{"id":14411,"date":"2011-08-18T17:31:58","date_gmt":"2011-08-18T22:31:58","guid":{"rendered":"http:\/\/law.marquette.edu\/facultyblog\/?p=14411"},"modified":"2011-08-18T17:31:58","modified_gmt":"2011-08-18T22:31:58","slug":"the-dodgers-debacle","status":"publish","type":"post","link":"https:\/\/law.marquette.edu\/facultyblog\/2011\/08\/the-dodgers-debacle\/","title":{"rendered":"The Dodgers Debacle"},"content":{"rendered":"

\"\"<\/a>Straight out of Hollywood, in what has turned into a long-running soap opera, is Major League Baseball\u2019s own \u201cWar of the Roses.\u201d MLB\u2019s version, featuring the divorce of the Los Angeles Dodgers owners Frank and Jamie McCourt, is being played out in court venues across three states and in a sundry of court proceedings and legal maneuverings involving numerous areas of law as well as MLB\u2019s rules.\u00a0 This is not \u201cDodgers Baseball\u201d; instead this tragedy has thrown \u201cone of the most prestigious teams in all of sport\u201d into the depths of despair, financial ruin, legal turmoil, and fodder for the tabloids.<\/p>\n

The story begins with Frank McCourt\u2019s purchase of the Los Angeles Dodgers in January 2004 after a failed attempt to purchase his home town team, the Boston Red Sox.\u00a0 Soon thereafter, he and his wife Jamie headed out to the \u201cWild Wild West.\u201d<\/p>\n

<\/p>\n

And for the first few years of the McCourts\u2019 ownership of the team, the prospects looked good.\u00a0 In October 2004, the Dodgers won the National League West but lost the Divisional Series.\u00a0 Frank, as the Dodgers\u2019 Chairman, named Jamie president of the team in August 2005.\u00a0 In October 2006 the Dodgers played in the National League Divisional Series, losing to the Mets.\u00a0 In March 2008, a crowd of 115,300 set an attendance record for any baseball game as they watched the Dodgers play the Boston Red Sox in an exhibition game at the Los Angeles Coliseum.\u00a0 In October 2008, the Dodgers reached the National League Championship Series.\u00a0 In March 2009, Frank named Jamie CEO of the Dodgers.\u00a0 In October 2009, the Dodgers won the National League West, swept the National League Divisional Series, but lost in the National League Championship Series.<\/p>\n

That same October, during the pinnacle of the Dodgers\u2019 recent successes, the McCourts\u2019 \u201cCalifornia Dreamin\u2019\u201d came to an abrupt end as, on the eve of the NLCS, the McCourts announced their separation.\u00a0 Concurrently, Frank announced that he was the sole owner of the Dodgers.\u00a0Jamie refuted Frank\u2019s announcement, claiming she had half ownership.\u00a0 \u00a0A week later, the Dodgers were out of the series.\u00a0The day after the Dodgers\u2019 exit, Frank fired Jamie as CEO, and less than a week later Jamie filed for divorce, ending their nearly 30-year marriage.\u00a0 And with that, the \u201cField of Dreams\u201d came crashing down.<\/p>\n

The first pitch in the McCourts\u2019 divorce trial was thrown on August 30, 2010.\u00a0 In November, their marital status was changed to \u201cdivorced,\u201d but the battle of \u201cMcCourt vs. McCourt\u201d was just heating up as proceedings over their shared assets continued, the ownership of the Dodgers, the stadium, and the surrounding property at stake.\u00a0 The Dodgers quickly transformed from being
\none of the crown jewels of MLB to the crown jewel of the McCourts\u2019 assets.\u00a0 California is a community property state and under community property laws Jamie is entitled to half of Frank\u2019s shares of the Dodgers and half of his personal assets, unless there is a written agreement to the contrary.\u00a0 Frank thought he had the bases covered when he and Jamie entered into a post-nuptial marital property agreement in March 2004.\u00a0 The McCourts agreed that the post-nuptial agreement placed the couple\u2019s properties in Jamie\u2019s name in order to protect them from creditors should Frank\u2019s business ventures fail; however, they disagreed that the post-nuptial agreement provided Frank with sole ownership of the Dodgers.\u00a0 Moreover, there were two conflicting versions of the document.\u00a0 Three of the six copies of the agreement signed by the McCourts included language stating that the Dodgers were \u201cinclusive\u201d of Frank\u2019s separate property and three stated that the Dodgers were \u201cexclusive\u201d of his property, indicating that the team was shared marital property.\u00a0 Meanwhile, the attorney who drafted the agreement, from the Boston law firm Bingham McCutchen, testified during the 11-day trial that when he noticed the error in the three copies that stated \u201cexclusive\u201d he replaced those pages to correspond with the copies that read \u201cinclusive.\u201d\u00a0 Both parties also employed forensic scientists to determine the validity of the agreement.\u00a0 Ultimately, in November 2010, the judge in the McCourts\u2019 divorce case threw out the agreement based on his finding that there was no requisite \u201cmeeting of the minds\u201d to form a contract and, therefore, the post-nuptial agreement was not valid under California marital property law.\u00a0 Frank argued against the call but his objections were overruled in January 2011.<\/p>\n

