WGR reports 10 year lease

[San Jose Bills Fan]

I don't recall this being posted in this topic.

 

It's JW's piece on the lease. There are some interesting details throughout so read attentively.

 

http://sports.yahoo.com/news/ny-official-state-nfls-bills-143955623--nfl.html

[BillnutinHouston]

A good day for WNY and Tony Farina.

[HalftimeAdjustment]

This is a pretty good deal. The reality is that the Bills did not have any immediate relocation prospects... we benefitted again from Ralph hanging on. However I do not think the terms are particularly favorable to one side over the other. The question of whether a new stadium will be built must be dealt with in year 4-5. Otherwise, the Bills will be free to look at other cities and break the lease in year 7. Also if a new owner takes over withon 2 years, he may appreciate a period of stability before tackling the stadium issue. For the area, $95 million is less than expected and the Bills will stay at least 7 years. All in all a very fair deal.

[ICanSleepWhenI'mDead]

You can sue over any deal. That doesn't mean squat. When you buy the Bills you buy any agreements the team makes. Unless you can find me a precedent that applies, I call BS.

 

PTR

Let me start by saying I hope the Bills stay in Buffalo, both during and after the term of the new 10 year lease. I also agree with you that the contractual obligations of the Bills, including the lease for Ralph Wilson stadium, don't disappear when a new owner buys the team, whether or not Ralph is then living.

 

As for calling BS, well, I suppose even robots are entitled to their opinions. I'm just some anonymous voice on a football message board with a bad sense of humor and a lot of brothers named Darryl. I'm not asking you to believe there's a potential problem with the opt-out clause just because I say so - - but maybe you should think about whether the excerpts from the links below were written by people with some expertise:

 

1. Leases are contracts involving real estate that generally are governed by contract principles. A lawyer who specializes in litigating complex commercial real estate disputes says so:

 

http://www.pircher.c...ticle.php?i=327

 

Although a lease consists of real property and contract components, it is generally interpreted under the rules of contract construction.

 

2. Same source states that if a lease requires an unreasonably large payment for a tenant's default, the courts may find the payment to be an unenforceable penalty:

 

• Liquidated Damages: A liquidated damages provision is an attempt by the parties to a contract to approximate the damages that would be incurred by a party when the other party breaches a particular provision.

 

* * * * * * * * * * *

The parties agree that the specified amount identified in the contract will be paid by the breaching party. The benefit of such a provision is that in situations in which damages are difficult to calculate, the parties have already agreed upon a number. However, if the parties do not follow the rules when drafting the provision, then a court may find that the provision is nothing more than a penalty and, therefore, unenforceable. In California, leases are subject to the liquidated damages rules. Those rules generally provide that liquidated damages provisions are valid “unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.” Care must be given to avoid an unreasonable amount to be charged upon a lease default. If there is no reasonable relationship between the amount and the potential damages caused by a breach of the applicable lease provision, the court may very well hold that the provision is not enforceable.

 

3. Here's what a Virginia lawyer who advises commercial landlords and tenants says (from the 3rd piece down, the one posted on June 15, 2011):

 

http://fairfax-virgi....com/tag/lease/

 

Generally speaking, under the law of contracts, when a damages clause in a contract is unreasonably in excess of a landlord’s actual damages, it is an unenforceable penalty.

 

4. Here's what a Colorado law firm that represents landlords wrote in 2009 about opt-out payments in leases - - what they call a "lease break fee:"

 

http://thslawfirm.co.../ab26de3873.pdf

 

Lease break lease clauses are commonly referred to as lease break fees, breakers, lease termination fees, or liquidated damages.

 

* * * * * * * * * * *

Some courts have not enforced lease break fees on the grounds that they either do not meet the requirements for a liquidated damages provision or are a penalty. While no Colorado Court has ever ruled on lease break fees, plenty of Colorado legal authority exists for residents to make strong analogous arguments that Colorado legal

precedent on liquidated damages clauses should apply to lease break fees. However, under liquidated damages legal precedent courts could readily conclude that lease

break fees are a penalty, and thus not enforceable.

* * * * * * * * * *

If you use a lease break fee, you have to be reasonable. The higher the break fee, the less likely it will be enforced because the court is much more likely to view it as a penalty.

 

5. By now you should understand that there's a reasonable basis for believing that if somebody buys the Bills, they might ask a court to decide if the $400 million opt-out clause is an unenforceable penalty. Although it does not specifically talk about leases, here's a lengthy law review article that discusses how courts have decided whether contract clauses are unenforceable penalties:

 

 

http://ir.lawnet.for...enalty fordham"

 

A penalty is a provision in a contract which "is designed to deter a Party from breaching his contract" by requiring the payment of a stipulated sum in the event of such a breach. A penalty is said to operate in terrorem. Such a provision is void and a party seeking to enforce it may only recover his actual damages. On the other hand, a provision which is designed "to estimate in advance the actual damage which would probably ensue from the breach [of a contract]" will be enforced as liquidated damages.

