Let’s Check in on Miami’s Suit Against the Marlins and Jeffrey Loria

Early last year, I wrote about the lawsuit Miami had filed against the Marlins and Jeffrey Loria, alleging that Jeffrey Loria had used “fuzzy math” to depress the value of his club and avoid paying a share of the team’s sale proceeds to Miami and Miami-Dade County. (The County is also a party to suit against the Marlins and Loria.) With the new year starting, this seems like a good time to check in on the state of the suit.

When we last looked at this case, the Marlins, under the new ownership group helmed by Bruce Sherman and Derek Jeter, rather dubiously claimed British citizenship as a way of moving the lawsuit to federal court (a process called “removal”) and attempting to force arbitration. Despite the less than stellar optics and even more questionable legal basis for the argument, the team nonetheless went all-in on their position that the team was, at least in part, a foreign citizen. In response, Miami sent Laurence Leavy – the attorney better known as “Marlins Man” for his formerly ubiquitous presence at Marlins games – and radio personality Andy Slater to the British Virgin Islands office where the team’s lawyers argued that one of the companies which owned the team, Aberneu, was ostensibly located. In a revelation that surprised no one, Aberneu, it turned out, had no offices or physical presence there – just a post office box. The Marlins, however, didn’t appreciate Slater’s involvement, and responded by revoking Slater’s press pass.

At oral argument on the issue of the team’s citizenship in July, the county emphasized that the team was, in all meaningful ways, an American company that did business in Florida, and showed the judge the evidence obtained from Slater and Leavy’s investigation. At that hearing, Judge Darrin Gayles indicated that she was skeptical of the team’s claim of British citizenship.

THE COURT: As I understand it, there is no question that the purchaser in this case is a U.S. corporation or is a U.S. entity. Right?

MR. DOYLE [attorney for the Jeter/Sherman group]: That is not correct, Your Honor. The buyer is an LLC that its citizenship is determined by its members under Supreme Court precedent and it has a non-U.S. member. So, therefore, it is the citizen of both the United States and outside the United States, foreign.

THE COURT: All right. So in situations where an LLC has dual citizenship, U.S. and foreign, can you point to me specific cases that say that in that situation it is a foreign country for purposes of the [New York] Convention [governing arbitration agreements]?

MR. DOYLE: Your Honor, we have not found such a case [.]

And later, Judge Gayles asked Doyle why the Marlins hadn’t attempted to raise the arbitration issue previously, before the state court. Doyle responded that “[t]he issue of the citizenship of the buyer was not known to me as counsel for the seller and it was in an investigation afterwards . . . that led us to discover that the buyer was, in fact, a dual citizen, foreign and domestic. So that information was discovered after the state court hearing.” That’s not entirely true, however – in fact, the team had moved to arbitrate the dispute in state court, and the state court judge, Beatrice Butchko, denied the motion on February 22, 2018, very early in the case.

So as you can probably see (and you can read the whole transcript for yourself if you’re interested), the Marlins’ attorneys weren’t really able to do a good job of articulating how a company that is both a citizen of the United States and a citizen of a foreign country somehow only qualifies as a foreign company for purposes of the law, nor were they able to explain adequately why they didn’t raise the arbitration issue before the state court when the case was first filed.

And so it was perhaps unsurprising when the Court denied the Marlins’ request to arbitrate the case in early August and sent it back to state court (a process called “remand”). Judge Gayles wrote that the team “face[s] an uphill battle in establishing the requisite citizenship to confer jurisdiction under the Convention[,]” adding that “[t]he Loria Marlins’ assignment of their rights to the Jeter Marlins likely did not . . . confer a more expansive right to arbitrate under the Convention.” In other words, the Court didn’t at all believe that the Marlins were a British citizen, and sent the case back to state court for the state judge to decide whether the case was arbitrable on the grounds that the state court had already taken the first steps towards doing just that in its February ruling (the one Doyle evidently forgot about).

Now, you might think that the Marlins and Loria, unable to arbitrate after having two courts deny their request, and stuck in a state court that had already indicated displeasure with Loria’s creative accounting techniques, would open lines of communication to resolve the case. After all, to this point, the case doesn’t appear to be going all that well for the team or Loria. But that’s not what happened. Instead, the team and Loria appealed the state court’s denial of their arbitration request even though the case wasn’t over yet. Appealing a non-final order is called an “interlocutory appeal,” and, regardless of what you see on television, it’s actually pretty extraordinary. The general rule in every state – and Florida is no exception – is that you can’t appeal until after a case is over, because appellate courts tend not to like piecemeal appeals; they want to look at everything at once.

In fact, the very first thing the team did once the case was back in state court was to file what’s called a “Notice of Appeal” – the document beginning the appeal under Florida law. The team then asked for a stay of all proceedings for the appellate court to weigh in on the arbitration issue that two courts had already looked at and denied. If at first you don’t succeed, try, try, try, again! At this point, an evidently exasperated Judge Butchko denied the stay outright on October 2, 2018, essentially ordering the team and Loria to stop playing around with demands for arbitration and start litigating the merits of the case.

Things looked very bleak indeed for the team and then, late last year, Florida’s Third District Court of Appeal granted review (essentially accepting the case), and issued an order staying all proceedings – ordering everything to stop – until they’d looked at the case and decided the arbitration issue. That means that the whole case is essentially in limbo until a third court decides the same issue that two courts already have.

Now, as a matter of law, Butchko and Gayles largely got it right. But it’s also possible that the Appellate Court decides that it wants this case out of the judicial system; judicial economy is a virtue appellate courts adore, and it’s one of the primary reasons arbitration is so often upheld. Courts like the idea of cases being decided by someone who isn’t them, because (theoretically) it frees up judicial resources and relieves case backlogs. That being said, appellate courts tend to move pretty slowly, and it could very well be late 2019 or early 2020 before this issue is decided.





Sheryl Ring is a litigation attorney and General Counsel at Open Communities, a non-profit legal aid agency in the Chicago suburbs. You can reach her on twitter at @Ring_Sheryl. The opinions expressed here are solely the author's. This post is intended for informational purposes only and is not intended as legal advice.

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joshua.barron1
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joshua.barron1

Loria being Loria

Sarachim
Member
Sarachim

If I understood the article correctly, all this legal chicanery is coming from Sherman and Friends. Though I’m sure Loria is out there being Loria, too.

Wonderful Terrific Monds
Member
Wonderful Terrific Monds

Loria is basically a bystander at this point. If the Marlins end up owing anything to the city/county, it will come out of a $50MM escrow fund created in the sale to fund contingent liabilities (the remainder of which will go to Jeter’s Group, I believe).