The New Gold Standard for Sports PSLs: The Provisions that Allow the Golden State Warriors to Overpower a Bankruptcy Estate

The Journal of Business, Entrepreneurship The Journal of Business, Entrepreneurship

& the Law & the Law

Volume 13 Issue 2 Article 8

5-15-2020

The New Gold Standard for Sports PSLs: The Provisions that The New Gold Standard for Sports PSLs: The Provisions that

Allow the Golden State Warriors to Overpower a Bankruptcy Allow the Golden State Warriors to Overpower a Bankruptcy

Estate Estate

Michael Medved

Follow this and additional works at: https://digitalcommons.pepperdine.edu/jbel

Part of the Bankruptcy Law Commons, and the Entertainment, Arts, and Sports Law Commons

Recommended Citation Recommended Citation

Michael Medved,

The New Gold Standard for Sports PSLs: The Provisions that Allow the Golden State

Warriors to Overpower a Bankruptcy Estate

, 13 J. Bus. Entrepreneurship & L. 245 (2020)

Available at:

https://digitalcommons.pepperdine.edu/jbel/vol13/iss2/8

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A NEW GOLD STANDARD FOR SPORTS PSLS:

THE PROVISIONS THAT ALLOW THE GOLDEN

STATE WARRIORS TO OVERPOWER A

BANKRUPTCY ESTATE

Michael Medved*

INTRODUCTION .............................................................................245

I. BACKGROUND ..................................................................247

A. Rise of the National Basketball Association ....... 247

B. Recent Success of the Golden State Warriors ..... 249

II. PRECEDENT .......................................................................256

III. ANALYSIS ..........................................................................261

IV. RECOMMENDATION FOR FUTURE NBA FRANCHISES

IMPLEMENTING A PSL FINANCING .............................266

INTRODUCTION

For the 2019–20 National Basketball Association season, the

Golden State Warriors are set to leave their current home of Oracle Arena

in Oakland to move across the bay to the brand-new Chase Center in San

Francisco.

True to the ethos of their Silicon Valley backgrounds, the

Warriors’ ownership implemented an innovative financing mechanism to

assist their move. The Warriors organization references this financing

scheme as a “‘membership’ program.”

This program is synonymous with

what previous sports franchises referred to as a “Personal Seat License”

(“PSL”) agreement.

In essence, the Warriors solicited their rabid and

*J.D. The University of Illinois College of Law 2020

Jim Harrington, Golden State Warriors unveil stunning new arena in

San Francisco, THE MERCURY NEWS (Aug. 26, 2019), https://www.mercurynew

s.com/2019/08/26/golden-state-warriors-unveil-new-amazing-new-arena-in-san-

francisco-photos/.

Al Saracevic, Warriors Reveal Long-Term Chase Center Season-Ticket

Plan, S.F. CHRON. (July 19, 2017), https://www.sfchronicle.com/sports/article/

Warriors-new-offer-Season-tickets-for-30-years-11300137.php.

Martin J. Greenberg & M’Kenzee Galloway, Personal Seat Licenses in the

NBA: Golden State Warriors, GREENBERG L. OFFICES (Feb. 1, 2018),

https://www.greenberglawoffice.com/personal-seat-licenses/#_ftn83.

BUSINESS, ENTREPRENEURSHIP & THE LAW VOL. XIII:II

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wealthy fanbase to help with the costs of constructing this new arena. Of

note, Bruce Schoenfeld of the New York Times speculates that this decision

was not made on a whim but rather has been in the works for quite some

time as he claims:

“Once Warriors’ owners Joe Lacob and Peter Guber

decided their team needed a new arena, in San Francisco – and they

seemingly made that decision before they bought the team in 2010 – they

also knew who would pay for it: the fans.”

Within the new Chase Center, 12,000 of the available 18,064 seats

for Warriors’ home games will be set aside for purchasers of the Warriors’

PSL membership.

For most seats the membership fee for the Warriors’

PSL reported to be $15,000.

Although, for some select seats this fee

reported as being as high as $35,000.

Moreover, this fee for the

membership is for the right to purchase a season ticket and is not

incorporated in the “actual cost of the season ticket.”

The price of the

actual tickets reported to be $600 per seat, which amounts to $26,400 for

the season.

The Warriors’ PSL offering is further unlike previously

implemented PSLs, differing in a few key respects. The general nature of

the Warriors’ PSLs offering is that it requires “season-ticket buyers to pay

a one-time fee that will enable you to buy your seats for 30 years.”

Bruce Schoenfeld, What Happened When Venture Capitalists Took

Over the Golden State Warriors, THE N.Y. TIMES MAG. (Mar. 30, 2016),

https://www.nytimes.com/2016/04/03/magazine/what-happened-when-venture-

capitalists-took-over-the-golden-state-warriors.html?searchResultPosition=1.

Id.

Ron Leuty, How the Warriors Shift the Ticket Lineup to Deliver

‘the Right Value’, S.F. BUS. TIMES (Jun. 22, 2018),

https://www.bizjournals.com/sanfrancisco/news/2018/06/22/golden-state-

warriors-season-tickets-chase-oracle.html.

Id.

Scott Ostler, Warriors’ New Arena Gives Some Season-Ticket Holders

Sticker shock, S.F. CHRON. (Mar. 1, 2018), https://www.sfchronicle.com/sports/

ostler/article/Warriors-new-arena-gives-some-season-12720962.php?psid=ixvj.

Patrick Murray, Just How Lucrative Will the Chase Center Be For The

Warriors, FORBES (Sept. 9, 2018), https://www.forbes.com/sites/patrickmurray/

2018/09/09/just-how-lucrative-will-the-chase-center-be-for-the-

warriors/#53b634102b29.

See Ostler, supra note 8.

Scott Polacek, Warriors’ Season Tickets to Require Fans to Buy 30-

Year Membership at New Arena, BLEACHER REP. (July 19, 2017),

https://bleacherreport.com/articles/2722678-warriors-season-tickets-to-require-

fans-to-buy-30-year-membership-at-new-arena.

2020 A NEW GOLD STANDARD FOR SPORTS 247

The first of these differences in the Warriors’ PSL from previous

PSL arrangements is a “refund.” “In a unique twist yet to be used in any

pro sport, the Warriors promise to pay back that fee after 30 years.”

Arguably, though, this refund does more for the Warriors from a public

relations standpoint than function as offering its fans a true refund.

For

after being “[a]djusted for inflation, that money won’t be worth much

down the road.”

A dollar today is worth more than a dollar tomorrow.

A dollar today is worth much more than a dollar in thirty years.

