What a difference a trade makes.
All the goodwill Major League Baseball’s Miami Marlins earned by amassing a star-studded $118.1 million roster on the way to opening their new 37,000-seat stadium in time for the 2012 season melted away like an ice cube in the Florida sun this week after the team moved to dump much of its remaining payroll in a blockbuster 12-player deal with the Toronto Blue Jays.
The proposed transaction is, in essence, yet another asset sale by a franchise known through much of its history for counting pennies. That stinginess was supposedly abandoned amid the team’s effort to flee the drab football stadium north of downtown Miami that used to be its home for the $634 million ballpark in Little Havana it moved into this past spring.
But the newly free-spending Marlins proved to be a bust, and the sell-off began even before they ended the season in last place. Now, by trying to ship Emilio Bonifacio, Josh Johnson, Jose Reyes, and Mark Buehrle to Toronto in exchange for a package of prospects, the team has made itself a subject of scorn within MLB circles, attracted additional scrutiny from league commissioner Bud Selig, and infuriated a shrinking fan base accustomed to franchise fire sales.
The Marlins—and, specifically, the circumstances under which the public picked up 80 percent of the cost of the new stadium via the sale of $405 million in municipal bonds—apparently also remain a focus of a broader SEC investigation into Miami’s municipal finances.
As part of the inquiry—which began several years ago and is being led by SEC senior counsel Andre Zamorano and Drew Panah—the agency sent letters to Miami and Miami-Dade County officials last December requesting financial records, meeting minutes, and communications with representatives of the team dn MLB, according to a copy of one of the letters obtained by The Wall Street Journal.
"We are trying to determine whether there have been any violations of federal securities laws," Panahi wrote in a letter to Miami city attorney Julie Bru.
Bru, Panahi, Zamorano, Marlins general counsel Derek Jackson, and Ivan Harris—the former assistant regional director of enforcement in the SEC’s Miami office and current Morgan, Lewis & Bockius partner representing the city in connection with the agency’s investigation—did not immediately respond to requests for comment about the status of the probe into the bond sales used to finance the construction of Marlins Park.
Over the summer, SEC investigators did recommend that civil actions be brought against the city of Miami related to the broader inquiry into its handling of financial disclosures for the sale of municipal bonds, according to sibling publication the Daily Business Review.
Repaying the bonds used to fund a new stadium for the Marlins will cost Miami-Dade County taxpayers an estimated $2.4 billion in combined principal and interest over the next 40 years—a tab Marlins owner Jeffrey Loria persuaded government officials to pick up by claiming the franchise couldn’t afford to build a ballpark to replace its substandard facility on its own and might have to move to another city such as San Antonio.
When sports website Deadspin.com obtained copies of audited Marlins financial statements in 2010 that showed the team cleared a $37.8 million net operating profit two years earlier—a chunk of it in the form of revenue shared with the Marlins by wealthier MLB franchises—critics accused Loria of deliberately misleading taxpayers about the team’s financial condition in order to feed at the public trough. But Loria and the Marlins were already in the clear.
Miami-Dade County commissioners ultimately approved a public financing package for a new stadium in July 2009. One potential impediment to construction was removed five months later, according to a report at the time by the DBR, when a state appellate court rejected a legal challenge to the bond sale. As the DBR subsequently reported, Miami sold another $103.6 million worth of bonds in 2010 to pay for the construction of four parking garages near Marlins Park, which features a retractable roof and two controversial tropical fish tanks nestled directly behind home plate.
Not surprisingly, the Marlins machinations have pulled in plenty of other lawyers along the way. Public records show that Tallahassee’s Bryant Miller Olive served as bond counsel to the city of Miami on the debt offering that helped finance the stadium, while Squire Sanders served as disclosure counsel. Akerman Senterfitt also had a role representing the city in connection with the design, development, construction, and operation of Marlins Park.
Foley & Lardner sports industry cochair and Miami native Irwin Raij—who led a team from the firm advising an ownership group that spent a record-setting $2.15 billion earlier this year to buy the the Los Angeles Dodgers out of bankruptcy—represented MLB in its efforts to mediate the negotiations between the city and the Marlins that eventually led to the stadium’s construction. (Foley—which, like Selig, has its roots in Milwaukee—is MLB’s longtime outside counsel.)
Proskauer Rose corporate partner Wayne Katz serves as outside counsel to the Marlins, having previously advised owner Loria on his $120 million sale of the Montreal Expos and subsequent $158.5 million purchase of the Marlins in 2002. (As recounted in an American Lawyer feature story, the complex deal also involved the sale of the Boston Red Sox to former Marlins owner John Henry.)
