Schultz sticks with lawsuit
Schultz sticks with Sonics suit
Schultz sticks with Sonics suit
Analysts: He may have case, but team's return is long shot
By GREG JOHNS
P-I REPORTER
While many are ready to dismiss the notion that Howard Schultz has any chance of unwinding the sale of the Sonics to Clay Bennett, the attorney for the Starbucks coffee mogul says there is good reason his client didn't take part in last week's settlement with the Oklahoma City ownership group.
A fraud and breach of contract suit against Bennett by the former Sonics chairman remains a difficult proposition, according to several legal experts, but the issue continues to be pushed forward in federal court by Richard Yarmuth, Schultz's attorney.
"I don't think this case is a long shot," Yarmuth said Monday. "This case is based on substantial evidence. There is sufficient evidence to prove that these Oklahoma businessmen fraudulently induced the sale of the Sonics to them. I think there will be substantial evidence to demonstrate they never wanted and never intended to own a basketball team in Seattle."
Schultz's suit is the lone legal weapon left that could bring the former Sonics club back to Seattle. A class-action claim by several Seattle fans still must play out in King County District Court as well, though that suit seeks financial damages instead of challenging the franchise's move.
Since Schultz didn't attempt the difficult procedure of filing for an injunction that would have blocked the team's immediate move to Oklahoma City, his hope now is to push for a trial next spring and attempt to get the team back to Seattle after it plays an initial season at the Ford Center.
Brad Keller, lead attorney for Bennett's ownership group, said Schultz's suit is a "far-fetched legal remedy seeking to salvage a tarnished reputation," a point shared by many who ponder the motivation of the man who sold the club to out-of-town owners.
But it's worth noting that Schultz turned down the public-relations opportunity to stand alongside Mayor Greg Nickels at last week's settlement announcement and claim the city's deal was best for all involved.
Instead, Schultz will forge ahead on his own in the court of Marsha Pechman, the same U.S. District Court judge who handled the city's trial. The two sides have a date this Friday for their first conference and a July 25 deadline to file their joint status report.
After that, Pechman will set a date for the nonjury trial, likely some time next year.
"The Basketball Club of Seattle and Howard Schultz intend to vigorously prosecute their lawsuit," Yarmuth said. "If they had any other intention, they could have joined with the city and embraced the city's settlement, which would have ended their suit.
"But the purpose of the BCOS lawsuit is to address the Bennett group's fraudulent activities and deprive the Bennett group of the fruits of its deception. There was nothing in the settlement that would have addressed that issue. The BCOS lawsuit will be vigorously pursued to that end."
Marc Edelman, professor of sports law at New York Law School, said he doesn't believe there has been a single case where a team was ordered to reverse course after being allowed to play games in a new city at any level of professional sports.
"It's extraordinarily difficult," Edelman said. "The biggest challenge is not the claim, but the remedy. It's extremely unconventional to unwind a transaction that has been closed for over two years, where the buyer of the team has already substantially performed by paying the purchase price of the team.
"With the recent settlement of the city's case, it makes it even more unlikely for Schultz to come in and get the remedy he seeks. Now not only is the transaction distant in time, but you have a team that has moved halfway across the country."
A judge would have to weigh the impact of employees who'd relocated, tickets and sponsorships already being sold in the new market and a fresh lease and broadcast contract signed in the new community.
"It's a tangled web and the more tangled it becomes, the more difficult it is to get a specific performance remedy," Edelman said.
Seattle attorney Randy Aliment believes Schultz's case has legal merit, but he also questions its potential once the team sets up shop in Oklahoma City.
"He does have a (legitimate) lawsuit. I think it does have legs," Aliment said. "Unfortunately, now the team is gone and getting a judge to drag that team back to Seattle is a real tall order."
Proving fraud is always a difficult legal challenge, but Schultz's case was bolstered considerably by the city's discovery process in its own suit. Numerous e-mails raising questions about the sincerity of Bennett's group in making a good-faith effort to keep the team in Seattle from the start were uncovered.
While Bennett made attempts to gain funding for a $500 million arena in Renton, Schultz will attempt to prove he was lied to when the Oklahoma City group vowed to make pursuit of a local arena solution its primary objective.
At Bennett's news conference in Oklahoma City last week announcing the settlement, his first words were, "We made it." Such statements and e-mails figure to play a far bigger role for Schultz than for the city, which was simply trying to enforce its lease instead of proving bad faith.
"He's been handed his case on a silver platter," Aliment said. "And now we do have a fresh combatant entering the ring. What we don't know is whether this combatant can take a punch. We do know the Oklahoma City guys can deliver significant blows. So Schultz had better be up to taking a punch in the nose and delivering his own."
Aliment expressed concern that Schultz's suit might jeopardize the city's chances of getting a replacement team through the NBA, a point Keller floated shortly after Wednesday's settlement.
Yarmuth declined comment on Keller's remarks, but did respond when asked if Schultz's suit runs counter to the city's desire now to work with Commissioner David Stern to find a replacement team in the next five years.
"We were asked to participate in the city settlement, but we chose not to do so because we feel the BCOS lawsuit is Seattle's best chance of having an NBA team playing in Seattle in the future," Yarmuth said.
"We didn't feel the assurances by the NBA were sufficient for us to abandon our separate lawsuit."
Schultz's claim doesn't seek the traditional monetary damages of most fraud or breach cases. Instead, it requests the team be taken away from Bennett and put into a trust that would allow local investors to purchase it and keep it in Seattle.
Had the city won its case, Schultz would have had two years to carry out his plan. Instead, with the settlement, he was forced to either file an injunction seeking to stop the move or allow the team to relocate and then try to reverse that at a future trial. He chose the latter, making for an even tougher legal fight.
But Edelman said it would have been extremely difficult getting a judge to grant an injunction, given the legal standard of having to show irreparable harm as well as the likelihood the case would ultimately prevail on its legal merits. Schultz's lawyers would have had to state their case immediately, without benefit of further discovery or preparation, as well as come up with a significant financial bond to cover potential losses suffered by Bennett's group during the time of the trial.
Instead, Schultz now has time to fully prepare his case and also see if local politicians come up with arena funding that would be necessary for the team ultimately to have a place to play if the deal is overturned.
The city's settlement with Bennett's group includes specific wording outlining the potential of the agreement being overturned by Schultz's suit, so Bennett has acknowledged that possibility going into any new contracts he signs in Oklahoma.
Additionally, the agreement states the former KeyArena lease will be assumed if the deal gets overturned, so a pact remains in place should Schultz prevail.
But whether those legal positions are enough to sway a judge to unwind a sale that will be three years old by the time of trial is a point of considerable debate.
ESPN legal analyst Lester Munson believes Schultz still has better than a 50 percent chance of succeeding. Edelman, the New York legal professor, isn't nearly as optimistic.
"I've heard people say his suit is frivolous," Edelman said. "It's almost certainly a loser, but it's not frivolous. He's just asking for a very extreme remedy I don't think a court will grant. If there was an alternative for monetary damages, I would not be able to state such a strong opinion."
All parties agree this case is unique, however, and there is no certainty of how it might play out in court.
"Schultz is asking for the team to be put back into a trust so he can sell it again. That's pretty novel," Aliment said. "It's an interesting theory and he has a terrific lawyer. I'll just be very surprised if he pursues it all the way through. Then again, we've seen nothing but surprises in this case. So who knows?"
P-I reporter Greg Johns can be reached at 206-448-8314 or gregjohns@seattlepi.com.
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