Sidney Volinn was already a respected bankruptcy judge by the time the Seattle Pilots case came before him. He was the first judge ever to handle such a case and I thought that he would have some interesting insights. I interviewed him in his office at the old U.S. Bankruptcy Court headquarters in downtown Seattle, in January 1994. Judge Volinn passed away in August 1998.
Will you describe the issues involved in the Pilots' bankruptcy?
Basically, the issue was whether the bankruptcy court had jurisdiction as a result of the filing of the Chapter XI over the sale of the Pilots franchise to the Milwaukee Brewers. The case was filed as a Chapter XI proceeding somewhere in the year 1970. The Pilots were owned by individuals who were underfinanced. They had been having financial difficulties for some time. The principals of the corporate entity that owned the Pilots were the Soriano brothers. Dewey Soriano actually was a pilotthat is, an individual who has sufficient maritime experience to be awarded a license to guide and pilot ships in close waters around Puget Sound. That's probably how the name Pilots became attached to the team. The other principal was his brother, Max Soriano, who was a lawyer.
The Pilots had hoped for some time to be able to play in a domed stadium which was being planned by King County. They had been playing at the traditional place, Sick's Seattle Stadium down on Empire Way, which was an outdoor stadium and that type of site for playing baseball. Particularly in the evening in the cool, damp weather which prevails in the Northwest even throughout the summer let alone the early evening game in the spring and the fall, discouraged the amount of attendance that was required to support major league baseball. As their financial difficulties mounted, it became clear that the franchise was a problem for the entire league. The American League owners began to discuss a successor to the Pilots franchise. It takes a lot of money to run a baseball team and the people who become interested in baseball are usually wealthy individuals and they become, from what I could perceive, somewhat of a club.
The financial problems of the Pilots became more and more of an urgent nature and as these problems mounted. Individuals who desired a franchise became aware of it. Negotiations began to take place. There were a lot of interests involved in Seattle. The Bank of California had advanced several million dollars. The bank was very concerned because the only collateral they had for the loan was the franchise itself, which wasn't worth very much, particularly if there was no sale and it just stopped operating. Negotiations were on-going and they began to focus on the Milwaukee Brewers and a combination of individuals there who were interested. The transaction was based on the consideration of the sale of the franchise, which would provide for the payment of every party to whom the Pilots owed moneypayment in full. The Bank would be paid in full, the season ticket holders would be paid in full. There were obligations arising out of the relationship of the Pilots to a farm team, which were not inconsiderable. The deal was to be cash to everybody, plus interest, so that the concern of the American League for its reputation for financial responsibility would be met. Negotiations had reached a point where it appeared the sale was imminent.
The public became aroused. There was a crescendo of newspaper articles critical of management of the Pilots, a great deal of public outcry about the loss of the Pilots, demonstrations and, I believe, the Sorianos were hung in effigy under the Monorail. The public officials and economic interests also were concerned, because obviously there were many economic consequences attendant to a major league baseball franchise. As a result of the public concern lawyers were retained to formulate and pursue courses designed to prevent the transfer of the franchise. One of the laywers was Alfred Schweppe. Mr. Schweppe had been the dean of the law school, he was a principal partner in the firm of Micken, Rupp & Schweppe, which, among others, represented what was then Pacific Phone & Telegraph Company. He was an eminent lawyer and a very public-spirited gentleman. He had been involved in a number of lawsuits which were off the beaten track for a person who represented, primarily, large business interests. As I recall, the American League owners were meeting in Tampa, Florida and they were having a meeting at which they would vote to transfer the franchise. Mr. Schweppe went to Florida, began a court proceeding and obtained an injunction there preventing the American League owners from voting to transfer the franchise. At that point, they were stymied. There was also a proceeding in the Superior Court of the State of Washington, King County, in Seattle. I've forgotten what that suit was about, but I assume that it did involve an attempt by the municipality hereKing County and the City of Seattleto preclude the League from transferring the franchise. It may have included anti-trust action, although that's usually a federal action. That lawsuit was on-going and what was also involved there, whether or not an injuction should be issued preventing the franchise from being transferred. There were probably also various damage claims of various kinds.