This article will focus on how this second key difference

implemented in the Warriors’ PSL would affect an eventual bankruptcy

proceeding of a purchaser into their “membership program.” In the event

of a purchaser filing for bankruptcy liquidation under chapter seven of the

bankruptcy code, the PSL will join the rest of the bankrupt’s assets in

becoming property of the now-bankrupt purchaser’s creditors estate.

Purchasers into the Warriors’ offering can be either individuals or

corporations. This article will provide an analysis of how the debtor, estate,

and team will likely fare in terms of recouping the value of the PSL as an

asset in the event of a purchaser’s liquidation in bankruptcy.

I. BACKGROUND

A. Rise of the National Basketball Association

Following the turn of the millennium in the year 2000, the

National Basketball Association (“NBA”) and its franchises saw a

tremendous ascension in terms of their financial value. The most recent

NBA franchise sold were the Houston Rockets, in 2017, selling for what

currently holds as a record $2.2 billion.

In context, the Miami Heat sold

See Saracevic, supra note 2.

Id.

Rick Welts, Golden State Warriors Season Tickets Will Require a 30

Year PSL Agreement at Chase Center, FROMTHISSEAT.COM, http://www.fromth

isseat.com/index.php/blog/19863-golden-state-warriors-season-tickets-will-

require-a-30-year-psl- agreement-at-chase-center (last visited Feb. 6, 2020).

Nick Lioudis, Time Value of Money and the Dollar, INVESTOPEDIA,

https://www.investopedia.com/ask/answers/032715/why-does-time-value-

money-tvm-assume-dollar-today-worth-more-dollar-tomorrow.asp (last updated

Apr. 18, 2018).

Id.

Tim Cato, How much did each NBA owner pay to buy their teams?,

SB NATION (Sept. 5, 2017), https://www.sbnation.com/nba/2017/9/5/16255168

/nba-teams-sold-highest-record-price-all-30.

BUSINESS, ENTREPRENEURSHIP & THE LAW VOL. XIII:II

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for only $68 million in 1995.

This ascension enjoyed throughout the

league has commonly been attributed to a few factors. First, the

introduction of streaming services such as Netflix, Hulu, and, Amazon

Prime among others placed a heavy premium on cable providers’ ability

to broadcast “event” television.

Watching an NBA basketball game live

became considered as within the bucket of “event” television.

For, it is

an utterly different experience to watch a television show such as

“Scandal” or “NCIS” subsequent to the original broadcast than it is to

watch a replay of a National Basketball game. Broadcasters responded to

consumers ascribing value in experiencing unscripted live events, such as

sports games, as they happen in real-time.

Second, the creation of social media platforms, most notably,

Twitter, created a community where fans communicate with friends or

even strangers in the conversation taking place online considering a live

game they are watching.

Fans, journalists, and NBA players came to

commonly refer to this medium as NBA Twitter.

Where fans “watch

games together and comment on news, highlights, and roster moves.”

This affected not only increased enthusiasm over the actual gameplay but

also interest in team management and transactions in the offseason. The

NBA capitalized on social media to a higher degree than any other

American professional sports league.

“The NBA is the most-tweeted-

about sports league in 2018, according to Twitter, with more than 100

million NBA-related tweets heading into the NBA finals.”

This was no

accident as other “leagues such as the NFL and Major League Baseball

have gone after sites and social media users who have posted video

without permission, the NBA took the opposite approach.”

Adam Silver,

Id.

Meg James, The Rise of sports TV costs and why your cable bill keeps

going up, LOS ANGELES TIMES (Dec. 5, 2016), https://www.latimes.com/busines

s/hollywood/la-fi-ct-sports-channels-20161128-story.html.

Id.

Rick Maese, NBA Twitter: A sports bar that doesn’t close, where the

stars pull up a seat next to you, WASH. POST (May 31, 2018),

https://www.washingtonpost.com/news/sports/wp/2018/05/31/nba-twitter-a-

sports-bar-that-doesnt-close-where-the-stars-pull-up-a-seat-next-to-you/.

Id.

2020 A NEW GOLD STANDARD FOR SPORTS 249

the NBA’s commissioner, contrarily took the position that he “considers

online videos to be a form of marketing. He likens them to ‘snacks’ that

might whet fans’ appetites for something bigger.”

Additionally, the players of the NBA, likely as a byproduct of

growing up in the social media world, sought out to build themselves as

being synonymous with a recognizable and positive brand.

Omar Raja,

founder of the House Highlights Instagram account, commented that

“what separates the NBA from the other leagues is the personalities,

accessibility, and relatability. Even if NBA players have wildly different

incomes and lifestyles than their fans, they live in the same online

community.”

Players such as LeBron James and Stephen Curry

transcended basketball to become some of the biggest household celebrity

names in the world. These stars transcended basketball even to use their

platform to become a powerful voice in social justice issues. As one

example, “Miami Heat star Dwyane Wade, who has 8 million followers,

tweeted about the victims of the Parkland, Fla., school shooting in

February, a post that received 538,000 likes and 155,000 retweets.”

Gone are the days of NBA players bringing firearms into the

locker rooms.

It very well may be the case that the public relations staff

of the NBA simply did their jobs well. In some respect it is of importance

to the NBA’s rise that it has mostly avoided the issues that recently

plagued the image of the National Football League (NFL) stemming from

players consistently engaging in domestic violence, kneeling during the

national anthem, and the increasing evidence of the long-term effects from

suffering numerous concussions.

B. Recent Success of the Golden State Warriors

In 1975, the Warriors won their first championship as tenants of

Oracle Arena.

In the following thirty years, however, the Warriors and

Id.

Jianna West, Gilbert Arenas Details 2009 Gun Showdown With

Javaris Crittenton, SPORTS ILLUSTRATED (Aug. 7, 2018),

https://www.si.com/nba/2018/08/07/gilbert-arenas-card-game-guns-details-

javaris-crittenton-wizards.

PBS NEWS HOUR, Tumultuous year for NFL marked by protests,

injuries and a ratings drop (Nov. 24, 2017), https://www.pbs.org/newshour/sho

w/tumultuous-year-for-nfl-marked-by-protests-injuries-and-a-ratings-drop.

Bruce Schoenfeld, What Happened When Venture Capitalists Took

Over the Golden State Warriors, N.Y. TIMES (Mar. 30, 2016),

BUSINESS, ENTREPRENEURSHIP & THE LAW VOL. XIII:II

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their fans saw little success as the franchise mostly fell into irrelevance;

“This wasn’t just a bad team, but a team that seemed permanently stuck in

a state of irrelevance.”

This irrelevance would quickly no longer be the

case after the Golden State Warriors changed ownership in 2010, when Joe

Lacob and Peter Guber purchased the Golden State Warriors for a reported

$450 million.

