Monday, June 30, 2008

Sonics: Preparing for a verdict

Well, the testimony portions of the Sonics trial have wrapped up, and Judge Marsha Pechman will hand down her decision Wednesday afternoon at 4:00 Pacific. Regardless of what happens, there will still be some battles to fight. If the city is able to hold the Sonics' ownership (Professional Basketball Club, or PBC) to their lease, they'll still be set to move to Oklahoma in two years. A victory would greatly increase the chances of success of Howard Schultz's lawsuit to try and return the team to local ownership, though, and even if that fails, there would still be plenty of time to try and work out a new arena solution and petition state authorities for funding.

However, if Judge Pechman rules in favour of PBC or allows them to buy their way out, the team's eventual departure will be almost inevitable: a win for the ownership group means the lease could only be enforced on appeal, which isn't too likely, and it also makes things tougher for Schultz. Thus, there's a lot at stake here for the owners, the team and the fans. The eventual verdict and the issues around it will also be of significant importance to sports fans everywhere, as this case has the capability to determine numerous precedents in franchise relocation. Read on for a breakdown of some of the trial's key battlegrounds and why what happens here is important to fans outside Seattle.

Battleground: The lease
The heart of the trial all comes down to the Sonics' lease of KeyArena from the city. As former Seattle Centre (the larger complex including KeyArena) director Virginia Anderson testified, the lease was intended to work for both parties. With the construction of KeyArena, the Sonics were able to get free land, use part of the existing structure and borrow money on the city's line of credit, all advantages they would have done without if they had built a private arena. The city worked out an plan where the Sonics would pay them back via revenue-sharing provisions instead of a regular loan, which they agreed to at the time. Anderson said the lease worked very well for both parties until Safeco Field and Qwest Field opened in 1999 and 2001 respectively, as those facilities drew fans and corporate money away from Key Arena.

The Sonics' main argument around the lease is that it doesn't reflect the new economic realities of the NBA. They have a point here: in the mid-90's, the NBA wasn't the economic juggernaut it is today (check out this hilarious-in-retrospect cover story from Sports Illustrated's June 1994 issue, entitled "Why the NHL's Hot and the NBA's Not," if you need any proof of this), but neither were any of the other pro sports leagues. Still, it's hard to use the justification that changing economic realities of a marketplace should allow you to break a contract. That wouldn't fly in most businesses, so it especially shouldn't work on its own here. The lease itself seems to favour the city's case, especially given the strong language concerning the term of the deal and the requirement for the Sonics to play all home-regular season games at KeyArena through 2010.

Advantage: Seattle

Battleground: The Sonics' e-mails
Another key part of the city's case is the e-mail correspondence between the Sonics' owners that strongly suggests that their efforts to get a new arena in Seattle were all a front, allowing them to say "Well, we tried," before shipping the team off to their desired home in Oklahoma City. You can read more details on the specific e-mails involved in my previous posts here and here, but the basic idea is that principal owner Clay Bennett was contemplating a "sweet flip" to get another NBA franchise right after he bought the team if by chance arena funding came through in Seattle, and then described himself as "a man possessed" in April 2007 when asked by fellow co-owner Tom Ward if there was any way to get the franchise to relocate to Oklahoma City more swiftly. Both of those e-mails were admitted as evidence (Exhibits 60 and 115, respectively). On the stand, Bennett said he meant he was a man possessed about keeping the team in Seattle, but he didn't bother to correct his partners' impressions that he was talking about Oklahoma City.

City attorney Paul Lawrence also introduced another e-mail sent shortly after the "man possessed" exchange where Bennett asked NBA executive Joel Litvin if there was any way to move the team before next season, thus suggesting he was talking about OKC after all. A great fourth one involved McClendon e-mailing Bennett about a piece in an Oklahoma city newspaper where he said that they'd bought the team with the intention of moving it to Oklahoma, and Bennett responded that he was concerned that McClendon's comments would violate the "good-faith, best efforts" clause Howard Schultz included when he sold Bennett the team (the main focus of Schultz's lawsuit, to be heard after this trial concludes). You can read Percy Allen's great recap of Bennett's e-mail-related testimony here on the Seattle Times' Sonics Trial Blog, the most comprehensive resource for following the case. These e-mails should be a great boost for the city's case, as they substantially detract from the Sonics' ownership's attempts to play themselves as victims interested in keeping the team local, but thwarted by the reluctance to publicly fund arenas.

