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Dismissal of Two Santa Clara Legal Actions Shows Litigious 49ers Relationship Not One-Sided

The Santa Clara Stadium Authority has brought four legal actions against the 49ers; refuting Stadium Authority/City Attorney Brian Doyle’s frequent statements that legal conflict between the Stadium Authority/City and the 49ers was initiated by the NFL team.

Doyle was forced to indirectly acknowledge this when he was asked about the dismissal of actions the Stadium Authority/City Council had brought against the 49ers.

The Stadium Authority/City Council brought two lawsuits against the 49ers based on the suits the 49ers brought against the Stadium Authority/City Council — “cross actions.”

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The Stadium Authority/City Council also brought two identical legal actions against the 49ers concerning the City’s unilateral adoption of a shared stadium expenses budget that the 49ers hadn’t agreed to, violating the stadium management contract terms.

The action was dismissed once and brought back for an equally unsuccessful re-do by Santa Clara. Both of these actions cost the City money in legal fees* — in addition to the costs the City will face for an arbitration action, the contractual method for resolving this dispute.

Doyle brushed these dismissals off as “procedural.”

But the question at the core of these actions is anything but technical or bureaucratic. It’s whether the Stadium Authority/City Council has authority to unilaterally set aside contractual requirements under a state law concerning public agencies’ authority to go into debt.

What the Stadium Authority/City Council was asking the court to do was to rule that their action was within the scope of their authority — called a validation action.

In this case, the Stadium Authority/City Council asked the court to validate that it has the authority to unilaterally adopt a disputed Levi’s Stadium shared expenses budget without the 49ers agreement. The court’s actions didn’t address the underlying budget dispute.

The City’s contract with the 49ers requires that intractable disagreements over any shared expenses budget must be submitted to arbitration. Evidently, the Stadium Authority/City Council believed that this action could bypass an arbitration that likely wouldn’t have resulted in the budget Santa Clara wants.

While arbitration also has costs, going to court is usually the most expensive way to resolve a dispute. That’s often the reason that business contracts have arbitration clauses.

The story begins in May 2020 when the Stadium Authority/City Council approved a 2020-2021 stadium shared expenses budget that the 49ers had not agreed to.

Contractually, the Stadium Manager (49ers) prepares the budget and submits it to the Stadium Authority for approval. If the two sides aren’t in agreement, the contract stipulates that disagreements will be resolved through arbitration.

The Stadium Authority/City Council’s position is that they can adopt their own shared expenses budget unilaterally without the two sides having to agree.  The 49ers’ position is that the parties have to go into arbitration.

On the basis of his interpretation, Stadium Authority/City Council Attorney Doyle filed a motion asking the County Superior Court to confirm that the budget was validly enacted, based on California statute (53510-535111). This statute allows public agencies to have a court confirm their authority to issue bonds and other kinds of debt.

Santa Clara’s position is that, because there is outstanding debt on the stadium, the budget fits the statute’s description of bonds and indebtedness.

“The budget is an integral component of the financing structure because if the budget is not passed, or if sufficient funds are not set aside, then the debt payments cannot be made and Stadium Authority will be in default,” Santa Clara said in its complaint.

The 49ers’ response was simple: Failure to agree on a budget wasn’t issuing bonds or any other kind of debt, and payment of the stadium construction debt is completely independent of agreement on an annual shared expenses budget.

The debt is paid by the Facilities Rent, which continues to be paid regularly and automatically goes to pay off the debt — neither the 49ers nor the Stadium Authority has discretion over those payments.

Judge Socrates Peter Manoukian didn’t buy the City’s argument, writing in his ruling that Santa Clara did not “state facts sufficient to constitute a cause of action for validation of ‘bonds, warrants, contracts, obligations or evidences of indebtedness’ within Government Code Section 53511.”

These legal actions were in court nine months, comprised almost 50 court events, and for which an outside law firm was paid to litigate.

It’s nearly impossible to know from public documents what the costs were because the attorneys in the case represent the Stadium Authority in other litigation, including the two countersuits that the City Council/Stadium Authority has brought against the 49ers.

However, in the disputed shared expenses budget, the City Council/Stadium Authority has budgeted $2.5 million for outside legal expenses — one of the items that the 49ers object to.

*Doyle refuses to reveal the costs of specific legal actions. Only when a law firm is hired for a single lawsuit can the cost be identified.

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