Did the Super Bowl Champions Win Again? Denver Broncos Take Control of Stadium Naming

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https://www.flickr.com/photos/plmccordj

*Robert Stalzer

October 31, 2016

Each fall, thousands of football fans routinely flock to worship their team at locations such as Lincoln Financial Field, Met-Life Stadium, and AT&T Stadium.[1]  In 2016, the NFL faced one of these stadiums’ namesakes, Sports Authority, Inc., filing for bankruptcy.[2]  After months of waiting, a federal bankruptcy judge in Wilmington, Delaware, signed an order giving the Denver Broncos control of Sports Authority Field at Mile High Stadium’s (“Mile High Stadium”) naming rights.[3]  The agreement was a practical and simple solution that allowed all the involved parties to move forward in their desired direction.[4]

When Sports Authority declared bankruptcy in 2016, sports fans and outdoorsmen salivated at the idea of discounted athletic gear.[5]  Sports Authority quickly began selling smaller discounted items, but failed to find a buyer for the naming rights to Mile High Stadium in Denver.[6]   Sports Authority’s failure to sell the naming rights to Mile High Stadium would result in the Metropolitan Football Stadium District (“District”) being owed $20 million from the stadium sponsorship contract.[7]

Prior Attempts to Sell Naming Rights

Although the Denver Broncos are arguably the most famous tenant of Mile High Stadium, the Broncos do not own the stadium.[8]  Rather, Mile High Stadium is a publicly owned stadium operated by the District.[9]  Prior to the agreement, Hilco Streambank, a third party, had been put in charge of accepting bids for the naming rights and intellectual property of Sports Authority.[10]

Sports Authority’s ability to auction the stadium’s naming rights had been complicated by the interests of the District, the Broncos, and the National Football League (NFL).  The ownership structure of Mile High Stadium, as well as the NFL’s interest in the stadium’s name, complicated Sports Authority’s ability to sell the stadium’s naming rights.[11]  The failure to sell the stadium naming rights contract at auction would have left the District waiting until Sports Authority defaulted on their August 2016 payment to begin the search for a new sponsor.[12]

Although rumors of interested buyers surfaced, Hilco Streambank failed to find a purchaser for the stadium naming rights contract.[13]  As a result, a federal bankruptcy judge in Wilmington, Delaware, signed off on a deal that would allow Sports Authority to get out of the deal and give control of the stadium naming contract to the Denver Broncos.[14]

Analysis of Bankruptcy Court’s Order

On August 18, 2016, United States Bankruptcy Judge Mary Walrath accepted a proposal allowing the Denver Broncos to assume the naming lease that was previously held by Sports Authority.[15]  Under 11 U.S.C. § 365, the trustee in bankruptcy has the ability to “assume or reject any . . . unexpired lease of the debtor.”[16]

The judge accepted the proposal and its acceptance by the trustee, stating that it was “in the best interest of the [d]ebtors, their estates, and creditors.”[17]  The agreement states that the Broncos took over the August 2016 payment owed to the District for $3,601,890. [18]  Further, the agreement releases Sports Authority and all persons who had previously involved in Sports Authority from any future obligations relating to the stadium naming contract.[19]  Further, the agreement prevents the District from asserting any future claims against Sports Authority related to the naming rights contract.[20]

A trustee in bankruptcy has the job of collecting the debtors’ assets and dealing with creditors, but their interest is in settling the debtor’s debts, not in personal financial gain from the sale.[21]  The settlement enables those involved in the former company, which filed for Chapter 11 bankruptcy in early March and almost immediately began the process of closing stores, to begin finalizing bankruptcy proceedings.[22]

Meanwhile, the settlement gives control over the naming rights to the Broncos will allow the NFL to remain heavily involved in the future naming of Mile High Stadium. Prior to this decision, both the Denver Broncos and the District had been proactively blocking the sale of Mile High Stadiums naming rights.[23]

