Houston Baseball Partners, the owner of the Houston Astros, filed a fraud and negligent misrepresentation lawsuit against former owner R. Drayton McLane Jr.; McLane Champions, the former owner of the Astros; Comcast Corp.; and NBCUniversal Media, alleging it was “duped” when it bought the team and the team’s interest in a regional TV network.
“In November 2011, Plaintiff bought the Houston Astros baseball team and the network asset based on written projections prepared by Defendants, oral assurances provided by Defendants, and contractual warranties provided by Defendants. But these projections, assurances, and warranties were based on knowing misrepresentations,” Houston Baseball Partners alleges in the
petition filed on Nov. 21
in the 80th District Court in Harris County.
In response to a request for comment, McLane provided a written statement that reads in part, “The accusations that have been reported are hollow and appear to be an attempt to recreate the facts. We will respond in a vigorous and persuasive manner to the lawsuit.”
Comcast and NBC Universal provided a joint statement, which reads in part, “[I]t appears that Mr. Crane is suffering from an extreme case of buyer’s remorse, and aiming to blame the Network’s challenges on anything but his own actions.
Houston businessman Jim Crane is president of Houston Baseball Partners.
Houston Baseball Partners LLC v. McLane Champions LLC, Houston Baseball Partners alleges it bought more than 40 percent of the Houston Regional Sports Network, established to broadcast local sports in the Houston area, “based on a valuation computed from falsely inflated subscription rates.”
The plaintiff alleges it did not know it had been duped until major TV distributors including Time Warner, DirecTV and AT&T “rejected” the subscription rates the defendants were selling and “Defendants’ employees and files showed that the rates were doomed to fail all along.”
Houston Baseball Partners, which paid about $615 million for the Astros and the Astros’ equity interest in the network, alleges it has been harmed because the value of the network asset is “substantially less” than promised, but fans also are “victims.”
The plaintiff alleges the misrepresentations leave it with an impossible choice: “[E]ither accept the broken network as is, and deprive thousands of fans the ability to watch Houston Astros games on their televisions, or distribute the games at market rates and take massive losses out of the Houston Astros player payroll—thereby dooming the franchise for years to come.”
Houston Baseball Partners brings fraud, fraud in the inducement, fraud by nondisclosure, negligent misrepresentation or omission, and civil conspiracy causes of action against all defendants, and breach of contract against McLane Champions. It also seeks a declaratory judgment that McLane Champions must indemnity it under the purchase agreement for breaches of conditions, covenants, representations, warranties and other obligations.
The plaintiffs seek unspecified actual damages and punitive damages, interest, attorney fees and costs.
In response to a request for comment, McLane provided this written statement:
“I haven’t seen the lawsuit yet, but Jim Crane is highly-experienced and has been in business over 30 years. He is surrounded by top-tier accountants, attorneys, operators and marketers, and he has participated in transactions even larger than this one. His experts meticulously examined the Houston Astros financial position. My team was absolutely transparent and produced thousands of pages of documents; we provided answers and explanations to all of their questions. Any suggestion otherwise is absolutely false. As an example, today, Jim Crane reportedly stated that he did not receive the business plan for CSN Houston prior to the purchase. That is not true.”
“This was one of the most complex and scrutinized transactions of my business career. Jim’s group had all the facts. In fact, he told the Chronicle this September that the regional sports network had ‘good long-term value.’ …”
Comcast and NBC Universal provided this joint statement: “Comcast/NBCUniversal vehemently rejects any claim of wrongdoing asserted by the Astros. This litigation outside the bankruptcy proceedings is a desperate act, committed during a period in which Mr. Crane and his team of sophisticated advisors have been granted by the Bankruptcy Court an opportunity to explore and effectuate solutions to the Network’s serious business problems. … Comcast/NBCUniversal looks forward to vindicating itself in this litigation and also remains committed to a reorganization of the Network in Bankruptcy Court.”
On Sept. 27, creditors of Houston Regional Sports Network filed an involuntary petition for Chapter 11 in U.S. Bankruptcy Court for the Southern District of Texas. In re: Houston Regional Sports Network LP. On Oct. 7, the Houston Astros filed a motion to dismiss the bankruptcy petition, alleging it is a ‘transparent attempt” to acquire the Houston Regional Sports Network and “gain control over the Astros’ most valuable asset, the media rights to televise their own Major League Baseball games.”
In a statement filed on Nov. 21 in the involuntary bankruptcy case, the Houston Astros alleged it filed
Houston Baseball Partners v. McLane Champions because the statute of limitations on “certain causes of action” was set to expire.
The state court petition was filed by Richard Drubel, a partner in the Hanover, NH, office of Boies, Schiller & Flexner. A call to Drubel was referred to Giles Kibbe, general counsel for Crane Capital Group of Houston, who did not immediately return a telephone message seeking comment.