Did Mark Cuban's Attorney Just File Greatest Legal Scoreboard Ever in Ross Perot Jr. Case?

Categories: Sports, The Courts
We've written here and there about Ross Perot Jr.'s legal claims that a "reckless and careless" Mark Cuban has done an awful job of running the Dallas Mavericks .... right, Your NBA Champion Dallas Mavericks, of which Perot still owns 5 percent. Well, moments ago Tom Melsheimer, Cuban's attorney, just submitted into evidence the document you see below as proof that Cuban's anything but a bad owner. Melsheimer's brief in support of his motion to dismiss is just that, brief -- proof that a picture's worth ... well, you know.2011-06-22 WC Mavs and Radical Mavs Mngt MSJ

Related: Richie's cover story on the Mavs Title, and plenty of photos of Cubes and the Larry O'Brien trophy in our slide show.

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Garyh10
Garyh10

I can't help believing that the only folks who aren't crazy over the Mavericks right now are nasty old Ross Perot and the few Miami Heat fans. I surely wish there was a way to keep the team together for another season.

Nafrenzy55
Nafrenzy55

My problem with the Brief is how in the world did the Mavericks (NBA Champions) become World Champions having never played a team outside the NBA?

Duh
Duh

The same way Barcelona becomes world champion without ever having to play an MLS team.

Qwruh
Qwruh

and now Perot has been humiliated publicly...again

Guest
Guest

Just to clarify, this claim of mismanagement is from the same Perot that failed at launching 'Victory Park', right? 

Anon
Anon

It just means he knows first hand what mismanagement looks like. 

peggy1974
peggy1974

HAHAHAHA Nothing like shoving it back at ya! 

Sandy wells
Sandy wells

I think Cuban should file a countersuit against Perot Jr. and extract the 5% the bozo owns, citing obstruction and fiduciary of business. Perot's actions had to be a negative distraction and he does not deserve any ownership or investment whatsoever. I think the exact same "court appointed overseer" he sought for Cuban's portion should now be assigned to his loosely held 5% because his negative interference is dangerous at this point financially. There, I said it.

Jedis54
Jedis54

That's a big F-U to Ross Perot, Jr.

Frank Marino
Frank Marino

Ross doesn't know if the ball is pumped or stuffed !!

Jay
Jay

In the past few years, Ross, Jr. and his father defaulted on the Victory Plaza project, and they and their investors lost over a 2.5 billion in a hedge fund they controlled. Their investors are suing....story here:http://www.dentonrc.com/shared...

My guess is that Ross, Jr. is trying to force Cuban to buy out his 5% interest at a premium through litigation. 

MavLover
MavLover

I believe this is exactly the case.  Rumor has it he reached out to Cuban immediately after filing w/ terms for buying out the interest. Cuban refused.

Citizen Kim
Citizen Kim

Yeah!!!! In your face, Victory Boy!!!

Chris Danger
Chris Danger

Looking at the brief and stating the truth, Perot Jr. was a bum when he ran this team and hillwood into the ground. Here's hoping the judge takes this into evidence and dismisses this case, as its one w/o merit..

BuffaloBill
BuffaloBill

Will be interesting to see if Perot files a response moving to strike the evidence as hearsay because it is not supported by an affidavit.

Deep-Sigh
Deep-Sigh

The fact that trading Kris Humphries keeps that Kardashian bimbo and her ilk out of Dallas is more proof of Mark's foresight......

DuckDuckGoose
DuckDuckGoose

The only thing missing from that legal brief was " ... take that wit' chew! "

Tim
Tim

Still really happy, but if this goes to court Cuban will have to defend carrying Eric Dampier for the full length of his contract. RE-SIGNING Shawn Bradley, trading Chris Humpheries for Eduardo Najera for spare change last year. Championship YES, but the path to get there was very mis-managed.

ThaManagement
ThaManagement

Its not as if there werent bumps and bruises along the way. RPjr had his fair share of mis-management during his tenure as owner. At the end of the day, it looks like sellers remorse. As Cuban brought the Mavs on a financial upswing, and Hillwood was losing in the Victory project....I can see RPjr wishing he still had a tad bit more the 5% of a growing (and NOW CHAMPIONSHIP) franchise. 

jamal
jamal

the answer to your questions is "yes."

Robert
Robert

Holy cow Cuban's brother reads and comments at UnFair Park. cool

Mike
Mike

It may seem heresy to people whose investment in the team is a t-shirt, but the championship proves nothing.  Perot's allegation is that Cuban is is covering the excessive spending with loans, not actual gifts, from his corporation.  Since it's pocket change to Cuban, he can carry the loans for years.  When the team gets sold, Cuban gets all those loans back with interest.  That repayment comes directly out of the capital that would have gone to Cuban and the other owners. 

