I'm not sure that the league could require that future owners waive the right to file for bankruptcy protection. Clauses like that exist in many settings, but they're generally unenforceable. Any attempt to act on such a contract would be a violation of the automatic stay.

 Anonymous -- 8/06/2006 6:43 PM  

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 BroBlog -- 8/06/2006 6:48 PM  

Please allow me to make some corrections to my last comment. Here is the corrected copy:

Great piece of work on this story; first, I don't think billionaires should get the benefit of bankruptcy filing as if they are just like common folks when they not; let's not create a Trumpism by allowing Paul to do this. I think the team should stay where it is. The Trailblazers will lose some money again this year, yes, but I think with Nate at the coaching helm, the team does have the right man in place to get things turned around. Make some good decisions in the draft and market the team better, this once proud franchise will get back on its feet.
Lastly, I don't think moving the team to Seattle is the answer. There is no building for them to play in. The Key Arena and its lack of aesthetic appeal is what may drive the Sonics out of town. Hello, people, this is not an option. Take your lumps, Paul; being a successful business man means you have had some failures before! Just my thoughts!

Broblog...

 BroBlog -- 8/06/2006 7:19 PM  

A corporation or other lim.liab. company is a fictional person distinct from its owners. It files bankruptcy, not its owners. Preventing billionaires from taking advantage of bankruptcy laws means preventing them from forming corporations or other limited liability companies. Naked class warfare that even I might not support. Besides, I thought most people would be happy to see an owner get out of having to pay Zach Randolph the rest of his $86 mil.

 SmittyBanton -- 8/06/2006 7:40 PM  

How could Allen use chapter 11 to get out from under the players contracts while maintaining control of the franchise? If the Blazers reject the contracts, the players would become general unsecured creditors of the team. In that case, absent consent of the players, the cram down provisions of the bankruptcy code would prevent the equity holders of the team from taking anything unless the creditors were satisfied first.

 PK -- 8/06/2006 10:04 PM  

The whole article just makes me sick at my stomache to think about...

How can someone worth $22 Billion be that much of a pain. I always say leave good enough alone. If he tries to file bankruptcy I'm going to laugh uncontrolabley.

If I'm the other owners, I'm not happy at all and would take every legal angle to make sure he pays HIS OWN PLAYERS what there contracts say they should get. The others owners didn't make the contracts, the Blazers did.

 Sports Overload -- 8/07/2006 1:25 AM  

Great discussion on Bankruptcy--this is a complicated area and I appreciate the insight.
Allen's beef is actually with the Portland Arena Management Corp. and it looks like he wants to get out of the lease agreement that the Blazers have with PAM. If he was able to declare Bankruptcy, would that help him to get out of the Rose Garden lease? If so, how?
Also, apparently he has an exclusive site agreement with the city of Portland--how binding is that and could Bankruptcy get him out of it?
Are there any other ways that the Blazers have of getting out of their links to Portland, such as arguing that PAM has breached the agreement by being unreasonable if PAM refuses to sell the stadium to the Blazers for the same price that was quoted to other buyers? (I assume that a price was set for the Rose Garden during the negotiations).

 Anonymous -- 8/07/2006 2:33 AM  

Thank you all for these comments, they are excellent.

Anonymous 1: Great point about how a clause that requires future owners to waive the right to file for bankruptcy protection may not be enforced by a court. I wonder if the context of a pro sports league may be sufficiently distinguishing, however? It sounds like you have some expertise in bankruptcy law, and I appreciate you commenting.

Broblog: I think you are right about the Blazers, they will soon turn it around. Although I am a Celtics fan, I've always liked the Blazers, and they have a pretty deep team right now. Brandon Roy was a great draft pick, too. I thought he was the best player in the draft.

Andre (SmittyBanton): I never thought you would be the one defending billionaires! But you make some great points. I think we have a cognitive inclination to group together the corporate entity declaring bankruptcy with the person running it, but you are right--it's not about the person running it; it's about the underlying corporate entity.

PK: you're right, Allen loses control of the franchise (or at least he is supposed to) under Chapter 11. But I wonder how a bankruptcy court would actually run the team--would it take a proactive role, as bankruptcy courts do in certain circumstances, or would it would let the franchise operate with some autonomy? Or would the NBA even let it get that far--would it immediately jump in and start paying the salaries to avoid the obvious public relations disaster? It's really a fascinating fact-pattern, and could lead to various forms of litigation and transactional behavior.

Sports Overload: I agree, it does seem pretty unseemly that bankruptcy law would protect someone worth $22 billion, but SmittyBanton makes some good counter-arguments above.

Anonymous 2: Those are some excellent questions. Declaring bankruptcy could help him get the Blazers out of the lease because it is a contractual obligation, but that would be up to the bankruptcy court. There's some evidence that courts are less willing to relieve leases than other forms of contractual obligations, especially if the lease obligation is short-term, although the obligation here, I believe, is a 30-year one. In terms the exclusive agreement, that's an interesting point should the Blazers declare bankruptcy; without seeing the agreement's text, it's hard to know how binding it would be on future lease agreements concerning Allen and the Blazers. I don't think Allen can argue that the PAM is being unreasonable to not sell the stadium to him, unless his lease agreement explicitly calls for a lease-to-own clause that he has satisfied.

 Michael McCann -- 8/07/2006 6:48 PM  

i guess my post yesterday didn't go through.

anyway, i wanted to address the site agreement portland has with the blazers. the rumor is that it is a pretty strong agreement and that paul allen is personally liable on the agreement. so, if i am not mistaken, allen would have to declare personal bankruptcy to get away from that agreement. someone with better bankruptcy knowledge would have a better idea on that though.

 The Fan's Attic -- 8/08/2006 1:56 PM  

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