By Alison Frankel
(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. MSG said in a statement on Monday afternoon that Dolan was interviewed by state regulators. The company said it was "hopeful" that its "full and total cooperation" with the liquor license board "will put an end to this investigation."
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 (NYSE:MKC) 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.”