The Lawsuit That May Pave the Way for a Denver Broncos Sale

That claim is now the subject of a lawsuit filed by the Broncos against ROFR Holdings in an unusual confrontation that involves the estates of two of the team’s deceased owners and one mysterious lender: Pat Bowlen, who bought the franchise in 1984; Edgar Kaiser, who sold Bowlen the team; and an Arizona-based businessman named Scott Schirmer, who along with Kaiser’s estate owns the entity known as ROFR Holdings.

The lawsuit, in Denver County District Court, seeks a declaratory judgment that the right of first refusal claimed by ROFR Holdings is no longer valid. The right was once owned by Kaiser as part of the team’s sale from Kaiser to Bowlen 37 years ago. ROFR Holdings says it owns the rights of first refusal after Kaiser placed the rights in the company before his death. 

The litigation, which hinges on a deal from 1984 between two people who have since died, carries huge implications for one of the NFL’s most valuable franchises. 

The future of the Broncos’ ownership has been murky for the past few years. During that time, the team was roiled by an intrafamily feud between various Bowlen relatives over who should succeed Pat Bowlen and take over the club. Before he died in 2019, Bowlen placed the team in a trust, and the trustees are tasked with deciding which of his children should become the controlling owner—or whether the franchise should be sold, if they believe that’s in the family’s best interest. 

People familiar with the matter expect one of two outcomes. One is that the team will be sold. The other is that Brittany Bowlen, one of Pat’s children and the team’s senior vice president of strategy, will be installed as the controlling owner in a scenario that would still require some familial resolution and likely buyouts of certain beneficiaries. Broncos CEO Joe Ellis, one of the trustees, has said he intends to have a resolution in early 2022. 

That’s where ROFR Holdings’s claim complicates matters. If a valid right of first refusal exists, it would likely diminish the sales price. Such rights typically give a party an opportunity to match any outside bid. Parties interested in buying the Broncos—a process that can require millions of dollars in fees for lawyers and bankers just to participate in the bidding for an asset that will cost billions—could be deterred by the idea that a successful auction bid could be matched.

That’s why the Broncos are eager to nix ROFR Holding’s claims, which stem from a little-known chapter in the history of the team’s ownership battles. 

Kaiser, a wealthy American-Canadian, bought the franchise in 1981, but he didn’t hold on to it for long. Three years later, he sold the Broncos to Pat Bowlen, another businessman with Canadian roots. 

When Bowlen made that initial deal with Kaiser in 1984, it granted Kaiser the right to match outside offers for the club if Bowlen were to sell it, with certain conditions. The team went on to win three Super Bowls during Bowlen’s tenure, the first two of which were in the 1990s and led by John Elway. 

Oddly enough, the quarterback became part of an earlier round of litigation over Kaiser’s rights. 

As Elway neared retirement, he was such a cornerstone of the franchise that Bowlen offered to sell him 10% of the team with an option to buy 10% more. Kaiser sued, claiming it should have triggered his right of first refusal.

After Kaiser initially prevailed, an appeals court sided with Bowlen. Separately, Kaiser also sued over sales inside the team involving Bowlen and his siblings, where Bowlen also triumphed. Elway didn’t follow through on purchasing the stake.

That flurry of litigation had an unforeseen consequence: Kaiser, to help finance the court battle, took a loan from an Arizona businessman named Scott Schirmer, through a business he established called Twelve LLC. As part of that arrangement, Kaiser placed his rights of first refusal on the Broncos inside ROFR Holdings—and gave Schirmer’s Twelve LLC a stake in it. 

After Bowlen prevailed in those lawsuits, the litigation between the two over the right of first refusal ended. Kaiser died in 2012. Bowlen placed the team in a trust and later died in 2019. 

But ROFR Holdings says the rights Kaiser once owned are still alive. In 2020, amid rumors of the franchise’s potential sale, a lawyer for the holding company asserted them in a brief three-paragraph letter delivered to the Broncos facility—and triggered this latest bout of litigation. 

The two sides don’t dispute the general facts of the case. They diverge on the interpretation of the decades-old contract. The Broncos say the rights weren’t legally transferred under the terms of the deal. ROFR Holdings says they were. 

Lawyers for the Broncos argued in court that the right is invalid for several reasons. They said the language in the contract and other evidence shows that it was a personal contract between Kaiser and Bowlen that ended when they each died. They also said the ROFR was invalidly transferred to the holding company, according to the terms laid out in the Kaiser-Bowlen deal. 

“The Denver Broncos are a unique, multibillion-dollar asset and the transaction costs in the event all or any part of the ownership interest is put up for sale are substantial,” said Dan Reilly, a lawyer who has represented the Broncos for more than two decades. “The evidence shows that Edgar Kaiser and Pat Bowlen agreed to limitations on Kaiser’s ability to transfer his right of first refusal and specifically included termination provisions which were triggered upon his death, resulting in the termination of his right.” 

James Kilroy, the lawyer representing ROFR Holdings, said his client’s rights remain valid because the contract’s language allows for them to be transferred. 

“We revert to the express language in the contract and believe the parties intended the ROFR right and obligation to be transferable,” Kilroy said. 

“It was smart of the current owners to try and resolve this through this declaratory judgment rather than cavalierly going forward and letting the chips lie where they fall,” said Andrew Schwartz, a professor at the University of Colorado School of Law. 

One clause, from an amended version of the original sale agreement between Kaiser and Bowlen, is central to the Broncos’ efforts to kibosh the claim that the right is still valid—and also why the defendants believe the arrangement is kosher. 

A section in that amendment states the ROFR “shall not be assignable or transferable by Kaiser.” It adds that Kaiser may transfer it to a “Subsidiary of Kaiser” but the ROFR terminates “upon the transfer thereof by such Subsidiary or upon such Subsidiary ceasing to be a Subsidiary.” 

The Broncos’ lawyers said it violated the arrangement for a number of reasons, including that it wasn’t validly transferred and that even if it were, the language explicitly states it had to personally belong to Kaiser, which is no longer the case following his death and the introduction of Schirmer’s interest via Twelve, LLC.  

The Broncos also argued over the original intent of the parties, which they said was to prevent Bowlen from buying and quickly flipping the team back in the ‘80s. And amid their testimony, they turned to an unlikely source: the late Edgar Kaiser. 

One of the pieces of evidence was a video deposition of Kaiser taken from the prior litigation, where he was asked about the language in that clause. According to testimony from Reilly, who also represented the Broncos in the prior litigation between these parties, Kaiser states in the video that he understood it meant he could transfer the right to a subsidiary of his. “But that if it became not a subsidiary of mine, it says then that right terminated,” Kaiser said in that deposition. 

Kilroy, the lawyer for ROFR Holdings, said that the amendment doesn’t apply to a sale of the Broncos franchise. 

“The intent of the parties is manifest in the contract itself, which is unambiguous in our view,” said Kilroy, the lawyer representing ROFR Holdings. “Any extrinsic evidence of the intent of the parties is immaterial. What matters is what the contract says.” 

A resolution in the case is expected around or shortly after the New Year—right around when a decision on a potential Broncos sale is expected. 

Write to Andrew Beaton at andrew.beaton@wsj.com