The owners of the Atlanta Hawks and Thrashers have sued King & Spalding for malpractice in state court after the law firm allegedly created a “fatally flawed contract” that prevented the owners from buying out a co-owner.
The impetus for the lawsuit was a dispute between the majority owners, known collectively as SSG Group LLC and LPF Atlanta LLC, and a minority owner, SB Belkin LLC (Steve Belkin), over whether to trade Hawks All-Star Joe Johnson. As an NBA Governor, Belkin had veto power over the trade.
In 2005, the owners hired King & Spalding to negotiate and draft a contract that would allow them to buy out Belkin, according to the lawsuit.
The law firm was allegedly tasked with negotiating the terms of a purchase and sale agreement (PSA). However, the parties could not agree on a price to be paid for Belkin’s interest, so an appraisal process was included in the contract.
The plaintiffs claimed that they were concerned about the appraisal and that it might be inflated to the benefit of Belkin. Specifically, they wanted the right to select a first or a second appraiser and the right to object to any appraisal even if the appraiser was selected by the joint owners.
The contract, as drafted by the law firm did not “meet the needs of plaintiffs,” according to the complaint. “The PSA did not contain an appraisal process that would result in a fair and reasonable valuation of Belkin’s interest, did not protect SSG and LPF’s economic interests in HPTA, did not guarantee plaintiffs the right to select one of the first two appraisers, and did not provide an expeditious appraisal.”
Specifically, the PSA allowed Belkin to hire the first appraiser. Then, whichever party objected to the findings of the first appraiser could hire the second. The contract, allegedly, didn’t provide for what the owners would do if both sides objected to the first appraisal, which is exactly what happened. Belkin objected to the findings of his own appraiser, one minute after the findings came in, according to published reports.
Litigation followed.
In August 2009, after a three-week trial in Maryland, a court declared the PSA “void and unenforceable because there was no agreement on a method for selecting the second appraiser when both parties objected to the first appraisal,” according to the complaint.
While the ownership dispute was settled in December 2010, the plaintiffs contended that they lost hundreds of millions of dollars associated with “operating the Thrashers after the franchise would have been sold but for the cloud on the franchise’s title.” They are seeking compensatory, consequential and punitive damages. They are represented by Robert E. Shields and Everette L. Doffermyre with Doffermyre Shields Canfield & Knowles.
Steven M. Collins , a partner with Alston & Bird, representing King & Spalding, told the media that his client “acted appropriately and the lawsuit is without merit. We look forward to presenting a substantial defense in court at the appropriate time.”
In a statement from one of the plaintiffs, Michael Gearon, released the following statement:
“My partners and I regret having to file a lawsuit. But King & Spalding made egregious errors that caused us to be tied up in litigation for five years and cost us an enormous amount of money, time, and anguish.”
