McCourt divorce a cautionary tale

Frank and Jamie McCourt bitterly contested their divorce in court, and in the court of public opinion, during more than a year in which the couple alone could have determined the fate of the Dodgers.

Now that Commissioner Bud Selig has appointed a trustee to run the Dodgers, the McCourts have not only lost control of the team but could lose financially as well, in what local divorce lawyers say is quite the cautionary tale.

"They were so focused on destroying each other that they destroyed themselves," said Lisa Helfend Meyer, a Century City family law specialist who has followed the case closely.

With a settlement, Frank McCourt could have kept control of the Dodgers, and the chance to pass the team along to his four sons. He also could have reaped the benefits of a fat new television contract and, perhaps, development in the Dodger Stadium parking lot. Jamie McCourt could have accepted what Meyer said probably would have been a large, tax-free payout.

Or the couple could have agreed to own the Dodgers together and keep the team in the family, perhaps with Jamie McCourt having no say in operations but getting an annual payment or a percentage share of profits.

Now they face the prospect that Selig could steer the team toward a franchise sale, and with it what could be a huge tax bill for the McCourts.

The most recent settlement talks contemplated a payout in the range of $200 million to Jamie McCourt, according to people briefed on the discussions but not authorized to talk about them.

An analysis of the Dodgers' finances conducted for The Times last year by Holthouse, Van Carlin and Trigt, the largest accounting firm in Southern California, and based on data through the 2009 season, showed that the McCourts could sell the team for $800 million but walk away with about $80 million each, after debts and deferred taxes were paid.

It is unknown how the McCourts' tax liabilities, the Dodgers' debt load and the franchise value might have changed since then, but Meyer said the general outcome for the McCourts appears clear.

"They'll both be worse off than they would have been had they been cooperative and not made such a spectacle of themselves," Meyer said.

The McCourts failed to resolve their divorce despite settlement talks before, during and after an 11-day trial last year. That trial settled only one issue, with a judge invalidating the agreement that Frank McCourt had relied had upon to establish his ownership of the Dodgers.

The McCourts have yet to agree on how to divide their assets. No future court dates on that issue have been scheduled, and lawyers for Jamie McCourt have said hearings might not resume until next year. Frank McCourt said last fall that he would pursue another legal strategy to show the Dodgers are his sole property, but he has not filed supporting papers.

Selig has not said how long he might consider running the Dodgers. If he defers to the court, and assuming the Dodgers are determined to be community property, then the court might set a value for the Dodgers, according to Santa Monica family law attorney Lynn Soodik.

She said the court could give each of the McCourts a window of time to buy out the other and receive approval from Major League Baseball's owners, an event that would be unlikely for Jamie and virtually unimaginable for Frank. Selig got the blessing of baseball's executive committee — a caucus of other owners — in taking control of Dodgers operations from Frank, according to a baseball official briefed on the events but not authorized to discuss them.

If neither of the McCourts could strike a deal with the other and with MLB, then the couple could be ordered to retain an investment banker who would negotiate a sale to a third party, Soodik said. However, she said, California law requires an asset to be valued at its current worth, not at a speculative future worth.

Frank and Jamie McCourt each have cited the riches of a new television contract for the Dodgers, but the prospect of future deals would not be considered by the court in determining the value of the marital estate. Frank McCourt recently agreed with Fox on what he said was a $3-billion contract — one that would more than triple the Dodgers' annual television revenues — although Selig has refused to approve the deal.

Fox has indicated that contract would be available to a new owner, which could persuade bidders to offer more for the Dodgers than the court's appraised value and could enable Selig to resist allegations that he forced a distressed sale. The McCourts might nonetheless file suit against Selig, if they believe his takeover in any way diminished the value of the team.

However, if the court has not acted by the time Selig receives the report of the auditors he has dispatched to Dodger Stadium, the commissioner could use his "best interests of baseball" powers — the same authority he cited for the takeover — to order the Dodgers sold.

California family law courts have no jurisdiction over MLB, according to Meyer. She said Selig could order the Dodgers sold and the court could freeze the proceeds until a final determination of whether the team was community property or Frank McCourt's sole property.

Whatever the legal path, it no longer appears that the McCourts could pass ownership of the team to their four sons. Frank McCourt angered Selig by refusing to sell any part of the team, instead obtaining cash by piling loan after loan upon the Dodgers. However, McCourt repeatedly insisted team ownership would remain all in the family so that his sons could follow him.

McCourt has indicated he does not plan to yield control of the Dodgers without a fight, and baseball officials briefed on the situation say Selig anticipates that McCourt could sue in an effort to keep the team.

Meyer said she was in court last week, working on a case in which the judge felt compelled to remind a divorcing couple to focus on dividing a substantial marital estate rather than attacking one another. The judge held up a newspaper and pointed to a story about the McCourts.

"See what happened to the McCourts?" the judge said. "This could happen to you."

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