Tuesday, October 19 2021

Pittsburgh Penguins co-owner Ron Burkle’s abandoned attempt to bring the 30th MLS franchise to Sacramento has instead brought him legal troubles. Burkle, who owns the Penguins with Mario Lemieux, has been sued by two companies—M.A. Mortenson and CAA Icon—that contend they’re owed millions of dollars for work performed in anticipation of constructing a new stadium. Yet those companies didn’t sign contracts with Burkle or other named defendants, including Burkle’s investment arm, The Yucaipa Companies.

Court records indicate that Burkle’s attorneys haven’t yet answered the complaints, which consist of unproven allegations. Answers and motions to dismiss will likely be filed in the weeks ahead and will present the defendants’ side of the story. The cases could also settle before courts assess the allegations.

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Sacramento’s MLS efforts once seemed like a sure thing: The city offered everything MLS wanted in an expansion location—existing soccer fans, local government support and most important, a deep-pocketed owner with experience in another major U.S. league. On Oct. 21, 2019, MLS commissioner Don Garber joined Burkle, Gov. Gavin Newsom and other local officials at a downtown Sacramento restaurant to announce the league’s latest franchise. Burkle’s plan involved a $300 million stadium project, with the USL’s Sacramento Republic joining MLS in 2022.

The group never broke ground on the stadium. In February, MLS announced that Burkle had backed out of the plan, citing issues “related to COVID-19.” Those issues were financially impactful. The pandemic impaired local investors’ wherewithal and willingness to contribute to the stadium project. The cost of construction in Northern California also rose. As a result of these changed circumstances, Burkle was expected to pay substantially more than originally planned. One person familiar with the deal says the total price Burkle faced was likely much higher than what he could have paid to buy an existing MLS franchise in a larger market.

The Sacramento crest was later removed from the MLS website’s list of teams, and the plan now appears stuck in limbo. With no big-money backer in Sacramento, MLS has begun looking elsewhere, and Las Vegas has emerged as the frontrunner for the slot originally given to Sacramento.

M.A. Mortenson, the Minneapolis-based construction manager for the Sacramento stadium project, claims it was misled and defrauded by Burkle and his partners. The company’s complaint was filed on Aug. 12 in a Sacramento federal court.

Burkle, the complaint charges, “engaged in detailed discussions with Mortenson” regarding the stadium’s design. Discussion topics included adaption of Mortenson’s previous plan for Allianz Field, the MLS stadium for Minnesota United FC, for use in Sacramento. As told by the complaint, the parties agreed to start construction in 2020 and finish in time for the 2022 MLS season opener. The stadium would have featured 19,900 seats and 22 private suites.

In 2018, Burkle formed Soccer Stadium Company, an LLC through which the stadium would be developed and financed. As Mortenson tells it, Burkle “failed to capitalize that entity with enough funds to proceed with the development and pay all of the designers, engineers, contractors, and managers, and representatives.” Mortenson also describes SSC as a “mere shell” to protect Burkle and others from personal liability.

Further, Mortenson says it relied on Burkle’s assurances of his commitment to Sacramento. For instance, after MLS awarded an expansion team to Sacramento, Burkle publicly stressed “the relationship between Sacramento and our club already is a special one, and I’m committed to deepening that connection for years to come.”

Mortenson’s complaint, which demands at least $1.4 million in damages, contains claims for breach of contract, quantum merit and fraud. The claim for breach faces a major hurdle in that no contract was signed. Burkle can use that point to argue he never accepted an offer—a necessary element for an enforceable contract.

However, a contract can sometimes be formed, and held enforceable, without a signature. Mortenson’s argument would be strengthened if it can produce specific written or electronic language that signal the parties’ intent to be bound. The complaint indicates an exchange of contract drafts, with “redline edits” made into the spring of 2020. As told by Mortenson’s attorneys, there was agreement on “all material terms” except “outstanding language to be agreed upon related to indemnity and COVID-19.” Mortenson contends it relied on what it portrays as a meeting of the minds.

Burkle’s attorneys, however, can insist that an established company like Mortenson should know that a deal isn’t consummated until a contract is in place.

The other two claims—quantum merit and fraud—do not require a finding of a legally enforceable contract.

Quantum merit reflects a reasonable amount of money for labor and other services. To prove quantum merit, Mortenson will need to establish the defendants requested the specific services Mortenson provided and haven’t paid a reasonable amount. Mortenson insists the defendants “promised to pay the reasonable value” for services provided.

Similarly, a finding of fraud is predicated on Mortenson’s assertions that Burkle and his partners assured they’d compensate the company for work and services. Mortenson portrays the defendants as dishonestly concealing “that SSC was not fully capitalized, that contracts were not signed nor were they going to be signed, and that Defendants would rely on the absence of a more formal written contract, or alternatively the lack of funds of SSC to deny liability and refuse to pay Mortenson.”

Burkle’s legal troubles also include a lawsuit filed in June by CAA Icon, which engaged in development and design of the stadium. CAA’s complaint says the company “assisted Burkle in more precisely understanding the budget and design of the Stadium Project.” The complaint, which is in Sacramento Superior Court, claims CAA invoiced just under $2 million in services, but none of the invoices were paid.

Like Mortenson, CAA argues it was deceived by a combination of a Burkle-led shell company that wasn’t sufficiently capitalized and by “secretly” unsigned contracts. The complaint, which seeks $2.4 million in damages, raises a similar set of legal claims to those brought by Mortenson. Court records indicate that Burkle and co-defendants have until Sept. 17 to answer CAA’s complaint. Expect them to portray the lawsuit as meritless since CAA wasn’t in contract with Burkle’s group and contracts between CAA and Sacramento Republic FC wouldn’t extend to Burkle.

Legal fights over stadiums aren’t new. In 1989, a 19-year litigation over a domed NFL stadium in Buffalo that was never built ended in a settlement. Five years later, New England Patriots owner James Busch Orthwein sought to move his franchise to St. Louis, but the man who owned the Patriots’ stadium was willing to go to court to block the move (that man, Robert Kraft, ended up buying the Patriots—which Sportico estimates is worth $4.97 billion—for $172 million). St. Louis, meanwhile, is currently in litigation with the Los Angeles Rams and NFL over the Rams leaving for L.A. despite a lease to play in the Dome at America’s Center.

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Source: Yahoo Sports

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