Which, at the time, was thought of as a price “wildly

excessive by nearly everyone.”

Yet, in the Warriors “Lacob saw a start-

up disguised as an underperforming business, a sports franchise that had

been run autocratically – and therefore ineptly – as the industry evolved

around it.”

Whether Lacob and Gruber knew at the time is unclear, but they

soon realized they had been dealt the equivalent of a pair of Aces. Just a

year prior to their purchase, Warriors in the 2009 NBA draft selected a

future superstar in Stephen Curry.

Curry became one of the best and most

popular players in the history of the league.

Within the next three years,

the Warriors would only add to their roster in drafting two more remarkable

players in Klay Thompson and Draymond Green.

With these three

superstars at the helm, in 2015, the Warriors won their first championship

in exactly thirty years.

The franchise that was recently considered mostly

irrelevant was now suddenly one of the preeminent franchises within the

entire NBA.

The Warriors mystique soon rose to even greater heights

when they made the addition of another superstar in Kevin Durant.

The

Warriors have since won subsequent titles in 2017 and 2018.

As of the

writing of this article, the Warriors are in first place in the Western

Conference heading into the postseason and appear poised to win another

https://www.nytimes.com/2016/04/03/magazine/what-happened-when-venture-

capitalists-took-over-the-golden-state-warriors.html.

Id.

Cato, supra note 17.

Schoenfeld, supra note 34.

Id.

Jason Parham, The Warriors and the Myth of the Silicon Valley-Driven

Team, WIRED (Jan. 13, 2020), https://www.wired.com/story/warriors-silicon-

valley/.

Id.

Schoenfeld, supra note 34.

2020 A NEW GOLD STANDARD FOR SPORTS 251

title in the 2019 season.

Today, Forbes estimates the value of the Golden

State Warriors franchise at 4.3 billion.

Consequently, ticket prices for a seat at a Warriors home game

skyrocketed since 2014-15. For season ticket holders during the 2014-15

season, the price range for a single ticket was $18 and $450.

For the

2017-18 season, these prices rose to $40 and $715.

As for the secondary

market (fans purchasing tickets on the likes of sellers such as stubhub.com

instead of directly from the team), the average listing price for the 2014-

2015 season was $122.

Thus far, in the 2018-19 season, the median

listing price on one of these indexes is $463.

These prices are based upon

the Oracle Arena having nearly 20,000 seats.

The Chase Center will

provide less supply for the demand by having a total of 18,000 seats.

Basic economics suggests that the price of entry for a Warriors’ home

game at their new arena will only grow. However, this is subject to change.

The Warriors’ current success in terms of selling season and single-game

tickets at the moment “doesn’t mean that someone else will want them ten

years from now.

”54

C. History of PSL Use by Sports Franchises

The origins of sports franchises employing the financing

mechanism of the PSL arises from the late 1980’s, when Max Muhleman

and George Shinn set out to bring an NBA expansion team to Charlotte,

NBA Standings 2019-20, ESPN (last visited Apr. 7, 2019),

http://www.espn.com/nba/standings.

The Business of Basketball, FORBES, (last visited Feb. 17, 2020),

https://www.forbes.com/nba-valuations/list/#tab:overall.

Darren Rovell, Warriors Raising Ticket Prices Again, ESPN (Feb. 7,

2017), https://www.espn.com/nba/story/_/id/18636756/golden-state-warriors-

raising-ticket-prices-again.

Id.

Prices For Warriors Tickets On Secondary Market Remain Steady

Following Back-to-Back Championships, TICKETIQ BLOG (Sept. 27, 2018),

https://blog.ticketiq.com/blog/2018-19-golden-state-warriors-tickets-prices-

schedule.

Id.

Al Saracevic, Warriors Reveal Long-Term Chase Center Season-

Ticket Plan, S.F. CHRON. (July, 19 2017), https://www.sfchronicle.com/sports/ar

ticle/Warriors-new-offer-Season-tickets-for-30-years-11300137.php.

Golden State Warriors Season Tickets Will Require A 30 Year PSL

Agreement At Chase Center, FROMTHISSEAT.COM, (last visited Feb. 17, 2020),

http://www.fromthisseat.com/index.php/blog/19863-golden-state-warriors-

season-tickets-will-require-a-30-year-psl- agreement-at-chase-center.

BUSINESS, ENTREPRENEURSHIP & THE LAW VOL. XIII:II

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North Carolina.

The original idea of Muhleman and Shinn was that

“future fans would put down a non-refundable deposit of about 10% of

what the cost of the season tickets would be to get on a season ticket

waiting list.”

Charlotte eventually brought an NBA expansion franchise

partially due to the help of this unique financing scheme.

Muhleman then

decided to give those fans “ownership of their seat as a gift to make them

feel more part of the team, and he called these gifts Charter Seat Rights.”

Importantly, “fans were also allowed to assign their rights to anyone if

they chose not to renew their season tickets.”

Of note, “Muhleman

never himself considered that Charter Seat Rights could be used as a

financing tool, or that fans could sell them for a profit, until he saw an ad

in a local newspaper.”

From this initial success in implementing a PSL financing scheme

by a sports franchise, Muhleman would use a similar scheme four years

later when he partnered with Jerry Richardson to bring an National

Football League (“NFL”) franchise to Charlotte.

Since then, numerous

NFL teams followed suit and employed PSL’s in financing not only

expansion franchises, but also for construction of new stadiums for existing

franchises.

Outside of the NFL, though, PSLs have not been in wide use.

The notable exceptions being the owners of the Toronto franchises using

them for the NBA Raptors and NHL Maple Leave.

Some speculated that

the PSL saw wider use in the NFL because “purchasing season tickets is not

as big of an obligation. NFL season ticket packages are limited to only 8

regular season home games each season.”

As applied to the NBA, “For a

41 home game basketball season, a personal seat license is a much larger

obligation which is why the Golden State Warriors are the first team to

experiment with this system.”

The success that the Warriors enjoined,

Greenberg & Galloway, supra note 3.

Id.

Rick Welts, Golden State Warriors Season Tickets Will Require A 30

Year PSL Agreement At Chase Center, http://www.fromthisseat.com/index.php/b

log/19863-golden-state-warriors-season-tickets-will-require-a-30-year-psl-

agreement-at-chase-center.

Id.

2020 A NEW GOLD STANDARD FOR SPORTS 253

however, will likely result in PSLs becoming more prevalent in the

financing operations of NBA teams.

