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McCourts’ Dodgers California Divorce Battle Includes High Stakes Business Valuation Debate – In re Marriage of McCourt

If you’ve been keeping an eye on the ongoing divorce battle between former L.A. Dodgers owners Frank and Jamie McCourt, you may want to know about a recent appeals court ruling in the case. If you haven’t been watching, the case provides a good example of some of the business valuation and property division issues that can come up in California divorce proceedings.

file0002123706631Jamie and Frank McCourt married in 1979 and split their time in New York, Massachusetts, and California over the next three decades. Jamie worked as a corporate lawyer, while Frank started a successful property development company. They eventually moved to the L.A. area, when Frank bought the Dodgers, the team’s stadium, and the surrounding real estate in 2004.

Frank told Jamie at the time of the deal that he believed the team was worth more than $2 billion. The Dodgers were under contract with a Fox Sports Net affiliate, in which the TV station was granted exclusive cable television rights until the end of the 2013 baseball season. Jamie ultimately became the team’s president and ran the Dodgers’ day-to-day operations from 2004 to 2009. During this time, the Court later explained, she reviewed an “offering circular” that the team had prepared for potential investors. The document valued the club at $963 million and its television rights – including the right for the team to start its own TV station after the Fox contract ran out – at just more than $1.5 billion.

Jamie sued for divorce from Frank in 2009, somewhere around the same time that she was fired. “Two years of intense litigation” followed, according to the Second District Court of Appeals. “She was represented by six different law firms in this litigation,” the appeals court said, referring to Ms. McCourt. “In addition, she hired forensic accountants, a ‘baseball expert,’ and multiple additional experts whose job was to advise her on the value of the Dodger Assets.” The parties engaged in “extensive” discovery, during which the Court said Frank produced roughly 220,000 pages of documents. Jamie also noted in a preliminary statement that the team was worth $962 million, adding that this figure didn’t include the value of any regional sports network television deal nor the value of potentially developing the land around Dodgers Stadium. She referred to the TV rights as being worth $1-2 billion throughout the litigation, according to the Court.

In June 2011, the Dodgers filed for bankruptcy. The LA Times reported that the club was $500 million in debt. Later the same year, Frank provided an income and expenses disclosure indicating that the Dodgers were worth $860 million. That figure didn’t include the Dodgers’ TV rights, which the Court said he separately disclosed as being worth $1.8 billion. Jamie and Frank ultimately reached a settlement agreement, in which Jamie would receive roughly $181 million in cash and real property in exchange for relinquishing any ownership rights in the Dodgers. Guggenheim Baseball Management bought the team in 2012 for $2.15 billion.

The trial court later denied Jamie’s motion to set aside the settlement agreement, in which she claimed that Frank had misrepresented the team’s value by failing to include the value of potentially creating a regional sports network to broadcast the team’s games after the Fox contract ran out. “The evidence produced by both parties shows that they both knew well before the commencement of the dissolution proceedings, the viability and projected value of the RSN as an asset of the Dodgers,” the trial judge explained.

Affirming the decision on appeal, the Second District said the evidence showed that Frank augmented his original financial disclosures to include the estimated $1.8 billion in TV rights before the couple entered the settlement agreement. It also found that Jamie wasn’t prejudiced by any initial failure to disclose this value, since she was well aware of the TV rights issue throughout the course of the litigation.

“Jamie was a sophisticated businessperson, claimed that she ‘ran the day-to-day operations of the Dodgers’ from 2004-2009, and was advised by multiple experts on the issue of the value of the Dodger Assets,” the Court noted. “Prior to the execution of the MSA, Jamie consistently represented that the Dodger Assets were worth approximately $1 billion exclusive of the value of a RSN and that a Dodger RSN had valuable potential.” As a result, the Court affirmed the trial judge’s decision.

You don’t have to own a multi-billion dollar sports franchise in order to be faced with some of the same issues that the McCourts grappled with in this case. Business and property valuation are complicated matters that can have significant consequences. If you are facing these types of issues in the Bay Area, consult knowledgeable divorce lawyer John S. Yohanan. With more than 30 years of experience, Mr. Yohanan is an accomplished family law attorney who has helped a number of clients resolve a property disposition and a wide variety of other issues on optimal terms. Call our office at (408) 297-0700 or contact us online to schedule a consultation.

Related blog posts:

Valuing Property in California Divorce Cases – In re Marriage of Sattler

Valuing a Spouse’s Business in California Divorce Cases – In re Marriage of Caldwell

In Divorce Cases, It’s ‘Speak Now or Forever Hold Your Peace’ – In re Marriage of Geiger