Howard Schultz suit adds fuel to e-mail fire

Even if the Oklahoma-based owners managed to work an arena deal to keep the Sonics in Seattle, they were ready to do a "sweet flip" and leave town, according to an owner's e-mail cited in a lawsuit filed Tuesday by previous owner Howard Schultz.

The Starbucks mogul said Sonics chairman Clay Bennett lied to him, "never intended to own a team that would continue playing in Seattle" and "fraudulently induced" the sale, according to a 12-page lawsuit asking that the sale be rescinded so Schultz could do what he said he intended to do all along: Sell to someone who would keep the team in Seattle.

The city of Seattle, which has a separate federal lawsuit against the Sonics, released several embarrassing e-mails weeks ago, but Schultz's suit disclosed a new potentially damaging e-mail written by Bennett two days before the sale in July 2006.

"Mr. Bennett confided to his co-owners that he was comfortable with the Purchase Agreement's good-faith provision because, in the event a Seattle arena deal could be negotiated, the Oklahoma City group could simply sell the team in a 'sweet flip,' and leave Seattle and the Oklahoma City group 'would still be in good shape for something in OKC,' " according to the lawsuit filed in U.S. District Court in Seattle.

"They were willing to lie, and did lie to complete the deal," the lawsuit says.

Attorney Richard Yarmuth, of the Seattle-based law firm Yarmuth Wilsdon Calfo, filed the lawsuit on behalf of The Basketball Club of Seattle, the former ownership group headed by Schultz, seeking to void the $350 million sale.

Seattle Deputy Mayor Tim Ceis said Schultz's action could help the city's federal lawsuit, which seeks to bind the Sonics to the team's KeyArena lease through 2010. NBA owners last week approved Bennett's bid to move the team to Oklahoma City for the next season.

"We're glad Howard is following through and he's back on the team," Ceis said. "It strengthens our case to have him coming at it from this other angle."

Schultz's sales agreement includes a July 18, 2006, "side letter" in which Bennett writes: "It is not our intention to move or relocate the teams so long, of course, as we are able to negotiate an attractive successor venue [to KeyArena] and lease arrangement. Our commitment to you to use our good faith best efforts over the coming year to negotiate such a venue and lease arrangement in the Greater Seattle Area provides further concrete evidence of this intention."

Previous e-mails, already publicly disclosed, were included in the suit to show that the Oklahoma City buyers were intent on owning an NBA team in Oklahoma, not Seattle.

Joel Ngugi, a University of Washington law professor, said Schultz's legal challenge is a longshot to succeed, though it could inflict the greatest amount of damage on Bennett.

"If Bennett and Co. had bound themselves to use 'good faith' to keep Sonics in Seattle while they engaged in conduct that purposefully aimed at moving them to OKC, it seems that would come very close to within the definition of 'bad faith,' " Ngugi said.

"This is because it is considered bad faith to knowingly or willfully deviate from contractual specifications, and failing to act diligently and cooperatively to actualize the contractual purpose," he said.

In a letter sent Tuesday to his former Sonics ownership group and obtained by The Seattle Times, Schultz described at length how he thought Bennett had duped him. Schultz said he has no intention of retaining ownership of the team. Instead, he said he wants to reclaim the team so he can sell it to investors who will keep the team in Seattle.

"We seek to have the court unwind the sale by imposing a constructive trust on the team and giving [Basketball Club of Seattle] the right to try and resell the team to a buyer that, in fact, would keep the Sonics in Seattle," Schultz wrote. "We do not ask the court to return the team to BCOS or in any way obligate any BCOS member to participate in repurchasing the Sonics.

"If I had known that Clay Bennett and his group had no intention of keeping the team in Seattle, I would not have advocated selling to him," Schultz continued. "In light of the recent revelations, it is clear there was bad faith by the PBC group in our negotiation and I feel personally responsible for my part in accepting false representations."

In the letter, Schultz said that when he sought to sell the Sonics and Storm, he retained investment banker Goldman Sachs and tried to find a local buyer but to no avail. (Bennett's group has since resold the Storm to a local group.)

"A small number of prospective local buyers showed interest, but none stepped forward," he said.

Schultz said he refused to sell to a California buyer because the buyer clearly intended to move the team.

"We left no stone unturned in trying to identify and to interest a local buyer, including our willingness to accept a lower price from a local buyer if one emerged," Schultz said. "And we agreed to the sale to [Bennett's Professional Basketball Club] only after they made promises that they would keep the Sonics in Seattle."

He added that at the "11th hour" he instructed Goldman Sachs to go back one more time to a prospective local buyer but "that solicitation was not successful, in large part because of uncertainty regarding the ability to secure a new arena."

Percy Allen: 206-464-2278 or pallen@seattletimes.com. Times reporter Jim Brunner contributed to this report.