In a twist to the ongoing legal battle involving the Kings, the bankruptcy trustee of Bruce McNall is trying to have last year's sale to Jeffrey Sudikoff and Joseph Cohen voided.
L.A. Kings, Ltd., the 28% of the franchise controlled by bankruptcy trustee R. Todd Neilson, filed suit last week in U.S. Bankruptcy Court--and made public on Thursday--alleging that the 72% transfer of the team to Sudikoff and Cohen in May of 1994 is voidable. An amended complaint was filed Thursday with an allegation that Bank of America's lien on the franchise is also voidable.
Additionally, the trustee has raised an objection to terms of the proposed financing between Sudikoff and Cohen to Colorado billionaire Philip F. Anschutz and developer Edward P. Roski Jr.
"The terms of the financing needlessly give Anschutz a competitive edge over other potential bidders," said Leonard Gumport, Neilson's lawyer.
Court papers also contend that Sudikoff and Cohen have failed to fulfill an alleged obligation to put additional money into the Kings. Sudikoff, Cohen and Bank of America have all said that the lawsuit is without merit.
"The trustee contends that the bank knew or should have known that the transfer was voidable and the bank strongly denies it," Gumport said. "And the court is going to decide. . . . This [the alleged failure to invest capital] is not something that just came up last week. The response they gave us, we concluded was not adequate. Everything in this lawsuit has been discussed, and we expect it to be hotly contested."
Portions of the litigation were unsealed at the request of U.S. Bankruptcy Court Judge Lisa Hill Fenning. A hearing on the matter was postponed until Monday while the parties try to reach an agreement.
During Thursday's session, The Times' legal representative, Kelli L. Sager, requested that the proceedings or portions of them to be made public. Fenning, concerned about the release of confidential financial material regarding the team, said she will decide how much, if any, of Monday's hearing will be open. Creditors and representatives of at least three unidentified potential buyers asked for permission to attend the hearing even if it is closed to the public and media.
Another issue of concern at the hearing was the Kings' payroll. Robert Morrison, a lawyer representing Bank of America, wanted assurances that payroll would be met, "so we don't end up fighting over nothing." Later in the day, a King spokesman said that the payroll indeed had been covered.
Last week, Laker and Forum owner Jerry Buss agreed to advance $500,000 in Senate Seat funds to the Kings to help keep the franchise operational. At the same time, the NHL had said it would not approve any transaction for at least a week.
Meanwhile, a lawyer for Sudikoff and Cohen said in court Thursday that the parties are "materially closer" to reaching an agreement. Another lawyer for Neilson, Susan Montgomery, said that substantial progress was made Wednesday night but that there were "still a number of obstacles to overcome." As of late Thursday, there were no meetings between the parties scheduled for today.