Allegiant Stadium is one of nearly 20 NFL stadiums with PSLs. Photo credit to sportshub.com.
On March 11, Utah Jazz forward Rudy Gobert tested positive for COVID-19, leading to the suspension of all major sports in North America. The COVID-19 pandemic has created a dramatically different sports landscape. Leading public health experts recommend social distancing as a major weapon against the spread of the virus, meaning that when fans exited NBA arenas that day, the sports world entered an uncertain, fan-free future. On June 17, the English Premier League (EPL), one of the best soccer leagues in the world, returned to action without any fans in the stands. Most EPL clubs have used tarps to cover these empty seats at their home grounds. These tarps are often branded with team sponsors (e.g. Standard Chartered) in addition to messages thanking essential workers and cheering on the home side (e.g. “Liverpool FC – Champions Again”).
With COVID-19 case numbers still surging across the United States, it is reasonable to believe that if the NFL plays football this fall, it will do so without fans in attendance. As it currently stands, the NFL will be blocking off the first six to eight rows in every stadium this season to protect players, coaches, and staff from being exposed to COVID-19. On June 25, NFL owners approved a deal to allow the sale of local advertising on the tarps covering this six-to-eight row “social distancing zone.” The intention of this plan is to mitigate the losses in revenue from playing without fans in attendance. Projections for that loss of revenue from tickets, concessions, parking, and merchandise range anywhere from $2 billion to north of $5 billion.  New stadiums expected to open this season in Las Vegas (Raiders) and Los Angeles (Rams/Chargers) stand to suffer heavy losses since new stadiums generally bring in huge crowds due to their novelty. For instance, the Dallas Cowboys leapt from 26th out of 32 teams in attendance for 2008, the final season at Texas Stadium, to first in team attendance for 2009, the team’s first year at AT&T Stadium. Dallas has held the top spot in each year of the stadium’s first decade.  One popular way of financing new stadium construction is via the sale of Personal Seat Licenses (“PSLs”). PSLs are paid licenses that secure the holder a right to purchase season tickets. If the holder chooses not to purchase season tickets, the team can revoke the license and sell it to another individual. Nearly 20 teams in the NFL have sold PSLs to partially fund the construction of new stadiums.  Some may be more reliant on these fees than others to generate revenue, leaving us to speculate whether the fear of losing PSL revenue motivated Las Vegas owner Mark Davis’s lone dissenting vote amongst NFL owners’ 31-1 approval of this season’s eight-row social distancing zone.
Liverpool FC’s “Kop” decorated with fan-made banners. Photo credit to static.standard.co.uk.
In the midst of numerous class actions stemming from COVID-19 issues, one question sports attorneys should consider at this point is this: For NFL stadiums who opt to cover the social distancing zone with local advertising, can PSL holders receive proportional profit from the ad revenue? Possibly relevant case law re-emphasizes that licensees hold no expectation of profit by holding a PSL.
That holding is codified in the Las Vegas Stadium Authority’s (LVSA) own Personal Seat License Agreement for the Raiders’ sparkling new home, Allegiant Stadium. Clause 12(b) says “the Licensee is not acquiring any PSL as an investment and has no expectation of profit as a Licensee” (emphasis my own throughout). Additionally, and possibly most importantly, clause 12(e) states that “the agreement does not under any circumstances confer upon Licensee any interest or estate in real property or any leasehold or possessory interest in the Seat(s) or the Stadium.” As there is no interest vested in the licensee via the agreement, it will be difficult to see any method for them to recover refunds or secure revenues from local advertising on the seats purposefully left empty by the NFL this season.
Even if these arguments were not recognized as dispositive, LVSA could alternatively argue that it has built in protections for force majeure possibilities. For instance, LVSA holds the right to alter any seating area in the sole direction of the Stadium Corporation, or “StadCo” (LVSA PSL Agreement 5(c)). Relocating seats to comparable locations is also within the discretion of StadCo.
Clause 9(b) reads, “In the event of any damage to or destruction of the Seat(s) due to an act of God, natural disaster, contamination, act of terrorism or other force majeure that renders the Seat(s) unusable, and StadCo is unable or elects not to repair or replace the Seat(s) in a reasonable period of time, the PSL Agent shall endeavor to provide Licensee a Comparable Seat(s) until the Seat(s) is repaired or replaced.”
Furthermore, the agreement contains inclusive “or” language that covers against failures in construction or general availability of seats (see LVSA PSL Agreement 11(a)), and also prevents Licensees from seeking refunds or interest in the event of alterations to seat locations due to NFL regulations and directives (see LVSA PSL Agreement 11(b)).
It appears based on the plain language of the agreement that the LVSA and the Raiders would be covered against having to provide refunds, interest, or any benefit except comparable seats due to seat relocation. Because the social distancing zone and the allowance of local advertising in that area are NFL regulations for this season, it is unlikely that licensees have any recourse to gain interest in the LVSA’s ad revenues.
------------------------------- Tarun Sharma is a second-year law student at the University of Minnesota. Prior to entering law school, he worked in baseball operations and analytics for the Arizona Diamondbacks and San Francisco Giants. He can be reached at @tksharmalaw on Twitter and on LinkedIn at linkedin.com/in/sharmatk.  Charean Williams, NFL owners approve covering first few rows of seats at every stadium, Pro Football Talk (June 25, 2020), https://profootballtalk.nbcsports.com/2020/06/25/nfl-owners-approve-covering-first-few-rows-of-seats-at-every-stadium/.  Charean Williams, NFL to sell advertising on lower rows of seats this season, Pro Football Talk (June 24, 2020), https://profootballtalk.nbcsports.com/2020/06/24/nfl-to-sell-advertising-on-lower-rows-of-seats-this-season/.  Ken Belson, N.F.L. Owners and Players in Talks on How to Offset Loss of Fans, New York Times (July 2, 2020), https://www.nytimes.com/2020/07/02/sports/football/nfl-salary-cap-no-fans.html.  Mike Florio, Fan-free season could spark $5.5 billion loss for NFL, Pro Football Talk (May 20, 2020), p://www.espn.com/nfl/attendance/_/year/2008.  http://www.espn.com/nfl/attendance/_/year/2008  NFL Attendance - 2009, ESPN, http://www.espn.com/nfl/attendance/_/year/2009.  NFL Attendance - 2019, ESPN, http://www.espn.com/nfl/attendance/_/year/.  What Is A Personal Seat License (PSL) And Should I Purchase One?, FromThisSeat.com, http://www.fromthisseat.com/index.php/blog/19113-what-is-a-personal-seat-license-psl-and-should-i-purchase-one.  Personal seat License, Wikipedia, https://en.wikipedia.org/wiki/Personal_seat_license.  Charean Williams, Mark Davis: You think I want to sell advertising on Black Hole seats?, Pro Football Talk (June 28, 2020), https://profootballtalk.nbcsports.com/2020/06/28/mark-davis-you-think-i-want-to-sell-advertising-on-black-hole-seats/.  See Gengo v. Jets Stadium Dev. LLC, 776 F. App'x 86 (3d Cir. 2019).  Personal Seat License Agreement, http://lvstadiumauthority.com/docs/2018/07/19/11-Personal%20Seat%20License%20Agreement%20(Non-Reserved)%20TEMPLATE.pdf.