Sept. 2 (Bloomberg) -- Los Angeles Dodgers owner Frank McCourt said a version of a postnuptial agreement he and his estranged wife signed in 2004 that excluded the baseball team from a list of his separate property was an “obvious mistake.”
Frank McCourt, 57, testified for a third day in the non-jury divorce trial in state court in Los Angeles to determine the validity of the agreement that he says makes him the sole owner of the Major League Baseball team. His wife, Jamie McCourt, 56, claims the agreement can’t be enforced because two contradictory versions were signed.
Three copies of the marital property agreement signed by Frank McCourt in California and by his wife in Massachusetts had an attachment that excluded, rather than included, the Dodgers among his separate assets. That was inconsistent with what his wife wanted to achieve, Frank McCourt said today, under questioning from his lawyer, Stephen Susman.
“It was inconsistent with the body of the agreement,” Frank McCourt said. “It was totally inconsistent with how we held title and ownership of our assets previously.”
Frank McCourt said his wife had wanted, and he had agreed, to have personal assets solely in her name and business assets solely in his name as far as back 1991, after his real estate development company almost went bankrupt and creditors came after their home, which he had used as security for a business transaction.
When he bought the Dodgers and the couple prepared to move to California from Boston, his wife wanted the postnuptial agreement to protect her assets from his business creditors under California community property law, Frank McCourt said. She wanted to make sure she didn’t incur any risk from the acquisition, he said.
“She was concerned about the amount of leverage,” he testified. “She made it clear her balance sheet was not available for additional liquidity.”
Jamie McCourt filed for divorce Oct. 27, six days after her husband fired her as the team’s chief executive officer. Frank McCourt accused her of insubordination and of “inappropriate behavior with regard to a direct subordinate.”
Lawyers for Jamie McCourt said last year that her relationship with that employee started after the marriage had fallen apart. The couple had been married for 30 years.
California Superior Court Judge Scott M. Gordon will decide whether the 2004 agreement is valid. Jamie McCourt’s lawyers have argued that, because there are two conflicting versions, no enforceable contract was made. They also claim the agreement isn’t valid because Jamie McCourt wasn’t told what it entailed under California community property law.
The $421 million acquisition of the Dodgers from Fox Entertainment Group Inc. closed Feb. 13, 2004. Frank McCourt claims the postnuptial agreement, signed after the purchase and before the couple moved to California, makes the team, now valued at $727 million by Forbes, his separate property.
His wife, who got sole ownership of the couple’s homes and additional investments, wanted the agreement to protect herself from the financial risk he took on when he bought the Dodgers with $330 million in loans, Frank McCourt said today in court.
‘My Own Nest Egg’
“She said to me repeatedly, ‘You can make a billion, you can lose a billion, I don’t care. I just want my own nest egg,’” he testified.
The 2004 agreement was needed to keep their assets separate under California community property law. Under California law, creditors of either spouse can seek payment from their shared assets. Unlike under Massachusetts equitable distribution law, divorcing spouses in California aren’t entitled to the other’s separate assets.
Three copies of the agreement that were signed by both McCourts in Massachusetts have an attachment that includes the Dodgers with Frank McCourt’s separate assets. The attachment that excluded the team from his assets was an uncorrected draft version erroneously attached to the other three copies he signed in California, Frank McCourt says.
Jamie McCourt says the agreement was intended only to preserve an arrangement the couple used in Massachusetts to shield their family residences from business creditors by listing them in her name. The Dodgers, like the houses, remained their shared property, she contends.
Frank McCourt said today under questioning from Jamie McCourt lawyer David Boies that he was trying to save his marriage when he told an estate planning attorney in July 2009 that his wife, then still the Dodgers’ CEO, “lacked rationality” and that he wanted her “out of the office” to save the business.
He said he told the attorney, Leah Bishop, that his wife wasn’t capable of being a CEO based on her behavior at that time. He wanted Bishop to “understand the situation” so that the attorney, who worked for both McCourts, could help him, Frank McCourt said.
“It was ruining the quality of my life,” Frank McCourt said. “It had to stop.”
Bishop, who testified earlier as a witness for Jamie McCourt, said that, as of June of 2008, Jamie McCourt had a fundamental misunderstanding of the marital agreement’s effect under California law. She didn’t know that she wouldn’t be entitled to a share of her husband’s separate property in the event of a divorce, Bishop said.
Frank McCourt claims his wife, who has a business degree from the Massachusetts Institute of Technology’s Sloan School of Management and was a practicing family law attorney in Massachusetts, was the driving force behind the agreement and knew what she was doing.
The case is McCourt v. McCourt, BD514309, Los Angeles County Superior Court (Los Angeles.)
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