Team may tap into tax funds, experts say
Monday, September 01, 2003 - 7:38:29 AM PST
By Paul T. Rosynsky, STAFF WRITER
OAKLAND TRIBUNE -- Promises by city and Alameda County officials that taxpayer funds are not at risk in a Sacramento jury's judgment awarding the Oakland Raiders $34.2 million in damages are not as sound as implied, legal experts say.
Should the Raiders win all the appeals certain to follow last week's jury award and a settlement is not reached between the two warring parties, experts said the team might have a chance to tap taxpayer funds for the award.
"The Raiders should be able to go after whichever entity owns the Coliseum," said Jessie Fried, a University of California, Berkeley, law professor who teaches corporate and bankruptcy law.
"The system is designed to not allow people to play these games."
City and county officials, along with attorneys for the Oakland-Alameda County Coliseum board, claimed last week the Raiders would not be able to tap city funds because the court judgment was against the Coliseum board only.
The board, established in 1963, is a private business with no legal connection to the city and county, lawyers said, and therefore the two governments should not be held liable for any judgment against it.
They argued that the Coliseum board relinquished its assets in 1995 after a new agency, the Oakland-Alameda County Coliseum Authority, took over operations of the Coliseum stadium and Arena.
That authority, commonly referred to as the JPA, is run by City Council members, county commissioners and appointed individuals.
In addition, Coliseum board attorneys and local officials argued, the Raiders would "not see a dime" of the award because the Coliseum board has no assets and is defunct.
"It is a corporation that is not active and it has no assets," said Alameda County Counsel Richard Winnie.
"We ourselves, through our own research, do not see a connection."
But at least one aspect of Winnie's and Coliseum board attorneys' research has already been proved wrong.
Business records held by the California Secretary of State show that the Coliseum board remains an active corporation. In addition, the Coliseum board is listed as meeting monthly.
"It's all smoke and mirrors," said Raiders attorney Ken Hausman. "They need to do something to keep the public fooled."
The status of the Coliseum board, however, doesn't answer questions about its assets or who is responsible for its liabilities.
While Winnie and others argue nobody has responsibility, Raiders attorneys and some legal experts disagree.
When the operations of the Coliseum stadium complex changed hands in 1995, some legal experts said liability for Coliseum board actions did too.
"It's conceivable they set this up in such a way that the Coliseum corporation is separate, but it is extremely unlikely," said Roger Noll, a Stanford University professor who has studied the case. "I think this is really a long shot; I think it is coming from left field."
As a general rule, corporate law requires that the only entity responsible for liability is the corporation which caused the harm, said William Wang, a professor of corporate law at the University of California Hastings College of the Law
But if the responsible corporation does not have assets as a result of a transfer of operations, then the new entity could be responsible, Wang said.
trim to optional add if needed qIf somehow the transfer made the corporation less credit worthy, that is a factor, q Wang said. qThis is a complicated case.q
Judges have allowed those seeking judgments to go after a parent corporation to prevent people from opening corporations simply to avoid liability, legal experts said.
qCorporations cannot escape liability by transferring its assets to other entities,q Fried said. qIf you allowed the JPA to escape liability in this situation, ... that would mean all you have to do is shut down to avoid payment and that would be a crazy system.q
Furthermore, the JPA signed an indemnity agreement with the Coliseum board in 1997 in which the JPA qagrees to indemnify, hold harmless and defend (the Oakland-Alameda County Coliseum, Inc.) ... who were or are parties or are threatened to be made parties to any proceeding.q
Winnie denies that agreement plays a role in the current case.
qIt was a very limited indemnity and they are going to have to explain why it matters,q he said. qIt's not my burden.q
In addition, experts said, they doubt the Raiders legal team would spend millions in legal fees suing a corporation without checking to see if that corporation has a way to pay a final judgment.
qThere is no way they would have litigated this all the way when all they thought they would get is the assets of a empty entity,q Noll said.
Crazy or not, local leaders are adamant that they have duped the Raiders into suing a qempty entity,q however, they will not say why that is the case.
qIt's (the Raiders) burden (to force payment), not ours,q Winnie said. qThis is so important so we are trying to handle it procedurally. q
qIt is going to be very easy to find out if they can get the money, let them try to collect, he said. qThat is our position. It is up to the Raiders to collect.q
The true position of the city and county, however, might be to scare the Raiders into a settlement, legal experts said. By indicating a willingness to aggressively fight Raider claims to the damages, local governments could be sending a message to the team that it will cost them dearly in legal fees to secure payment, the experts said.
But that tactic will cost taxpayers thousands of dollars as attorney's fees continue to rise with every court battle. And it also damages any chance for the Raiders and the two governments to come together to reach a settlement.
"Both sides have said things that are inappropriate," said Alameda County Supervisor Gail Steele. "It is very destructive."
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