The McCourts\u2019 lavish lifestyle and alleged pilfering of the Dodgers were exposed as part of the acrimonious divorce proceedings.\u00a0 For example, the McCourts own (although they are in Jamie\u2019s name) seven properties estimated anywhere between $65 million and $84 million with a reported cost of $568,000 per month in mortgages and related expenses. They racked up a reported $6.8 million in flight expenses on a private jet in 2008 and 2009.\u00a0 Meanwhile, Jamie had her own private hair stylist and make-up artist.\u00a0 Then there were also the country club memberships, vacations, and expensive dinners.\u00a0Most of their personal expenses were paid by the Dodgers and its various entities.\u00a0 In fact, it has been alleged that the McCourts diverted more than $100 million dollars from the Dodgers to fund this lavish lifestyle.<\/p>\n

Amid the divorce drama, the Dodgers were striking out financially.\u00a0 Frank re-negotiated the Dodgers\u2019 television rights with Fox Sports in order to work out a long-lasting solution to the Dodgers\u2019 financial problems.\u00a0 Fox\u2019s current broadcast rights agreement expires in 2013 and provides Fox with the exclusive right of first negotiation until 2012.\u00a0 On April 15, 2011, Frank presented the estimated $3 billion deal to MLB for its approval, as required.\u00a0 In the midst of leveraging the broadcast rights, the Dodgers struggled to pay \u201cThe Help.\u201d\u00a0 It was able to meet its April payroll obligations with a $30 million personal loan to Frank by Fox.\u00a0 It is rumored that Fox\u2019s assistance came shortly after Fox learned that Frank put a squeeze play on it by approaching Fox\u2019s broadcast rival Time Warner for a loan.\u00a0 And since the loan was a personal loan to Frank and not a loan to the Dodgers, the loan did not have to be approved by MLB.\u00a0However, after MLB learned of Fox\u2019s loan to Frank, it seized control of Dodgers, taking over its day-to-day operations on April 20, 2011.<\/p>\n

Back in Los Angeles Family Court, Jamie requested that the Dodgers be sold in order to maximize the proceeds and divide them accordingly.\u00a0 Frank requested a ruling from the judge thatJamie had no standing to be involved in the television rights deal with
\nFox.\u00a0 As the motions were proceeding, Frank and Jamie reached a property division settlement on June 17, 2011, that was contingent on MLB approving the Dodgers\u2019 television rights deal with Fox.\u00a0 On June 20, 2011, the settlement was thrown out when MLB vetoed the Dodgers\u2019 re-negotiated television rights deal with Fox.\u00a0 MLB.com reported<\/a><\/em> that the deal called<\/p>\n

\n

for an up-front payment of $385 million, with $173.5 million going to the McCourts and their attorneys.\u00a0 Additionally, $80 million would have repaid debt, $23.5 million would have repaid a personal loan from Fox . . ., $10 million would be for legal fees, $10 million would have gone to the McCourts and $50 million could have gone toward a $100 million payment to Jamie if the club ultimately was ruled Frank\u2019s property through the divorce proceedings.<\/p>\n<\/blockquote>\n

In rejecting the deal, Bud Selig, the Commissioner of MLB, announced that the \u201cproposed transaction would not be in the best interest of the Los Angeles Dodgers franchise, the game of baseball and the millions of loyal fans of this historic club.\u201d<\/p>\n

A week later the Dodgers were running out of cash and could not meet payroll obligations.\u00a0 Instead of facing the possible takeover of the team by MLB, McCourt pinch hit and filed for Chapter 11 bankruptcy protection in Delaware on June 27, 2011.\u00a0 Under MLB\u2019s constitution, Frank may be stripped of his ownership rights by filing for such protection although it has been asserted that the bankruptcy court and its proceedings trump MLB\u2019s rules in such circumstances.\u00a0 As part of the proceedings, Frank arranged a $150 million debtor in possession financing from a hedge-fund, which arrangement was opposed by both MLB and Jamie. \u00a0The bankruptcy judge approved the arrangement on an interim basis in order to meet payroll but at a later hearing rejected it and ordered Frank to work out financing with MLB.\u00a0 Earlier this month Frank and MLB agreed on a $150 million loan to the Dodgers in order to fund its operations through the end of the season.\u00a0 Under the terms of the loan MLB cannot seize the team if it defaults on the loan, however, MLB did not waive any claims for past or future violations of MLB rules and regulations that the Dodgers might have, including filing for bankruptcy protection.<\/p>\n