Is Cuban stealing?  No.  But he's forcing the other owners to pay for his choices while making it look like nothing is happening.  If you love Cuban, that's fine.  Imagine happening with a smaller partnership where the minor partners, maybe your father or mother, watch their capital walk out the door each day paying for baubles and ego boosting trinkets.    Courts may take a dim view of it.

Isanchez
Isanchez

Imagine how upset you would be if your father or mother had a 5% stake in Groupon, (which has never shown a profit and is losing $1M almost everyday at this point) and would had to suffer through the $25 Billion IPO.  The Mavericks are a professional sports franchise, not an office building. The value creation process for an enterprise like the Mavericks is foreign to Perot, which is why he couldn't pull it off (see Frank McCourt).  Its more than "hey, I've got a new idea!  Let's separate the real estate from the sports team!  and then do this that and the other!  Yeah!  and build a parking lot, but not just ANY parking lot, one with BILLBOARDS!!"  Give me a break.  Mike, you sound like a smart guy and maybe even have a law background, but Cuban smashed him on this one.

Gilbert Cavello Jr
Gilbert Cavello Jr

If the minor partners dont like it, Im sure Cuban would gladly buy there share. Mr. Don Carter seems very happy!...

Merez
Merez

In my business priority loans are sometimes intrinsic to the success of a venture. Not getting a priority loan could be grounds for mismanagement.

Here's the thing. As a majority owner, Mark Cuban (or his entity) has the right to put forward loans and get repaid for them. That's the deal. Perot Jr. takes that risk when he agrees to be a 5% stakeholder instead of a 51% stakeholder. Besides that, having large liabilities on the balance sheet isn't exactly an indicator of poor business practices....especially if those liabilities eventually pay off. Mark Cuban takes a risk financially as well. If the Mavericks is in jeopardy those loans won't be worth the paper on which they're written. FTR, any majority stakeholder  or general partner "forces" his choices on the rest of the investment team. The majority stakeholder would have to do something illegal or dangerous or have a direct conflict of interest for a suit like this to have merit.

This looks like "seller's remorse" to me. Ross Perot Jr. has too much time and money on his hands and filed a nuisance suit.

Guest
Guest

When you delegate management decisions, you are agreeing to be forced to pay for the choices of management (at least to the extent you have invested capital).  If Perot doesn't like Cuban's management of the Mavs, he should sell back his interest.  You don't get to sue because management makes decisions you don't like (well, you get to sue, but you also get to lose).  Perot's problem is that he thinks he's still the big swinging d*** and should be listened to even though he only owns 5% and has no right dictate how the team is managed.    

Anonymous
Anonymous

That's not actually true. You still owe a fiduciary duty to minority shareholders, and the legal purpose for the Mavs' (as for any corporation's) existence is to make a profit for its owners, not to win championships, not to bring glory to Dallas, not to make the world a better place, not to boost the US economy, etc. Those secondary and tertiary goals sometimes go hand in hand with the primary purpose of making money, but that's not always true. In this case, it seems unlikely that the suit will go forward because the overspending and theoretical mismanagement has produced an outcome that is likely a positive to the team's bottom line. The whole lawsuit was probably just about leverage anyways. I doubt Perot really wanted to sit through a long and drawn out lawsuit - the more likely scenario is that he wanted Cuban to buy his 5% stake from him to monetize it, and wanted a higher price than Cuban was willing to pay. The threat of a lawsuit would give Cuban incentive to overpay his minority holder so that he can continue to operate the team the way most billionaires do - as a plaything.

Anonymous
Anonymous

Right, but a 5% holder is considered pretty significant. As you are no doubt aware, the SEC requires anyone who acquires that much (or more) to register it publicly, because they are considered important and can use that position to meaningfully influence the board, and in turn, the management of a company. We're not talking about someone who owns a $50 share of a $1 billion company.Obviously, we're talking apples and oranges here since the Mavs are a privately held company with a single majority shareholder. But to pretend that a 5% shareholder has to sit back and take whatever is coming their way is completely misguided.

Lance Haynie
Lance Haynie

If in most cases all shareholders get to vote on is the board. How come Citigroup keep's sending me forms to vote on a plethora of issues?

Larry L. Johnson, Jr
Larry L. Johnson, Jr

I didn't comment on what sharehlders get to vote on. I merely stated, Class B shareholders typically get less of a vote than Class A Shareholders.

Guest
Guest

You don't seem to know much about what shareholders get to vote on.  In most cases, all they get to vote on is the board.  That's it.  They don't get to vote on who becomes CEO, let alone how the CEO conducts a company's business.  And a shareholder has to show a lot more than a reckless decision by a manager to have a case.   