Reached Friday, Katz told The Am Law Daily that the Marlins’ recent trades won’t adversely affect the underlying security of the city’s bonds, because the bonds aren’t tied to the team’s attendance or revenue. Hotel tax revenues are instead being used to fund repayment of the bonds, although questions have been raised over whether there will be enough of an increase in tourist revenues in future years to cover those payments.
In any event, Katz believes the Marlins were within their right to readjust the composition of their roster, noting that the team’s last-place finish in a weak division shows it wasn’t competitive even before the flurry of player moves.
Holland & Knight, meanwhile, is acting as local Florida counsel to the Marlins. A relative of team president David Samson works at the firm, according to a source familiar with the matter. Samson, who is Loria’s stepson, has promised Marlins fans that better times are on the horizon. Despite their habit of repeatedly selling off stars, the Marlins have two World Series wins in their relatively brief existence, the most recent coming in 2003 when the team beat the New York Yankees.
At the time, Samson and Loria were locked in a legal dispute with a group of 14 former Expos minority owners over the proposed sale of the team to MLB, which eventually unloaded the team to an ownership group that moved the franchise to Washington, D.C., for the 2005 season.
After years of litigation, an arbitration panel ruled against the plaintiffs in 2004, effectively ending the case. Weil, Gotshal & Manges and Dewey Ballantine took the lead for the plaintiffs in the case, while Willkie Farr & Gallagher, Proskauer, and Foley represented the defendants. Samson and Loria likely hope that’s the last legal challenge to their stewardship of a professional baseball team, despite some very loud calls for the contrary.
Skadden Scores for Nike, Penn National Gaming
Shifting toward the sporting world’s fringe, Skadden, Arps, Slate, Meagher & Flom recently grabbed lead roles on a trio of notable transactions, two of them related to footwear and the third involving the gambling industry.
In the latest of the two shoe deals, Skadden’s Kenton King, global cohead of the firm’s corporate transactions practice, led a team from the firm advising Nike, the world’s largest athletic shoe and apparel company, on the $570 million sale of its Cole Haan brand to private equity firm Apax Partners. Also working on the deal are Skadden executive compensation and employee benefits partner Joseph Yaffe and counsel Kristin Davis, and IP and technology counsel Carrie LeRoy. (Apax is the majority owner of ALM Media, parent company and publisher of The Am Law Daily.)
Kirkland & Ellis corporate partners Eunu Chun and Ariel Yehezkel and debt finance partners Jay Ptashek and Eric Wedel are leading a team from the firm advising London-based Apax, which has long turned to Kirkland for transactional work. Apax’s general counsel is Simon Cresswell.
Last month, Skadden represented Beaverton, Oregon-based Nike—which earlier this year announced plans to scale back its product offerings—on the $225 million sale of its Umbro soccer brand to the New York-based Iconix Brand Group. Skadden’s King, who heads the firm’s Palo Alto office, also took the lead for Nike on that deal, according to British publication Legal Week.
Nike general counsel Hilary Krane started her legal career at Skadden before become the company’s top in-house lawyer in 2010, according to sibling publication Corporate Counsel.
Skadden is also serving as real estate investment trust tax counsel to Penn National Gaming, which announced this week a plan to separate its real estate and gaming assets into two publicly traded companies. Penn owns and operates about 30 casinos, racetracks, and other gaming facilities throughout the U.S. and Canada.
Skadden tax cohead Fred Goldberg, Jr., tax partner John Rayis, M&A partner John Rayis, and restructuring partner Evan Levy are leading a team from the firm representing the Wyomissing, Pennsylvania-based company on the planned split, which The Wall Street Journal reports could help Penn trim $160 million from its U.S. tax bill. Jordan Savitch serves as Penn’s general counsel, while Harold Cramer, a retired partner at Schnader Harrison Segal & Lewis, is a member of Penn’s board of directors.
Elsewhere on the gaming front, former Pennsylvania Gov. Edward Rendell, a longtime gambling advocate who rejoined Ballard Spahr in 2011, spoke to a group in Baltimore this week on the heels of Maryland voters approving a plan to expand gaming operations in the state. The increased prevalence of legalized gambling at the state level has drawn the ire of groups like the NCAA, which last month said it would relocate six championships from New Jersey because of new laws allowing betting on collegiate and professional games in the Garden State.
Yankees Seek Sale of Minority Stake in TV Network
MLB’s New York Yankees are reportedly in the final stages of selling a minority stake in cable channel the YES Network to News Corporation, according to The New York Times.
Forbes reports that the proposed sale values YES, which was launched in 2002 and broadcasts games for the Yankees and the National Basketball Association’s Brooklyn Nets, at more than $3 billion, making it by far the most valuable regional sports network in the country.