D. Current Demographics of the Bay Area

One of the consequences of the Warriors’ massive success in the

2010s has been the many Bay Area residents jumping onto the

“bandwagon” into newly fashioned Warriors fandom. What it means to be

a Bay Area resident in terms of demographics—and subsequently for

many a Warriors “fan”—is much different in the post-2010s than what it

had been when the Warriors first entered Oracle Arena in 1975.

Prior to

the dotcom boom of the early 2000s, the Bay Area was viewed simply as

the compilation of neighborhoods surrounding San Francisco. Back then,

San Francisco was just “a small city of around 825,000 poised on the tip

of a peninsular on America’s western edge that sprang up during the 1840s

gold rush.

Within the past two decades, though, the Bay Area underwent

dramatic change. Millennial entrepreneurs flooded the area as a

consequence of massive increase in the availability of venture capital

funding throughout the area.

Resultingly, “San Francisco has become the

hype- and capital-fuelled [sic] epicentre [sic] of America’s technology

industry, which has traditionally centred [sic] on the string of suburban

cities known as Silicon Valley.”

To the longstanding inhabitants of San

Francisco that have been there for generations, this drastic change to the

demographics of the community has “led to a city that some of its residents

find unrecognizable.”

These new “people moving in are more likely to

have higher levels of formal education, and they tend to be younger, white

and Asian . . . The result is a city that is younger, more educated, [and]

richer [by the year.]”

Another prevalent feature of the new Bay Area is the amount of

well-funded startup companies in the area. These startup companies play

Michelle Robertson, New Census Data: San Francisco Getting Richer,

More Crowded, SF GATE (Dec. 28, 2018), https://www.sfgate.com/expensive-

san-francisco/article/median-income-sf-demographics-rent-price-census-

13491703.php.

Zoe Corbyn, Is San Francisco Losing Its Soul?, THE GUARDIAN

(Feb. 23, 2014), https://www.theguardian.com/world/2014/feb/23/is-san-

francisco-losing-its-soul.

Id.

Dan Kopf, Quantifying the Changing Face of San Francisco,

PRICEONOMICS (May 5, 2016), https://priceonomics.com/quantifying-the-

changing-face-of-san-francisco/.

Id.

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a key role in the purchasing of Warriors’ tickets.

The abundance of these

companies combined with the limited nature of available seating for a

Warriors home game made Warriors tickets the hottest commodity in

town.

Many of these startups are “software as a service” (SAAS)

companies whose business models are reliant upon large scale companies

contracting for use of their services.

In turn, these companies have to

cater to the interests of executives at these corporations in order for them

to engage with their companies’ offering. For the most part, it is more

attractive to these executives to receive an offer to attend a Warriors’ game

than it is to attend that of the San Francisco Giants. The baseball season

contains many more home games, and the cost of entry is significantly less

expensive.

The same is true upon consideration of the San Francisco

49ers. The 49ers have considerably less mystique than that of the Warriors

and much higher low-cost ticket availability. The Bay Area also offers

numerous high-quality restaurant options; making a dinner at one of them

less interesting. These startups in large part are competing with one

another. If one of your competitors is offering Warriors’ tickets, your hand

is essentially forced. The necessity for Bay Area startups in purchasing

Warriors’ tickets in order to entertain potential clients plays a significant

role in the desire for these Warriors’ tickets with the opening of the brand-

new Chase Center.

E. Part 5: Prevalence of American Bankruptcy

In the absence of the occurrence of an unforeseen event such as

the recession of the late 2000s, only a minority of membership purchasers

will eventually enter bankruptcy during the pendency of the agreement. In

2017, 0.235%, (772,594), of the American population filed for

bankruptcy.

However, 0.235% taken year over year for a thirty-year

period, suddenly becomes a much more prevalent issue. Moreover, in the

Schoenfeld, supra note 4.

Id.

New York Giants Tickets, SEATGEEK (last visited Feb. 18 2020),

https://seatgeek.com/new-york-giants-tickets; see also Golden State Warriors

Tickets, SEATGEEK (last visited Feb. 18 2020), https://seatgeek.com/golden-state-

warriors-tickets.

June 2017 Bankruptcy Filings Down 2.8 Percent, U.S. COURTS (July

21, 2017), https://www.uscourts.gov/news/2017/07/21/june-2017-bankruptcy-

filings-down-28-percent.

2020 A NEW GOLD STANDARD FOR SPORTS 255

post-recession period of 2011, this number was double than what occurred

in 2017 with 1,417,236 bankruptcies.

It is impossible to know how analogous the Warriors’ membership

purchasers are in terms of likelihood of bankruptcy compared to the

American public as a whole. Logically, citizens of the Bay Area who can

afford these tickets seemingly have a significantly larger net worth than

the typical American and thus a further distance from bankruptcy.

Yet,

most of these purchasers are likely part of the “new-money” community

that made their fortunes off of companies that for now are seen as

innovative but are not certain to be viewed in the same light in the future.

These individuals also likely possess a lack of experience in maintaining

such affluence.

It may seem on the surface that due to the wealth in the

Bay Area region that bankruptcy statistics would be lesser than the

averages within the United States as a whole. However, the validity of this

assumption seems unclear in light of these unique characteristics that are

tied to the wealth accumulated in the Bay Area.

The identity of these purchasers is unknown as they have not been

made public. Yet, it is safe to assume that in addition to individual

purchasers that a significant portion of purchasers is the technology-based

startup companies themselves. The volatility in solvency becomes further

magnified when considering the companies themselves. 25,227 businesses

went bankrupt in America in 2017.

A corporation signing onto a thirty-

year agreement assumes that in thirty years that corporation will still be in

existence. By nature, this is a gamble. Some of these member corporations

will go bankrupt and have an effect on the Warriors’ plans. Factors such

as the possibility of another company producing a product that leaves theirs

obsolete or failing to live up to ideological promises are a common

occurrence in the Silicon Valley. The recent outing of the fraud behind one

of the most discussed Silicon Valley companies in Theranos perhaps is the

Just the Facts: Consumer Bankruptcy Filings, 2006 -2017, U.S.

COURTS (Mar. 7, 2018), https://www.uscourts.gov/news/2018/03/07/just-facts-

consumer-bankruptcy-filings-2006-2017.

Leanna Garfield, Striking maps reveal the huge wealth gap between

San Francisco and the rest of the country, BUSINESS INSIDER (May 25, 2018),

https://www.businessinsider.com/weath-maps-cities-san-francisco-bay-area-

2018-3.

Alejandra Reyes-Velarde, Here’s why San Francisco isn’t the best

place to work for a startup, BIZJOURNALS (Aug. 14, 2017),

https://www.bizjournals.com/sanfrancisco/news/2017/08/09/sf-cost-of-living-

dissuades-startup-owners.html.

