Global Family Law Services

Property Division in Divorce – Jamie McCourt is Looking for the Payoff Pitch

| May 13, 2013 | Property Division

March 28, 2012… the Los Angeles Dodgers announced that the team sold for a record-breaking $2 billion dollars. And Jamie McCourt cries FOUL! Jamie claims that her ex-husband Frank McCourt, former owner of the team, intentionally underestimated the value of the team and cheated her out of a serious chunk of change. About $770 million worth of pocket change. That’s a whole lot of Cracker Jack!

What led to the dispute was that on October 11, 2011, Jamie and Frank executed a Binding Term Sheet agreeing to a distribution of assets from the marriage. Subsequently, in January 2012, Jamie executed a Stipulated Judgment asking the court to enter the terms of the Binding Term Sheet and acknowledged that she was waiving her right to a full hearing. Jamie even agreed that although the value of the LA Dodgers had been a contentious issue during negotiations, she was willingly entering into the agreement “regardless of the value that [the team] may ultimately have.” Now Jamie is asking the court to set aside that agreement and award her a distribution based upon what the team actually sold for.

So why didn’t Jamie realize the team was worth so much money? Well, first you have to look back at the recent history of the Dodgers. In July 2011, the team filed for bankruptcy. In fact, according to court records, the Dodgers did not even have enough money to make payroll that week. Not only that, months before the bankruptcy filing, an altercation outside of Dodgers stadium left a man in a coma. The family of this man and the hospital that treated him alleged that Frank and the Dodgers were responsible for his injuries and subsequent treatment because security was lacking at the ballpark. The team was over a half a billion dollars in debt and counting. So what was it worth? You could argue that on its face the team was virtually worthless.

Frank’s lawyer claimed that during negotiations Jamie was provided research that indicated the team could potentially sell for $1.5 billion. Jamie’s lawyer contends that Jamie never received this information “and might not have understood it if she had.” Wait a minute! She potentially received information about the value of the team that she may or may not have understood, yet accuses Frank of knowingly defrauding her? The fact of the matter is that Jamie received a very good settlement considering the state that the team was in when she agreed to settle, and it was up to Jamie to perform the necessary due diligence.

Jamie alleges that she believed that the divorce agreement was to be a 50/50 split. It has also been reported that in August 2011, Frank entered a document with the court stating that the couple’s joint assets were worth $294 million – not the team, but the total joint assets.

So let’s take a look at what Jamie actually received:

  • 1 house in Los Angeles
  • 2 Houses in Malibu
  • 1 Condo in Vail
  • All of the contents of the above mentioned homes
  • All of the vehicles and boats that were titled in her name
  • All accounts, funds, and assets held jointly by the parties
  • $131 million lump sum settlement
  • $225,000 per month until the lump sum settlement was paid
  • Up to $593,675 reimbursement for taxes, interests, and penalties for her 2008/2009 individual tax returns
  • No tax liability – and treated as 100% owner of business interests and properties to entitle her to 100% of the tax deductions associated with those assets
  • Indemnity from the $18 million line of credit partially secured by the Vail condo

Frank received two houses with their contents, his vehicles and boats, his individual accounts, and his companies.

Without even knowing what any of these assets are worth, it is clear that this was not meant to be a 50/50 split. The fact that Jamie walked away with no tax liability whatsoever points to the division not being 50/50. Yet even if a 50/50 split was the intent, in October 2011 this team was for all intents and purposes worth significantly less than what someone was ultimately willing to pay. Furthermore, did Jamie request a valuation on the team or any of the assets? No. She took what she thought was a great deal and ran with it.

At the end of the day, Jamie McCourt did not walk away a pauper. Could she have held out and made more money? Sure. But she could instead have received less. The bottom line is that Jamie took a chance on settling her divorce. She agreed to a sum certain and even agreed to that amount regardless of the value of the assets, and specifically the team, may ultimately have been worth. Should the court now set that agreement aside? When she signed the agreement Jamie probably thought that the team would sell for less due to its debt and legal drama. She may have also believed that the clause enforcing the agreement terms in spite of the team’s ultimate value would serve to guarantee her $131 million lump sum payment if the team were worth even less. Unfortunately for Jamie, the situation was reversed and the clause was now acted to keep her from getting more money.

Ohio Revised Code § 3105 generally contends that the division of marital property should be equal. However, Ohio courts have found that this statute applies to contested divorces and not settlement agreements. Davis v. Davis, 1996 Ohio App. LEXIS 1612 (Ohio Ct. App., Cuyahoga County Apr. 18, 1996). Further, the courts have determined that “[w]hen the parties have agreed, without objection and with the judge’s approval, to enter into stipulations for the record, the court will not consider objections to such stipulations on appeal.” Presjak v. Presjak, 2010 Ohio 1455, P40 (Ohio Ct. App., Trumbull County Mar. 31, 2010).

If Jamie found herself before an Ohio judge, the decision would likely be in favor of her ex. Since the McCourts’ divorce is under California jurisdiction and California is a community property state, the court may find otherwise. Stay tuned for the Judge’s decision in June. It’s sure to be a bench clearer.