Advantage: Seattle

Battleground: The Renton arena
Bennett's proposal to build a $500 million arena in suburban Renton also became a significant focus of the trial. The city argued that he was never serious about the deal, merely using it as a front to make it seem that he was trying to keep the team local, and introduced substantial evidence to back up their case. This includes e-mail discussions between Bennett and political consultant Jim Kneeland that show that Bennett was never willing to outline his exact contribution to the project and produced his site and financing plans way behind schedule, further discussions between Bennett and spokesman Brent Gooden on what exactly constituted the "good-faith, best effort" clause, an admission by Bennett that the proposed arena would be the most expensive in the NBA and would only receive a "negligible" [his own words in an e-mail] contribution from the team ($100 million, but from forthcoming revenues, not paid up front), further admissions that he missed all of the legislature's deadlines to apply for funding, and even a video clip where Bennett told the state legislature that KeyArena would be viable for a few years to come.

That last admission is particularly significant, because the city is currently only seeking to force the Sonics to play there for two more years. It's also interesting that Bennett realized that KeyArena was still functional and could be made into a reasonable NBA facility at a much smaller cost than constructing a completely new arena (as shown by e-mails from a consultant he hired), but refused to even discuss the possibility of a KeyArena renovation with city and state officials: that suggests that it was the doomed-from-the-first Renton arena plan or nothing for him. The Sonics argued that the amounts they spent lobbying for the Renton arena show they were committed to the plan, but the city showed that much of that lobbying was shown to be ineffectual and without concrete proposals or documents. It's hard to believe that a smart businessman like Bennett would think that the Seattle area, where public sentiment currently runs strongly against publicly-funded arenas (as came up later in the trial), would be willing to build the most expensive arena in the NBA with primarily taxpayer dollars and only a "negligible" private contribution, late and incomplete plans, and a suburban site that made little sense to most people. The evidence entered regarding the Renton plan suggests that it was all a rather elaborate front, doomed before it began, which would substantially bolster the city's case.

Advantage: Seattle

Battleground: The team's economic impact

This was a pretty hotly disputed subject. The city called economists Andrew Zimbalist and Lon Hatimaya to talk about what kind of impact the team makes on the city's economy. Zimbalist, an economics professor at Smith College in Northampton, Massachusetts and the author of such books as Sports Jobs and Taxes and The Economics of Sports, made some impressive points about the Sonics' impact on the community on direct examination and established his credentials as a highly-regarded sports economist. However, he was first skewered and then roasted over the coals until slightly charred by PBC attorney Paul Taylor on cross-examination, as Taylor pointed out that much of his report on the Sonics' situation was completely cut and pasted from an earlier report he'd produced for the city of Anaheim for their 2005 case to try and stop the Anaheim Angels (now the Los Angeles Angels of Anaheim) from relocating. Taylor also showed that Zimbalist's evidence had been rejected in a Kentucky Speedway versus NASCAR Association case by a judge who described him as a "hired gun" and said there were no standards controlling his evidence in individual cases, as it wasn't subject to the usual peer-review and publication status required for scientific analysis. Taylor also brought out that Zimbalist had been able to quantify the intangible benefits of the Angels to the tune of over $7 million, but said he couldn't make the same determination in the Sonics' case (especially interesting because the city's whole point is that a dollar value can't be put on the team). City attorney Greg Narver restored a little of Zimbalist's credibility on redirect, where it was established that the Anaheim situation shared many similarities with the Sonics' case, making the notes from that case relevant and valuable to repeat, and that PBC had tried to hire Zimbalist for their own side, showing that they at least think he's a valuable witness. Still, his collapse under cross-examination means his testimony probably came out as a loss for the city. Gary Washburn of the Seattle Post-Intelligencer has a good take on Zimbalist here.