The NFL is immensely invested in its image not just as a sports league, but also as an American institution.[24]  This motivation was apparent in the failed bids for naming rights of legal businesses that are not universally accepted throughout the United States.[25]  Furthermore, the agreement that was reached will allow the Bronco’s and the District to work closely to search for the best sponsorship partner.[26]

Conclusion

Even though many native Bronco fans want the stadium to remain simply “Mile High Stadium,” the Broncos are confident that they will be able to find a suitable sponsor for the stadium.[27]  Historically teams that have brought back naming rights contracts from bankrupt sponsors have had no trouble finding a replacement, and often sign new sponsorship deals for larger sums.[28]  However, as it stands the settlement reached between Sports Authority and the Broncos enables all the involved parties to move forward in a direction that benefits their interests.

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* Staff Writer, Jeffrey S. Moorad Sports Law Journal, J.D. Candidate, May 2018, Villanova University Charles Widger School of Law

[1] Why the NFL Has Become a Religion, Bleacher Rep. (Aug. 17, 2010), http://bleacherreport.com/articles/437542-why-the-nfl-is-replacing-religion; see also Stadiums:Printed NFL Stadium Photos, NFL Photo Store, https://nflphotostore.nfl.com/stadiums (last visited Oct. 6, 2016).

[2] See Steven Church & Jodi Xu Klein, Sports Authority Files for Bankruptcy with Plan to Slim Down, Bloomberg Tech. (last updated Mar. 2, 2016, 1:26 PM), https://www.bloomberg.com/news/articles/2016-03-02/sports-authority-files-bankruptcy-after-bungling-fitness-boom (noting that Sports Authority had failed to keep up with competitors).

[3] See Order Authorizing the Debtors to Assume and Assign Stadium Naming Rights Contract to the Denver Broncos Pursuant to Section 365 of the Bankruptcy Code, In re TSAWD Holdings, Inc., No. 16-10527 (Bankr. D. Del. Aug. 18, 2016) (order authorizing debtors to assume and assign stadium naming rights to Denver Broncos).

[4] Laura Northrup, Broncos and Mile High Stadium Take Back Naming Rights from Sports Authority, Consumerist (Aug. 19, 2016, 2:52 PM), https://consumerist.com/2016/08/19/broncos-and-mile-high-stadium-take-back-naming-rights-from-sports-authority/ (noting that Broncos can now seek a replacement sponsor, while Sports Authority is relieved from contract).

[5] See Laura Northrup, Let’s Check out an Actual Store-Closing Sale at a Sports Authority Store, Consumerist (June 2, 2016, 9:47 AM), https://consumerist.com/2016/06/02/lets-check-out-an-actual-store-closing-sale-at-a-sports-authority-store/.

[6] See Northrup, supra note 4 (noting that stadium naming rights may have failed to find purchaser because NFL, District, and Broncos may not have accepted auction winner as being legitimate).

[7] See Alicia Wallace & Tracy M. Cook, Mile High Stadium Naming Rights Headed to the Denver Broncos, Denver Post (last updated Aug. 15, 2016, 2:39 PM), http://www.denverpost.com/2016/08/03/mile-high-stadium-naming-rights-headed-denver-broncos/.

[8] See id.

[9] See Monica Mendoza, Owner of Broncos Stadium Takes First Steps Toward Renaming, Denver Bus. J. (last updated June 27, 2016, 3:11 PM), http://www.bizjournals.com/denver/blog/finance_etc/2016/06/owner-of-denver-broncos-football-stadium-anxiously.html (noting that money from stadium naming contract is used by District to maintain and improve public stadium).

[10] See Laura Northrup, Sports Authority Prepares to Auction Off Its Name, Your Name, Broncos Stadium Naming Rights, Consumerist (June 9, 2016, 10:31 AM), https://consumerist.com/2016/06/09/sports-authority-prepares-to-auction-off-its-name-your-name-broncos-stadium-naming-rights/ (noting that Hilco Streambank specializes in sale of intellectual property of companies); see also Wallace & Cook, supra note 7 (noting that Hilco Streambank sent notice to two hundred potential buyers to determine interest in purchasing stadium naming rights).

