Unlike breaking down the then-most recent updates in the many, many lawsuits of Trevor Bauer or Yasiel Puig pleading guilty to lying to federal agents (or changing his mind), sometimes a legal dispute arises related to the Dodgers that literally falls within my actual legal purview. Whereas I used to do civil litigation, I currently work on estate planning matters and real estate issues, so I see disputes like the one between the White Sox (and Dodgers) and the City of Glendale, Arizona all the time.
First off, kudos to our own Jake Dicker for providing an excellent introductory summary of the issue, which first came to my attention by way of Bill Shaikin of the Los Angeles Times on November 14.
Camelback Ranch, the current spring training home of the Dodgers and White Sox, is in need of a female locker room to accommodate female personnel working for teams due to a 2021 edict from Major League Baseball mandating a separate locker room for women to change at all major league stadiums, minor league stadium, and spring training locations.
Both the landlord, the city of Glendale (“City”) (by way of a legal entity it created to be the landlord), and the tenants, the Dodgers and the White Sox (“Teams”), are arguing the other side has the obligation to pay for it.
As a lawyer, this case is far simpler, far easier, and far more one-sided to talk about than the other subjects discussed in Law Talk. Objective contract terms in a lease are a far drier subject than credible allegations of sexual assault or admitting guilt (or withdrawing a plea of guilt) as to a federal offense.
This case is actually to the point where if I were brought in to advise the City, I would be quite sad, because of the impossible position I would have to argue legally. And conversely, if I were brought in to advise the tenants, prosecuting the case would feel like shooting fish in a barrel, which is technically impossible to fail.
Why? Because we are dealing with objective terms in a commercial lease contract. And what is even rarer, we are dealing with on-point terms in a commercial lease contract.
The Contract between the City of Glendale, the White Sox, and the Dodgers for use of Camelback Ranch
The contract between the City, the White Sox, and the Dodgers was entered on November 2, 2007. This public document (attached herein) shows the lease, also known as the Facility Use Agreement (“FUA”) agreed upon by all of the parties, which I will refer to throughout this essay as the Contract.
This document is a standard commercial tenancy lease contract, as it has recitals stating who the parties are and the fact that they are entering into a lease agreement after the City has designed and built a two-team spring training facility for the team.
The Contract also defines the terms of various items that are found throughout the contract or lists which section further discussion can be had for specific terms that require more attention in-depth than the definition section can provide.
The contract also describes the specific terms of the agreement. For brevity’s sake, this essay will skip to the relevant portions of the Contract. As I have provided the link, one can examine the entire contract at your leisure. There are also three subsequent agreements (under code 6368-1, 6368-2, and 6368-3) that you can access from the Glendale archives.
The relevant article of the contract
Article 8 of the Contract covers Capital Repairs and Routine Maintenance and Facility Upgrades. Article 8.1 allocates the responsibilities for making repairs and making upgrades. The screenshot from the contract with my highlighting shows the clear division of labor: the White Sox and the Dodgers are responsible for funding and providing Routine Maintenance and the City is responsible for funding all Capital Repairs and Facility Upgrades. What do these terms mean, the Contract defines them. This point is critical to understanding the current dispute and how one-sided it is.
What is Routine Maintenance?
Routine Maintenance is defined in Article 8.2 by both the specific language, the provision of all labor and materials that are required to keep the Stadium in good order and keep the Stadium clean, sanitary, and safe. This clause of the Contract also has examples including doing preventative maintenance, groundskeeping, maintaining the fields, etc. Read together with the covered language in Article 8.1, the scope of the teams’ responsibility as to this issue is clear.
What are Capital Repairs and Facility Upgrades?
Capital Repairs is defined in Article 8.3 of the Contract by both the specific language, any work reasonably required to be performed in and about the Stadium to repair, restore, or replace portions of the Stadium that may require said work because of wear and tear, damage (not from the teams’ misuse), defects, or destruction. The clause of the Contract also has examples, which I will show, in part, below, which is why the dispute is extremely one-sided.
Facility Upgrade is defined in Article 8.4 of the Contract. The term “Improvements” is defined in the definition section (Article 1.1.25) to mean the Stadium, the Parking Lots, the Playing Fields, all landscaped areas, and all other improvements on the Site [of the spring training Facility].
