By Jeff Birren
The feuds of the mighty provide sport for the masses, and often-full employment for the Bar, especially when the feud is a divorce. So it has been with the divorce between Jamie and Frank McCourt, former owners of the Los Angeles Dodgers and once one of L.A.’s power couples. The litigation began in 2009 and on February 24, 2015, the Court of Appeal rejected Ms. McCourt’s appeal from an order that denied her request to set aside the Marital Separation Agreement (“MSA”) and the judgment that incorporated it, (In re the Marriage of Jamie McCourt and Frank H. McCourt, California Court of Appeal, Second Appellate District, No. B254182, (2-24-15)). This article adopts that court’s practice, and “for simplicity and clarity,” refers “to the parties by their first names” (Id.at 2, fn 2).
Frank and Jamie married in 1979, after Jamie graduated from the University of Maryland Law School. Thereafter, she received an MBA from MIT. She practiced law from 1979 to 1992, and became general counsel for Frank’s real estate company in 1994 (McCourt at 2).
Frank, or possibly both, “purchased the Dodgers, Dodger Stadium and the Chavez Ravine property surrounding the Stadium…from Fox News Corp. for $430 Million” (Jamie McCourt Declaration ¶ 21, McCourt v. McCourt, L. A. Superior Court Case No. RD514309 (‘Jamie Declaration”) (10-12-09). The Dodgers’ television contract with Fox ran through the 2013 season. He was Dodgers chairman; she was vice-chairman with an “integral role” (Jamie Declaration,¶¶ 24-32). She became team president in 2005, and was responsible for the day-to-day operations (McCourt at 3). In 2009 she reviewed an “offering circular” that valued the team at $963M plus the English-language TV rights at $1.503 (Id.). Then the roof fell in.
Frank fired Jamie from the Dodgers in 2009, amidst public speculation she “had an affair with her Dodgers bodyguard and driver” and they “spent more than two weeks on a summer vacation in France and billed the team for it” (“The Nastiest Billionaire Divorce Ever: Jamie And Frank McCourt” Delevingne, Business Insider, 2-23-10). Jamie initiated divorce proceedings in October 2009 (McCourt at 3). Her declared list of Dodgers’ “perquisites, emoluments and benefits” was over two pages long, (Jamie Declaration, ¶ 53, pages 13-15).
Jamie “was represented by six different law firms,” and hired “forensic accountants, a ‘baseball expert’ and multiple additional experts” who advised “her on the value of the Dodger Assets. One consultant had extensive experience in the sale of sports teams and the creation of RSNs (regional sports networks)), (McCourt at 3). Her legal team included David Boies and partner James Miller; Dennis Wasser, Bruce Cooperman and Amy Rice; Michael Kump and Susan MacIssac; and Bert Fields.
Frank hired Sorrell Trope and partners Mark Platt, Thomas Dunlap, James Durant and Anne Kiley; Manley Fried; Stephen Susman plus partners Marc Seltzer and Victoria Cook; and Marshall Grossman.
Both McCourts filed initial disclosures in January 2010. Jamie stated the fair market value (“FMV”) of the Dodgers was $962M, excluding “the unrealized value of RSN rights” and 276 acres surrounding Dodger Stadium (McCourt at 4). Jamie took 40 volumes of depositions, served twelve sets of document requests, and Frank produced 220,000 pages of documents that included “detailed financial data regarding the Dodgers.” Jamie “repeatedly cited to such documents’ valuation of the Dodger Assets and asserted, throughout the litigation, that these assets were worth at least $1billion” (Id.). Jamie testified in deposition that Frank had told her that the Dodgers could be worth “between a billion and $2 billion” and she agreed (Id.). In October 2010 the marriage was dissolved, reserving jurisdiction over other issues.
By April 2011 the team was $500M in debt and LA Times reported it did not have the cash to meet payroll. MLB appointed a monitor to oversee the team. In May, Jamie filed a motion to compel the sale of the team, because “Frank’s ongoing mismanagement of the Dodgers will continue to devalue the team” (Id. at 5.) The Dodgers filed for bankruptcy in June.
The divorce litigation continued, and Jamie repeatedly stated in court filings that the Dodger Assets were worth over $1B and that the RSN rights were worth $1.5B (Id. at 6.) In October 2011 the McCourts signed the MSA. Frank was required to pay Jamie $131M in cash and transfer to her approximately $50M in real estate and personal property. She released all claims on the Dodger Assets, and Frank assumed seven years’ worth of all their joint tax-return liability (Id. at 8). The parties negotiated language for the stipulated judgment that stated they were entering into it “regardless of the value that the assets might have” and both “testified under oath that they freely and voluntarily entered into the terms of the MSA and the judgment” (Id. at 9).