Larry L. Johnson, Jr
Larry L. Johnson, Jr

Funny, I'm not discussing ideology. Input does not equal audience. Input means input. In this case a shareholder that owns 1 B class share of Berkshire Hathaway gets 1/1000th (or something similarly small) of a vote on all things shareholders are allowed to vote on. If you think input = audience then perhaps you are the one confusing things. I've agreed the input may not be effectinve in creating change but it's still input.If a shareholder wants more input, then buy more shares, buy shares in a smaller company where your share holds a higher percentage or get together with a million other people that each own one share and coordinate your vote on issues that matter to you. To get back to my original point, if Perot can prove Cuban made reckless decisions that eroded the value of his portion of the business, he has a case, if he can't, he doesn't.

Rooster
Rooster

I personally try never to confuse ideology with reality....

Larry L. Johnson, Jr
Larry L. Johnson, Jr

Granted, the "right" isn't worth much if you own 1 share. Doesn't mean you'll get an audience. But it doesn't mean the right doesn't exist. The reality of getting an audience is slim to nil but there are other ways in which shareholders can be heard. What's important here is that management's interests and the shareholder's interests should be aligned in maximizing the value of the corporation. Several other people have pointed it out and I think they are right, this suit is probably a tool Perot is using to get a higher sale price for his share out of Cuban.

Anonymous
Anonymous

Yea, but you still have standing to bring a lawsuit if you think the business is being managed in a way that is detrimental to your single share. It's just that you will lose, and it was never worth your time in the first place to sue with so little potential gain. It doesn't change the fact that there is no such thing as a "weak" fiduciary duty. You owe the same duty of care to every single shareholder.

Rooster
Rooster

Horsefeathers.

Buy one share of Berkshire Hathaway.  Call Warren Buffet and see if you can get an audience.

You'll find out how much your "right" to input is really worth.

Anonymous
Anonymous

I don't think you'd ever overcome that burden of proof either, unless you were doing something willfully negligent or corrupt, like throwing piles of cash to family members or something else of that nature. I don't even think overpaying for players would qualify because the return on investment on a marquee player is inherently risky. That's why I think it was just a way to get Cuban to buy his stake for more than it would otherwise be worth. It had nuisance value, and little more. And now that they've won, it just makes Perot look that much more foolish.

Larry L. Johnson, Jr
Larry L. Johnson, Jr

All shareholders have a right to give input to management. Management is put in place specifically to look out for the best interest of the shareholders, i.e increase the value of their investment. Berkshire Hathaway (Warren Buffet) often owns less than 10% of the value of a company in which they invest and they hold significant influence over the decisions made by management.

Guest
Guest

Yes, you owe a fiduciary duty, but it is a very weak one.  Minority interest holders have no right to give input to management.  The business judgment rule is powerful, and in managing a sports franchise (e.g., making personnel decisions, etc.) I doubt it could ever be overcome. 

Enrique De La Fuente
Enrique De La Fuente

But is Mark being "careless and reckless"?  Let's face it, you do not buy a sports franchise to be rich.  You buy a sports franchise once you are rich.  Sports franchises are not money makers unless you are the Cowboys, Yankees, Red Sox or Lakers.

Steve
Steve

This is the viewpoint of someone who doesn't invest much more in the team than a t-shirt. Sports franchises have been, and will continue to be, money makers in the vast majority of cases. Some owners like Cuban and some Russian oil billionaires with their European soccer teams do treat it as a toy. But they are the exception, not the rule. It's still Cuban's job to make money for Perot. You may not like that, but thats how the world operates.

Montemalone
Montemalone

Is there not a wee bit of irony in that Hillwood defaulted on its Victory project? Who can't run a business?

Larry L. Johnson, Jr
Larry L. Johnson, Jr

At the risk of being the naysayer here and while this is an awesome “scoreboard,” Perot Jr. is claiming the franchise is “insolvent and/or in imminent danger of insolvency.” I find it unlikely the “World Champion Dallas Mavericks” are in that much financial danger but it’s possible. Personally, I’ve not seen the financials, which presumably Perot Jr is privy to, so I can’t say for sure.

Marc
Marc

It's Cuban's money, and he has plenty of it! The team is hardly insolvent, and even if it were, then Cuban would just loan it a few hundred million to tide it over.

Little Perot reminds me of the pissboy in Mel Brooks' "History of the World".

guest2
guest2

It is fairly well known that Cuban does not care about operating in the black with the Mavericks. The team is simply a toy to him... according to reports he's lost as much as $130 million on the team since he bought it.

