Comedian Danny Thomas’ Investment Group Fails in Bid to Buy Chicago White Sox

Epton v. CBC Corp., 48 Ill.App.2d 274, 197 N.E.2d 727 (Ill. App. 1 Dist., 1964)

What happened?
 

In early April 1961, the investment group with a controlling interest in the Chicago White Sox offered to sell its share to a consortium organized by Chicago attorney Bernard Epton that included well-known comedian Danny Thomas. The agreed upon sale price was $4.8 million (about $37.5 million today.)

The White Sox stock, comprising a 54% share, was owned by CBC Corporation, controlled by Bill Veeck, Hall of Famer Hank Greenberg and Arthur Allyn, Jr. The group had purchased this share on March 10, 1959 from White Sox founder Charles Comiskey’s daughter, Dorothy, for $2.7 million (about $21.8 million today.)

Upon the sale to CBC, the White Sox enjoyed immediate success and captured the 1959 American League pennant. After falling to the Los Angeles Dodgers in the World Series; however, the White Sox finished 10 games back in 1960. By early 1961, the Bill Veeck group saw an opportunity to make a quick, handsome profit and agreed to sell their 54% interest in the American Baseball League Club of Chicago to the Danny Thomas group.

On May 31, 1961, a handshake deal was made with the Thomas group having a one-week option for $1000 to purchase the shares of stock for the agreed upon price. At the conclusion of this meeting, Veeck reportedly told Epton, "O.K., Bernie, *** we have a deal. I am glad that it’s taken care of. I know you will do a good job." Greenburg and Allyn are also alleged to have shaken hands with Epton and congratulated him on the deal. The written option agreement had not been signed, however.

As agreed, plaintiff delivered the check for $1000 to the seller’s attorney on the morning of June 2, 1961. That afternoon, however, Epton visited Allyn’s office and was told that Greenberg was being difficult. Allyn assured Epton that they would get the option agreement signed so that the sale could be formally announced on June 5, 1961. For unknown reasons, however, Hank Greenberg was having second thoughts.

On June 3, 1961, Epton offered a certified check in the amount of $100,000 to show their group’s good faith and ability to perform. Veeck refused the check, telling Epton that it was not necessary.

Bernard Epton with Certified Check

On June 5, 1961, CBC returned the $1000 check that they had accepted but not deposited, informing the Thomas group that Greenberg was not willing to sign the option agreement and that the CBC group was not going to be able to sell the stock to them.

As a result of the deal having fallen through, Epton filed suit seeking that the court compel CBC to sell them the team under the terms of the option agreement or alternatively, award them damages in the amount of $700,000 (about $5.47 million today), claiming that the stock they agreed to purchase for $4.8 million was actually worth $5.5 million.

The option agreement at issue provided that the Thomas group was to give written notice of their intent to exercise the purchase option and deliver a check in the amount of $99,000 to CBC. The Thomas group had not done either but claimed that their oral notice was sufficient and that they had substantially complied by offering the $100,000 check that Bill Veeck said was not necessary.

So who won?

The court ruled in favor of the CBC group, refusing to force the sale or award any monetary damages to the Thomas group.

Why?

The court found that even though Epton was on notice that Greenberg was refusing to go along with the option, "plaintiff still did not give written notice or pay the required $99,000; rather, he insisted that defendants sign the option agreement, thereby evidencing his uncertainty as to whether there was in fact any binding agreement." Accordingly, the court affirmed the lower court’s dismissal of Epton’s lawsuit.

What happened after this lawsuit was decided?
 

Interestingly, the stock owned by Veeck and Greenberg was sold to Arthur Allyn, Jr. and his brother, John Allyn and they owned the team together until John bought out Arthur in 1969. In 1975 John Allyn sold the team back to Bill Veeck.

Bernard Epton served in the Illinois House of Representatives from 1969 through 1983. He was unsuccessful in his 1983 bid for mayor of Chicago, losing a close race to Harold Washington.

