A Matter of Impressions
With the Dodgers' playoff hopes on the brink of blowing away in the Santa Ana winds, fans' attention has shifted to the Stanley Mosk Courthouse, two miles down the road from Chavez Ravine.
There, Frank and Jamie McCourt are engaged in a tight race for control of the franchise. Each has retained a gold-plated roster of attorneys, led by David Boies and Steve Susman, the Sabathia and Halladay of their profession.
Aside from the drama regarding the team's ownership, the divorce trial has opened a window into how the rich live, and how they fight. In three and a half days of testimony last week, Frank McCourt revealed that the couple argued over how many bodyguards to hire and how to choose among their "menu of houses."
"We had a disagreement about how many homes you need," he said.
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They settled on seven — two across from the Playboy Mansion in Holmby Hills, two in Malibu, one in Vail and two on Cape Cod — plus one lot each in Cabo San Lucas and at the Yellowstone Club in Montana, where they planned to build yet more homes.
Finances can be a sticking point in any marriage, whether you make $15 million or $15,000. What you're arguing about isn't money, exactly. It's security.
Despite the couple's vast wealth, Jamie McCourt had good reason to feel insecure. She was married to a high-roller developer who never met an asset he didn't want to leverage.
"The nature of the real estate development business is you need to borrow money in order to build things," Frank explained at one point. "You need to have the stomach for it."
In the early 1990s, Frank lost $30 million on a waterfront development project in Baltimore and nearly went bankrupt. Frank said Jamie "freaked out" when the sheriff knocked on the door at the couple's home in Brookline, Mass., and served her with a lien. After that, she kept the houses in her name in order to protect them from Frank's business bets.
But that led to another source of insecurity: Jamie had no independent source of income. Although she owned title to the homes, they were heavily mortgaged, and she had no independent means to pay them off.
All of these issues came to a head at a meeting in March 2008. Jamie, Frank and various lawyers and accountants sat down to discuss the "four corners" of Jamie's financial security. They included paying off the mortgages, giving Jamie access to capital to do renovation work and having enough income to support a "growing lifestyle."
Joined by various lawyers and accountants, the McCourts started to make their respective positions clear. Frank said he didn't need his wife's permission to use his business assets to set up a trust fund for the kids. That would also mean she didn't have a claim to the Dodgers upon divorce.
The McCourts' estate-planning lawyer, Leah Bishop, objected that Jamie might well have a claim. Bishop said steps had to be taken to make sure Jamie was protected.
This was the first time the "D-word" was mentioned.
Frank asked, "Are we talking about divorce?"
If you're looking for someone besides the McCourts to blame for the divorce case, consider Juan Rodriguez Cabrillo. If he hadn't discovered California, the state would not have inherited the Spanish civil code, and there would be no such thing as community property. Without that, Frank and Jamie wouldn't have had to sign a contract when they moved here from Massachusetts in 2004.
And without that, they wouldn't have anything to fight about.
But they did sign the "marital property agreement" — six copies, in fact — and here we are. Their goal was to preserve the same deal they had in Massachusetts. To protect the "family assets" from the banks, Jamie kept title to the homes and Frank had control of the business.
In Massachusetts, that arrangement would have no bearing on how the assets would be divided upon divorce. There, all the couple's assets would be put into one pot and then "equitably" distributed.
That's not how it works in California. Here, in the event of divorce, Jamie would keep her property, and Frank would keep his. Any "community property" would be divided in half.
It's not clear whether the McCourts understood that when they signed the agreement in 2004. Jamie says she didn't. According to her, they simply wanted to maintain the status quo, and she thought that's what the agreement did.
Frank, meanwhile, says they both understood the consequences perfectly well. He says he would have been happy to preserve the status quo, but that was impossible because of the difference between California and Massachusetts law. In California, Jamie couldn't wall off the houses from business creditors and maintain a stake in the Dodgers upon divorce.
So she would have to choose: Did she want to protect the houses, or did she want to share in the risk of owning the team? According to Frank, she chose the relative safety of owning the houses.
On the stand, he said that Jamie would often tell him, "You can make a billion. You can lose a billion. I don't care. I just want my own nest egg."
If Jamie's best argument were that she didn't understand what she was signing, she wouldn't have much of a case. Steve Susman, Frank's attorney, summed his client's position up this way: "I'm from Texas, and in Texas, a deal's a deal."
But here is where it helps to have the best lawyers money can buy.
There's an adage that cases are won and lost in discovery — the pretrial exchange of all relevant information. It's not the sexiest part of the job. There will never be a Law & Order: Document Production Unit. But it was critically important in this case.
Beginning in May, Jamie's lawyers — led by David Boies — began demanding the six original signed drafts of the contract. Bingham McCutchen, the firm that held the originals in its vault, refused, saying that photocopies had already been produced.
Boies & Co. kept demanding the opportunity to inspect the originals. In July, the two sides finally agreed to have two forensic examiners — one for Frank, one for Jamie — look over the originals.
The first three, which were signed in Massachusetts, were authentic. They even had the original staples. But on the second set of three, which Jamie signed in Massachusetts and Frank signed in California, there was something wrong with Exhibit A.
Exhibit A was a list of Frank's separate property, including the Dodgers. In each copy, it was two pages after the signature page. So if it were the original, it would have had indentations from the signatures. But the three California copies had no indentations.
This discovery set off a furious search within the offices of Bingham McCutchen. In the files of Larry Silverstein, the attorney who had drafted the document, were found three loose sheets. They were the original "California" Exhibit A pages, and they did have signature indentations.
And there was one other very important difference.
This Exhibit A excluded the Dodgers from Frank's separate property.
That would give Jamie a claim to the team. Is that what they actually intended? To protect the houses by putting them in Jamie's name but also to preserve her interest in the Dodgers upon divorce? Wasn't that the status quo?
Boies and his team had turned a dead-bang loser of a case into a much harder call.
A deal's a deal. But which deal?
The trial resumes on Sept. 20.
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