Hawks, Thrashers owners set for another court fight

One ownership issue with the Hawks and Thrashers has just ended.

Another one is just beginning.

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Pouya Dianat/pdianat@ajc.com

The buyout dispute started in 2005 when one Hawks owner tried to block the trade for then-Phoenix Suns guard Joe Johnson (left, with Hawks guard Mike Bibby).

THE STORY SO FAR
• Previously: The Atlanta Spirit, an eight-member group, bought the Hawks and Thrashers from Turner Broadcasting System in 2004.
• The latest: Boston-based co-owner Steve Belkin's opposition to the Hawks' trade for guard Joe Johnson triggered a legal fight between Belkin and the other seven owners. The seven owners want to buy out Belkin's interest in the teams, but there is a dispute over how to do that.
• What's next: A Feb. 17 trial in Montgomery County, Md., where a judge must decide how to resolve the dispute.

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The first case came to a head in Fulton County Superior Court last December. A jury said Turner Broadcasting System should pay Texas businessman David McDavid $281 million for breaking a deal to sell him the teams five years ago. Atlanta-based Turner has asked a judge to overturn that ruling.

The second case starts Feb. 17 in Montgomery County, Md. But this one doesn’t involve Turner. It is about a group of eight owners, known as the Atlanta Spirit, who have been fighting almost since they bought the teams in 2004. Seven of the partners want to buy out the eighth, but the contract that spells out that process is so vague that they haven’t been able to agree on a process or a price.

The buyout was supposed to take 125 days. It has been drawn out in a high-profile legal battle to more than three years — forcing the owners to spend time and money fighting instead of focusing solely on the teams’ operations.

Meanwhile, seven of the owners continue to shovel cash into the teams, which are far from making a profit, according to court records.

“I think the biggest issue is just the financial drain on the owners,” said Bob Hope, a long-time public relations executive who at one time worked for the Hawks and Braves. “That takes away from your momentum of enthusiasm of running a business. That’s a headache that [you] don’t need.”

The war started in July 2005 when Boston-based co-owner Steve Belkin tried to block a trade of then-Phoenix Suns guard Joe Johnson. The seven other owners — who live in Atlanta and Washington — tried to remove Belkin as NBA governor, triggering a lawsuit.

Belkin agreed in August of that year to have the owners buy out his 30 percent stake, and lawyers drew up an agreement as to how that would happen. The price was to be set by up to three appraisals, with the first appraiser to be hired by Belkin and the second by either party objecting to the findings of the first.

But the contract didn’t say what would happen if both sides objected to the first appraisal, which is what happened.

Both sides claimed the right to pick the second appraiser, which landed them in court.

The partners have waived their right to a jury trial, so it’s up to a judge to figure out what the contract was supposed to say.

The judge could decide, based on the owners’ intent, that the seven partners can pick the second appraiser and buy out Belkin. The decision could allow Belkin to pick the second appraiser.

Or, the judge could scrap the contract entirely, causing the partners to rely on an original 2004 purchase-and-sale agreement — one that spells out another buyout process.

“We look forward to the court process in February and having the buyout process resolved,” co-owner Michael Gearon Jr. said.

Lawyers representing Belkin and the seven other owners declined to comment for this story.

It is not unusual in pro sports for teams to have more than one owner. What is unusual in the Hawks-Thrashers case is how ownership shares power.

Rather than having a single managing partner, the Spirit shares voting power equally among three subsets of owners: the Atlanta-based partners Gearon Jr., Michael Gearon Sr., Rutherford Seydel and Beau Turner; the Washington-based partners Bruce Levenson, Ed Peskowitz and Todd Foreman; and the Boston-based Belkin.

“The average sports fan, who is the consumer of this product, they don’t necessarily care who the ownership group is unless it starts affecting the product,” said Tim Halloran, an adjunct professor at Emory University and the president of Brand Illumination, a branding-consulting company.

While the owners have said the lawsuit has not affected the teams, many local sports fans question the owners’ ability to do what’s financially necessary to compete at a high level — given the acrimony.

“If their arguing back and forth results in a freeze on salaries on players or a change in the game experience for the fans, then absolutely it’s going to affect what consumers perceive as the brands of the teams,” Halloran said.

“When you look at any brand or product, everyone has to be on the same page, and you have to have a focused, tight strategy that dictates the type of players you are going to sign, what kind of goals there are for on the court and on the ice and what kind of experience the fans are going to have.”

Tough time to sell tickets

Though the Hawks just snapped a four-game losing streak, the team made the playoffs last year and started off with one of the best records in the Eastern Conference. They are now in second place in the Southeast division.

“The Hawks have had a great season. … The biggest thing hurting the Hawks now is the economy,” Hope said. “Regardless of who you are, it’s tough to sell tickets.”

The Thrashers, meanwhile, are a bottom feeder in the NHL, ranked 28th in a 30-team league. On top of that, the team’s payroll is $44 million, just above the NHL’s minimum required payroll of $40.7 million.

The judge will not rule on who, by name, will own the teams. But after the buyout process is resolved and the legal feuding ceases, the fate of the Thrashers eventually may hang in the balance. Unlike the Hawks, the Thrashers are not tied to a 30-year bond payment-agreement for Philips Arena and could be moved.

Some fans worry about that prospect, given Atlanta’s pro hockey history. The Atlanta Flames moved to Calgary in 1980, leaving the city without a hockey team until the Thrashers arrived in 1998.

“The difficult one long-term will be hockey,” Hope said. “I think hockey is certainly the sport at risk.”

— Staff writer Tim Tucker contributed to this article.

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ATLANTA SPIRIT PARTNERS KEEP THE CASH FLOWING

Seven of the eight Atlanta Spirit members have made nine cash infusions since agreeing to buy the Hawks and Thrashers from Turner Broadcasting System in fall 2003, according to court documents.

The money is needed to operate the teams — to pay for management and player salaries, for example — but it has also been necessary to offset losses.

Boston-based co-owner Steve Belkin hasn’t been legally required to participate in the infusions, known as capital calls, because of the pending court case. He has contributed an initial $11.7 million, an investment he made in December 2003, court documents show.

All told, the Washington-based owners have contributed $53.3 million through July, court documents show. That includes their initial investments and capital calls.

The Atlanta owners have paid in nearly $25 million through that time.

Since July, the Washington and Atlanta owners have made additional cash infusions, but court documents do not reveal the amounts.