Perspectives: Timberwolves arbitral ruling recalls prior salvation

Listen to this article

“When will mankind be convinced and agree to settle their differences by arbitration.”
Benjamin Franklin (1706-1790)

* * * * * * * * *

“We’ve got to move a large volume of the private cases out of the court and put them into arbitration.”
Chief Justice Warren Burger (Aug. 27, 1985)

* * * * * * * * *

“Never arbitrate. Arbitration allows a third party to determine your duties. It’s a resort of the weak..”
Attila The Hun (406-453)

The high-profile decision handed down in Minneapolis last week by a three-member arbitration panel concerning ownership of the Minnesota Timberwolves basketball team and the sibling women’s Lynx team probably brings to an end the clash between the minority owners seeking to wrest majority control from Glen Taylor, the owner for the past three decades.

In the end, two of the three arbitrators, one chosen by each side and the other a neutral selected by the arbitrators, voted in favor of a group of investors led by serial entrepreneur Marc Lore and former baseball star Alex Rodriguez, who currently own 40% of the organization compared with Taylor’s 60% stake. Lore and Rodriguez, known as A-Rod, are in league with former New York City mayor and short-lived 2000 Democratic presidential candidate Michael Bloomberg, one of the few billionaires not part of the Trump II administration, and other high rollers.

The majority of the arbitration panel, composed of former state Supreme Court Justice Kathleen Blatz, selected by Taylor, Delaware Jurist Joseph Slights, chosen by the opposition, and neutral Thomas Fraser, a former Hennepin County District Court judge selected by Blatz and Slights, reasoned that a clause in the purchase agreement between the Lore and A-Rod group and Taylor allowed a 90-day grace period after the purchasers missed a deadline last spring to make a third and final payment of about $942 million as part of the installment purchase arrangement. By then calling off the deal, the majority reasoned, Taylor, a Mankato billionaire and owner of the Minnesota Star Tribune newspaper among other enterprises, breached the contract, entitling the buyers to an extension of time to complete the acquisition of another 40%, which they say they now have in hand.

The brouhaha — and its apparent dénouement — coincidentally is occurring as the Pohlad family is trying to sell the Minnesota Twins baseball club, which it has owned for 41 years, for some $1.7 billion. The Twins play at Target Field across the street from the Timberwolves’ 34-year-old Target Center home, which Team Love/A-Rod seeks to renovate, along with a plan announced after the arbitral victory to acquire the remaining 20% from the vanquished Taylor.

How the basketball team’s future — and the Lynx as well — will play out remains to be seen. But whatever happens, the arbitral proceeding recalls the occasion three decades ago when the team was salvaged from a prospective sale and transfer to New Orleans.

Arbitral authority 

The 2-1 arbitral award, with neutral Fraser siding with the Delaware judge in opposition to Blatz, will undoubtedly withstand any challenge that might be mounted by the Taylor Team under the Uniform Arbitration Act, Minn. Stat. § 572B.01-31. The first  of its kind in the nation in 1957, the statute grants virtually limitless authority to arbitrators, whose decisions may be overturned on extremely narrow grounds such as fraud, bias, or other gross impropriety under § 572B.23. The courts in Minnesota view arbitration as “a proceeding favored in the law.” Ehlert v. Western Nat. Mut. Ins. Co., 296 N.W.2d 427 (Minn. 1980), and an arbitrator is regarded as the “final judge of law and fact,” making the awards virtually impervious to challenge. Cournoyer v. American Television & Radio Co., 249 Minn. 377, 83 N.W.2d 409 (1957).

This elevated posture stems from the seminal labor arbitration process case decided in 1957 by the U.S. Supreme Court in Steelworkers v. American Mfg. Co., 263 U.S. 564 (1960), in which the high court held that “[w]hether the [parties are] right or wrong is a question of contract interpretation for the arbitrator,” a phrase that gave a boost to the nascent but growing movement favoring arbitration.

