Negotiating Sports League Sponsorships

In Chapter 15 of 18, Major League Soccer legal counsel provides Jen Duberstein learns to mitigate risk in structuring and negotiating contracts. Duberstein learns why drafting sponsor fair agreements must lock sponsors into business terms and reduce termination risk. She finds larger deals, including expansion agreements, must include huge non-commitment penalties in protecting league interest and weighing business risk vs. legal risk.

Erik Michielsen: How does mitigating risk play a role in structuring sports league deals? Jennifer Duberstein: So if you’re going to enter into a sponsorship agreement, you want to draft in an agreement that locks in the sponsor to the business terms and gives latitude for different people or different parts of the contract to not necessarily be fulfilled. So in the world of sports sometimes, a field work doesn’t go up where it’s suppose to. So if that happens, you don’t want someone to be able to terminate the contract because of one non-immaterial part of the contract or asset isn’t delivered. So you look at ways to reduce risk of termination, risk of the client, the sponsor being unhappy and you help the team get through the knitty gritty and work with the other lawyers on the other side to make it a fair deal. So that is kind of how I reduce rick on that. I mean there were other things that have bigger deals. So if you worked on an expansion agreement, you want to make sure that this person is committed, and when he make denouncement, there would be huge penalties if they backed out because that isn’t something that you want. And can you imagine if an NFL team granted an expansion at franchise to LA and then the owner decided he didn’t really want to spend $500 million on the team or build the stadium. So, you have to really protect the interest and see what the business risk is versus the legal risk. And a lot of time in this, we don’t necessarily have the upper hand so you have to give on certain items, but then there’s other things that you won’t risk, so whether it’s an indemnity provision you do or you don’t want to make, you’ll look at it in the sense of the organization and not into specific deal.