Larry L. Johnson, Jr
Larry L. Johnson, Jr

I’m not really very concerned with what’s “fairly well known,” or if Cuban has lost $130 million or $130 billion. Frankly that’s all irrelevant and impossible to say with any certainty unless you’ve looked at the financials. The reason its irrelevant is because the essence of Perot’s claim is Mark Cuban’s decisions (which he will have to prove were “reckless”) have eroded the value of Perot’s portion of the business. So it doesn’t matter if the business is losing money year after year, if the value of the company, is going up, Perot doesn’t have a case. Please keep in mind when valuing a company, not just physical assets are counted, “goodwill,” future ticket sales, etc are all included in the valuation of a company. I’m no expert on sports franchises but my guess would be, having a marquee player in the league, at least 2 future hall of famers, and the league’s championship trophy in hand all dramatically increased the value of the company. It’s quite possible before game 6 Perot’s claim had merit and post game 6 it did not.

Rooster
Rooster

Dude.  Stop being a douchebag. Just stop.

Guest
Guest

Yes, but now Perot needs to come forward with evidence of insolvency.  I doubt that evidence exists given the amount of revenue produced by the World Champion Dallas Mavericks.  Perot should have dismissed the suit before it came to this, but he let it linger too long and made the accusations against Cuban too personal for Cuban to let him out of this the easy way.  My prediction, Perot files a "non-suit" without ever responding to the motion for summary judgment, meaning he voluntarily walks away with nothing.   

Tim
Tim

It was reported that the Mavs have the 2nd highest payroll and have been in the top 5 for 6-7 years. While the franchise is worth a lot to doesn't operate in the black at all.

Doogie
Doogie

That's crap and you know it.  Perot's only real argument here is washed up mainly because he was a horsesh*t majority owner.  The AAC was getting built anyway, in an era where it didn't take any arm twisting for sports franchise owners to get great financial terms on any stadium/arena lease. If Perot is so up in arms about having to go along with Cuban's commitment to a competitive franchise, then maybe he should sell his stake in the Mavs, and then go to Donald Sterling and ask to buy a 5% stake in the Clippers.

Doogie
Doogie

They only have big profits now because they (politically) engineered the biggest counterparty bailout in history by having their AIG-related derivatives risks repaid to them at 100 cents on the dollar.  If it weren't for that, we would be talking about GS trading division in the past tense today. Furthermore, sports franchises cannot be run like other businesses, because a sports franchise is also considered a public trust with their customer base, i.e. the fans. If Mark Cuban wants to operate the Mavs on a level where he sacrifices some profits in order to win championships, well, in my book that's the sign of an owner that I want to have running my favorite team.I'm sure there are a lot of Dodger fans praying for Cuban right now, but with McCourt's scheming re: his division of Dodger assets, I don't see how Cuban will ever be serious about a Dodger ownership stake.  Who wants to deal with McCourt's BS?

Mike
Mike

Courts do not have a category for vanity purchase.  Money is money.  They have to look out for the minority stockholders or the system collapses.  Most people are minority stockholders and we need them in the system.  Additionally Perot could argue the real source of any increase in franchise value was the sweetheart deal he cut for the AAC using his political muscle over the chumps we had/have sitting at the horseshoe table.

Guest
Guest

I have my doubts that the bottom line is paramount when investing in a sports franchise.  We all know that buying a sports team isn't an investment, it's a vanity purchase.  There's a reason you don't see large investment companies buying large interests in sports teams. 

But in any event, there can be no doubt that the fanchise is worth far more today that it was when Perot sold down to a 5% interest.  And there can be no doubt that the current management is better than what preceded it (i.e. Perot). 

Mike
Mike

Goldman Sachs has a high above average payroll too, but the organization delivers big profits.  When other people are involved, no matter how small a share, you have to run it as a business.  Businesses have to show a profit or have a good reason why.  The courts allow the managing partner some latitude, but you just can't go off the deep end.  In his typical way, Mark Cuban is pretty flagrant with his actions at not watching the team bottom line.  It's an iffy case, but not a slam dunk for Mark Cuban.

Guest
Guest

Tim, I am certain it is in the black this year.  All those extra home games in the playoffs.  All that extra merchandise. 

Of course the Mavs have one of the highest payrolls, didn't you notice they just won a championship?  And what does the payroll prove?  Do you think that every team paying more than the average payroll is mismanaged, meaning every team that has won a championship is mismanaged. 

Bottom line, if Perot wanted the Mavs run like a business with an eye toward profit maximization instead of winning, then he shouldn't have sold the team.  But he did sell the team, and as a pittifuly small minority interest owner, what he wants doesn't mean sh*t. 

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