Hatimaya's testimony was more favourable to the city's case. He concluded that the Sonics have a total economic impact on the city of about $187 million annually, that they support about 1,200-1,300 full- and part-time jobs annually and generate approximately $25 million in additional household income every year. He also testified that their economic benefits would leave with them, instead of merely being diverted to other local sources as PBC proposed. Taylor also tried to punch holes in his testimony, but Hatimaya seemed able to hold his ground for the most part. In a possible unfortunate turn for the city, though, Judge Pechman asked him at the conclusion of his testimony if his model was unique to the Sonics or if it would work for any business, including Wal-Mart or Boeing, and he said it wasn't unique. That could indicate that Pechman's already dismissing the city's claims that the Sonics can't be treated like any other business, which would suggest that she might allow the Sonics to leave but force them to offer financial compensation, as is common with business relocation requests. Alternatively, she might have been specifically referring to Hatimaya's economic model, and it would benefit both the model and the city to have its credibility strengthened by increasing its applicability.

The Sonics later brought out their own economist witness, Brad Humphries from the University of Alberta (yes, everything on this blog does eventually come back to CIS connections!). Humphries said his data suggests that the team leaving would have little to no impact on the Seattle area, as those dollars would be redistributed to other sources. That's in direct contrast to Hatimaya's testimony. Lawrence turned in an excellent effort on cross-examination, though, and clearly established that Humphries' data only relates to larger metropolitan areas, not individual cities. This may be a significant point, as Seattle's population is only 582,454, while the Seattle Metropolitan Statistical Area has 3,263,497 people. Lawrence suggested that Sonics fans from the larger area would likely spend their money in suburbs like Bellevue or Tacoma instead of Seattle if the team leaves, and Humphries agreed. That could be key, as it's the city that signed the lease with the team, not the region: the city has the responsibility to act in terms of what's best for it, not what's best for the region. Thus, Humphries' evidence was probably helpful to the city's case. Still, PBC's destruction of Zimbalist means that they probably win the economics battle, although the testimony of Hatimaya and Humphries at least let the city get some points on this one.

Advantage: PBC

Battleground: The "Machiavellian plan"
PBC spent most of its own case trying to prove that the city had a "Machiavellian plan" to force Bennett to sell to local ownership (the Ballmer/Griffin group). They made numerous references to a "poisoned well" PowerPoint presentation, which former senator Slade Gorton of K & L Gates (the same firm representing the city in this trial, and Gorton was actually retained personally by the city to lead their litigation efforts, but probably chose not to argue the case in court because of his personal involvement) distributed at an Oct. 7, 2007 meeting with Ballmer, former Sonics president Wally Walker and former Safeco president Mike McGavick, who created the presentation. The "poisoned well" apparently actually refers to the poor relationship and atmosphere PBC had created with the fans, but the document proposed that the key course of action was to carry this further and "separate the NBA from the Oklahomans while increasing the exposure for each," which was to be partially accomplished by making it expensive for PBC to fight their way out. The city objected to the presentation's introduction into evidence as it wasn't produced by their staff, but Judge Pechman overruled the objection. The document itself wasn't a knockout punch, but combined with a bunch of e-mails between the Seattle ownership group, it showed that the city's hands weren't necessarily all that clean either. At the very least, Gorton seems to have had a conflict of interest, as he was representing the city as well as the Seattle ownership group at the same time: if that isn't a conflict of interest and the two groups' goals are ultimately the same, that means there really is more of a Machiavellian plan than has been let on. The complete details on these e-mails can be found in this excellent Seattle Times story by Percy Allen.

This may not necessarily be all that damaging for the city. First, these e-mails are nowhere near as incriminating as those between the PBC owners: it was clear to all that the Seattle ownership group wanted to buy the team, and the city also made it clear that they wanted to stay in Seattle. Also, as far as I can tell, no one on their side's been caught in as clear of a lie as Bennett thus far. What these e-mails do portray, however, is that the city wasn't above potentially using dubious negotiation tactics (mostly related to Gorton's hands in multiple barrels). That takes away a little bit of their moral high ground, but keep in mind this occurred long after Bennett's initial lies, and when it seemed obvious that he would move the team at the first opportunity. Still, not good for the city.

