Bucks Diary

Saturday, November 03, 2007

Can Senator Kohl prevent the next owner from relocating?


In Michael Hunt's column that appeared in Wednesday's Milwaukee Journal-Sentinel, he wrote that Senator Kohl would only sell the Bucks to an owner who promised to keep the team in Milwaukee. While that would be a noble gesture, such a promise almost certainly would be unenforceable.

When contracts contain "non-relocation clauses", those clauses are considered restraints on trade. Under our common laws, as derived from England, restrictive agreements in restraint of trade are frowned upon (the classic example, provided by Lord Coke, involved the sale of a horse -- that's how far back the rule goes). The reason is simple. Allowing people who no longer own assets to control how, where, or when those assets can be used would stifle competitive efficiency, which is the lifeblood of our market-based economy.

Therefore, such restraints are only enforced in situations where the court considers them reasonable (limited in time or space), and where the promisee (in this case Senator Kohl) can show a legitimate protectible interest. In business sales, protectible interests are generally limited to situations where the promisee has an interest in preventing the promisor from engaging in direct competition with him (for instance, if I buy your lemonade stand, the court would say I have a time-limited interest in preventing you from opening a lemonade stand across the street). Thus, its generally the purchaser who has an enforceable interest, not the seller. And in this case Senator Kohl, as the seller, would have no such identifiable interest.

Besides that, even if such a clause would be considered enforceable, it would only be enforceable against the initial purchaser. If the Bucks were ever subsequently resold, the non-relocation clause would have no effect on the new owner.

If Senator Kohl really wanted to prevent any future owner from relocating the team, he might consider shackling the franchise to an ironclad long-term arena lease. At this point, however, such a lease would not be economically feasible given the Bradley Center's current revenue generating limitations. If Senator Kohl were to sign such a lease at this moment, I doubt he would find anyone willing to purchase the team.

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