The Work

July 10, 2008 2:27 PM

NBA Turns to Skadden to Smooth Sonics Transition

Posted by Brian Baxter

The legal saga surrounding the proposed move of the National Basketball Association's Seattle SuperSonics to Oklahoma City never seems to abate.

Even after last week's agreement that seemingly sealed the deal for the departure of Seattle's oldest professional sports team, the Seattle Times reports that the league was back in a Seattle federal court today trying to intervene in a lawsuit brought by former Sonics owner and Starbucks CEO Howard Schultz.

The NBA has turned to seasoned league hands Jeffrey Mishkin, Douglas Adler, and Anthony Dreyer of longtime outside counsel Skadden, Arps, Slate, Meagher & Flom to file the motion to intervene.

Schultz claims that current Sonics owner Clayton Bennett's ownership group--known as the Professional Basketball Club--fraudulently induced Schultz into selling the team by claiming they would keep the Sonics in Seattle. Schultz wants the federal court to rescind the sale so he can resell the team to a more Seattle-centric buyer.

The NBA claims any effort to unwind the $350 million sale would jeopardize not only the current agreement between the city and the Sonics, but also the league's constitution and future ownership transfers.

Litigation partners Ralph Palumbo and Maureen Mitchell of the Summit Law Group in Seattle are serving as the league's local counsel.

Download the NBA's motion to intervene.

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All of the documents one would need to read in order to more accurately assess the NBA's Motion to Intervene are not accessible through this article. But, one may download the Motion. In reviewing the NBA's Motion, the NBA may have a good basis for intervention arising out of its Association Rules and Regulations, which require the NBA Board of Governors’ approval of the proposed transfer of the team to a receiver. However, the Release does not appear to provide any basis for intervention.

The quoted portion of the Release on page 4 of the Motion appears to be a release by BCOS and by PBC only "of the Affiliated NBA Parties", and not a mutual release of claims between BCOS and PBC themselves. Based upon the plain reading of the quoted portion of the Release, the NBA's claim on page 8 that it negotiated and obtained the Release "not only on behalf of PBC, but on behalf of the NBA and all of its member teams" including the proposed new owners of the basketball team is not correct.

One would think that if the NBA had obtained a Release on behalf of PBC from claims against it by BCOS, then the Release would have expressly provided for it. Obviously this assessment is coming only from a reading of the Motion, and not the entire Purchase and Sale Agreement between BCOS and PBC, nor a reading of the entirety of the Release. But the quoted portion is merely looks like a release by “the Parties” of other the NBA member teams; it doesn’t even look like a release of the NBA! Although we don’t have a definition of “Affiliated NBA Parties”, it appears that they are comprised of the NBA’s “member teams”, as indicated at page 8 of the Motion.

In short, if the NBA was correct that BCOS had released PBC, then the relevant portion of the Release paragraph should have specifically provided for a mutual release between them, as well as of the “NBA Affiliated Parties”.

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