Dodgers’ Bankruptcy a Cautionary Tale for Business Owners Dealing with New Jersey Divorce
Well, at least they aren’t in Brooklyn anymore.
The Los Angeles Dodgers are due in court this week for an initial bankruptcy hearing, the L.A. Times reports.
It’s a cautionary tale about protecting a business from New Jersey divorce. Books could be written (books have been written) about the saga of the L.A. Dodgers and the divorce of the team’s owners. But, at the end of the day, the case is just one more business destroyed because of a lack of proper protections and the divorce of its owners.
In the latest move, Major League Baseball rejected a cable rights agreement between FOX and the Dodger’s believed to be worth $3 billion, saying it wasn’t in the long-term interest of the storied franchise, according to the New York Post.
That move forced the showdown in bankruptcy court.
The TV deal was the latest attempt to resolve the 20-month divorce saga of Dodger’s owners Frank and Jamie McCourt. At one point, the judge threatened to order the team be put up for sale. And recently meeting payroll has been an ongoing struggle. MSNBC reported nearly $9 million in deferred compensation is due Manny Ramirez on June 30. The bankruptcy filing lists Ramirez as the team’s largest unsecured creditor — he is owed more than $20 million.
At issue is whether the Dodgers are community property for the purpose of the McCourt’s divorce. A one-day hearing is set to determine the issue on Aug. 4. If a judge rules the team is community property, a forced sale will be the likely result.
“And why would MLB approve the TV deal in the interim if the Dodgers have to be sold, possibly sticking a new owner with a below-market deal?” The L.A. Times wrote. “It’s time for MLB to conclude its investigation, turn down the TV deal and officially seize the team. And no contingent divorce settlement should stop it from doing what’s right.”
The truth of the matter is divorce often spells the end of a family business. For most couples, the business is their most valuable asset. They are unable to work it together after divorce, and neither party wants to work to pay the other. The result, too often, is the sale of the business. Once taxes are figured, what’s left doesn’t go far.
In reality, the best time to ensure the survival of a business is either before marriage of during an amicable marriage. A pre-nuptial agreement can help. So can putting the business in trust. During a marriage, couples rarely have the desire or foresight to contemplate something as disagreeable as determining what’s in the best interest of a business in the event of divorce.
Once a New Jersey divorce is initiated, the identification and valuation of marital property is critical. And such determinations can be surprisingly complex. If one party owns a house before marriage but the mortgage is paid by both parties during the marriage, is it communal, personal or both? What about college degrees earned during the marriage? Retirement accounts? Inheritance?
And too often couples don’t pay enough attention to the other side of the equation — bills are marital property, too. Who pays this year’s taxes? And what about those joint credit cards?
Even identifying marital assets and liabilities can be a challenge — particularly when one spouse earns the majority of income and keeps the family’s books. In such cases, it can be even more critical for a spouse to consult with an experienced Morristown family law attorney at the earliest stage — even before notifying your spouse of your intentions to separate. Gathering the proper documentation and protecting your rights can be much easier before relations turn contentious on the home front.
If you need to speak with a divorce or child custody lawyer in Morristown, contact (973) 455-1220 or fill out the Contact Form on our website.