 

Why would Ralph and politicians agree to such a large opt-out fee if they know it might be unenforceable? Stay tuned - - this is already a long post and I don't have time to explain right now. I still gotta buy my middle brother Darryl's Christmas gift.

Edited December 22, 2012 by ICanSleepWhenI'mDead

[mrags]

Ok. I didn't read that while thing. It's a lot of legal crap that I probably wouldn't understand anyway. But I saw there were quotes from Colarado and Virginia. Which mean absolutely squat s#%t here in NY. Of course, I'm not saying you might be right, but it probably doesn't hold true in NY. Even if it did, a lease on something like an office building and a personal residence is probably much different than a 1Billion dollar NFL franchise. Probably much different from a state and county run facility. Of course I'm not saying its not possible there's some sort of opt out, but chances are if the state and county went through all this trouble to add in a $400million opt out policy then there's no way out of it. In fact, a judge in the matter would most likely side with the state and county and say that was part of the terms when purchasing the team in the first place. It would be very public and the terms would be known of for sure. Again, I'm not saying it couldn't happen, but to say it like its going to happen is just a false. In fact, if it did happen, and some billionaire won the bid in the team and wanted to move it while trying to skimp on paying the $400m, chances are the legal battle and court itself would last so long it wouldn't be until after the 7 years is up anyway.

 

I'm no lawyer, I'm a lowly lowly landlord and Bills fan. And I believe there are holes in your argument.

 

Enjoy your day of shopping.

[BillsWatch]

What happened to the original 200+ estimate received by the Bills for renovations, etc?

 

I think they determined that much in one chunk was unpalatable to politicians / taxpayers so they went with a shorter / less expensive deal.

[PromoTheRobot]

@ICSWID, not disputing your fine examples, and I am no lawyer, but I have to side with mrags here. There must be a difference between a 2BR apartment lease and a municipal stadium, not to mention the difference in state law. I could easily see an argument that $400M is quite reasonable when you take the entirety of the economic impact of the Bills into account. And like mrags said, they could drag it through the courts forever. It would be easier and cheaper just to wait

till year 7.

 

FYI Sal just had a lawyer go over the lease deal on his show. Should be on audio vault shortly.

 

PTR

Edited December 22, 2012 by PromoTheRobot

[mannc]

Good news. BTW did anybody hear the guy call in and tell Buddy Nix he was absolutely wrong? I was ROTFL

As someone who no longer lives in WNY, and is therefore not often exposed to Bills pressers, hearing the interview with this hayseed was a shock. Of course there is the stubborn ignorance of modern NFL football, which is by now well documented. But the idea that a billion dollar enterprise would put someone like this in charge of its football operations is stunning and tells you all you need to know about why this franchise has floundered, seemingly forever.

Edited December 22, 2012 by mannc

[ICanSleepWhenI'mDead]

mrags & PTR,

 

You're both absolutely correct that decisions by state courts in CO and VA aren't binding on a New York court. But the idea that penalty clauses in contracts are unenforceable is a pretty basic one that doesn't seem to vary much between states. If you want to see what a New York court said about this issue when applying NY law, here's one example:

 

http://www.nycourts.gov/comdiv/Law%20Report%20Files/October%202001/Bates%20Advertising.htm

 

A liquidated damages clause will be upheld only if the amount fixed is a reasonable measure of the probable loss that the party would incur and it would be very difficult or impossible to determine the actual loss should a breach occur. (Truck Rent-A-Center v Puritan Farms 2^nd, 41 NY2d 420 [1977]). A clause that provides for an amount that is "plainly or grossly disproportionate to the probable loss" will be treated as a penalty and will not be enforced because "public policy is firmly set against the imposition of penalties or forfeitures for which there is no statutory authority." Id. at 424. The rationale for this rule is that the purpose of such a penalty clause is not to provide just compensation but, rather, to secure performance by the compulsion of the very disproportionate sum that must be paid if the work is not done. (LeRoy v Sayers, 217 AD2d 63 [1^st Dept 1995]). Also, the "tendency of the courts in doubtful cases is to favor the construction which makes the sum payable for breach of contract a penalty rather than liquidated damages, even where the parties have styled it liquidated damages rather than a penalty." (City of New York v Brooklyn & Manhattan Ferry Co., 238 NY 52, 56 [1924]; Schiffman v Deluxe, 100 AD2d 846 [2^nd Dept 1984]).

