Sunday, June 22, 2008

Sonics: Day I Recap

Courtside Entrance

Not here... [Mike C. Peck photo, via Wikimedia]

But here... [Andrew Bucholtz photo, taken via cell phone so poor-quality]

Well, the first week of the city of Seattle's lawsuit against the Sonics ownership (Professional Basketball Club, or PBC)* has wrapped up with plenty of interesting material to write about. However, there's now a break until Thursday, when the final witnesses, wrap-up testimony and closing arguments take place. To keep the trial fresh, I'll be presenting a recap of each day of testimony so far with my evaluations of each witness, the lawyers and the overall winners from each day. This post will cover Day I (Monday, June 16), where I had real court-side seats with the rest of the media covering the trial. I'll have Day II up later tonight, Day III and IV Wednesday and Day V Thursday morning. I was only able to attend the trial in person on Day I due to other work commitments, so this first one will probably be the most detailed, but I've been following the rest of the case pretty closely with the help of excellent coverage from Percy Allen and Jim Brunner of The Seattle Times, Art Thiel and Greg Johns of the The Seattle Post-Intelligencer and Seth Kolloen of Sports Northwest Magazine and Enjoy the Enjoyment, among others. In the end, it will all come down to whether Judge Marsha Pechman decides to enforce the "specific performance" clause of the lease, forcing PBC to play out the next two years in KeyArena, or if she allows them to buy out the city and move the team. Anyway, without further ado, here's the first recap, from last Monday.

*It may be significant that Clay Bennett's group has such a generic name. Howard Schultz's group was called the Basketball Club of Seattle, and most other NBA franchises' groups have either the city or the team name in the ownership group name: perhaps Bennett didn't want to be too tied to either the city of Seattle or the Sonics' name?

Here's a recap of what's transpired to date. At the end of each section, I'll put my opinion on which side benefited the most from that portion of the trial.

Monday (complete transcript available here via The Seattle Times): Between the opening statements from both sides, the testimony from Mayor Greg Nickels, former Seattle Center director Virginia Anderson and former KeyArena manager Jyo Singh, there was a lot to talk about.

Opening statements:

Attorney Paul Lawrence gave the city's opening statement, and did a very impressive job in my mind. He kept it short and concise, but drew powerful parallels to the situation in 1993 when the team said that their facilities in the Seattle Coliseum were inadequate, which resulted in the city's involvement to the tune of $84 million dollars in the construction of KeyArena. Lawrence also referenced the benefits the Sonics bring to the community, and said the city will have experts testify about both the tangible economic benefits of having an NBA franchise as well as the less quantifiable benefits of increased civic unity and pride. He made a good point about how Bennett and the Sonics are dismissing the economic benefits an NBA franchise provides to Seattle, but used the same arguments to convince Oklahoma politicians to provide massive public funding for the arena upgrades there. Additionally, Lawrence talked about how they plan to show that the Sonics' ownership knew the team's facility and lease situation when they purchased the team in 2006, demonstrating that they were fully aware of the issues when they took over the lease and thus shouldn't be able to get out early.

"They, in short, understood that risk, and the NBA warned them of that risk," he said. "They can afford the losses that they knew were coming."

Perhaps Lawrence's most powerful point (and one that will certainly be one of the more interesting parts of the trial) referred to Bennett's long trail of incriminating e-mails, which the city's hoping to use to show that Bennett was never serious about trying to keep the team in Seattle. In fact, Lawrence said that Bennett applied for relocation to the NBA and secured a deal with Oklahoma City right after his infamous "man possessed" e-mail (which he maintains referred to keeping the team in Seattle). Lawrence also talked about how Bennett rejected any talk of a partially publicly-funded renovation KeyArena out of hand, and refused to meet with the mayor to discuss the project, instead offering a $500 million arena in suburban Renton, to which the ownership group contribution would be "nominal" and "negligible" (in Bennett's own words). In summary, he outlined a very strong case for the city.