[11] Laura Northrup, Still No Sponsor to Replace Sports Authority on Mile High Stadium, Consumerist (July 26, 2016, 2:35 PM), https://consumerist.com/2016/07/26/10248859/ (noting although marijuana is legal in Colorado, both vape company and marijuana distributer were rejected as replacement sponsors of Mile High Stadium).

[12] See Nick McGill, Future Name of Mile High Stadium in Limbo, 9NBCNews (July 22, 2016, 7:05 PM), http://www.9news.com/news/local/future-name-of-mile-high-stadium-in-limbo/279978087 (noting it was hypothesized potential bidders were waiting until Sports Authority defaulted, so companies bidding could sign new contract).

[13] See supra note 10 for discussion of possible buyers.

[14] See Order Authorizing the Debtors to Assume and Assign Stadium Naming Rights Contract to the Denver Broncos Pursuant to Section 365 of the Bankruptcy Code, In re TSAWD Holdings, Inc(No. 16-10527) (Bankr. D. Del. Aug. 18, 2016).

[15] See id. 

[16] 11 U.S.C. § 365 (2005).

[17] Order Authorizing the Debtors to Assume and Assign Stadium Naming Rights Contract to the Denver Broncos Pursuant to Section 365 of the Bankruptcy Code, In re TSAWD Holdings, Inc(No. 16-10527) (Bankr. D. Del. Aug. 18, 2016) at 1–2.

[18] See id at 2.

[19] See id at 3 (noting this release applied to “current and former affiliates, officers, directors, agents, attorneys, employees, advisors, investment advisors, investment managers, partners, members, consultants, and shareholders”).

[20] See id at 2–3.

[21] See Koch Refining v. Farmers Union Cent. Exch., Inc., 831 F.2d 1339, 1342 (7th Cir. 1987).

[22] See Church & Klein, supra note 2.

[23] See Mark Darden & Monica Mendoza, Firm Hired to Sell Sports Authority’s Broncos Stadium Naming Rights, Denver Bus. J. (last updated June 9, 2016, 7:16 PM), http://www.bizjournals.com/denver/news/2016/06/09/sports-authority-hires-firm-to-sell-off-broncos.html (noting District argued in court that Sports Authority could not sell stadium naming rights without consent from team).

[24] See Jeremy Gordon, The Image Conscious NFL Has an Image Problem, Wall St. J. (Sept. 19, 2014, 10:36 AM), http://www.wsj.com/articles/the-image-conscious-nfl-has-an-image-problem-1411137396.

[25] See supra note 9 for discussion of marijuana related companies rumored to have bid on naming rights.

[26] See Wallace & Cook, supra note 7 (stating that Broncos and District believed Broncos assuming contract enabled both parties to expedite goal of finding new sponsor).

[27] See Tom Mustin, Broncos Purchase Naming Rights to Stadium, Have ‘Exciting Prospects’, CBSDenver (Aug. 3, 2016, 4:43 PM), http://denver.cbslocal.com/2016/08/03/sports-authority-mile-high-stadium-denver-broncos/.

[28] See Joe Mock, Stadium Countdown: Minute Made Park Needs Some Juice, USA Today (May 1, 2013, 9:17 AM), http://www.usatoday.com/story/sports/mlb/astros/2013/04/30/houston-astros-minute-maid-park-no-27-rank-mlb-stadiums/2125653/ (noting that within six months of Houston Astros purchasing naming rights from bankrupt Enron, they had signed a new naming rights contract with Coca-Cola subsidiary Minute Maid); see also Jon Morgan, M&T Bank Buys Right to Rename Ravens Home, Balt. Sun (May 6, 2003), http://articles.baltimoresun.com/2003-05-06/news/0305060011_1_ravens-stadium-mt-bank (noting that Baltimore Ravens Stadium was originally sponsored by PSINet for $4.65 million per year for twenty years, but after PSINet filed for bankruptcy M&T Bank agreed to seventeen year deal worth $5 million per year).