Details On Blazers Sale Lawsuit

Reporting earlier this week indicated that RAJ Sports, which had made an unsuccessful bid to buy the Blazers, had filed a lawsuit against the Cherng family after they joined Tom Dundon‘s new ownership group, citing a breach in an exclusivity agreement.

The lawsuit centers on the relationship between the Cherng family, founders of the Panda Express restaurant chain, and the Bhathal family, which owns RAJ Sports and holds stakes in the Portland Thorns and the newly established WNBA team, the Portland Fire.

According to new details in the lawsuit, reported by Sean Highkin for the Rose Garden Report (subscriber link), the Bhathals allege that the Cherngs – described in the complaint as “longstanding Bhathal family friends” – entered into a “confidentiality and exclusivity agreement” with them once the Bhathals began preparing to make a bid on the Blazers, and were eager to be a part of the Bhathals’ potential ownership group.

The language of the agreement contained the following clause:

“You agree that, for a period of (1) year from the Effective Date, you shall not, directly or indirectly, without [RAJ Sports’] prior written consent: (a) pursue or enter into any agreement, arrangement, understanding, acquisition, investment transaction, merger, or other combination transaction with or involving [the Trail Blazers franchise], any portion of the [the Trail Blazers franchise’s] assets, or any direct or indirect equity interests in the [Trail Blazers franchise], (b) contact, solicit, or attempt to contact or solicit a Transaction with existing or future holders of equity interests in the Teams without [RAJ Sports’] consent, or (c) otherwise circumvent, bypass, interfere with, compete with, or attempt to circumvent, bypass, interfere with or compete with [RAJ Sports] . . . in connection with the Transaction or any similar or related transaction involving the [Trail Blazers franchise], any portion of the [Trail Blazers franchise’s] assets, or any direct or indirect equity interests in the [Trail Blazers franchise].”

Even after it was announced in mid-August that the Allen estate had entered into a tentative agreement with the Dundons, the Bhathal group continued to build its case for winning the bid, believing it could still make a superior offer.

“Those efforts included working feverishly to finalize equity commitments with [RAJ Sports]’s co-investors, including [the Cherng family],” the lawsuit states.

The claim states that in late August, despite previous communication between the lawyers of the Cherngs and Bhathals that everything was proceeding accordingly, the Cherngs’ lawyers reported that they would be “ceasing discussions with your client regarding the transaction.” The suit also claims that Alex Bhathal called Andrew Cherng to directly ask him if he was joining the Dundon ownership group, which Cherng denied.

Weeks later, on September 12, the formal sale of the team to the Dundon group was complete, and the Cherng Family was listed as an investor.

Highkin notes that the lawsuit is aimed only at the Cherng Family, not the Blazers themselves, nor the Dundon group. RAJ Sports has requested a temporary restraining order that would prevent the Cherngs from moving forward as investors in the team, a request that will be heard by a judge in a few weeks.

The next step is a hearing on a temporary injunction against the Cherngs formalizing their investment with the Dundon group. If either were to be granted, the Dundons would either have to wait out the results of the trial process – which Highkin writes could take the entire year – or find a new investor to replace the Cherng family.

If neither is granted, the Cherngs can move forward with their investment, though with litigation underway, it would mark a risk for the Cherngs, who could be forced to pay damages if the judge rules in favor of the Bhathals. Highkin writes that it appears unlikely that, in such a scenario, a judge could undo the finalized sale outright.