Jeffrey Koewler wants more cowbell.
A corporate partner at Downey Brand in Sacramento, Koewler is leading an effort to find a new buyer for the National Basketball Association’s Sacramento Kings—whose devoted fans call themselves Cowbell Kingdom—in order to prevent the team from leaving town for Seattle.
An ownership group led by hedge fund manager Chris Hansen and Microsoft CEO Steven Ballmer has reached an agreement to buy a 53 percent stake in the Kings from majority owner the Maloof family and another 12 percent stake held by Robert Hernreich. The estimated $340 million deal for almost three-quarters of the Kings values the team at $525 million, which would be the highest price ever fetched for an NBA franchise. The sale of the Kings would see them moved to the Puget Sound region, where they would reconstitute the SuperSonics franchise, which left Seattle in 2008 to become the Oklahoma City Thunder.
The Am Law Daily reported earlier this month that the Hansen-Ballmer group is being advised by a team of lawyers led by Covington & Burling, Jeffer Mangels Butler & Mitchell, and Seattle’s McCullough Hill Leary, while the Maloofs have turned to Milbank, Tweed, Hadley & McCloy.
Downey Brand’s Koewler, a Sacramento native and lifelong Kings fan, says his firm is providing pro bono representation to a client he won’t name, whose "interests are aligned" in keeping the team in California’s capital. The next step involves finding a viable buyer for the Kings ahead of the NBA’s March 1 relocation deadline.
"This is a very interesting transaction that involves M&A, funds work, and debt financing, all of with which I’m familiar," says Koewler, adding that he’s trying to "move the pieces forward" on a competing offer for the Kings that will provide the framework for their future in Sacramento.
So far 21 local residents have pledged $1 million each to keep the Kings around, although what’s missing is a well-heeled investor to add to the group to offset the deep pockets of Hansen and Ballmer. This week Sacramento mayor—and former NBA player—Kevin Johnson said publicly that he had "whales" ready to bolster the local bid to prevent the Kings from skipping town.
While Johnson has not identified those potential investors, numerous media reports have named grocery billionaire Ronald Burkle and 24 Hour Fitness chain founder Mark Mastrov as the most likely contenders to partner up with local investors in a bid for the Kings.
While Koewler claims not to know the details of potential buyers seeking to scoop up the Kings, he says he is working closely with Johnson, a fellow Sacramento native whom he has known "on and off" over the years. (Both Johnson and Koewler attended the same local high school and the University of California, Berkeley, although not at the same time.)
Koewler’s effort to save the Kings isn’t the first such rescue bid launched by a Sacramento lawyer to hold on to the team, which has had a somewhat itinerant existence throughout its history. A deal to keep the Kings in Sacramento collapsed last year after the Maloofs walked away from a handshake agreement that would have used municipal funds to finance the construction of a new home for the franchise.
The Kings currently play in the outdated Sleep Train Arena and the Maloofs have entertained offers from municipalities like Anaheim and Virginia Beach that would see the team play in a more modern facility. In Seattle, several leading local and Am Law 100 firms have put in place a $490 million deal for the construction of a new arena where the Kings-turned-Sonics could play within the next few years, according to our previous reports.
Koewler, who stepped down as managing partner of 130-lawyer Downey Brand last year, is well aware of the economic challenges facing Sacramento. He says real estate has traditionally been the region’s biggest industry, but acknowledges business has slowed over the past few years. (Downey Brand, which opened a San Francisco office three years ago, picked up more than 20 lawyers in 2010 following the collapse of leading local firm McDonough Holland & Allen.)
Nonetheless, Koewler says that Sacramento is resilient, and he’s determined to keep the city’s sole major professional sports franchise from fleeing elsewhere. To do so he’ll need to overcome the strong bid put forth by Hansen and Ballmer, which reportedly includes a nonrefundable $30 million deposit on the Kings that will be lost if the NBA rejects their proposed purchase of the team.
The NBA itself has only once in its history moved to block the sale of a team. The league scuttled a $152.6 million acquisition of the Minnesota Timberwolves in 1994 by boxing promoter Top Rank and its Harvard Law School–trained founder Robert Arum, who would have moved the team to New Orleans. The decision sparked a brief court fight that ended with the T-Wolves remaining in Minnesota.
Koewler proclaims to have no idea whether Sacramento might pursue litigation in the event the Kings are sold off and repurposed by Hansen and Ballmer as Sonics 2.0. "I’m a transactional guy," adds Koewler. "The only time I’ve been in the courtroom is to fight a parking ticket."
Before they left Seattle in 2008, the Sonics themselves were known for flirting with other cities in an effort to secure a new arena deal of their own. Eric Rubin spent 18 years as a lawyer for the team during his role as general counsel of a communications company owned by late Sonics owner Barry Ackerley, who threatened to move the franchise to San Diego in 1989 unless renovations were made to the team’s arena. Seattle acquiesced. (Rubin, now a name partner at Washington, D.C.’s Rubin, Winston, Diercks, Harris & Cooke, did not respond to a request for comment.)
