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HomeMy WebLinkAboutR-96-0081i i J-96-194 1/31/96 96- RESOLUTION NO. 81 A RESOLUTION OF THE MIAMI CITY COMMISSION DIRECTING THE CITY ATTORNEY TO FILE A COMPLAINT FOR DECLARATORY JUDGMENT IN THE COURT OF APPROPRIATE JURISDICTION AGAINST DECOMA MIAMI ASSOCIATES, LTD., TO DECLARE THE RIGHTS AND STATUS OF THE PARTIES WITH RESPECT TO SECTION 11.1 OF THE LEASE AGREEMENT BETWEEN THE CITY OF MIAMI, MIAMI SPORTS AND EXHIBITION AUTHORITY, AND DECOMA MIAMI ASSOCIATES, LTD. BE IT RESOLVED BY THE COMMISSION OF THE CITY OF MIAMI, FLORIDA: Section 1. The Miami City Commission hereby directs the City Attorney to file a complaint for declaratory judgment in the court of appropriate jurisdiction against Decoma Miami Associates, Ltd., to declare the rights and status of the parties with respect to section 11.1 of the Lease Agreement between the City of Miami, Miami Sports and Exhibition Authority, and Decoma Miami Associates, Ltd. Section 2. This Resolution shall become effective immediately upon its adoption. CITY COMMISSION MEETING OF JAIL 3 3. 1996 Resolution No. 96- 81 13 PASSED AND ADOPTED this 31.st day of January, 1996. STEPH N P. CLARK, MAYOR ATTEST: uj o6- WALTER J. OEMAN CITY CLERK PREPARED AN PPROVED BY: WAR N BITTNER AS STANT CITY ATTORNEY APPROVED AS TO FORM AND CORRECTNESS: a I /// A. TI NES, III CIT AT RNEY W654:CSK -2- N' l PONCE DE LEON PLAZA LAW OFFICES KRONCOLD and TODD, P.A. EIGHTH FLOOR, 201 ALHAMBRA CIRCLE CORAL GABLES, FLORIDA 33134 February 2, 1996 TELEPHONE (305) 446-3033 FAX (305)443-4469 Mr. Cesar H. Odio City Manager Cittyy of Miami 3500 Pan American Drive Miami, FL 33133 /C and Quinn Jones, Esq. City Attorney City of Miami 300 Biscayne Blvd. Way Suite 300 Miami, FL 33131 RE: City of Miami; Miami Arena Contract Our File No. 5644.1 Dear Cesar and Quinn: Enclosed please find my proposed response to Blaisdell's letter. If it meets with your approval, please indicate by initialing a copy of the letter and faxing it back to this office. Cesar, I would appreciate it if you would approve the content and Quinn, I want to make sure this doesn't affect your potential declaratory judgment action. Very truly yours, M. RONALD ONGOLD MRKIg1 Enclosure cc: Rafael Diaz, Esq. g:\arena.mia\odio/Jones.1tr LAW OFFICES KRONGOLD and TODD, P.A. EIGHTH FLOOR, 201 ALHAMBRA CIRCLE CORAL GABLES, FLORIDA 33134 PONCE DE LEON PLAZA Mr. John A. Blaisdell Leisure Management International 11 Greenway Plaza, Suite 3000 Houston, TX 77046 February 2, 1996 O�p�q RE: City of Miami; Miami Sports and Exhibit Authority Our File No. 5644.3 Dear Mr. Blaisdell: TELEPHONE (305)446-3033 FAX (305) 443-4469 I am in receippt of your letter of February 1, 1996 which, read in conjunction with your January 19, 1996 letter, is contradictory on it's face. In paragraph 3 of your January 19, 1996 letter you specifically state "any conversations between the City and the Miami Heat regarding the Miami Arena or any alternative to the Miami Heat remaining as a tenant in the Miami Arena would constitute tortious interference with or violation of their respective rights ...". I assume from your latest letter of February 1, 1996, that you have changed your position and are clarifying it in such a way that you are now in agreement that the City of Miami may discuss with the Heat a lease extension at the present arena which may or may not involve discussions with regard to as what will happen at the termination of that lease extension. Just so there will be no misunderstanding, if the Heat does bring up the question of a new arena then you have indicated in your letter of February 1, 1996 that the City may discuss it with the Heat subject to the non -compete provision. Meaning we may discuss a new arena but anything beyond these discussions i.e. contractual arrangements would be subject to the non -compete, and should the City feel that the non -compete is void that would be subject to a judicial determination. . Should I not hear back from you in plain, clear and precise language that this is not your position on or before Monday, February 5, 1996 at 5:00 PM, my client, the City of Miami, will assume that you have changed your position as set forth in your January 19, 1996 letter and will contact the Heat and request them to initiate conversations regarding the various issues at hand. 96- 81 Mr. John Blaisdell Page No. 2 February 2, 1996 do wish to continue our conversations and since one of the impediments has been removed, I suggest that we meet again to discuss a method of moving forward. I will