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.