Madison Square Garden doubles down on plaintiffs lawyer ban, even after it backfires

A general view of Madison Square Garden before game four of the second round of the 2022 Stanley Cup Playoffs at Madison Square Garden between the Carolina Hurricanes and New York Rangers. Mandatory Credit: Danny Wild-USA TODAY Sports

(Reuters) - It takes a special kind of moxie for a defendant to double down on a litigation tactic that the judge overseeing your case has described as “the stupidest thing I’ve ever read.”

The billionaire family that owns New York’s Madison Square Garden apparently has just that kind of temerity.

On Tuesday, after trial judges in both New York State Supreme Court and Delaware Chancery Court criticized a months-old MSG policy to ban plaintiffs lawyers who have sued the company for any reason from attending events at any of their venues, MSG sent out a new letter reinforcing the ban. Plaintiffs lawyers are not allowed into MSG, Radio City Music Hall, the Beacon Theater or the Chicago Theater, no matter how they obtained tickets, the new letter said. And if they try to defy the ban and enter one of those venues, MSG advised, they will not be allowed in.

The new letter comes just a day after New York State Supreme Court Justice Lyle Frank of Manhattan ruled that plaintiffs lawyers from Davidoff Hutcher & Citron, who sued over the MSG ban, “may not be denied entry into any shows where they possess a valid ticket.”

Frank held that MSG can refuse to sell tickets directly to Davidoff Hutcher lawyers and can bar them from attending sporting events at its venues. But according to lead plaintiff Larry Hutcher, Frank’s ruling allows lawyers from his firm to attend shows and concerts at MSG venues with tickets they have obtained from resellers.

In an interview on Tuesday, Hutcher, a longtime season ticket holder for the New York Knicks, quipped that in light of the team’s record so far this season, “I have a much better chance of enjoying a concert than a Knicks game.”

MSG disputes Hutcher’s interpretation of Frank’s ruling. Monday’s decision said that MSG “may revoke tickets” held by Davidoff Hutcher lawyers until the tickets are presented for entry. Therefore, MSG said in an email statement, “Nothing has changed. Lawyers who are engaged in active litigation against MSG are still barred from all events and all venues.” The company has said repeatedly that lawyers will be welcomed back when their cases end.

In his decision on Monday, the New York judge rejected MSG’s purported justification of the ban as a way to assure that company employees would not accidentally reveal confidences to plaintiffs lawyers attending games or concerts.

“There appears to be no rational basis for the policy instituted by the defendants except to dissuade attorneys from bringing suit,” Frank wrote.

That’s mild compared with the assessment of Chancellor Kathaleen McCormick of Delaware Chancery Court, where MSG is defending consolidated shareholder litigation over a 2021 merger of two companies controlled by the family. (It’s complicated, but two different sets of minority shareholders are asserting that MSG’s controlling shareholders, members of the billionaire Dolan family, improperly orchestrated the merger for their own benefit. The Dolans, who point out that the two shareholder groups are asserting discrete and irreconcilable theories, deny any impropriety.)

At a Nov. 3 hearing, McCormick called the MSG ban on plaintiffs lawyers, “the stupidest thing I've ever read,” adding, “It just seemed totally crazy, and it played into every single one of plaintiffs' case themes.”

McCormick was considering a request by shareholder lawyers to depose the MSG in-house lawyer who signed the first round of letters advising them of the MSG ban. Defense counsel Randy Mastro of King & Spalding urged the judge to block the deposition, arguing that the plaintiffs lawyers’ ban from MSG venues is irrelevant to the underlying dispute over the company’s restructuring.

Mastro also told McCormick that MSG’s policy, which covers lawyers from more than 90 plaintiffs firms, is entirely justified by longstanding New York precedent allowing private owners to restrict access to their premises.

“I think people have the right, private parties, have the right to decide not to do business with people who sue them,” Mastro said.

Shareholder lawyer Gregory Varallo of Bernstein Litowitz Berger & Grossmann told McCormick that his side wanted more information about the company’s decision to issue the ban in order to bolster arguments that the Dolans, as controlling shareholders, are “unchecked and simply out of control.”

Varallo offered a story to show just how extreme the ban has proved to be: A lawyer from Grant & Eisenhofer who is not involved in the MSG litigation and was not aware of the ban on her firm, went to Madison Square Garden for a music concert. She was stopped by security officials who demanded her ID. They eventually told her, per her sworn affidavit, that they had used facial recognition software to identify her as a lawyer from a banned firm. She was then ejected from the premises, Varallo said.

McCormick ended up ruling that shareholders were not entitled to depose MSG’s in-house lawyer — but that plaintiffs lawyers had effectively won the battle by making her aware of the company’s “completely idiotic letter.”

The ban on plaintiffs firm, she said, seemed to display precisely the “rude, bullying approach” that, according to plaintiffs, had tainted MSG’s restructuring and raised questions about the defendants’ fiduciary duties.

The shareholder firms suing over the MSG deal regard McCormick's decision as a win. “Chancellor McCormick’s comments speak volumes,” said Christine Mackintosh of Grant & Eisenhofer, who is scheduled to depose James Dolan later this month.

The letter that MSG sent out on Tuesday seems to be an attempt to pre-empt any interpretation of Monday’s New York decision as a weakening of the plaintiffs lawyer ban. MSG does not specifically mention the New York ruling but said in the new letter that the company retains a legal right to revoke any ticket to any event at any of its venues.

Plaintiffs lawyers in the Delaware case were buzzing about the new letter on Tuesday. Jeffrey Golan of Barrack, Rodos & Bacine called it “not surprising, at this point.”

But the best reaction I heard came from Eric Zagar of Kessler Topaz Meltzer & Check, referring back to the chancellor’s assessment of the first MSG letter: “We may have a new candidate for stupidest thing ever.”

Read more:

Game over? Plaintiffs' lawyers banned from Madison Square Garden by MSG

MSGE shareholders sue board, execs in Delaware over MSG Networks union

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Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.