Business Negotiation
Fall 2012-2013 Section 101
Case study(3) project
Name:
Suliman AL-Sadaan 200700260
Hassan mira 200800524
Mustafa G. Al Nemer
200600149
In the evening July 11, the future of Washington Bullets was hung in balance on issue of signing
Juwan Howard, the club’s all star free agent forward and at the same time fans of Howard had
rally to ensure that he remained with Washington Bullets. Washington Bullets a Basketball team
that had not won a single title in last nine years and Howard was the most wanted player in team.
But there was conflict of interests for Washington Bullets and Howard as Washington Bullets
had limited financial supports to meet the fees and contract demanded by Howard as he was
asking for $100 million contract offer for seven year term while Washington Bullets was eager to
offer around $78.4 million for seven years. This resulted into Howard started thinking about
other teams though he wanted to play for Washington Bullets.
The business interests and financial calculations of Washington Bullets resulted into refusing
offer that much of money to Howard and this forced Howard to contemplate a deal with other
team Miami franchise Miami Heat that guaranteed $100.8 million. It was biggest deal in history
of team sports. This offer was supplemented with luxury hotel suites and limousine service
during the road trips. This posed huge risk to Washington Bullets as it most promising player of
the current generation was who could have resuscitate the club’s fortunes.
Howard decided to move with Miami Heat with tears in his eyes but this decision of Howard and
offer from Miami Heat became controversial within 30 days of the announcement with National
Basketball Association and National Basketball Players Association coming together to allege
Miami Heat of violating league rules that resulted into Howard coming back to Washington
Bullets. Howard delighted with the deal wanted to buy luxury suite at MCI Centre, a mansion in
Washington and a Ferrari sports car. But this decision of him and Miami Heat became a
nightmare for both the parties as NBA decided to take action against Miami Heat for violating
the rules relating to salary cap and chances of Howard’s contract with Heat being invalidated.
Initially Washington Bullets announced in an advertisement that it would take every step to
retain Howard and would be paying around $105 million to $140 million for seven years to
Howard. But this initially could not materialized as Unseld, the general manager of Washington
Bullets was not eager to offer more than $78.4 million to Howard while Howard was expecting
$100 plus million deal from the club. The negotiation between the Unseld and managers of
Howard ended abruptly as Unseld was not simply interested to negotiate further. This made
Howard upset as he wanted to play with Washington Bullets only. Later Riley representing
Miami Heat offered deal of $94.5 million plus perks for seven years to Howard. Howard was
impressed with deal offered Riley but he still wanted to give Washington Bullets another chance
so that he did not have to leave the team. So he with his managers went to meet Unseld and
Pollin, owner of Washington Bullets. But the negotiation broke as Bullets were eager to pay only
$84 million. This made Howard to think about Miami Heat’s offer. Then Howard was
approached by Riley with an offer of $95.2 million plus $6 million in bonuses with perk such as
hotel suites and Limos as well as extra $5,000 to help Howard sponsor a summer basketball
camp. Again at this point Howard was approached by Unseld with various suggestions for
increasing the value of his offer such as deferred payments. This was not accepted by Howard as
Unseld was not eager increase the offer value and this made Howard to take call to finally
engage with Miami Heat.
Everything was going smooth till NBA and National Basketball Players Association intervened
in the matter alleging Miami Heat of violating salary cap. In between, Riley to get Howard on
Heat board, made some compromises with the rules relating to salary cap of the club that was
capped at $24.3 million annually. Riley entered into a contract with Mourning, Brown and
Hardaway that promised some unlikely bonuses that were later considered by NBA to be part of
the salary making whole salary expenses of Miami Heat $4.56 over the cap allowed by NBA.
This created huge controversy. On July 16, Mourning left an impression that he had an
agreement with Heat that promised him $100 million plus deal. And according to NBA, Heat had
not notified that some to NBA in this regard. The deal with Mourning had left no room for Heat
to sign Howard and validity of Howard deal was in question. Initially though such deal with
Mourning was denied by Riley.
To investigate the matter NBA hired Robert Del Tufo to determine if the Heat had circumvented
salary cap rules and the team had any undisclosed deal with Mourning. On July 31, NBA
informed Heat that NBA had disapproved Howard’s contract because the club could not fit
Howard’s first year base pay of $9 million under the salary cap. NBA further informed Heat that
the team had made undisclosed agreement with Mourning as well as with Tim Hardaway and P.
J. Brown. Miami Heat decided for arbitration in the matter and Howard and Heat decided to
come together against the challenge offered by NBA.
The choice of arbitration had risks for both the Heat and Howard. The results of arbitration
would come out in two months and if the Heat would lose, Howard would end up losing tens of
millions of dollars. At this stage Bullets could sign Howard only if the league restored the team’s
Larry Bird rights. On August 1, the NBA declared Howard a free agent. Next day Unsled
decided in consultation with Pollin an offer from Bullets to be presented to Howard through
Unseld. On August 3, league and union completed an agreement to restore the Bullets’ Bird
rights and Unseld decided to negotiate properly this time with Howard the only hope of
Washington Bullets. In Howard’s case league and union decided to restore the Bullets’ Bird
rights and agreed that if a player signs a second contract after the first deal has been disapproved,
the second contract would be the valid one making arbitration moot. Bullets agreed to enter into
a deal with the value of $100.8 million adding $4.2 million to cover Maryland taxes even though
Howard was in relatively weaker negotiation position and Unseld in powerful position. Within
30 minutes a deal of $105 million was negotiated and Howard was again back with his previous
team. Howard and Bullets both reconciled their underlying interest. Though, during the period
relationship between Howard and the Heat soured.
Everyone actor in the negation seems to be right as Howard wanted to secure his financial
interests, Bullets were securing its own and the Heat was doing same in its own case. Though, it
looks contradictory but actions of every actor are right. But the dispute could have been avoided
Bullets had thought properly about their underlying future interests in Howard that they later
reconciled as they could had easily satisfied the perceived values that seemed to be fair for
Howard and there would had not been a phase of strained relationship with many parties; mainly
Howard and Bullets as the final criteria for every action was the future interest of one’s. Being
focused on the rights and power plays important role in effective dispute resolution as the case
suggest clearly as a dispute arose between NBA and Heat as well as Heat and Howard on the
issue of salary cap and contract and the parties used rights and power to resolve the dispute.
NBA used its power to in case of salary cap and Howard used his right to enter into second
contract with Bullets. This defeated the tricks of deception by Heat to sign Mourning, Hardaway,
Brown and Howard at the same time. The controversy put the whole interest of Heat at stake as
Heat was weaken by the threat of legal actions and the dispute was resolved easily without much
problems. As a whole it can be said that it was failure of Bullet as it failed to negotiate with an
eager party Howard who was more than eager to remain part of the Bullets and of this situation
Heat wanted to take advantage but its own deceptive practices costed Heat costly and position
and power of NBA and National Basketball Players Association helped all the parties to come
out of the dispute and to some extent safeguard their respective interests and positions.