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Lawyers Gauge Fallout From Angels Jury Win



By Roger Bloom

Arte Moreno saw a loophole in his lease with Anaheim and drove a truck the size of Los Angeles through it. Then a jury backed him on it.

So could Moreno’s win in Anaheim v. Angels Baseball LP usher in an era of paranoia, nitpicking and “over-lawyering” of contracts, dragging out some negotiations and killing others outright?

Most lawyers agree the Angels case is a cautionary tale for deal makers. But they differ on how much it’s likely to affect how contracts are negotiated or vetted.

“Lawyers tend to be as careful as they can,” said Mike Leifer, a litigator with Palmieri Tyler Wiener Wilhelm & Waldron LLP in Irvine. “This won’t cause them to be any more careful.”

Others see an impact.

Mike Hensley, a shareholder in Jackson DeMarco Tidus Peckenpaugh of Irvine who does contract work and litigation, said the Angels case could lead to “more intensive negotiation mainly in sports and licensing.”

The fallout could spill over to more general areas, Hensley said.

To recap: Moreno in early 2005 changed the baseball team’s name to Los Angeles Angels of Anaheim. The awkward, two-city name was a way for Moreno to broaden the team’s appeal and satisfy an Angel Stadium of Anaheim lease provision requiring Anaheim be in the team name.

The city sued, contending the name change violated the intent of the 1996 lease, signed with former team owner Walt Disney Co.

Last month, an Orange County Superior Court jury sided with Moreno, deciding the name change from Anaheim Angels to Los Angeles Angels of Anaheim satisfied the lease.






The jury rebuffed the city’s argument that the name change violated the legal notion of “good faith and fair dealing” in which both sides agree not to renege or undercut a deal. The city contended it got a marketing benefit from having its name prominent, and the switch took that away.

The city’s lawyers argued that a decision for the Angels would have a chilling effect on contract negotiations and cause lawyers to dwell on every possible eventuality.

“You always try to anticipate (problems),” said Michael Flynn, a partner at Stradling Yocca Carlson & Rauth in Newport Beach and head of the firm’s corporate practice. “Nevertheless, sometimes things come out of the blue. This came out of the blue.”

The Angels decision could lead to more intensive negotiations in non-compete clauses, Jackson DeMarco’s Hensley said.

“You’d better precisely define what you’re talking about in terms of geographical areas and other parameters,” he said.

The case could have more of an effect on clients than lawyers, said Charles Ruck of the Costa Mesa office of Los Angeles-based Latham & Watkins LLP.

“Lawyers are often the ones saying things could go bad, and playing out doomsday scenarios,” Ruck said. “Now, clients might be more willing to listen when lawyers say, ‘Here’s what could go wrong.’ To the extent that contracts are more lawyered, it could be that the clients are more focused on it.”

The Angels case revolved around what essentially was a naming or licensing deal embedded in a larger stadium lease deal handled on the Anaheim side by a real estate attorney, Ruck said.

“One of the consequences could be that corporate lawyers or real estate lawyers will be more likely to call in experts,” he said. “And clients are going to be more willing to put up the bucks for it.”

Most lawyers said the Angels decision didn’t undermine the good faith tenet, which may not be that strong to begin with.

“For each case like this there are a thousand others that uphold a stricter interpretation,” Stradling Yocca’s Flynn said. “It’s just one jurisdiction. It’s not like the U.S. Supreme Court came out with a ruling that this is OK. Now that would be scary.”

An Anaheim win could have had a bigger impact, said Leifer of Palmieri Tyler, who has handled cases against the city of Anaheim, mostly over eminent domain issues.

A win by the city would have opened the door for contracts “to be fully litigated as to the intent of the parties every time there is a disagreement,” he said. “If the Angels had lost, it would have caused more litigation, with parties claiming, ‘Well, the agreement says this, but I really meant that.'”

Good faith and fair dealing is seen more as “the final safety net” in a breach-of-contract case, rather than a strong basis for a case in and of itself, said James Bastian of Shulman Hodges & Bastian LLP in Foothill Ranch.

“The saying goes, ‘If you have the facts on your side, argue the facts. If you don’t have the facts, argue the law. If you don’t have the law, bang the table.’ Well, good faith and fair dealing are banging the table,” he said.

Bloom is a former Business Journal managing editor who now runs Roger Bloom Consulting in Huntington Beach.


_________________________________________________________

IBM Yankees of New York?

The Los Angeles Angels of Anaheim took on a decidedly untraditional moniker to boost the team’s marketing, and, according to testimony by owner Arte Moreno, it worked.

The city of Anaheim claimed its attachment to the name was worth hundreds of millions of dollars in marketing.

So are teams poised to go the way of some Japanese and European counterparts, selling team names to the highest bidder? Think the Anheuser Busch Cardinals, The Verizon A’s of Oakland or even the IBM Yankees of New York.

A team name “does carry economic value,” sports agent Leigh Steinberg of Newport Beach said.

“Teams are in a dramatic search for any new revenue streams they can find,” Steinberg said. “I think it’s inevitable that geographic location (in a team name) will be bartered.”

But corporate names?

Most U.S. professional leagues ban commercial sponsorships, said David Cornwell, a sports lawyer who works from Newport Beach and Atlanta and a former assistant counsel to the National Football League. Those rules are unlikely to change, he said.

“There is unanimity among the principals of the leagues that commercialization can cross the line at some point, and that regional affiliations are more important in the long run,” Cornwell said.

Other owners looking to emulate Moreno’s move may run up against walls that Moreno did not. Hypothetical moves by the Oakland A’s or Jacksonville Jaguars to become the California A’s or Florida Jaguars could be opposed by other league teams in those states, Cornwell said.

(The Los Angeles Dodgers have smirked at Moreno’s name change, but haven’t challenged it.)

Moreno inadvertently could have given owners more leverage with their host cities, said Ryan Patch, a shareholder at Jackson DeMarco Tidus Peckenpaugh in Irvine who has negotiated sports licensing and media deals.

“A team could say, ‘Give us more money or we’ll change the name,'” he said. “Whether they’re actually going to do it is another story.”

,Roger Bloom

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