Howard Schultz says he wants the Sonics back. Nearly two years after selling Seattle's NBA franchise to Oklahoma City investors, the Starbucks mogul is preparing to file a lawsuit against current Sonics chairman Clay Bennett to rescind the July 2006 sale.
Howard Schultz says he wants the Sonics back.
Nearly two years after selling Seattle’s NBA franchise to Oklahoma City investors, the Starbucks mogul has hired a lawyer and is preparing to file a lawsuit against Sonics chairman Clay Bennett to rescind the July 2006 sale.
Attorney Richard Yarmuth confirmed Monday that his Seattle-based law firm, Yarmuth Wilsdon Calfo, is representing Schultz and plans to sue Bennett’s Professional Basketball Club in the next two weeks.
“The damages that are being sought is to rescind, unwind the transaction,” Yarmuth said a day after the team played what could have been its final home game in Seattle.
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“It’s not money damage. It’s to have the team returned. The theory of the suit is that when the team was sold, the Basketball Club of Seattle, our team here, relied on promises made by Clay Bennett and his ownership that they desired to keep the team in Seattle and intended to make a good-faith effort to accomplish that.”
When Bennett purchased the Sonics and its sister franchise in the WNBA, the Storm, for $350 million, he agreed to a stipulation that he would make a good-faith effort to keep both teams in Seattle. He has since sold the Storm to four Seattle women who will keep the team here.
E-mails among the Oklahoma City owners, made public last week, paint a different picture of their intentions. In preparation for a June 16 trial in Seattle’s lawsuit, which seeks to hold the owners to the remaining two years of the team’s KeyArena lease, lawyers for the city obtained several e-mails in which owners expressed an intent to move to Oklahoma City shortly after the sale.
On Aug. 2, 2006, two weeks after the sale, team co-owners Tom Ward and Aubrey McClendon e-mailed about moving the Sonics to Oklahoma City as soon as possible. The communication was after one of the original Oklahoma partners had dropped out of the ownership group.
“I don’t think that you and I really want to own a team there [Seattle] either but we are better partners,” Ward wrote.
On April 17 last year, Ward wrote McClendon and Bennett: “Is there any way to move here [Oklahoma City] for next season or are we doomed to have another lame duck season in Seattle?”
The exchanges detail a breach of contract, Yarmuth said. He also cites McClendon’s comments last August to the (Oklahoma) Business Journal in which the billionaire founder and chief executive of Chesapeake Energy said: “We didn’t buy the team to keep it in Seattle; we hoped to come here [Oklahoma City].”
“The issue is did the Oklahoma group fraudulently induce the Seattle owners, Howard Schultz and the other owners, to sell the team on a misrepresentation of their intentions at the time,” Yarmuth said.
McClendon’s published comments drew a $250,000 fine from the NBA. On Monday, NBA commissioner David Stern said he is aware of the e-mails and is convinced Bennett acted in accordance with the sale agreement.
“I haven’t studied them, but my sense of it was that Clay, as the managing partner and the driving force of the group, was operating in good faith under the agreement that had been made with Howard Schultz,” Stern said on a conference call. “His straight and narrow path may not have been shared by all of his partners in their views, but Clay was the one that was making policy for the partnership.”
Even though Bennett made several trips to the state to drum up support for a proposed $500 million arena in Renton and hired a Seattle-based lobbyist and architectural firm, Yarmuth said, those efforts have no bearing on Schultz’s lawsuit.
“We’re talking about fraud at the time the contract was signed,” Yarmuth said. “It’s not merely what activities, good faith or otherwise, were engaged in after the contract was signed so far as lobbying for a new stadium.”
Bennett’s spokesman Dan Mahoney and NBA spokesman Tim Frank could not be reached for comment Monday night.
Terry Foster, assistant dean at Seattle University’s Albers School of Business and Economics, said Schultz’s case hinges upon the definition of good faith.
“It just allows for so many different interpretations that it may not be much to hang your hat on if that’s all there is go on,” Foster said. “In other words, if there’s not some specific promise in that original agreement that defines what they mean by good faith, then it’s open to interpretation from all sides.”
At the time of the sale, Schultz said he had included a side letter to the sales agreement that he called a “deal breaker.”
“As part of the negotiation, I asked for something that was a deal breaker in negotiation,” he said in a KJR (950 AM) interview then. “What I asked for was a side letter to our ownership group and to me … that said basically he would honor the four-year lease in terms of the 2010 terms, and use his best efforts over the next 12 months … to get something done.”
Last week, when the e-mails become public, former Sonics co-owner Wally Walker said they clashed with the “good faith” pledge Bennett made when he bought the team.
“For the people who voted for the deal, the good-faith, best-efforts promise was a significant factor in supporting the deal,” Walker said. “This is not what they signed up for.”
NBA owners will gather Friday in New York City to vote on the proposed move. A subcommittee has recommended approval.
Stern has suggested that Oklahoma City — when combined with the presence of Tulsa less than 100 miles away — could be a viable market even though Seattle has a higher population and TV audience. On Monday, he downplayed Seattle’s role as a gateway to Asia.
“I would say that we don’t ever like to leave a city,” Stern said. “We don’t like to leave a city as robust as Seattle, but the Asian cities that we’re tending to focus more on have names like Shanghai, Beijing, Hong Kong and Guangzhou.
“It’s disheartening simply to leave the city, as it would be to leave any city.”
Percy Allen: 206-464-2278 or firstname.lastname@example.org. The Associated Press contributed to this story.