Unfortunately for Sonics fans, Bennett has quite the legal team on his side as well. His head lawyer, Brad Keller, also gave a very good opening statement, and he only improved as the day went on. Keller argued that the concept of economic viability was built into the original lease, and that KeyArena was no longer viable due to the changed economic situation, namely the spread of luxury arenas across the NBA and the opening of two new stadiums in Seattle (the Seahawks' Qwest Field and the Mariners' Safeco Field). Keller skillfully avoided blaming the city for the lease agreement, telling the court, "You'll see that it's not anyone's fault. The world in which this lease operated changed." He argued that the Renton arena proposal was a genuine effort, despite the lack of contributions from PBC, and claimed that they spent over $2 million on the proposal. He also took a shot at the state legislature, arguing that their lack of support for the project indicates the true importance placed on basketball in Seattle. "Olympia [the state capital]'s unwillingness to act may say something about the perceived role of NBA basketball in Seattle," he said.

Keller also promised to introduce evidence that Seattle city officials were scheming with the Steve Ballmer/Matt Griffin group of proposed local owners to try and force PBC to sell the Sonics. He went on to detail the shortcomings of KeyArena, claiming that it's well below NBA standards and prevents the franchise from being successful. "The city has known that these guidelines hamstring its NBA tenant and prevent it from being profitable," he said. There was plenty of conflicting testimony on the arena throughout the trial thus far: the city agrees that it's no longer ideal but believes it could work with significant renovations, while the Sonics tried to paint it as the ninth circle of hell.

Opening Statement Verdict: Seattle by a nose.

Plaintiff's first witness: Mayor Greg Nickels

The city began its case by calling Mayor Nickels to the stand. Unfortunately, his testimony was long (over two hours), but not particularly impressive. City lawyer Jeffrey Johnson stumbled over his words a couple of times, and seemed to be presenting a relatively leading line of questioning, rare in direct testimony. Nickels spoke about his long involvement in the city's public service, his proposals to revitalize and renovate KeyArena (which began in the Schultz years) and his desire to keep pro basketball as the facility's anchor tenant. He offered three different options to Schultz for the arena's future, all involving partial city funding of extensive renovations and a renegotiated lease more favourable to the team.

Nickels said he was unhappy when he learned that Schultz had elected to sell the franchise to an out-of-town group (PBC) instead of pursuing renovation options.

"My reaction was one of disappointment in large part because we thought with these three options we’d come up with something that would work for the ownership and the city," he said.

During his direct testimony, Nickels also discussed the contacts he had with Bennett, which were of a surprisingly limited nature. They talked on the phone within a week of the sale and met for lunch later that week, but little progress was made, as Nickels favoured a dramatic renovation of the existing facility, which Bennett seemed unwilling to consider.

Nickels got absolutely roasted on cross-examination, though, as Keller seemed to channel Perry Mason to pick his story apart. The worst part for the Sonics' fans watching was that he appeared unprepared and unable to tell a consistent story. Keller asked if he had been working to try and create a sale to the local ownership group led by Ballmer and Griffin, and Nickels responded that he supported the sale, but hadn't been working towards it. Keller then played a clip from Nickels' video desposition where he asked an almost identical question and Nickels responded, "Yes." The same embarrasing situation occured again when Nickels refused to characterize the Sonics-Seattle relationship as "economically dysfunctional" and was then revealed to have done exactly that in his desposition. I'd be more understanding if these were long-ago comments of his dredged up from an obscure interview, but these were directly contradictory responses to almost the same questions posed on the court record by the same lawyer only weeks ago. In a trial where one of the city's key arguments is that Bennett and McClendon have been lying and changing stories all along, it severely damages their own credibility when the mayor directly contradicts himself several times in the span of a couple weeks. He also made it tough to believe that he's really in this because he cares about the team as opposed to seizing a political opportunity when he revealed that he hadn't been to a Sonics' game in six or seven years. Granted, the team wasn't very good for much of that span, but given the propensity of politicians to be drawn to large crowds and the NBA's seating style, where celebrities get great airtime from their courtside seats, you'd think he would have bothered to show up at least once in that period if he had any regard for the Sonics.