Danny Thomas founded the St. Jude Children's Research Hospital in 1962.  It may never be known if the White Sox deal falling through sped up his efforts to bring the children's hospital to fruition, but Danny Thomas' vision has certainly been responsible for saving the lives of thousands of children since its inception. 

Over Fifty Years Before Jackie Robinson Broke Major League Baseball’s Color Barrier, an Integrated Minor League Team Battled for the Rights to Future Hall of Fame Black Ballplayer Frank Grant

Harrisburg Base-Ball Club v. Athletic Association, 1890 WL 2997, Pa.Com.Pl. (1890)

Who was Frank Grant?

The plaintiff in this case, better known as the Cuban Giants, was admitted to Eastern Interstate League as the representative from York, Pennsylvania and played as the Monarchs.  The manager of the defendant Harrisburg Ponies, James Farrington, was none too pleased that the talented Giants were welcomed into the league and countered by luring second baseman Frank Grant and catcher Clarence Williams to sign on with the Ponies, despite the fact that each had already signed contracts to play for the Giants/Monarchs for the 1890 season.

Grant was held in such high regard that he received a hero’s welcome in Harrisburg and was nicknamed “The Colored Dunlap” (an obviously insensitive moniker nowadays) due to his favorable comparisons to white second baseman Fred Dunlap.

According to the Harrisburg Morning Patriot, Grant was the “most famous colored ballplayer in the business” and “when he appeared on the field a great shout went up from the immense crowd to receive him, in recognition of which he politely raised his cap.”

What was the basis for the lawsuit?

The Giants claimed that the loss of Grant, one of their “most expert players” would cause irreparable harm to their profitability.  Moreover, the Giants claimed that they had expended great sums of money to erect “buildings, fences and accommodations for the public” with the expectation that Grant, “a player of great reputation,” would draw a substantially larger paid attendance.  They asked the court to issue an injunction to prevent Grant from playing for the Harrisburg Ponies in 1890.  Importantly, however, the Giants could not ask the court to compel Grant to play for them in 1890 because such a remedy was not available at law.

So who won?

The court ruled in favor of the Ponies and Frank Grant was allowed to play the 1890 season for Harrisburg.

Why?

The court found that because they did not have the power to force Grant to play for the Giants in 1890, Grant’s playing for the Ponies was not the direct cause of the damages to the Giants.  In other words, the Harrisburg Ponies were not at fault because the Giants would have sustained the same claimed losses even if Grant had played a team other than the ponies.

Additionally, the court found that Grant’s contract with the Giants was not fully enforceable because it lacked mutuality, in that only the Giants had the right to compel specific performance.  The provision that the court singled out gave the club the right to cancel the contract “at any time” if it appeared that Grant was “not fulfilling his agreements to the best of his ability.”

What happened after the case was decided?

Grant enjoyed a productive season for the Ponies during their time in the Eastern Interstate League, hitting .333, slugging .488 and stealing 22 bases in 59 games.  In the middle of July, an opportunity arose for the Ponies to join a higher minor league when the Jersey City Jerseys of the Atlantic Association folded. 

The problem for the Ponies was that the American Association did not have any black players.  Teams such as the Washington Senators and Baltimore Orioles initially refused to play the Ponies if Grant was in the lineup.  Regardless, Harrisburg was admitted and took over Jersey City’s record. 

Despite the prejudice Grant faced on and off the field, he hit .332 with 13 doubles in 47 American Association games with the Ponies.  In 2006, Frank Grant was inducted into the Hall of Fame by the Negro League Committee.

