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The Sport Digest - ISSN: 1558-6448

Divorce and Team Ownership

Scales of Justice and Divorce

What does a high profile divorce case have to do with sport law? Plenty, if the combatants are the owners of the Los Angeles Dodgers. The long running divorce case involving Frank and Jamie McCourt is now waiting on the decision of the judge.

The McCourts purchased the Dodgers in 2004. The purchase price of some $500 million was leveraged by Frank McCourt, who got his financial start back in Boston in the 1970s buying and developing parking lots.

The couple’s lavish lifestyle has been reported with great zeal in the press. The key issue in the case is relatively straightforward, however. Are the Dodgers considered “community property” under California’s divorce statues? There is no dispute that the couple jointly purchased the Dodgers and that both of them performed management functions for the team.

What is in dispute is an agreement drawn up by an attorney in 2006. Some of Frank McCourt’s business dealings were under financial stress. Jamie McCourt was concerned that creditors might try and legally attach some of the couple’s other assets, including almost $170 million in personal real estate holdings.

The McCourts had their attorney draft an agreement creating two family trusts. One trust was funded by the Dodgers and was to include all debt secured by the club’s assets. The second was to include all other real estate holdings, which were already titled in Jamie’s name.

Both parties have claimed in sworn testimony that early in 2010 they discovered that six copies of the agreement had been signed. There was a significant difference in the 12th word of the second paragraph of the agreement. In three copies the word “exclusive” was used. In the other three copies the word “inclusive” was used.

Frank has claimed that the original intent was to use the word “exclusive”, which pertained to who was to retain the rights to the Dodgers in the event of some legal problem. Jamie has insisted that the word “inclusive” is correct and means that she was to retain an interest in the club. If Jamie is correct, then the Dodgers will be considered community property and Jamie can be entitled to the equivalent of one-half ownership interest in the team.

There is of course a question as to why the attorney who drafted the agreement would make such a mistake and then apparently try to correct that error without notifying both parties. He testified at trial that the word “exclusive” should have been used and that he simply corrected the initial mistake to reflect what he knew to be the original intent. He also testified that he did inform Jamie of this correction.

The teaching point here is that when administrators in sports fields are dealing with legal documents there are some hard and fast rules to be followed. First, always read any document that you will sign. The McCourts testified that they only saw signature pages and didn’t read the document in question. Second, never assume anything when dealing with legal documents. If you have a question about wording, ask for a clarification.

It has been estimated that the McCourts will wind up incurring over $20 million in legal costs in this case. The attorney who drafted the legal document at the heart of the case will likely face civil and bar liability issues.

The facts of this case are readily available online. A good source for coverage is the Los Angeles Times. See an article in the Oct. 4, 2010 edition summarizing some of what took place during the trial.

Mr. Tyler is the Director of Library/Archivist at the United States Sports Academy. He is also a former practicing attorney.