Someone conceived of what was, at that time, the most unusual motion, that a bankruptcy should be filed under Chapter XI of the Bankruptcy Act as it existed at that time. There are various chapters of the Bankruptcy Act. Chapter XI is distinguished from Chapter VII, which is the usual type of proceeding. It involved the concept that a business could undergo an arrangement with the consent of its creditors, whereby it could be on-going or sold in a different form presumably with a greater degree of satisfaction or benefit to its creditors. It was a brilliant maneuver. As President Kennedy said, "success has a thousand fathers, failure is an orphan." I tried to find out who thought of it and I've had various individuals and organizations take credit for it. The notion started in the office of a Cleveland law firm, whose name I have forgotten. They in turn, retained a Seattle law firm--I think it was Aiken, St. Louis--to carry it forward in Seattle.
Why was filing under Chapter XI brilliant?
Chapter XI is a federal statute which, in a general way, pre-empts state law. Basically, they were stymied by these various state court proceedings and they had a chance in a federal forum to possibly override state law. At that time, bankruptcy law was a lot less formulated than it is now. Also, we now have a different statute which defines further the pre-emptive aspects of bankruptcy law. At that time, a great deal of this was unformulated and unknown, but he pressure was on to do something, because the baseball season had to start. It wasn't just a matter of the Pilots. The Seattle franchise was integrated with all the other franchises, there had to be a schedule. While the payments that the media paid for the right to broadcast games was nowhere what it is now, it was substantial at that time. The public interest is always high in listening to or watching games. There was a great deal of pressure on for the entire League to know its fate.
They were being bogged down with the Tampa injunction and the proceedings in state court. The filing of the bankruptcy was a possible way of escape for them and they took it. When the Chapter XI was filed, that of course, received an enormous amount of media attention. At that time, we were called "referees in bankruptcy," our relationship to the District Court and our jurisdiction was not well defined. The relationship with federal courts to state courts is always a tricky matter. Federal courts are reluctant to intrude into the matters before state courts, particularly where there's an on-going case. As I recall, the Superior Court judge in charge of the state court proceeding was Judge Mifflin. I wasn't sure just what I ought to do in respect to the proceeding by way of transferring the franchise. While I was somewhat concerned about the relationship with the federal court system and the state court system, I do remember reading a statement that Judge Mifflin, who was in charge of the state court case made. He said to the newspaper reporter, "well, I guess the federal court will take us off the hook." I didn't take that as a nod of permission, but it was an indication that he was not jealous of the jurisdiction of the state court.
It all came to a head at at hearing where, after considerable argument, I held that I would consider whether or not a sale should go ahead and ultimately set a date for a hearing on the sale. That provided a focus and again, the public interest to me was astonishing. I got telegrams from everywhere. I remember one night at home, I got a call from a talk show host in Detroit that asked me to go on national radio and say what I was going to do. I remember getting a wire from a physician who knew mehe should have know bettersaying "please don't let the Pilots go." It was just astonishing what a grip professional sports, all sports, holds on the public. We had to have the hearing, the pressure was really on. All of this happened in six weeks. We had the hearing on whether or not this particular sale was appropriate based on the best interests of the creditors. While in a statutory sense, the public considerations were not immediately involved, nevertheless, everyone was heard. The hearing actually terminated late one evening.
I can still remember the arguments by Mr. Schweppe and by Mr. Dwyer and other parties relating to the sale. I can still remember Orlo Kellogg, attorney for the Bank of California. His argument was very brief. I think the sale price was $10 million and Orlo in his final argument, wringing his hands, said "ten million, Judge, think of it. Ten million would pay everybody, including my client and what do they have to offer? Only hopes." I can remember Mr. Dwyer's argument about the need for the public to have the team, for the state to have the team and the technical considerations relating to the League and its dealings with the Brewers. I forget who argued for the City and County, they stated that they had made a deal, they were going ahead with the stadium on the basis of the deal that had been made and a great deal of money had already been expended. Mr. Schweppe appeared obstensively for the people who had purchased season tickets. There's a theory of law that they are entitled to a unique performance. Damages, that is, returning the ticket money, could not replace something that's unique. He knew that I liked baseball myself and he compared stylized motions of baseball players out on the field to a ballet performance. He pointed out that where but in baseball could a minority such as Jackie Robinson rise to the heights? I concluded that the sale should go ahead and it did go ahead and the Pilots left town.
