Spirit blames 'botched contract'

[DrReality]

Spirit blames 'botched contract': Owners' case goes to appellate court

By Tim Tucker

The Atlanta Journal-Constitution

Published on: 03/02/07

Annapolis, Md. —- Deep in a brief filed with the Maryland Court of Special Appeals comes an attempt to explain how the Hawks-Thrashers ownership group got into such a mess.

"The reality is that this was a botched contract, negotiated in haste," says the brief filed by lawyers for part-owners Bruce Levenson, Ed Peskowitz, Michael Gearon and Rutherford Seydel.

The fallout from the August 2005 contract —- a contract that was supposed to result in estranged part-owner Steve Belkin selling his stake to his partners —- will continue today.

Oral arguments will be heard by Maryland's second-highest court on the appeal by Levenson, Peskowitz, Gearon and Seydel of last year's circuit court ruling that they breached the contract and thus triggered Belkin's right to buy them out at cost and take over the teams.

"This catastrophic penalty is indeed unconscionable," they tell the appeals court in a filing.

They are asking the court to overturn a string of rulings made last year by Montgomery County (Md.) Circuit Court Judge Eric Johnson. They contend the judge made a flawed contract worse with his "plainly erroneous" interpretation of it.

A Belkin brief counters that Johnson ruled correctly and says: "The appellants offered a series of excuses to relieve themselves from performing their obligations under the [contract] —- all of which the lower court found either nonexistent or unavailing."

The appeals court typically takes at least several weeks, often longer, after oral arguments to rule.

The contract —- negotiated in 1 1/2 days in "a pressure-cooker atmosphere" driven by the NBA, according to court documents —- laid out a method by which Belkin was to sell his 30 percent stake to his partners in the Atlanta Spirit ownership group. The price was to be set by up to three appraisals, with the first appraiser to be hired by Belkin and the second by either party objecting to the findings of the first.

The contract made no mention of who would choose the second appraiser if both sides objected to the first. Neither side even broached that possibility in the negotiations.

"This key omission lies at the heart of this case," the non-Belkin owners argue to the appeals court.

Both sides did object to the first appraisal, and both claimed the right to hire the second appraiser, throwing the process into disarray —- and into court.

Johnson ruled that Belkin had the right to choose the second appraiser despite having chosen the first, because he objected fastest to the results of the first, beating the other owners by 12 minutes. The second appraisal valued Belkin's stake at $140 million, up from the first appraisal's $88 million.

Johnson subsequently ruled that Belkin's partners breached the contract by missing a deadline to pay Belkin. The partners argue that they were awaiting the outcome of Belkin's litigation.

They contend the lower court erred when it found the contract inferred a "race" to object to the first appraisal, erred when it found the second appraisal to be valid without considering the fairness of the "race" or the appraisal, and erred when it found them to have breached the contract and triggered Belkin's right to buy.

They also argue the lower court should have fully examined their claim that Belkin objected to the first appraisal four minutes before they received it.

"The illogic and unfairness of the court's decision are not open to serious question," they say in court documents.

A Belkin filing counters: "The appellants' attacks on the lower court are unwarranted."

[mrhonline]

Quote:

---

Johnson ruled that Belkin had the right to choose the second appraiser despite having chosen the first, because he objected fastest to the results of the first, beating the other owners by 12 minutes. The second appraisal valued Belkin's stake at $140 million, up from the first appraisal's $88 million.

---

Wow.

[Swatguy]

Quote:

---

The contract made no mention of who would choose the second appraiser if both sides objected to the first. Neither side even broached that possibility in the negotiations.

"This key omission lies at the heart of this case," the non-Belkin owners argue to the appeals court.

Both sides did object to the first appraisal, and both claimed the right to hire the second appraiser, throwing the process into disarray —- and into court.

...

Johnson ruled that Belkin had the right to choose the second appraiser despite having chosen the first, because he objected fastest to the results of the first, beating the other owners by 12 minutes.

....

They also argue the lower court should have fully examined their claim that Belkin objected to the first appraisal four minutes before they received it.

"The illogic and unfairness of the court's decision are not open to serious question," they say in court documents.

---

Belkins cunning was without a doubt underhanded considering the spirit of the contract. I believe Judge Johnson's rulings will be overturned with a fair answer of the right for the second appraiser.

Belkin has damaged this franchise much much greater than percieved.