be available Monday, Tuesday and Wednesday of next week for these conversations. Cordially yours, ao � M. RO D KRONGOLD MRMgl cc: Marshall Burak, Esquire C.easar Odio, City Manager Mayor Clark Lael Schumacher, Assistant to Mayor J.L. Plummer, City Commissioner Joe Carollo, City Commissioner Millie Dawkins, City Commissioner Willie Gort, Cityy Commissioner Quinn Jones, Ci&puty Attorney Rafael O. Diaz, City Attorney r CITY OF MIAMI, FLORIDA INFER -OFFICE MEMORANDUM TO : DATE : FILE Honorable Members of the City January 31, 1996 Commission & City Manager, SUBJECT : EMERGENCY COMMISSION MEETING FROM : REFERENCES See4nClark ENCLOSURES: Please be advised that an EMERGENCY MEETING of the City of Miami Commission will be held this afternoon, Wednesday, January 31, 1996 at 5:00 p.m., in the City of Miami Commission Chambers. This meeting is in reference to The Miami Heat and the Florida Panthers. The presence of all City Commissioners is strongly encouraged. Thank you. SPC:ekm cc: -t Vice Mayor Willy Gort -; Commissioner J.L. Plummer, Jr. Commissioner Miller Dawkins Commissioner Joe Carollo Cesar Odio, City Manager A. Quinn Jones, City Attorney '"Walter Foeman, City Clerk 96- 81 (� :� F CESAR H. ODIO CITY MANAGER *URGENT* P. O. BOX 330708 MIAMI, FLORIOA 33233-0708 305-250-5400 FAX 305-285-1835 EMERGENCY CITY OF MIAMI COMMISSION MEETING At 6.nesday, January31, 1996, The Miami City Commission will convene for a special emergency city commission meeting to discuss the Miami Heat and the Florida Panthers, The meeting will be held at the Miami City Commission Chambers, 3500 Pan American Drive. 96- 81 MEMORANDUM �. To: Joe Carollo Chairman From: Christopher G, Korge, Esquire V - • Ak General Counsel Date: January 17, 1996 Subject: Negotiations for New Arena and Acquisition of Deconna Interest This legal opinion revises the written opinion I gave you Tuesday, January 16, 1996, mricerning the following questions: First, Mn the City A4anager, Mayor, City Commissioners and Chairman of the Miami Sports and Exhibition Authority ("Authority") engage in discussions with the Miami Heat or some other third party concerning faoilitating the construction of a new arena without breaching the Miami Arena Land Lease Agreement or the Miami Arena Contract; and sea md, whether the City of Miami Manager, Mayor or Commissioners can negotiate to purchase Decoma's interest in the Miami Arena set forth in the Land Lease Agreement and the Miami Arena Contract without the Miami Sports and Exhibition Authorities pa•ior cvmcnt. 1. Engaging in discussions with the Miami Beat or a third party to facilitate the construction of a new arena in the City of Miami will cause a breach of the Land Lease Agreement, A basic assumption has been made in my legal analysis that any discussions that the City Manager, Mayor and City Commissioners ("City Official") would undertake relating to facilitating the construction of a now arena in the City of Miami would be done, formally or informally, in their capacity as a City Official. The nature and extent of the relationship between parties said to occupy states of principal and agent presents a questions of fact and is not typically controlled by the descriptive labels employed by the pardefi 6emselves. Parker v. Dominos Pizza. Inc. 629 So.2d 1026 (Fla. 4th DCA 1993). However, in this situation, the very reason why a City Official would be discussing with the Miami Heat or any other third party would clearly be interprotcd to be for aura un behalf of the City and therefore, they would be deemed HANZIV AN CRIDEN KORGE HERTZBERG & CHAYM P.A. 96- 81 to be acting as an agent for the City. Consequently, any negotiations conducted by a City Official for the construction of a new arena are subject to the prohihitions outlined in Section 11.1 of the Land Lease Agreement, titled "NON- CONTETITION", which states; Section 11.1 The City agrees thAt d ring the term hereof it shall not sponsor in any manner a facility that shall compete with the arena at which substantially similar events can be presented on . a commercial basis to audiences of cumparablc aizt;—. Land Lease Section 11.1, pages 47-48. The covenant not to "sponsor in any manner a facility that shall compete with the Arena" applies to the City as well as those acting with the City's authority. Clearly, any discussiunh f4cilitatuig die construction of a new arena that would compete with the lvriami Arena constitutes sponsorship by the City of a competitive facility and is therefore, expressly prohibited by the terms of the Land Lease Agreement. A violation