Brian Schwalb, the Washington, D. C., attorney general who has litigated against the Washington Commanders over time seat plans, is now warning Monumental Sports &, Entertainment—the family of the Washington Capitals and Washington Wizards—that moving the clubs to a proposed new venue in Virginia would violate their legal obligations to the area.
” We fundamentally disagree with the Attorney General’s views, which are contradicted by the DC General Counsel as late as 2019 when the town ratified the Earth Lease”, a Monumental Sports director told Sportico.
The proclamation came in a text Monday to Monumental standard guidance Abby Blomstrom. Schwalb cites D. C. publicly financing$ 50 million in improvements to Capital One Arena ( then called Verizon Center ) in 2007 through municipal bonds. As Schwalb tells it, D. C. “expressly conditioned” the leasing on the market rent extending through 2047.
He also said the legislation does n’t authorize Monumental to prepay outstanding bond debt as a vehicle to terminate the lease earlier. The AG further stressed that D. C. officials, including Mayor Muriel Bowser and Council Chairman Phil Mendelson, support an additional$ 500 million in public funding to improve the area.
Next December, Monumental founder and CEO Ted Leonsis announced a open- private agreement to create a new venue in the Potomac Yard area of Alexandria, Va. The strategy remains a function- in- improvement as it requires republican support in Virginia, where both chambers of the legislature are controlled by the Democrats and the governor, Glenn Youngkin, is a Republican.
Anticipate Monumental Sports to subject to Schwalb’s disagreement that the company may post- pay the bonds. The teams and D. C. have negotiated some agreements, including a Earth Lease deal that leaves open the possibility that prepayment is achievable.
An attempt by D. C. to stop the relocation of the teams could spark a court fight, including over the legal capacity of Monumental Sports to prepay. States and municipalities have often struggled to block relocation before teams ‘ leases expire. Normally teams can eventually relocate by breaching a lease and paying monetary damages.
Leases, however, sometimes contain” specific performance” clauses, which require the team and government entity to perform the contract. These clauses express, in so many words, there would be no financial remedy—of any dollar amount—to adequately substitute performance of the lease.
Specific performance clauses are especially relevant to pro sports teams. They are unique tenants for venues since they are difficult, if not practically impossible, to replace. Their loss can trigger not only enormous monetary damages but also community, social and political damages that ca n’t be quantified. This is why government entities sometimes demand inclusion of a specific performance clause in a lease. If enforced by a court, such a clause would compel a team to not leave a venue until the lease has expired.
Specific performance clauses have a mixed record in court. In 1979, the City of New Orleans tried to block the New Orleans Jazz moving to Utah on the basis of a specific performance clause in the Superdome arena lease. The courts rejected that argument, in part because the Jazz had already moved and because of the heavy burden it would place on the NBA and other NBA teams. The Seattle SuperSonics were bound by a specific performance clause to remain at KeyArena, but, after a litigation settlement, still moved to Oklahoma City in 2008 and became the Thunder. On the other hand, the Minnesota Twins were ordered by a court in 2002 to play in the Metrodome because of a lease requiring they play there. The court order helped the Twins frustrate an MLB plan to contract two teams, with the Twins eyed as a prime candidate.
Given that the relocation of the Capitals and Wizards to Virginia remains a political uncertainty, it’s premature ( as Schwalb’s letter alludes ) to explore litigation. But the possibility of D. C. and Monumental disagreeing about whether the team has a capacity to relocate and, if so, how much money must change hands looms large as a future sports law controversy.
( This article has been updated with a comment from Monumental in the second paragraph, and with more information on potential legal ramifications in the seventh paragraph. )