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Your Move, Howard Schultz

THURSDAY, APRIL 10, 2008

When Clay Bennett bought the Sonics, he signed, to quote the Times’ fantastic Jim Brunner, “an agreement requiring a ‘good-faith’ effort until Oct. 31 [2007] to seal an arena deal here.”

The emails that have come to light today show that the effort to keep the team here was not made in good faith. Not only were Bennett and his co-owners talking amongst themselves about moving the team as early as April, they reached out to Oklahoma City officials in June.

Question is, would that agreement be enforceable? And by whom? I asked Professor Joel Ngugi, who teaches a contracts course at UW Law School, to weigh in.

“There will be a real question here whether the side agreement became part of the sale agreement,” Ngugi wrote in an email. That is, if it was a prior agreement, the sale supersedes it. If it was contemporaneous, it would be enforceable, Ngugi wrote.

“However,” he added, “the contract here was between Bennett and the previous owners–who might not want to set aside the agreement.”

And there’s the issue. The aggrieved party here is Howard Schultz and his team of owners. They may be peachy-keen about how this whole thing has gone down.

What about the city? Could they sue?

“Unless the City was party to the contract they can only enforce it if the City was an intended Third-Party beneficiary to the contract….I am not sure this standard is met here.”

So if there’s a case to be made, Howard Schultz will have to make it.

Let’s say the side agreement was part of the sale, and Schultz and co. decided to sue. Could they win?

Wrote Ngugi: “Generally, even absent a specific ‘good faith’ term in a contract, every contract imposes upon each party a duty of good faith and fair dealing…As you can expect, it is notoriously difficult to determine if particular conduct comes within this definition. However, willful evasion of the spirit of a contract and lack of diligence in performing a specific term would usually come within the heart of the definition. The problem, of course, is determining if the good faith obligation assumed by Bennett and Company here was part of the spirit of the contract.

“The fact that Bennett and Company seemed not to have been acting in good faith during the negotiations of the contract (not just during its performance stage), however, raises other issues as well. It means that his lack of good faith goes to the very formation of the contract–because it vitiates [ed: law talk for ‘invalidates’] the quality of consent given by the other side… Misrepresentation and fraud make the contract invalid.”

That is to say, side agreement or not, if Bennett was acting in bad faith all along, that in itself could invalidate the agreement.

Just imagine–after being the guy everyone’s hated through this whole thing, Howard Schultz could still ride in on a coffee-colored horse and be the hero.

How ’bout it, Howard? Personally, I think you owe us. Not that you’d have to pay…I can think of a pretty awesome lawyer who’d be willing to take the case pro bono.