In the good old days, when a married couple decided to
split, mom kept the house, the kids, and the family dog. These days, the
division of property and parenting time is no longer black and white. Today,
when there is a dispute as to who gets the house or the furnishings, the court
considers many factors such as, who purchased the item, was the item a gift,
was it inherited, which party is in a better position to maintain or afford it,
etc. The value of the property is generally offset by cash or the division of
other property to make the split equitable (legalese for “fair”). To
illustrate, a court might order that the husband gets the TV and the wife gets
the couch. With regard to dividing the time with the children, if there is a
dispute the courts generally follow guidelines which attempt to assess the
“best interest” (again legalese, but self-explanatory) of the child.
But what happens to Rover?

Courts consider a dog, although a beloved family member,
property. From a legal point of view a dog is no different from the living room
couch. Of course, some families feel that their pet is another child, and in
some cases the only child, which makes the concept of a dog as mere
“property” hard to accept. Yet, the courts usually look at the family
pet as property that needs to be allocated to one party or the other. Only in
extremely unusual cases will a court order a visitation schedule for an animal.
This is because the animal is not a child and state statutes consider a dog to
be property. To determine who should get the dog post-divorce courts look to
see who the dog is registered to, who purchased the dog, to whom the dog was
gifted or to anything else that makes sense under the facts and circumstances
of a particular case. This is the same process the Court uses to divide
furnishings, bank accounts, and the wedding china.

If the parties can agree on a certain visitation schedule it
is likely that a court will enforce that agreement. While a visitation schedule
will allow for both parties to continue spending time with the pet, is such an
arrangement really in everyone’s (including the pet’s) best interest? Are the
strings that come with sharing a pet worth it for anyone involved? Although
Rover is like the child you never had (or more loveable than the one(s) you do
have), he is an animal. Bouncing back and forth between two households does not
provide him with the stability that a domesticated animal needs. Also, a
visitation schedule for a pet is for a very, very long time. There is no age of
majority for a dog. Most people who have decided to live separate lives will
not be able to sustain that sort of relationship with their ex for up to 20
years.

At Zashin & Rich, we have represented many clients who
sought “custody” of the family pet. Determining who the rightful
owner is can be an expensive process. In fact, we have had a committed pet
owner who bought a new vehicle just to transport their dog back and forth.
“Pet custody” cases are different from deciding who gets to keep a
certain piece of property because many emotions come into play; somewhat like
deciding who gets to keep a family heirloom. Parties must look at the cost of
fighting to keep the pet compared to the value of the relationship with that
pet. If a party decides that Rover is priceless, and he/she will pay whatever it
takes to keep him, in legal fees alone Rover may end up being a very expensive
pet indeed.

In our previous blog, Property Division in Divorce – Jamie McCourt isLooking for the Payoff Pitch, we discussed the divorce of former Los Angeles
Dodgers owner Frank McCourt and how Ms. McCourt asked the court to set aside
her divorce settlement. Specifically, she wanted to nix the previous agreement
because Mr. McCourt sold the Dodgers – an asset he kept in the settlement – for
more than two billion dollars before the ink had even dried on the settlement
documents. The actual sale price for the team was far higher than anyone
thought was possible. While the degree of difference between the anticipated
value and the actual apparent value of this asset is certainly unusual, the
situation is certainly not. People often come to our office wanting to reopen
their divorce case or revise their settlement because something was unfair
about the result. There are occasions where we have prevailed in these
situations. But that being said the person trying to reopen the case is more
frequently on the losing side in court. Here’s why:

The public policy that guides our courts in all legal decisions, including
divorce cases, is the need to create “finality” as to a dispute. When
a case is closed, public policy dictates that it should be over for good.
Period. Thus, only in rare circumstances can a court order, or a settlement
agreement, be set aside. In Ohio, for instance, there is a considerable body of
law which contemplates under what circumstances a case can be reopened. The
allowable circumstances are actually quite rare. Typically the person seeking
to reopen the case must show there was some fraud, mistake, or duress. Thus, one
side must have unfairly taken advantage of the other side. And, the request
must come relatively quickly, no more than a year from the time the court
issued its order or adopted the parties’ agreement. Beyond a year the ability
and reasons why a court would reopen a case become even narrower (typically
that “prospective enforcement” of the terms would be unfair or there
was a fraud upon the court.) Aside from these examples, when the case is over
it is really over.

After knowing what is now known about the value of the baseball team, Ms.
McCourt feels like she got a raw deal in accepting a lump sum settlement of
$131,000,000. (Note that her settlement also included several parcels of real
estate, multiple vehicles, all financial accounts in her own name, and
indemnity against significant back due taxes and other debt.) She argues that
she also should have received her fair share of the more than two billion
dollars received from the team’s sale.

What your divorce lawyer will tell you is that when people divorce usually
one spouse takes the family business and the other spouse is bought out for an
agreed upon or court ordered number. In this way the parties are separated as
much as possible, not only legally and physically, but also financially.
Unfortunately, it is often true that during the process of this separation one
side (the “in spouse”) might have more information than the other
(the “out spouse.”) And, because the out spouse is usually bought out
of the business completely, the determined value of the business is quite
significant. With the benefit of hindsight it is obvious that Ms. McCourt, the
out spouse, made a bad deal. Or, at least, she made a deal that could have been
better. If Mr. McCourt and his attorneys are to be believed, no one could have
known the team would sell for so much at the time the divorce settlement was
made. However, if Ms. McCourt and her attorneys are to be believed, the value
of the team was purposely misstated.

At Zashin & Rich we have had clients who have received a business in
settlement and have subsequently sold it for a windfall as Mr. McCourt claims
to have done. But many others have not been so successful and sometimes the
business significantly drops in value for whatever reason. Certainly, there are
instances of one party being ripped off by the other. But a situation in which
the out party was actively mislead or flat out lied to by the in party, is very
different than an out party’s failure to complete appropriate due diligence or
to hedge bets on what will happen to an asset in the future. That is, whether
or not Mr. McCourt actively hid information about the Dodgers’ value matters.
But whether or not Ms. McCourt did all appropriate due diligence and used that
information to make a settlement decision she believed at the time to be sound
also matters. The mere fact that the decision turned out to be a poor one in
retrospect is largely irrelevant. If every case was subject to being reopened
each time someone sold a business for an amount much greater than or less than
the amount considered at the time of the agreement or court decision was
struck, our courts would work even more slowly than they already do. Things
would grind to a virtual halt. In this case, especially given the stakes, it
seems unlikely that due diligence was missed. And while the court in California
has ruled that financial details of the sale must be turned over to Ms.
McCourt, based on the facts reported so far, our prediction is that Ms. McCourt
will probably not prevail. However, as the facts come out, the final decision
will doubtlessly depend on what each party did and when. Stay tuned….

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.