of this provision may result in the City of Miami being sued for dtunages and/or potentially other equitable relief The prohibitions set forth in the Miami Arena Contract are slightly more permissive as it relates to the actions that Authority officials may undertake without violating the cuvontuit aut to compete set forth in the Miami Arena Contract, Scc Section D.1.1.2(d), pages D-3, D-4). The Authority and•its agents are only prohibited from "commencing construction" of a new arena. In my opinion, any negotiations specifically conducted by the Chairman of the Authority (who by Ordinance is also a mcinbcr of the City Commission) would more than likely still be deemed to be undertaken in his capacity as an agent for the City and consequently in breach of the City's more strict covenant not to compete. Z. City Officials can negotiate the purchase of Decoma's interest under the Land Lease Agreement and the Miami Arena Contract without the i+iiamia Sports and Exhibition Authority's prior consent, There is no principal of law or provision contained in either the Miami Arena Contract or the Land Lease Agreement which would preclude a City Official from negotiating the purchase of Decoma's interest in the Miami Arena. Consequently, there is no obligation on behalf of the City of iviiami to obtain the prior consent of the Authority to negotiate with Decoma. Obviously, any amendment to the Land HANZMAN CRID EN KOROE HERTZBERG & CHAYIUN P.A. 96- 81 r Lease Agreement and/or termination of the Miami Arend Contract resulting from such acquisition of Decoma's interest would require the ultimate approval of the Miami 1, Sports and Exhibition Authority because they are a party to such agreements. 2073\carolto.op MEMORANDUM VIA. 1FACSY1V ME_- 856-SZ30 To: Joe Carollo, Chairman Miami Sports & Exhibition Authority From: Christopher G. Korge, General Counsel Date: January 23, 1996 Subject: Miami Arena Land Lease Non -Competition Clause This memo is to clarify the scope of the opinion requested by you on Thursday, January 11, 1996, concerning whether or not a City Commissioner or Chairman of the Miami Sports and Exhibition Authority could engage ui discussivais to facilitate the construction of a new arena with the Miami Heat or some third party, My opinion was strictly limited to whether or not such discussions would be a breach of the actual language cnnmined in the Miami Arena Land Lease Agreement. I have, however, continued to research the issue of whether or not such a non -compete clause would be binding under Florida law, After a further review, I have found that such provision could potentially be void pursuant to Section 542.33 Florida Statutes. I believe that extensive research needs to be done concerning whether or not such provision would be deemed to be a restraint of trade pursuant to Florida law and therefore void. Please advise me as to whether or not you would like rue to continue may research concerning this matter. I believe that if my research concludes that such provisiun is in fact void, then both the City and the Authority should file an action for declaratory relief prior to any discussions with the Heat or any third party to facilitate the construction of a new arena in the City of Miami. I feel it would be imprudent to engage in discussions which will clearly be in breach of the Miami Arena Land Lease Agreement without first seeking such declaratory relief. I look forward to hearing from you concerning this matter. ; V cc: William R. Perry 2073\c uotlo.3 - HANZMAN CRiDEN IKORGE HERTZBERG & CHA.YICIN F.A. 96-- 81 r ----------------------------------------------- 2. (A) ACCEPT MANAGER'S RECOMMENDATION TO REQUEST MIAMI SPORTS AND EXHIBITION AUTHORITY (MSEA) TO REPORT BACK TO THE COMMISSION ON STATUS OF NEGOTIATIONS BETWEEN LEISURE MANAGEMENT INTERNATIONAL AND THE MIAMI HEAT CONCERNING EXTENSION OF LICENSE AGREEMENT WITH THE HEAT AT MIAMI ARENA -- DIRECT COMMISSION REPRESENTATIVES TO CONTACT DECOMA VENTURE, AND DECOMA MIAMI ASSOCIATES, LTD., AND START NEGOTIATIONS TO PURCHASE ITS RIGHTS TO THE MIAMI ARENA. (B) APPOINT VICE MAYOR PLUMMER TO REPRESENT THE COMMISSION AND COMMISSIONER CAROLLO ELECTED AS CHAIRMAN OF MSEA. Mayor Clark: Mr. Manager, at our last meeting, this Commission passed a resolution concerning the Miami Sports and Exhibition Authority, and expected a report back at this time. Would you please respond. Mr. Cesar Odio (City Manager): Yes, sir. I will ask Ron Krongold to please come up to the podium and... Mayor Clark: Please, folks. Listen. Mr. Odio: ... and give us a report and