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Monday, June 16, 2008
Seattle Pins Hopes on Specific Performance to Keep Sonics in Town

Specific performance is one of those rarely-invoked contract remedies that makes for interesting reading. Because the remedy is limited to contracts involving "unique" items, it forces courts to determine the level of irreplacability and scarcity before imposing the remedy. Specific performance cases often involve cases of contracts involving rare works of art or real estate.

But a sports team? That is the question being asked in Seattle, where the city is attempting to compel its team, the SuperSonics to play out the remaining two years of its lease in Seattle before making a move to Oklahoma City. Previous posts in April 2008 and October 2007 discussed the dispute in detail. Essentially the team played in an aging facility (the smallest in the NBA) and when the city refused to make improvements in the KeyArena, the team was sold to Clayton Bennett, an Oklahoma City businessman who vowed to move it to his home town. The NBA gave its approval in the April.

However, the lease with Key Center ends in 2010 and the city wants the team to honor it. Marsha Pechman, the federal district court judge who will preside, will have the opportunity that law professors crave: decide on a case that has a compelling set of facts and the question of whether specific performance can be awarded in this case.

There is an excellent piece in the Seattle Post-Intelligencer which outlines the issue exceptionally well for non-lawyer readers. [Note, however, there is one journalistic faux pas that bothers me (as a former journalist). In that article, it states that "most attorneys claim that the city has a strong case." The author does not identify any attorneys nor gives us any basis for that quotation. It would have been helped to get some quotations.]

In any event, I don't see the case as being that simple. In addition to "uniqueness" the party seeking specific performance must show that it acted with good faith and with "clean hands." Let's assume that the Sonics are a "unique" tenant, unlike a typical business. This is reasonable since it would be difficult to find a replacement NBA team. But the good faith issue is in question and certainly would be contested during the trial. Did the city block attempts to refurnish or built a new arena? Did the two sides honestly try to resolve the dispute? Did Bennett act with good faith in his negotiations or did he consider it a fait accompli to move?

Finally, there is a bona fide question of the equity of compelling a team to play out a lease that would be less than economically viable. Setting aside the debate on whether the team "lost money" in Seattle, one can imagine the space crowds and public disdain for the team during those two years in Seattle. Compounding all this is a lawsuit by the former owner of the team seeking rescission of the sale and what effect a grating of specific performance would have on that litigation.

I see two upsides if the city is successful. By granting the request is that during those two years, it may be possible to the city of Seattle to agree on refurbishing the KeyArena or funding (partially) the construction of a new facility. But that is speculative and it may takes years for the fans to forgive the team for its actions. The second upside for the city is more vindicative: stick it to the team and force them to negotiate a settlement on better terms for the city. My gut tells me that is a plausible scenario.

The best solution: avoid specific performance and slap Mr. Bennett with damages (even perhaps some consequential damages, although that would be a leap) and wish him and the team a not so nice adieu.



What is the relevance of Bennett's good faith in determining whether or not the city has "clean hands"? Thanks,

Anonymous Anonymous -- 6/17/2008 12:06 PM  

Is there any chance that the city could successfully bring a condemnation action against Bennett, under the theory that the team is essential to the city's economy (mostly in an indirect sense)? Of course that would require paying Bennett substantial damages, but at least it would keep the team.

Anonymous Peter -- 6/17/2008 12:32 PM  

Of course the Sonics could "win" the lawsuit over the lease (and buy their way out), but lose the suit brought by Howard Schultz regarding the ownership's failure to act in good faith to keeep the team in Seattle.

It doesn't help the Sonics that Clay Bennett so obviously lied about what he meant when he said (in an email) the he was a man possessed. I can't imagine that the judge can buy what he is selling after that.

The Schultz lawsuit deserves its own analysis.

Blogger richard -- 6/18/2008 7:29 PM  

Great article ! I really enjoy reading your posts.

Anonymous anwalt fuer erbrecht -- 6/20/2008 10:01 AM  

In analyzing this case I dont see Clayton Bennett's "man possessed" email as proof of fraud. The Schultz case is not asking for damages. It is asking for Bennett's PBC to be removed from ownership, while placing the team in a protective trust.

Even if Bennett's emails seem damning on the surface, his lawyers showed in the lease case multiple emails of their own in which he attempted to secure backing for an arena deal in the Seattle suburb of Renton.

I dont believe you can prove intent by Bennett's "man possessed" email. Meanwhile I dont see how damages to Schultz or the previous ownership group can be proven. How is getting $100 million+ over team value being defrauded? Not only that but Schultz, while attempting to appear as a "White Knight" in this case is actually acting quite the opposite as he is unwilling to pay back the money he was paid for the team. It is his contention that the team should be removed from Bennett's group while he and his fellow investors walk away with $350 million dollars.

Blogger Grendel_Knight1974 -- 6/24/2008 7:10 PM  

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