It’s a drama right at home in Hollywood
First, news broke last week that Mark Walter intends to sell the Los Angeles Lakers to billionaire venture capitalist Joshua Kushner and former Disney CEO Bob Iger at a $12.5 billion valuation
Then five of the six Buss siblings — who inherited ownership of the team from their father, Jerry, when he died in 2013 — voted to sell their remaining stake in the Lakers, approximately 17.8 percent of the team
But Jeanie Buss, who operates as the team governor and is the last family member actually working for the Lakers, arguedenced a 2017 court order requiring her co-trustees to “take all action reasonably available to them” to ensure Jeanie remained the controlling owner of the Lakers
Everything we know about the Lakers being sold again
Dan Woike
What’s going on here? The Athletic interviewed nine legal experts, many of whom specialize in trust and estate law, to get their take on the drama and what might happen next
Which side has the upper hand?
This is a complex situation that even confounds experts, largely because the trust documentation is not yet publicly available. It also involves many different kinds of law: trade and estate laws, corporate laws, contracts and, of course, the NBA’s rules, creating what one expert termed “a Russian nesting doll of legal issues.”
“I think everyone has a perfect right to be kind of confused about this. Because as a trust and estates professor, I’m a little confused about this,” said William P. LaPiana, professor of wills, trusts and estates at New York Law School. “We’re all kind of in the dark.”
The experts The Athletic interviewed stressed that their insight is based on public reports, given that they have not seen the terms of the trust. What is more clear, however, is that this saga may just be getting started
There appears to be three different agreements that are at odds with one another. The original trust requires a majority of the beneficiaries (i.e., four of the six Buss children) to agree on a sale of trust assets. The 2017 court order instructs the trust to refrain from taking actions that would result in Jeanie Buss losing her position as the Lakers’ “controlling owner.”
The Lakers’ sale last year complicates things as well. As part of the sale, Walter agreed that Jeanie could remain the team’s governor for the next five years. While most team governors are majority owners, the NBA allows a governor to own as little as 15 percent of a franchise. That sale also reportedly contained a tag-along provision, an opportunity for the Buss family to sell their stake along with Walter if he chose to sell
Some experts believe that Jeanie Buss’ approval is required for the family to sell its ownership stake
“The three trustees – Jeanie, Janie and Joey – must consent to the sale that has been authorized by a majority of the siblings. Without her consent, the sale cannot go forward,” said Bridget Crawford, a law professor at Pace University in White Plains, N.Y. “[The siblings] have a textual argument about what the trust terms mean. That debate runs right into the 2017 ruling, though. That court order makes this a clearer case in Jeanie’s favor. That order says the co-trustees must protect Jeanie’s controlling ownership … If the trust sells the whole 17.8 percent, the order isn’t just inconvenient to follow, it’s impossible.”
Whether the Buss family can sell its stake could require a legal interpretation of which rules take precedent
“Since the siblings (other than Jeanie) are purporting to sell 17.8 percent, this would violate the 2017 amendment/order,” said Jeff Schneider, the executive director of the University of Southern California’s Center for Sports, Entertainment, Media & Technology Law. “The sale does not violate the trust per se, only the 2017 order, and theoretically, the entire case will come down to whether she could get an injunction based on the 2017 amendment to stop this new sale.”
A general rule in trust law that California follows requires trustees to act as a “prudent investor” would, Schneider said
“Usually, this means maximizing wealth without taking unreasonable risks,” he said. “It is hard to argue that if five of the six beneficiaries and two of the three trustees voted to maximize the overall wealth of all parties, it was not the most prudent thing to do.”
Other experts believe Jeanie’s siblings make a good case, too, aided by last year’s sale to Walter
“Jeanie’s siblings may counter that the 2017 order does not expressly prohibit a sale and that a unanimous vote of the trustees is not required to sell the trust’s interests in the Lakers,” said Rutgers law school professor Reid Kress Weisbord and University of Virginia law school professor Naomi R. Cahn in a joint statement. “The 2025 transaction with Mark Walter, in which the Buss family sold most (but not all) of their interest in the Lakers, also reportedly included a ‘tag-along’ provision. That provision reportedly allows the family to sell its remaining stake for the same valuation as Walter if he later sells his interest. The siblings may argue that the current transaction implements the type of sale that Jeanie and the trustees contemplated in the tag-along provision.
“Ultimately, who has the stronger position will depend on the terms of the trust instrument and the 2025 agreement, neither of which is public, and the 2017 court order.”
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What could happen next?
If there is no settlement, this could be headed for a court battle that could take years to hash out. The trust and estates world “does not move fast,” LaPiana said
“If the trust dispute went to litigation, that could take years,” said Maureen A. Weston, professor of Law at Pepperdine Caruso School of Law. “If it went to trial and there was testimony … that’s a year at that, that’s two years. It could drag on. If there’s an arbitration provision in there in the trust document… that can be faster.”
That potential timeline makes it crucial, Schneider said, for Jeanie to obtain a preliminary injunction to pause the sale
“That’s why being able to stop the sale, and not just suing after the fact, is so important,” he said. “These cases take potentially years; injunctions happen pretty quickly.”
Most sports teams are owned by families, and family trusts are not uncommon, these experts say
“A conflict over a purported sale of a franchise is nothing new in the sports law context, where partners in ownership, or various members in the trust, have had differences in agreement,” said Marc Edelman, professor of law at Baruch College’s Zicklin School of Business. “The first thing that comes to mind as a reasonable analog also took place in Los Angeles several years back when the McCourt family had owned the Dodgers and the two owners of the team had gone through a divorce, leading to complications in ownership.”
The McCourt dispute ended with a financial settlement where Jamie McCourt received $131 million, plus more than $50 million in real estate and luxury properties, while Frank McCourt remained the sole owner of the Dodgers
Disputes are also not uncommon
“These are really rich people, and any time there is some big transfer of assets like this in the legal world, you better get yourself ready for some type of fight,” said Aaron Hernandez, director of the National Sports Law Institute at Marquette University
But what makes the Buss trust unusual, according to trust and estate experts, is a so-called “last-person-standing” provision that redistributes the shares to the living members if someone dies
“Unless a beneficiary sells his or her share while still alive, it passes to the remaining surviving beneficiaries as each passes, until there is only one left who gets it all,” Schneider said. “Supposedly, Jerry did this to ensure that one of his kids would always own the team but it also creates a huge incentive to sell while still alive.”
Will the Lakers still be sold to Kushner and Iger?
As The Athletic reported earlier this week, akers owner didn’t believe the latest Buss family disagreement would threaten his deal with Iger and Kushner. Two other league and teamnsaction
That sale still needs to be approved by the NBA’s Board of Governors. If it is, and if Jeanie Buss is able to ensure the Buss family retains at least 15 percent of the Lakers, will the new ownership group would honor Walter’s commitment that Jeanie could retain governorship for the near future?
“I would imagine, without knowing for sure, that (the other NBA governors) would probably be happy to see the majority owners having the requisite control,” said Matt Mitten, a law professor at Marquette University Law School. “They’re the ones that are basically going to be that voice and vote when they have the league meetings. That’s an important thing to have that vote. It seems to me that if there’s someone, a group with a minority interest that’s holding that – and it’s a small minority interest (17.8) — that just seems to me like, at some point, there’s going to be a conflict between majority ownership and the Buss family ownership.”
Iger has supported the commitment to Jeanie Buss’ governorship both publicly and privately. Then again, as he said during a recent interview with The California Post, “if things change, they’ll change.”