In layman's terms, this language in Article 8.3 is a checkmate to the dispute. As we just went over, the teams are responsible for maintenance and the City is responsible for Repairs and Capital Upgrades, and the contract literally defines an example that includes a requirement of Major League Baseball per the 2021 edict.
A prior dispute related to these terms in Contract 6368-3
Before jumping to the remedies for a dispute in this Contract, let us just jump in time to another dispute between the Teams and the City regarding a different dispute these parties had to show what can happen when there are gaps in the Contract and/or when the parties are willing to negotiate.
In 2007, the original Contract was signed. Five years later, in December 2012, the Teams reached out to the City making a request to repair/replace certain turf maintenance equipment as a Capital Repair. The City refused, saying that the maintenance and equipment necessary are Routine Maintenance. The parties disagreed about this point for literally eight years until they executed another Contract (6368-3) on June 2020, which amended their original Contract.
6368-3 included the following terms: the City would provide a list of original grounds equipment to be used to maintain the grounds of Camelback Ranch. For any item on that list, the Teams would be responsible for maintaining, replacing, repair at the Teams’ own expense. The City would also reimburse the Teams for $220,467.47 by no later than August 1, 2021. Once this amount was paid, the City would have no further obligation to repair, maintain, or replace any of the equipment on the list.
Contracts having gaps in them, especially in a commercial context, happen all the time. But the usual response to this happening is negotiation, followed by either amending the agreement or finding an accommodation going forward assuming the parties continue to have to co-exist together.
But what if the parties cannot come to an agreement, you ask, as in the core dispute as to the women’s locker room? The original contract provides clarity.
Remedies through arbitration
The Los Angeles Times report of November 14 was silent as to whether the White Sox had declared that the City was in Default of its obligations in the Contract. Commercial leases often require that one party declare the other to be in default, which is a separate, defined clause in the contract that allows the non-breaching party to force the breaching party to comply with all lease obligations. The default clause commonly provides the procedure for obtaining an eviction or the threat of an eviction for a commercial tenant’s violation of the lease (if the tenant defaults) or grounds that the tenant can seek damages against the landlord (if the landlord defaults).
In this case though, unless there is a quirk in Arizona law that I would not be aware of, this distinction is probably a moot point because the Contract has ways for the parties to address a dispute even if a default has not been declared by the non-breaching party.
Article 10 of the Contract covers what happens if either the City or the Teams do not uphold all of their obligations as defined and agreed upon in the Contract and how to adjudicate that dispute. Article 10.3 states all disputes or defaults are to be handled through expedited alternative dispute resolution (ADR) unless the non-breaching party would be irreparably harmed due to the time it would take to use the expedited alternative dispute resolution process.
In this case, the parties have already agreed to use arbitration when there is a dispute. There is a separate Exhibit listing the guidelines for arbitration to use in case of a dispute, including already-agreed-upon arbitrators, already-agreed-upon timetables of when the matter needs to be heard, and already-agreed-upon procedures to be used. Agreements between the parties to use ADR firms like Judicial Arbitration and Mediation Services, Inc. (JAMS) or the American Arbitration Association (AAA) is fairly common. ADR is far cheaper and far faster than court litigation, especially in the aftermath of the COVID-19 pandemic.
On November 14 the Los Angeles Times reported, in part using correspondence between the City and the teams that I do not have access to, that the City wants the White Sox to pay $200,000 for the women’s locker room. On November 4, the White Sox demanded that the City submit itself to binding arbitration over this issue.
Instead of following the obligations as defined in the Contract, which we just covered, per the Times, “the [City] invited the White Sox to complete [the plan to install a women’s locker room] at [the teams’] expense.”
Based on the prior dispute with the grounds equipment, this behavior would be consistent with the City’s past behavior. However, instead of paying for the locker room and trying to get reimbursed later, the White Sox moved forward with the dispute resolution powers in the original Contract.
Based on my experience, this division of costs and responsibility is pretty common in commercial tenancies. Needless to say, the White Sox did not take too kindly to that suggestion when they had language in the Contract that clearly said it was not either the White Sox’s or the Dodgers’ responsibility to make this addition. Most people have experience with residential tenancy contracts, but there is not a residency-based equivalent, as most of us do not get upgrades or additions to our apartments on the landlord’s dime. However, in situations like this one, it is rare for a commercial tenant to just shrug it off when the landlord does not uphold its end of the bargain.