June 2017 Bankruptcy Filings Down 2.8 Percent, supra note 76.

BUSINESS, ENTREPRENEURSHIP & THE LAW VOL. XIII:II

256

best example of this latter scenario.

Resultingly from the Theranos

scandal having such public significance, the “fake it until you make it”

mentality of Silicon Valley startups is subject to more scrutiny now than

ever before.

II. PRECEDENT

In 1924, Chief Justice Taft delivered a landmark Supreme Court

bankruptcy decision in Board of Trade of City of Chicago v. Johnson.

The

facts of the case were that one of the members of the Chicago Board of

Trade and the corporation—he was President of both—filed for

bankruptcy.

Under the rules of the Board, a member was subject to the

same obligations and discipline as was their corporation.

The rules of the

Board membership provided that for the purpose of securing payment on

obligations, any member of the Board could “prevent the transfer of the

membership of the debtor member by filing objection to such transfer with

the Directors.”

The bankrupt’s now defunct company was “indebted to

thirty or more members of the Exchange on its contracts in an aggregate

amount of more than $60,000.”

Due to the bankrupt’s failure to make

good on his company’s defaulted contracts, other board members that were

creditors of the company filed an objection to the transfer.

These member

creditors ultimately petitioned to the Supreme Court that the bankruptcy

trustee’s ability to sell the seat as an asset of the estate was conditioned on

the prior payment of the $60,000 owed to them.

As of the bankruptcy

filing, the free and clear membership seat was valued at $10,500.

Upon a filing for bankruptcy, all non-exempt property of the

bankrupt becomes property of the estate, which consists of the collective

creditors of the now bankrupt.

The Court first held that “[t]he

Tony Echols, Three Tough Leadership Lessons We Learned From The

Theranos Scandal, FORBES (Apr. 17, 2019), https://www.forbes.com/sites/forb

escoachescouncil/2019/04/17/three-tough-leadership-lessons-we-learned- from-

the-theranos-scandal/#24ff83c74cc2.

Bd. of Trade v. Johnson, 264 U.S. 1 (1924).

Id. at 7.

Id. at 8.

Id.

Id. at 7.

Id. at 8.

Id. at 1–2.

Id. at 8.

Id. at 12–13.

2020 A NEW GOLD STANDARD FOR SPORTS 257

membership is property, in a way attached to the person of the bankrupt

and disposable only by his will. It follows him, therefore, into the

bankruptcy court . . . ”

Thus, “[b]y operation of the bankrupt law, the

membership passes, subject to the rules of the exchange, to the trustee, for

his disposition of it. The trustee does not become a member, but he does

come into control of the bankrupt’s right to dispose of the membership . .

. ”

The Court ultimately held for these petitioners as it proclaimed that

the rights the trustee obtained in the seat were of the same nature as was

held by the bankrupt; “[h]e can transfer or sell it, subject to a right of his

creditors to prevent his transfer or sale till he settles with them, a right in

some respects similar to the typical lien of the common law . . . ”

The

Court further stated,

The preference of the member creditors is not created

after bankruptcy. The lien, if it can be called such, is

inherent in the property in its creation, and can be asserted

at any time before actual transfer. Indeed, the danger of

bankruptcy of the member is perhaps the chief reason, and

a legitimate one, for creating the lien.

For the Warrior’s PSL, the importance of this holding is that the

trustee would gain no superior rights as had the debtor in terms of the

contract, which now became property of the estate.

Under this holding,

a contract for membership to a board of trade and membership to a

program allowing purchase of season tickets are of the same validity in

being considered as an asset.

The contractual conditions that the asset is

subject to though continue to hold as the right to it passes to the bankruptcy

trustee.

In 1996, the Ninth Circuit in In re Harrell then considered whether

a now bankrupt’s season ticket agreement that contained the opportunity

to renew season tickets for the Phoenix Suns in following seasons was a

property right that passed to the estate as a consequence of the bankruptcy

filing.

The Ninth Circuit held that “the opportunity to renew season

tickets is not a property right under Arizona law.”

Thus, the Ninth Circuit

Id. at 12.

Id.

Id. at 11.

Id. at 15.

Id.

Id. at 13.

Id. at 11.

In re Harrell, 73 F.3d at 218.

Id. at 219.

BUSINESS, ENTREPRENEURSHIP & THE LAW VOL. XIII:II

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found the season ticket agreement to be of inconsequential value to the

estate.

100

As such, it once more became the property of the bankrupt.

101

The court found of particular relevance that the Suns made “it clear in

written notices sent to season ticket holders each year that the ‘opportunity

[to renew season tickets] is a privilege granted by the SUNS and may be

withdrawn in the SUNS’ discretion.’”

102

It additionally took into account

that the season ticket agreement stated that “while the SUNS will exercise

reasonable efforts to maintain renewal privileges, season ticket holders are

not guaranteed this opportunity.”

103

Moreover, the court considered that

“even if the high probability of renewal of season tickets does add to the

salable value of a season ticket account, ‘the addition would represent a

speculation on chance, not a legal right.’”

104

In light of the Supreme Court’s ruling in Board of Trade of City of

Chicago v. Johnson, the Ninth Circuit’s holding in 1996 in In Re Harrell

seems to have been made in error. Here, the Ninth Circuit committed two

distinct flaws in error. First, it seemingly ignored the holding of Board of

Trade of City of Chicago v. Johnson as well as another Supreme Court

holding in the case of Butner v. United States.

105

In these cases, the

Supreme Court defined the interrelationship between federal bankruptcy

law and state law.

106

The Supreme Court established that what comprises

the property of the estate is first decided by federal bankruptcy law.

107

Eleven U.S.C. § 541(a)(1) of the Bankruptcy Code further codifies this

notion as it provides that on the instance of a bankruptcy filing that a

creditors’ estate is automatically created.

108

This estate is comprised of “all

legal or equitable interests of the debtor in property as of the

commencement of the case.”

109

State law then, as a subsequent matter,

addresses the concern of defining the attributes of the property interest in

100

Id. at 220.

101

Id.

102

Id. at 219.

103

Id.

104

Id. at 220.

105

Butner v. United States, 440 U.S. 48 (1979).

106

Id. (holding that state law, not federal equity law, resolved issues

around securities for property interest in rents and profits); see also Bd. of Trade,

264 U.S. 1, (holding that state law controls in federal bankruptcy court for

property rights).

107

Bd. of Trade, 264 U.S. at 15.

108

In re Harrell, 73 F.3d at 218.

109

§ 541(a)(1).

2020 A NEW GOLD STANDARD FOR SPORTS 259

question.

110

The Supreme Court recognized this procedure in Butner v.

