Braves, D-backs in Litigation with Cities Over Stadium Leases

Currently, more than 75% of major-league teams — 23 out of 30, to be exact — play their home games in stadiums publicly owned by a local government entity. Each of these relationships between the franchise and its host municipality is, in turn, governed by a contract specifying the terms under which the government has leased its stadium to the MLB team.

As one might expect, disagreements between the franchises and their local communities occasionally arise under these lease agreements. Recently, two such disputes — one involving the Atlanta Braves and the other involving the Arizona Diamondbacks — progressed to the point that the team or local municipality opted to file a lawsuit against the other in state court.

S.M.P. Community Fund v. Atlanta Braves

In late December, the Atlanta Braves were sued in local state court by the S.M.P. Community Fund, an entity formed by the City of Atlanta to distribute funds generated by the Braves’ former stadium — Turner Field — throughout the local community. Under the terms of the Braves’ lease agreement, the team was obligated to contribute 8.25% of the parking revenue it generated at Turner Field, along with 25% of the net revenue generated from any special events held at the stadium, to the Fund. The Fund would then use these proceeds to benefit the neighborhoods immediately surrounding Turner Field.

According to the lawsuit, however, the Braves have allegedly been short-changing the Fund since at least 2010. Specifically, the team is accused of miscounting the number of parking spaces surrounding Turner Field, an error that allegedly enabled the Braves to underpay the city its fair share of parking revenue for a number of years. Similarly, the lawsuit asserts that the Braves also failed to pay the Fund its designated share of revenues from some of the special events held at the stadium. Altogether, the lawsuit estimates that the team has improperly withheld hundreds of thousands of dollars from the Fund over the past few years.

The Braves have not yet responded to the lawsuit, so it’s uncertain to what extent the team will dispute these allegations. For example, it is possible that the franchise will contest whether the Fund was, in fact, entitled to a share of some of the revenues it is seeking under the terms of the Turner Field lease agreement.

Along these lines, the Fund’s lawsuit specifically identifies ticket sales for public tours of the stadium as special-event revenue that the Braves wrongfully withheld from the city. The team could theoretically argue that these tours do not fall within the lease’s definition of “special events,” for instance, which are characterized as “events, meetings, conventions, assemblages, shows, presentation, concerts, games, contests or other gatherings” held at the stadium.

Ultimately, however, despite any potential legal objections the team might lodge against the suit, it would appear that the veracity of most of the suit’s allegations against the Braves should be relatively easy to determine. Consequently, one can probably expect that the parties will quietly settle the lawsuit at some point in the not-too-distant future.

Arizona Diamondbacks v. Maricopa County

Also likely to end in a settlement — albeit perhaps on a slower timetable — is the recent lawsuit filed by the Arizona Diamondbacks against Maricopa County under the team’s lease to Chase Field. The lawsuit is the latest escalation of a long-running dispute between the team and local government over the condition of the stadium — and, in particular, the lengths that the county is legally obligated to go in order to maintain Chase Field as a “state-of-the-art facility” under the terms of the team’s lease.

Specifically, the Diamondbacks allege that their lease obligates the county to fund a reserve account from which it will pay for various repairs to the stadium over the course of the lease. These reserve funds were to be generated, in part, from non-baseball events held at the stadium over the offseason. According to the team’s lawsuit, however, Maricopa County has failed to book a sufficient number of special events and, as a result, lack sufficient reserve funds to pay for all of the repairs that the team believes the stadium will require over the remainder of its lease.

For instance, while the Diamondbacks’ lawsuit notes that the Anaheim Angels have averaged more than $6 million per year in revenue from non-baseball events held at Angel Stadium, and the Padres more than $2.4 million per year from Petco Park, Maricopa County has scheduled fewer than 10 such special events per year, generating less than $650,000 in annual revenue. The Diamondbacks contend that, consequently, the county will be unable to fund the roughly $185 million in repairs that the team anticipates will be needed over the last 15 years of its lease in order to maintain Chase Field as a minimally safe, let alone state-of-the-art, facility.

Ultimately, the lawsuit asks the court to release the Diamondbacks from Section 11.2.1.2 of the team’s stadium lease. This provision restricts the team from exploring new stadium opportunities until 2024. Instead, the team insists that it should be free to pursue a new stadium arrangement immediately, in order to ensure that it has sufficient time to find a new home before Chase Field falls into such a state of disrepair that it can no longer safely host MLB games.

For its part, Maricopa County disputes the Diamondbacks’ characterization of both the financial state of the stadium-repair reserve fund, as well as the necessity of many of the team’s desired repairs to Chase Field. While county officials insist they have the funds necessary to maintain Chase Field, they also believe that many of the upgrades that the team is seeking are cosmetic — rather than structural — in nature, and thus are the Diamondbacks’ responsibility under the terms of the lease agreement.

Rather than expressing legitimate concerns about the state of Chase Field, Maricopa County officials instead believe that the Diamondbacks are simply looking for a way out of the existing lease. Along these lines, the county has noted that it had struck a deal last year to sell Chase Field to private investors — who would have then, in turn, repaired and updated the stadium — only to have the agreement fall apart after the Diamondbacks refused to meet with the potential buyers.

Ultimately, as with the lawsuit between the Braves and the City of Atlanta, the disagreement between the Diamondbacks and Maricopa County would appear to be of the sort that will eventually be settled in some manner (perhaps through a reworking of the team’s lease, allowing the Diamondbacks to take control of the booking of non-baseball-related events at the stadium). That having been said, the fact that the parties have been unable to resolve this dispute for several years suggests that any such deal may not be struck anytime soon.

We hoped you liked reading Braves, D-backs in Litigation with Cities Over Stadium Leases by Nathaniel Grow!

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Nathaniel Grow is an Associate Professor of Business Law and Ethics at Indiana University's Kelley School of Business. He is the author of Baseball on Trial: The Origin of Baseball's Antitrust Exemption, as well as a number of sports-related law review articles. You can follow him on Twitter @NathanielGrow. The views expressed are solely those of the author and do not express the views or opinions of Indiana University.

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madjockmcferson
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madjockmcferson

Surprise, surprise; the Barves are at it again. A reminder, once again, that sports teams are a drain on the taxpayers of the county in which they reside.

Bob Davidson
Member
Bob Davidson

you misspelled “city of” Atlanta, as they are the ones acting like juvenile brats after putting all their taxpayer eggs in the Falcons basket. Of course, you would know that if you lived here… Oh, and Barves, how funny and original!