Did Kings’ Owners Fail to Live Up to Bargain?

One of the contentions behind the attempt of Bruce McNall’s bankruptcy trustee to have last year’s sale of the Kings voided is that co-owners Jeffrey Sudikoff and Joseph Cohen failed to live up to an earlier agreement to put $20 million into the franchise.

This allegation is included in a lawsuit filed last week by R. Todd Neilson--the bankruptcy trustee controlling L.A. Kings Ltd., which is 28% of the team. Portions of the litigation were ordered unsealed earlier this week by U.S. Bankruptcy Court Judge Lisa Hill Fenning. An amended complaint--with some omissions of financial and other information--as well as one exhibit were provided to The Times on Friday.

The particular exhibit was the transfer agreement signed May 16, 1994, the closing day of the sale of 72% of the Kings from McNall to Sudikoff and Cohen. In that agreement, there was a commitment from Sudikoff and Cohen to put a “capital contribution” of $20 million into the team on certain terms and conditions.

Court papers called it a “bad faith” commitment and a “sham.” The trustee also took issue with another contention in the transfer agreement, that the new owners believed that the Kings would be solvent after the sale. Yet the complaint alleges that the Kings were “recklessly undercapitalized” by Sudikoff and Cohen.

Sudikoff and Cohen and the other defendants involved in the litigation have contended that the lawsuit is completely without merit.

That the Kings were having financial problems was no secret last season, although team officials maintained it was business as usual. Coach Barry Melrose said that the team was unable to make a deal at the trading deadline because it couldn’t afford to add one or two more salaries. “Things happen with this team that no one can think of,” Melrose said in April when he was fired after almost three seasons in Los Angeles.

And on Thursday, a lawyer for Bank of America said he had no information whether the payroll would be covered and wanted assurances it would be met. A King spokesman said payroll was met that day.

Bank of America, which loaned $50 million to Sudikoff and Cohen, is one of the defendants in the lawsuit, with the trustee alleging that its lien on the franchise is voidable. In the same lawsuit, another defendant is Majestic/Anschutz Venture L.P., which is currently negotiating to provide interim financing to the Kings. Last month, Cohen acknowledged the purchase offer from an investment group led by Colorado billionaire Philip F. Anschutz and developer Edward P. Roski Jr.