The Atlanta Spirit Group won't square off in court against its former law firm after all.
The Spirit, which recently sold the Thrashers and has an agreement to sell a majority stake in the Hawks, and prestigious Atlanta law firm King & Spalding have settled the legal-malpractice lawsuit the sports ownership group filed against the firm early this year.
The owners submitted paperwork in Fulton County Superior Court on Friday to dismiss the suit, which had claimed King & Spalding cost them almost $200 million by negotiating a "botched" contract that prevented unloading the money-losing Thrashers for more than five years.
Terms of the settlement were not disclosed.
"King & Spalding is pleased that the dispute has been amicably resolved," said Steve Collins, an Alston & Bird lawyer who represented King & Spalding in the matter. "The terms of the settlement are confidential."
"I'm glad we settled," Spirit part-owner Michael Gearon Jr. said. "The terms are confidential, but I will just say we're glad to put it behind us and move on."
The Spirit, which bought the Hawks, Thrashers and Philips Arena rights from Time Warner in 2004, is in the process of moving on from its tenure in Atlanta sports ownership.
After selling the Thrashers in June to a Canadian group that relocated the team to Winnipeg, the Spirit reached an agreement in August to sell a majority stake in the Hawks and the arena to Los Angeles businessman Alex Meruelo, who will keep the basketball team in Atlanta. The proposed sale to Meruelo awaits NBA approval.
The Spirit's ownership of the teams was marked by a protracted, high-profile court battle with former partner Steve Belkin. That dispute led to the lawsuit against King & Spalding.
According to the suit, filed in January, King & Spalding negotiated a "fatally flawed" contract in 2005 that caused a planned buyout of Belkin to "break down into chaos," triggering a five-year battle between Belkin and the other owners. The lawsuit claimed the flawed contract resulted in costs of $14.5 million in legal fees to fight Belkin, $50 million in lost value of the Thrashers franchise and $130 million in operating losses.
The contract with Belkin was tossed out by a Maryland court in 2009 as ambiguous. The other owners finally settled with Belkin and bought out his stake late last year.
If the NBA approves the Meruelo deal, the seven remaining Spirit partners, including Gearon, Bruce Levenson and Ed Peskowitz, will retain a sizable minority stake in the Hawks for at least a period of time, believed to be five or six years. But all ownership decisions, as well as all obligations for financial losses, would be Meruelo’s.
Getting NBA approval of a sale is typically a time-consuming process that includes extensive vetting of the prospective owner, negotiation of an agreement between the owner and the league, and ultimately a vote by the league’s Board of Governors on whether to approve the change of ownership.
The process is in progress with Meruelo, but a vote hasn’t been scheduled and isn’t expected until next month at the earliest. Part of the process is for Meruelo to meet with a committee of NBA owners; originally scheduled for this week, that meeting has been delayed until late this month.
Meanwhile, the Spirit group remains the Hawks’ owner, although Meruelo already has been brought into the loop on major decisions -- not that there have been a lot of major decisions to be made with the NBA in a lockout and no player-personnel moves permitted.
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