Litigation pitting Phoenix Suns and Phoenix Mercury minority owners Kisco WC Sports and Kent Circle Investments against Suns Legacy Holdings—the Delaware LLC that owns the Suns and Mercury—and owner Mat Ishbia expanded on Monday with Kisco and Kent Circle countersuing for breach of contract, fraud and related claims.
The two sides have sued each other in Delaware Chancery Court in a legal battle that began in August. At the time, Kisco, which is led by Andrew Kohlberg, and Kent Circle, led by Scott Seldin, sought a court order permitting them to investigate what they contend are potential breaches of a limited liability company agreement, mismanagement of the team and conflicts of interest. Last month, the lawsuit to inspect financial documents was dismissed as Kisco and Kent Circle released a statement saying they had obtained sufficient access to records.
Separately, Suns Legacy Holdings sued Kisco and Kent Circle in October, seeking a declaratory judgment that a capital call held last June 2 was valid under operating agreements. The call involved a loan-to-equity conversion that Legacy contends was contractually authorized. Legacy also describes the conversion as sensible given Ishbia’s ambitions for the Suns and Mercury through “bold trades, competitive salary commitments for star players, construction of a world-class practice facility, and the signing of creative, exposure-enhancing broadcast agreements.”
Kisco and Kent Circle view the call differently. Their attorneys say it was part of “a scheme to threaten our clients with massive dilution of their interests in the Suns if they failed to fund a capital call within 10 days’ notice.”
After Ishbia bought a majority stake in the Suns in 2022 for $4 billion, all 16 of the limited partners at the time were offered buyouts for what Legacy says was a “massive profit” that reflects “nearly 20 times their invested capital.”
Of the 16, 14 took the buyouts, but Kisco and Kent Circle declined.
In a filing authored by Michael A. Barlow and other attorneys from Quinn Emanuel Urquhart & Sullivan, Kisco and Kent Circle contend Ishbia has “spent wildly on player and coach contracts” and “mortgaged the Suns’ future by trading away valuable draft picks for years to come.”
Among other allegations brought against Ishbia are that he “extended a loan to the Suns at an interest rate exorbitantly above market” and “leased the Mercury’s practice facility from himself at undisclosed rates.”
The minority owners also maintain that Ishbia has left money on the table by “knowingly forgo[ing] significant revenue opportunities.”
To that end, Kisco and Kent Circle reference Ishbia putting Suns and Mercury games on TV for free. In 2023, the Suns and Mercury struck a deal to air games via a pair of over-the-air Gray Television channels and a digital streaming service. Many other NBA and WNBA teams’ local broadcasts are available through regional sports networks that require fans to buy subscriptions.
Kisco and Kent Circle also note that Ishbia decided to reduce concession-stand prices “well below market, again forgoing a legitimate revenue stream.” Last December, the Suns and Mercury introduced “affordable, fan-friendly food options” at Mortgage Matchup Center in the form of five items—hot dogs, chips, popcorn, fountain soda and water—for $2 each.
In addition, the counterclaims portray Ishbia as spending too much money on basketball-related decisions that haven’t worked out.
“The Suns have also fired three coaches over [Ishbia’s] three-year tenure, two of whom the company is still paying tens of millions not to coach the Suns,” Kisco and Kent Circle charge.
They also mention Los Angeles Clippers guard Bradley Beal, who negotiated a buyout from the Suns in July. Beal is highlighted when Kisco and Kent Circle complain that ownership is paying players “nearly a hundred million dollars not to play for the Suns.”
Attorneys for Legacy Holdings will answer the counterclaims, deny wrongdoing and seek their dismissal. Expect Legacy Holdings’ attorneys to argue the allegations of financial mismanagement are untrue and designed to badmouth Ishbia and pressure him to offer more to buy out Kisco and Kent Circle.
Those attorneys will likely also maintain that some of the allegations rely on what might be called sports or business critiques of Ishbia. For instance, Ishbia is blamed for trades and signings, and for not charging more money for services. But Legacy Holdings will probably assert those critiques are protected by the law’s deference for managerial discretion. In other words, it’s not illegal for Ishbia to have overseen the Suns’ trade for Beal instead of for other players. It’s also not illegal for Ishbia to appeal to fans at a time when affordability is a major concern in the U.S. by letting them watch games for free and charging them only $2 for menu items.
“This isn’t a lawsuit,” a Suns spokeswoman told Sportico in a statement. “It’s a shameless shakedown dressed up as legal process.”
The statement asserted that Ishbia has been committed to spend money to improve the two teams and that he “told all the investors that they could step up with him or sell their stake and step aside.”
As the Suns see it, “Kohlberg and Seldin stayed in and now they’re trying to freeload off the value Mat created” and “want to drag the organization backward.” The Suns also criticize Kohlberg and Seldin for admitting “in this filing that investing in the team and its fans” isn’t good business.
While the two sides launch missives at the other in court filings and in public statements, the most likely outcome remains the same: Eventually the minority owners will sell their shares at a price they find acceptable.