Tuesday, September 28, 2010

Day twelve preview: closing arguments.

Long ago--about ten and a half months ago, to be exact--we were just a couple weeks into a conflict that is nearly certain to last over a calendar year. Each McCourt had filed their opening salvo, and, in between jokes about Jamie's pool demands, we were just beginning to get a grasp on the issues involved in the divorce. On November 10, I wrote:
From my perspective, unless Jamie can prove that Frank was misleading, fraudulent, or otherwise acted in bad faith, she's going to have a difficult time getting out of the agreement. Just because she later decided she gave up too much in the deal doesn't mean she can just get out of it. See Juan Pierre, 5 years, $44 million. The kind of smoking gun I'd look for is Frank concealing the fact that the Dodgers were included in the agreement. Because of her heightened burden [as a lawyer], I don't think she can win on this unless Frank took active steps to hide the fact that ownership of the club was involved.
Well, here we are. And, what do you know: Jamie has found and relied upon evidence that something terrible took place: a switcheroo. Yes, the substitution of the "corrected" Exhibit A is just the sort of event we long ago knew might lead to a Jamie victory. But, on the eve of closing arguments, the switcheroo is hardly Jamie's only theory.

While sexy and media-friendly, Jamie's lawyers just haven't been able to get to the bottom of the switcheroo. Larry Silverstein contends it was a minor mistake--to him, anyway--that he cured without thinking twice about it. Yes, it would have been "best practice" to inform the couple of the "correction," but he was simply acting in accordance with the couple's wishes. And Frank's lawyers have certainly done a good job laying out Jamie's role in the separation of the couple's assets. I still strongly believe that "the only textual version of the MPA Jamie understood to exist in 2004 was the only one she even suspected to exist when she filed for divorce last Fall."

But the facts might not be enough to carry the day for Frank. For as difficult a time Jamie has has fighting the contention that she was wary of the risk, Frank's had just as dreadful a time proving Jamie knew the implications of the MPA. If that was all Jamie had--that she never meant it to be this way--I'd give this one to Frank tonight. She's a lawyer. She doesn't get the protection of not knowing what simple documents mean. But that's not all she has.

She has a lawyer who put an Exhibit in an agreement the couple signed that is completely opposed to another Exhibit attached to another signed agreement. And that lawyer never sought permission to correct the error nor acknowledgement of the correction. She has lawyers who either acted directly against her best interests or, at least, without the diligence she had every right to expect. And there were other ways to protect the homes without having the drastic effect of divesting her of the Dodgers in the event of divorce. And she has very much won the point that divorce, while mentioned, was never considered during the construction of the MPA. It was a document for happier people in happier times.

As we go into closing arguments, the legal question is whether a valid, enforceable contract ever existed. Tomorrow, Frank's lawyers will say that Jamie got exactly what she wanted in the post-nup. And that she shouldn't be allowed to benefit from the protection she needed early in McCourt ownership and now, in retrospect, also share in the upside of what turned out to be a good investment. And Jamie's attorneys will say that her inadequate (at best) representation and the entire stain of the switcheroo raises serious doubt as to whether the parties ever agreed to the terms of the MPA Frank tries to enforce.

As Judge Gordon has 90 days from tomorrow to issue a decision, I am not going to guess as to the outcome prior to hearing the closing arguments, except to say: each party very much knows it might lose. And each party very much knows that the litigation in McCourt v. McCourt won't end here, unless the parties and their representatives come together to end it on their own terms. I still believe that a settlement is the only reasonable outcome, and that, eventually, we will see that the McCourts are reasonable people.


  1. Love your work on this so far, Josh. My wife is a 1L at Berkeley, and we're following this with great interest. I check this several times a day.

    As a 1L spouse, I'm certainly no expert, but this seems to me to be a situation where the facts are not much in dispute, and that it is really a question of law: given this set of facts, is the contract valid?

    Have you (or has anyone analyzing this case) hit Westlaw to delve into precedential cases? If the decision rests on the application of law, it would be really great to know what the relevant laws might be.


