Wednesday, January 26, 2011

Jamie McCourt wants a say.

Some long-latent questions about how the Dodgers will be run for the duration of the McCourt divorce litigation came into sharper focus yesterday following a hearing in Los Angeles County Superior Court. Two stalwarts of the saga were there to gather quotes and develop the storyline. LA Weekly's Gene Maddaus offers this note from  Jamie's lead attorney, on the timeline of the next potential trial in McCourt v. McCourt: 
Speaking after a brief court appearance, Dennis Wasser said it will take at least [a year] for attorneys on both sides to prepare.
"The discovery on the second phase is not simple," he said. "It'll take a long time and it will cost a lot of money." 
As we've discussed, the next trial would concern the characterization of each and every asset of the marriage, including the Los Angeles Dodgers. The principle issue would be whether the couple's deliberate titling of the Dodgers in Frank's name would overcome the California family law presumption that property acquired during a marriage is community property in the absence of clear and convincing evidence that the parties meant to keep it separate.

Maddaus' post also passes along another nugget from Wasser, who says there will be "skirmishes" over other issues in the months leading up to a possible second trial. What are the parties skirmishing over? Enter Bill Shaikin: 
After a procedural court hearing on Tuesday, attorneys for Jamie McCourt said they would soon assert what they said were her rights as co-owner of the team. 
"That is not to say she is going to appear on the first day of the season and say, "I'm here; I'm firing people,' " attorney Dennis Wasser said. 
Instead, in trying to assure her interest in the value of the team is protected, Jamie is likely to ask for the Dodgers' most recent financial results and projections, including information on discussions with Fox for a new television deal. 
Jamie's position seems reasonable enough: while the couple is still fighting over the Dodgers, she wants to make sure nothing happens that could jeopardize the long-term value of the club (and, thus, her potential take from the divorce). The advance from Fox to Frank on the club’s TV deal might not have sat well with her at all. The issue, though, is just how far she means to go. Asking for information is one thing, trying to gain actual influence on Dodgers decisions is another. Both in the days following the MPA trial and the moments following today's hearing, Frank's side has been perfectly clear: they believe Jamie McCourt is in no way entitled to any sort of control over the Dodgers.

This presents several analytical hurdles. When it comes to the eventual judicial division of the McCourts' assets--should it occur--Judge Gordon will not likely be forced to award joint ownership to both Frank and Jamie. If he specifically finds--and gosh, does this seem like a lock--that Frank and Jamie are incapable of working together as co-owners, he can order one spouse to buy out the other. Factors like experience and capability to manage the Dodgers can figure into Judge Gordon's decision to award the team to one of the McCourts, and that would be a fight unto itself.

Jamie wants additional and continuing disclosure about the Dodgers' operations. I never know just how technical to get around here, but the bottom line is that her request for information looks viable: California Family Code  requires a spouse managing a community property business to give the other spouse equal access to information about the business upon request. The McCourts are no longer spouses, of course, but the duty of disclosure appears to run until the assets are divided by the court or the parties.

As for actually influencing Dodgers operations, however, the issue isn't as clear cut. There are certain automatic restraining orders effective upon the initial filing for divorce. These restrict the parties from making major changes to their assets; things like buying, selling, or encumbering big assets are generally forbidden. However, California courts have held that bona fide third-party entities (like holding companies) that have legal control of the assets in question aren't automatically bound by the basic restraining orders. Further, even major actions like purchases, sales, or encumbrances of assets might be in the usual course of business for a third-party holding entity, even where such things would be off-limits to the parties themselves.

The upshot is that if Jamie McCourt wants to exert any influence over Dodgers operations in an effort to preserve or improve the assets' value, she probably needs to take one of two routes. First, she might argue that the numerous companies connected to legal ownership of Dodgers assets are not truly separate and distinct entities from the McCourts themselves, so the automatic restraining orders apply. Second, she could file for a restraining order against the third-party entities themselves. As best I can tell, she hasn't done this, but I am not positive. Either way, as the time horizon of this litigation extends farther and farther into the future, it's clear that Jamie intends to keep a close eye on the management of the defunct marriage's crown jewel.

Monday, January 24, 2011

Blood in the water?

There have been few positive signs for Frank McCourt in recent weeks. In December, of course, he lost the battle over the post-nup, and little has gone right since. He's met with MLB executives to pitch his plans to keep the team. He's been forced to seek an advance from Fox on the team's TV deal. And the list of potential buyers grows, one rich person at a time. Adding to previously-speculated suitors such as Jamie McCourt, Alan Casden, Mark Cuban, and Steve Garvey, we're introduced by Bloomberg to Alec Gores. Some particulars:
Alec Gores, 57, chief executive officer of Gores Technology Group in Los Angeles, declined to comment on the Dodgers, said Terry Fahn, a spokesman at Sitrick & Co. His company’s investments include a 75 percent stake in Westwood One Inc., the radio programmer, and Alliance Entertainment, a DVD distributor.
Fahn's outfit, Sitrick and Co., is one of the elite public relations firms. The Bloomberg article speculates that Alec Gores may go in on a potential Dodgers purchase with his brother, Tom Gores. Alec is said to be worth $1.7 billion, and Tom $2.4 billion. What a delightful sibling rivalry! 

