Saturday, April 23, 2011

The McCourts in Court

This case is just wonderful for lawyers.   Maybe not so much for the parties involved.   It definitely has not been good for the Dodgers.    What should have been a straighforward, simple divorce -- after all there was a postnuptial agreement -- has so far led to rulings on the validity of that agreement, a lawsuit against the firm who drafted the agreement, an request by the law firm for a declaratory ruling that the firm met its ethical obligations, and finally MLB taking over the Dodgers.

Jami and Frank McCourt bought the Dodgers after they were married.   They had fun running the team.   In 2004, they had the law firm draw up a postnuptial property and settlement agreement.   This agreement says who gets what in the event of a divorce.    Among other things, the ownership of the Dodgers was addressed in this document.   Frank says the agreement gave him sole control and she got all the houses they accumulated (6).   Jami says that is not the agreement, she wouldn't have signed away the Dodgers.   This would not have mattered if the parties stayed married.   But, they didn't.   The marriage fell apart and away to court the McCourts went.

Frank was convinced he had an ironclad agreement.   Apparently, despite paying big bucks for his attorneys, no one told him there was no such thing as an ironclad agreement.   If there were, contract disputes would never see the light of a courtroom.

Jami challenged the agreement in court.   Apparently, there was a wording problem.    Not all the copies of the agreement say the same thing.  (no one had ever heard of copy machines or hitting print multiple times to avoid this?)   In some copies the word "inclusive" is used to describe what property Frank would get and other places it says "exclusive."   Seriously, NO ONE NOTICED TWO COMPLETELY DIFFERENT WORDS WERE USED?????    An attorney for the firm who wrote up the agreement admits to flubbing the words.     Honestly, if you are paying these guys as much as Frank was most likely paying his attorneys, you would think they would at least take the time to proofread all the copies.  

There was an actual hearing on the agreement itself in December 2010.    A judge ruled the agreement was invalid.   This meant no agreement dividing up the property existed.   Frank had an interest in Jami's property and Jami had an interest in Frank's property.    Everything was up for grabs.

Frank was not happy about having to share the Dodgers with his ex-wife.   Frank hired Sullivan & Cromwell to represent him in any claims he may have against the misdrafting firm of Bingham McCutchen.   Before Frank's new attorneys could act, Bingham hit back.   In something I have never heard before, they filed suit against their client.    For some reason, they filed in Boston, although all events seem to be based in California, which is also the current residence of Frank.    Bingham asks the court to rule that the firm mets it obligations to its client and did nothing wrong.    They also ask for all their attorneys' fees for representing Frank so far in this mess.  This is unusual in that attorneys don't normally go to court to prove they were right.   They defend when sued, but they don't bring the pre-emptive non-malpractice claim.    I have to wonder about the ethics of this as well.    You can't put a clause in the retainer agreement that says "fees are reasonable" or that the client can't sue you for malpractice.    So, how can a firm affirmatively ask a court that the firm did not commit malpractice.   Also, they asked for the ruling in Boston.    Some legal principles may preclude a lawsuit then in California on the same subject, but I just don't see a California court meekly agreeing with whatever a Massachusetts court says on a malpractice claim.

Jami is ecstatic of course.   She just wants to be a part of the Dodgers.    Or be paid off for her share.   This could be quite lucrative -- if Frank has the cash handy to pay her off.   Which leads to the latest bit in this saga.  

The finances of the Dodgers are a mess.   To get sole control, one party would have to buy out the other party.    MLB, just like all the other leagues, has rules about debt and using the team as collateral.    Frank could only borrow so much to buy out Jami.   He reportedly sought a loan on advance television fees.    He went to Bud Selig to get permission to do this, which was denied.   Frank then threatened to sue MLB.   Frank doesn't read agreements real well.   There is a clause in the ownership contract that prohibits said owner from suing MLB (n.b. wonder how enforceable that  little clause is.   Courts don't like clauses that deny people their day in court).  At this point, Bud Selig as MLB comissioner has had it with the McCourt drama.    Does anyone know where the Dodgers are in the standings?   I sure don't.    But lots of people know when the McCourts were in court last and what happened.   Selig decided enough was enough.   He announced on Wednesday that MLB would run the Dodgers.   Another nifty clause in the ownership contract allows this "in the best interest of baseball"*

Most people will never have a fight over who gets the sports team.   However, property agreements can be useful in resolving divorce disputes, no matter the amount of property.   The key is to have a well-drafted one that clearly states each party's intentions.    It may still wind up in court, but it is a starting point.    Divorces get nasty enough, trying to value the property during the divorce is just asking for a long court case.   Property settlement agreements can avoid some of the time and expense, if properly drafted.

So, what have we learned from all this:

1.   There is no such as an ironclad marital property agreement.
2.   Make sure all the copies of said agreement are the same word for word.
3.   Read and understand what you are signing.
4.   It never gets old saying McCourts in Court.
5.   It's not the amount of money you pay your attorney that ensures competence.

*No, I have no idea if the NFL has a similar clause so Goodell can make Jones and Snyder go away.   Feel free to investigate this and get back to me.

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