Kroenke Reimbursing NFL for Bulk of Rams’ Litigation Settlement
The NFL is set to avoid a potential legal controversy with Rams owner Stan Kroenke over litigation stemming from his team’s relocation from St. Louis to Los Angeles. On Tuesday, ESPN reported that NFL owners plan to approve a resolution directing Kroenke to reimburse the league $571 million—about 72% of the $790 million the league paid to St. Louis to resolve a lawsuit over the Rams’ relocation.
Last November, Kroenke reportedly threatened to not honor an indemnification agreement with the NFL over expenses in defending a lawsuit brought by St. Louis’ city and county governments in 2017. In the litigation, the governments argued they were third-party beneficiaries of the league’s relocation policy, which they insisted was wrongfully applied when the NFL approved the relocation. The case was set to go to trial this past January, with NFL commissioner Roger Goodell and owners as potential witnesses, but the parties settled in late November.
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One thing left unresolved after the settlement nearly a year ago was the extent to which Kroenke should pick up the tab.
Had Kroenke, fellow owners and the NFL failed to resolve that matter, Goodell would have likely attempted to arbitrate the dispute under his authority as commissioner. The league constitution confers in him “full, complete and final jurisdiction and authority to arbitrate … any dispute involving two or more [owners] of the League.”
However, Kroenke might have objected to Goodell, or a surrogate, playing such an instrumental role given an apparent conflict of interest. Goodell works for all the owners, so Kroenke would have been going up against Goodell’s “bosses.”
That scenario created a risk for litigation, wherein Kroenke could have refused the league’s dispute resolution process. The NFL, in turn, would have had potential breach of contract and unjust enrichment claims (since Kroenke gained the most from the settlement and relocation). Kroenke, meanwhile, could have countersued for breach and antitrust violations, with owners depicted as conspiring against him.
Although the NFL often markets itself as acting with one voice, the league has endured two high-profile litigations with owners. In the 1980s, Raiders owner Al Davis sued over the league trying to block his relocation of the team from Oakland to Los Angeles. In the 1990s, Cowboys owner Jerry Jones and NFL Properties battled in litigation over Jones’s desire for the Cowboys to sign their own sponsorship deals. These types of legal controversies attract unwanted national headlines and give rise to litigation disclosures that the league would prefer to avoid.
No such litigation will occur with Kroenke given the pending resolution. ESPN reported the league will lift allowable debt limits on Kroenke to facilitate the payment.
The Rams, which now play in the nation’s second largest media market, are the second most valuable NFL franchise, according to Sportico’s 2022 NFL valuations. The team is worth $5.91 billion, trailing only the Cowboys, which are worth $7.64 billion.
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