Belkin is entitled to do so within 30 days

[DrReality]

Judge gives Belkin 30 days for buyout, but quick end unlikely

By TIM TUCKER /

Published on: 06/14/06

The Maryland judge who last week ruled that Steve Belkin has the right to buy out his partners in the Hawks' and Thrashers' ownership group issued an amended order Tuesday that said Belkin is entitled to do so within 30 days.

In last week's order, the judge had left out, apparently inadvertently, the timeframe.

The amended order does not necessarily mean, however, that Belkin will take over the teams within a month. The other owners — a group led by Bruce Levenson, Ed Peskowitz, Michael Gearon Jr. and Rutherford Seydel — have said they will appeal the decision, and that likely would lead to a stay of the order.

Suffice to say, questions still permeate the case.

Q: What happens next?

A: The owners on the losing side of the Montgomery County (Md.) Circuit Court decision have 30 days to file notice of intent to appeal to Maryland's Court of Special Appeals. Eventually, both sides would file briefs, oral arguments would be heard, and the court would consider whether Circuit Court Judge Eric Johnson committed legal error. The appeals court could reverse or modify the ruling and could send the case back to Johnson for further proceedings. Or it could uphold his ruling.

Q: So how long would all of that take?

A: Probably six to 12 months.

Q: And who would own and run the teams during the appeals process?

A: After filing notice of appeal, the owners other than Belkin would ask the circuit court to stay last week's ruling, in effect maintaining the status quo within the ownership group during the appeals process. Such stays are routinely granted, lawyers say, but the judge could require that the other owners post a bond to protect Belkin against any decline in the value of the franchises during appeals.

Q: If the Court of Special Appeals upholds the ruling, is the case over?

A: Not necessarily. The decision could be appealed further to Maryland's highest court, the Court of Appeals, which would have the option of hearing or not hearing the case.

Q: Even though a court has ruled that Belkin's partners breached their agreement to buy him out and that he now is entitled to buy them out at cost instead, the NBA and NHL constitutions say a team can't change owners without league approval. Would that apply in this case?

A: Yes, a purchase by Belkin of his partners' stakes would require the approval of 75 percent of each league's board of governors.

Q: And what would happen if last week's ruling is upheld by the appeals court but one or both of the leagues don't approve Belkin as sole owner?

A: Sounds like more litigation.

Q: The court said Belkin is entitled to buy the other owners' stakes for their "aggregate contributed capital," or cost. How much would that be?

A: $31.4 million as of Jan. 25, according to an affidavit filed then by Levenson. The amount might have increased because of subsequent capital contributions.

Q: Didn't an appraiser put the value of Belkin's 30 percent stake at about $140 million?

A: Yes, that was the value put on Belkin's stake by JP Morgan Securities in a December appraisal. A November appraisal by CitiGroup put the value at $88 million.

Q: So . . . because the other owners didn't pay Belkin as much as $140 million for his one-third stake . . . they could be required to sell their two-thirds stake to him for as little as $31.4 million?

A: Yes.

Q: How could that be?

A: In last summer's purchase-and-sale agreement under which Belkin was to have been bought out, the other owners agreed to pay him "fair market value" for his stake as determined by a series of up to three appraisals. But the agreement also said that if the other owners failed to complete the buyout, Belkin instead could buy them out for "aggregate contributed capital." The judge ruled last week that the other owners breached the agreement when they "failed and refused" to participate in the joint engagement of a third appraiser and that they "failed to perform" their obligation to buy out Belkin, triggering his right to buy them out. "Judicially sanctioned theft," the other owners called it in an earlier court filing.

Q: What would be the grounds for an appeal?

A: The owners on the losing side of the circuit court decision haven't said anything about their appeals strategy beyond calling Friday's ruling "wrong, both on the law and on the facts." One crucial issue before the court was who had the right to retain the second appraiser in the buyout process. Last summer's agreement said either party objecting to the results of the first appraisal had the right to retain the second appraiser — but did not stipulate what would happen if both sides objected to the first appraisal, as they did. The judge ruled that since Belkin objected first — one minute after the appraisal was received — he had the right to hire the second appraiser despite having retained the first. The other owners argued that the purchase-and-sale agreement did not contemplate any such "race to object." They also had sought to more fully explore numerous issues, including the fairness and accuracy of the appraisals, before the court decided the case. The judge wrote in last week's ruling: "Should defendants truly feel that the valuations . . . fail to comport with the terms of the [purchase-and-sale agreement], then defendants are free to pursue a cause of action against the entities who actually performed the valuations."

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[Packfill]

Not encouraging.

Essentially, even if the "good guys" win, then should probably sell the team to save face and restore some respect to the franchise. These guys are just too tainted and do not appear to be detail oriented.

The Hawks need a white knight.

[Hoosier]

Contrary to what I originally thought, thank goodness, this case is far from over. For one thing I think both sides pursue all legal options available.

Secondly Stern(owners) could possibly have the final say, which if unfavorable for Belkin could force him into some kind of settlement. I would think Stern would make his desires known in confidence sooner rather than later.