United States where it stated that the second step is defining the “property

interests . . . created and defined by state law.”

111

Moreover, the Ninth

Circuit also erred in its analysis of the state law attributes the season ticket

agreement entailed. Despite all of these considerations, the Ninth Circuit

has not indicated that it believes In Re Harrell to be of non-binding

precedent.

In regard to the first error made by the Ninth Circuit, a season

ticket plan is essentially a membership. By purchasing a season ticket plan

offered by a team, a buyer in effect becomes a member of the team’s

season ticket program. In Board of Trade of City of Chicago v. Johnson,

the Supreme Court stated that a “membership is property.”

112

Thus, in In

Re Harrell, the season tickets should have automatically passed to the

trustee upon the debtor’s filing for bankruptcy.

113

At that moment, the

trustee, on behalf of the estate, should have become the rightful owner of

the season ticket agreement. The trustee resultingly should have gained the

opportunity to decide whether it had value as an asset of the estate. The

Suns, or alternatively the debtor, should have then been obligated to file a

motion to the court if he or she desired the tickets be deemed of

inconsequential value. Importantly, either of these parties (and importantly

not the trustee) would hold the burden of proving that the agreement was

of inconsequential value to the estate.

114

As to the latter error, because contract interpretation is a matter of

state law and the Phoenix Suns are located in Arizona, the Ninth Circuit

correctly applied Arizona law.

115

Yet, the Ninth Circuit misunderstood the

underlying nature of season ticket agreements with sports teams. The

Ninth Circuit mistakenly relied on the holding of a distinguishable Arizona

Court of Appeals case, where the contracting conditions fastened to the

agreement were entirely distinguishable from what was under

consideration in In Re Harrell.

116

In that case, the court did not recognize

the expectation of a lease renewal as an asset because “the underlying land

[had been] taken [by condemnation] by the state.”

117

As a reminder, the

110

Butner, 440 U.S. 48 (1979).

111

Id. at 55.

112

Bd. of Trade, 264 U.S. at 12.

113

In re Harrell, 73 F.3d at 220. (holding that Trustee could not sell the

season ticket renewal upon the debtor’s bankruptcy).

114

Id.

115

Id. at 219.

116

State ex rel. Miller v. Gannett Outdoor Co., P.2d 221 (Ariz. Ct. App.

1990).

117

Id. at 222.

BUSINESS, ENTREPRENEURSHIP & THE LAW VOL. XIII:II

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pertinent issue is whether a trustee can recoup value from selling the asset.

The Ninth Circuit failed to realize that there is a clear distinction between

a season ticket agreement with a sports team and a lease for land that has

already been condemned by the state. The Ninth Circuit should not have

found these two circumstances synonymous. Furthermore, all of the

additional cases cited by the Ninth Circuit focus on landlord-tenant

relationships, in which the landlords have revocable powers.

118

The legal

rights and duties ascribed to landlord-tenant relationships are entirely

different from season ticket purchasers and sports team relationships.

The trustee would likely see value in the agreement for the right

to specific seats during a Phoenix Suns home game. This is a different

scenario than the potential value to be gained from condemned land. The

ultimate buyer of the ticket, however, would have to be made aware of the

risk that the Suns might not renew. But, it is likely that the market would

provide such a buyer with other options that would make it worth the risk

that the Suns might, for some reason, not honor the renewal. The court

found that the trustee was never able to find such a buyer.

119

It is unclear

if the Suns maintained any sort of waitlist for these tickets. Yet, in the

current case of the Warriors, it is public information that there is currently

a 43,000 person-long waitlist for the Warriors’ membership.

120

Thus, there

certainly would be value in having priority consideration over the rest of

the waitlist.

Lastly, it should be noted that despite the factual similarities arising

from the Sixth Circuit’s holding in Reiser v. Dayton Country Club (In Re

Magness), the case would not apply as persuasive authority here.

121

The

Sixth Circuit in In Re Magness considered whether a trustee could sell a

golf club membership that was conditioned on a non-assignability

clause.

122

If the condition could have been removed, the asset would have

had considerable value to the estate due to the club’s long waitlist.

123

The

analysis in the case, though, was based on the court’s classification of the

agreement as an executory contract.

124

The court found that “the contracts

118

In re Harrell, 73 F.3d at 220.

119

Id.

120

Warriors Have 43,000 Season-Ticket Holders On Wait List For New

Arena, SPORTS BUSINESS DAILY (Mar. 2, 2018), https://www.sportsbusinessdail

y.com/Daily/Issues/2018/03/02/Franchises/Warriors.aspx.

121

In re Magness, 972 F. 2d 689 (6th Cir. 1992).

122

Id.

123

Id.

124

Id.

2020 A NEW GOLD STANDARD FOR SPORTS 261

creating the complex relationships among the parties and others are not in

any way commercial. They create personal relationships among

individuals who play golf, who are waiting to play golf, who eat together,

swim and play together. They are personal contracts.”

125

The Sixth Circuit,

thus, essentially categorized the contracts as personal service agreements

that the club renews to its members who paid their fee.

126

Consequently,

the agreement was classified as an executory contract because both parties

still had ongoing material obligations.

127

The Warriors’ only ongoing obligation in their PSL agreement is to

pay a refund thirty years in the future.

128

The team does not provide a

service beyond allowing a person the ability to purchase season tickets.

129

The PSL itself does not commit the Warriors to any further obligation.

130

The purchaser, in addition, still has to affirmatively buy season tickets that

would be subject to a separate agreement.

131

Even if the actual season ticket

agreement was included in the initial PSL, a court would be unlikely to

classify allowing entry to a sporting event as an ongoing obligation that is

akin to a personal service agreement. Moreover, the purchaser is not

obligated to purchase the tickets every year, but is simply given the

opportunity to do so if they so choose.

132

Based on these facts, it is unlikely

that a court would classify the Warriors PSL as an ongoing executory

contract.

III. ANALYSIS

As a California-based sports franchise, the Golden State Warriors

fall within the scope of the Ninth Circuit. Yet, even if the Ninth Circuit were

to maintain that its holding in In Re Harrell was sound, in spite of Chicago

Board of Trade & Butner, the circumstances of the Warriors’ offering is

distinguishable from those considered in In Re Harrell. Under the

Warriors’ membership plan, “Members will receive the right to buy a

specific season ticket location for each year of the membership term.

Memberships will be available on a per seat basis.”

133

In contrast to the

125

Id. at 696.

126

Id. at 696.

127

Id. at 695.

128

Chase Center Membership Program FAQ, NBA, https://www.nba.c

om/.element/media/2.0/teamsites/warriors/pdf/chase-center-membership-

faqs.pdf (last visited Feb. 7, 2020).