So, you're a baseball fan?
Let's just say that I was a member of the Boston Braves' Knothole Gang as a kid.
Had you followed the Pilots' situation before being assigned the case?
I couldn't avoid reading the newspapers, but I didn't know any more about it than any other person that read the papers.
How did you feel about taking the case, being a baseball fan and knowing that you might have to order the hometown team might move away?
Just like any other judge, you try to detach yourself from personal experience. None of us can escape experiences of a personal nature which may have something to do with the case. If it's strong enough, you can always recuse yourself, but I was not that emotionally wrapped up.
The State's attorneys argued that the Chapter XI was filed in bad faith. Did you agree?
There's a doctorate of law that when a Chapter XI is filed, it was for arrangements. The idea of an arrangement is to rearrange a company so that it can be on-going, but if there is actually a great emergency whereby it should sell its assets, then under the emergency ruling, it can sell its assetsand there certainly was an emergency here. The good faith concept actually attachesdid attachto Chapter X.
Would you explain the difference between Chapter XI and Chapter X?
Right now, there is no more Chapter XI and X, they've been blended. At that time, Chapter XI was an arrangement whereby a business could file and they would provide a plan whereby they would pay their creditors "x" cents on the dollar. Maybe 10 cents, maybe 20 cents, but in any event, more than the creditors would get if the business were liquidated. Then, the creditors would vote on it and if they voted for it, the plan would be confirmed and then the debtor would go out of bankruptcy, in effect, having made a new deal with its creditors and presumably would pay them based on that. Corporate reorganization, as indicated, is a corporate matter. Chapter XI arrangements didn't have to be a corporation, it could be a partnership. It was a much more formal structure, the Securities and Exchange Commission had to be involved. There, they did have a good faith test. That did not exist in the Chapter XI. What good faith meant was whether or not we had a reasonable prospect of reorganizing.
Did the attorneys for the State of Washington argue that the Pilots should have filed under Chapter X because it would have taken longer or put greater controls over the American League?
I can't ascribe motivations to them. I can say that it would have provided a much more formal, deliberate proceeding and it would have been inconsistent with the desire of the American League to get this thing passing.
Were the people of the state creditors?
All I know is that they wanted to slow it down. There were counter-measures being taken in the City of Seattle. It wasn't as if Seattle was a dry hole. They just couldn't get a deal together in time. This deal was there. There were a number of individuals and entities in Seattle who had means, the question was getting it all together. All the various businesses that were dependent on the activities, economic activities that follow on having an American League franchise, like the hotel business, restaurants, transportation facilities of various kinds. There was a great deal of economic interest at that time that had a stake in keeping them here and it wasn't as if they were standing by. They were actively trying to get something together, they just couldn't get a focus. I'm fairly certain Mr. Schweppe actually represented hotel interests. I forgot just how that worked.
Did it make any difference that William Daley had the financial means to put in more money or that the American League had pledged $650,000 to keep the team going in Seattle after they rejected Eddie Carlson's non-profit proposal?
I just felt that, to put it crudely, "a bird in the hand is worth two in the bush." There was $10 million there. It was going to pay everybody and that's all we knew. We also knew that there were possiblilities that somebody else could take care of these debts, but they were only possibilities and the possibility of bailing out the Pilots had been discussed for months. The financial problems of the Pilots by the time we had this hearing were well-known and had been well-known by people on the inside for a long, long time. The Sorianos themselves had been desperately exploring for a long, long time, getting the funds to keep themselves together. I still remember Max Sorianohis appearance, he was so troubled. His brother, Dewey, at least on the outside was a more pragmatic-looking individual. You could see in Mr. Soriano's posture and his appearance as this thing developed over the weeks, he really was under an enormous stress and very troubled. It was not a good time for the Soriano brothers. It was a very bad time. The public pressures were tremendous, their responsibilities were great and they were aware of it and they just couldn't raise the money. They were trying desperately. There I was sitting there, evaluating, and I just felt for the people directly involved and, indeed, in the long-range public interest, the best thing to do was to take the offer. There it was. There was nothing else that came anywhere near it. There was no prospect of anything else anywhere near it. What was there was chaos. It's possible that if the franchise wouldn't have transferred, the American League would have had come in and done some patch work. Maybe. I'm not sure. Nobody knew.