As the Dodgers continued to bleed red and not Dodger Blue, Frank balked on his television rights deal with Fox and announced that the Dodgers would attempt to resolve its financial crisis through the sale of its television rights with the bankruptcy court\u2019s approval.\u00a0 By selling the rights while in bankruptcy protection the Dodgers do not need MLB approval.\u00a0 With this play, Frank is
\nessentially asking the court to abrogate the existing media rights deal with Fox prior to its expiration.\u00a0 Fox filed a motion challenging the rights sale and it is expected that MLB and Jamie will do the same.<\/p>\n

In between Frank\u2019s maneuvering for sole ownership and control of the Dodgers and dodging financial ruin, his former law firm Bingham McCutchen preemptively filed a lawsuit in Massachusetts hoping to ward off a malpractice lawsuit.\u00a0 \u00a0Bingham is seeking a declaratory judgment finding that it acted within the proper standards of care in drafting the McCourts\u2019 voided post-nuptial marital agreement and should not be liable for any losses Frank suffered.\u00a0 Bingham followed that suit with a separate request for declaratory judgment from an arbitrator relying on a 2006 settlement agreement between the firm and McCourt.\u00a0 That settlement agreement requires any disputes relating to Bingham\u2019s acquisition work for McCourt related to his taking over the Dodgers be submitted to arbitration.\u00a0 Earlier this month Frank\u2019s motion to dismiss the lawsuit was heard in Massachusetts Superior Court.\u00a0 In the motion Frank argued that Bingham committed malpractice and that it was forcing him to choose when and where to bring his malpractice suit.\u00a0 He further argued that the lawsuit could force him to waive attorney-client privilege as
\nwell as prejudice his other on-going legal battles.\u00a0 Lastly, Frank requested that Bingham not be permitted to pursue the arbitration proceeding claiming that the 2006 settlement agreement did not cover the post-nuptial agreement.<\/p>\n

Another lawsuit stepped up to the plate in May 2011 when the family of the Giants fan that was severely beaten on opening day<\/a> filed a lawsuit<\/a> against Frank, the Dodgers, and 12 other related companies owned by Frank.\u00a0 The lawsuit asserts that the McCourts’ lavish lifestyle and messy divorce depleted the Dodgers of the necessary funds to operate adequately and properly which caused a drastic reduction in security staff at the stadium and surrounding parking lot and defective facilities, all of which contributed to the beating.\u00a0 The lawsuit alleges nine causes of action that include: negligence, premises liability, negligent hiring, retention, and supervision, negligent infliction of emotional distress, loss of consortium, assault, battery, false imprisonment, and intentional infliction of emotional distress.\u00a0 Similar to his other legal proceedings, Frank did not take a walk on this one either.\u00a0 Frank and the Dodgers initially filed a motion to remove the judge assigned to the case, which motion was granted. \u00a0Next they filed documents with the court asserting that the bankruptcy proceedings should stay the lawsuit.\u00a0 And, most recently, they filed a motion asking the court to strike much of the lawsuit, including any references to McCourts\u2019 \u201cpurported financial status, assets, and lifestyle.\u201d\u00a0 In doing so Frank\u2019s attorneys alleged that \u201cthis is a premises liability case.\u00a0 It is not a corporate fraud action or shareholder derivative suit . . . [and] allegations relating to [Frank\u2019s] finances, his use of funds, the corporate structure of his assets or his lifestyle have no place here.\u201d<\/p>\n

Like the sands of the hourglass, the McCourt battle drags on and truly puts them and their tenure as the owners of the Dodgers in \u201cA League of Their Own.\u201d\u00a0 Meanwhile, the Dodgers and its fans are \u201cThe Biggest Loser\u201d thus far.\u00a0 The Dodgers are mired in the bottom of the National League West and it seems the fans no longer want to watch the implosion on the field or off it.\u00a0 The Los
\nAngeles Times<\/a><\/em> estimated that the Dodgers will lose $27 million in ticket, parking and concessions, representing a 9.4% revenue decline and about 8,000 fewer fans per game.\u00a0 It appears that the Dodgers\u2019 fans have spoken and the \u201cThe Verdict\u201d is in.\u00a0 They want the game called and the McCourts\u2019 \u201cL.A. Story\u201d to be completed.\u00a0 However, barring a \u201cMiracle at Chavez Ravine\u201d it appears that they will have \u201cUnanswered Prayers\u201d for the foreseeable future.<\/p>\n","protected":false},"excerpt":{"rendered":"