129

Id.

130

Id.

131

Id.

132

Id.

133

Id.

BUSINESS, ENTREPRENEURSHIP & THE LAW VOL. XIII:II

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facts considered in In Re Harrell, the Warriors’ agreement suggests that the

right to purchase season tickets for the seasons that would follow a

bankruptcy filing is guaranteed.

134

Furthermore, the fact that the Warriors

currently have 43,000 people on their waitlist evidences that there would

be significant and identifiable value stemming from the possibility of

jumping this line.

135

It is a fair assumption that the Golden State Warriors’

legal team confirmed that the conditions in their PSL are valid under

California contract law. Since the right for a PSL purchaser to be given the

option to purchase Warriors season tickets is guaranteed for every season,

it is unlikely that a court within the Ninth Circuit would find this property

interest to have no value under California property law.

136

The Warriors’ PSL offering also does not contain a firm non-

transferability clause that could lead to a court bound by the Ninth Circuit

to find that the PSL contains no value for the estate.

137

Chicago Board of

Trade once more requires that the trustee gain no additional rights than

those the debtor possessed under the original agreement.

138

If the debtor

was unable to transfer the seat, neither could the trustee. In this scenario,

the Warriors would be under no obligation to honor its PSL obligations as

to the eventual purchaser from the trustee’s sale. The PSL is thus worthless

if it becomes owned by anyone but the initial purchaser. The trustee would

have no other option than to find this type of PSL to be of inconsequential

value to the estate. As a result, the PSL once again returns to the possession

of the now bankrupt debtor. This scenario places the Warriors in a non-

ideal position. Seemingly, each subsequent year, the Warriors would be

at the mercy of having to wait and see whether the bankrupt debtor can

find the solvency to pay for the next season before being able to find a

replacement customer to recoup value. Importantly, the purchaser who is

now bankrupt already fulfilled their obligations under the PSL by paying

the initial fee. Accordingly, the bankruptcy purchase faces no risk of

absolving the agreement by default.

On the other hand, if the Warriors had no conditions on their

transferability clause, then the trustee could seemingly sell the

“membership” to any individual who offered the most value for the benefit

134

Id.

135

Warriors Have 43,000 Season-Ticket Holders On Wait List For New

Arena, supra note 120.

136

Chase Center Membership Program FAQ, supra note 128.

137

Id.

138

Bd. of Trade v. Johnson, 264 U.S. 1.

2020 A NEW GOLD STANDARD FOR SPORTS 263

of the estate. This arguably harms the Warriors in three main ways. First,

this does a disservice to their long waitlist, which results in a wave of

negative publicity. Second, the estate—not the Warriors—would be in the

position to recoup all of the available proceeds that could be acquired on

the market for the membership sale. Lastly, arena security came into more

focus than ever before as a result of a series of unfortunate recent incidents.

Of particular note is the recent suicide bombing that occurred at an Ariana

Grande concert at the Manchester Arena in 2017, which resulted in the

deaths of twenty-two concert goers.

139

To ensure the safety of all game

attendees, it is in the best interest of the Warriors to know and control who

can enter their arena. This concern is further heightened when certain

individuals are in attendance for every Warriors home game. Currently, the

prevalence of secondary market sales for single game tickets on sites such

as Stubhub

140

or SeatGeek

141

made knowing everyone who is in the

building for a game difficult. However, being able to do so is an

aspirational goal for sports teams in the future and must be considered in

light of the Warriors’ PSL containing a thirty-year lifespan.

The Warriors avoided these issues by instead including the

provision that they “will control all transfers, or sales of memberships, on

their own marketplace” in their PSL agreements.

142

Following Supreme

Court precedent

143

and the bankruptcy code,

144

this provision will continue

to attach to the Warriors’ “membership” in the case it were to become an

asset of a bankruptcy estate. The importance of this is that it avoids all of

the undesirable issues outlined above as the effect of this provision is that

the PSL provides some value as to not be found inconsequential to the

estate. Thus, the PSL would not remain subject to the now bankrupt

individual. The PSL further provides that, in addition to the sale having to

place on the marketplace controlled by the Warriors, “Members will have

139

Eoghan Macquire, Alexander Smith, Jason Cumming & Alex

Johnson, Manchester Arena Suicide Bombing: 22 Die at Ariana Grande Concert,

NBC NEWS (May 22, 2017), https://www.nbcnews.com/news/world/deaths-

injuries- confirmed-after-explosions-heard-u-k-concert-featuring-n763286.

140

Golden State Warriors Tickets, STUBHUB (last visited Feb. 18, 2018),

https://www.stubhub.com/golden-state-warriors-tickets/performer/136/.

141

SEATGEEK (last visited Feb. 18 2020), https://seatgeek.com/.

142

Al Saracevic, Warriors Reveal Long-Term Chase Center Season-

Ticket Plan, S.F. CHRON. (July, 19, 2017), https://www.sfchronicle.com/sports/a

rticle/Warriors-new-offer-Season-tickets-for-30-years-11300137.php.

143

Bd. of Trade, 264 U.S. 1.

144

11 U.S.C. § 541(a)(1) (2014).

BUSINESS, ENTREPRENEURSHIP & THE LAW VOL. XIII:II

264

the opportunity to sell their membership to a third party, for an amount not

to exceed their initial investment.”

145

Importantly, though, there is no limitation to what price the

Warriors could receive from this sale. The market dictates this. A waitlist

of 43,000 suggests that the current price would largely exceed the initial.

By contract, all value above the initial price is for the sole enjoyment of

the Warriors organization. They ensured that as each individual or

corporation, startup or otherwise, enters into bankruptcy liquidation their

membership no longer applies to an insolvent, will be sold to a person of

their choice and at a value that they receive the greatest benefit. The

occurrence of the number of purchaser bankruptcy filings will not be

insignificant over a thirty-year lifespan.

The Warriors, in effect, presented an opportunity for subsequent

NBA teams to now deploy their own future PSL offerings. However, the

amount of leverage each team may have in contracting favorable terms

differs based on the surrounding circumstances. As addressed in the

background portion of this paper, the Warriors enjoy a number of favorable

factors that place them in a position of significant leverage in the

contracting process. The Warriors were in a position that allowed them to

contract for complete control over the sale or transfer of one of these

memberships from the outset of the agreement. Once more, the waitlist

contains 43,000 potential purchasers. For the Warriors, these provisions

are not triggered on the occurrence of any event. They come into effect as

soon as the PSL is enforceable onto the parties.