[Sothron]

I remember explaining over and over again at realgm.com how unfair it was that the idiot judge ruled in Belkin's favor because he filed his claim first when the contract has zero language in it about a "race" deciding whose appraiser's value would be used.

I really do hope the Spirit Group wins this. Belkin flatout does not have the money to run two pro sports team and an arena. He has no interest in Atlanta or the Atlanta sports fan as shown by his rooting against the Thrashers recently in Boston.

[drzachary]

Quote:

---

I remember explaining over and over again at realgm.com how unfair it was that the idiot judge ruled in Belkin's favor because he filed his claim first when the contract has zero language in it about a "race" deciding whose appraiser's value would be used.

I really do hope the Spirit Group wins this. Belkin flatout does not have the money to run two pro sports team and an arena. He has no interest in Atlanta or the Atlanta sports fan as shown by his rooting against the Thrashers recently in Boston.

---

I'll up the ante a bit. I hope Belkin's career is ruined and he disappears from the public eye forever. (Ideally, Tim Hardaway would be suffer in this as well, somehow.)

[Swatguy]

Quote:

---

I remember explaining over and over again at realgm.com how unfair it was that the idiot judge ruled in Belkin's favor because he filed his claim first when the contract has zero language in it about a "race" deciding whose appraiser's value would be used.

I really do hope the Spirit Group wins this. Belkin flatout does not have the money to run two pro sports team and an arena. He has no interest in Atlanta or the Atlanta sports fan as shown by his rooting against the Thrashers recently in Boston.

---

It blesses me when we agree, it gives me hope.

[TheDude]

amazing what this entire million dollar battle really comes to...a race to challenge an appraisal....seems a bit trivial in a case of this proportion...

actually this makes me feel a little bit better because I dont see how they can rule to FORCE Spirit to sell the franchise AT COST for something as undefined and trivial as beating them to the punch on challenging an appraisal..

in any case, why is this in Maryland anyway?

[Sothron]

lol we're all fans bro. Hopefully the Spirit can win, Belkin can go kupo himself and then the Spirit will start spending serious money to bring in what we need to win.

[AHF]

Quote:

---

actually this makes me feel a little bit better because I dont see how they can rule to FORCE Spirit to sell the franchise AT COST for something as undefined and trivial as beating them to the punch on challenging an appraisal..

in any case, why is this in Maryland anyway?

---

It is in Maryland because the parties agreed that disputes under the contract would be litigated there.

The rationale behind the Court forcing the ASG to sell is this:

(1) Belkin objected first therefore he gets to pick the second appraiser;

(2) Belkin got a second appraisal;

(3) When the second appraisal was done, the ASG had two choices under the contract - pay per the second evalution or object to the second evaluation and let the NBA appoint someone to appraise the team;'

(4) The ASG did not do either and let the deadline lapse for when they had to complete the buyout of Belkin under the contract;

(5) The negotiated penalty under the contract for not completing the sale in time was giving Belkin the right to buy out the other owners at cost.

* * * *

As I have said before, the best argument on appeal is that the judge read into the contract a provision giving the right to pick the second appraiser to the first party to object even when both parties object in the time limit described under the contract.

It also appears that the ASG is arguing that they could not have objected first under any circumstances because Belkin objected 4 minutes before the ASG even received the report. This lends more strength to the previous argument.

Cross your fingers and we'll see what happens.

[frosgrim]

AHF, thanks for the legal insight. It does seem impossible for the ASG to have any ability to have a choice in the second appraiser if they received the information after Belkin. This, to me as a lay person, would indicate that ASG did not have a fair opportunity to object as per the contract. But I have no idea how these legal machinations go, so all I can do is hope that what is fair and reasonable comes through. My hope is simply that Belkin and ASG find a common ground price and the ASG pays that to Belkin.

However, I would not be surprised if ASG doesn't at some point sue Belkin for their losses...

[AHF]

Quote:

---

However, I would not be surprised if ASG doesn't at some point sue Belkin for their losses...

---

Are you talking about the money they have invested while he has been on the sidelines waiting out the litigation? I am unsure what you mean by this.

[DrReality]

Has there been any report of whathappened today?

[DJlaysitup]

It's very unlikely that a superior court judge in MD changes a ruling on appeal (and this isn't life and death mind you). Judges hang together. If I were a betting man I would make it 65-35 for Belkin.

