Judge tosses Spirit's deal to buy out

[DrReality]

BelkinBy SEKOU SMITH

The Atlanta Journal-Constitution

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The feuding Hawks and Thrashers co-owners are still in business, now that a Maryland judge has scrapped an agreement between them saying the contract outlining how seven of the partners can buy out the eighth is too vague.

.Boston-based partner Steve Belkin asked his partners to buy out his 30 percent stake in the teams in August 2005, a process that was supposed to take 125 days. The Spirit has been embroiled in a high-profile legal battle that has lasted more than three years.

The ruling, issued Monday afternoon, tossed out the initial purchase and sale agreement to buy out Belkin and keeps him in the partnership as a minority owner. The partners are now placed back in the same position they were in before August 2005.

Belkin, however, does have the right to appeal Monday's decision.

The eight-man ownership group bought the Hawks, Thrashers and Philips Arena operating rights from Atlanta-based Turner Broadcasting System in spring 2004.

The celebration was short-lived.

The group began squabbling over things such as who would speak publicly at events. Then Belkin wouldn't let the other owners into the Hawks' locker room or fly on the team plane.

The warring came to a head over how to trade for then Phoenix Suns' guard Joe Johnson, who has since become a three-time All-Star for the Hawks.

Belkin, who previously accused co-owner Bruce Levenson of player tampering, stepped down as the team's representative to the NBA and then asked that the seven others buy out his 30 percent share.

[gsuteke]

The group began squabbling over things such as who would speak publicly at events. Then Belkin wouldn't let the other owners into the Hawks' locker room or fly on the team plane.

WOW - that's a new piece of news. That speaks volumes on how fractured that ownership group was with Belkin involved. That makes Belkin look extremely childish.

[mrhonline]

Translation please???

[gsuteke]

Translation please???

Exactly.

Either Belkin will be reinstated in the everyday decision making process of the club now or the other owners have to make him whole again via buying out his 30%

Sekou hasn't been very helpful lately -

[AHF]

Here is my translation:

Belkin is now a 30% owner of the team with all the rights and responsibilities that entails. He needs to pay his way for his share of the team and he gets to vote on everything but can be voted down every time if the Washington and Atlanta blocks vote against him. He is in the exact same situation he was when he resigned the governor role back in 2005 - a minority owner who is at odds with the rest of the ownership group.

This is very good news for the Spirit Group, IMO, because now they don't have to pay any amount they don't want to and Belkin doesn't get control of the teams. Belkin buying out the other owners at cost (not at valued amount) or getting bought out based on his own appraisals were two other possibilities that would have been real problems.

It does mean that Belkin is likely to appeal and this is likely to continue dragging out for some time unless the owners all work out a new buyout agreement. In a practical sense, that new buyout should be the next step here but we'll see.

[DrReality]

But the buy out would be done in a fair and equitable manner that the Spriit could live with?i I bet the will be a F/U piece in the buisiness journal that will give us insight that Sekou can't.

Edited August 17, 2009 by DrReality

[gsuteke]

Is Belkin wealthy enough to not need the money as this thing drags out for 5 years?

[Guest Walter]

Here is my translation:

Belkin is now a 30% owner of the team with all the rights and responsibilities that entails.

I assume that Belkin does not have to pay for the team operation the last 3 or so years while keeping his percentage stake in the team increasing in value.

Pays nothing, gains. Still, good news for the magnificent seven of The Spirit Group. Not really good for fans or the team. We needed this over.

W

[Lascar78]

Either Belkin will be reinstated in the everyday decision making process of the club now or the other owners have to make him whole again via buying out his 30%

He was never removed from the decision making process. Even right now, he has been voting on every decision. But practically speaking, the other 2 parties come to an agreement on what they want, then do an official vote over the phone with him where Belkin can either agree with them or get voted down 2-1. None of this changes.

It seems pretty obvious that the end result will be a buyout. There will be appeals, Belkin will lose, and then they will draft up a new agreement to do a buyout, hopefully with better lawyers this time. I bet it'll take a few years to get it all done though.

I'm not clear on the money. If the agreement has been tossed out and Belkin still has his stake, I can't see how he wouldn't be responsible for paying his share of the operating costs for the past couple of years.

[mrhonline]

The good news is that the only major decision in the near future is JJ's extension.

[bird_dirt]

Is Belkin wealthy enough to not need the money as this thing drags out for 5 years?

i would think the longer it drags out, the more he will want/need the money.

[AHF]

But the buy out would be done in a fair and equitable manner that the Spriit could live with?

Since they are starting from ground zero, both parties would have to agree to it and live with it.

[ShooterMcGavin]

The translation is that everything is exactly the same as it was 4 years ago, except several lawyers have become very wealthy. Very wealthy using money which could have been used to improve the basketball and hockey products the owners are supposed to care about.

[DrReality]

The translation is that everything is exactly the same as it was 4 years ago, except several lawyers have become very wealthy. Very wealthy using money which could have been used to improve the basketball and hockey products the owners are supposed to care about.

I wonder if they teach this tactic in law school?

[DrReality]

From NY Times:

Maryland Judge's Ruling a Setback for Belkin Sign in to Recommend

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By THE ASSOCIATED PRESS

Published: August 17, 2009

Filed at 11:05 p.m. ET

ATLANTA (AP) -- A Maryland judge has ruled the eight owners of the Atlanta Hawks and Atlanta Thrashers are back in business under the same operating agreement they shared before their split in 2005.

Montgomery County Circuit Court Judge Durke G. Thompson ruled Monday that the contract the owners reached that would allow the seven owners to buy out Boston-based Steve Belkin was too ambiguous.

