Business Ownership Dispute Analysis: Tampa Bay Rays

In nature, a group of stingrays is called a fever. However, it is unclear whether scientists have yet assigned a name for the group of lawsuits coming fast and furious at Tampa Bay Rays principal owner Stuart Sternberg, who was sued for the third time in less than three years by a group of minority owners. The most recent ownership dispute lawsuit alleges Sternberg “wrongfully and surreptitiously” transferred control of the team to his own limited liability company—without first informing the minority owners.

In this most recent business dispute, five partners owning slightly less than 10% of the team filed the new lawsuit in Pinellas-Pasco Circuit Court. While several complex legal issues are at stake among the three lawsuits, the heart of this particular business ownership dispute centers on the private business dispute between the majority owner and a vocal group of minority owners who believe that they are being “squeezed out” of the baseball club’s business. Speak with an experienced business dispute attorney at BrewerLong about any private ownership concerns you need legal advice on.

Who Are the Parties to the Business Ownership Dispute?

This case centers on Mr. Sternberg and five individuals that compose a minority partnership with a 9.6% stake in the Tampa Bay Rays baseball franchise—Robert Kleinert, Gary Markel, the MacDougald Family Limited Partnership, Stephen M. Waters, and a trust in Waters’s name.

Mr. Sternberg owns between 80 and 90% of the company and has been growing his stake over the last decade. The minority partners allege he has been achieving this growth by unlawfully squeezing out minority owners. A ‘squeeze out’ is a situation in which the majority owner of a business pressures minority owners to sell their stake in a business, often at an unfairly low price or on unfavorable terms.

What Was the Legal Basis for the Business Dispute?

The five minority partners here had previously sued Mr. Sternberg in May 2021, alleging he had not only been trying to squeeze owners out of their stake and profits in the team, but had also been asking them to pay a disproportionate amount of taxes on the team’s income. That lawsuit is proceeding in Florida state court.

This situation, however, demonstrates the true vulnerability of being a minority shareholder. Generally, an organization’s governing documents will identify the person or persons who operate as the managers. They will also specify who is entitled to what financial information.

The Risks of Being a Minority Shareholder

Shareholders’ entitlement to documents is typically determined by an organization’s operating agreement or other governing documents. If shareholders or members are not involved in drafting or revising these agreements and guaranteeing that such access is provided for at the company’s formation, they may face an uphill battle in obtaining enough information to truly understand their financial obligations and the limitations on their own power as minority shareholders.

Missing Information in the Tampa Bay Rays Business Ownership Dispute

According to the trio of Tampa Bay Rays ownership dispute lawsuits, the minority shareholders learned that Sternberg had transferred ownership of the Tampa Bay Rays baseball club to a new entity—501SG LLC—that was wholly owned and controlled by Sternberg. Sternberg not only managed the baseball club and was the public face of the organization, he also served as a managing member of the different legal entities. As such, the lawsuits allege he was able to influence or control the flow of business information internally to suit his interests, potentially at the expense of minority members.

Missing Distributions at the Heart of the Lawsuit

Another one of the issues at stake in the Tampa Bay Rays ownership dispute is that the minority partners claim that they have not received proper distributions from the business. In rebuttal, Sternberg claims that the team is undergoing an ordinary corporate reorganization and that nothing is amiss

As you can see, these are complicated issues that arise when testing the rights of majority versus minority shareholders. To prevail on their claim, the minority partners must prove that their rights and interests in the business have been unlawfully harmed due to Sternberg’s actions.

How Was the Ownership Dispute Resolved?

To date, no resolution has yet been reached. These cases are still winding their way through the Florida state courts. The team insists that because Major League Baseball and the team’s creditors approved the reorganizations, the minority shareholders’ rights could not have been compromised. The minority vocally disagrees.

Have Questions? Contact BrewerLong

At BrewerLong, we understand the challenges faced by Florida entrepreneurs. Our team successfully helps business owners at all stages of a company’s growth cycle to help create a solid foundation to limit the potential for business disputes. When conflicts arise, we help business owners efficiently and effectively reach a solution with minimal impact on their operations. If you are involved in a business ownership dispute, contact our team today for legal help.

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