ASG is in DEEP stuff. (IMHO)

[DrReality]

Todays paper sounded a little more optimistic.

http://www.ajc.com/sports/content/sports/h...0302spirit.html

Would be interested in other's opinion, but seems they are getting down to the nitty gritty. The percentage increase that the appraisals came back with seem crazy.

[Lascar78]

Well I think that most peoeple agree that the Spirit should win, but given the fact that they lost the original verdict when most agreed that they should have won, you never know what's going to happen. I think in the end Belkin will get a nice payoff. I just hope this goes as fast as possible (yeah right!).

[frosgrim]

I was thinking that they could possibly sue for damages incurred by his litigation and dragging out of the process. The Hawks and possibly Thrashers have incurred damages, in the sense that there were contracts and or trades that could not be made due to Belkin. Its probably a stretch, so I will drop it here before my low legal knowledge shows itself even more...

[gsuteke]

Quote:

---

Spirit blames 'botched contract': Owners' case goes to appellate court

By Tim Tucker

The Atlanta Journal-Constitution

Published on: 03/02/07

Annapolis, Md. —- Deep in a brief filed with the Maryland Court of Special Appeals comes an attempt to explain how the Hawks-Thrashers ownership group got into such a mess.

"The reality is that this was a botched contract, negotiated in haste," says the brief filed by lawyers for part-owners Bruce Levenson, Ed Peskowitz, Michael Gearon and Rutherford Seydel.

The fallout from the August 2005 contract —- a contract that was supposed to result in estranged part-owner Steve Belkin selling his stake to his partners —- will continue today.

Oral arguments will be heard by Maryland's second-highest court on the appeal by Levenson, Peskowitz, Gearon and Seydel of last year's circuit court ruling that they breached the contract and thus triggered Belkin's right to buy them out at cost and take over the teams.

"This catastrophic penalty is indeed unconscionable," they tell the appeals court in a filing.

They are asking the court to overturn a string of rulings made last year by Montgomery County (Md.) Circuit Court Judge Eric Johnson. They contend the judge made a flawed contract worse with his "plainly erroneous" interpretation of it.

A Belkin brief counters that Johnson ruled correctly and says: "The appellants offered a series of excuses to relieve themselves from performing their obligations under the [contract] —- all of which the lower court found either nonexistent or unavailing."

The appeals court typically takes at least several weeks, often longer, after oral arguments to rule.

The contract —- negotiated in 1 1/2 days in "a pressure-cooker atmosphere" driven by the NBA, according to court documents —- laid out a method by which Belkin was to sell his 30 percent stake to his partners in the Atlanta Spirit ownership group. The price was to be set by up to three appraisals, with the first appraiser to be hired by Belkin and the second by either party objecting to the findings of the first.

The contract made no mention of who would choose the second appraiser if both sides objected to the first. Neither side even broached that possibility in the negotiations.

"This key omission lies at the heart of this case," the non-Belkin owners argue to the appeals court.

Both sides did object to the first appraisal, and both claimed the right to hire the second appraiser, throwing the process into disarray —- and into court.

Johnson ruled that Belkin had the right to choose the second appraiser despite having chosen the first, because he objected fastest to the results of the first, beating the other owners by 12 minutes. The second appraisal valued Belkin's stake at $140 million, up from the first appraisal's $88 million.

Johnson subsequently ruled that Belkin's partners breached the contract by missing a deadline to pay Belkin. The partners argue that they were awaiting the outcome of Belkin's litigation.

They contend the lower court erred when it found the contract inferred a "race" to object to the first appraisal, erred when it found the second appraisal to be valid without considering the fairness of the "race" or the appraisal, and erred when it found them to have breached the contract and triggered Belkin's right to buy.

They also argue the lower court should have fully examined their claim that Belkin objected to the first appraisal four minutes before they received it.

"The illogic and unfairness of the court's decision are not open to serious question," they say in court documents.

A Belkin filing counters: "The appellants' attacks on the lower court are unwarranted."

---

If Belkin's 30% stake is worth 140 million the other other owners should say "Ok, here is the other 70% of the teams, that will be 329 million. we'll take that in case please."

call his bluff. worst case scenario Belkin bails them out of a situation they seem to be taking a bath on. the last laugh would be on Belkin.

If Belkin can get an interpretation of the contract in his favor allowing this to drag out surely the ASG can argue an interpretation that allows them to accept the 2nd appraisal that Belking wanted to hold them to and make it cut both ways.