Keller also forced Nickels to reveal that senior officials in the mayor's office, including deputy mayor Tim Ceis, had been working closely with former Sonics president Wally Walker ever since July 2007, who had strong ties to the proposed local ownership and was trying to help them acquire the Sonics. A key part of this evidence was Exhibit 599, an July 24 e-mail from Walker to wireless magnate John Stanton, part of the local ownership group. The incriminating passage reads "I met with the city today and felt better about my message of fighting Clay’s attempts to leave. Make it too expensive and litigious for him. I get the impression they were in total agreement and that they (administration) understand the value of buying more time." As Keller pointed out, this was long before the team made an official request for an arbitrated solution to allow them to exit their lease (which happened in the third week of September) and before the city filed its lawsuit in response, which involved Nickels stating that the city was "lawyering up" (where they set aside a million dollars to retain Slade Gorton and his firm to fight to enforce the lease). Nickels maintained that he didn't know the specific dates or topics discussed in the meetings with Walker, and that the city subsequently following Walker's strategy of "making it too expensive and litigious" wasn't related to any dealings with Walker, but that's somewhat difficult to believe, to be honest.

Again, the problem here is more the optics than the specific actions taken. It's hard to paint Bennett and the rest of his gang as evil villains hell-bent on whatever nefarious activities would get them out of Seattle when the city was fighting almost as dirty to try and keep them. As Jerry Brewer of The Seattle Times wrote Friday, "There are no victims in this trial. There are only villains, villains on both sides, villains who made shameful and dishonest choices along this road to hostility. Everybody's exposed. Everybody's dirty. The Raiders may have started it, but that shouldn't excuse the city from playing in the mud. This trial is the Oklahoma Raiders against the City Swindlers."

Jeffrey Johnson established some key points during his redirect examination of Nickels, including that Bennett never asked to renegotiate the KeyArena lease and never offered to contribute to a renovation, pro basketball revenues account for "a significant portion" of the KeyArena revenues and that the city never actively lobbied against Bennett's proposal for a Renton arena, even though a suburban arena would compete with KeyArena for concerts and other events. Nickels said he felt having the Sonics remain in the region was more important in the long run.
"In the larger scheme of things, we’re part of a region and having the Sonics continue to be part of the region is good for the greater community," he said. He also made it clear that the lease made no reference to other NBA arenas: thus, it shouldn't matter that what was "state of the art" at the time isn't any more. Still, despite the ground regained on redirect, Nickels proved a poor witness for the city's case due to his concessions on cross-examination. Never a good sign when your first witness helps the other side more.

Mayor Nickels Verdict
: A big step forward for PBC, which is unfortunate as he was a key city witness.

Plaintiff's second witness: Virginia Anderson, former Seattle Center director

Anderson, who was the director of Seattle Center from 1980-2006 and thus a key participant in the Sonics drama over the years, turned out to be a very strong witness for the city. City attorney Greg Narver, who handled her examination, wasn't nearly as strong, though: he made his points and his line of questioning was solid, but he sometimes stumbled over his words and he had to be reminded to slow down a couple times by Judge Pechman.

For those not from the Seattle area, the center is primarily an arts and culture facility with various theatres and galleries. It included the Sonics' original home, the Seattle Coliseum, where the team played for 20 years. The center is 75 per cent privately funded and 25 per cent publicly funded, and Anderson described it as "the nation’s best gathering place." She said its goal is to "inspire the human spirit and bring a diverse community together," qualities the city has tried to ascribe to the Sonics throughout the trial. Her testimony was made more compelling by her admission that she doesn't particularly like basketball, but still thought it was "absolutely" worth it to keep the Sonics in town. She also talked about how the combination of an arts center and a sporting facility draws fans to both who probably wouldn't go otherwise: "There are a lot of people who find their way of coming together around arts, many others who find it around sports, and others who find it around the international fountain." That all speaks to the city's key point that the Sonics provide an intangible, unquantifiable benefit to Seattle that can't be replaced with dollars. Fans already know this, but they'll have to convince Judge Pechman.

Anderson also spoke about her involvement with the construction of KeyArena. Originally, team owner Barry Ackerly had planned to build an entirely privately-funded arena on a different site, but the city offered to help with the construction of a new "state of the art" arena on the grounds and core of the old Coliseum. Only a couple of supports from the old arena remained: the rest of the facility was rebuilt from the ground up. Interestingly, the partnership allowed the Sonics to define "state of the art", which means that they certainly liked it at the time.

