Thursday, September 27, 2012


Two Dodgers-related news stories this week caught my attention. You've probably seen both. We'll go chronologically, and I'll explain why the second changes my opinion of the first.

Jamie McCourt popped back up, and she's claiming Frank McCourt misrepresented the value of the Dodgers in connection with the couple's divorce, and that her $131 million payday is essentially unfair in light of the club's sale for $2.15 billion.

I don't like her argument here, as presented. Yes, at one point in the litigation, Frank claimed the enterprise to have a net worth of less than $300 million. This was during the time when it was beneficial for Frank to show a "low" net worth, because, among other things, the less liquid he showed himself to be, the lower he could argue his payments to Jamie should be.

The problem, as I saw it, was that Jamie herself had offered an estimate to the enterprise's net equity value value: in excess of $2 billion. How do you make a claim that you didn't know how much money was there when, two and a half years earlier, you had the number pretty accurately pegged?

Further, there's more to the settlement story than Jamie's filing seems to have told. At the time she agreed to the $131 million figure, there was a very real chance Frank's incredible run of luck would end, and he would crap out. Jamie would be stuck in bankruptcy court for years. Settlement was, as it very often is, a risk-mitigation maneuver. She decided $131 million in hand was reasonable.

Frank's lawyers didn't comment on the story, but I suspect they might have said this was the second time Jamie hedged against Frank's possible failure and was wrong.

But now, there's this TV rights/Major League Baseball issue, as reported on today by Bloomberg (and by Bill Shaikin in May). Apparently, a special agreement between baseball and the Dodgers allows the Dodgers to cap the amount of television rights money received in a new contract that is subject to revenue sharing to about $84 million annually. In a nutshell, this means that, if the club's new TV deal paid $225 million annually, the Dodgers would contribute 34% of $84 million, rather than of $225 million.

A major league baseball executive downplayed the story, confirming that the Dodgers will pay 34% of the money "actually received" in a deal. So, which is it? Are the Dodgers getting a huge tax break from baseball? Or is this all a big misunderstanding?

The key is the phrase "actually received." I am not aware of any requirement that the entity selling the TV rights (and taking in the cash) needs to be the legal entity that owns the Los Angeles Dodgers. Want to be clear: I am purely speculating at this point. But I know of nothing that would stop an affiliated entity (but not the Dodgers) from raking in the TV money, while paying the club itself just enough to cover the annual revenue sharing bill. The rest might stay in the TV entity or be paid up to another. But the Dodgers would not "actually receive" it.

The fans would be justified in seeing this as a major red flag; after all, how did splitting off ticket revenue work for the club? However, I'd advise a wait-and-see approach. The new ownership group seems awfully committed.

But I'd like to turn back to Jamie. Surely, she was permitted to conduct (and elected to conduct) some sort of due diligence investigation of Frank's assets prior to agreeing to the settlement. What struck me after digesting the TV rights news was the question:

Did she know of the special MLB/Dodgers deal?

I ask, because if she didn't know of the deal, she didn't know what could have been a pretty important factor in the club's value to potential bidders.

Could she have known? Should she have known?

Obviously, conclusions are premature. Whether Jamie failed to do her homework or whether Frank didn't give her information she should have had are complex questions that will likely take a while to sort out.

Just know that these two stories aren't as separate as you may first think.