Foul Ball! A Case Study on Understated Assets During Divorce: McCourt vs. McCourt
Not too long ago, we blogged about a very practical topic: “Getting Top Dollar for Household Items Sold During Divorce.” We covered things like how to post used books for sale on Amazon and how to work with an estate auctioneer to sell off furniture, artwork, antiques, collectables, and other items whose proceeds are typically split by a divorcing couple. One item we didn’t think to address? How to get top dollar for your…baseball team. Yet, this is exactly what Frank McCourt, former owner of the Los Angeles Dodgers, and his ex-wife Jamie McCourt are now wrangling over — two years after their divorce.
When Frank and Jamie divorced in 2010, Jamie received a settlement of $131 million. This amount was based on the current asset valuation of the high net worth couple’s holdings, including the assessed value of the LA Dodgers. At the time Frank claimed the team was worth only $300 million, substantially less than the $430 million he paid for it in 2004. The Dodgers weren’t sold before the McCourts’ divorce settlement was finalized in October 2010, and Frank’s low assessment seemed to hold true when the team declared bankruptcy in 2011. Then, seemingly out of the blue, in May 2012, magic happened: a group of investors led by Magic Johnson bought the team for a staggering $2 billion — the highest figure ever paid for a professional sports team.
This game changer has led Jamie McCourt (via her divorce lawyer) to claim foul play. Ms. McCourt went back to court on September 26, filing a motion to set aside the couple’s divorce settlement on the basis of fraud, alleging that Frank McCourt dramatically understated what he knew to be the Dodgers franchise’s true value – and that Frank’s actual assets amounted to $1.7 billion.
Frank McCourt’s legal team has yet to comment on this latest move, but looking back at the couple’s divorce proceedings, it’s been a troubled legal path for the couple. Frank had originally claimed that he was the sole owner of the Dodgers on the basis of their postnuptial agreement which gave him 100% interest. However, a family law judge invalidated the postnuptial agreement based on a variety of factors which included the fact that there were two distinctly different versions of the agreement. As a result, Jamie was still considered a 50% owner of the team under California’s community property laws when their settlement was reached. (It should be noted that in New Jersey, divorce law relies on the principle of equitable distribution rather than community property). Ms. McCourt’s lawyer is now taking the position that his client is now entitled to much more than $131 million.
What’s the takeaway for those of us who don’t own a sports team? When valuable assets and complex divorce issues are at stake, consider the source carefully when agreeing on the value of certain jointly-held property. For some couples, utilizing a forensic accountant or having a formal lifestyle analysis performed can be effective in turning up unreported or undervalued assets. Your divorce lawyer can help you determine if this course of action is right for you.
Play ball!