Now Sacramento is faced with a similar situation—put up public money to help finance a new arena or have its team torn away. The inability of Seattle to hold on to the Sonics stemmed from the Emerald City’s unwillingness to pick up the tab on a new building to replace KeyArena, the same facility renovated in the mid-nineties.
The Sonics eventually left Seattle after the city reached a $75 million settlement with the NBA that allowed the team’s name to remain behind. The ownership group selling the franchise to Oklahoma businessman Clayton Bennett was led by Starbucks CEO Howard Schultz, but was also composed of several prominent local lawyers, according to a report at the time by the Seattle Times. After the dot-com bubble went bust in 2001, the newspaper reports it took 58 people to come up with the $200 million necessary to buy the Sonics from Ackerley.
Besides Schultz, the team’s new ownership group at the time included other Starbucks employees, technology investors, and Fast Break Partners‚ a group of Perkins Coie lawyers led by business practice chair Stewart Landefeld, labor and employment partners Valerie Hughes and Michael Reynvaan, litigation partners Ronald Berenstain, Harry Schneider Jr., and V.L. Woolston, and corporate partner Patrick Simpson. (Former Perkins Coie life sciences partner Roger Tolbert, who joined Fenwick & West in 2008 but is no longer with the firm, was also part of the group.)
Landefeld, who advised on the acquisition of the Sonics by Schultz’s group in 2001 and the subsequent sale of the team in 2006, did not respond to a request for comment. Nor did Stanley Barer, of counsel with Garvey Schubert Barer in Seattle, who also owned a piece of the franchise.
Another ex-Sonics owner and attorney, K&L Gates corporate partner G. Scott Greenburg in Seattle, tells The Am Law Daily that he was not able to represent the Hansen-led group in its effort to bring an NBA team back to the Pacific Northwest because of a conflict caused by his firm’s role as bond counsel to King County in the plan to construct a new sports arena. "However, I am looking forward to once again becoming a fan and season ticket holder," adds Greenburg.
Whether or not the Sonics do return to Seattle will likely depend on how successful Downey Brand’s Koewler and other local attorneys and officials are in drumming up investor interest for keeping the Kings in Sac-town.
James Sanchez, city attorney for Sacramento, did not respond to a request for comment on whether he has retained outside counsel in the effort to hold on to the Kings.
Burkle, who currently co-owns the National Hockey League’s Pittsburgh Penguins and has been mentioned as a possible suitor for the city’s Major League Baseball team, is likely the best bet Sacramento has in enticing the NBA to nix a Kings move to Seattle.
Loeb & Loeb has handled work for Burkle’s Yucaipa Companies, but the firm is likely conflicted out of any potential representation of him because it has previously advised the Maloofs in their efforts to find a solution to their ownership issues involving the Kings.
John Frankenheimer, partner and chairman emeritus of Loeb & Loeb, did not return a phone call about his firm’s potential role in the fate of the Kings. Yucaipa’s general counsel Robert Bermingham declined to comment through a Burkle spokesman. (A year ago this month Yucaipa stayed in-house in picking up a minority stake in Relativity Media, part of Burkle’s move into Hollywood.)
By the time the NBA’s regular season concludes in late April, the fate of the Kings should be determined, as will whether or not Hansen and company prevail in bringing pro basketball back to Seattle or meet an Arum-like fate.
Dodgers’s TV Deal Yields Roles for Five Firms
Covington’s sports lawyers aren’t just busy representing Hansen and Ballmer in their bid to brings the Kings to Seattle. The firm is also advising Time Warner Cable, which this week beat out Fox Sports Media Group for the rights to broadcast games for MLB’s Los Angeles Dodgers. The deal, officially announced on Monday, will create a new regional sports network called SportsNet LA.
Covington corporate partner Douglas Gibson, restructuring partner Benjamin Hoch, special counsel Scott Roades, and associate J. Jason Davis are advising New York-based TWC, along with Paul, Weiss, Rifkind, Wharton & Garrison deputy corporate practice chair Ariel Deckelbaum.
Deckelbaum and Paul Weiss previously advised the nation’s second-largest cable company on its $9.3 billion spin-off from former parent Time Warner in 2009, as well as its $3 billion acquisition of Insight Communications and $3.6 billion wireless spectrum sale to Verizon in 2011. (Marc Lawrence-Apfelbaum serves as general counsel for TWC.)
As it happens, Covington is intimately familiar with the Dodgers, who were sold out of bankruptcy last year to Guggenheim Partners for a record-setting $2.15 billion. The firm served as special counsel on media rights issues to the team in its Chapter 11 case. (Court filings by Covington show the firm reaped at least $250,000 for its work.)
While Covington represented the Dodgers prior to their sale to Guggenheim, sources familiar with the matter say that the team granted the firm permission to advise TWC in the broadcast rights negotiations. While terms of the deal have yet to be disclosed, various news reports put its value at roughly $7 billion over the next 25 years.
Advising the Dodgers on the deal with TWC are a team of lawyers from Davis Polk & Wardwell led by corporate partners John Butler and Bjorn Bjerke, tax partner Neil Barr, litigation partner Lawrence Portnoy, and associates Matthew Bacal, Ethan Goldman, Livingston Miller, Pritesh Shah, and Brian Wolfe. Also representing the team is Foley & Lardner sports industry cochair Irwin Raij, who advised the Dodgers last year on their sale to Guggenheim.