Guggenheim Baseball Management, L.P. ultimately purchased the Dodger Assets for $2.15 billion in March 2012 (Id.). Jamie appeared in the bankruptcy action to request her $131M from the sale proceeds. In April, Frank wired the $131M to her. That day Jamie’s counsel wrote to Frank’s counsel, claiming that she had grounds to set aside the stipulated judgment.
She made that motion in September 2012 (Id.). She claimed that Frank had misrepresented the value of the Dodger Assets in his August 2011 Declaration, that he had not included the RSN Valuation Analysis to her, that he had concealed evidence of offers to buy the Dodgers, and that Frank “had falsely represented” that he would “never sell the Dodgers” though she did “not address this contention on appeal” (Id. at 10). She later “acknowledged that the RSN Valuation had been produced and she failed to submit any evidence of undisclosed offers.” The Court of Appeal also stated that Jamie “made inconsistent claims in her motion” concerning whether Frank’s Declaration value was net value or FMV (Id. at 9, fn 4).
At the hearing, Jamie testified that “she believed, based on Frank’s misrepresentations, that the Dodger Assets had a net value of only $300 million and the potential RSN did not add any value. She also testified that she ‘had no idea’ that the sale of the team by MLB could affect the value of the team despite having previously argued to the court that this would result in a lower price” (Id. at 10).
Judge Scott Gordon heard and denied the motion. Her testimony was “not credible;” as the asset valuation was “a primary issue in the case;” “the valuations and projection of revenue… presented by the parties were far from consistent. [Id.]“Despite the uncertainty and speculation regarding the future of the Dodger Assets, the parties finalized a [MSA] that provided for the division and distribution of the parties assets…” (Id.). Judge Gordon further found that Jamie “failed to produce sufficient credible evident to show that [Frank] concealed or misrepresented any information about the RSN or the Dodger Assets;” that she failed to prove reliance, or made a mistake of fact when she signed the [MSA] (Id. at 11).
Jamie hired Joe Cotchett for the appeal, replacing prior counsel. Frank added Jon Eisenberg and Curt Cutting, to Susman Godfrey. Oral argument was on February 11, 2015. The Court affirmed 13 days later.
Jamie contended that the MSA and judgment should be set aside because Frank had failed to comply with Family Code disclosure requirements; that Frank committed fraud; that she mistakenly believed the Dodgers were worth far less when she signed the MSA; that Family Code §2601 entitled her to an equal division of assets; and that she was entitled to a “presumption of undue influence.” Since that was first raised in the reply brief, the court did not consider it (Id., fn. 5).
The Court stated it had to find that the alleged facts “materially affected the original outcome…” (McCourt at 12, emphasis in the original). The denial of a motion to set aside an MSA will not be “disturbed on appeal in the absence of a clear showing of abuse,” creating “a manifest miscarriage of justice” and the appellate court “assume(s) that the trial court’s judgment is correct” (Id.).
The Alleged Failure to Properly Disclose
Family Code §2104(c) requires divorcing parties to make sworn statements identifying all assets with ownership percentages. During oral argument, Jamie’s counsel abandoned the claim that the omissions in Frank’s preliminary disclosure declaration provided grounds for setting aside the judgment (Id. at 13, fn 6). Counsel argued that Frank failed to complete a Judicial Council Form that required a FMV for the assets and that failure constituted grounds for setting aside the MSA. Frank had had not completed the form but the Court disagreed with the conclusion.
The Court stated that Jamie had not proven that this failure on the initial disclosure “materially affected the outcome of the action” (Id.at 14, 15). Moreover, the State Constitution mandates that no judgment shall be set aside unless the result is a miscarriage of justice, and Frank had “augmented his preliminary declaration with multiple documents setting forth values for the Dodger Assets,” (Id. at 15,16). The Court noted that Jamie never made this objection until the motion to set aside the MSA, two years after the judgment was entered, declining to take advantage of statutory remedies that had been available to her (Id. at 14,15, fn 7).