recommend... I asked him also to, since he's been working with us very closely on this issue, to come up with some recommendations. And the Sports Authority is also here, and they are willing and ready to make a report, too. Mr. Ronald Krongold: My name is Ronny Krongold, and I'm an attorney with the law firm of Krongold and Todd, at 201 Alhambra Circle, Coral Gables, Florida. I was asked by the Commission at the last Commission meeting to investigate and look into the items. that were passed in that resolution. Based on that, I spoke to Chris Korge, who is the attorney for the Miami Sports, Authority, and, in fact, met with him last Friday, where he was very forthcoming, in giving me the history of the Sports Authority, and also discussing who the owners of the operator, Decoma, were, and, in fact, on Monday, supplied me some documentation, and then told me as late as yesterday that we would be getting documentation indicating who the operator actually was, the makeup of the operator, and if there were any assignments and so forth and so on. And in fact, this morning, he handed me a document which I haven't had a chance to review, EK-Tape 1 2 November 16, 1995 96- 81 r, which I believe purports to tell us who is Decoma... who's the operator, and if there is or have not been any assignments. So without having the ability of discussing that document, but assuming for the moment that the document indicates that Decoma has complied with the provisions within the land lease with regard to assignment, if there has been an assignment, or transfer of ownership, which they have to notify us if there's 85 percent or more ownership of the operator, that they have done that, I make my suggestions with keeping that in mind. My suggestions are as follows: First of all, I strongly recommend that this City Commission does not enter into any negotiations at all with any of the sports teams, be it the Heat or the Panthers, in the Arena. And I think it has already been pointed out amply that that may be considered to be an interference with the contract between the operator, who is Decoma, and the sports team, and possibly even the contract between the Sports Authority and the operator. Also, I'd like to point out that we cannot discuss... The City of Miami is prohibited from discussing any new arena with anybody, because in Section 11 of the land lease, which is the document that sets the rules as to what the City of Miami does with regard to the sports Aren, there is a specific provision that says that we cannot compete nor discuss competition of any new arena as long as we have this Arena and we're the landlords of this Arena, which we are. Based on those two propositions, the City could ask MSEA (Miami Sports and Exhibit Authority), the Sports Authority, to bring a lawsuit requiring the operator to provide the City with the information requested in the resolution. But I would hesitate to recommend that for two reasons. Number one, I think that information may be forthcoming anyways. And to get into litigation is expensive, time-consuming, and I always recommend, whenever I can, if you can avoid litigation, avoid it. It's the best ally of an attorney and very expensive for their client. What the City could do is enter into negotiations with the operator, with Decoma, if they will enter into those negotiations, to buy Decoma's position. The City, in fact, would step into the shoes of the operator under the Miami Arena contract. If the operator and the Panthers have a common ownership, as I have been led to believe they do, the Panthers are not - seem to be saying they're not staying in Miami. And possibly, for those reasons, the operator, Decoma, would sell its interest to the City, the Sports Authority or a combination of interested parties, which, in turn, would allow the City to control its own destiny with regard to the sports teams and the Arena within the City of Miami. And that -is my recommendation to the City Commission. Mayor Clark: Mr. Krongold, you read to me provision number 9, what it's all about, what the contract includes and doesn't include? Mr. Krongold: Excuse me, Mayor, I didn't hear what you said. Mayor Clark: In the contract itself, about... was it 9A you said this morning? EK-Tape 1 3 November 16, 1995 06- 81 CITY OF MIAMI, FLORIDA INTER -OFFICE MEMORANDUM Joe Carollo January 26, 1996 MIA-96-00001 TO : DATE FILE City Commissioner FROM SUBJECT: Legal Opinion Non -Competition Clause of Triparty Agreement A. Q Inn J s, III REFERENCES: - City Atto y ENCLOSURES: You have requested a legal