At any rate, Anderson's testimony established plenty of other facts that won't help Bennett and his Raiders (of the Seattle SuperSonics instead of the Lost Ark). The city provided a substantial amount of funding for KeyArena, including paying part of the cost ($10 million) up front, which was to be recouped over time via the lease's revenue-sharing provisions. They also borrowed the necessary remainder of the money on their own credit rating and at their own lower rate, thus assuming much of the risk involved and also diminishing their borrowing capacity to deal with other civic projects. A memo of understanding (Exhibit 41) drafted in early 1993 between the city and the team that Anderson said provided the "framework for the lease" included provisions that the Sonics would help out in the community, buttressing the city's case that they are a valuable addition to the area. Anderson signed the lease for the city, illustrating her deep knowledge of it, and she also spoke of how the 15-year term was a compromise between the 10 years the team wanted and the 20 years the city preferred. Her direct testimony demonstrated that the Sonics were originally quite happy with both the building and the lease, thus showing that it clearly wasn't always the "worst in the league" as Stern described it [The Associated Press via].

Anderson's most impressive performance was under cross-examination from defence attorney Paul Taylor, though. Where Nickels collapsed under tough questioning, she sat ramrod-straight and refused to budge an inch. Under cross-examination, it came out that the arena was on track for its budget projections right until the construction of the Mariners' new home at Safeco Field was completed in 1999, taking a substantial part of the luxury suite market, a significant revenue source for the Sonics and the city (which was then further diluted when the Seahawks' and Sounders' Qwest Field opened in 2002 and an events centre opened in Everett shortly thereafter). She talked about how important on-court success is to the team's financial health, as one year up to 40 per cent of their revenue came from the playoffs, making a strong case that a franchise successful on the court could still make a profit in KeyArena. If the team went all the way to the Finals and won a championship, she estimated that they would double their season revenue from that playoff run.

Anderson's best testimony came when Taylor tried to get her to portray the lease as a lose-lose situation, though.
“Both sides are losing money," she said. "I wouldn’t characterize it as both sides have lost.”
She pointed out that both the slumping economy and the other new buildings would still have negatively impacted the Sonics if they had built their own arena, and they would have suffered the full losses in that scenario instead of splitting them with the city. She also wittily refuted Taylor's assertion that the fans' interest in the team had declined, saying, “Well, there’s a lot of buzz around them and a lot of excitement around this trial.” She discussed the cyclical nature of sports, saying that every franchise has heights and troughs. "They’re in the trough right now," she said. "There will be a time when it comes back up. People buy their season tickets because they know it would bottom out and come back up.”

Taylor tried to get in a last shot by referring to an assessment from the KeyArena task force that suggested even if the Sonics sold out every seat, they’d still be $6 million below the NBA average in ticket revenues. However, Anderson held her ground, reiterating that that didn't include playoff revenues or other revenue streams like concessions and advertising and didn't mean the team would lose money. "That does not say they’re not breaking even, it says they’re below the NBA average," she said. "It’s not a fair statement to say that they’d be losing money.”

On redirect, Narver got Anderson to establish that the Sonics' declining attendance and revenues, as well as their poor play and dismal future prospects, had received considerable coverage in the press long before Bennett bought the team in 2006. She also showed that the loss of suite revenue from the competition with Qwest and Safeco had been well-publicized, the city had saved the team considerable money on KeyArena's construction by retaining the land and part of the structure of the old Coliseum (the team saved an estimated $15 million from the structural savings alone), and that Howard Schultz had frequently spoken publicly about the losses he incurred while running the team.

Virginia Anderson verdict
: A big win for the city.

Plaintiff's third witness: Jyo Singh, director of communications, events and facilities for the Seattle Centre and a former KeyArena manager.

On direct examination from Greg Narver, Singh testified that he'd been in his current job for three years and had served as the KeyArena manager for eleven years before that. He worked closely with the Sonics in both capacities. He told the court that he had daily interactions with Sonics staff and there were regular biweekly meetings between his city staff and the Sonics staff. He said there had been a good working relationship between the two groups over all of his fourteen years despite the changes in ownership and the acrimony that developed between the city and PBC, as both staffs don't let outside influences impact their professional dealings with each other. As such, it was a pretty neat rebuttal of PBC's claim that forcing the Sonics to play at KeyArena for two more years (which is what the case is essentially all about) would strain a dysfunctional relationship and make staging the games impossible. "I don’t see any reason why the relationship should become acrimonious or difficult because they’re our major clients," Singh said. He also offered the example of the Thunderbirds, Seattle's Western Hockey League junior team who played at KeyArena for many years including this past one, but will be moving to a new arena in suburban Kent for next season. Singh said there was no change in that relationship when it was learned the team was moving.

