Meyer Orbach, the second largest shareholder in Minnesota Timberwolves, filed a complaint in the U.S. District Court in Minneapolis on Wednesday alleging that owner Glen Taylor’s impending sale of the franchise to Marc Lore and Alex Rodriguez violated the franchise’s partnership agreement breach a copy of the complaint received from ESPN.
The complaint states that Taylor is failing to honor minority shareholders’ “participation rights” in the franchise, which allows them to sell their stake in the teams before Taylor sells its own.
A vote of the NBA Board of Governors is still required to finalize the sale to Lore and Rodriguez.
The complaint filed by Orbach, a New Jersey real estate mogul who owns more than 17% of Timberwolves and WNBA Lynx, also contains a significant disclosure: Despite public statements to the contrary by Taylor, it has no provision in the $ 1.5 billion Sales contract signed with Lore and Rodriguez requiring the new group of owners to keep the Minnesota franchise after taking control of the team, according to an exhibit in the complaint.
In fact, new details of Taylor’s sales agreement with Lore and Rodriguez – which is expected to be completed by July 1 – include a clause under “Governance Matters” that lists several actions that would require new ownership in order to join the Advisory Board Submit Discussion “- including any plans to” move the team outside of the Twin Cities market “.
According to an exhibit in the complaint, the agreement between Taylor and the Lore Rodriguez Group recognizes that the “Advisory Board is only advisory … and no action … requires the Board’s approval in any form.” Effective.”
Basically, there are no contractual restrictions preventing Lore and Rodriguez from relocating the Timberwolves and Lynx to a new town.
The language of the sales agreement between Taylor and potential owners Rodriguez and Lore contrasts with Taylor’s numerous public comments that the sales agreement would contain a provision requiring the new group to keep the Timberwolves in Minnesota. “They’ll keep the team here, yes,” Taylor told the (Minneapolis) Star Tribune on April 11 of Lore and Rodriguez’s group of owners. “We’ll put it in the agreement. At this point we have a letter of intent, but when we get the deal we’ll put that there. It’s not a problem. It won’t be a problem.”
A few days later, Taylor repeated to WCCO radio in Minneapolis: “We have it in the contract. You signed the contract for it …”
Taylor then said, “But let’s just say they broke that agreement somehow. The real deal is with the NBA. The NBA will make the decision on whether or not someone will move. The NBA will not approve the Timberwolves’ move . ” from here to seattle. It is in the interests of the NBA that a new team be formed in Seattle.
“It’s an economic decision that is in the interests of all owners because if they start a new team out there, that team might have to pay $ 2 billion to start there. They’re paying that to the other owners. The current owners, I won’t Pay a billion and a half to keep it in Minnesota and another $ 2 billion to get it out of there. That’s the assurance I have they won’t get it out of there. “
Lore and Rodriguez are expected to buy the team in installments, first becoming limited partners, and then increasing their percentage until they acquire a controlling stake for the 2023-24 season. Sequencing is expected to include a 20% purchase of the team in 2021.
Essentially, Orbach’s complaint is that the tag-along provision should be exercised immediately upon Lore and Rodriguez’s agreement to purchase the team is closed.
According to the complaint “When Orbit [Orbach’s company] Taylor tried to exercise his participation rights and not only ignored Orbit, but also stated privately – contrary to his public statements – that he was not currently proposing to make a “control sale” with Rodriguez and Lore. Instead, Taylor claims that each “control sale” will be years in the future, and therefore Orbit currently has no participatory rights. “
The complaint continues: “Taylor is wrong. Although the deal with Rodriguez and Lore was structured in a clumsy attempt to circumvent Orbit’s rights of participation, it does not deprive Orbit of its rights of ownership. … The rights of participation are triggered whether or not the Control is “transferred” “in a single transaction or series of related transactions,” according to the Timberwolves partnership agreement.
The 80-year-old Taylor had entered an exclusive 30-day negotiation window on April 10, which had passed without an agreement, even though the sides continued to negotiate in good faith. Taylor previously said a deal was contingent on Lore and Rodriguez keeping the Minnesota team. The Timberwolves have a lease at the Target Center through 2035, even though the buyout is $ 50 million – roughly 1.3% of the $ 1.5 billion purchase price.
It is believed that it would take Lore and Rodriguez that time to raise funding for the majority ownership purchase, sources told ESPN. The first payment is due when the deal is closed, which is expected to happen around July 1st.
The Timberwolves have traditionally been one of the worst performing teams in the league when it comes to generating revenue.
From the time Kevin Garnett traded out of Minnesota in the 2007-08 season to 2018-19 – the last full season before the pandemic – the Timberwolves were the second worst attendance figure according to only the Sacramento Kings, according to ESPN stats and information.
Taylor had been looking for this type of arrangement for a long time. Other owners such as the late Washington Wizards owner Abe Pollin sold on sale to current owner Ted Leonsis and more recently when Mikhail Prokhorov Joseph Tsai sold the Brooklyn Nets in two transactions one year apart.
Taylor bought the Timberwolves in 1994 for $ 88 million, which prevented a franchise move to New Orleans. Taylor has announced that he will lead the club for two more seasons before a handover in 2023.
The sale also includes the G League’s Iowa Wolves and T-Wolves Gaming.
Lore and Rodriguez met with Timberwolves employees last month and toured the team’s facilities in Minneapolis.
ESPN’s Brian Windhorst contributed to this report.