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Santa Clara, California Has Accused Levi’s Stadium Manager of Breach of Contract

A few weeks ago, the city of Santa Clara issued a breach of contract letter to the management team of the San Francisco 49ers. The letter related to a $643,568 bill for polishing the floors in Levi’s Stadium, which the team passed on to the city even though the work was not originally approved. The city has also requested an audit of the Santa Clara Stadium Authority’s spending to ensure no other unapproved bills have gone unnoticed.

This latest chapter in a series of disputes highlights the unique ownership and management structure surrounding most modern professional sports facilities. Since the mid-1980s, public financing of U.S. professional sports stadiums has become commonplace. From 1990 to 2010 alone, 84 new arenas were built at a total cost of $34 billion, and taxpayers paid for near 60 percent of that amount in the form of tax credits and public bonds. Levi’s Stadium, which opened in 2014, made news because the parties (particularly lawmakers and taxpayers in the Bay Area) were trying to reverse this trend and make the team pay the vast majority of the construction costs rather than the other way around.

The ongoing spite between the 49ers and Santa Clara elected officials, however, shows there may be a non-financial cost from demanding that teams foot most of the construction bill. When teams have more stake in the facility, one might expect them to push back against public stakeholders when the team feels like it is being treated unfairly. While Levi’s Stadium is managed like other stadiums (the city itself owns Levi’s Stadium and leases it out to the team through a stadium authority), the team itself is charged with managing the Stadium Authority’s day-to-day finances pursuant to a written agreement. As the landlord, though, the Stadium Authority gets the final say on vendor contracts using public funds costing more than $100,000. When the team’s stadium manager hired a flooring contractor to perform services costing more than six times the amount required for city review, what seems like a routine expense landed in a web of contractual authority.

A History of Bad Blood

This dispute follows years of bad blood between the City-Council controlled Santa Clara Stadium Authority and the 49ers over a previous audit of team records, increased rent, a 10 PM curfew, and demands for increased financial transparency. The Santa Clara Stadium Authority won a legal victory against the team back in August 2018, increasing the team’s rent by $238,000 to $24.7 million after the 49ers requested a rent reduction.

In March, city manager Deanna Santana sent an email to 49ers’ president Al Guido stating that the team’s stadium manager had not provided documentation displaying proper bidding and minimum wage practices in securing the flooring contract. In the letter, Santana states:

“Given the unknown magnitude of potential non-compliance with the issuance of public contracts with public funds as the Stadium Authority’s agent, you must produce copies of all Stadium Authority contracts issued by the Stadium Manager no later than April 12, 2019.”

According to Santa Clara, the team’s “non-compliance” is a breach of the parties’ stadium management agreement.

What is Breach of Contract?

Businesses in the sports industry and beyond enter contracts in order to clarify each party’s duties and responsibilities to each other. A business’s success often depends on the promise of others to hold up their side of a contract. When a counterparty fails to do so, suppliers, vendors, customers, employees, and executives may all suffer from an interruption to the smooth operation of business. A breach of contract can have severe financial and other repercussions for any type of entity.

Breach of contract is one of the most common business disputes because it applies to a variety of agreements, such as employment contracts, nondisclosure agreements, non-competes, real estate contracts, contracts for services, and the purchase and sale of goods.

When a breach of contract happens, taking the appropriate steps to protect your business is essential. If the breach of contract is detrimental to your business, you may be able to obtain damages, but you will likely need the help of a skilled attorney who specializes in these cases.

Houston Breach of Contract Attorneys

The attorneys of Drumheller, Hollingsworth & Monthy, LLP pride themselves on being experienced and skilled litigators when it comes to breach of contract cases. We have represented businesses, individuals, governmental agencies, and professional sports teams involved in contract disputes, and we have taken a matter to trial where the marketing of Levi’s Stadium was at issue. Whether a contract has been breached to your detriment or you have been accused of breaching an agreement yourself, our attorneys can ensure your best interests are taken into account. Contact us today to see how we can best serve your needs.

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