Explaining Ohio’s suit against PSV with UCLA law professor Steven Bank

Capital City Soccer readers, you’re in for a treat today.

I was lucky enough to take some time out of UCLA law professor Steven A. Bank’s day and ask him a few questions about the incipient lawsuit the State of Ohio and City of Columbus have brought against Precourt Sport Ventures.

Bank answered a lot of questions I think many common Austin soccer fans are curious about, so enjoy his responses below—they’re incredibly helpful.

Zach Mason: So, the State of Ohio is suing Precourt Sport Ventures for allegedly breaking an implied contract, in hopes of keeping the Columbus Crew from moving to Austin. Can you start by telling us what the State of Ohio is claiming PSV did wrong? 

Steven A. Bank: The State of Ohio and City of Columbus (the “plaintiffs”) filed a complaint seeking a Declaratory Judgment and injunctive relief. The former is what you seek when there is some uncertainty about whether a law is valid and/or applies in a particular case and you want a court to “declare” that it does and order the party to comply. In this case, the plaintiffs are asking the court to declare that PSV and MLS cannot move the Crew from Columbus to Austin or any other city without complying with R.C. 9.67.

They are also asking the court to bar PSV and MLS from moving absent compliance with the statute (the injunctive relief). The “implied contract” language that has been bandied about in the briefs is simply a way to characterize what the plaintiffs claim that the defendants agreed to by accepting financial assistance in a state that has R.C. 9.67 in the books. This isn’t a breach of contract case, though, and, indeed, the plaintiffs are not actually alleging that the defendants did anything wrong…yet.

There is some dispute about whether the defendants are actually complying with the statute on their own already (i.e., by providing notice and listening to offers for the club), but that’s because of the defendants’ legal strategy.

They are arguing (1) the statute is invalid, (2) if it is valid, it doesn’t apply to us, and (3) if it is valid and it does apply to us, then this lawsuit (and the oversight of the court of the compliance process, which the plaintiffs seek) is unnecessary because we’re complying voluntarily anyway.

ZM: What exactly is R.C. 9.67, and does it apply to PSV or the MLS? 

SAB: R.C. 9.67, otherwise known as the Modell Law, is a statute that requires an owner of a professional sports team that uses a tax-supported facility for most of its home games and receives financial assistance from the state or a political subdivision (such as a city or county) that seeks to move somewhere else to either get permission from the city/county in which it is located before moving or give the city/county at least 6 months’ advance notice of its intent to move and give the city/county or any individual or group of individuals living in the area the opportunity to purchase the team during that time.

The statute was enacted after Art Modell moved the Cleveland Browns to Baltimore, but it has never been used or tested in court in the over two decades it has been on the books. This is part of the reason there is uncertainty about whether the law is valid or applies in this case.

The defendants have argued that the statute does not apply to them on at least two grounds:

  1. They claim that MLS is the owner of the Crew and PSV is just an investor-operator.  This relies on the single-entity notion of the league, in which the teams are just divisions of the entity (the players are contracted to MLS, not the investor-operators), and the investor-operators such as PSV are given the right to operate the league’s team in a facility owned or leased by the investor-operator. PSV has to share a certain percentage of ticket revenues with the league for Crew games, but could use the facility for other purposes and keep the entire amount itself. So, the theory is that any financial assistance benefitted PSV, but not the owner of the team (MLS).
  2. They claim that the allegations of financial assistance are really just evidence that the facility is tax-supported and don’t constitute separate evidence of financial assistance (since the statute requires both).

ZM: What all falls under “financial assistance” in this context? 

SAB: Not clear. That isn’t a defined term under the statute. That is part of what the plaintiffs hope the court will declare in the case—that what they allege the defendants received will be sufficient to constitute financial assistance for purposes of the statute.

ZM: In PSV’s argument, they say, “The freedom to relocate a sports team and the right to sell (or not sell) that team to buyers on equal terms throughout the country are guaranteed by the Constitution.” Is this true or false, and why? 

SAB: MLS/PSV’s argument is their characterization of what they claim the US Supreme Court and lower federal courts have held in cases involving at least a few constitutional rights:

  1. “Dormant Commerce Clause” (the notion that the Federal gov’t has the explicit right to regulate interstate commerce under the Constitution and, even if it does not in some particular area, the state may not directly regulate interstate commerce itself or effectively favor in-state interests over out-of-state interests in areas involving interstate commerce operating within the state), and
  2.  the “Privileges and Immunities Clause” (the notion that states should not be able to unreasonably discriminate against the citizens of one state in favor of the citizens of their own state because we are supposed to be a United States in which citizens of one state can operate freely in another state).

ZM: Where does “notice of intent” come into play here? 

SAB: R.C. 9.67 requires an owner to give “notice of the owner’s intention to cease playing most of its home games at the facility and, during the six months after such notice” give local residents an opportunity to purchase the team.

The question is whether PSV/MLS have provided sufficient notice of intention to start the six month clock. PSV originally discussed pursuing parallel paths between Austin and Columbus, so that might suggest it has not decided yet whether it intends to leave, meaning the clock has not started regardless of what notice it has provided.

Presumably, if the six month period had already started and no offer had been made, PSV would be free to move the Crew regardless of whether R.C. 9.67 were valid and applicable or unconstitutional.

ZM: The argument that PSV didn’t know exactly how to provide that notice…does that actually carry any water? 

SAB: There’s a fair argument that nothing is precisely clear about this statute until a court has had a chance to rule on it and its requirements.  Indeed, that’s part of the function of a declaratory judgment—to resolve any uncertainties so the parties can comply if necessary.

Nevertheless, it does appear that PSV has been attempting to have it both ways. It has provided notice, but it and MLS have also hedged against that notice by pursuing conversations with Columbus about a new stadium etc.

ZM: How strong do you think the State of Ohio’s case is? What percent chance would you give the State of Ohio to win this case?

SAB: This is one of those cases where the forum matters. In Ohio, where are all judges and supreme court justices are elected, this is a fairly popular statute, and the State/City are taking a popular position on a statute in which the legislative history very likely supports the State/City’s interpretation of the intent of the statute and its application in this case, it would be surprising if they were to lose on the statute itself.

PSV/MLS’ arguments seems primarily directed at the constitutional case it would likely make in federal courts if the case goes that far. Indeed, even their argument on notice seems to be made more with an eye to emphasizing the burden the statute is placing on interstate commerce, rather than with the hope of convincing the local judge that their compliance with the statue is sufficient. If the defendants are going to “win” this case, it would likely be on the constitutional arguments and likely in a federal court.

I want to once again thank Professor Bank for sharing his tremendous insight on the matter. For more super interesting legal content, make sure to follow him on Twitter at @ProfBank.