We signed Marvin Webster, had to give up cash, the 7th overall pick, and Lonnie Shelton..........

Webster's compensation case was one of the most contentious of the period when compensation awards were used to settle free agency (the 1976 through 1980 offseasons, before the right of first refusal was introduced), right up there with Bill Walton's. With some help from Google News, here's a chronology:

Teams were free to work out compensation between themselves, but if they could not, they could appeal to the NBA Commissioner's office. That is what happened in this case. Commissioner O'Brien's initial award, made in September 1978, was Shelton, $450,000 cash, and a 1979 1st round pick. The 1st round pick was actually the Nets', acquired as part of the settlement of the indemnity for the Nets intruding on the Knicks' territory when they joined the NBA; ironically, the Knicks' own 1979 1st round pick had already been sent to the Sonics as part of the 1975 Spencer Haywood trade. The pick turned out out be #7 overall, and the Sonics used it to take Vinnie Johnson. The Knicks were extremely unhappy with the award, feeling that it was excessive, and were particularly upset that they had to lose a player in the deal. Appeals were ultimately pursued by both the Knicks and the Players' Association.

The case initially went to a "Special Master" assigned to hear appeals of disputes involving the collective bargaining agreement between NBA owners and players. In May 1979, the special master upheld the award. The special master's ruling indicated that he personally found the award to be excessive, but did not feel that it met the appropriate legal standard for reversal.

The case was then appealed to a federal court. In a ruling issued in September 1979, the court overturned the special master's decision, ruling that the original award had in fact been excessive. This time it was the NBA's turn to appeal.

In June 1980, a federal appeals court issued a ruling in the case. As I understand it, the court found that 1) the special master had not used the correct legal standard to decide whether the award should be reversed, and 2) the trial court only had the authority to undertake a legal review of the decisions of the special master (it could not make its own "de novo" determination on the facts). The appeals court then returned the case to the special master, to review it again in accordance with the appeals court's decision.

In July 1980, the special master ruled that the award had been excessive. This placed the matter back in Commissioner O'Brien's hands, to modify the existing award or make a new award. The ruling suggested that the Commissioner consider returning some of the cash to the Knicks. The ruling denied a request from the Knicks that either Shelton be returned to them or that they receive the player selected by the Sonics with the pick they had received (Vinnie Johnson).

A few weeks after the special master's ruling, O'Brien gave the Knicks the option of receiving $275,000 cash or the Sonics' 1981 1st round pick. The Knicks continued to grumble about it, but they ultimately accepted the pick. This finally brought the case to a close, nearly two years after Webster had originally signed with the Knicks.

One of the reasons the Knicks grumbled about the final settlement was that, while on the surface it looked like they were getting their pick back, they felt that the pick they were to receive wasn't equal in value to the 1979 pick they had given up earlier. That pick had been #7 overall, and the Sonics' 1981 pick figured to be a lot lower. In the 1980 draft, the Sonics had won 56 games, and their 1st round pick had been #20 (out of 23). Even after agreeing to accept it, the Knicks didn't keep the pick. In September 1980, they sent it to the Kings along with Joe C. Meriwether as part of a 3-way trade that sent Campy Russell to New York.

Then, the Sonics' 1980-81 season crashed and burned. Gus Williams did not come to terms and sat out the season. Lonnie Shelton and Paul Westphal (acquired in a fire-sale trade of Dennis Johnson) both missed large portions of the season due to injuries. The Sonics slumped to just 34 wins, last in their division. Their first round pick? It turned out to be #7 overall. (The Kings used it to take Steve Johnson.)