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Pinellas judge rules part of Rays ownership lawsuit can proceed in court

Some complaints will go to arbitration, as Stuart Sternberg requested, but a jury could still rule on his removal as general partner.
 
Tampa Bay Rays managing owner Stuart Sternberg speaks during a press conference at Tropicana Field in November. A Pinellas-Pasco Circuit Court judge ruled Wednesday that a group of minority owners suing Sternberg for alleged fraud and breach of fiduciary duty can proceed in court with part of a lawsuit seeking to remove him as the team's general partner. Other aspects will go to arbitration, as requested by Sternberg.
Tampa Bay Rays managing owner Stuart Sternberg speaks during a press conference at Tropicana Field in November. A Pinellas-Pasco Circuit Court judge ruled Wednesday that a group of minority owners suing Sternberg for alleged fraud and breach of fiduciary duty can proceed in court with part of a lawsuit seeking to remove him as the team's general partner. Other aspects will go to arbitration, as requested by Sternberg. [ IVY CEBALLO | Times ]
Published March 3, 2022

A group of minority Tampa Bay Rays owners can proceed with part of a lawsuit seeking to expel Stuart Sternberg as a general partner in the team, a judge ruled Wednesday.

The lawsuit, filed in May and amended in October, alleges that Sternberg withheld financial and strategic information while buying up shares from other limited partners, increasing his personal stake in the team at the expense of the partnership that governs it.

Related: Tampa Bay Rays minority owners sue Sternberg, say he secretly negotiated Montreal deal

Sternberg had sought to have the case settled through arbitration, rather than a jury trial. On five of the six counts in the lawsuit — all alleging fraud and breach of fiduciary duty, and asking for a full review of the team’s finances — Pinellas-Pasco Circuit Judge Amy Williams agreed, deeming elements of the original team partnership agreement, written in 1995 and signed by Sternberg in 2004, vague enough to warrant independent arbitration.

The sixth count, she said, was “a different bird.”

That partnership agreement stipulates that a general partner can be removed via majority vote by other general partners.

According to the lawsuit, Sternberg became managing partner after acquiring 49 percent of the team in 2004. By 2020, he had increased his stake to 85 percent by buying other general partnership stakes, including those held by the family of former owner Vince Naimoli, making him both managing partner and sole general partner.

Because Sternberg is the Rays’ sole general partner, “it isn’t very likely that he’s going to choose to vote himself out,” said attorney Courtney Fernald of St. Petersburg law firm Englander Fischer, representing the minority owners. That made the limited partners “powerless to remove the general partner, no matter how reprehensible his conduct might be.”

Williams concurred that a trial would be the most viable option.

“There would be no other way in a situation like this for a general partner to be removed,” she said. “It wouldn’t be possible.”

The lawsuit was filed by five limited partners who own a combined 9.6 percent of the team: Robert Kleinert, Gary Markel, the MacDougald Family Limited Partnership, Stephen M. Waters and a trust bearing Waters’ name.

Their suit only seeks to remove Sternberg as general partner, not majority partner. If it happens, according to the partnership agreement, he could be compelled to sell the general partnership stakes he’s acquired since 2004.

Related: Judge in Rays lawsuit used to be team's minor league GM, co-owners say

The Rays, in a statement last year, called the lawsuit “deceptive” and “fraught with error and falsehood.”

For the allegations that will go to arbitration, the minority owners are seeking a financial audit and damages in excess of $30,000. Dates for arbitration and a trial have not been set.

A spokesperson for the limited partners’ lawyers declined to comment further. A Rays spokesperson and attorneys for Sternberg also declined to comment.