 

After my original posts above in this thread, a few more details about the new lease deal have come out:

 

http://www.buffalonews.com/apps/pbcs.dll/article?AID=/20121221/CITYANDREGION/121229782/two-bills-drive-1004

 

Some of those details make specifying $400 million as liquidated damages early in the new lease slightly more reasonable than the first sketchy reports about the new deal. Assuming Tim Graham's article has the details right, the combined public spending by the state and county over the full 10 year term isn't just $95 million for stadium repairs and improvements - - - there's also $7.7 million/yr for combined working capital, operating expenses and game-day expenses. It's not clear if the latter expenditures will vary over time, so let's call it $77 million over the full 10 year term.

 

Unlike the present lease, the new lease will actually require the Bills to pay some rent. At $800k/yr, that's another $8 million in maximum potential losses to the public if the Bills skipped town shortly after signing the new lease. Ignoring the fact that the public actually would save $7.7 million/yr in expenses if the Bills moved, if you just simplistically add those numbers up you can get to 95 + 77 + 8 = $180 million. Maybe, just maybe, that's close enough to $400 million to make $400 million a reasonable estimate of potential public damages if the Bills skip town early in the new lease.

 

But there's still a problem. If the politicians were actually trying to estimate what the public's losses might be if the Bills moved, that estimate would be highest in the early years of the lease (when the stadium repairs and improvements had been made and paid for but not yet recouped from tax revenues), and gradually decrease over time. In the last year of the lease, when it was about to expire, the estimated public losses from a Bills move would be much less. That's the general shape of how the opt-out fee in the current lease changed over time.

 

But instead, the new lease specifies a $400 million liquidated damages amount for any move in the first 6 years of the lease, followed by a year at about $28 million, and then back to $400 million for the last 3 years of the 10 year term. We also have politicians predictably on record saying they made the first 6 years of the lease "ironclad." That may help them politically, but it's just plain stupid from an enforceability standpoint. They might as well just say that they wrote a big penalty clause into the lease for every year except year 7.

 

There's just no way to rationally argue that the way the opt-out fee varies over time is a reasonable estimate of the losses the public will incur if the Bills were to move out at various times during the 10 year lease. So bottom line is that I still think the liquidated damages clause in the new lease won't be enforced by a court if it ever gets litigated.

 

Obviously, predictions about the enforceability of the new lease would be easier if we get to see the actual text after it is signed. I'm actually encouraged by the disclosure in the Tim Graham article about how the lease will explicitly give the Bills the right to seek an injunction from the court to prevent the Bills from moving - - but we have almost no details about how that clause will be set up.

 

As for the $400 million opt-out fee, it's a fair question to ask why Ralph and the politicians would agree to such a clause if they already knew there was a good chance it would not be enforceable in court. Check this out:

 

http://moritzlaw.osu.edu/students/groups/oslj/files/2012/03/70.5.Sullivan.pdf

 

Contracts frequently contain clauses that are not enforceable—at least, not enforceable as written. While mistake may explain some such clauses, invalid terms are often used by sophisticated actors who are well aware that they are unenforceable as written. Presumably, this is because such clauses have utility for those who impose them, and the most obvious reason is that the other party to the contract (or, conceivably, some third party) does not realize the clause is unenforceable as written or is unwilling to risk the resources needed to establish its invalidity.

 

Ralph and the politicians both benefit if the public believes that the new lease is "ironclad," even if in reality any new owner of the Bills could move the team. Ralph makes more $ (paying customers won't stay away thinking the team is about to move), and the politicians get to take credit for being tough negotiators who locked the Bills into staying in Buffalo for the next 10 years.

 

I got my shopping done today and will be going camping and off the grid for a few days. If you want to discuss this more I'll check back here after the 25th.

 

Either way, I hope y'all have a nice Christmas!

[mrags]

@ICSWID. You sound like a lawyer here. And if you are, that's fine. Either way, I'm not taking any pessimistic road here. The fact is the lease is here. It's got an more of an "Ironclad" $400m opt out clause that I didn't have before and that's a good thing.

 

Personally I don't think it holds up in court that someone would get that waved. They would know the terms when purchasing the team. This is something I don't have knowledge to in your examples. And honestly I'm not going to read them because they are probably very long and just like any legal document, probably very confusing.

 

On the end, they are here. It makes it almost impossible for an LA move. And I personally believe all the people "in the know" when they say the Bills aren't going anywhere.

 

Glad you got your shopping done. Merry Xmas. Happy new year. I also will globe gone and away from here for the most part as I have to go back to work tonight until after Xmas.