Dodgers spokesman Steve Sugerman stuck to the oft-repeated McCourt Company line, saying the Dodgers are not for sale. Which they may not be, for now. But it's that 'for now' that has so many wealthy folks spending a whole lot of time and money to take a close look at what it would cost to buy the Dodgers.

As for me, I am beginning to question Frank McCourt's position. I'm probably in the minority in that I do think he still has a chance to keep the Dodgers. I'm just having a lot of trouble understanding why he would even want to at this point. He's not at all popular with several different groups at the moment. The fans are angry. Baseball is nervous. And the team's creditors are likely, at the least, wary. Winning games would, for various reasons, alleviate the majority of everyone's concerns, but that doesn't look terribly likely for the next few years. 

And in that time, rumors about Frank's financial condition won't stop rumbling. Potential Dodgers suitors won't stop expressing interest. And the fans and media won't stop looking at club transactions in the context of the divorce and related revelations about McCourt ownership. This won't stop. Not for a long, long time.

And I am having trouble understanding why a person would want to subject himself to this any longer.

For a while now, I've worried that the divorce might result in the club being sold at a depressed value. I'm beginning to think, though, that the widespread perception of Frank's imminent need to sell the club might just end up creating a bidding war. And, if it does, I wonder if Frank might just sell the club after all. Not because he has to, but because wants to. 

I can't read Frank McCourt's mind. I can't say just how much he values keeping the team, both financially and as a matter of pride. I can't tell the extent to which his competitive, damn-the-torpedoes approach to business renders him unwilling to even consider selling the club. I can say, though, that if I were in Frank McCourt's position, I'd think long and hard about the possibility that, when it comes to a fight to keep the team, winning might be worse than losing. 

Wednesday, January 12, 2011

The song remains the same.


Recent days have not been kind ones to Frank McCourt and his hopes of owning the Dodgers long-term. Over the weekend came the news that Team Frank had jetted to New York to convince Major League Baseball that McCourt ownership is salvageable despite Frank’s  several-hundred-million-dollar tab potentially coming due. Further, it was reported that, while the Commissioner might have difficulty directly removing Frank McCourt from baseball, Selig had a few methods by which he could make continued McCourt ownership plenty difficult.

These methods of potential coercion are mostly financial; Selig could reject a television contract that would offer Frank a lifeboat in his quest to retain the team. Further, the Commissioner could decline to allow Frank McCourt access to the sort of emergency funding most recently and notably tapped into by the Texas Rangers prior to their sale last year. Both of these tools would deny Frank that resource which most believe he needs scarcely less than oxygen: cash.

Yesterday and today, the news didn’t get much rosier. Tuesday, Buster Olney speculated that Major League Baseball might, in the event Frank indeed moves to sell the Dodgers, effectuate such a sale by essentially trading A’s owner Lew Wolff the Dodgers in exchange for his current club. The A’s, like the Montreal Expos before them, would likely operate under MLB command for a season or more while certain stadium-related issues are resolved and a new long-term owner can be discovered and wooed.

Of course, this being the Dodgers, something strange had to happen: today, Wolff communicated to Major League Baseball’s central offices, the Los Angeles Dodgers brass, and the media that he has no interest whatsoever in the occupants of Chavez Ravine. While such a statement is not entirely without an embedded message—Wolff surely doesn’t want Oakland fans thinking he’s shopping around for a new club like the Miami Dolphins searched for a new coach—the fact remains: Wolff prefers the Oakland Athletics to the Los Angeles Dodgers.

And, at this point, that’s at least a defensible position. Make no mistake: there’s not likely a more toxic ownership situation in American sports than what we find ourselves in. The major unknowns are how the organization rises again—and it will—and whether the McCourt family will be part of that renaissance.

It is easy to see Frank’s loss on the MPA, followed by his recent New York roadshow, as sure indications he’s not long for the Dodgers. And maybe he’s not. But know this: Frank McCourt is a fighter. If Selig tries to block his attempts to raise cash through a TV deal or emergency funding, you can bet Frank will look to other methods. And if he can’t find any, he’ll look some more. And if he still can’t find them, he’ll ready himself for whatever battle might come his way.

A good friend of mine is fond of paraphrasing the Forgetting Sarah Marshall line by saying, “When life gives you lemons, don’t make lemonade. Say ‘F*** the lemons’ and bail.” Frank McCourt will do neither. He’s not one to make lemonade. He’s not going to bail. You see, Frank McCourt doesn’t believe in lemons. It’s, as the cliché goes, perhaps his greatest strength and his greatest weakness.

So, the same way he couldn’t keep the Dodgers’ issues private by settling with Jamie 18 months ago, the same way he couldn’t stop the bleeding by settling before news of the MPA switch came to light, the same way he couldn’t avoid trial, the same way he couldn’t give Jamie what she wanted before Judge Gordon’s decision, he’ll stick to his guns. Why?

Because all of this is the same way he held onto the Boston Seaport property through years and years of contentious litigation, and ended up trading out some parking lots for the Los Angeles Dodgers. While it might make the most sense not to get out while he can still do so on his own terms, doing things that make sense to you and I and most other people isn’t necessarily Frank’s way.

So the fights—and there will always be fights—will continue.


The above was written on a flight from Minneapolis to Los Angeles. My welcome-home present was this blog post from the Times' Bill Shaikin (shocking, I know). When reached in passing, Frank McCourt remarked that he does not share other owners' privately-expressed concerns about his chances of keeping the Dodgers. (Also shocking, I know)