Monday, August 8, 2022

Tampa Bay Rays owner Stu Sternberg sued for alleged ‘fraudulent transfer’ of team control

A group of minority partners of the Tampa Bay Rays filed suit this week against principal owner Stuart Sternberg, alleging that he improperly enriched himself by transferring operational control of the MLB franchise to a secretly controlled entity.

The legal dispute centers on minority owners’ claim that Sternberg “wrongfully and secretly” transferred legal ownership of the team in 2020 from the current partnership structure to an entity called the “Ray Baseball Club”. The partners say they didn’t know about the transfer until months after it happened.

“These actions strip the plaintiffs of the value of their long-standing investments in the franchise and the team,” the lawsuit says.

The minority owners participating in the lawsuit against Sternberg are listed as McDougald Family Limited Partnership, Stephen Waters, a trust in Waters’ name, Robot Kellinert and Gary Merkel. They collectively own less than 10% of the Razz franchise.

Razz Minority Partners is suing Sternberg for violations of Florida’s Unfair and Deceptive Trade Practices Act and for unjust enrichment and fraudulent transfers.

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The lawsuit alleges, among other claims, that the Sternberg and Rays baseball club entity failed to disclose a $376 million payment from regional broadcast partner Fox Sports Sun, which was “received after the club owned and The franchise was transferred out of the partnership. And into RBC.”

The partners accused Sternberg of “deliberately concealing” the existence of the Rays baseball club unit.

“The effect of all of this is that the partnership has been reduced to just a shell, with no revenue from baseball-related operations, no cash flow, and no responsibility for the limited partners to manage the Rays team and franchise.” – The very reason the limited partnership was formed,” the lawsuit states.

Minority owners have less than 10% stake in the franchise.
Getty Images

Ray and an MLB representative declined to comment on the lawsuit.

“Represented as simply transferring assets to a wholly owned subsidiary, there was in fact a targeted and hidden plan to eliminate individual rights of our clients, while both RBC and Sternberg were given partnership agreements.” Wider rights were allowed than those provided under the Act, this litigation was required,” it said. Courtney Fernald, member of the legal team representing minority owners and managing partner at Englander Fisher.

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The Athletic was the first to report on the lawsuit.

The latest filing marked the third time this year that minority owners have sued Sternberg during a legal battle over control of the Rays.

The Tampa Bay Times reported that the same partners sued Sternberg in May 2021, accusing him of engaging in a long-running “limited partners squeezing plan” and seizing full control of the franchise.

The Rays rank among the least valuable MLB teams with an estimated valuation of $1.1 billion according to Forbes’ calculations.

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