Houston Astros Ownership Files Fraud Lawsuit against Drayton McLane over Botched TV Deal

Houston Baseball Partners, LLC v. McLane Champions, et al., No. 201370769, Harris County, Texas

The wrangling over future broadcasts of Houston Astros games has finally come to blows as the Houston Baseball Partners, LLC ownership group, led by Jim Crane, has filed a lawsuit in Harris County, Texas alleging misrepresentation and fraud.  Specifically, the petition alleges that the Houston Regional Sports Network, of which plaintiff purchased a 40 percent stake, was fraudulently overvalued and that the subscription rates previously being sold by defendants were rejected by Time Warner, Direct TV and AT&T. 

           

“Ultimately, fans of the Houston Astros have been injured because Defendants’ misrepresentations leave plaintiff with an impossible choice: either 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”

The Astros had formed the network in 2003, in conjunction with the Houston Rockets ownership, and Comcast later purchased an equity stake in the network in 2010.  Comcast agreed to pay certain monthly fees based on the number of subscribers in a given month for each of several distinct geographic zones. 

Plaintiff claims that Comcast eventually agreed to an “inflated” Zone 1 base rate; however, Comcast retained a “most favored nation” right such that they could reduce their rates if affiliate distributors were not willing to contract at the premium Zone 1 rate.  These “inflated” rates were thereafter incorporated into the Comcast business plan that plaintiff relied upon in negotiating the purchase of the ball club and broadcast network shares in 2011.

In order to prove their case, Houston Baseball Partners will need to prove that the (1) inflated Zone 1 base rates overstated the projected profitability and ultimate value of the Astros’ stake in the network, (2) that these representations were materially false and misleading when they were made, (3) the defendants knew or should have known that the representations were false and misleading, (4) that the false or misleading representations were made with the intent of inducing plaintiff to execute the purchase agreement, (5) that plaintiff relied on these misrepresentations to their detriment, and (6) that plaintiff suffered damages as a result.

Fraud is difficult to prove and initially, it would appear that plaintiff will have some difficulty establishing that the inflated rates were misleading if they were being honored at the time of the purchase.  Presumably, the most favored nation status would have been examined during the due diligence process and the risks that accompanied such a provision would likely have been accounted for in the purchase price.

What is not clear at this point is the correlation between the Astros’ on field performance and the number of subscribers that pay to access the broadcast, especially in light of the dismal performance of the team in 2013. 

Revenue Sharing Deal Cubs Struck with Rooftop Owners Holding Up Wrigley Field Renovations

During the 2013 baseball season, the City of Chicago approved a $500 million plan to renovate Wrigley Field and build an adjacent office building and hotel.  Included in the renovation plan is the proposed construction of a large video board behind the left field bleachers and signs advertising Budweiser behind the right field bleachers.  The Cubs have delayed the start of this project, however, because the owners of the rooftop businesses across from the ballpark have threatened to file a lawsuit against the Cubs because the proposed signage will obstruct the views of the field from their respective rooftop businesses. 

Rooftop Litigation History

Detroit Base-Ball Club v. Deppert, 61 Mich. 63, 27 N.W. 856 (Mich., 1886)

Disputes over neighbors viewing ballgames are nothing new.  In 1885, John Deppert, Jr. constructed a rooftop stand on his barn that overlooked Recreation Park, home to the National League’s Detroit Wolverines, future Hall of Famer Sam Thompson and a rotation featuring the likes of men named Stump Wiedman, Pretzels Getzien and Lady Baldwin.  The Wolverines claimed that they had to pay $3000 per month for rent and that the 50 cent admission fees, helped to offset this cost.  They were thereby “annoyed” by Deppert charging people, between 25 to 100 per game, to watch the games from his property and asked the court to forever ban Deppert from using his property in this manner. 

Recreation Park - Home of the Detroit Wolverines

Deppert countered that the ballgames had ruined the quiet enjoyment of his premises, that ballplayers often trespassed on his land in pursuit of the ball and that he often had to call the police to “quell fights and brawls of the roughs who assemble there to witness the games.”  He further claimed that his viewing stand had passed the city’s building inspection and that he had the legal right to charge admission and sell refreshments. 