Once finalized, the Timberwolves sale would then be subject to approval by the NBA’s Board of Governors, composed of other team owners. If that materializes, as expected, the buyers will have a team valued by Fortune magazine at approximately at $3.1 billion, more than twice the price tag when the deal was made four years ago and more than 15 times Taylor’s $94 million purchase price in 1994.

Sale stopped

The Timberwolves arbitration award in favor of the Lore/A-Rod purchasing group recalls the time 31 years ago when the organization seemed destined for a sale and transfer by its original partnership owners to a New Orleans-based group known as Top Rank, headed by prize fighting promotion Robert Arum.

The City on the Bayou was seeking to replace its NBA franchise, which had moved to Salt Lake City, Utah accompanied by its ill-fitting ”Jazz” sobriquet to that community, where it has thrived financially and done moderately well on the court.

But the Minnesota team found salvation from that fate when U.S. District Court Judge James Rosenbaum in Minnesota ruled on favor of the NBA, enjoining a competing lawsuit in Louisiana State Court seeking to consummate the $152.5 million transaction. While the case did not stop a separate lawsuit by Arum’s group against the Timberwolves owners at the time, it cleared the way for Taylor to buy the team for the $94 million discounted price, while the Big Easy, as New Orleans is often known, as a consolation, later received a new NBA franchise known as the Pelicans, who have perpetually struggled in the league.

Appellate affirmance

The 8th U.S. Circuit Court of Appeals affirmed Judge Rosenbaum’s ruling in NBA v. Top Rank Louisiana, Inc.,56 F.3d 866 (8th Cir. 1995). It reasoned that the Judge’s cessation of the Louisiana case, coming on the heels of the earlier Minnesota lawsuit, was proper despite the Federal Anti-Injunction Act, 28 U.S.C. § 228.3, which generally proscribes federal courts from enjoining state court proceedings.

That statutory prohibition did not apply because of the “relitigation” exemption that bars the Louisiana state court litigation on issues that Judge Rosenbaum had already addressed and resolved in favor of the NBA‘s effort to bar the sale.

The two Timberwolves ownership disputes — the New Orleans organization and the Taylor Tussle — were not the only professional basketball ownership disputes here. Some 65 years ago the Timberwolves’ predecessor NBA squad, the Minneapolis Lakers, was moved by its owner, Edina businessman Bob Short, to Los Angeles when a minority owner sued to seek access to the club’s financial records in Skutt v. Minneapolis Basketball Partnership, 261 Minn. 574, 110 B. W. 2d 545 (Minn. 1962).

The Minnesota Supreme Court refused to review a challenge to a ruling of the Hennepin County District Court allowing access to that data a year after the club already was in LA. The court here declined to intervene because it was a non-appellate interlocutory ruling.

The case then disappeared from view, without any attempt to stop the transfer of the team that had won four league titles led by the game’s first big superstar, George Mikan, and coached by former Minneapolis high school and University of Minnesota standout star John Kundla. Both were inducted into the Hall of Fame, along with pioneering power forward Vern Mikkelsen from Hamline University. Settling into Southern California, the transplanted team began a long run of excellence, including 11 NBA titles led by marque players like Elgin Baylor, Jerry West, Wilt Chamberlain, Magic Johnson, James Worthy, Kareem Abdul Jabbar, Kobe Bryant, Shaquille O’Neal, Pau Gasol and now LeBron James, along with strong supporting casts that have included players from Minnesota like Mark Landsberger from Mounds View; Devean George, a Benilde St. Margaret high school and Augsburg College star; and Mychal Thompson, a University of Minnesota All-America center.

The Timberwolves arbitration outcome is a turn-about for the team’s savior 31 years ago, Mankato’s Taylor, who this time was on the losing end of an effort to retain ownership of the club in a ruling that defied the decidedly injudicious doctrine of home court advantage.

PERSPECTIVE POINTERS

Some Timberwolves Data

Win-loss record: 1177-1670

Division titles: 1 (2004)

Playoff appearances: 12

Number of All-Stars: 18

Current estimated value: $3.1 billion

Marshall H. Tanick is an attorney with the Twin Cities law firm of Meyer Njus Tanick Linder & Robbins, PA.

RELATED: More Perspectives columns