Straight out of Hollywood, in what has turned into a long-running soap opera, is Major League Baseball\u2019s own \u201cWar of the Roses.\u201d MLB\u2019s version, featuring the divorce of the Los Angeles Dodgers owners Frank and Jamie McCourt, is being played out in court venues across three states and in a sundry of court proceedings and […]<\/p>\n","protected":false},"author":114,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ocean_post_layout":"","ocean_both_sidebars_style":"","ocean_both_sidebars_content_width":0,"ocean_both_sidebars_sidebars_width":0,"ocean_sidebar":"","ocean_second_sidebar":"","ocean_disable_margins":"enable","ocean_add_body_class":"","ocean_shortcode_before_top_bar":"","ocean_shortcode_after_top_bar":"","ocean_shortcode_before_header":"","ocean_shortcode_after_header":"","ocean_has_shortcode":"","ocean_shortcode_after_title":"","ocean_shortcode_before_footer_widgets":"","ocean_shortcode_after_footer_widgets":"","ocean_shortcode_before_footer_bottom":"","ocean_shortcode_after_footer_bottom":"","ocean_display_top_bar":"default","ocean_display_header":"default","ocean_header_style":"","ocean_center_header_left_menu":"","ocean_custom_header_template":"","ocean_custom_logo":0,"ocean_custom_retina_logo":0,"ocean_custom_logo_max_width":0,"ocean_custom_logo_tablet_max_width":0,"ocean_custom_logo_mobile_max_width":0,"ocean_custom_logo_max_height":0,"ocean_custom_logo_tablet_max_height":0,"ocean_custom_logo_mobile_max_height":0,"ocean_header_custom_menu":"","ocean_menu_typo_font_family":"","ocean_menu_typo_font_subset":"","ocean_menu_typo_font_size":0,"ocean_menu_typo_font_size_tablet":0,"ocean_menu_typo_font_size_mobile":0,"ocean_menu_typo_font_size_unit":"px","ocean_menu_typo_font_weight":"","ocean_menu_typo_font_weight_tablet":"","ocean_menu_typo_font_weight_mobile":"","ocean_menu_typo_transform":"","ocean_menu_typo_transform_tablet":"","ocean_menu_typo_transform_mobile":"","ocean_menu_typo_line_height":0,"ocean_menu_typo_line_height_tablet":0,"ocean_menu_typo_line_height_mobile":0,"ocean_menu_typo_line_height_unit":"","ocean_menu_typo_spacing":0,"ocean_menu_typo_spacing_tablet":0,"ocean_menu_typo_spacing_mobile":0,"ocean_menu_typo_spacing_unit":"","ocean_menu_link_color":"","ocean_menu_link_color_hover":"","ocean_menu_link_color_active":"","ocean_menu_link_background":"","ocean_menu_link_hover_background":"","ocean_menu_link_active_background":"","ocean_menu_social_links_bg":"","ocean_menu_social_hover_links_bg":"","ocean_menu_social_links_color":"","ocean_menu_social_hover_links_color":"","ocean_disable_title":"default","ocean_disable_heading":"default","ocean_post_title":"","ocean_post_subheading":"","ocean_post_title_style":"","ocean_post_title_background_color":"","ocean_post_title_background":0,"ocean_post_title_bg_image_position":"","ocean_post_title_bg_image_attachment":"","ocean_post_title_bg_image_repeat":"","ocean_post_title_bg_image_size":"","ocean_post_title_height":0,"ocean_post_title_bg_overlay":0.5,"ocean_post_title_bg_overlay_color":"","ocean_disable_breadcrumbs":"default","ocean_breadcrumbs_color":"","ocean_breadcrumbs_separator_color":"","ocean_breadcrumbs_links_color":"","ocean_breadcrumbs_links_hover_color":"","ocean_display_footer_widgets":"default","ocean_display_footer_bottom":"default","ocean_custom_footer_template":"","ocean_post_oembed":"","ocean_post_self_hosted_media":"","ocean_post_video_embed":"","ocean_link_format":"","ocean_link_format_target":"self","ocean_quote_format":"","ocean_quote_format_link":"post","ocean_gallery_link_images":"on","ocean_gallery_id":[],"footnotes":""},"categories":[122,63],"tags":[],"class_list":["post-14411","post","type-post","status-publish","format-standard","hentry","category-public","category-sports-law","entry"],"_links":{"self":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts\/14411","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/users\/114"}],"replies":[{"embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/comments?post=14411"}],"version-history":[{"count":0,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts\/14411\/revisions"}],"wp:attachment":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/media?parent=14411"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/categories?post=14411"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/tags?post=14411"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}