Monday, September 27, 2010

Day eleven preview.

Good morning. First, a couple housekeeping matters. If you're new to the site, or would like a refresher on the basic issues, you can check out this trial guide I put together a few weeks ago. The basic issues are unchanged, though some details have certainly emerged since then. Next, I want to point out the long-overdue Twitter gadget on the left sidebar. I was dismayed to learn many non-Twitter users were having a difficult time accessing an updated feed last week, and the gadget on the side should solve that problem. It shows, in chronological order, my last ten tweets; about the most I'd ever get out after any session in court.

Today, Frank sets out to legally establishing the veracity of the factual background detailed in the post below this one. It's one thing, of course, to know the facts, but another altogether to prove them. To this point in the trial, Jamie has done a good job casting doubt on Frank's side of things. Her attorneys strongly implied Reynolds Cafferata was in the Dodgers' pocket, and they managed to characterize Larry Silverstein as either a man hiding a secret or a lawyer who made some pretty shaky decisions.

The fact is that, had Silverstein sought the parties' acknowledgment of the Exhibit A switch in April 2004 when, as Frank contends, both he and Jamie were on the same page, we probably wouldn't be here today. Most of Jamie's initial arguments, including the possibility of undue influence, have fallen through. The existence of that other Exhibit A, though, and the circumstances surrounding the switch, have given her a fairly strong position to argue from. It's only fitting that her best legal theory here--the switcheroo--and Frank's best defense--the facts--play in perfectly with how they've handled the divorce publicly. Jamie has been vocal and visible, Frank reserved and reticent.

Los Angeles Dodgers CFO Peter Wilhelm will take the stand today, and he is expected to be the first in a series of several witnesses testifying as to Jamie's knowledge and understanding of the MPA at the time of its creation and execution. Blessedly, this week's witnesses are supposed to be on and off the stand much quicker. Poor Larry Silverstein, between depositions and trial testimony, was under oath for a calendar week explaining to David Boies his role in the matter. Ouch.

The parties left trial last Thursday publicly optimistic about the possibility of settling the issue via mediation, but talks stalled out after a ten hour session Friday. The Times' Bill Shaikin reports that the sides are about $300 million apart, and also dealing with issues related to the timing of payments. This is in line with past settlement discussions, in which Frank's starting point was always what Jamie would get from his version of the MPA. Further, while Frank is willing--and might want--to spread payments over time, he has refused in the past to structure a settlement in any way that would have ramifications on the club. This means that giving her a chunk of the team or a hook in future revenue streams have been largely off the table.

While settlement talks haven't gone particularly well--this past Friday or in two other attempts this year--I still believe a settlement is the only reasonable option here. Frank might have the facts as they actually happened in his favor, but he's got several difficult hurdles to go in proving them and avoiding other land mines, such as Jamie's lack of independent representation. The risk of losing is still very real for both of them. And, among the several elephants in the room are multiple other legal theories, avenues, and disputes that would follow resolution of the issue on the table now. Unless settled, this litigation won't end here, and the parties both risk spending so much money unwinding the marriage that there is little left when all is said and done.


  1. " Further, while Frank is willing--and might want--to spread payments over time, he has refused in the past to structure a settlement in any way that would have ramifications on the club. This means that giving her a chunk of the team or a hook in future revenue streams have been largely off the table."

    This is a good thing, isnt it? I read about Frank taking out a loan against future tv rights, and that really scared me. I know I have waited for that day for a LONG time. Ive always viewed those TV rights as the key to the future success of the team as far as opening up payroll. I have largely wanted Frank to win this case. I think he is a smart buisness man. you really cant argue against the success of the team, since he has taken over. But, if he sells off the TV rights, I think its a disaster for the orginization.

    But who knows.. 300 mill is alot of money to be apart by. Even if they settle for half of that, its a serious chunk of change, and I dont see how Frank can pay that without it effecting the team. Maybe the best option IS the Dodgers being considered community property, and the team has to be sold. I would imagine that neither party wants this, as the long term plan is to have their sons own the team. Theres no gurantees that new ownership brings any stability either. The McCourts have brought on-field success, and theyve done a heck of a job, turning the team around from the wrecking ball that was Rupert Mudoch/News Corp/Fox.

