Those are probably four words you never thought you would see together in the same sentence of a legal blog. Yet the saga of Frank and Jamie McCourt, the former owners of the Los Angeles Dodgers, is one of the best lessons in the nuts and bolts of making and breaking a premarital agreement.
Illinois and California have both adopted the Uniform Premarital Agreement Act. So, if the McCourts owned the Chicago Cubs, the results would have been much the same.
Before the UPAA, premarital agreements were little more than divorce insurance for the super-rich, but this act streamlined applicable law and procedures. Therefore, results are much more predictable. Additionally, a Chicago family law attorney can draft a solid premarital agreement in as little as one office visit.
Prenups resolve financial disputes in advance, so money matters cannot poison your relationship. Additionally, premarital agreements can cover inheritance and succession matters. That is especially important for people who have been married before or have family businesses to pass on.
The McCourts, a billionaire SoCal power couple, acquired the Dodgers in 2004. At the time, the club’s value was rather low. Years of underachieving teams had decreased fan interest, and team revenue had declined proportionally.
Most likely, the McCourts planned to buy low and sell high. They assumed the team’s value would go up again, and they could sell the club for a tidy profit. That is normally an effective approach, but neither the McCourts nor anyone else knew that the Dodgers would sink lower.
The team’s financial fortunes hit rock bottom in the summer of 2011. Reportedly, Frank McCourt, who was the sole owner at the time, would have been unable to make payroll unless then-Commissioner Bud Selig approved a new TV broadcasting deal. When Selig refused to sign off on the deal, the Dodgers declared bankruptcy.
Further complicating matters, while the team was in bankruptcy court, its owners were in divorce court. The divorce included a property settlement agreement. In this agreement, Frank paid Jamie several hundred million dollars in exchange for her half of the Dodgers. Jamie probably thought she took her soon-to-be-ex-husband to the cleaners. After all, the Dodgers were essentially worthless at the time.
As it turns out, rumors of the Dodger’s financial death were greatly exaggerated. Less than a year later, Frank sold the team for over $2 billion. Flabbergasted, Jamie tried to overturn the prenup.
Challenging the Premarital Agreement
Jamie claimed that Frank lied to her about the team’s value. Additionally, the sale left her about $900 million short of a 50/50 split in a community property state. So, Jamie seemed to have a strong case. But the court disagreed, as follows:
- Involuntary: Misrepresentation of a material fact is grounds to overturn a prenup. In this case, the challenging party did not understand what s/he was signing. But the court did not buy Jamie’s argument, noting that Frank turned over tens of thousands of pages of documents during the divorce. Additionally, under the UPAA, the withheld information must have been unavailable elsewhere. The court noted that Jamie was a co-owner at the time, so she had access to all the financial data she wanted.
- Unconscionable: $900 million is an unconscionably harsh division by almost any standard. But under the UPAA, the agreement must have been unconscionable at the time it was signed. In this case, that was not true. Jamie chose a guaranteed $131 million payment upfront instead of taking on the risk that the team was worth nothing.
So, Jamie lost her case, and she had to pay Frank’s legal fees. But the story has something of a happy ending for her. A few years later, President Donald Trump named Jamie, who is a longtime GOP supporter, as ambassador to Monaco and France. That is not a half-bad consolation prize.
Reach Out to an Assertive Attorney
Today’s premarital agreements are rather easy to make and rather difficult to break. For a consultation with an experienced family law attorney in Chicago, contact the Law Offices of Martin A. Delaney III, Ltd.