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Thread: Schultz sticks with lawsuit

  1. #1

    Default 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.

  2. #2

    Default Re: Schultz sticks with lawsuit

    hopefully he has to close down a bunch more fourbucks stores to pay for this if he pursues it

  3. Default Re: Schultz sticks with lawsuit

    What a joke. I don't think Clay is sweating this one...

  4. #4

    Default Re: Schultz sticks with lawsuit

    It seems Schultz is cutting off his nose to spite his face (or despite his face or whatever the saying is). This may gain him some support Rain City but I think it hurts him on a national scale. Starbucks is closing 600 stores but he has enough money to fight for a basketball team. It'll become seen as closing the stores to finance his crazy beef with Bennett. I know that these two things aren't exactly interdependant but they are not also mutually exclusive.

    Bad PR move in my view.

  5. #5

    Default Re: Schultz sticks with lawsuit

    Big surprise, the lawyers for Schultz are encouraging him to fight on at $650/hr. This is just like the City lawyers encouraging Nickels to fight on while they gouged the City of Seattle for $1.1 million. All they did was get Seattle fan's hopes up only to sell out in the end. Schultz is doing the same thing.

    On the plus side, I would pay good money to watch Keller cross-examine Schultz. They should put that on pay per view. $100 says Keller can make Schultz cry on the stand.

  6. Default Re: Schultz sticks with lawsuit

    Quote Originally Posted by Kerry View Post
    Big surprise, the lawyers for Schultz are encouraging him to fight on at $650/hr. This is just like the City lawyers encouraging Nickels to fight on while they gouged the City of Seattle for $1.1 million. All they did was get Seattle fan's hopes up only to sell out in the end.

    They sold out for up to approx. $50MM more than they would have without all that "gouging." Their attorneys did their job, and a job worth a mil, at that.

  7. #7

    Default Re: Schultz sticks with lawsuit

    No surprise here. Schultz has taken a beating in Seattle because of this case. He CAN'T drop his lawsuit. If he does, he's finished in Seattle.

    If he makes a go of it and fails, the Seattle fans will at least see that he gave it his best shot and that may be enough to significantly repair his reputation.

  8. #8

    Default Re: Schultz sticks with lawsuit

    PR move...a desperate one at that. Most folks with an ounce of intelligence would see right through it.

  9. #9

    Default Re: Schultz sticks with lawsuit

    Let's help Charlie Brown (Schultz).
    Boycott Starbucks.

  10. #10

    Default Re: Schultz sticks with lawsuit

    Quote Originally Posted by OKCMallen View Post
    They sold out for up to approx. $50MM more than they would have without all that "gouging." Their attorneys did their job, and a job worth a mil, at that.
    OKCMallen - that wasn't meant as a knock against lawyers. It was just a comment about there being a fine line between what is best for the person billing and the person paying the bill. If Schultz took his case to one of the contingency lawyers he probably would get any takers except for Lionel Hutz.

  11. Default Re: Schultz sticks with lawsuit

    Quote Originally Posted by Kerry View Post
    OKCMallen - that wasn't meant as a knock against lawyers. It was just a comment about there being a fine line between what is best for the person billing and the person paying the bill. If Schultz took his case to one of the contingency lawyers he probably would get any takers except for Lionel Hutz.
    I understand....just pointing out that, as it turned out and given the fact that the team was on the way out anyway, Seattle came out smelling like roses on the deal, and the attorneys for Seattle deserve some credit for that deal instead of implications that they were going against the best interest of their client. They upped the settle by a possible $50MM. That's pretty good lawyering.

  12. #12

    Default Re: Schultz sticks with lawsuit

    Quote Originally Posted by OKCMallen View Post
    They upped the settle by a possible $50MM. That's pretty good lawyering.
    Well, Clay came out of the deal fairly well. He was projected to lose around 60 million over those two lame duck years, so he as the potential of saving 15 million. (If Seattle gets their team)

  13. #13

    Default Re: Schultz sticks with lawsuit

    So let me get this straight..

    According to Schultz...

    If you're driving on the highway, and you see your ex dying on the side of the road. If you call for an ambulance, do cpr, and try to save her.. her family can sue you because you hoped she would die all along?

    If the ends don't justify the means, why should the ends matter? If we could prove that inside of Bennet's heart he really wanted the team in Seattle, would he be in the clear according to Schultz's logic?

    It doesn't make sense to me at all. In the real world, either you did something wrong or you did not. No one cares what your intentions are. Maybe it is different in a court room...

  14. Default Re: Schultz sticks with lawsuit

    Quote Originally Posted by OU Adonis View Post
    Well, Clay came out of the deal fairly well. He was projected to lose around 60 million over those two lame duck years, so he as the potential of saving 15 million. (If Seattle gets their team)
    Settlement was always in the best interest of both parties.

  15. Default Re: Schultz sticks with lawsuit

    Quote Originally Posted by Toadrax View Post
    So let me get this straight..