opinion on the following question: DOES THE NON -COMPETITION CLAUSE CONTAINED IN SECTION 11 OF THE LANDLEASE AGREEMENT DATED OCTOBER 10, 1986 (THE "AGREEMENT") PROHIBIT THE CITY OF MIAMI ("CITY") FROM CONSTRUCTING OR PARTICIPATING IN DISCUSSIONS ABOUT THE CONSTRUCTION OF A NEW ARENA AND MAY SAID CLAUSE BE WAIVED OR OTHERWISE RENDERED VOID? The questions above cannot be answered with a categorical "yes" or "no" because of the conflicting legal principles that impact upon them and the different interpretations which a court may have concerning said principles. Therefore, we will attempt to summarize our research concerning this matter and to give you our best conclusion with regard to the validity of the non - competition clause of the Agreement. Section 11 of the Agreement reads as follows: SECTION 11 NON -COMPETITION Section 11.1. The CITY agrees that during the Term hereof it shall not sponsor in any manner a facility that shall compete with the Arena at which substantially similar events can be presented on a commercial basis to audiences of comparable size other than the James L. Knight International Center, the Ralph Monroe Ma ' Stadium (as they presently exist), any permanent and/or to Exhibition/Convention Hall Facility, including the Coco 0 0 Exhibition Center and any expansion thereto, and t plann Bayfront Park Amphitheater so long as commercial au u`�nces v 96- 81 r Joe Carollo City Commissioner January 26, 1996 Page 2 ® purchase tickets for any such event held at the amphitheater are restricted to no more than 4,000 people for each such event. A literal reading of Section 11.1 of the Agreement clearly indicates that the City is precluded from sponsoring "in any manner" the building of a facility which would compete with the Miami Arena. Therefore, were we to restrict our approach to your questions solely to general contract law and principles, we would have to conclude that, as long as the language of Chapter 11 of the Agreement remains unamended, unwaived and in force, the City would be precluded from participating in any discussions with third parties concerning the building of a new arena. We have, however, researched other principles of law which may negatively impact upon the validity or enforceability of Section 11.1 of the Agreement. There are primarily two other approaches that may be undertaken in order to produce such a result. They are as follows: 1. Statutory Restriction on Contracts Which Restrain Trade Section 542.33, Fla. Stat., reads as follows: 542.33 Contracts in restraint of trade valid (1) Notwithstanding other provisions of this chapter to the contrary, each contract by which any person is restrained from exercising a lawful profession, trade, or business of any kind, as provided by subsections (2) and (3) hereof, is to that extent valid, and all other contracts in restraint of trade are void. (2)(a) One who sells the goodwill of a business, or any shareholder of a corporation selling or otherwise disposing of all of his shares in said corporation, may agree with the buyer, and one who is employed as an agent, independent contractor, or employee may agree with his employer, to refrain from carrying on or engaging in a similar business and from soliciting old customers of such employer within a reasonably limited time and area, so long as the buyer or any person deriving title to the goodwill from him, and so long as such employer, continues to carry on a like business therein. Said agreements may, in the discretion of a court of competent jurisdiction, be enforced by injunction. However, the court shall not enter an injunction contrary to the public health, safety, or welfare or in any case where the injunction enforces an unreasonable covenant not to compete or where there is no showing of irreparable injury. However, use of specific trade secrets, customer lists, or direct solicitation of existing customers shall be presumed to be an irreparable injury and may be specifically J enjoined. In the event the seller of the goodwill of a business, or a 96- 81 r Joe Carollo City Commissioner January 26, 1996 Page 3 AXL vp shareholder selling or otherwise disposing of all his shares in a corporation breaches an agreement to refrain from carrying on or engaging in a similar business, irreparable injury shall be presumed. W �1.J (b) The licensee, or any person deriving title from the licensee, of the use of a trademark or service mark, and the business format or system identified by that trademark or service mark, may agree with the licensor to refrain from carrying on or