Did Jim Crane overpay in the Astros deal? Texas Supreme Court to decide if decade-long spat goes trial
As the Houston Astros battle the Philadelphia Phillies in the World Series, Astros owner Jim Crane is engaged in a decade-long legal fight with the previous ownership group claiming they lied and overcharged him by hundreds of millions of dollars when he bought the team in 2011.
Lawyers for Crane told the Texas Supreme Court last week that their client was duped into paying $332 million too much when he purchased the Astros and a stake in a regional sports network as part of the purchase. Crane wants a Houston jury to decide the case.
But Crane’s demand for hundreds of millions of dollars in damages was met with a skeptical eye when justices on the state’s highest court pointed out that the value of his investment has climbed 600 percent since he purchased the Astros in 2011.
Crane and Houston Baseball Partners, the entity created to buy the Astros, sued former owner Drayton McLane and media giant Comcast in 2013 claiming the defendants’ lies and deceptions caused them to pay far too much when they bought the Major League Baseball team and a stake in Houston Regional Sports Network for $615 million — $283 million for the Astros and $332 for the network.
The main issue is whether HBP and Crane were misled about the affiliate rates the Houston Regional Sports Network would be able to charge distributors of its programming.
Lawyers for Comcast and McLane asked to have the lawsuit dismissed under the Texas Citizens Participation Act, a state law intended to bring an early end to baseless lawsuits seeking to chill free speech. A Harris County trial judge in January 2020 rejected those arguments and said the case should go to trial. The Fourteenth Court of Appeals in Houston did the same in June 2021.
The case was appealed to the Texas Supreme Court.
Crane’s attorney, Thomas Farrell, said his clients have the right to sue because the sellers provided false or misleading information during the due diligence phase of the negotiations regarding what rates could be charged.
But Justice Jimmy Blacklock asked how Crane would calculate damages from a deal that seemingly has been quite lucrative. In April, Forbes published an article valuing the Astros franchise at $1.98 billion — six times the purchase price.
“In the typical fraudulent inducement case, the plaintiff would regret the transaction and seek to undo it because he was induced by fraud to enter into the deal that now has turned out to be regrettable,” Blacklock said. “I wouldn’t think that this [situation] is that — we have an asset worth three to four times, according to magazines, what was paid for it.”
So, if Crane is right and the court agrees the case should proceed to trial, Blacklock asked Farrell to explain what the damages model would be.
Farrell responded that Crane and his group should be able to recover the $332 million they paid for the stake in the regional sports network. “The damage model is very simple,: Farrell said,” the difference in value as represented and as delivered.”
The Houston Regional Sports Network was formed in 2003 by the Houston Astros and the Houston Rockets to broadcast games in the greater Houston area, according to court documents. Comcast bought a $157.5 million interest in the network in 2010 and signed an agreement to distribute the programming to its other affiliates for a fee.
The idea was, according to court documents, that Houston Regional Sports Network would sign similar agreements with other distributors for the same rates. Crane and his s purchased the Astros and its stake in the regional sports network. Not long after, Houston Baseball Partners bought its stake, the network became insolvent. Litigation ensued.
A decision by the Texas Supreme Court is expected sometime next year.
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