Pound the table — the City’s position
There is an old saying in law: if you don’t have the facts [on your side], argue the law; if you don’t have the law [on your side], argue the facts; if you don’t have either, just pound the table and yell really loudly. This adage applies to the City’s position.
When this story broke, I thought that it was quite telling that the City Manager of Glendale was not arguing the terms of the contract. Moreover, the City Manager was attempting to make a moral argument in order to get the City out of its obligations as to the facility.
An accepted practice in American jurisprudence is that you have the right to make a contract, even if the terms are unfavorable to one side. However, there is the unconscionability doctrine that can serve as a defense if the terms of the contract are so unfair, so one-sided that the terms shock the conscience, that it would be unjust for one of the parties to be required to perform their duties under the contract.
But that doctrine will not help the City here. If a court finds that this subject Contract is unconscionable (it won’t), then the remedy would be to void the entire contract. The result would mean that the White Sox and Dodgers would be free to find a new spring training home. Based on what I have read so far, the City does not want to find new tenants and/or be taken to arbitration, the City just wants to not build a women’s locker room.
When the unconscionability doctrine is successfully employed in the real world, the majority of abusive contracts that Courts deem unconscionable are because of unequal bargaining power between the parties due to one party’s lack of knowledge, experience, or resources. Think of a shady Motown producer getting a naive singer to sign over all her song rights.
Here, the City has lawyers. The teams have lawyers. I know that there is a classic The Simpsons bit that says otherwise, but the absence of lawyers would not have helped this situation.
The teams did not blackmail or coerce the City of Glendale. The teams were not negotiating a deal with you, dear reader, who may not have a lawyer, to build and run a stadium. Normally, I am on Team Anti-make-bad-deals-with-municipalities because they tend to get shafted by billionaires. Just look at most stadium deals involving public money, i.e. what the Athletics are trying to do...or what the Royals are starting to do.
If pressed, I would imagine that the parties involved would likely prefer (and ultimately will) settle the matter between themselves informally without resorting to arbitration procedures as defined in the Contract, but I tend not to underestimate the pettiness involved when it comes to landlord/tenant disputes. And just like that, on December 1, the Dodgers and the White Sox filed paperwork demanding arbitration, thus ensuring another essay on this matter.
A bad deal is a bad deal....but when a contract is validly made, you live with the terms of it, especially when you should have known better. But there is one argument that needs to be addressed before concluding this essay.
The City made a bad deal — it gets to live with it
Per the Los Angeles Times article:
The city borrowed $200 million to build Camelback Ranch; the Dodgers and White Sox each pay $1 per year to use it...
MLB offered no compensation to cities that had built spring palaces at no cost to teams, [the City Manager] said, and in the meantime, the Dodgers and White Sox kept asking the city to pay for furnishings....
“Ultimately, what I would be hopeful for is that our two teams, which are important partners for us, would acknowledge they have got a great situation, that the city of Glendale and its citizens built them a phenomenal facility,” [the City Manager reported to] the City Council last week. “We get $1 a year, so we can’t go much lower on the lease.”
But Michael, you say, the White Sox and Dodgers are only paying a dollar a year to lease this facility from the City of Glendale — how on earth is this contract fair? Shouldn’t the White Sox and Dodgers have to pay for these locker rooms out of moral fairness?
That statement is not how contracts work.
The argument that the City of Glendale gets nothing out of this agreement with the Chicago White Sox and the Los Angeles Dodgers is factually wrong. I have gone through the entire contract and here is what the City gets out of it, along with their annual dollar in rent:
- Article 3.5 - Six complementary tickets, bundled together, in an “excellent location” to be given to the Arizona Sports and Tourism Authority, an Arizona agency that owns State Farm Stadium, funds the promotion of tourism in Maricopa County, funds the construction and renovation of Cactus League spring training facilities, and funds Youth and Amateur Sports projects in Arizona for each spring training Game played at Camelback Ranch throughout the term of the lease;
- Article 3.5 (continued) - Ten complimentary tickets, bundled together, in an “excellent location” to be given to the City for each spring training Game played at Camelback Ranch throughout the term of the lease;
- Article 3.5 (continued) - the City’s use of one luxury suite at Camelback Ranch for all events conducted at Camelback Ranch throughout the term of the lease at no cost to the City except for incidental costs, including food and beverage costs, which the City will have the right to negotiate directly with the vendors;
- Article 4.2 - The Teams shall pay all taxes associated with the operation of the Stadium, except that portion of taxes levied as a result of improvements and any sales taxes in connection with City Events;
- Article 6.2.1 - If the Teams have unsold advertising display space, subject to the Team’s prior reasonable approval as to content, design, frequency, and placement, the City shall be permitted to have public service advertisements or promotional materials to market/promote the City in such unsold display space.
