The fallout from unfair and ill-advised negotiated agreements can reverberate for years to come, as the City of Miami learned from its 2009 stadium deal with former Florida Marlins owner Jeffrey Loria. The story highlights aspects of dealing with difficult people, including their threats, questionable claims, and other potentially unethical negotiation tactics.
The Great Switcheroo
Back in 1999, Loria launched his career as a Major League Baseball (MLB) team owner when he bought a 24% stake in the Montreal Expos, a neglected team with a crumbling stadium, for just $12 million, writes Jonah Keri for CBS Sports. Within two years, Loria engineered the financing needed to secure a 94% stake in the franchise.
Then came “the Great Franchise Switcheroo of 2002,” as Keri calls it. With the Expos’ future in Montreal uncertain, Loria sold the team to the other 29 MLB owners for $120 million—10 times his initial investment—and bought the Marlins for $158.5 million from their owner, John Henry, who turned around and bought the Boston Red Sox. Loria paid nothing out of pocket for the ownership transfer, funding the difference in the Marlins purchase with a $38.5 million interest-free loan from the MLB.
Carrots and Sticks
The Loria era started on a high note for the Marlins: In 2003, the team beat the New York Yankees in the World Series. Then Loria traded away stars and didn’t rebuild, saying he couldn’t afford to invest in payroll because ticket sales were low. Fans were staying away from the Marlins’ outdoor stadium during Miami’s hot and rainy summers.
To reverse the ballpark’s misfortunes and those of its Little Havana neighborhood, the team needed a retractable-roof stadium, Loria said. He then claimed he couldn’t afford to build one and threatened to relocate the team to another city.
City leaders fell in line behind a very generous public-financing deal in which Miami and Miami-Dade County taxpayers would pay about 75% of the $634 million construction costs for a new 37,000-seat stadium. The team itself would pay just $125 million and keep almost all the revenue generated.
Build It, but They Might Not Come
When it opened in 2012, the new Marlins Park enhanced the value of the team, but the economic benefits Loria had predicted didn’t materialize. Ticket sales remained stagnant, the Marlins’ losing streak continued, and the neighborhood did not revitalize.
Moreover, the burden on taxpayers was far worse than anticipated. Largely because Miami-Dade County used public bonds to secure high-interest loans to fund the deal, the stadium is expected to cost taxpayers a whopping $2.4 billion over 40 years, according to the South Florida Sun-Sentinel. The stadium itself is tax-exempt; Loria paid about $2.3 million annually in rent, which was used to pay back a $35 million loan from the county.
Meanwhile, contrary to Loria’s claims, a 2010 Deadspin exposé suggested that the team was turning a profit—and that Loria was pocketing millions of dollars each year in “management fees.” The Securities and Exchange Commission launched an investigation but eventually dropped it. Voters angered by the stadium deal recalled Miami-Dade mayor Carlos Alvarez in protest.
The Competition Heats Up
As the Marlins played another lackluster season, Loria began floating the idea of selling the team in late 2016 for $1.7 billion, according to Forbes.com.
Forbes estimated the team’s value at $675 million, second-lowest among MLB teams, but a highly lucrative TV deal awaited in 2020, plus possible naming rights to Marlins Park. Then there was the prospect of turning around a struggling MLB team with a brand-new, tax-free stadium.
An “unusually lengthy and public” bidding process unfolded, with the Marlins handling it themselves to avoid paying bank fees, according to the New York Times. Two main buyer groups emerged, one including former Yankees star Derek Jeter and basketball great Michael Jordan, to be largely financed by venture capitalist Bruce Sherman; and another that included Tagg Romney, son of former senator Mitt Romney, and former Florida governor Jeb Bush.
Winners and Losers
In August 2017, Loria agreed to sell the Marlins to the Sherman/Jeter group for $1.17 billion. When the question arose of how much local governments would get from the sale to help pay down the billions they invested in Marlins Park, Loria claimed he somehow was selling the team at a loss and thus couldn’t contribute a penny to paying down the debt. Disputing that improbable claim, the city and county sued. Loria settled in January 2021 for a mere $4.2 million. For him—and him alone—it was another great deal.
Dealing with Difficult People in Negotiation
When dealing with difficult people in negotiation, we are too often intimidated and insufficiently suspicious. Here’s advice on how to deal with difficult people:
- Don’t be intimidated by threats. Bullies frequently don’t intend to follow through on their threats and fully expect you to cave. Take a clear-eyed view of the situation, investigate how likely they are to follow through, and develop a strong backup plan. Then bargain for everything you’re worth.
- Take the long view. In the business world, one negotiation often leads to another. Think through the long-term implications of deal terms, analyzing possible scenarios, and then prepare for both the best and the worst of them.
- Choose your partners wisely. A businessperson’s past agreements can say a lot about them and their ethics in negotiation. When dealing with difficult people, research their reputations in their industry and remember that people who have made threats and engaged in unethical negotiation tactics in the past often do so again.
What negotiation strategies do you deploy when dealing with difficult people?