Who really owns the Timberwolves and Lynx? Arbitration begins in ownership dispute.

Lawyers for Timberwolves and Lynx owner Glen Taylor and lawyers for minority owners Marc Lore and Alex Rodriguez will start an arbitration hearing this week over the legalities of Taylor’s claim in March that the teams were “no longer for sale.”

Taylor’s announcement came as Lore and Rodriguez were trying to secure financing on a final call option from Taylor that would have given them majority ownership of both teams.

The purchase agreement the two sides entered in 2021 featured 35 pages of legal parameters, including if there was a dispute for more than $5 million, the two sides would make arguments in front of a three-member arbitration panel who would decide the fate of the franchises.

Ever since Taylor pulled the plug on the sale, the two sides have been at odds. Mediation didn’t work. Now the arbitrators take over.

Minneapolis attorney Lewis Remele has argued in front of and served on arbitration panels throughout his career. He said the stakes will be high for everyone involved as they meet at an undisclosed location in Minneapolis. “The arbitrators have an incredible amount of power, because whatever they decide is going to be the result,” he said.

That decision will have major ramifications for the future of the Wolves and Lynx.

A pile of money is also at stake. Three years ago, the purchase agreement Taylor agreed to with Lore and Rodriguez set the value of the franchise at $1.5 billion. Last week, Forbes valued the Timberwolves at $3.1 billion.

Here is what to know about the arbitration process that will decide who runs the show at Target Center.

A source familiar with the process said a Sportico report from September was correct in naming Kathleen Blatz, Thomas Fraser and Joseph R. Slights III as the three members of the arbitration panel.

All three are highly respected.

Blatz served in the Minnesota House of Representatives from 1979-94 and was the youngest female legislator in state history. She was appointed as a Hennepin County District Court judge in 1994, was named an associate justice of the Minnesota Supreme Court in 1996 and was appointed chief justice by Gov. Arne Carlson in 1998. Blatz was the first female chief justice in state history and served in that role until retiring in 2006.

Fraser served as a Hennepin County District Court judge from 2013-21 after being appointed by Gov. Mark Dayton. He also worked in the Solicitor General and Tort Claims divisions of the Minnesota Attorney General’s Office and was chair of the Judiciary Committee of the Minnesota State Bar Association.

Slights III has a prestigious legal résumé out of Delaware, which is the epicenter of business incorporation and litigation in the United States. He is a partner at Wilson Sonsini but previously served as the vice chancellor of the Delaware Court of Chancery and as a Delaware Superior Court judge.

Fraser is the neutral arbitrator, Blatz was selected by Taylor and Slights III was selected by Lore and Rodriguez.

Remele said each side selecting one arbitrator can indicate they will essentially act as additional lawyers arguing for each side while the neutral arbitrator sits in the middle, but that isn’t always the case. “A lot of times when the arbitrators are appointed like this, they’ll all decide they’re going to be neutrals,” Remele said.

The dispute is whether Taylor, who also owns the Star Tribune, was within his rights to cancel the sale. The parties had agreed to a series of call options on tranches of ownership units of the Wolves and Lynx from Taylor to Lore and Rodriguez.

The final call option was for a 40% ownership tranche and scheduled for Dec. 31, 2023. It needed to be finalized “not more than ninety [90] days” later, according to the purchase agreement. It was widely reported that Lore and Rodriguez lost funding from private equity firm Carlyle not long before those 90 days were up.

On March 27, 2024, Taylor released his statement that the Timberwolves were no longer for sale and that Lore and Rodriguez had missed the deadline.

Lore, a billionaire tech entrepreneur, and Rodriguez, a former baseball star-turned-investor, said they secured the necessary funding for the deal and submitted the paperwork to the NBA on time. They also noted the purchase agreement allowed for the 90-day deadline to be extended an additional 90 days if “NBA Approvals or other required approvals of any Governmental Entity have not yet been obtained.”

Since then both sides have traded accusations against each other, and Lore and Rodriguez have made several public proclamations about the funding they have now secured to buy the team — including the backing of New York billionaire Michael Bloomberg. But the current status of their funding will have no impact on this arbitration.

The arbitration will take place away from the public eye, likely in a lawyer’s office or hotel conference room. Remele said arbitration took off in the past 50 or 60 years as a way for companies to settle disputes without the “vagaries of juries” and it has become common practice.

The purchase agreement between Taylor and Lore and Rodriguez stipulates this should be a speedy process. “Discovery in the arbitration shall be circumscribed to the greatest extent possible,” the purchase agreement reads. “Neither Party shall be allowed more than two depositions and thirty document requests.”

Remele said arbitration exists outside the traditional, public legal process and is meant to create a cheaper, speedier outcome.

“The arbitrators are not required to adhere to the rules of evidence,” Remele said, adding that the panel is trusted to be sophisticated about the law, which allows for legally inadmissible evidence like hearsay to be accepted. “The rules are really a little more relaxed.”

Still the arbitration structure will be like a trial.

Lawyers for Lore and Rodriguez will present evidence and witnesses who will then be cross-examined by Taylor’s lawyers. Then Taylor’s lawyers will do the same before the legal team for Lore and Rodriguez has a chance to cross-examine.

The proceedings will end with either closing arguments or closing briefs, which are written and submitted. The panel will take an agreed-upon amount of time — it could be weeks or months — to make a decision.

“Once they read everything and come to their own conclusions, they have a meeting and then they hash out what they think the decision should be,” Remele said. “It can be 2-1, it can be unanimous. As panel members, you really try to get consensus. That is the whole idea. But sometimes that’s not possible.”

There will be no gray area in the decision. The arbitrators will say whether Lore and Rodriguez failed to execute the purchase agreement or if Taylor erred in canceling the sale.

“Arbitration awards are virtually unappealable,” said Terrence Fleming, a lawyer at Fredrikson who specializes in business litigation. Fleming said, as a practical matter, whatever the panel decides will be final.

“It’s typically very simple and there is no explanation behind it,” Fleming said. “I would guess in a case like this that both parties would request a reasoned award in which they lay out in detail how they came about to their decision.”

Egregious examples of fraud or bias — for instance, if one of the arbitrators didn’t disclose their relationship with either party — could be grounds for appeal, but both Remele and Flemming said it’s extremely rare.

They also said there’s unlikely to be much argument against a panel carrying this level of expertise and reputation.

If Taylor prevails he will retain ownership while Lore and Rodriguez would still have their 40% minority stake in the franchises. If Lore and Rodriguez were to prevail, the transfer of ownership would go to the NBA Board of Governors for approval.