Sunday, October 23, 2011

Could Football Have a McCourt Problem?

On Friday, I had the honor of meeting and speaking to Richard Cass, the President of the Baltimore Ravens.   He was the keynote speaker at a conference I was attending.    I also got a chance to speak to him at the reception after the conference.   He even shook my hand.   Squeeing like a fan girl would not have been professional, but I really wanted to do so.

During his speech, Mr. Cass mentioned that one of the cool things about the NFL was that it was basically 31 family owned teams -- and Green Bay which is community owned.   It makes it easier to know who is in charge of the team and makes for a different attitude towards the business of football.   Now some could argue that the idea of an NFL team as a Mom and Pop business is long gone.    Let the business blogs argue that one out.   This is a family law blog.

Which brings up my concern.    If the team is family owned, what happens when the family disintegrates?   What happens when Mom and Pop split up?    We also saw what happened to the Dodgers in the McCourt divorce (quick note, that one finally settled - Frank got the team, Jami got cash, MLB still ticked at everyone involved).

I asked Mr. Cass that very question.   He very graciously answered me.   Seriously, the guy is super nice and approachable.    He said it was unlikely to happen because the teams are not business where you have to sort out shares, etc.   In the NFL one person has to own at least 30% and one person has to have total voting control.    He also mentioned that the NFL has debt limits rules to keep a team's finances from getting too out of whack.

All that may be true, but Mr. Cass is clearly not a family law attorney.    I hate to disagree with such a great guy, but I just don't see how these things save a team from a McCourt style fight over ownership.   I raised these issues in a previous post of the Blank divorce and the Falcons.

Yes, the teams are family owned.   But to keep the families from being personally liable for the debts of a team, they tend to be corporations or limited liability partnerships.   One person may have voting control, but they are still businesses.

Businesses get divided in divorces ALL the time.   A spouse may have made monetary contributions to the business.   A spouse may have made non-monetary contributions such as working at the business without pay or even just making sure the face of the business has a clean shirt and ate recently.   All of these factors go into dividing up a business.

In community property states such as California or Texas, the law may consider the teams to be comunity property automatically entitling the spouse to half.    This would effect 5 teams in the NFL -- the Chargers, the 49ers, the Raiders, the Texans and the Cowboys.   Other states may also be community property states.

Marital property states, such as Maryland where the Ravens are based, would consider whether marital funds were used to purchase or maintain the team.   Marital funds are any money earned during the course of the marriage (with some exceptions).    In a marital property state, the court would consider the contributions of each spouse, the source of the funds, and what an equitable distribution of the property would be.

It is conceivable that a court may consider a team part of the community/marital property subject to division in th event of a divorce.   A court is not really going to care about the NFL bylaws -- except for possibly guidance on how teams are owned, structured and what the League might do in the event of a court fight.   But, the NFL bylaws are not the law of the land.    A judge is bound to apply the rules of the state in which the court hearing the divorce is located.

All is not lost.    The team is probably not the only asset of the divorcing couple.   They most likely have other assets in the pot of community/marital property that need to be divided up.    Contrary to  popular belief, it is not half of everything as in half of each thing.   It is half (or whatever figure) of the total.   So in this situation, a judge realizing the NFL really frowns on split ownership (remember guidance of the bylaws) such that frowning could result in the complete loss of the asset to both parties, will most likely give the team to one party and more cash and other assets to the other party.   In other words, one spouse gets the team and the other spouse gets more of the other goodies in the pot.

Of course, the problem arises when BOTH spouses want to control the team.    A judge is probably not going to divide  ownership -- even without the bylaws -- because that would require the spouses to continue working together.   If they got along, they wouldn't be getting a divorce.  A judge would have to choose between the spouses.   Some very fancy lawyering would have to go on here.    If someone is determined to keep ownership of a team in event of a divorce and can afford to keep fighting, this would go to trial.

In summary, sorry, Mr. Cass, I can see a prolonged court fight over control of a team despite all the rules the NFL has in place.   Just because it hasn't happened yet, doesn't meant it won't.