What about the $650,000 pledge?
$650,000 for running a baseball team, even in 1970? I don't know what the record would show, but looking back, I don't think that's very much. Baseball costs a lot of money. I have to say that I was very impressed with the character of the American League owners. They were very concerned about the financial responsibility of baseball overall and meeting every debt that the Pilots owed.
And yet, a lot of people criticized the owners for not checking out the Sorianos' financing more carefully before awarding them the franchise.
That was water under the dam. By the time 1970 came around, everybody knew that that was the case. Imagine the bank loaning $4 million and their only collateral was the franchise and a guarantee of a wealthy individual. Most lawyers find out that a guarantee is a tough thing to sue on. It's a like a mine field. There are a lot of pitfalls to suing on a guarantee. A careful banker would be careful about getting a guaranteeeven if it was collateralized and I'm not sure how well collateralized the guarantee was.
Another thing that impressed me about this particular case was the high caliber of all the lawyers. I met the Cleveland lawyers and they were riding shotgun. Wally Aiken was the principal attorney for the debtor, he was a very high quality lawyer. Dwyer and Schweppe. All that judges get from lawyers is advice. That's basically what it isyou're listening to advice from competing individuals, but if they're high quality, then you can be sure that the authorities they're giving you are honestly reported to youyou do check it yourself, of courseand the arguments are rational. In a way, I was privileged to be involved with lawyers of very high quality. Orlo Kellogg for the Bank was a terrific lawyer.
You presided over the first bankruptcy in major league history. Were you aware of the enormity of what you were doing?
When I started to get all those telegrams and telephone calls, I certainly was aware that something was going on. After a while, one loses oneself in the problem that's immediately dealt with and you're not affected. At least I think I was not affected so much by the attention of the media. You have a sense of responsibility because you realize that what you're doing affects a lot of people. That raises the stakes when you consider it.
Some people have said that the Sorianos were in undue haste to sell the team. Do you agree with that?
I think that anyone whose effigy is hung from the Monorail, it would certainly take a most stolid individual not to be affected by that. As far as haste is concerned, everyone was in haste for a very definite and specific reason: the season had to start. The Sorianos didn't have the money to do it by themselves. Where were they going to get it from? They sold it.
Did it matter that most of the team's losses came from depreciation of player contracts?
No, no. What mattered most was the future and they didn't have it. They could never make it just with gate receipts. They've got to have all the other stuff, particularly the media things, TV and radio. It was so up in the air, how could they make a contract with anybody? At the point in time when they filed the Chapter XI, who knew if they'd even be playing in Seattle? It was sort of a game of chicken. I think what happened was that the people who wanted the franchise to remain figured that if the franchise is here and they didn't let it go, the American League somehow would keep the team going. Which might have happened. The big problem was that they didn't have a good place to play. Sick's Stadium was just not a good place.
Did anyone blame you for the Pilots' move?
No. I remember there was a big crowd around the building and a lot of reporters when I delivered the final decision. I didn't want to go out and have the press bother me with questions, so I was sitting in my chambers and the custodian of the building came in and he says, "Judge Volinn, I have a way out for you, come on with me" and he took me out and we went down the stairs and into the garage on the side of the building and he opened the door and I walked out, bypassed the reporters and went home.
What was the most memorable thing in the case for you?
The final argument. I really enjoyed listening to the lawyers summarize the case. 'Enjoyed' isn't the right word, I was enthralled. They were good lawyers, each one summarized their side beautifully and it was most interesting and that's what I enjoyed the most. Then I had to make up my mind.
How was this case different from other bankruptcy cases?
In a general way, it's pretty much the same, where there's a genuine contest with complex issues and the economic stakes are high. I would say that this case, considering its subject matter and legal issues and problems was one of the more interesting cases I've had.
Is baseball just like any other business?
To the people who are in the business of baseball, it certainly is. An accurate statement is: "it's the bottom line that counts." To the people who are involved in the business aspect of baseball, they buy and sell the players. The players are merchandise They're marketed. The game is marketed in many different ways, all the way from baseball caps to baseball players, to the media rights, radio and television and cigarette advertisements, wherever they can make a dollar.