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No Gloves to try on. Case Summary

So the local newspapers would have us believe that city has had their asses handed to them by the PBC and their attorneys. OUCH!

I am not going to sit here and say that I would not prefer it if people were congratulating our side. The consensus by observers makes me extremely nervous and I wish that we were talking about how the PBC had been beaten with a stick all week. I am however going to point out that the newspaper guys don’t know everything. Keep in mind that for all the drama there is no jury, there were no gloves to try on, and Brad Keller is no Jonny Cockran. The fireworks that were presented for the general public are not necessarily going to sway Judge Pechman in a court of law.

Let me provide a brief strategy update. As always understand that I’m not a lawyer. I have obviously invested a lot of time becoming familiar with these issues.

The cities base argument revolves around a really simple concept: The two parties have a lease which contains a clause calling for specific performance. Specific performance would stipulate that all games be booked in Key Arena through the 2010 season. The PBC assumed this lease and in doing so they, with full knowledge of its terms, assumed the responsibilities of the lease including specific performance. The lease also contains a clause in which both parties acknowledge that the presence of an NBA team playing its games in Key Arena is “unique in nature” and thus cannot be compensated for with money.

The teams base argument is that, while specific performance is spelled out in the lease it is generally considered a remedy of last resort in any contract dispute. In general, absent a specific performance clause being included in a lease, courts almost always seek “equitable remedies” or cash payments before resorting to specific performance.

Legally there are several factors which can affect the courts decision to enforce specific performance. The PBC has seized upon two of them to make their case:

UNDUE HARDSHIP: If specific performance is so burdensome, financially or otherwise then it may be waived by the court.

The PBC has argued the financial numbers of the deal, stating that they have a $80M swing in revenue should they be allowed to relocate to Oklahoma rather than remain in Seattle. This they claim represents an undue hardship and should be the basis for setting a financial remedy.

The City has specific answers for this claim. There are several reasons why undue hardship would NOT be considered by the court. The first is when this hardship could have been anticipated by the injured party at the time they assumed the contract. The PBC took major hits on this issue, essentially conceding that they knew full well the potential damages, advised their investors of the damages, were warned by the NBA, and prepared for them from day 1. Additionally they have the financial means to absorb the losses with no substantial harm to their lifestyle.

The second reason financial hardship should not be considered by a court is when the hardship is self inflicted. Again the PBC took a pretty good beating in this regard. It is clear as day that their decision to file early for relocation and to abandon arena efforts in this region.

The PBC worked hard to demonstrate that their burden was not self inflicted and that in fact their arena efforts constituted a real plan to avoid these losses. One item which will clearly factor here is whether the judge believes the PBC that these efforts were legitimate and feasible. The city attacked those efforts(and will look to sharpen that attack at closing) by pointing out that these efforts were for a building so outrageous and a funding package so unfeasible that it did not meet any market standards and should not be acknowledged.

UNCLEAN HANDS:

Definition: n. a legal doctrine which is a defense to a complaint, which states that a party who is asking for a judgment cannot have the help of the court if he/she has done anything unethical in relation to the subject of the lawsuit. Thus, if a defendant can show the plaintiff had "unclean hands," the plaintiff's complaint will be dismissed or the plaintiff will be denied judgment.

In addition to undue financial hardship the PBC is claiming that specific performance should not be granted due to unclean hands on the part of the city.

A great deal of the fireworks in this case revolved around the unclean hands argument. The PBC argued that the cities involvement in plans by Wally Walker, Slade Gorton, Mike McGavick, etc. conspired against them in an unethical way to “bleed the team” and force them to sell. This argument resulted in the now infamous powerpoint presentation and e-mails.

I would ask if those e-mails were any more incriminating than the “man possessed” e-mails and others provided by the PBC. In many ways the fact that those e-mails had been for the most part leaked months earlier made them much less dramatic for the public. The “new bombshells” resonated much more loudly but I do not believe they will be any more impactful.

The city will likely counter this in two ways. The first will be to state that these efforts by Walker, McGavick, etc. to find long term local ownership were not related to the cities official efforts to enforce the lease. While Walker was engaged on a limited basis by the city he was largely acting independently when doing so. These were concerned citizens trying to save a regional asset that had already announced their intentions to leave the area by filing for arbitration.

Furthermore the city will argue that there is nothing “unethical” about concerned citizens in a region wanting to retain their 41 year team. They did not mislead the public or the PBC. They did not take underhanded actions such as encouraging ticket holders and sponsors to boycott the PBC, they did not really do anything except for encourage all parties to enforce the existing lease via a court of law. Just as Clay Bennett worked to “explore all options” to relocate the team via legal remedy the city and its associates worked to “explore all options” when it came to keeping the team. They made no secret about it, they wanted the two years because it provided additional financial incentive for the team to come back and negotiate.

The question here is whether the judge will be swayed by the very damning terminology used during these e-mails and the presentation. References to “bleeding” people do appear very hostile and hurt the cities case.

So at the end of the day the city feels that they have to prove a couple of things. The first is that the contract language exists and was binding. They have done so.

The second is that basketball provides a unique and unquantifiable benefit that cannot be adequately compensated for with an alternative payment. I think that this is questionable. They have to re-establish Zimbalist as an expert and hope that the judge believes testimony by Sherman Alexie and others. Additionally they have to hope that in the end the contract language which states that basketball is unique gives them a huge leg up in this argument. That will depend almost entirely on the judges perception of the contract.

As said the PBC is countering those arguments with undue hardship and unclean hands. In both cases they face the burden of proof by a preponderance of the evidence. I do not believe they came even close with undue hardship so their strongest card is going to be unclean hands.

In short the city is relying heavily on the contract document. It states that specific enforcement is the remedy and it states that the product is unique. They are further relying on the fact that this is not a jury trial and that in fact the court will give very little weight to the “theatrics” of Brad Keller. While they may have stirred the passions of Jerry Brewer and Jim Brunner very little of what they said should be relevant to Marsha Pechman who will ultimately make the decision.

The PBC is hoping the judge will put legal tradition over the contract and recognize specific enforcement as a remedy of last resort. They further are absolutely reliant upon the judge finding that their argument of unclean hands has a role in this case.

Attorneys closely related to this case as well as those who have followed it do not necessarily share the media’s view. In general K&L Gates feels like they proved their legal points without being so confrontational that they re-enforced the notion that this relationship cannot continue. They were encouraged by the fact that, other than unclean hands, the PBC made no efforts whatsoever to attack their core legal arguments. They did not even make a pretense that the PBC did not understand the contract or that they did not anticipate the damages.

My understanding from an unaffiliated attorney is that Judge Pechman is known to be quite literal when it comes to contract law and not easily swayed by opinions or feelings. That hurts the city in the case of Sherman Alexie and the fans, but helps them when it comes to the contract and unclean hands. It explains their tactical decision(which I hope was correct) to stay very simple and with the facts of the contract. Keller, not having this option went for the drama.

I do not know where I sit. I entered this feeling very strong but right now I have to acknowledge that the uncertainty is simply eating away at me. This is a great example that no matter how much of an edge you think you have anything can happen in a court of law. I will be on edge until the verdict is read.