Phoenix Rising: Inside the Owner's Box with Counsel to Jerry Colangelo
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Vanderbilt Journal of Entertainment & Technology Law Volume 1 Issue 1 Article 6 1999 Phoenix Rising: Inside the Owner's Box with Counsel to Jerry Colangelo J. S. Ruffner Follow this and additional works at: https://scholarship.law.vanderbilt.edu/jetlaw Part of the Entertainment, Arts, and Sports Law Commons Recommended Citation J. S. Ruffner, Phoenix Rising: Inside the Owner's Box with Counsel to Jerry Colangelo, 1 Vanderbilt Journal of Entertainment and Technology Law 75 (1999) Available at: https://scholarship.law.vanderbilt.edu/jetlaw/vol1/iss1/6 This Article is brought to you for free and open access by Scholarship@Vanderbilt Law. It has been accepted for inclusion in Vanderbilt Journal of Entertainment & Technology Law by an authorized editor of Scholarship@Vanderbilt Law. For more information, please contact [email protected]. sports n late spring of 1987, I received a telephone call that changed my law prac- tice. Jerry Colangelo, General Manager of the Suns since its arrival in Phoenix as an expansion NBA franchise in 1969, called me to discuss representing a group of inves- tors he was putting together for the purchase of the franchise. At the time, the Suns franchise was the only major professional sports team in Arizona and had been very successful. Unfortunately, the reputation of the team, care- fully nurtured from its arrival, recently had been tarnished by allegations and investigations concerning drugs. Jerry explained that the Tucson and California owners of the Suns were considering selling the franchise or moving it from Phoenix. True to an unwritten understanding with the owners, Jerry was being given an opportunity to buy the fran- chise if he could meet the price the owners had set. Jerry recounted that he had begun contacting investors by meet- ing with John W. Teets, Chairman of the Board and CEO of The Greyhound Corporation, and Greyhound's General Counsel, L. Gene Lemon. He proposed that Greyhound consider becoming a lead investor. During the discussions with Greyhound, I had been recommended to assist in putting together the investment group. Having just received the call from John Teets that he was waiting for-confirming that the Board of Directors of Greyhound had voted to put up $6 million for a 25 per- I N S I D E T H E cent interest in the team-Jerry thought it was time for me to get involved. B OX I had moved my family to Phoenix in 1972 after obtaining an L.L.M. O W NER'S from the Graduate Tax Program at New York University. By 1987, I was C primarily a transactional lawyer and it was as a result of several large W IT C OUNSEL projects for Greyhound that I became involved with the Suns. Except for TO J E R RY a few areas (such as the organization and structure of the professional By JAY S. RUFFNERoenix r"iCOLANGELO sing ..... o000 tiiii:.,X 1 1 leagues and associations, player distinct impression that he would Things came to a head one afternoon contracting and certain aspects of prefer to do the deal on a handshake, in our offices, shortly before the arena and stadium development but was resigned to the need for scheduled closing. What we hoped matters), "sports law" differs very lit- lawyers to become involved. A dead- would be a wrap-up meeting with tle from any other business practice. line for early October had been set in executives of these investors was not Needless to say, with its increasing order to close the deal and afford new going well. After covering where he popularity, the markets for related ownership sufficient time to prepare stood with the Bank and other merchandise and business interest in for the 1987-88 NBA season. investors and after sharing his seeking sponsorship and promotion We quickly began work forming an expectations for the franchise, Jerry opportunities, professional sports has Arizona corporation (to be the gener- asked for their commitment in order become big business. This article cov- al partner) and a Delaware limited to help close the deal. The executives ers my involvement in Phoenix during partnership (to be the owner and asked for time to discuss the matter what has been a period of unprece- operator of the franchise); began the privately and adjourned to separate dented growth. preparation of subscription informa- conference rooms. About a half hour My wife and I already knew Jerry tion for investors; and started negoti- later they returned and announced and Joan Colangelo socially. They ations with the Arizona Bank. At the that they were sorry but had to pull were very active in the community same time, work was underway to out of the deal. As they got up to and, under Jerry's leadership, the