Madison Square Garden sues to block liquor board's access to CEO's testimony in lawyer ban flap

MSG Knickerbockers

06/02/2023 20:57

By Alison Frankel
       Feb 6 (Reuters) - Madison Square Garden Entertainment
Corp does not want New York’s liquor licensing agency to see
sworn testimony from its chairman and CEO James Dolan as
regulators probe MSG’s policy of banning plaintiffs lawyers who
are suing the company from attending events at MSG venues.
    In the latest fallout from the controversial policy, which
MSG enforces through the use of facial recognition technology,
the company filed a petition on Friday in New York State Supreme
Court to squelch a subpoena issued by the New York State Liquor
Authority as the agency considers a potential revocation of the
company’s licenses to sell alcohol.
    The liquor licensing board is weighing whether MSG’s ban on
so-called adverse plaintiffs' lawyers from about 90 law firms
violates state regulations requiring liquor license holders to
be open to the public. Liquor board regulators issued a Feb. 2
subpoena to Bernstein Litowitz Berger & Grossmann, which is one
of the plaintiffs firms suing MSG in Delaware Chancery Court
over a 2021 restructuring of MSG companies under the Dolan
family’s control.
    The agency asked Bernstein Litowitz to produce, among other
things, transcripts of the Chancery Court depositions given by
James Dolan and former high-ranking MSG executive Andrew
Lustgarten.
    The subpoena’s return date was Feb. 6, the same day that
Dolan was scheduled for an interview with liquor board
investigators. It is not clear whether the interview took place
as planned.
    On the day it received the liquor authority’s subpoena,
Bernstein Litowitz notified defense lawyers in the Chancery
Court litigation. The plaintiffs' firm said that under the terms
of a confidentiality agreement in the Delaware cases, it would
object to the production of documents and testimony marked
confidential. Bernstein Litowitz also said, however, that it did
not believe Dolan’s deposition testimony was actually
confidential — and that it would not subject itself to sanctions
if it was ordered to turn over the material.
    In a series of increasingly heated emails last week between
MSG counsel Randy Mastro of King & Spalding and Jeroen van
Kwawegen of Bernstein Litowitz, Mastro insisted that the
subpoena was procedurally improper and that MSG would imminently
move to quash the liquor board’s demand. (The emails are an
exhibit to MSG's quash petition.) The MSG lawyer warned van
Kwawegen not to turn over anything in the meantime, accusing his
firm of “collusion” with New York regulators “for some ulterior
motive than any genuine desire to meet your legal obligations.”
    Bernstein Litowitz’s van Kwawegen retorted that he had
respected the strictures of the Delaware confidentiality
agreement and was simply trying to comply with his legal
obligations. “By contrast, you are trying to intimidate me with
baseless threats and unfounded assumptions,” he told Mastro.
“Your client’s conduct by imposing a ban to visit various venues
on anyone who happens to disagree with him — enforced by facial
recognition software that was developed to protect us from
terrorists and violent hooligans — comes to mind. The court will
see your email for what it is.”
    MSG argued in Friday's quash petition that the state liquor
authority does not have subpoena power at this early stage of
investigation and that the confidential materials it seeks from
the Delaware cases are irrelevant to the liquor board’s
investigation of the plaintiffs' lawyer ban.
    “These two matters have nothing to do with one another,” an
MSG spokesperson said in response to my query on the quash
petition. In a separate affirmation accompanying the quash
petition, Mastro said MSG is concerned about protecting its
confidentiality from Freedom of Information Law requests, “in
light of the increased media attention and political pressure
surrounding MSG and its venue policy.”
    Van Kwawegen declined to comment. The New York liquor
board’s lead investigator on the MSG matter, Charles Stravalle,
did not respond to my email. He told MSG in a Feb. 3 email that
he is not seeking confidential information via the subpoena.
    MSG’s aggressive reaction to the liquor authority’s subpoena
should surprise no one. The company, which owns the New York
Knicks and Rangers, as well as venues including Madison Square
Garden and Radio City Music Hall, has steadfastly refused to
back down from the he plaintiffs' lawyer ban since I first broke
news of the policy last June, despite a barrage of negative
publicity. MSG has repeatedly said that it is within its legal
rights to bar lawyers who are suing the company from access to
private venues.
    In a Jan. 26 interview with a New York television station,
Dolan was defiant about the liquor board’s investigation. He
said that in response to “threats” to revoke his venues’ liquor
licenses, he has contemplated refusing to sell alcohol at a
Knicks or Rangers game and directing angry fans to complain to
state regulators.
    The plaintiffs' lawyer ban has already backfired in MSG's
Delaware litigation, where Chancellor Kathaleen McCormick
described the policy as “completely idiotic” and “the stupidest
thing I have ever read.” She also said that it reinforced
shareholders’ depiction of Dolan as a vindicative bully.
    New York Attorney General Letitia James announced last month
that her office is investigating the ban as a potential
violation of New York civil rights laws. “Forbidding entry to
lawyers representing clients who have engaged in litigation
against the company may dissuade such lawyers from taking on
legitimate cases,” James warned MSG.
    A New Jersey plaintiffs' firm on MSG’s banned list, Davis,
Saperstein & Salomon, came up with the idea of challenging MSG’s
liquor licenses after one of its lawyers, Kelly Conlon, was
denied entry to Radio City Music Hall as she chaperoned her
daughter’s Girl Scout troop.
    Name partner Samuel Davis told me on Tuesday that he’s glad
to see the liquor board pushing for answers from MSG and CEO
Dolan. “It’s pretty evident by the way they are prosecuting the
investigation that they are not comfortable” with the
plaintiffs' lawyer ban, he said. “And if Dolan doubles down
against the liquor authorities, Randy Mastro will have a bunch
more disgruntled shareholder lawsuits to deal with.”
    Read more:
    Shareholders blast Madison Square Garden’s ‘implausible’
explanation for erasing emails    
    Madison Square Garden doubles down on plaintiffs lawyer ban,
even after it backfires    
    Game over? Plaintiffs' lawyers banned from Madison Square
Garden by MSG
 (Reporting By Alison Frankel; editing by Leigh Jones)