Advantage: PBC

Battleground: The lawyers
This is a bit different from the other battlegrounds, but skilled legal counsel can make a substantial difference in a trial. This effect is probably lessened in a judge trial, as you would expect that a judge would focus more on the technical legal points and less on the impressions the lawyers create than a jury would. Still, it's an important area in my mind. PBC's lawyers have been very effective, particularly lead attorney Brad Keller, who cross-examines and objects like he's just stepped out of a Perry Mason novel. They've intimidated several of the city's witnesses and have substantially reduced the impact of their testimony via skillful cross-examination: Mayor Greg Nickels (you can read more of my thoughts about his day in court here) and Andrew Zimbalist spring to mind immediately. The city's lawyers have been more hit-and-miss. Lead attorney Paul Lawrence is very good, and he has produced a lot of excellent points on direct and cross-examination: his interrogation of Brad Humphries over cities versus metropolitan areas was particularly effective. Unfortunately, Jeffrey Johnson and Greg Narver didn't seem to do well in a trial situation: Johnson often seemed to lose his train of thought, and Narver was repeatedly cautioned by Judge Pechman for talking too fast. Gary Washburn of the Seattle Post-Intelligencer has a good piece on Johnson's mistakes here, and I have more about the various lawyers' performances when I saw them in person here. In the end, PBC has the stronger team on its side. I'm sure Narver and Johnson are good lawyers, but neither seemed able to handle the pressure of cross-examination in a big trial like this: the city would have been better off if Lawrence had handled all of the witnesses and the other lawyers had worked in a supporting role.

Advantage: PBC

Why all of this matters:
So, why should you care about this trial if you're not a Sonics fan? Well, there's plenty of reasons, but one is that it may set a quite interesting precedent. The heart of the issue is if the Sonics are like any other business, which can get out of a lease with a financial settlement, or if they're unique and can be held to a "specific performance" clause. The city has tried hard to prove that they're unique, from economic, fan, and political perspectives, while PBC is attempting to argue that they're no different than Wal-Mart or Boeing. Historically, most relocation court decisions have allowed owners to move (see Davis, Al). However, this one is a bit different, as the question isn't if the Sonics can move, it's if they can abandon their contract. Also, a victory for the city may have an unforeseen side effect: a ruling enforcing specific performance would emphasize that sports teams are in the public interest, which would strengthen the case for public funding of sports arenas in general.

Personally, I think the landscape in Seattle has changed a bit on that from when I-91 (a bill limiting the public financing of sports arenas) was passed in November 2006. Back then, the taxpayers had just contributed significant amounts of money to Safeco Field and Qwest Field and felt no desire to do so again. Also, Bennett's threats to move the Sonics at that time seemed far away. When they got closer to actually moving, more and more support rallied around the cause of keeping the Sonics in Seattle (led by the excellent team of Steven Pyeatt and Brian Robinson over at Save Our Sonics). Local taxpayers would probably be more willing now to consider arena funding, as long as it's a somewhat reasonable proposal like Ballmer's plan to renovate KeyArena instead of Bennett's outlandish Renton boondoggle.

The most important aspect of this trial, though, is that the eventual outcome will go a long way towards showing us what fandom means in this day and age. Does history and tradition still mean anything to the NBA? Judging by the way they promoted the Lakers-Celtics Finals, you'd think so, but then you look over and they're about to abandon a 41-year-old market to start a Dust Bowl Division. If PBC wins and the team does move, their ownership, Judge Pechman and the league have all made it clear that pro sports franchises offer nothing unique to a city, that fans are consumers like any other and that it's the almighty dollar that rules the sporting world. If by some chance, though, a miracle occurs in this lawsuit and the other actions, or Bennett decides to get out of town while the getting's good and leave the team behind, it will be clear that all the protests, columns and rants weren't in vain, that fans can still impact the way a league does business and that the relationship between fans and their team is deeper than the usual vendor-consumer ties. You can read more of my thoughts on this in my Journal column this month. In any case, the overarching moral that can be gained from both sides is clear: Don't send or keep incriminating e-mails!

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