Family Law Corner: Major League Problems

A few weeks after San Francisco Giants fan Brian Stowe was brutally beaten at Dodgers Stadium, MLB commissioner Bud Selig announced that Major League Baseball was taking over day-to-day control of the Dodgers franchise from owners and divorcing couple Frank and Jamie McCourt.  Selig's announcement came on the heels of managing owner Frank McCourt’s announcement that he had arranged to borrow $30 million from Fox (the team's television partner) to make the club's payroll.  The deal included a $300 million upfront payment to the Dodgers, which Frank McCourt promised to invest in the team.  However, it appears that MLB was concerned that the divorcing couple were running the franchise into the ground due to their personal disputes.  Court documents revealed the former couple had taken out more than $100 million in loans from Dodgers-related businesses.

MLB's ability to seize control of an asset mirrors a family court's ability to appoint a third-party receiver to protect or manage assets subject to divorce litigation.  In a divorce proceeding, a receiver may be appointed upon noticed motion or sua sponte by the Court pursuant to Family Code §290 and Code of Civil Procedure §564 “where necessary to preserve the property or rights of any party.”  When a family judge appoints a receiver, a party to the dissolution has usually already requested enforcement of the standard family law automatic restraining orders or asked the court to issue an injunction or find the other party in contempt, all to no avail.

For example, in In re Marriage of Economou (1990) 224 Cal.App.3d 1466, the trial court appointed a receiver to collect/protect community assets after the husband secreted community property in both the United States and abroad; removed and continued to remove community property from the United States in order to defeat wife's community property interest; and disobeyed all orders of the court regarding discovery of his income.

Selig and his appointed receiver have so far refused to okay the Fox deal, and now Jamie McCourt is expressing her support for Selig’s move.  She has taken the position that she does not approve of the Fox deal, which makes sense, since the deal includes provisions which would not allow Frank McCourt to use any of the up-front cash to settle the divorce and forecloses the possibility for the Dodgers to start their own TV network.  

Perhaps she is rightfully concerned that potential buyers (or forensic accountants who may be valuing the franchise) will value the Dodgers differently depending on the status of the TV rights.  Uncommitted TV rights add significant value to any franchise, and pledging them for security or selling them would negatively impact the value of the franchise.  Selig’s move may be one more win for Jamie McCourt, who in December successfully invalidated the parties’ postnuptial agreement which purported to assign the Dodgers franchise to Frank McCourt.  Selig and the receiver may be rightfully concerned that Jamie McCourt will sue MLB if it allows the Fox deal.