The judge encouraged the owners to settle the feud, based in part on a disagreement on the value of Belkin's 30 percent share of the teams, without outside intervention.

Also at stake are the operating rights to Philips Arena, where the Hawks and Thrashers play.

Michael Gearon, one of the Atlanta-based owners, celebrated Thompson's decision, delivered in a 38-page ruling.

''We won on every single point,'' Gearon said.

''The court did exactly what we asked it to do. We are back under the operating agreement which we think is a good agreement. We no longer have any obligation to buy out Belkin nor does Belkin have any right to purchase the Hawks and Thrashers.''

Belkin can appeal the ruling.

The ownership split began in 2005 over Belkin's objection to the Hawks' decision to trade Boris Diaw, two first-round draft picks and a $4.9 million trade exception to the Phoenix Suns for guard Joe Johnson.

The ownership group, led by Gearon and Rutherford Seydel in Atlanta and by Washington businessmen Bruce Levenson and Ed Peskowitz, had the support of NBA commissioner David Stern. Gearon replaced Belkin as the NBA governor in the group.

Belkin asked the other owners to buy out his 30 percent share of the partnership called Atlanta Spirit LLC. But the parties could not agree on the value of Belkin's share. Then they could not agree on who should set the value.

Belkin, backed by a 2006 Maryland circuit court ruling that was later overturned, then contended he was entitled to buy out his fellow owners at cost and take over the teams.

Thompson said the eight should closely consider how they might reopen the negotiation for the seven to buy out Belkin's interest. The judge said ''the parties would be well served if they were to reach an agreed buyout price on their own without relying on investment bankers to make such a vital decision for them.''

Added Thompson: ''Much of what has become a stumbling block in this case would be avoided had this been the procedure originally adopted.''

[Bahamut]

I wonder if they teach this tactic in law school?

Yes.

[Swatguy]

I'm not clear on the money. If the agreement has been tossed out and Belkin still has his stake, I can't see how he wouldn't be responsible for paying his share of the operating costs for the past couple of years.

It appears to me, the ASG have Belkins Balls in a vice. Gearons/Levinson may have latitude in isueing Belkin a large or considerated bill over the past 3+ years. I suspect Belkin will not appeal and save the money ASG can sue for. Lawyer fees, operation cost and others are now an issue for Belkin.

If Belkin appeals, ASG may send a due balance of the entirety of cost.

If Belkin p[lays ball with ASG, his obligations probably will be lessened (than they could be).

imo

[DrReality]

From Mark Bradley:

The Atlanta Spirit case: No decision is bad news for Belkin

8:41 pm August 17, 2009, by Mark Bradley

Only in the tangled realm of the Atlanta Spirit can a no-decision be deemed a rousing victory for one side, but that’s what this is. The Atlanta/D.C. connection — essentially the Gearons and Bruce Levenson — cannot proceed with the proposed buyout of the battling Bostonian Steve Belkin, and somehow that’s better for the party of the first part. (If this sounds like a Marx Brothers movie … well, it should.)

Much has changed between 2005, when this jerry-built partnership splintered over Joe Johnson, and August 2009. The economy has gone so far south that even wealthy men have lost real money, and the idea of not having to put up more cash — $145 million plus interest — to get rid of Belkin must seem mighty appealing to the seven other Spirit men right about now.

With Belkin long since removed as the Spirit’s representative on the NBA’s board of governors, there’s no pressing call to sign divorce papers. The Atlanta/D.C. bunch can simply continue to do as it did on Joe Johnson, meaning outvote him 2-1. Yes, it’s weird to have an ownership so disconnected it has to be seated on separate sides of an opponent’s arena (as happened during the 2008 playoffs in Boston), but it’s no worse than forcing these owners to show up in a Maryland court to give periodic testimony.

If Belkin still wants out, he’ll have to take much less than $145 million plus interest. If he wants to stick around and be outvoted on every essential matter, the other partners won’t mind as long as he’s paying his share of the bills. It’s not as if they run into him at the Blue Ridge Grill. (Michael Gearon Jr. and Arthur M. Blank have standing tables at that eatery, but not Steve Belkin.)

Against the odds, the Spirit has shown it can move forward while being torn litigiously asunder. The Hawks had a very good season and an even better summer. The Thrashers are showing signs of stirring. This partnership fits no earthly notion of a model, but as long as the teams are spending money and trying to win, do we really care?

And here’s the key part: With no ongoing court case — Belkin can appeal this decision, but he isn’t apt to win — the Spirit can look beyond the next deposition. Rumors have circulated for months that the Spirit might sell the Thrashers (while keeping the Hawks), but nobody could do anything while the Maryland decision was pending.

That could well be the best thing for Atlanta sports fans. It’s no secret that, with the exception of Levenson, the Spirit has always cared more about basketball. If the group could find a suitable local buyer, I doubt Blueland would revolt. (General manager Don Waddell insists existing agreements would preclude the Thrashers from being moved.)

In this economic climate, the trick would be in finding a buyer. But that’s another matter for another day. Unless …

Didn’t Roddy White just come into a sum of money? Think he’d like a hockey team?

[khaos7]

The thing that concerns me is that Belkin is "entitled to be reinstated" as the governor for the Hawks. This is according to Jeff Schultz latest blog. Although the Spirit doesn't have to pay Belkin that big sum for a buyout nor can he force them to sell to them, he was the governor under the old agreement. Of course, it would have to be in compliance with the NBA. However, I don't like the sound of that. It is a scary thought.

[ShooterMcGavin]

If I win Mega Millions tonight, I'll buy Belkin's share out. Then I'll put a poll up on hawksquawk regarding JJ's contract.