The Hicks Saga – View from a Dallas based litigator

Posted: October 15, 2010 by mcdonaldtaf in Business, Liverpool FC
Tags: , ,

I was contacted as news broke from Dallas a couple of nights ago by a fellow red who was also a bankputcy litigator in Dallas. He offered to answer a few questions for me. Seeing the unease that had been created among our fan base we agreed to publish those answers here.

Please remember these answers were before yesterday’s high court ruling. But as we wait for the court in Dallas today there are still some interesting points to note.

My sincere thanks to Jon Lawson. We really are in this together, even his neighbours in Dallas!

1. Can you tell us a bit about yourself and your legal background?

JL – I’ve been a litigator for a little over 5 years now, here in Dallas. I mostly specialize in bankruptcy, and pertinent to this conversation, did a little prospecting a few months ago during our version of the “Hicks Saga.” I actually did a semester abroad at LSE several years ago for undergrad, but for political science. Perhaps I can (and certainly with a little research) speak to the differences in our judicial systems.

2. What was your initial take on Hicks and Gillett’s latest attempt to retain control of the sale process or club?

JL – While I am attorney, I’m also an LFC fan so I will attempt to be impartial. Actually, before I continue, let me say that those of us over here who are Rangers fans feel precisely what is going on over there. Hicks (in our case, solely) dragged our team through bankruptcy (I believe your equivalent of administration) in order to leverage a plan against his unsecured creditors. As I am sure your readers have heard, the proceedings ended with Mr. Hicks in the best possible scenario(in my opinion), for him, of an auction. Though he did not earn any hard cash from this sale, his business debts (state-side) were wiped out. Unfortunately, this wipe out has most probably enabled him to seek additional financing towards LFC and prolong this garbage of retaining ownership (if your readers have not seen this, what a wonderful article: http://online.wsj.com/article/SB40001424052748704814204575508070757773784.html)

On to the question. My initial take is that this is a hail-mary or long-shot move. From your standpoint, it is rather ridiculous to delay the inevitable, but from H&G (and the world-class representation they retain) they stand to lose a considerable amount of money. Perhaps I should qualify and say they stand to gain more sizeable debt, as the team was not purchased in hard currency. When the Rangers thing was happening here, one of our local newspapers made the comment that this is a field of high-finance that most of us just cannot understand. Running two bankrupt teams into the ground state-side, while purchasing a football team in England on credit? I do not believe Hicks to be a particularly shrewd business man, but I do certainly think of his legal team as well qualified.

3. Is Hicks’ just trying to give himself home advantage?

JL – Home advantage would suggest he stands to gain something more from filing here as opposed to England. Much like your system, each case is heard on an individual basis, without prejudice. From what I understand, this was literally a last-minute affair, directly before the presumed new owners were meeting with the Board (correct me if I’m wrong on this as I am getting most of my information from third-party news sites). I believe this is a desperate man, who as he stated a few years ago, “has been in the sports business world for decades.” In other words, he was in Dallas, and filed there.

4. Many fans are questioning a Texas court’s juristiction in this case. Especially as the Texas court is lower in the US legal hierarchy than the equivalant of our High Court. What’s your take on it?

JL – As the article you posted on Twitter suggests, we live in a global community. All of your banks operate here and NESV certainly operates state-side. Additionally, Broughton has conducted considerable business here. I do not find the jurisdiction argument particularly convincing, though the Board’s representation would be remiss not to challenge this stance. Further, the Dallas Texas Court does not hold jurisdiction over your High Court, but a Court here can indeed postpone the sale. As far as legal hierarchy, this is a very tricky question that requires a discussion of international law, but put simply it is not in either Court’s interest to block the actions of the other. I’m trying not to make this a legal discussion, but to those inclined, I can produce precedent and further analysis within a few days.

5. I’ve seen lots of tweets suggesting these tactics are delaying the inevitable. So, the big question. Can this work for Hicks and Gillett, and what are the salient points in respect of potential success or failure?

JL – I need to examine the TRO and also the NESV proposal to properly answer this question, but indeed this seems as a delay before the inevitable. My guess, without having read the full NESV proposal, is that the only successful move Hicks can make is perhaps getting a higher bid approved. I would also need to look at how LFC is structured internally to produce an accurate answer. Anyone have access to LFC charter/business structure?

6. The High Court acted swiftly in the UK. Are the American courts likely to act as quickly?

JL – From my understanding, the new proceeding is October 25th to examine the TRO. This should be a one-day thing. This is another issue I need to research. I certainly understand the H&G strategy of delaying the sale, but I’m not quite sure what future strategies would be. For me, either the UK or US courts are not really the issue. I’m more concerned with where H&G are going with this. Is the plan to push higher bidders into the conversation, or is this a stall tactic to develop other financing strategies of their own? The latter is particularly frustrating seeing as the debt due date was pushed back to the TRO proceeding.

7. Can you see any potential for Hicks to cause problems elsewhere, in a higher US court for example?

JL – I suppose an appeal could have been filed if the TRO was not granted, but I do not see a relevant legal strategy in the US beyond this ploy. Without knowing the inter-working of the UK system, I would guess their next step is some procedure in the UK. I will say however, that this idea of fiduciary duty came into play in the US during the Rangers bankruptcy and was a catalyst in forcing an auction of the team (see Part C. No. 30 in the TRO) This, of course, is related to voluntary bankruptcy proceedings and LFC (thank goodness) has not entered administration. I would like to know if UK law allows for the same type of voluntary bankruptcy and how the Premier League would view a measure like this.

Hopefully this has been at least somewhat informative. Perhaps without even knowing, your questions of international law are particularly technical. Being a fan of LFC, and a beholder of notable disdain for Tom Hicks two-fold (LFC and Rangers), I will look into some of these other issues. To summarize the above, one should know that those with money will use whatever means necessary for gain. As an example, it was reported that in one night of bankruptcy proceedings (during the auction day of the Rangers), Hicks ran up a $12 million legal bill. To be blunt, this guy is a ball-buster. So we have a man who protects his interests to the very end. Make no mistake, his interest is profit.

————

Again, a massive thanks to Jon.

Note: I did this post on my phone so apologies for any formatting problems etc. I thought it important to get out there ASAP.

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