TulsaThe Tulsa Shock of the WNBA, originally known as the Detroit Shock before moving to Tulsa in 2010, are on the move again, this time to the more populous Dallas-Fort Worth area, that is, unless a lawsuit brought by an “oppressed” minority owner succeeds in stopping it.

The team is owned by an Oklahoma limited liability company known as Tulsa Pro Hoops, LLC (TPH), whose majority member is Bill Cameron, a successful banker and insurance executive. Cameron publicly announced the move on July 20th. Cameron’s press release explained the team’s reasons for relocating after six unimpressive and financially unrewarding basketball seasons in Tulsa:

“This is a very difficult decision, and I know it is particularly difficult for the Tulsa investors,” he said. “From a business perspective, it was necessary to evaluate options to place the team and the organization in the best position to achieve financial success. After a thorough review, I believe the Dallas-Fort Worth area holds the greatest potential to achieve our long-term business objectives.”

In a letter addressed to Tulsa’s mayor released the same date, Cameron also acknowledged the disappointment for a number of his Tulsa co-investors:

Mayor, I am especially appreciative of the Tulsa investors without whom we would not have been able to move the team from Detroit to Tulsa in 2010. They are wonderful citizens of Tulsa who care deeply for this community. I respect and admire them, and their commitment to Tulsa is second to none. I recognize this decision is particularly difficult for them.

In another letter the same date addressed to TPH’s owners, Cameron expressed his gratitude for their help in rebuilding the organization and keeping the team “afloat” after the move from Detroit. The letter also mentions that “[s]everal of you have said to me you prefer to seek a buy out” and offers “to work with you on that.”

Cameron’s kind words and talk of a buy-out did little to mollify Stuart Price, a Tulsa businessman and original investor who contributed $250,000 for a 7.21% membership interest in TPH. Within hours of Cameron’s announcement, Price filed a lawsuit against Cameron and others in Oklahoma state court seeking a declaration that the majority owner-defendants “are prohibited from voting on a relocation of the Tulsa Shock” along with various other claims for equitable relief and damages.

Included in the complaint (read here) is a claim entitled “Squeeze-Out/Oppression of Minority Shareholder.” The claim does not ask for judicial dissolution of TPH or a buy-out remedy. Instead, it seeks an award of compensatory and punitive damages.

Price’s complaint alleges that “[b]ased on the Operating Agreement and related statements made to Plaintiff and others to induce their acquisition of membership units in TPH, it was unequivocally represented that the Tulsa Shock would be located in, and remain in, Tulsa, Oklahoma.”

Later in the complaint, however, Price acknowledges that Section 6.6(c)(ii) of the TPH Operating Agreement, a copy of which is included as Exhibit A immediately following the complaint, expressly contemplates the possibility of relocating the team “to a new geographic playing location outside the Tulsa area” subject to the required approval by members holding at least two-thirds of the membership interests.

The complaint vaguely suggests either that no member vote approving the move took place or that, if it did, the vote was invalid.

  • In paragraph 22, Price alleges that TPH’s failure to maintain adequate records with respect to member ownership “has prevented Plaintiff and the other minority members from discovering the true ownership percentages of each member and from evaluating the votes required for Super Majority approval.”
  • In paragraph 39, Price alleges that Cameron’s press release announcing the move made no reference to the required vote.
  • In paragraph 47, Price alleges that TPH “cannot effect a vote on relocation until they are in full compliance with the Operating Agreement, including disclosure, notice and meeting requirements.”

With only the complaint to look at, it’s impossible to know for sure how or if member approval was obtained. But given the predictable pushback — the press was reporting opposition from fans, public officials, and some minority owners for weeks before the rumored announcement of the move — my guess is that Cameron lined up at least two-thirds of the membership  interests to approve the move before the July 20th announcement, and that the requisite approval was given without a formal vote or meeting by means of written consents as authorized by Section 9.5 of the TPH Operating Agreement and Section 2020 of the Oklahoma LLC Act.

And what of Price’s oppression claim? I’ve not found a single reported Oklahoma court decision addressing oppression claims by a member of an Oklahoma LLC. Nor have I found any Oklahoma cases addressing the standard for dissolution under Section 2038 of the Oklahoma LLC Act authorizing judicial dissolution, the text of which is identical to New York’s dissolution statute. In the absence of such authority, my guess is that the oppression claim seeking damages likely duplicates the complaint’s claims for breach of fiduciary duty based on alleged self-dealing, mismanagement, conflict of interest, usurpation of business opportunities, and improper disclosure of confidential information.

If the case had been brought in New York involving a New York LLC, I doubt the oppression claim would survive, for two reasons. First, I’m not aware of any New York cases involving any form of business entity that recognize oppression of a minority owner as ground for a damages remedy as opposed to judicial dissolution. Second, there is New York case law holding that, unlike in cases brought by minority shareholders under the Business Corporation Law, oppression is not recognized as ground for relief under New York’s LLC Law — at least when seeking judicial dissolution (as discussed in this prior post).

Meanwhile, there’s no sign that Price asked the court to issue a preliminary injunction preventing the team’s management from proceeding with the relocation. In fact, within just a few days after Cameron announced the move, the WNBA’s governing body gave its approval, which makes it look even more likely the 2016 league roster will include the Dallas Shock. Plaintiff Price is quoted responding to the WNBA’s approval as follows:

Absolutely the litigation will continue. We have sent document requests to the defendants. The facts of the defendants’ self-dealing, unprincipled pattern of behavior and fraudulent activities remain to be determined by the Tulsa County District Court.

If anyone’s oppressed, I’d say it’s the team’s loyal Tulsa fans who suffered through five horrendous losing seasons between 2010 and 2014 (6-28, 3-31, 9-25, 11-23, 12-22) before enjoying a half-decent midseason record of 10-10 so far this year.