Business and antitrust law say Hansen has a good argument for being allowed to buy the Kings. Here’s one way it could be win-win-win for all.
I’m going to take Chris Hansen at his word that when he says he still wants to buy the Sacramento Kings, he will do all he can. And he has the paperwork.
For purposes of this little exercise, I’ll also accept that the NBA has the right to determine where its franchises are located, for the reason that McDonald’s never allows two of its stores to occupy the same intersection.
Therefore, it is plausible to assume that Hansen would be willing to operate the team in Sacramento for a length of time to be negotiated. Again, for exercise purposes, let’s say one year.
In that year, the three parties — Hansen, Sacramento investors, the NBA — get what none of them have and all want: Time.
Time for Hansen, governments and taxpayers to review the mandatory environmental impact statements for the proposed arena in SoDo and work toward resolution of litigation that it may prompt.
Time for Sacramento investors to organize themselves and move their downtown arena plans off cocktail napkins and onto blueprints, as well as work toward resolution of litigation that will follow the project.
Time for the NBA to move to a new commissioner who is relatively free of the baggage that the incumbent has accumulated, and to begin negotiations with TV networks well ahead of the expiration of its national contracts after the 2015-16 season. With that information, Commissioner Adam Silver can make a more considered decision on expansion.
Around the end of the 12 months, everyone will know much more than they do now about arena projects in both cities.
If Sacramento is well on its way, Hansen would agree to sell the team to the Sacramento group, led by Vivek Ranadive, for what Hansen paid for it, and Hansen would be able to make a stronger argument for expansion to a more informed NBA (more on this below). If Sacramento fails, the NBA will grant permission to Hansen for a franchise move to Seattle, with no expansion necessary.
There’s a technical term for this. It’s called win-win-win — not to mention the fact that the Maloofs get their money and the hell out of the NBA.
There’s a technical term for the alternative: It’s called lose-lose-lose — it means the lawyers, like the Maloofs, will get their money, only the lawyers won’t go away for a long time.
In the wake of Monday’s decision that rocked Seattle’s sports world and jacked Sacramento’s, Hansen’s feisty, Ali-quoting retort that he will fight and that “impossible is nothing,” has led to speculation that Hansen is bound for the courtroom. If that happens, it will be a shame, for everyone in the process, especially the fans, whose money is the entire driver in this deal.
That isn’t to say Hansen doesn’t have a case. I have heard from attorneys who aren’t involved who were willing to speculate without attribution. Remember this is an exercise, not a trial.
Hansen’s bid has been identified as “very strong” by the outgoing commish, David Stern. So presuming there are no fatal flaws with the Maloof transaction that the NBA has reviewed, business law says there is no reason not to complete the transaction, as long as Hansen agrees to the by-laws of ownership that include no relocation, as well as no suing other owners or the league.
For the NBA to deny the sale risks a suit by Hansen for tortious interference against the Sacramento investors. Hansen can claim that his rivals used a procedural maneuver by a third party (the NBA) — the denial of relocation ahead of the vote on the sale – to thwart the sale.
The NBA, whose acronym for a long time has been known as “Nothing But Attorneys” by the jaded media pack that covers the league, is hip to the claim. That’s part of why the vote to deny relocation Monday was 7-0 and not 12-0, because the five owners on the finance committee could be cited for conflict if they participated in the relocation vote.
Further, in denying the sale, the NBA risks being drawn into an antitrust argument. And the fight would be against, irony of ironies, the city that whipped the NBA on antitrust once before.
In 1971, the U.S. Supreme Court ruled that the NBA was in violation of the Sherman Antitrust Act because the league discriminated against Spencer Haywood, the 20-year-old star signed by Sonics owner Sam Schulman after Haywood won an Olympic gold medal in 1968 and had a stellar year in the old ABA with Denver.
The NBA had a rule that prevented a player from joining the league until four years after his class graduated from high school. The league denied Haywood’s contract. Schulman received a court injunction that allowed him to play. On March 1, 1971, the Supreme Court, in a decision written by Associate Justice William O. Douglas, one of the greatest jurists in American history who grew up in Yakima, said:
“Applicant then commenced an antitrust action against the NBA. He alleges the conduct of the NBA is a group boycott of himself, and that, under Fashion Originators’ Guild v. FTC, 312 U. S. 457, and Klor’s v. Broadway-Hale Stores, 359 U. S. 207, it is a per se violation of the Sherman Act. He was granted an injunction . . . which allowed him to play for Seattle and forbade NBA to take sanctions against the Seattle team . . . This group boycott issue in professional sports is a significant one.”
An attorney experienced in antitrust wrote me that there is no difference between the actions taken in 1971 by the NBA against the Sonics and Haywood and the possible denial of the Kings sale to the Maloofs.
“There is nothing in the Supreme Court’s decision that restricts its reasoning to contracts between players and teams,” he wrote. “Basically, the NBA owners (would be) engaging in a group boycott disallowing the Maloofs from executing their contract with the Hansen group, in the same way it attempted to prevent the Sonics from executing their contract with Haywood.
“In both cases the league as a group (would be) engaging in anti-competitive practices preventing free trade — here the sale of the basketball team to the highest bidder.”
I imagine the NBA has a different view, just as it did in 1971. And I’m not endorsing the view of the attorney quoted above. What I will say is Hansen at least has a good argument, backed by case law, IF he is denied the purchase of the Kings.
I also imagine each party has a vested interest in not testing federal antitrust law again when a negotiation can bring a much more salutary and immediate result. Which gets this exercise back to a point made earlier about expansion, as well the oddness of the potential one-year temp ownership.
The risk in Hansen’s temporary stewardship in Sacramento is minimal, because unlike Clay Bennett’s ruthless butchery of the final two Sonics seasons in Seattle, Hansen has nothing to gain by diminishing the Kings because he will have a chance to own them long-term. Bennett knew he was moving the team, so he disengaged it from the community, stripped it of talent, deliberately lost games and gained high draft choices that made the Thunder a team that reached the NBA Finals last year.
As far as expansion, the NBA has a modest argument that it is only beginning to see the results of a new collective bargaining agreement, achieved after a lockout, whose revenue sharing eventually will make all teams close to break-even in their markets. Taking on a 31st partner for 2013-14 is premature when no substantive study has been done.
But preparing for a new team in 2014-15 is enough time to know what future revenues may look like, and what the one-time expansion fee payment will be that compensates the 30 owners.
So there you have it. Not buying this exercise?
Fine. Suggest a better solution, short of litigation. Remember two things: The bid war for the Kings is unprecedented in the history of modern American pro sports, so it requires an unprecedented solution, and the outcome has to be win-win-win.