O’Melveny & Myers entertainment, sports, and media practice chair Joseph Calabrese is advising Guggenheim on the deal along with partners Christopher Brearton and Robert Haymer and counsel Adam Sullins. Guggenheim’s chief legal officer is David Korman, while the Dodgers’s longtime general counsel is Santiago "Sam" Fernandez.
Lockout Over, NHL Gets Back to Business
With the high-powered attorneys for NHL owners and players finally reaching a deal on a new collective bargaining agreement earlier this month, some nonlabor related legal issues are getting attention.
The Dallas Stars announced this week that they had refinanced a $95 million loan with a consortium of banks to complete a $267 million sale of the team to Canadian businessman R. Thomas Gaglardi. Baker & McKenzie corporate partner Jim Rosssiter—a veteran hockey dealmaker—and banking and finance partner Ata Dinlenc and associate Olumide Owoo are advising Gaglardi on the deal, which began in 2011 when the Stars were put into bankruptcy by their former owner.
McGuireWoods finance partner Kevin McGinnis in Charlotte and associates Timothy Hicks and Paul McNamara are representing Bank of America on the refinancing. The NHL is being advised by Thomas Gowan, a corporate and finance partner at longtime league outside counsel Skadden, Arps, Slate, Meagher & Flom. (Gowan is also advising the NHL on the proposed sale of the Phoenix Coyotes.)
North of the border, the Edmonton Oilers have reached an agreement with local officials on a plan to construct a new $480 million arena for the team by 2016. John Karvellas, a former partner at leading Canadian firm Fraser Milner Casgrain (soon to be absorbed into SNR Denton), took the lead on the deal as a key consigliere of Oilers owner Darryl Katz.
Katz himself is under scrutiny for political donations made to the Progressive Conservative Party of Alberta. The Edmonton Journal has the full breakdown on what the arena deal is going to cost—Alberta’s premier Alison Redford (herself a lawyer) has said publicly that no proceeds from the province’s lottery will be used to build the new facility.
Around the Horn
—March Madness is just around the corner and the Final Four to determine the top team in men’s college basketball this year will be held in Atlanta, where Morris, Manning & Martin technology practice head John Yates will head the city’s host committee for the festivities, according to sibling publication the Daily Report.
—The decision by the NBA’s San Antonio Spurs to rest most of their starters in a nationally televised game against the Miami Heat on November 29 earned the franchise a stern rebuke from former Proskauer Rose partner and NBA commissioner David Stern, who slapped the Spurs with a $250,000 fine. Now Miami lawyer Lawrence McGuinness of local shop McGuinness & Gonzalez has filed a class action suit against the Spurs, according to sibling publication the Daily Business Review. Bracewell & Giuliani partner J. Tullos Wells in San Antonio has been a longtime season ticket holder for the Spurs and has also served as the team’s outside general counsel, according to sibling publication Corporate Counsel.
—Covington and Proskauer took the lead last year on the $338 million sale of the NBA’s New Orleans Hornets, which had been owned by the league since December 2010. This week the Hornets announced their decision to change the team’s name to the Pelicans. The choice to adopt more of a local flavor had been telegraphed last month when NBA senior intellectual property counsel Anil George filed trademarks on several potential new team names for the franchise that relocated from Charlotte to New Orleans in 2002. The name change has spurred talk that Charlotte’s current NBA team, the Bobcats, could readopt its old Hornets moniker. As it happens, the general manager for the Bobcats is Richard Cho, a former assistant general counsel for the Sonics.
—For the past several years—click here, here, here, here, and here for some of our previous reports—the America’s Cup yachting race has been the port of call for high-priced litigators the world over. Now a client of McDermott Will & Emery has become the latest firm to run aground in the courtroom while seeking to take part in the niche sport of competitive sailing, according to a report this week by sibling publication The Am Law Litigation Daily.
—Suburban Chicago inventor and entrepreneur Greg Dempsey is waging a fierce patent battle against Rolling Meadows, Illinois-based RTC Industries and its CEO Richard Nathan over Goal Alert, a device designed to protect soccer goals from tipping over and injuring or killing children. Jody Factor, a founding partner of the Factor IP Law Group in Chicago, is advising Dempsey in litigation with RTC over ownership and IP rights to the product, according to the Chicago Daily Law Bulletin. Joseph Berghammer, a partner at Chicago-based IP boutique Banner & Witcoff, is representing RTC.
—And we’ve heard of some pretty extreme sporting feats involving lawyers—the Olympic weightlifting regimen of Bryan Cave tax partner Daniel White in St. Louis recently caught our attention—but Akin Gump Strauss Hauer & Feld litigation partner R. Laurence Macon takes the cake. Macon celebrated his 68th birthday on December 31 by running his 157th marathon of the year, according to sibling publication Texas Lawyer. Two years ago, Texas Lawyer reported that Macon broke his own record by finishing nine marathons in 10 days.