    This whole thing is just craziness. I just hope the only divorce I have to go through, is this one.

  2. What Frank should do is offer Jamie a lump sum of $125-130 million, paid by 2013, with a securitized loan of broadcast revenue... if he wants to settle this..

    There are $300 million apart because Jamie is pretty much putting the pressure on Frank. She is being as unrelenting as Frank. She isn't going to get $400 million, because the Dodgers don't have $400 million in liquidity to give her.. She should be a bit more realistic, that probably the most she would get from Frank or the sale of the team is $80-100 million, in structured payments.

    If both care about the Dodgers, they would sell the team to settle the divorce. The second best thing is get the finance to start a TV channel. However Disney and Fox (which has two sports channels in the Southern California Market) could block any Dodger Sports Network, by strong arming the other teams, especially teams like the Clippers, the Ducks or the Kings, from joining, (the Lakers can probably start their own sports channel if they want) The Dodgers can't go alone on their Sports Channel, they need another sports to fill in the programming during the off season.

    Ideally, a powerhouse sports channel would be the Dodgers and a future NFL team, but the NFL wouldn't allow a team to do this, because of their TV contracts.

    One thing that bothers me about both McCourt is their business plans have these absurd expectations of instant profit, and revenue projections that are borderline unrealistic. They are expecting huge profits from a Dodgers Sport Channel, even though they probably cannot get financing. They are expecting that making the area around the Stadium a open area mall, like the grove would be a wild hit.

    Instead in reality, the financing is barely covering expenses, they don't work well with others, and there are some powerful interests, especially broadcasting to block any sort of regional sports channel from going on their turf.

    As much as I think the Dodgers should be in community property, Jamie needs to be a bit more realistic in the settlement talks. Both of them have huge debt loads, that doesn't give them much wiggle room..

  3. Josh,

    I think you are taking a very simplistic view and going only by contract law with passing judgments in your posts. California Family Law is very specific about certain benchmarks that have to be met for an asset in a marriage to be excluded from community property in a pre nuptial and post nuptial contracts

    No. 1 - A waiver signed by a partner in a marriage, surrendering their rights to contest the assets in question,(whether a business or a property)

    No. 2-Clear financial compensation in the contract, for waiving those rights to a specific property that is considered "separate property"..

    The whole aspect that a contract can only be waived because it was signed under duress or fraudulent measures, does not take into account that California Family Law and Community Property stipulations are very specific that assets acquired in a marriage should be divided (along with the debt) as equally as possible. This can supersede a well put together pre nuptial and post nuptial contract.

    What is coming across from the divorce and the flippant behavior of both McCourts about not reading the MPA, or not practicing due diligence, is that the MPA was not intended as an ironclad separate property contract. If the McCourts were serious in making the Los Angeles Dodgers as Frank's separate property. The MPA would be very specific and detailed laden about the Los Angeles Dodgers as the property of Frank McCourt. Instead, it is kind of boils down to a paragraph in the MPA and the words "Inclusive" and "Exclusive".

    Obviously the intent was to shield the McCourts' residential properties and other assets not connected to the purchase of the Los Angeles Dodgers in 2004.

    When the problem was discovered close to four years after the MPA was signed, it was more to see the legal pratfalls of the MPA, then to see it as a very good MPA. It needed to be fix mainly for one reason: clarity.

    The biggest argument that Jamie has on her side, isn't that there was a switch of the Exhibit A and the California MPA, or Silverstein said one thing in his deposition and stated something else on the witness stand. The biggest argument in Jamie's corner that the Family Laws considers in these matters is that Jamie was married to Frank for 28-29 years. All their assets (and debts) were pretty much accumulated during the marriage. Jamie's intent during the signing of the MPA and whether she ignored the advice of legal counsel at the time, and changed her mind years later about the nature of MPA doesn't minimize that the duration of the marriage.

    I know there situation that the McCourts are in, isn't an anomaly in California Family Law, and there have a couple rulings that waived pre and post nuptial contracts because of the unfair nature of the division of assets..

    So you need to realize that there is contract law, and then there is contract law and how it fits into California Family Law.