The trial court dismissed the Wolverines case and the ball club appealed.  The Supreme Court of Michigan agreed that the Wolverines had no right to control the use of the adjoining property; therefore, Deppert was within his rights to erect a stand on his barn roof and sell refreshments to fans that wanted to watch the game.  Furthermore, there was no evidence that Deppert’s rooftop customers would otherwise have paid the fees to enter Recreation Park.

Similarly, the rooftops of the buildings across the street from Shibe Park were frequently filled with fans wanting a view of the Philadelphia Athletics game action.  While never happy about the situation, Connie Mack was pushed too far in the early 1930s when the rooftop operators started actively poaching fans from the ticket office lines.  Mack responded by building the “Spite Fence,” a solid wall that effectively blocked the view of the field from the buildings across 20^th Street.

Looking north on 20th Street with Spite Fence on left

Lawsuits were filed but the “Spite Fence” remained in place throughout the remainder of the use of Shibe Park, later renamed Connie Mack Stadium.

  

The Current Dispute

Chicago National League Ball Club, Inc. v. Skybox on Waveland, LLC, 1:02-cv-09105 (N.D.IL.)

In this case, the Cubs sued the rooftop owners on December 16, 2002 seeking compensatory damages, disgorgement to the Cubs of the defendants’ profits and a permanent injunction prohibiting the rooftop owners from selling admissions to view live baseball games at Wrigley Field, among other remedies and under several causes of action.  According to the complaint, the Cubs alleged that the defendant rooftop operators “…have unlawfully misappropriated the Cubs’ property, infringed its copyrights and misleadingly associated themselves with the Cubs and Wrigley Field.  By doing so, Defendants have been able to operate multi-million dollar businesses in and atop buildings immediately outside Wrigley Field and unjustly enrich themselves to the tune of millions of dollars each year, while paying the Cubs absolutely nothing.”

In their statement of undisputed facts, the defendants countered that the rooftops had been used to view games since the park opened on April 23, 1914 as home of the Chicago Federal League team and that the Cubs conceded that their present management knew the rooftop businesses were selling admissions since at least the late 1980s. 

In May 1998, the City of Chicago enacted an ordinance authorizing the rooftops to operate as “special clubs,” which allowed them to sell admissions to view Cubs games under city license.  The City wanted their piece of the action and interestingly, the Cubs made no formal objection to the ordinance.  Based on the licensure and lack of any opposition from the Cubs, the rooftop owners made substantial improvements to enhance the experience and to meet new City specifications.

By January 27, 2004, the Cubs had reached a written settlement with owners of 10 of the defendant rooftop businesses which assured that the Cubs “would not erect windscreens or other barriers to obstruct the views of the [settling rooftops]” for a period of 20 years.  The remaining rooftop owners later settled and the case was dismissed on April 8, 2004, just days ahead of the Cubs home opener set for April 12^th.
 

Operative language in para. 7

After the 2004 agreement legitimized their businesses, the rooftop owners made further improvements to the properties.  Long gone are the days that a rooftop experience meant an ice-filled trough of beer and hot dogs made on a single Weber.  The rooftop operations are now sophisticated businesses with luxurious accommodations, enhanced food and beverage service and even electronic ticketing.

  

As a result of the settlement agreement of Cubs’ 2002 lawsuit, the team now has legitimate concerns that a subsequent lawsuit by the rooftop owners to enforce the terms of the contract could ultimately result in the award of monetary damages to the rooftop owners; cause further delays in the commencement of the construction project due to a temporary restraining order; or, be the basis of an injunction preventing the Cubs from erecting the revenue-producing advertising platforms for the remainder of the rooftop revenue sharing agreement.

It is obvious that the rooftop owners need the Cubs more than the Cubs need them; however, the Cubs wanted their piece of the rooftop owners’ profits (estimated to be a payment to the Cubs in the range of $2-$3.5 million annually) and now the Cubs have to deal with the potential that their massive renovation project will be held up by the threat of litigation over the blocking of the rooftop views. 

