Rockets' Legal Dj Vu
While the local media gushes about the wonders of the just-opened Toyota Center, the downtown home of the Houston Rockets, team owner Les Alexander is in court again before the season even gets started.
Minority organizations that sued and then settled a dispute over a 30 percent share of the publicly financed arena's food and beverage revenues earlier this summer have returned to the civil courthouse, charging Alexander with reneging on his commitments through fraudulent inducement, breach of contract and unjust enrichment.
According to a lawsuit filed by attorney Benjamin Hall last week, Alexander's terms for the minority investors violate the mediated court settlement. According to the court pleadings, "Alexander and his alter ego entities have now constructed a complex labyrinth of unconscionable conditions intended to frustrate and breach" the settlement agreement.
"We're going to make sure they don't steal by accounting," says Hall, who also has a share of the deal as legal fees from the first round of litigation. "We're not going to take some empty piece of paper and walk away and let him do all his accounting tricks and hog-tie these minority investors."
Hall contends Alexander has set up a dummy partnership to run the arena investment that would be immune to legal challenge should he fail to live up to the terms of the agreement. According to the lawyer, Rockets officials tried to hide the details of a so-called private placement memorandum by instructing investors not to divulge the document to anyone.
The lawsuit claims Alexander is requiring minority investors to cover the costs of complimentary food to clients in the arena's luxury boxes run by Rockets-controlled companies.
"In their memorandum, all of the deductions and exclusions and revenue he can take out, including feeding his rich folk over there, are not included in the minority share," says Hall. "We think that's improper."
Rockets general counsel and Baker Botts LLP attorney Mike Goldberg laughed when asked for a response to Hall's allegations. "Ben's approach was just like before: trying to derail the entire process. I have no idea why he's doing it. We are going to continue the process and will have it complete before the opening of the season."
Goldberg says that either Hall doesn't understand the terms of the investment memorandum, "or he understands it and is concerned about his legal fee interest or publicity."
According to the general counsel, the filing of the latest suit "was just a complete shock, but I guess it shouldn't be a shock given who we're dealing with."
If these are Alexander's new partners, we'd sure hate to meet his enemies. -- Tim Fleck
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