Sonics settlement leaves former owner Howard Schultz alone in court battle

For months, Howard Schultz and the city of Seattle waged separate legal battles against Sonics owner Clay Bennett in the fight to keep the NBA team in Seattle.

After Wednesday's settlement between the city and Bennett, Schultz stands alone.

Shortly after Seattle Mayor Greg Nickels outlined the parameters of the 11th-hour deal, which includes payments that could reach $75 million and no guarantees of a future NBA team, Schultz indicated he would continue fighting on behalf of the Sonics' former owners, the defunct Basketball Club of Seattle.

"The BCOS case will continue," said Richard Yarmuth, Schultz's attorney. "Our lawsuit is separate. We are not a party to the settlement, and in fact, we chose not to participate."

Schultz said Bennett lied to him when he bought the Sonics for $350 million in June 2006. In his lawsuit, the Starbucks CEO charges that Bennett fraudulently induced the sale and breached the contract by failing to use good-faith best efforts to keep the Sonics in Seattle. He wants a court order to place the team in a collective trust and allow a sale to an "honest buyer" who would keep the team in Seattle.

When Schultz filed his lawsuit in April, Seattle Deputy Mayor Tim Ceis said: "We're glad Howard is following through and he's back on the team. It strengthens our case to have him coming at it from this other angle."

On Thursday, City Attorney Tom Carr said the city is an interested spectator in the lawsuit with no rooting interest.

"The settlement says that we are to take a neutral position," Carr said. "Those of us that live in Seattle want to see the team stay here, but it's a separate lawsuit. We're not a party, and we don't have a formal role in any sense and never have."

Schultz will not seek an injunction to prevent the team from moving immediately to Oklahoma City. But if he forces Bennett's team to return to Seattle for the 2009-10 season, the city will have to repay $22.5 million within five days of the first game played in KeyArena. Bennett would also be released from an obligation to make a $30 million contingent payment.

"The Sonics certainly wanted the Schultz lawsuit dismissed, but that was up to Mr. Schultz and he didn't want to dismiss his lawsuit," Carr said. "As you see in the settlement, what we did was draft around that and provide that if Mr. Schultz is successful and keeps the team here, the settlement goes away."

Brad Keller, Bennett's attorney, described Schultz's lawsuit as "a far-fetched legal remedy seeking to salvage a tarnished reputation."

Yarmuth declined to comment Thursday, but acknowledged Schultz's lawsuit would have had an easier road if the city had forced the Sonics to play the final two years of their lease at KeyArena.

ESPN legal analyst Lester Munson said Schultz's case suffered a serious setback.

"You're asking the judge now for more than what the judge had to do before the exit from Seattle," he said. "You're asking the judge, in effect, to move a team and bring it back instead of simply changing ownership.

"Legally, it's the same case. In terms of the relief, in terms of what the judge must do, it's asking for more. So it's a setback for Schultz and Yarmuth, there's no question about that."

Munson said Yarmuth would have the advantage of reviewing the testimony, documents and evidence from the six-day trial between the city and Bennett as he prepares his case.

"I still think Schultz has a very good chance of winning, above 50 percent," Munson said. "Having the team in Oklahoma City hurts, but trying the case in Seattle and given the theory and the evidence, I think he's got a 55 or 60 percent chance of winning the case."

Munson said Yarmuth will conceivably press Bennett on the e-mail correspondence between the Oklahoma owners, Bennett's "I'm a man possessed" e-mail and the "good-faith best effort" clause in the sale agreement.

Alfred L. Brophy, who teaches at the University of North Carolina, said proving a breach of good-faith clauses in litigation is generally unsuccessful. He acknowledged Schultz's case is atypical, but said the chances of success are slim.

"He's trying to control what happens long after the sale and after he's out of the picture," Brophy said. "Plus, what he wants is to show a 'material breach of contract,' as a way of 'rescinding' the sale. Rescissions are a really rare remedy — and they're subject to the same kinds of equitable defenses that the city tried to use in the lease trial."

U.S. District Judge Marsha Pechman, who presided over the bench trial between the city and Bennett, was assigned to the Schultz and Bennett case.

She was supposed to set a schedule for the trial last week, but Yarmuth and Keller submitted a joint order asking her to delay scheduling. Pechman is expected to set a trial date after courtroom proceedings that could wrap up by July 25.

Schultz wants the trial to begin next spring, which would give the city time to solve the KeyArena renovation funding problem and find a prospective buyer in time for the 2009-10 season.

Percy Allen: 206-464-2278 or pallen@seattletimes.com