Henry Oberbeck Recovers in Contract Lawsuit Against St. Louis Browns

Oberbeck v. Sportsman's Park & Club Ass'n, 17 Mo.App. 310 (Mo. App., 1885)

What happened?

Henry Oberbeck had a relatively uneventful career in professional baseball, playing for four teams over two seasons as a third baseman, outfielder and pitcher.  At the plate, he compiled a .176 lifetime batting average in 238 at bats and was 0-5 with an earned run average of 5.30 on the mound.  


Oberbeck was signed to a contract with the St. Louis Browns that would pay him a total of $785 (approximately $18,255 today) for the 1883 season lasting from May 23^rd through October 31^st.  By June 23^rd, he had appeared in four games as an outfielder and was hitless in 14 at bats.

He was then informed that the Browns no longer needed his services and was discharged, having been paid only $150 of the agreed upon contract amount.  The Browns refused to pay Oberbeck the remaining salary, prompting him to sue for the balance.

The Browns claimed that there were actually two separate contracts signed, the first of which had not been approved by the American Association.  They claimed that the second contract included the right on the part of the Browns to terminate employment at any time.  Oberbeck denied he had executed the second contract and relied on the fact that the first contract did not allow the Browns to unilaterally cancel his contract.

The case proceeded to trial and the jury was instructed that if they found Oberbeck had signed the second contract, he would not be entitled to recover.  If they instead found that Oberbeck had not signed the second contract, he would be assessed damages in the amount of $635, less any amounts that he had earned or might have earned “by reasonable diligence” between the date of discharge and October 31, 1883.

Who won?

The jury awarded damages to Henry Oberbeck having found that Oberbeck had not signed the second contract.

The appeal

The Browns appealed, claiming that the court erred in its jury instructions by failing to include the possibility that both contracts could be construed together as part of the same contract. 

Who won the appeal?

Henry Oberbeck.  The appellate court found that the jury had been instructed properly and adopted plaintiff’s version of the transaction, which was “borne out by sufficient evidence.”

Oberbeck played professionally in 1884 for the Baltimore Monumentals and Kansas City Cowboys of the Union Association.  He was out of professional baseball by the time this case was decided.

Chicago Cubs Sue Mark Guthrie to Recover on Payroll Error

Chicago National League Ballclub, Inc. v. Guthrie

Middlesex County, Connecticut, MMX-CV04-0104650-S

What happened?

Mark Guthrie was a big lefty reliever who pitched for 8 teams over the course of his 15-year Major League career, which included a World Series victory with the Minnesota Twins in 1991. He played for the Chicago Cubs from 1999 to 2000 and again in 2003. His salary in 2003, which was his last in the Majors, was $1.6 million.

A man with the same name, Mark Guthrie, delivered newspapers for The Courant newspaper in the tiny Connecticut town of Old Saybrook. He presumably made much less than the Cubs’ Guthrie.

The Tribune Company, based in Chicago, Illinois owned both the Chicago Cubs and The Courant newspaper at the time. Due to a mix-up, someone from the Tribune deposited over $300,000 into the wrong Mark Guthrie’s bank account. Suddenly, Connecticut’s Mark Guthrie was flush with cash.

Mr. Guthrie realized that he was paid in error and contacted the Tribune to straighten out the mix-up. He eventually returned all but $26,000, seeking assurances that he would not be liable for taxes on the mistaken payroll deposit into his account.

After Mr. Guthrie froze his account, however, the Chicago Cubs filed this lawsuit in an attempt to recover the amount that had been held back.

Who won?

A settlement was reached and the case was dismissed in January, 2005. The Cubs had filed a motion for summary judgment that was not heard. Mr. Guthrie was satisfied that the IRS would not have any issues with the sudden influx of cash to his account.