Frank and Jamie McCourt agree on this much: For the sake of their four sons, they would prefer to settle their divorce, to avoid a trial in which father and mother would testify against each other.
If Frank loses at trial, he could lose the Dodgers and the chance to pass ownership of the team to his sons. If Jamie loses, she could be left without a penny from a team that generates hundreds of millions of dollars every year.
The party who loses could launch an appeal process that could last several years, leaving the ownership and financial resources of the Dodgers uncertain as such key players as Andre Ethier, Matt Kemp and James Loney approach free agency.
With all those incentives, however, the McCourts have been unable to settle because they disagree wildly on a fundamental question: How much are the Dodgers worth?
The trial to determine who owns the Dodgers is set to start Aug. 30. Frank has asked the court to enforce an agreement that specifies he is the sole owner of the team; Jamie wants the court to invalidate that agreement and declare her co-owner.
The agreement also specifies Jamie is the sole owner of the couple’s residential properties, including two homes in Holmby Hills, two in Malibu, one in Cape Cod, a condominium in Colorado and ranch property in Montana. The total value of those properties is a small fraction of the value of the Dodgers, said David Boies, the attorney for Jamie.
The court has ordered the McCourts to sell property in Cabo San Lucas to help pay expenses. The court also has ordered Frank to pay Jamie $637,159 per month in spousal support for the balance of the divorce proceedings, pending a hearing on permanent support that would be held after the trial.
In order to reach a settlement, Jamie has offered to cede control of the team to Frank, according to Boies.
Although Jamie has said in court papers that she “dreamed of owning a major league baseball team” since childhood and that she took pride in becoming “the highest-ranking woman in Major League Baseball” by serving as the Dodgers’ president and chief executive, Boies said she would drop her bid for a 50% share of the team and a management role if that would help end the expensive, high-profile legal war.
“This is bad for her,” Boies said. “This is bad for her children. This is bad for the Dodgers. This is bad for everything she cares about.”
That leaves the two sides arguing solely about money, which in theory should facilitate a settlement. Yet the McCourts cannot decide how to split the pool of money until they agree on the size of that pool.
“One of the problems in settling this case is the total disconnect between the parties on what the team is worth,” said Steve Susman, the attorney for Frank.
Frank values the Dodgers as they are today: anywhere from $725 million to $900 million for the team, Dodger Stadium and surrounding parking lots, according to Susman.
Jamie values the Dodgers based on what they could become: $1.5 billion and up, Boies said, because so much money could be generated if the team follows through on long-standing plans to launch two cable sports channels and develop those parking lots.
“All she wants is a percentage of the company, whatever it’s worth,” Boies said. “The reason we haven’t settled is that Frank absolutely refuses to negotiate a percentage.”
And the reason for that, Susman said, is because granting Jamie even a small stake in the Dodgers could set her up to sue Frank if she later objects to how he runs the team.
“Frank does not want to become business partners with his former wife,” Susman said.
“A deal where she has a percentage interest in the team is a non-starter.”
Boies said a percentage interest might be the only way to go, since Frank cannot afford to pay Jamie off all at once.
Gerald Phillips, a Newport Beach lawyer who has represented professional athletes and chief executives in divorce cases, said a percentage agreement could be drafted so Jamie would share in the Dodgers’ profits but would have no say in their operation.
“It’s done in virtually all high-asset cases,” said Phillips, who is not involved in this case. “Most people don’t have a couple hundred million dollars floating around.”
Susman concedes that Frank does not. As a result, he said, Frank has offered annual payments that would enable her to maintain her lifestyle until 2014, when the Dodgers expect to generate additional broadcast revenue that would enable him to make a lump-sum payment to her.
Susman called the offer “extremely generous,” citing Frank’s responsibility to the couple’s four grown sons. Susman did not specify how much money Frank offered.
“He wants to get this behind him,” Susman said. “He wants to restore peace with his family, with his boys. He wants to do the right thing for them.
“He needs their approval that he is being fair and decent to their mother.”
In the absence of a settlement, each side would face significant risk.
If Frank loses and the Dodgers are declared community property, he could have the same experience former San Diego Padres owner John Moores did during his divorce: wanting to keep the team but needing to sell it to raise enough money to pay off his estranged wife.
Frank’s advisors have said he could raise that money by taking out loans and/or taking on investors in the Dodgers, but Susman said that hurdle might be impossibly high.
“If Jamie wins, the most likely scenario is the team would be sold,” Susman said. “Neither one can afford to buy the other out at those numbers.”
Boies and another attorney for Jamie, Bert Fields, each has said she could line up the money to do so.
If Frank wins, thus confirming the team is his and his alone, Boies argues that Jamie still would be entitled under California law to a share of the Dodgers’ appreciation during her time with the team.
Frank’s lawyers argue otherwise, citing a provision of the disputed agreement that states “appreciation and income from the separate property of either party shall remain the separate property of that party.”
If that provision is upheld, Jamie could end up with no money from the Dodgers.
She also could end up with nothing from the cable sports channels and future land development, should the court make the determination of how much the Dodgers are worth.
“If it goes to the judge, the law is clear: I have to value it at the current value, not speculate about what could happen,” said Lynn Soodik, a Santa Monica family law attorney also not involved in this case.
The Dodgers’ television contract with Fox expires in 2013. Court filings have revealed plans for two cable sports channels -- dubbed DTV: Dodger Television, one in English and one in Spanish -- with projections that indicate the Dodgers could more than triple their annual television revenue -- $38 million this year and $41 million in 2013 -- after the Fox contract expires.
In his depositions, Frank has said he has not decided whether to implement those plans.
Even if the Dodgers never launch a cable channel of their own, Boies said, Jamie is entitled to a share of what he believes would be a substantial gain in television revenue.
“They could turn around tomorrow and get $300 million to $500 million from Fox for an extension,” Boies said. In a deposition, a club executive said the Dodgers could sign a five-year extension with Fox for $300 million.
The land development appears more problematic -- or, in Susman’s words, “pie in the sky.”
Court papers have revealed the Dodgers’ hope of developing up to a million square feet of the stadium parking lot for what could be an NFL stadium, condominiums, offices and/or shops.
The Dodgers have received zoning approval for the “Next 50" project, according to City Councilman Ed Reyes. The development, unveiled two years ago, would add restaurants, shops, an office building and a team museum beyond center field.
But the Dodgers have said they have been unable to secure financing for the project, with banks tightening loan restrictions during the recession. The team has yet to submit any other development plans, Reyes said.
Yet Boies said he won’t back down from asking for a percentage of the Dodgers rather than a lump sum, even if such a deal would include a percentage of revenue from land that might never be developed.
“If that’s zero, that’s zero,” he said.