 101(5) (2016); 11 U.S.C. § 365 (2016).

[43] Team Non-Relocation Agreement, supra note 11, at § 5.1(c)–(g).

[44] Id. at § 1.

[45] Id.

[46] Id.

[47] Greenberg & Ward, supra note 19, at 38–39.

[48] A city would have to be guaranteed a replacement MLB team; as discussed above, such a guarantee is virtually impossible.  And even in this situation, a strain from the loss of ‘psychic income’ would occur. Id. at 38, n. 128.

[49] A home city will likely sue for specific performance of the non-relocation agreement, an injunction prohibiting the team from playing in another location, and a temporary restraining order prohibiting the team from proceeding with relocation plans during the pendency of the lawsuit. Id. at 38, n. 129.

[50] Traditional remedies for breach would not provide any compensation for loss of ancillary economic benefits to the community or for loss of psychic income. Id. at 38, n. 130.

[51] Id. at 39; Pac. Mech. Corp. v. City of San Luis Obispo, 2009 U.S. App. LEXIS 25006, 2–3 (9th Cir. Cal. Nov. 13, 2009) (citations and internal quotes omitted, emphasis in original).

[52] Greenberg & Ward, supra note 19, at 39; see, e.g., Ladco Props. XVII v. Jefferson-Pilot Life Ins. Co., 531 F.3d 718, 720 (8th Cir. Iowa 2008) (“[a] liquidated damages provision is enforceable and will not be considered a penalty where (1) damages are speculative or difficult to ascertain, and (2) the amount stipulated is a reasonable estimate of probable damages or the amount stipulated is reasonably proportionate to the damages actually caused by the breach.”). Id.

[53] Greenberg & Ward, supra note 19, at 39; see, e.g., Ladco Props, 531 F.3d at 720 (“Such a provision is valid if the liquidated damages amount represents an estimate of actual damages likely to result from the breach; if instead it represents a fixed amount designed solely to punish a party for a breach, it amounts to an unenforceable penalty.”). Id.

[54] Greenberg & Ward, supra note 19, at 38–39.

[55] Team Non-Relocation Agreement, supra note 11, at § 5.2(b).

[56] Id.

[57] Team Non-Relocation Agreement, supra note 11, at Exhibit A to Team Non-Relocation Agreement, Type I Non-Relocation Default Liquidated Damages.

* Notwithstanding the definition of “Operating Year” in the Team Agreement, if the first Operating Year under the Team Agreement commences after the NBA All-Star Game during the Basketball Season of such first Operating Year, then, for the purposes of this Exhibit A only (and for no other purpose under this Agreement or any other Project Agreement), the first Operating Year shall be automatically extended through the end of the second Operating Year under the Team Agreement. For the avoidance of doubt, if the first Operating Year is so automatically extended, then there shall not be less than 30 Operating Years for the purposes of this Exhibit A (and the Type I Non-Relocation Default liquidated damages hereunder in the last Operating Year shall be $200,000,000). Id.

[58] Id. at § 5.2(a).

[59] Id.

[60] Id. at § 5.2(c)–(f).

[61] Id.

[62] Tom Daykin, Wisconsin Center District Approves 30-year Lease for Bucks’ New Arena, Mil. J. Sentinel (Apr. 13, 2016) http://archive.jsonline.com/business/wisconsin-center-district-board-approves-30-year-lease-for-bucks-arena-b99705536z1-375553911.html.

[63] Id.

[64] AP, Bucks Sign 30-year Lease with Arena Owner, NBA (Apr. 13, 2016) http://www.nba.com/2016/news/04/13/milwaukee-bucks-sign-30-year-lease-with-arena-owner.ap/.

[65] Charles F. Gardner, Bucks Owner Wes Edens Says Vote is ‘Just the Beginning,’ Mil. J. Sentinel (July 29, 2015) http://archive.jsonline.com/sports/bucks/bucks-owner-wes-edens-says-vote-is-just-the-beginning-b99547142z1-319754401.html.