The Work

March 26, 2010 7:13 PM

The Agent Zero Chronicles II: Where Litigation and Corporate Come Together

Posted by Brian Baxter

Just when the NBA's Washington Wizards thought they could forget about Gilbert Arenas--Agent Zero is gone for at least for this season--the star-crossed player's sentencing on a felony federal gun charge on Friday could affect his team's sale price.

Arent Fox and Kirkland & Ellis are advising the estate of former Wizards owner Abe Pollin and an investor group led by longtime AOL executive Ted Leonsis, respectively, on the expected transfer of the team to Leonsis's Lincoln Holdings group.

But as noted by The Washington Post, Arenas has $80 million left on a six-year, $111 million contract he signed with the Wizards in July 2008, which could determine whether or not he's valued as an asset or as a liability to a new ownership group. On Friday, Arenas received two years probation for bringing guns into the Wizards locker room, Reuters reports, and was ordered to pay a $5,000 fine, serve 400 hours of community service, and spend 30 days in a halfway house.

After several months of negotiations, the Wizards finally received a price tag this week when Leonsis agreed to value the team and its home arena, the Verizon Center, at $550 million. The WaPo reports the agreement follows three months of negotiations between Leonsis and the estate of Pollin, the longtime Wizards owner who died in November.

The estate is being advised by David Osnos, Pollin's longtime lawyer and former chairman of Arent Fox. The firm has been representing the Wizards since they were called the Bullets. Arent Fox also advised the team in January when Arenas and teammate Javaris Crittenton first faced federal gun charges. (Arenas and Crittenton were advised by O'Melveny & Myers's Kenneth Wainstein and Schulte Roth & Zabel's Peter White, respectively.)

It's the second time in two weeks that Arent Fox has made headlines for its NBA work. As previously noted by our colleague Zach Lowe, the firm joined Wachtell, Lipton, Rosen & Katz and Vinson & Elkins in advising clients on the sale of a controlling interest in the NBA's Charlotte Bobcats to Michael Jordan last week.

This time around Osnos and Arent Fox corporate partner Richard Brand are advising the Wizards on the expected sale to Leonsis's Lincoln Holdings. Neither lawyer responded to requests for comment. The Associated Press reports that the agreement is part of a succession plan put in place by Pollin before his death last year. (Leonsis, who also owns the NHL's Washington Capitals, has been a partner of Pollin's in the Wizards since 1999.)

When Pollin's estate and the Leonsis-led Lincoln group failed to agree on a sale price, both the team and its arena went to an appraisal process in January to help expedite a deal, according to The WaPo. Although the value of the team and its arena stands at $550 million, The WaPo reports the final acquisition price will actually be much less because Lincoln already owns 44 percent of the Washington Sports & Entertainment holding company set up by Pollin that owns the Wizards and Verizon Center.

Lincoln has its own legal ties through Kirkland corporate partner George Stamas, a member of the group and close friend and business associate of Leonsis. Stamas did not respond to a request for comment. (Kirkland corporate partners Andrew Herman and James Cosgrove are advising Lincoln on the Wizards deal.)

As for Pollin, the late Wizards owner remains somewhat of a legend in league circles, having befriended current NBA commissioner David Stern back when Stern was a young associate working at Proskauer Rose.

"The kid was so young that he had to bring a big cigar [to show] he was old enough to be a lawyer," Pollin once joked when describing his first meeting with Stern in 1967. (Proskauer is the NBA's longtime outside counsel.)

Proskauer corporate partner Wayne Katz, who advised the NBA on the Bobcats sale, was on vacation and unavailable for comment on the Wizards sale. As with the Wizards, completion of any deal is subject to the approval of the NBA's 30 team owners. And yet the franchise ownership carousel continues...

Firms Line Up For More Sports Team Sales

Earlier this month we wrote about the flurry of sports teams coming on the market in recent months, leading to key legal advisory roles for several firms. The Wizards and Bobcats aren't alone on the auction block.

The NBA's Golden State Warriors announced this week that they had hired Galatioto Sports Partners, the same firm retained by the Bobcats, to broker a sale of the team. Warriors owner Christopher Cohan has had financial problems recently, according to The Associated Press, and Oracle cofounder and billionaire Lawrence Ellison has made no secret of his interest in the team. (The Warriors play in Oracle Arena.)

So far any prospective sale appears to be in its early stages, as no formal bids for the team have been made. Warriors general counsel Steven Adamski, a founding partner of San Luis Obispo, Calif.-based Adamski Moroski Madden & Green, declined to comment on any potential deal when contacted by The Am Law Daily. Adamski has served as the team's general counsel since 2001. He jokingly tells us that being an attorney for a rich person who wants to buy a sports team is the best way to break into the sports law business.

We put in calls to Latham & Watkins corporate partner John Newell and Davis Polk & Wardwell corporate partner William Kelly to see if Ellison had reached out to them to advise on any prospective Warriors bid. Both lawyers have led teams from their respective firms advising Ellison's Oracle on high-profile M&A deals in recent years. (Newell handled Oracle's acquisition of Sun Microsystems, while Kelly advised on Oracle's hostile takeover of PeopleSoft.)

