In addition to control of the Minnesota Timberwolves and Minnesota Lynx, financial damages are at stake in the ongoing ownership dispute between want-to-be buyers Marc Lore and Alex Rodriguez and majority owner Glen Taylor.
As the feud heads toward arbitration following an unsuccessful mediation last week, terms of their contract agreement specify that the side that prevails could seek monetary damages for the ordeal once resolved.
The central question of arbitration is whether Lore and Rodriguez can continue with the purchase, or if Taylor was within the rules of the contract when he voided the sale. A secondary issue, though, could be determining financial loss.
In legal disputes, an indemnification clause, such as the one in their contract, states the party who breached the agreement must pay damages to the nonbreaching party, said retired Twin Cities attorney Robert Huber.
Lore and Rodriguez were expected to make their third and final installment of a $1.5 billion payment to Taylor for the teams by March 27, giving them 80% ownership of the franchises. The next day, Taylor — who also owns the Star Tribune — said the acquisition option had expired because Lore and Rodriguez missed the deadline.
Lore and Rodriguez contend they secured the necessary funding for the deal and submitted the paperwork to the NBA on time. That deadline can be extended 90 days if the sides are awaiting league approval to finish the acquisition, they argue.
If the arbitration panel rules in favor of Lore and Rodriguez and finds Taylor breached the contract by voiding the sale during the 90-day extension, they could be entitled to compensatory damages. The contract, however, states that amount cannot exceed the amount they've already paid to Taylor to acquire the teams. So far, they've paid 40% of the sale price, or about $600 million.
If it was determined Lore and Rodriguez failed to perform the obligations of their contract by not making the third and final payment to Taylor by March 27, Taylor's compensatory damages could be much greater, said Twin Cities attorney Marshall Tanick. There is no limit mentioned for Lore's and Rodriguez's obligation to reimburse Taylor for his losses, per the contract, though an arbitration clause states the prevailing side is entitled to costs, excluding attorneys' fees, "to the maximum extent allowed by applicable legal requirements".
Hypothetically, Taylor could argue the dispute and failure by Lore and Rodriguez to close the deal on time led to his loss of potential gains, like selling equity of the teams, and at a higher price, to other groups, Tanick said, and these hypotheticals can be addressed during arbitration.
Taylor previously said, though, another person offered to buy the team for more money.
"We could've gotten more — we could've gotten $2.5 billion paid upfront — but that person was going to try to move the team to Las Vegas," Taylor told Star Tribune columnist Patrick Reusse.
The teams were valued at a combined $2.94 billion by Forbes in December, an 87% increase from a valuation of $1.57 billion in 2021, when the deal was made.
The arbitrators would first determine the amount of the damages suffered, and then may add prejudgment award interest to that amount and incorporate that interest into the award amount, Huber said. Under terms of the contract, the prevailing party is also entitled to prejudgment interest. For any judgement over $50,000 in Minnesota, the interest rate is 10% each year until paid.
"There's a lot of collateral issues here, but the main issue seems to be, 'Do they get the extension or don't they?'" Tanick said. "And if they don't, then these other hypothetical issues come into play."