Counsel also argued that Frank should have produced a third-party document. However, the asset-value in that document was similar to values that Frank had provided to her (Id. at 16, fn 8). Frank’s August 2011 Declaration stated that there were no material changes since a prior Declaration that had a valuation figure that “Jamie does not argue …was inaccurate” (Id.at 17). Jamie also claimed that Frank had failed to disclose a higher offer to purchase the Dodgers, though that was “not supported by a citation in the record and, in fact, the record belies this assertion. The trial court found that during post-judgment discovery, no ‘evidence was found or submitted of any undisclosed offers or bids to purchase the Dodgers’” (Id. at 17, fn 9, emphasis in the original).
The Court held Jamie was not “prejudiced by the purported inaccuracy.” She did “not address, in any meaningful manner, the trial court’s findings that her testimony was not credible and that, in fact, Jamie ‘had knowledge and evidence that the value of the Dodger Assets was well in excess of the amount that she indicated that she relied on in signing the [MSA]” (Id.). The Court further stated: “we must defer to the trial court’s determination that Jamie’s testimony was not credible” (Id.). The Court elaborated that she “was a sophisticated businessperson” who “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”, and even after she received the purportedly low value from Frank, “she represented to the trial court” that the Dodger Assets were worth far more” and she had not shown “that [Frank] failed to fully or accurately augment his preliminary declaration of disclosure or that she was prejudiced by that purported failure,” (Id. at 18).
Fraud
Jamie claimed that the MSA was procured by fraud and that the “trial court erred in not applying a presumption of fraud because Frank received a larger share of the parties’ assets” (Id.). The Court quoted her briefs and stated: “[T]hese general and conclusory arguments are insufficient to satisfy Jamie’s burden of proof” and “it is unclear from Jamie’s arguments what specific misrepresentations or failures to disclose she is referencing” (Id. at 19). Furthermore, the incomplete disclosure was fully augmented, the subsequent disclosure did not misrepresent that an RSN “was without value” and “the record shows Jamie did not rely on her purported understanding of that document” (Id.). Her “lack of reliance constituted an independent ground” for the finding that she was not “kept in ignorance” (Id.).
Mistake
Jamie also sought to set aside the judgment based on her mistaken belief as to the value of the Dodger Assets, citing Family Code §2122(e). The Court again recited the trial court’s finding that she was not credible, and although she claimed she never saw one specific valuation document before signing the MSA, that document was admittedly “produced by Frank before the MSA was signed” and that she “purportedly chose not review documents produced to her in discovery does not provide grounds for her to later claim mistake based on her ignorance of those documents,” (Id. at 20). She had also stated in an August 2011 Declaration that the assets’ “precise market value” was unknown (Id.). Quite simply, “the trial court was correct in finding that Jamie was not mistaken when the executed the MSA and judgment. Jamie simply chose the security of a guaranteed $131 million payment, plus more than $50 million in real and personal property, over the uncertainty and risk presented by the valuation and sale of the Dodger Assets” (Id. at 21). Furthermore, her entitlement to any Dodger Assets “had not yet been determined,” when she signed the MSA (Id. fn 10).
Family Code §2601
Jamie argued that Family Code §2601 entitled her “to a payment equal to the value of assets awarded Frank and the trial court was not authorized to ‘waive Jamie’s rights to an equalizing payment under Section 2601’” (Id. at 21). §2601 states that the trial court “may” make such an award. It does not create grounds to set aside an MSA or judgment. The Court stated that her motion “was filed pursuant to Family Code section 2122 which provides six exclusive grounds to set aside a judgment… That a spouse may qualify for relief under section 2601 is not one of those grounds” (Id.at 22).
The Court observed: “[E]ntire paragraphs in this section of Jamie’s brief are copied verbatim from Jamie’s ‘trial brief’”… In fact, large portions of Jamie’s entire opening brief are also simply copied from her trial brief. We note that such an approach ignores the fundamental distinction between the trial court and appellate court: ‘we do not retry cases on appeal’ but rather review the actions taken in the trial court.” (Id.at 22, fn 11).
Some of the country’s most notable and quotable attorneys presented her case for over five years, yet the negotiated MSA remains inviolate.
Thus all of Jamie’s lawyers and all of her men and women could not reunite her with Dodgers lucre again.
Birren worked for the LA/Oakland Raiders for 34 seasons and was general counsel for much of that time. During that time he worked closely with owner Al Davis and Amy Trask, the NFL’s first female Club Chief Executive. He has an MA in History from USC and a JD from Southwestern, where he taught sports law for three years. He can be reached at jebirren@comcast.net.