Singh also testified about the many improvements the city has made to the arena over the years at the request of the Sonics, frequently at its own expense. He said the city had spent $5.5 million in capital improvements since the arena opened, many of which were for the Sonics' primary benefit. These included installing a ring of video advertising boards ($1.3 million), upgrading the suite level ($1 million), installing new sound and lighting systems four years ago to bring the arena up to new NBA standards in those areas, enhancing the scoreboard and building a lounge for players' families to watch games. The city often turned areas they were renting to other tenants into facilities the Sonics could use to generate revenue, such as the FSN Lounge (built out of a storage/catering space) and the Lexus Lounge (built out of four or five suites). Singh also stated that the city spent an extra $150,000 annually on KeyArena maintenance. He then discussed the initial reaction of the Sonics, the NBA and the public to the facility, which he described as "superlative".

David Stern thought it was a great arena as well at the time, as this video shows (a Mitch Levy interview with him on the pay-per-view broadcast of the first Sonics game there on November 4, 1995). The city tried to introduce this video during Singh's testimony, but it was ruled inadmissible on a hearsay objection by the defense. The city also tried to call Levy to testify, but they apparently were too late adding him to the witness list [Jim Brunner, The Seattle Times]. They also tried to call David Stern, but U.S. District Judge Loretta Preska in New York decided that he wouldn't be ordered to testify. I'm not a lawyer, but it seems odd to ban what could be crucial evidence on a hearsay charge when you've already shot down the conventional ways to use it. Most of the Sonics' arguments rest on the idea that KeyArena is a decrepit pit unsuitable for an NBA team, something Stern has been eager to support recently. The opinion of the NBA commissioner is pretty important as well, so it would have been a victory for the city to be able to demonstrate how quickly that opinion's changed. Still, this is a judge trial, not a jury one, so that might have less credence.

Here's a transcript of the best part of the Stern interview:

Levy: "How does our KeyArena stack up, and how do you like it so far?"

Stern: "It's very special to me. I know what a struggle it was for the Sonics and the Ackerly family. They very much wanted to have this team playing in a beautiful building. It's intimate, the sightlines are great, the decorations are terrific. I think the city of Seattle should be very much proud of what's going on here tonight."

Compare that to his comments to The Associated Press on March 26 of this year [via The Seattle Times]:

"While taking questions about an NBA relocation subcommittee's recommendation to move the Sonics to Oklahoma City, Stern said, 'The reason that this journey began was because KeyArena was not an adequate arena going forward and there were a lot of recommendations made for another arena ... but the tax revenues and the various contributions weren't forthcoming.

Quite the contrast, no?

In any case, Singh offered some more interesting information. He talked about how he'd visited 14 or 15 NBA arenas as part of his job as arena manager, and most of them were of comparable quality to KeyArena. He said that having NBA basketball provides a boost to the facility in quantity and quality of concert bookings, due to the supposed prestige and arena standard involved. That should go a ways to show that the Sonics do bring other benefits to the city, a key part of their case. He also said that bringing Seattle University basketball to KeyArena, which there have been discussions about, couldn't replace the Sonics' impact due to the smaller audience, the fewer dates and the lower quality of play.

Taylor began his cross-examination of Singh by attempting to get him to comment on a report created by HOK consultant Russ Simmons, which PBC retained him to produce to analyze KeyArena. The city objected on hearsay grounds, and also on the grounds of trying to introduce expert testimony without having the expert present for questioning. Taylor admitted the hearsay, but referenced a couple of complicated legal exceptions to try and allow the report's introduction. Narver said they didn't apply, as they were designed to introduce regular business records, while this was a specially-generated report. As it was almost time to adjourn, Judge Pechman decided to consider the arguments of both sides and reserve judgement until the next day, thus ending Day I of the trial.

Day I verdict: PBC comes out slightly on top here due to the excellent performances by their lawyers. Brad Keller, in particular, had Mayor Nickels on the ropes all day during cross-examination, which is extremely worrying for the city given how important his testimony was to their case.

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