Minority owners Andy Kohlberg and Scott Seldin have sued Mat Ishbia, the majority owner of the Phoenix Suns. This new and unexpected reality is developing quickly. On August 21, 2023, that lawsuit was filed, still under seal, in Delaware. It focuses on claims that minority business partners were blocked from viewing critical business documents. Ishbia is taking a controlling 57% stake in the Suns for $2.28 billion. This purchase has raised serious questions about governance and transparency or lack thereof within the organization.
The ownership landscape shifted significantly when Robert Sarver sold his 37% stake for $1.48 billion, paving the way for Ishbia’s entry into the franchise. At the time of the buyout, all but two of the 16 partners in the Suns’ ownership group leaped at Ishbia’s offer. His estate valued the team at an estimated $4 billion. Kohlberg and Seldin chose not to divest, creating pressure that boiled over into a lawsuit.
In a letter sent Tuesday to Kohlberg and Seldin’s legal counsel, a copy of which was later acquired by ESPN, Ishbia expressed the following. This move to us seems like an attempt to both quell the continuing arguments over access to their records and handling of team money. Ishbia contended that the Suns have “complied with its duties under the LLC Agreement,” indicating that he believes the allegations made by Kohlberg and Seldin lack merit.
Kohlberg, the minority founder, president and CEO of Kisco Senior Living, has complained that he’s been victimized by improper treatment as a minority owner. Likewise, Seldin, who’s the president of Kent Circle Partners, expresses these concerns. Their legal counsel claims that transparency will ultimately be what makes the team successful.
“Transparency with minority owners is not optional, and our clients think it is critical to the success of the Suns.” – Michael Carlinsky and Michael Barlow of Quinn Emanuel
The lawsuit, for its part, alleges that Ishbia did not disclose how some facilities were paid for. This obnoxious refusal constitutes a violation of his fiduciary duty to the minority owners. Their letter from Ishbia’s attorneys provided a glimpse of Ishbia’s impatience and displeasure with Kohlberg and Seldin’s tactics thus far in this ongoing divorce.
“If your clients do not share these same priorities, then perhaps they should try to sell consistent with the terms of the parties’ agreement. Instead, Kohlberg and Seldin have resorted to threatening baseless litigation and sensationalized press coverage as a means of intimidating and coercing Ishbia into unprincipled and unjustified buyout negotiations. That will not work. Ishbia and the Suns will not be bullied by these sharp and abusive tactics.” – Letter from the Suns
By September 2024, Kohlberg was said to have begun negotiating a buyout with an adviser to Ishbia. This is a hopeful sign that the parties are not yet done talking, despite today’s tensions. The case is about more than just financial concerns. Beyond the misuse of public funds, it raises larger questions about governance behavior at large professional sports franchises.
Kohlberg and Seldin’s lawyers pointed out their clients’ greater interest in promoting access to public records. In fact, they’ve told us, they see these documents as key to their fiduciary duty as minority owners. They counter that this level of public access is a minimal expectation and critical to ensuring that the public can meaningfully participate in decisions about ownership.
“Our clients sued to obtain records to which they are entitled as minority owners of the Suns,” – Michael Carlinsky and Michael Barlow of Quinn Emanuel
As this unusual ownership transition unfolds, it’s revealing the messy realities that can be hidden behind complex ownership structures often found in professional sports teams. The balance of power between majority and minority stakeholders can lead to significant conflicts, particularly when financial interests collide with governance practices.
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