Future small-market teams implementing a PSL likely will be

unable to enjoy the advantages the Bay Area provides. There are not many

locations that contain such wealth and scale of well-financed corporations

nearby. These teams likely would find themselves unsuccessful in

implementing such strenuous provisions onto their purchasers. It may also

be of importance as to what the PSL is funding. For example, there may be

significant excitement in the community that results in increased demand

for an expansion team that proposes to enter a smaller market for the first

time, as evidenced by the events in Charlotte.

146

The effect of this may be

that the organization has comparable leverage to the Warriors in order

implement similar terms in a licensing agreement that guarantees a seat

for a number of years. In most instances that a PSL will be implemented

though organizations will consider an already existing team in a market

145

Chase Center Membership Program FAQ, supra note 128.

146

Greenberg & Galloway, supra note 3.

2020 A NEW GOLD STANDARD FOR SPORTS 265

proposing a PSL for the purpose of helping fund construction of a new

arena. In a small market, the leverage equation would likely shift in the

opposite direction.

The Warriors left their previous home of the less affluent Oakland

to move across the bay in large part because the demographics of their

new location in San Francisco allowed them to price their PSL to a level at

which they could rely on private financing.

147

Resultingly, they were for

the most part able to avoid the outcry that often occurs when a team only

pays a small portion for the construction of a new stadium while leaving

taxpayers to foot the majority of the bill. The Warriors’ ability to charge

such a high price in their PSL is in addition to these subsequent conditions

they included in the agreement that are the subject of this article.

148

This additional context speaks to the magnitude of the leverage that the

Warriors enjoy.

To almost every other NBA team, the idea of making fans pay a

substantial fee for the right to be able to buy tickets is substantially outside

the scope of reason. Their PSL offerings almost assuredly need to account

for the actual tickets before the subsequent conditions of the agreement are

even considered. For many NBA cities, the different options such as season

tickets to the cities other sports teams are comparable in terms of value to

what the NBA team offers. Unlike the Warriors, such a need for these

tickets for some individuals and corporations simply does not exist in other

cities. Most purchasers, especially corporations, will also likely retain an

attorney to go over the agreement before paying what would be a large

sum to them. Some level of negotiation and red-lining will likely take

place between these potential purchasers and the team. The Warriors

seemingly did not have to face this. The likelihood of the NBA team being

able to hold onto these provisions is not very high. However, these teams

should take note from the Warriors and implement these provisions with a

trigger that bears no consequence onto the purchaser but would for the

team.

In sum, a classification can be made as to three levels for leverage

future sports teams have for what terms and conditions they place on a

successful PSL offering. The first and highest level is for teams that enjoy

conditions similar to the Warriors. The next level is for teams that enjoy

similar leverage to the Warriors due to the specific circumstances

147

Patrick Murray, Just How Lucrative Will the Chase Center Be for the

Warriors?, FORBES (Sept. 9, 2018, 2:00 PM), https://www.forbes.com/sites/pat

rickmurray/2018/09/09/just-how-lucrative-will-the-chase-center-be-for-the-

warriors/#53b634102b29.

148

Id.

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surrounding the PSL offering. The most likely scenario here would be an

expansion team entering a new market. The third and most prevalent level

concerns teams that are in a position of having considerably less leverage

than the Warriors had for their PSL offering.

IV. RECOMMENDATION FOR FUTURE NBA FRANCHISES

IMPLEMENTING A PSL FINANCING

The lesson is clear for teams that find themselves in the position

of being in the first or second level in terms of the leverage they have for

their PSL offering. These teams should mirror their offerings by the closest

proximity possible to those of the provisions discussed in this article

implemented in the Warriors offering. The best possible scenario for all

teams is for these provisions to be given full effect from the outset of their

relationship with the PSL purchaser coming into existence. For the

majority of teams, however, the trigger that should be added onto these

provisions in future PSLs is as follows. Importantly, the result for these

teams would be avoiding the undesirable circumstance of the Phoenix

Suns arising from In re Harrel.

149

As to what this specific trigger could be, § 541(c) of the bankruptcy

code bears large significance.

150

This provision of the bankruptcy code

makes any contractual provision unenforceable upon a bankruptcy filing

that is:

[C]onditioned on the insolvency or financial condition of

the debtor, on the commencement of a case under this

title, or on the appointment of or taking possession by a

trustee in a case under this title or a custodian before such

commencement, and that affects or gives an option to

effect a forfeiture, modification, or termination of the

debtor’s interest in property.

151

The added trigger thus must fall outside of the scope of conditions

541(c) and deemed as ineffective upon a bankruptcy filing and result in

being stripped as applying to the from PSL. At the same time, however, the

149

In re Harrell, 73 F.3d at 218.

150

11 U.S.C. § 541(c).

151

§541(c)(1)(B).

2020 A NEW GOLD STANDARD FOR SPORTS 267

trigger should also take into account how purchasers and their attorneys

would react when presented with a sales pitch.

Upon consideration of all the various aspects, future teams in

this latter category should implement the following trigger onto the new

provisions introduced in the Warriors PSL: “purchaser’s creditors have

gained legal entitlement by a judicial proceeding to sell the seat license

subject to this agreement.”

As to the 541(c) issue, this provision is outside of its scope

because it is a trigger that occurs often outside of bankruptcy and

insolvency. Notably, it would trigger in the event of a non-bankruptcy

foreclosure sale over the PSL. Secured transactions undergo such sales in

significant frequency and often do not concern an insolvent party. In fact,

it would occur probably more often here than it would in bankruptcy.

Thus, 541(c) should not be of issue.

Also, purchasers should have no issue with this trigger as the

occurrence of said trigger taking place—the purchaser likely already lost

their rights to the PSL anyway. The purchaser who defaulted with the PSL

as collateral likely would be unable to redeem and prevent a foreclosure

sale. Season tickets to a sports team are also likely not of much concern in

the face of bankruptcy for the filer. Thus, teams should not face any

roadblocks in implementing this suggestion in their future PSL offerings.

It is always best to be safe than sorry as evidenced by the crippling

recession of the late 2000s. Teams should take advantage of the growing

interest in the NBA in their financing schemes to the level they can.

Including this provision in a future PSL can only serve as a benefit to a

team. Bankruptcy courts are courts of equity; higher courts are often not as

experienced in bankruptcy law and may be subject to manipulation by the

parties. NBA teams should protect themselves by specifically contracting

for these outcomes in the event of a future purchaser’s bankruptcy

liquidation.

In conclusion, future NBA teams should follow the Warriors’ lead

and implement marketplace and sales restrictions to the extent their

leverage over purchasers allows in future PSL offerings. At the very least,

every team should implement these provisions with the proposed trigger

above to address concerns arising from a future purchaser’s filing for

bankruptcy liquidation.

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