Divorce-court drama and the Dodgers
Frank and Jamie McCourt take the team's ownership issues into legal battle this week.
At the top of the document that has become the centerpiece in the dispute over the future ownership of the Los Angeles Dodgers, there is a warning in boldface, upper-case letters. Its terms are clear and unmistakable: "THIS MARITAL PROPERTY AGREEMENT AFFECTS IMPORTANT PROPERTY RIGHTS. YOU SHOULD SEEK INDEPENDENT LEGAL COUNSEL BEFORE SIGNING THIS AGREEMENT."
The significance of the warning is obvious. It means the document is important, a big deal. It tells both parties they should not sign it until their lawyers have reviewed it and explained it.
In the 10 pages that follow this stern caveat, Frank and Jamie McCourt divide the property the couple had accumulated during their marriage. Signed on March 31, 2004, shortly after the McCourts paid $430 million (most of it borrowed) for the Dodgers, the agreement provides agonizing detail on every aspect of the couple's life together, including written procedures for the giving of personal gifts and the preparation of income tax returns.
In its division of the couple's property, the contract states that jointly owned property will become "separate property." The now-separate property is described in "schedules," lists of the things that Frank and Jamie now own individually. In Schedule A, which is described as "Frank's Separate Assets," the inventory specifically includes "all assets of the Los Angeles Dodgers baseball team."
The agreement obviously was an attempt to protect the couple's personal assets from foreclosure by their numerous business lenders who were part of their debt-ridden empire. If, for example, the McCourts were unable to pay the loans they used to purchase the Dodgers, they would not be forced to give up even one of their eight residences.
And that is exactly what happened. In 2006, when the McCourts and the Dodgers were unable to pay off a $200 million loan from Rupert Murdoch's News Corp., which had sold the Dodgers to them, on time, they gave up a parking lot in Boston instead of losing a home.
So it worked for a while. But when the marriage began to fall apart in 2008, the agreement became the flash point. Jamie, an experienced attorney who holds an MBA from MIT, claimed "great surprise" when she realized she had given the Dodgers to Frank.
In a trial that begins Monday in Superior Court in Los Angeles, Jamie will try to persuade Commissioner Scott Gordon that she was hoodwinked. With an all-star cast of lawyers, including David Boies, one of America's premier litigators, at her side, she will claim that she was bamboozled. In a sworn affidavit filed in court, Jamie asserts, "I was never told that by signing the [agreement], I was giving away the Dodgers."
Claiming that she was misled into signing the document, Jamie says she "trusted Frank and believed he would always honor our understanding and our manner of operating with our assets and that he would never take unfair advantage of me."
It will be a tough sell for Jamie and her legal team. She was general counsel to the couple's complex and lucrative real estate business from 1994 to 2004 and claims credit for its successes in extensive litigation. She also admits that she has "done some family law work." It will be difficult for an experienced divorce lawyer who has handled complicated real estate litigation to convince anyone that she did not know what she was signing when she put her name on the contract that gave the Dodgers to Frank.
In a recently filed brief, Jamie's lawyers claimed that "it is simply not credible that she knowingly would have given up her rights to the Dodger Assets under any circumstances."
One of Frank McCourt's attorneys, Marshall Grossman, replied that "Jamie McCourt saying she didn't understand the [agreement] is like John Hancock saying he didn't understand the Declaration of Independence when he signed it."
In addition to her claim that she was somehow tricked into signing the document, Jamie and her legal team will argue that the agreement she signed is "fraudulently altered." Boies and his team have unearthed six versions of the agreement, only three of which provide that Jamie gives the Dodgers to Frank. The multiple versions will allow Jamie and her lawyers to argue that the contract was never really finalized. It isn't a great legal argument, but they must say something, anything if they want to stop the contract from becoming effective.
They also will claim in court this week that the "schedules" of separate property in the original agreement were switched after Jamie signed.
Frank's legal team rejects any claim of fraud in the signing of the agreement and will produce forensics experts who will attempt to document the authenticity of the agreement that gives the Dodgers to Frank.
Commissioner Gordon, who will make the ultimate decisions on the agreement and the ownership of the Dodgers, can do three things. He can give the Dodgers to Frank as the agreement provides. He can set aside the agreement as unfair and decree that Jamie and Frank are the joint owners of the Dodgers. Or he can declare that the Dodgers are community property under California law, which he can do with anything owned during the marriage. It would lead to a division of the property.
If Gordon does not give the Dodgers outright to Frank, the franchise could be offered for sale. Gordon already has said in court that the team may be sold to pay the couple's bills.
For Frank to keep the team if he receives an adverse ruling, he must be able to pay Jamie for her interest. It is highly unlikely that he would be able to borrow enough money to buy Jamie's share, especially when she is now arguing that the team is now worth or soon will be worth more than $2 billion.
In the face of these uncertainties, the ownership of the Dodgers is a dispute that should be settled by the McCourts rather than adjudicated. Commissioner Gordon has suggested that the McCourts work out a compromise for the benefit of their four sons. Boies agreed, saying, "It's a deal that cries out for compromise." But, Boies added, "She's not going to take zero, and he's not going to give her half."
Frank and his lawyers have reluctantly offered Jamie ownership in the Dodgers, but only if she becomes a silent partner. That scenario might be difficult for Jamie, who as the CEO of the Dodgers became involved in every aspect of the team's operation, including whether to include names on the backs of players' jerseys. (They are now there.)
Unless Frank and Jamie find a way to settle, the trial is expected to last a week based on estimates from the lawyers and the judge.
Lester Munson, a Chicago lawyer and journalist who reports on investigative and legal issues in the sports industry, is a senior writer for ESPN.com.