  4. "Poor Larry Silverstein" my arse. Just wait for the grilling he gets from the Bar.

  5. Actually you CAN argue against the success of the team under Frank. Boston doesn't want to get rid of Manny = 1 Postseason has become blatantly obvious the 3 stooges simply rode Logan White's players + Manny to those NLCS, they themselves haven't done much good to the success of this franchise.

  6. I echo Okojo's sentiments regarding the difficulty Frank will have in starting a Dodger YES network. In fact, there have been recent studies stating that it may be overblown in this region due to the limits of actual Dodger viewership on television. If they do not fit in other significant programming, it may never become what they expect. I think after all is said and done, that a new stadium may be the solution. A 45,000 seat retro-Ebbets urban outfit located somewhere downtown with a view of the skyline of Los Angeles. This seems to be more in line with the current model of ballparks, and could create some more needed offense if band box in nature.

    I cannot imagine that Jamie is willing to settle for anything less than $150Mil with either a small revenue portion or future revenue against TV or new stadium. At the end of the day though, folks, this is all just looking like bubba meises. They're done!

    By the way, I walked out of the courthouse at noon and thought I had landed on the surface of the sun. McCourt's Inferno!

  7. (From Mark Heisler's phenomenal article on Truthdig, "The War of the McCourts"):

    Buying the Dodgers had helped Murdoch pre-empt a Disney challenge to his regional sports networks, but became a PR debacle and, he claimed, a financial one.

    Since Murdoch was effectively taking money from the Dodgers and giving it to Fox, no one could tell how much—or if—he was losing.

    (This to piggyback on the veracity of arguments which have claimed over the years that FOX's claims of losses are greatly exaggerated, Mr. Twain).

  8. If the MPA is thrown out can the judge also issue a ruling which might give a guide to what a settlement should be? Frank has supposedly offer 100 million and Jamie wants around 400 million.

    On the surface Jamie seems to want it both ways and knows that Frank can't afford that now. Could the Judge say the MPA is flawed, but, since Jamie got properties and in theory was protected from risk, she should get about 250 million?

  9. New Stadium?
    I just threw up in my mouth

  10. In response to Tony:

    There isn't going to be a new stadium. If there was a new stadium, it isn't going to be a Fenway Park facility in downtown with no parking..

    The City of Los Angeles is hurting for money, the County isn't do much better and the State' finances are borderline bankrupt. There is no money for a taxpayer's funded stadium. (there isn't going to a Giants' privately finance stadium)

    On a TV channel. LA is the second largest media market in the nation. The biggest part of the Forbes valuation of the Dodgers is media market.

    I think the limits are that a huge amount of capital has to be raised, and some huge fees to be charged to fans to subscribe to the channel to watch games, to recover costs. We are probably talking around $250-$300 million of capital to be raised for such an endeavor.

    Fox and Disney could throw plenty of monkey wrenches into the birthing process for a Dodgers Channel. It wouldn't be pretty.

    If any channel I would emulate isn't YES as much as WGN and how they marketed the Cubs during the Tribune ownership era. The White Sox and the Cubs took two different paths for TV broadcasting, and the Cubs became the dominant team in the region.

    I doubt there would be a Dodgers channel for a couple reasons. Frank McCourt doesn't have the money. The Dodgers don't have the money to entice another Southern California team to join them. They don't have the money to entice some big wigs to risked being blackballed from Fox and Disney to come over. I think any Dodgers' sport channel will piss off subscribers to no end, for charging huge fees, and shoddy broadcasting...

  11. I agree--there will not be a new stadium in Los Angeles, nor is there the need for one. Los Angeles taxpayers will not even foot the bill to lure an NFL team. So, what makes anyone think that they would fund a new stadium for the Dodgers, especially when Dodger Stadium is a revered civic treasure? It won't happen.

  12. @ okojo

    not completely relevant to the above discussion, BUT . . .
    Why not LATV channel? This would include the Lakers and Dodgers and whoever else. I s'pect that most LAL fans would throw down $5/month to watch the Lakes as long as they are contending. The Lakes are perhaps the most valuable team in the NBA . . .