MLS to ATX #10: Update on City of Austin Resolution and Ohio Lawsuit to Save the Crew

By | 2018-04-20T23:36:18+00:00 April 20th, 2018|Austin Sports Law Blog|0 Comments

Since my last article, the MLS to Austin story has continued to develop on two fronts. Here in Austin, the City Council approved a resolution directing the City Manager to complete a “community engagement process” and a detailed analysis of McKalla Place as a possible stadium site.

Meanwhile in Ohio, PSV and MLS responded to the lawsuit by giving notice of their intention to leave Columbus, prompting the State of Ohio to move to toll the six month notice period and effectively enjoin the team from leaving Ohio until the lawsuit is resolved. Then last night, PSV and MLS moved to dismiss the lawsuit.

In this article I’ll try and summarize these latest developments and look ahead to what might happen next.

Austin Update

A couple of days after my last article, the owner operators of the Columbus Crew, Precourt Sports Ventures (PSV) announced that, in spite of my idea to utilize both McKalla Place and Guerrero Park, it had settled on McKalla Place as the preferred site for an MLS Stadium.

PSV stated that it was looking forward to working with the City of Austin to create a world-class soccer stadium on the disused land near the Domain. A resolution was then drafted and set for discussion at the City Council meeting on March 22nd.

The proposed resolution was number 99 on a packed agenda that day, and it was not until just after midnight that the resolution passed unanimously stating that the Austin City Council was “strongly interested in continuing a deeper analysis of this site”.

The City Manager was directed to provide a detailed analysis of 10414 McKalla Place as a potential site for a major league soccer stadium, including:

  • An economic analysis of direct and indirect benefits;
  • Financial opportunities and challenges;
  • Traffic considerations; and
  • A community engagement plan with stakeholders.

The City Manager was directed to report back no later than June 1, 2018. Read the resolution here.

Although the resolution passed unanimously, I still get the feeling that the City Council are not completely convinced on PSV and MLS in Austin. Although the level of opposition to the proposal has decreased significantly since city-owned parkland was removed from the discussion, some City Council members have commented that they remain skeptical of the benefits of a professional soccer team.

There are two dates set for City Council meetings in June – June 14 and June 28. After that, there are no scheduled meetings until August. If everything goes to plan, the City Council would hold a vote on whether to authorize negotiations for a lease of the property to PSV in June.

The new team though will still need somewhere to play for the 2-5 years it will take to build a stadium. The soccer field at UT remains the most obvious location for that but Chris Bils of the Statesman reported on March 29th, that the position of the University of Texas was, first of all, that no one from PSV or MLS had approached them about using any UT facility, and second of all, that they saw ‘no added value’ to UT in allowing such a use.

I wrote earlier this year about why I don’t think UT would help out a soccer team here in Austin and I have not changed my position. Even if McKalla is confirmed as the permanent site for a stadium, the temporary stadium issue remains a issue.

Ohio Update

Meanwhile in Ohio, a lawsuit was filed on March 5th aiming to enforce the statute that requires certain owners of a sports team to give notice of their intention to leave, and then provide an opportunity for local investors to purchase the team. I’ve wrote at length about this statute in January and then again the day after the lawsuit was filed in March.

A lot has happened already with that lawsuit. First of all, I wrote last month that no one had said for sure that the Columbus Crew were actually moving to Austin, so I said that the notice requirement probably wasn’t in play yet. Well, a few weeks later MLS published a letter saying that, actually, it could be argued that they gave notice back in October 2017, and then again in November 2017. And then just so that no one was in any doubt, MLS said here is our notice now.

And that was the biggest development so far for me. That March 16th letter where MLS said that notice had been given, but “to the extent such notice is deemed not to have been given, this letter shall constitute such notice”. That letter was the first public confirmation that MLS was intending to move the Columbus Crew to Austin. It wasn’t just exploring the options any more, it was leaving.

Since then the State of Ohio and City of Columbus have asked the court to suspend the 6 month notice period pending the outcome of the lawsuit. This is probably their best hope of keeping the team in Columbus a bit longer. I don’t think they will win the lawsuit. And I don’t think PSV or MLS will sell the team. But maybe this causes some delay in the process.

Last night (April 19) MLS and PSV filed a motion to dismiss the case pursuant to Rule 12B of the Ohio Rules of Civil Procedure. The rule appears to be based on the Federal Rule 12(b)(6) motions to dismiss.

This type of motion is pretty common in commercial litigation, but it is rarely granted. It’s not a motion that brings forward new facts and it’s not a motion that goes to the merits of the case. It’s a purely legal and/or procedural argument where you are basically saying that even assuming everything in the Plaintiff’s lawsuit is true, there is no possible way that Plaintiff could win. I have won on motions to dismiss but it’s rare. There usually has to be a major defect in the Plaintiff’s case.

Here you have a case where the State of Ohio and the Attorney General of Ohio have filed a lawsuit to try and enforce their own, properly enacted Ohio legislation. It would have to be a very brave judge to turn around and tell the State and the AG that there is no way they could win on their own laws. I still think that MLS would ultimately prevail in this lawsuit, but I expect the motion to dismiss to be denied. At the very least, the law is arguable.

There were a couple of interesting points in the motion though. Most of the MLS arguments were constitutional and I might get into those in a future post. It also argued that the statute was vague, and it is, but it’s not so vague that the case gets dismissed. Towards the end of the motion though, MLS did say this: “PSV, a Delaware limited liability company, has the contractual right to operate an MLS club and has a corresponding minority equity interest in MLS”.

Their point was that the intangible rights at issue here are properly located in Delaware, or in New York, so Ohio can’t force a sale of those rights. But as far as I know, this is the first time that MLS has described the relationship between the teams and the league. I’ve described it as a license to play in the league in earlier posts, and certainly if the right is contractual between the team and the league, and both sides agreed to terminate that contract, then it has the same effect as a license.

Ok that’s enough about intangible rights.

I’m going to stop now. It’s late and I’m boring myself. There is a lot more that could be written about these legal arguments, but now is not the time.

Here are my general thoughts on this motion to dismiss. We’ve only seen one side’s arguments. The State of Ohio will respond in a few weeks time and will strongly oppose the motion. There may even be a hearing in Court. Either way, I expect the motion to be denied. I think the arguments are good, but it’s just very difficult to win this sort of motion at the outset of the case.

Also my brief research of Ohio law shows that MLS cannot appeal the denial of a motion to dismiss. Fans of the Columbus Crew will celebrate like they have won the league when the motion to dismiss is denied, but it wont really mean anything. The case would just continue as if the motion had not been filed.

Of more interest (for lawyers at least) is the pending fight over discovery, especially over financial information, and of more relevance to Austin will be the Court’s decision as to whether to allow the six month opportunity to purchase period to be extended. If it does, that could make things messy. If it doesn’t then mark your calendars for September 16 2018 as that will be the last day for anyone to have an opportunity to purchase the Columbus Crew. You can also expect a lot more legal filings before then. If you really want to read them, most of the papers in the case can be found on the Court’s website here.

Austin soccer fans though should take some comfort in the fact that both PSV and Major League Soccer are aggressively fighting this lawsuit. It’s clearer now, more than ever, that both PSV and MLS want to be in Austin.

And here in Austin, we can expect the City Manager to report back on McKalla Place before the end of May. Then a vote should be held at City Council later in June on whether to move forward with McKalla as a site for MLS.

Things are moving quickly, but for supporters of MLS in Austin, things are moving in the right direction.

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