Neither lawyer immediately responded to a request for comment.

The NHL's Phoenix Coyotes were also in the news again this week over continuing ownership issues. The Coyotes, which went bankrupt last May after former owner Jerry Moyes put the team into Chapter 11, were bought by the NHL in October in a deal that saw Skadden, Arps, Slate, Meagher & Flom and Cadwalader, Wickersham & Taft nab lead roles.

The Phoenix Business Journal reports that Jerry Reinsdorf, owner of the NBA's Chicago Bulls and MLB's Chicago White Sox, is now back in the picture as a prospective owner for the team. Squire, Sanders & Dempsey bankruptcy partner Thomas Salerno, who represents the Moyes-owned Coyotes entity in Chapter 11, told the PBJ that the debtors were being kept completely out of the loop on negotiations over the team's future.

John Kaites, a partner at Phoenix firm Ridenour, Hienton & Lewis who the PBJ reports was present at talks between Reinsdorf and the Phoenix suburb of Glendale where the Coyotes play, did not respond to a request for comment.

Reinsdorf has a longtime client relationship with Katten Muchin Rosenman. Former Katten partner Gerald Penner, who served as outside general counsel to both the White Sox and Bulls, passed away in January. The firm advised Reinsdorf last summer when he made an offer for the team that was later withdrawn.

Adam Klein, the chair of Katten's sports practice, was on vacation and unavailable for comment about any potential Coyotes deal.

Lawyers Help Major League Soccer Avoid a Crisis

If it wasn't for the efforts of some hardworking labor lawyers, the Major League Soccer season opener on Thursday between the Seattle Sounders and Philadelphia Union might never have taken place. Last week the league and the MLS Players Union reached an agreement on a new five-year collective bargaining agreement.

Proskauer's L. Robert Batterman and Howard Robbins advised the league on labor negotiations with the players, represented by Jonathan Newman of Washington, D.C., labor firm Sherman, Dunn, Cohen, Leifer & Yellig; Newman also serves as the union's general counsel. (Bob Foose, the executive director of the MLS Players Union, is a former associate at Sonnenschein Nath & Rosenthal.)

The players had threatened to strike unless the league agreed to make concessions on guaranteed contracts and player movement, Batterman says, and MLS was not willing to grant the players total free agency. Unlike other major North American pro sports leagues, MLS is set up as a single-entity structure where players sign contracts with the league and not individual teams.

The two sides were at an impasse until early March, when, according to Batterman, both agreed to bring in mediator George Cohen, the director of the Federal Mediation and Conciliation Service. Cohen, a former senior partner at D.C. labor firm Bredhoff & Kaiser, was nominated by the Obama administration last June to take over the FMCS.

Unlike arbitration, a mediator doesn't have the power to make decisions, only to facilitate dialogue between both sides. Batterman, who's known Cohen from working in the labor and sports field for nearly 30 years, says he was the right man for the job. The two worked on opposite sides in the 1982 labor negotiations for the NBA, Batterman says, adding that familiarity with one another helped in reaching an MLS agreement that prevented a work stoppage.

"It was a relatively last-minute deal, just a couple of days before the deadline, which is usually what it takes to get a deal done," Batterman says. "But now I think everybody's quite pleased, and this is a win-win for everyone."

Around the Horn

-- The bitter divorce battle between Los Angeles Dodgers owner Frank McCourt and his wife, Jamie, can now employ almost a full lineup of top flight attorneys. With the team's ownership potentially at stake, both sides have sought to bolster their bench strength. Jamie McCourt, herself a lawyer, was the latest to add legal firepower, retaining David Boies of Boies, Schiller & Flexner earlier this month.

Boies joins a legal team that already includes Hollywood heavyweight Bertram Fields from L.A.'s Greenberg Glusker Fields Claman & Machtinger, and divorce lawyer Dennis Wasser from Wasser, Cooperman & Carter. Frank McCourt is not about to be outgunned. He's turned to Bingham McCutchen litigation bigwig Marshall Grossman, Susman Godfrey's Marc Seltzer, famed divorce lawyer Sorrell Trope, and veteran family attorney Manley Freid.

-- Florida State's challenge of an NCAA penalty that took away a dozen of former football coach Bobby Bowden's victories cost the school $172,000 in legal fees, paid to Florida firm GrayRobinson, The Associated Press reports. Boosters contributed $70,000 to offset those bills, but taxpayers picked up the $102,000 balance.

-- It will be up to Patrick Hobbs, dean of the law school at Seton Hall, to deal with the disciplinary problems plaguing the school's basketball program, according to The Newark Star-Ledger. Seton Hall named Hobbs to oversee its athletic department and find a replacement for Bobby Gonzalez, the controversial basketball coach fired a week ago.

-- The angle to this story by Slate is more economic than legal, but if you spent at least part of your childhood collecting baseball cards, then the collapse of the Great Baseball Card Bubble is a must-read.

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