The corporate entity that currently serves as the second-largest ownership group of the NBA’s Minnesota Timberwolves and WNBA’s Minnesota Lynx has filed a complaint against the teams’ majority owner, Glen Taylor, and his corporations. The plaintiff, Orbit Sports, seeks monetary damages of at least $300 million and says that its partnership agreement provides that, in the event of a “control sale,” it had the right to sell its entire interest to the buyer, which is referred to as tag-along rights, and that the defendants have wrongfully denied the invocation of such rights.
On May 14, it was revealed that Taylor was near finalizing an agreement to sell the Timberwolves and Lynx to former baseball star Alex Rodriguez and tech entrepreneur Marc Lore for $1.5 billion. The following statement was issued by the clubs:
“Glen Taylor has reached an agreement with Marc Lore and Alex Rodriguez regarding the sale and future ownership of the Timberwolves and Lynx. The transaction will close following league approval, beginning the transition of ownership and a new chapter of Minnesota Timberwolves and Lynx basketball.”
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The Star Tribune reported that Taylor said any sale of the Timberwolves would include a commitment that the team stays in Minnesota. While it is not entirely material to the complaint, Orbit Sports notes that Taylor’s agreement with Rodriguez and Lore does not include a provision that requires the purchasers to keep the Timberwolves in Minnesota.
The litigation, which includes a request that the court blocks the sale of the teams in the meantime, revolves around whether the sale should be classified as a control sale and thus whether the tag-along rights are ripe. Orbit Sports says that it has tried to exercise those rights and that Taylor ignored the request while privately stating that he is not proposing to enter into a control sale with Rodriguez and Lore. Instead, Taylor allegedly has claimed that any control sale will be years in the future.
“Taylor is wrong. Although the deal with Rodriguez and Lore was structured as a clumsy attempt to circumvent Orbit’s Tag-Along Rights, it does not deprive Orbit of its Tag-Along Rights,” the complaint states.
It appears that Taylor has tried to avoid the classification of the deal as a control sale by indicating that there will be a series of related transactions to Rodriguez and Lore, as opposed to a single transaction. Rodriguez and Lore are supposed to acquire 20% of the teams this year and purchase all of Taylor’s remaining interests in the clubs as of the end of 2024. They can accelerate their acquisition at any point in time.
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Orbit Sports says that the payment plan is irrelevant under the partnership agreement. Instead, Orbit Sports argues, the tag-along rights were triggered as soon as there was a proposal to enter into a control sale, irrespective of how long it takes for the sale to close.
The plaintiff has brought its action, in the U.S. District Court for the District of Minnesota, for breach of contract, breach of the implied covenant of good faith and fair dealing, declaratory judgment, and injunctive relief enjoining Taylor and his corporate entities from proceeding with the transaction with Rodriguez and Lore without first honoring the tag-along rights.
Darren Heitner is the founder of Heitner Legal. He is the author of How to Play the Game: What Every Sports Attorney Needs to Know, published by the American Bar Association, and is an adjunct professor at the University of Florida Levin College of Law. You can reach him by email at [email protected] and follow him on Twitter at @DarrenHeitner.