Monday, November 20, 2006
C.A. Throws Out $34.2 Million Verdict for Oakland Raiders
Team Waived Fraud Claim Against Oakland Coliseum by Signing New Deal, Divided Panel Rules
By KENNETH OFGANG, Staff Writer
A party that claims it was fraudulently induced to enter into a contract waives that contention if it enters into a new contract with the same party regarding the same subject and receives substantial benefits from the new agreement, the Third District Court of Appeal for this district ruled Friday.
A divided panel of the court overturned a $34.2 million judgment in favor of the Oakland Raiders football team against the nonprofit corporation that formerly operated the Oakland Coliseum.
A Sacramento Superior Court jury three years ago found that the Raiders had entered into a 16-year lease for the Coliseum on the basis of a misrepresentation that enough “personal seat licenses”—long term commitments to purchase season seats in a specific location—and suite leases had been sold to fill the 46,000-seat facility.
In fact, the team later showed, while there had been more than 45,000 applications for PSLs and suite licenses, more than 10 percent of the applicants were disqualified because there were problems with the credit cards used to guarantee their deposits, and other applicants either bounced checks or failed to complete their purchases.
The team wound up with only 37,000 license holders and lots of unsold seats. Oakland-Alameda County Coliseum, Inc., however, said the team’s attendance problems were also a result of high prices and losing performances.
Return to Oakland
In 1996, after their first season back in Oakland—where the team had played for more than 20 years before departing to Los Angeles—the team and coliseum management entered into a supplemental agreement that modified a number of the parties’ original understandings with regard to license deposits, operations financing, advertising revenues, and stadium improvements.
The agreement made no mention of any fraud claim and specified that the document and other documents referenced therein “shall constitute the entire agreement among the parties relating to the subject matter hereof and . . . shall supersede any negotiations, understandings, or agreements, written or oral relating to the subject matter hereof and thereof.”
The Coliseum managers argued that by entering into that agreement, the Raiders waived their fraud claim, and were entitled to judgment as a matter of law. Superior Court Judge Richard K. Park disagreed, saying the waiver issue had to be resolved by the jury.
But Justice Kathleen Butz, writing for the Court of Appeal, said the defendant was entitled to judgment notwithstanding the verdict.
“California law has, for more than a century, recognized that a plaintiff claiming to have been induced into signing a contract by fraud or deceit is deemed to have waived a claim of damages arising therefrom if, after discovery of the alleged fraud, he enters into a new contract with the defendant regarding the same subject matter that supersedes the former agreement and confers upon him significant benefits,” the jurist explained.
The rule, she elaborated, dates from Schmidt v. Mesmer (1897) 116 Cal. 267, in which the lessees of a hotel claimed that the lessor had misrepresented the hotel’s cash flow. The high court claimed that the plaintiffs—who had fallen behind in rent—waived that claim when, eight months after entering into the lease and without raising the fraud issue, they reached an agreement with the lessor to execute a promissory note, due in six months, in lieu of rental payments for that period.
That ruling remains good law, Butz explained, although there have been few cases on the issue recently.
Justice Vance Raye concurred in the opinion, but Justice Rodney Davis dissented, calling the majority’s approach “misguided.”
Cases subsequent to Schmidt, he argued, clarified that the question of waiver is one of intent. The trial judge, Davis wrote, properly submitted that issue to the jury and properly instructed the jury on express and implied waiver.
Substantial evidence, the dissenting justice added, supported the jury’s conclusion that there was no waiver, since jurors could have concluded that the Raiders entered into the 1996 agreement solely to cut their losses—which the team claimed were more than $500 million—rather than to reaffirm the original agreement and obtain additional benefits.
Raiders general counsel Jeff Birren told the Associated Press the team was considering seeking review in the state Supreme Court. Stadium officials were not immediately available for comment.
The case is Oakland Raiders v. Oakland-Alameda County Coliseum Inc., 06 S.O.S. 5580.
Copyright 2006, Metropolitan News Company