By Daniel Friedman
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“What a long, strange trip it’s been.”
Of course, those Grateful Dead lyrics aren’t in reference to the Islanders’ ownership situation, but they might as well be. It’s been twist and turn after twist and turn for this franchise.
Rumors about a potential sale persisted for months and, last week, those suspicions were confirmed. Charles Wang announced that he had agreed to sell a minority stake to John Ledecky and Scott Malkin that will turn into majority control in two years.
There’s going to be a lot of pressure and tons of expectations on this new ownership group. Some of it will likely be unfair or unrealistic, but nevertheless, they’ll have to face it anyway. Fans are going to demand that payroll reaches the salary cap ceiling, as well as anything else that demonstrates a willingness to spend, and spend big.
Do you need to spend the most money to be the best team? No, you don’t. That said, you do need to invest significantly in improving your personnel if you’re going to compete. The goal should be to do whatever is necessary to put together a winner – whatever that means. That’s what any ownership group should be expected to do.
A commitment to winning is generally the main priority for ownership, but Ledecky and Malkin have an even tougher task that, in my opinion, precedes anything else right now. They need to figure out how to sway Islander fans that are on the fence about this move to Brooklyn, convince them that it’s a good thing.
While the team’s influence and popularity should expand into Brooklyn, that alone will not be enough. The Isles need the support of the existing Long Island fan base to make this work.
For many, getting to games will now be much more difficult. For many, losing Long Island’s hockey team leaves a bitter taste in many mouths. Any way you want to slice it, there are mixed feelings about the move from Nassau Coliseum to Barclays Center.
Putting a viable product on the ice will certainly help draw people to games, but I think the Ledecky and Malkin will need to do even more. They’ll need to market the heck out of the team and do anything and everything to create a more positive vibe about the move to Brooklyn.
One thing that must be said: Without Wang, the Islanders don’t exist. They’re in Kansas City, Quebec City or maybe even Winnipeg right now, if not for him. Like him or hate him, you have to recognize that.
Still, this is a significant upgrade for the Islanders. Ledecky and Malkin have deep pockets and should be able to come up with additional cash to improve the team that otherwise wouldn’t be there – even during their two years as minority owners.
Pending approval from the NHL Board of Governors’, go ahead and pop open some champagne.
BUT WAIT! WHAT ABOUT BARROWAY?
Andrew Barroway thinks he had a deal with Wang and is currently suing him. That hasn’t changed, despite the announced agreement to sell to Ledecky and Malkin.
Where does this leave us on that front? I sat down with Leo V. Gagion, a commercial litigation partner at Chapman and Cutler LLP, to find out:
“What are Barroway’s chances here?”
LG: “I don’t like to handicap litigation because there are so many variables in a case. There is excellent counsel on both sides of the issue. At this juncture, we only have the allegations in the Complaint to examine and we have little knowledge of the communications between the parties and the back and forth in the days leading up to this dispute, all of which may be relevant to determining whether a binding agreement exists between the Parties.
“The bottom line, however, is that there appears not to be a document executed by the Parties setting forth their alleged deal and thus proving the existence of a binding contract between the parties. The issue of whether a binding agreement exists therefore becomes problematic.
“From the surrounding events, communications and documents, NY ICE, LLC will have to show that the Parties intended to be bound to the deal as set forth in the Securities Purchase Agreement appended to the Complaint — that there was a meeting of the minds between NY ICE, LLC and Charles Wang and the Defendants on all material terms to form an enforceable contract.
“This is not to say that NY ICE, LLC’s claim does not have merit, but it does point out that NY ICE, LLC’s ability to prove its claim may be problematic, depending on the record of communications between the parties.”
Can Barroway prevent or delay the sale to Ledecky and Malkin, or is it more likely that he’ll be awarded money damages?
LG: “If the Plaintiff is seriously seeking specific performance (First Cause of Action), it would be likely that NY ICE, LLC in the near future will be going into Court seeking a temporary restraining order and a preliminary injunction preventing the Islanders from being sold to the present third party pending resolution of this case.
“This is because that, as I understand it, an intent to sell to a specific third party has been announced. If NY ICE, LLC does not do that, it will be very difficult for a Court to “unscramble the eggs” after a sale to a third party has been consummated. For NY ICE LLC to succeed in obtaining preliminary injunctive relief, it will have to show a reasonable likelihood of success on the merits, i.e., that it has a good case.
“It will also have to show the existence of irreparable harm — harm to it that cannot be corrected through an award of monetary damages at the end of the case (assuming that it is successful).
“A court will also look to issues such as a balancing of the equities in this case (which party would be put under the greater hardship) and public policy concerns.
“As to whether it is more likely that NY ICE LLC would be awarded money damages, even if specific performance is not an option, there are scenarios under which monetary damages could be awarded. There is the issue of the break-up fee set forth in the Securities Purchase Agreement to the extent the Court finds some form of binding agreement.
“If the court finds that a binding agreement existed, but additional terms or conditions needed to be negotiated and the Defendants did not do so in good faith, the Court could nonetheless award damages to NY ICE LLC for the failure to negotiate the additional terms in good faith. The measure of damages in such a case would not likely be the value of the team, but would be NY ICE LLC’s losses (such as out of pocket costs) as a result of the failure to proceed with the negotiations in good faith.”
Do you think Barroway is serious here, or does this just strike you as him trying to make some noise because he didn’t get what he wanted?
LG: “I have no basis to believe that Plaintiff is not serious about its case. And I also have no doubt that Plaintiff is not happy about how this matter has turned out. But I see nothing frivolous about the allegations in the Complaint. If provable, they would appear to lay the framework for at least an award of monetary damages — the break-up fee set forth in the Securities Purchase Agreement, etc.
“As to whether the existence of a binding agreement can be established, that will have to await development of the record.”
Follow Daniel Friedman on Twitter @DFriedmanOnNYI
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