Tuesday, December 7, 2010

The MVP of the McCourt divorce.

This morning, Los Angeles County Superior Court Judge Scott M. Gordon issued his tentative Statement of Decision on the validity of the Marital Property Agreement at the heart of the McCourt divorce. Long story short, Jamie got what she wanted. Judge Gordon tossed the MPA altogether, possibly rendering the Dodgers community property, pending the outcome of additional litigation. This does not make Jamie McCourt a co-owner of the club; she won't be returning to the office any time soon. It does mean that Jamie may be entitled to half the value of the couple's marital estate.

I think the easiest way to do this is to give you a few brief notesfrom the decision and then put them in context. The foundation of the decision is that the MPA, when considered under the California laws germane to such things, did not sufficiently demonstrate that the McCourts had a mutual understanding of relevant terms of the agreement. While Judge Gordon was clearly skeptical of just about every element of this process--and, really, who wasn't?--he issued a decision that mostly amounts to this: when you have two radically different versions of what looks like the same document executed and notarized, how can either be said to be the controlling agreement?

  • The Marital Property Agreement was a transmutation agreement as defined and governed by California Family Code Sections 850-852. 
    • This is important because, as discussed below and several times since the trial began, these particular provisions place specific requirements on marital property agreement. Further, these sections deny the admissibility of extrinsic evidence to prove the parties' intent as to what property they mean the document to affect, and how that property should be affected. Simply put: when the issue is analyzed under these Code sections, the document itself is viewed as the ultimate measure of the parties' intent.
  • The Marital Property Agreement was not an effective transmutation under the Code provisions above.
    • The MPA, mostly (but not entirely) due to the existence of conflicting Exhibit A's, failed to demonstrate that the parties were ever in agreement about what the document was meant to do. Therefore, it is pretty much meaningless.
  • There was no meeting of the minds--mutual assent--on either of the versions the McCourts signed in 2004.
    • Sorta hard to enforce a contract that neither party agreed to, isn't it? California law requires that a marital property agreement contain "express declarations" of the property to be transmuted, and the conflicting Exhibit A's make finding compatible "express declarations" nearly impossible.
  • Jamie McCourt drove the creation of the MPA, and was not defrauded or disadvantaged by its terms.
    • While the asset allocation was far from even, she got the benefit of protection from creditors as well as her own nest egg. The Court roundly dismissed allegations of undue influence and constructive fraud in the MPA's creation.
  • Judge Gordon notes that "[t]he parties argued at great length and presented a great deal of evidence with regard to the credibility of the other."
    • This mostly goes to Frank's argument that it is absurd for Jamie, a lawyer, to say she didn't understand the MPA, and to Jamie's argument that Frank could not possibly remember going over the MPA in detail given that he couldn't remember much else from the day it was signed.
  • Judge Gordon proceeded to find neither party's testimony concerning the content of the MPA credible.
    • He also specifically pointed out that the draft of the MPA that came to be known as the California version--the one giving Jamie the homes but leaving the Dodgers as community property--was never presented to either McCourt for review prior to the execution of the six supposedly-identical copies of the MPA.
  • There wasn't enough admissible evidence to persuade Judge Gordon that he could rule the conflicting Exhibit A was, truly, nothing more than a scriviner's errror.
    • Drily, Gordon wrote, "[Frank McCourt] argues that the California version of Exhibit A is an obvious drafting error when viewed in the context of the agreement as a whole, without resort to extrinsic evidence, and attempts to support this position with extrinsic evidence."
That's the nuts and bolts of the matter. The combination of conflicting Exhibit A's and California's strict guidelines on what can be used to show the parties' intent pretty much spelled doom for Frank McCourt's case. Judge Gordon, in eliminating constructive fraud and undue influence, grounded his decision almost exclusively in the MPA's failure to show, by its terms, mutual assent. 

Without its shameful cousin, the Massachusetts Agreement would have probably demonstrated a sufficient meeting of the minds to survive legal challenge. Maybe Jamie would have fought the other issues differently. Maybe she could have persuaded Judge Gordon that the MPA still didn't contain the sort of "express declaration" required by California law. Maybe she could carry the day on a completely separate legal theory.


For today, though, I'd prefer to deal in what we know. And what we know is that the existence of the California Exhibit A--just a single piece of paper, really--sure looks like the deciding factor in a billion-dollar divorce.


  1. First off, I am absolutely thrilled beyond words at this decision. It was the right decision, the ONLY decision, based on California transmutation law. This should have been obvious to anyone without even a modest legal background. Second, the outrage I have for Frank McCourt at this moment is off the charts for the amount of money he spent, money that no doubt could have been used quite differently, to enforce an MPA that HE asserted made him sole owner of the team, in defiance of 852, which he surely must have been advised was dubious to begin with. In this Shakespearian travail, it was Frank's hubris that brought his Dodger house down. I do not think he has the stomach to continue this charade. I also find it laughable to think that this could lay the "real" foundation for a settlement that would mutually benefit the McCourt brood. These two people hate each other, their blood running cold like the best served dish.

    Whatever time table it takes to divvy up their affairs, a sale is imminent. Whether it is now or a year or more, I for one can breathe a sigh of relief that their tenure has begun to look its last.

  2. I have no legal background at all, besides a family friend who is a lawyer......and it was obvious to me too! In California you split! No ifs and or buts! Frank will fight to the bitter end, but i expect his debt, shenanigans and this first ruling to hold up and he will be on the mat, counted out baby!

  3. it is not a deciding factor at all. im a lawyer. frank lost on the MPA; meaning they tried to transmute the property from CP to SP. This failed and now there will be a presumption of CP that frank can rebut.

  4. Good work, Josh. Thanks.

  5. The MPA has been set aside, that's all that has happened. Frank will now show that he purchased the Dodgers entirely with proceeds titled in his name, which even in California, could cause some problems for Jamie. This thing is very far from being decided, and unfortunately, I believe that the club is only marginally closer to sale than it was last week.

  6. McCourt has been eagerly seeking a cash infusion over the last year, but has been turned down by at least three entities, including a Chinese investment group. Citibank also rejected McCourt's cash call, telling him it "did not feel that the Dodger organization had the capacity to take on more debt It seems painfully obvious to Frank’s wallet, as well that the divorce of the McCourt’s will impact the ownership of the Dodgers. It will determine whether a forced co-ownership will occur; it will determine whether Jamie is reinstated as an executive of the Dodgers; it will determine how financially painful it will be to Frank in terms of meeting Jamie’s extravagant lifestyle and we didn’t get into how the McCourt properties could be sliced up.

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