engaging in a similar business and from soliciting old customers of such licensor within a reasonably limited time and area, so long as the licensor, or any person deriving title from the licensor, continues to carry on a like business therein. Said agreements may, in the discretion of a court of competent jurisdiction, be enforced by injunction. (3) Partners may, upon or in anticipation of a dissolution of the partnership, agree that all or some of them will not carry on a similar business within a reasonably limited time and area. (4) This section does not apply to any litigation which may be pending, or to any cause of action which may have accrued, prior to May 27, 1953. Amended by Laws 1988, c. 88-400, § 1, eff, Oct. 1, 1988, Laws 1990, c. 90-216, § 1, eff. June 28, 1990. This statute has been interpreted by the Fifth District Court of Appeal to stand for the proposition that it makes all "contracts which restrain one from exercising a lawful profession, trade or business void unless such restraint is expressly permitted by §542.33(2) or §542.33(3)." Spencer Pest Control Company of Florida, Inc. v. Smith, 637 So. 2d 292 (Fla. 5th DCA 1994). The line of cases that has developed interpreting the provisions of §542.33, Fla. Stat., deal almost exclusively with the typical situation where an employer is attempting to enforce a non - competition clause when an employee leaves his/her employment. In the instant case, something similar to the opposite has occurred. The City is a party to an Agreement through which it finds itself subject to a restriction enforceable upon it by Decoma Miami Associates, Ltd. ("Operator"), an agent .or an independent contractor under contract to the Miami Sports and Exhibition Authority ("MSEA" ), an independent agency of the City. A review of the definition of the terms used in §542.33, Fla. Stat., however, in no way precludes the statute from being applicable to the City's Agreement with the Operator. For example, a "municipality" is one of the definitions of the word "person" as used in §542.33, Fla. Stat., and the word "trade" means "... any economic activity of any type whatsoever ...." If a court deems §542.33, Fla. Stat., to be applicable to our fact pattern and it finds that the exceptions of §§542.33(2)(a) and (2)(b) and §542.33(3), Fla. Stat., are inapplicable, it should declare Section 11.1 to be void and unenforceable. 96- 81 Joe Carollo January 26, 1996 City Commissioner Page 4 A strict construction of the language of §§542.33(2)(a) and (2)(b) and §542.33(3), Fla. Stat., would preclude a court from exempting the Agreement. Neither section specifically addresses the situation created by the non -competition clause of the Agreement. A similar scenario was addressed in Flatley v. Forbes, 483 So. 2d 483 (Fla. 2d DCA 1986) in which the court held that a "statutory exception to a prohibition contract by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is confined to restraining the i commercial activities of the seller of the business and does not encompass the agreement in which the buyer of a business agrees not to compete with the seller of the same business." Although the court in Flatley makes references to sellers and buyers of business as opposed to the City's and the Operator's role in this instance, the ruling can be interpreted to mean that §542.33, Fla. Stat., is to be strictly construed so that the only non -competition agreements that are valid are those that specifically fit the exceptions in §542.33(2) and §542.33(b), Fla. Stat. Even if a court of competent jurisdiction were to reject the argument concerning the exceptions discussed in the above paragraph, and attempted to fit our facts to any of the exceptions of §542,33, Fla. Stat., the court would then have to determine that the restraints placed on the City were reasonable as to time and territory. Pensacola Associates v. Biggs Sporting Good Company, 353 So. 2d 944 (Fla. 1st DCA) cent. denied, 364 So. 2d 881 (Fla. 1978). It would appear from a review of the cases considering reasonableness as to time, that a fifty-two (52) year non -competition agreement could be considered unreasonable by a court, particularly since the reason the issue is being debated is because of the perceived obsolescence of G� the existing arena. Flammer v. Patton, 245 So. 2d 854 (Fla. 1971). Auto Club Affiliates, Inc. v. Donahey, 281 So, 2d 239 (Fla. 2d DCA), cert. denied, 285 So. 2d 28 (Fla. 1973). Summarizing Section 1 of this opinion, it must be stated that, if a court deems that, the Agreement is governed by §542.33, Fla. Stat., the City would have a good opportunity to have the non -competition portion of the Agreement declared void pursuant to the analysis above. However, we must caution that a court may decide that the relationship between the City and the Operator is such that the Agreement is not subject to the provisions of §542.33, Fla. Stat. 2. Public Policy gnd the Non-Compgtition Agreement It is an established principle of contract law that a municipality cannot contract away its authority to control the powers and functions properly pertaining to municipal government. McQuinllin, Mun. Corp. §29,07, 3rd Ed. (1990). In the instant case, the non -competition clause of the Agreement may be deemed to, in fact, control the powers and functions of the City. The determining factors in concluding whether a municipality has contracted away its power and authority in contravention of public policy are whether the municipality has acted in a proprietary or municipal capacity or in a legislative capacity. In Shealor v. Ruud, 221 So. 2d 765 (Fla. 4th DCA 1969), the court stated that a rule distinguishing a governmental function from a proprietary function is difficult to formulate but a factor to be considered in determining whether the function of government is proprietary is whether the function could be performed as well by a private corporation. 96— INI r L'. Joe Carollo January 26, 1996 City Commissioner Page 5 In our case, the court would have to decide whether the relationship of the City, MSEA, and the Operator created by the Agreement and the conditions dictated to the City by the non - competition clause would constitute an usurpation of the City's legislative authority. The fact that the City has contracted away its ability to build another arena for at least fifty-two (52) years may be construed by a court to be an abrogation of the City's power to decide when to use its police power. See, Partnership v. City of Largo, 549 So. 2d 738 (Fla. 2d DCA 1989) where a court concluded that an agreement purporting to restrict a city's ability to decide where to build a road, install a traffic device and permit the development of a parking lot and storm drain connection was ultra vires and unenforceable. The public policy argument is more difficult for the City to make because it is not easy to distinguish clearly between proprietary and legislative powers. However, this argument could be effectively used in a challenge to the validity and enforceability of Section 11.1 of the Agreement, particularly in conjunction with the arguments set forth in Section 1 above. We wish to interject a word of caution concerning contact by City officials with any third parties prior to a final determination of the legality of the non -competition clause of the Agreement. The Operator could allege that the City had engaged in tortious interference in a business relationship if the City is deemed to be interfering with the existence of a business relationship under which a plaintiff has a legal right; doing so intentionally and unjustifiably and damaging the plaintiff. Georgetown Manor, Inc. v. Ethan Allen, Inc., 991 F.2d 1533 (1 Ith Cir. 1993). Therefore, City officials should refrain from contacting third parties about the construction of a new arena until the issue dealt with herein is resolved by virtue of a declaratory judgment or otherwise. CONCLUSION In conclusion, our analysis of the applicable statutory provisions, the case law and legal principles impacting upon the enforceability of the non -competition clause of the Agreement indicates that there is a good possibility that a court would determine that said clause is unenforceable vis-a-vis the City. However, since there is no case law exactly on point, the safest course for the City to adopt is to seek a declaratory judgment from a court of competent jurisdiction which would determine whether Section 11.1 of the Agreement is enforceable. PREPARED BY: RAF L 6. DIAZ Deputy City Attorney AQJ:ROD:bf:W009 . :WED BY: � r, 'oh d E. MAXWE y City Atto ey CITY OF MIAMI, FLDRIDA INTER -OFFICE MEMORANDUM TO A, Quinn Jones III January 12, 1996 r,LE City Attorney Request for Opinion " FROM �foeCaroilo Commissioner Please render an opinion on the so-called "no -compete" clause in the City's land lease agreement at the Miami Arena, Specifically, to what extent can the City participate in discussions regarding the construction of a new arena'? If the City cannot commence any discussions at the present time, under what circumstances may the "no -compete" clause be waived? JC/cmw 81