  2. If this case happened to take place in Massachusetts, would it have been easier for Jamie to get joint ownership under MA's equitable distribution statute?

  3. (From Billy Witz' afternoon wrap up of the trial on NYTimes.com):

    Susman said he had “no idea” if the McCourts would settle, but Dennis Wasser, a lawyer for Jamie McCourt, said he expected them to once Gordon made a decision on the marital property agreement.

    (I am assuming he means that if Frank wins outright, then they would have a settlement, as opposed to her winning, which would declare the Dodgers community property thereby making it unnecessary for a settlement. Yes?)

  4. I believe he means the opposite of your assumption. Wasser expects Jamie to win, which would then force Frank to settle with Jamie before Gordon actually distributes the properties.

  5. Come on Jamie! Bring in Kuo to shut it down!

  6. As a Padre fan...I approve this divorce.

    I expect the judge will require the McCourts to split their loot. Frank can then try to buy out her half - but to do that he will have to dump payroll and sell off chunks of something - the stadium, radio or tv rights. If he tries to do that MLB will scream bloody hell. Eventually he will be forced to sell the team, just like John Moores sold the Padres. Hopefully, MLB will require to new owner to submit a pre-nup for approval.

  7. Josh's insightful coverage is appreciated and have become interested in a divorce which has tentacles that can adversely affect many and illumine the ruthless, greedy aspect of human nature in the business of baseball.

    It could be said that all this was invevitable from the moment the MLB allowed the highly leveraged purchase.

    A 30-yr marriage, a transmutation agreement knowingly agreed to in 2004 by business minded, intelligent husband and wife.

    No matter if the agreement is his SP or their CP, Frank will be putting out gazillions (if the Dodgers do prosper by future potential of broadcast rights)in Spousal Support forever.

    Whether a buyout of her interest or spousal support, it seems to come down to the same result: Wife will get whatever lifestyle she has become accustomed to in the course of 30 years.

    This Judge will set the parties and the attorneys straight.

  8. In response to Jeff M...

    Why Frank is fighting tooth and nail against Jamie, is that he probably can't buyout her. As much as the Dodgers have $430 million in debt on their books. Blue Land Co LLC, the McCourt holding company that includes the Dodgers has something like $619 million in liabilities. The McCourt are carrying a huge debt load, and they are making a small profit after all their overhead is covered. They also have some pretty big loans, one with the stadium as collateral, to another with ticket sales as the revenue, to $60 million loan from the parking lot, which my guess the parking revenue is paying off.

    An upfront cash deal for the broadcasting rights, would help with investment and some cash in the bank for interest. However, it would be more of a stop gap than what the Dodgers should had done under the O'Malleys, started their own channel. Frank doesn't have the money to start one.

    Frank isn't going to sell unless he is forced to. I see the private placement investors and the banks have more sway over Frank than the courts and public opinion. He is going to sell when he is drowning more into an ocean of red ink.

  9. I'm not a lawyer and don't know much about law, but simple common sense tells me that this MPA cannot possibly be valid because a change was made without telling either Frank or Jamie, and therefore it must be tossed. It shouldn't even matter what kind or what size change.

    Further, California is a community property state, and without a valid MPA that states otherwise, everything, including the Dodgers, automatically becomes community property to be divided equally between Frank and Jamie. That makes Jamie the "winner" by default.

    In that case, Judge Gordon awards her X amount of dollars which Frank must pay, and if he can't, he must sell the team to do so. Happened in San Diego between John and Becky Moores.

    However, Frank apparently developed plans long ago to file appeals and who-knows-what legal actions to keep this mess tied up in court for up to three years -- anything to retain sole ownership for as long as possible.

    From where I sit, the only thing that can save the team now is for another potential owner to come in and institute a hostile takeover. Even if MLB steps in and orders Frank to sell the team, he could stall for awhile with more legal crap.

    Any way you look at it, the Dodgers and their fans are screwed for at least another year.

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