prepare the agreement for purchas- leave, Jerry remained seated and Phoenix Suns seemed to support ing the assets comprising the fran- crumpled up in a ball several pieces every worthwhile cause in town. 1 In chise; to obtain NBA approvals 2 of of paper that were in front of him. Phoenix, Jerry was the Phoenix the newly formed limited partner- In a single movement, he swiveled in Suns. He had committed 17 years of ship, its general partner and his chair and tossed the crumpled his life to the franchise and had investors as they signed up; and to paper the length of the large confer- earned a reputation for hard work draft the host of other agreements ence room toward a small waste bas- and marketing genius. His integrity and documents necessary to com- ket. I will never know how he made and business ethics were above plete the project. The principal that shot. No one said a word. reproach. Nonetheless, with the assets of the team consisted of player We stayed at the office for hours drug controversy and the team suf- contracts, trademarks and trade discussing how to fill the gap. We fering through one of its most disap- names, participation rights in the ran through our list of existing pointing years on the court, the ques- NBA and affiliated organizations, investors, we considered additions to tion was whether his ambition was season ticket deposits, local broadcast the list-though time was very realistic. While Jerry had been very and telecast contracts, advertising and short-and we considered options successful with the Suns and in real sponsorship agreements, merchan- with the ownership of the franchise estate, he was of limited personal dise, and an office and facility lease (which was insisting on being bought means (certainly in comparison with (the Veterans Memorial Coliseum). out entirely). Late in the evening, I the controlling interests of other pro- With the commitments of rejoined Jerry in our conference fessional sports franchises), and I Greyhound and the Bank, Jerry had room. He had wanted to be alone. was soon to learn that he had agreed early success in generating interest With no options readily apparent, I to pay the highest price ever for an among other investors. Pinnacle struggled for words. This was more NBA franchise. West, through its investment sub- than a business deal gone bad-I had sidiary, committed to $3 million and become infected with Jerry's passion CLOSING THE DEAL Ross Farnsworth, a successful Mesa, and he deserved to succeed. When he When we met, Jerry explained the Arizona real estate developer, com- left our offices late that night, he said Greyhound investment and the com- mitted to $4 million. Other smaller it was not over-but for the life of mitment of the Arizona Bank for a investors came on board and, for a me, I did not see a solution. substantial loan if the balance of the while, it looked like smooth sailing. The next morning, the sun was $44.5 million purchase price could be As the deadline approached, signs shining and the clouds had lifted. raised. The meeting went well and began to appear that certain early Jerry called and said "It's a go." In we discussed the various steps that and substantial expressions of inter- early morning conversations, he had would have to be taken in order to est by two prominent Phoenix-based convinced the owners of the franchise purchase the franchise. I had the companies might be unraveling. to stay on as limited partners in the As if there was some urgency new partnership and Chambers, one of the first free agents. carry back some debt. onlyi ie perceived, Jerry " "sted NBA's deal of The rest, Jerry made up We There was a great by borrowing to purchase that we meet the deadline. speculation by the fans the two remaining limit- [uled, and the sports writers ed partnership units. closed the purchase, as sched about Chambers. While The elation of the recognized as a player with moment quickly gave way on October 14, 1987. tremendous talent, he had a to around-the-clock work reputation in some quarters to restructure the deal. s later, Black Monday it. for inconsistency. In addition to Jerry's The 1987-88 team pro- waste basket "hoop," several unusual dissolution of the partnership. An duced 55 victories. Coming off a 28- of the greatest things occurred during the acquisi- advisory committee of limited part- 54 season, it was one tion of the franchise. We expected ners was established to meet with turnarounds in NBA history. The that some investors might insist on Jerry once or twice a year to discuss team reached the Western burdensome constraints on manage- the affairs of the business. When the Conference Finals and Jerry could do ment and in the course of resisting limited partnership repaid investors no wrong.