Sunday, June 22, 2008

Specific Performance of the Seattle Sonics' Lease

Keyarena_seattle Out in Seattle Judge Marsha Pechman (W.D. Wash) has been conducting a trial over whether the Seattle Sonics must abide their lease with of the city's KeyArena for the next two years or whether they can move immediately to their new home of Oklahoma City.  Interesting stuff, whether the city can require specific performance of the lease; I think the case for specific performance is strong here.  It looks like there isn't a material breach of the lease by the city, only by the team, so the question is one of remedies. 

Which will it be, then, damages or specific performance?  Now, courts are obviously (and for good reason) reluctant to give affirmative injunctions.  I wouldn't be holding my breath for an affirmative injunction requiring the team to play in the KeyArena.  But I think here that a negative injunction--you can't play anywhere else when you're scheduled to play home games--may be appropriate.  Why would a negative injunction be superior to damages?

The question is whether harm is irreparable (with apologies to Doug Laycock!)--and irreparable injury is determined by whether we can measure the damage in dollars.  I don't think we can--or at least we can't with the specificity that we usually demand.  The damages to the city are going to be somewhat are to compute--how much lost revenue will there be (not just from the stadium lease, but from the Sonics overall)?  There's been a lot of talk in the trial of how difficult (or not) it will be to gauge the lost revenue--and no surprise here the Sonics' owners say it'll be easy and the city says it'll be hard.  The difficulty of computing damages is one of the key factors in determining whether you're entitled to an injunction and I think all the city needs to do here is make the case for computing damages look murky.

Of course, we also balance the equities in determining injunctive relief--do we think that the harm to the city of not granting the relief is substantially outweighed by the harm to the Sonics of granting relief?  On this there's some important evidence.  The city's interest is substantial--their beloved team is leaving; many people whose livelihood depends on the team are going to be hurt; the ripples will go out for a long way.  What about the harm to the team?  They claim they're going to lose $60 million over the next two years--that's a substantial harm, of course.  But remember two things--first, that's their allegation.  Second, that's balanced against the harm to the city. 

For me (fan of aloha jurisprudence and other populist strains in property law) perhaps the most exciting piece of this equity puzzle is the public interest--which we typically consider in cases where there are interests at stake beyond the parties to the litigation.  This is a great example of one of those cases and I think it points in favor of a negative injunction.  The community's interest here (and remember this is an equitable question of whether we're going to allow a company to breach a contract and only pay money damages) is in favor of keeping the team for the fans, as well as the people in the city who need the work the home games generate.  Anyway, we'll all know soon enough!

Jim Brunner of the Seattle Times has a great article in this morning's paper on the case.  You can also follow the trial on Jim's blog.

Alfred Brophy

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I've been fascinated by this case since the very beginning. It's played out exactly as one would expect. I have however been mystified by the move, to of all places, Oklahoma City!! I find it hard to believe that the OC fathers could actually live up to their financial promises to the Sonics.

On the other hand, I have never bought into that smack about the economic impact of a team leaving a city. Impact? Yes. To the degree everyone cries about? Absolutely not. For every bit of testimony from one economic expert, there's 10 economists who tell a different story. In fact, countless studies have purported to show that it's invariably a losing proposition for a city to undertake wooing a pro sports franchise.

I've always been rather skeptical of the logic about preventing lease breaking based on the "people will lose jobs angle." If cities held all local businesses to that standard, there'd never be any corporate movement at all.

At any rate, does any of it really matter now that the beloved Celtics have once again risen to the top of the NBA?? The rest should just sit out next season and let Beantown have the crown.

Posted by: Sam Gompers | Jun 23, 2008 4:53:25 AM

Hi Sam--thanks for joining the conversation.

I'm far from expert on the economic impact of sports teams--though, boy howdy, 80,000+ fans coming into Tuscaloosa on Saturdays in the fall sure give the town a much-needed boost. And a place like OKC will get all sorts of benefits from a professional basketball team--lots of people coming from outside the city to spend money and probably lots of it. Plus, there will be additional focus in the national media. It'll put OKC "on the map" quite literally--at least on sports page maps. There's a corresponding loss of prestige for Seattle, as well as jobs.

One key issue for the judge is deciding on whether an injunction is warranted, of course. And here I think that the potential of lost jobs is relevant. We've seen this in lots of places before--perhaps most apparent to law students is the loss of jobs that might have followed an injunction in Boomer v. Atlantic Cement. Judges are entitled, indeed expected, to take the public interest into account in deciding on an injunction. At the end of the lease, the Sonics owners are, obviously, entitled to move from the KeyArena.

Posted by: Alfred | Jun 23, 2008 8:51:44 AM

Oh I certainly agree about the immediate influx of 'new money' into OC. What I had referred to was the fact that many economists have studied these things over the years and concluded that when all is said and done, the economic benefits aren't what they at first appear to be.

You know, about the legalities, I would love to see a nice compendium of the history and related legal wranglings associated with the moves of professional sports franchises.

As someone who watched with great pain and trauma the Colts sneak out of Baltimore in the middle of a cold, snowy March night some 24 years ago, my interest goes back to one of the seminal events in the industry.

That was my first memory of ever hearing the phrase 'eminent domain'--a tactic the Baltimore city fathers desperately attempted to employ against Robert Irsay, the owner of the Colts (and former owner of the Los Angeles Rams).

And then again, there's Mr. Al Davis--not enough space in the blogosphere for him!

Posted by: Sam Gompers | Jun 25, 2008 5:39:05 AM

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