VOL. 132 | NO. 227 | Wednesday, November 15, 2017
Graceland Sues Over Concert Venue Scrapped By Grizz Noncompete
By Bill Dries
Graceland is challenging the noncompete agreement the city and county governments have with the Memphis Grizzlies in a lawsuit filed Wednesday, Nov. 15, in Shelby County Chancery Court.
The lawsuit by Elvis Presley Enterprises Inc. and Guesthouse at Graceland LLC seeks a declaratory judgment against the city of Memphis, Shelby County and Memphis Basketball LLC.
EPE wants a court to declare that its plans to build a 6,200-seat entertainment and concert venue announced earlier this year do not violate the city and county agreement with Memphis Basketball, a part of the Memphis Grizzlies organization that operates FedExForum.
Under the FedExForum Use and Operating Agreement, city and county government cannot fund the construction of an indoor venue that contains 5,000 permanent seats or more.
A statement from EPE following the filing of the lawsuit said Memphis Basketball made “baseless objections” to city and county leaders after Graceland went public with the project.
EPE later withdrew its original plans in reaction to the objections from Memphis Basketball.
The lawsuit seeks relief that Graceland says would either allow it to build the original 6,200-seat theater or a scaled-back version of the venue.
City chief legal officer Bruce McMullen said Wednesday in a written statement that the city negotiated in "good faith" with Graceland toward a "suitable resolution for its concerns."
"The administration is shocked that EPE would use a misleading press statement and a lawsuit to try to advance its position in the negotiations," McMullen added. "We don’t object to Graceland building a 6,200-seat venue. That option is available to it without the use of public funds, and it is free to do so."
Graceland announced plans in August to build a $50 million, 6,200-seat theater and event center in the area of its Whitehaven campus where the closed Heartbreak Hotel currently stands. The venue was to open in early 2019 and include retail and museum areas. The plans were to host 50 events a year.
Graceland planned to finance the facility by upping the percentage of property tax increment it gets from the tax increment financing (TIF) district the city previously approved for the Graceland campus.
The specific extension of that tax incentive to support the theater, in addition to other elements of the recent expansion of Graceland in Whitehaven, is what is at stake in the court case. EPE contends the city and county "regularly extended such incentives to other qualifying commercial enterprises."
The proposal also included a $1-per-ticket surcharge on events at the theater, community events excluded, that would go to the Economic Development Growth Engine – or EDGE – to support economic development in Memphis in general as determined by EDGE.
Joel Weinshanker, the managing partner of Graceland Holdings LLC, told county commissioners in September that the event center “is not looking to usurp any other venues in the city and county.”
He said the venue addressed a gap in the size of Memphis indoor concert venues between the 2,300 seats at the Orpheum Theatre and 18,000 seats at FedExForum.
Attorneys for Graceland told city and county leaders that they did not believe the plans violated the noncompete agreement.
But later that same month when Graceland went to the EDGE board for approval of bond financing, its attorneys abruptly announced it would change the plans for the venue to include no fixed seats and limit any concerts to those produced by Elvis Presley Enterprises.
Attorney James McLaren told the EDGE board that he and other attorneys still believed the original EPE arena design would not violate the noncompete clause, but he said Graceland was changing its plans “in order to be a good corporate citizen of Memphis.”
Talks among Graceland, the Grizzlies and City Hall continued.
But in its statement about Wednesday’s lawsuit, EPE said it and the city and the Grizzlies were “not able to reach a reasonable business agreement.”
According to Graceland, the city wanted to have the ability to sue EPE for damages if the Grizzlies left Memphis and blamed their departure on the new Whitehaven venue.
“A representative of the Memphis Grizzlies insisted that the limitations on the use of the multi-purpose facility on the Graceland campus last until the end of the FedExForum Use and Operating Agreement, even if the Memphis Grizzlies agreed to allow another multi-purpose facility or arena,” the Graceland statement added, pointing to the possibility of an exception to the noncompete as part of the Strickland administration’s plans for a youth sports complex as part of the Fairgrounds redevelopment.
Graceland executives said those were conditions “no reasonable business person would have agreed to.”
“Elvis Presley Enterprises was left with no choice but to protect both itself and the city of Memphis by filing a declaratory judgment action, so that it can move forward with its business plans, continue to invest heavily in the Graceland campus in the Whitehaven community of Memphis, and bring more jobs and increase tourism in the community, greater Memphis and Shelby County,” the statement said.