- Article 6.2.2 - For each year of the Lease in the Contact, the Teams shall, at the City’s request, produce two video public service announcements directed at youth crime prevention, youth educational development, and youth sports and recreational participation. Said announcements shall feature players of the Teams or other publicly recognizable personnel of the team. All announcements are to be made at the City's expense.
- Article 6.2.3 - For each year of the Lease in the Contract, the Teams shall make two public appearances at area schools, youth facilities, or City facilities in support of local youth programs. Said announcements shall feature players of the Teams or other publicly recognizable personnel of the team.
- Article 6.2.4 - The City shall have the right to use the Stadium, the Parking Lots, and the Playing Fields at Camelback Ranch for up to five days per Lease Year for civic, youth, and recreation events at no charge. Said usage will not occur between January 1 and April 30.
- Article 6.2.5 - The Teams and the City shall each receive 50% of the gross revenues from the use of the Facility’s Parking Lot for use of the multipurpose facility constructed under A.R.S. 5-807, provided that the events do not conflict with the Teams’ scheduled use of the Facility. (The Teams get all the revenues for parking at the Facility for all spring training Games, other baseball-related events, and all Ancillary Events conducted by the Teams under the Lease.)
Now, if after reading this list, you have the sense that the City of Glendale, Arizona took on $200 million dollars of debt to build its own neato clubhouse, I do not think such a statement would be that far off the mark. If I were a voter in the City, I would be hopping mad and try to vote out everyone involved with this deal, at the time of the adoption, or anyone who tried to raise taxes on me to try and fix the revenue shortfall caused by the said-above bad deal.
In case you were wondering who gets to keep the revenue from ticket sales, food and drink sales, merchandise sales, parking, broadcasting, advertising, sponsorships, promotional and signage rights, Facility naming rights, luxury suite licenses, and any other revenues derived/generated in connection with baseball or derivative events held at Camelback Ranch, it all goes to the Teams (Article 7.1).
Whining about building a locker room misses the point and does nothing to lessen the one-sided nature of the terms both parties agreed to.
Again, it is worth repeating that I do not have access to the correspondence between the parties like the Los Angeles Times did. If anything said correspondence would provide some additional context but from an outsider’s perspective, it sure looks like the City made a bad deal.
The problem for the City of Glendale is that the deal they struck with the White Sox and Dodgers has turned out to not work in their favor mostly due to the sheer lopsidedness of the terms, made worse by the COVID-19 pandemic and the 2022 Lockout.
There are no parking revenues at the ancillary facilities to collect if fans cannot go to qualifying events. If there are fewer spring training games, there are fewer opportunities to collect increased revenues and taxes from local merchants who have not had a full spring training since 2019, as two springs have been wiped out due to COVID-19 and one spring was cut in half due to the Lockout.
Should the City have gotten more money out of teams to rent its facility? Yes, probably.
Would the City have negotiated different terms if they knew about a global respiratory pandemic that would have upended their plans for at least three seasons? Yes, probably.
And to rub salt in this figurative wound, the Dodgers and White Sox have a twenty-year lease lasting until December 31, 2028 (Article 2.1). After that, the Teams have four successive options to renew the Contract as written for an additional five-year Renewal Term (Articles 2.2 and 2.3).
I draft contract terms for a living now. There are times, when I am annoyed in a transaction that I write up terms that are over the top in my client’s favor to work out steam, like writing a letter that you do not mail to vent. This Contract is basically that contract...but the other side agreed to every demand my client could have ever wanted and then some!
There is nothing stopping the City and the Teams from renegotiating their lease of Camelback Ranch. However, considering the leverage ceded by the City in past negotiations regarding the current terms of the deal, it is difficult to see how the Teams could be forced back to the bargaining table.
While the White Sox and Dodgers may be the bad guys in the court of public opinion, the City of Glendale dug its own hole for this mess. Digging up is not a solution, either. If there are updates, we will revisit this topic. In the interim, just keep this dispute in mind, if you happen to visit Camelback Ranch this spring.