    According to Schultz...

    If you're driving on the highway, and you see your ex dying on the side of the road. If you call for an ambulance, do cpr, and try to save her.. her family can sue you because you hoped she would die all along?

    If the ends don't justify the means, why should the ends matter? If we could prove that inside of Bennet's heart he really wanted the team in Seattle, would he be in the clear according to Schultz's logic?

    It doesn't make sense to me at all. In the real world, either you did something wrong or you did not. No one cares what your intentions are. Maybe it is different in a court room...

    From what I understand, it won't work differently in court. It's pretty hard to rescind a sell when both parties were dealing at arms-length, both parties have performed or substantially performed, and both parties received the benefit for which they bargained...much LESS having them form a constructive trust from which the team is to be sold to a third party without Schultz having to cough up the money he pocketed. It's just ludicrous in my mind.

  16. #16

    Default Re: Schultz sticks with lawsuit

    NBA seeks say in Schultz lawsuit

    By Randy Ellis
    Staff Writer

    The NBA has asked to intervene in a Seattle federal lawsuit to help prevent coffee mogul Howard Schultz's former Seattle SuperSonics' ownership group from voiding the sale of the team to its current Oklahoma owners. If the judge does undo the sale, the NBA says it has a legal interest in making sure any new owner is "qualified in all respects to operate an NBA team and has the ability to provide for the long-term financial stability and efficient operation of the Sonics."

    The Schultz group's requests to void the sale "are fundamentally inconsistent with the most basic rules and regulations governing the operations of the NBA and its member teams, which do not authorize or permit ownership transfers without the express approval of the NBA," the league said in its request for intervention. The NBA contends the Schultz group is barred from trying to void the sale by a release and indemnification agreement the group signed in exchange for the NBA's approval of the group's sale of the team to a group of Oklahoma owners headed by Clay Bennett. Because of the release, "former owners are prevented from taking future legal action that could disrupt the efficient management and operation of the league and each of its member teams," the NBA told a federal judge.

    The Schultz group sold the team to Bennett's group for $350 million in July 2006. This year, the Schultz group filed a federal lawsuit in an attempt to void the sale, contending Bennett's group fraudulently represented that it wanted to keep the team in Seattle when its real desire was to move the franchise to Oklahoma City. The team is currently in the process of moving to Oklahoma City after settling another federal lawsuit filed by the city of Seattle. That settlement allowed the team's Oklahoma owners to buy their way out of the remaining two years of a Seattle arena lease.

    "The financial success or failure of the business of the NBA is vitally affected and substantially determined by the success or failure of each individual team," the NBA said in its intervention request. "The NBA Constitution, which binds all NBA owners and member teams, makes clear that the NBA Commissioner and NBA Board of Governors have the sole and exclusive authority to approve or disapprove any proposed transfer of an ownership interest in an NBA team. In its lawsuit, the Schultz group is asking a federal judge to cancel the sale and appoint a receiver to operate and manage the team until the team can be transferred to "an honest buyer who desires to keep the team in Seattle."

    In the NBA's intervention request, it said that the league's constitution contains a provision that if a receiver is appointed for any team, the NBA's board of governors has the right to cause the team "to be placed under the management and control of the commissioner."
    "The purpose of these provisions is, of course, to ensure that NBA teams are, at all times, operated only by persons that have been found by the NBA board of governors to be fully qualified to manage and direct a professional basketball team in accordance with NBA rules and regulations," the league said. "Enforcing and safeguarding the provisions of its own Constitution are plainly protectable interests and entitle the NBA to intervene."

  17. Default Re: Schultz sticks with lawsuit

    An article on ESPN also adds this:

    "The NBA also claims that Schultz's ownership group signed a release as part of the league's approval of the 2006 sale that prevented the former owners from suing Bennett's Professional Basketball Club ownership group."

    ESPN - NBA wants to intervene in Schultz's bid to regain control of team - NBA

  18. #18

    Default Re: Schultz sticks with lawsuit

    Do you think Schultz is going to let that stop him. In the Sales agreement itself he signs away his right to sue. Schultz (and Seattle for that matter) rejects reality and substitutes in their own version.

  19. Default Re: Schultz sticks with lawsuit

    If you're suing on the basis of the validity of the contract, then anything in the contract is arguably not binding.

  20. #20

    Default Re: Schultz sticks with lawsuit

    I think what the NBA is saying is that unless it approves of an owner they won't approve of the sale and thus no one but them can receive the team. I would bet that a judge will not want to test forcing the NBA to make a schedule that includes Seattle. The NBA could simply void any game played in Seattle and move on. Then the judge would have to deal with that. Not a pretty legal picture.

  21. Default Re: Schultz sticks with lawsuit

    No, and it's exactly the kind of situations courts are loathe to encounter. Courts disfavor extended and expansive use of their equity powers.

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