Akin Gump Strauss Hauer & Feld senior counsel Randy Levine, who serves as president of the Yankees, did not respond to a request for comment on whether the franchise has retained outside counsel for the deal. Nor did team deputy general counsel and vice president of legal affairs Alan Chang or COO Lonn Trost, a former head of the sports law practice at now-defunct New York firm Shea & Gould.
Hogan Lovells traditionally handles transactional work for News Corp. A Hogan Lovells spokesman was not able to comment on whether the firm is playing a role in either the potential YES deal or advising an investment vehicle controlled by Mikhail Prokhorov, the Russian billionaire who owns the Nets, on its purchase this week of Moscow-based investment bank Renaissance Capital.
Around the Horn
—Dewey & LeBoeuf may be dead, but the fees generated by the firm for its work during the Dodgers’ bankruptcy remain a live issue. As noted above, the storied baseball franchise was sold out of bankruptcy in May to Guggenheim Partners for a whopping $2.15 billion. Dewey represented the team in the Chapter 11 case and worked closely with Sullivan & Cromwell on the sale to Guggenheim. A Delaware bankruptcy judge allowed Dewey to postpone its final fee request in the matter amid the firm’s death spiral. This week former Dewey partners led by Bruce Bennett, who is now at Jones Day, submitted a bill seeking almost $12.5 million plus a fee enhancement of $500,000. Bennett claimed in court records last month that Dewey owed him more than $8.8 million, according to our previous reports.
—ESPN broke a major story with serious legal implications Friday, reporting that a disability board staffed by the National Football League’s top medical experts concluded years ago that playing the game could result in traumatic brain injuries, even as top officials denied any official link between the two. The news comes as the NFL and its lawyers from Paul, Weiss, Rifkind, Wharton & Garrison try to frame the concussion suits as a labor dispute, according to a report this month by sibling publication The Legal Intelligencer. Former Atlanta Falcons players involved in a separate workers’ compensation suit, meanwhile, recently failed in their effort motion to move their case to California, according to sibling publication the Daily Report, which notes that King & Spalding and Akin Gump are representing defendants in the case.
—Albert "Hal" Biagas has been named the new general counsel of sports and talent agency Excel Sports Management, according to the Sports Business Daily. The Am Law Daily last crossed paths with Biagas three years ago when the former deputy general counsel of the NBA players association helped the New York Knicks cut their ties to Stephon Marbury. Biagas actually met his wife in the Weil cafeteria when visiting the firm’s offices a decade ago for a hearing involving another troubled star, Latrell Sprewell. Biagas left the union in 2009 to join Wasserman Media Group.
—Utah Attorney General Mark Shurtleff’s long-threatened antitrust suit against the Bowl Championship Series is apparently never going to find its way to the end zone. Shurtleff, who is leaving office at the end of the year, recently told The Salt Lake Tribune that the case has been suspended indefinitely due to lack of evidence. Though Shurtleff’s office sent requests for proposals to leading antitrust firms to gauge their interest in taking on such a suit, the BCS’s decision to switch to a more inclusive college football playoff system, which we reported on earlier this year, ultimately scuttled the possibility of any legal challenge.
—Cut by the NBA’s Los Angeles Lakers in October, former UCLA forward Reeves Nelson received more bad news last month when a state court judge dismissed his defamation suit against Sports Illustrated over a feature story earlier this year about the school’s star-crossed basketball program that portrayed him a poor light. O’Melveny & Myers trial and litigation practice chair Daniel Petrocelli successfully represented the magazine in the litigation, while Reeves was advised by Olaf Muller of local firm Fink & Steinberg.
—Another collegiate basketball program that has received its fair share of unwanted publicity over the past year—so much so that Paul Weiss was brought in for an internal probe—got some good news this month when federal prosecutors dropped a child sex abuse investigation into former Syracuse assistant basketball coach Bernie Fine. Karl Sleight, cohead of the compliance and investigations practice at upstate New York firm Harris Beach, represented Fine along with partner Donald Martin and David Botsford of Austin’s Botsford & Roark. In May, Fine’s wife Laurie and her attorneys from Cohen & Willwerth filed a defamation and libel suit against ESPN over a report on the molestation allegations. Levine Sullivan Koch & Schulz, a firm known for its First Amendment expertise, is representing ESPN in the litigation.
—A bankruptcy judge in Fort Lauderdale has sided with a foundation created by former Miami Dolphins star and NFL Hall of Famer Dan Marino by granding its motion for summary judgment in a clawback suit brought by the trustee for disgraced Fort Lauderdale lawyer Scott Rothstein’s defunct firm Rothstein Rosefeldt Adler. The trustee’s suit sought the return of $300,000 in donations, according to the DBR. Florida firms Greenspoon Marder and Berger Singerman represented the foundation and trustee, respectively.