After nearly 12 years of litigating, it took exactly one day of trial testimony for Jim Crane and Drayton McLane to settle their $440 million fight over the sale of the Houston Astros and a stake in a regional sports network.
In the Ceremonial Courtroom on the 17th floor of the Harris County Civil Courthouse Friday morning, about 10 minutes before 9 a.m. — when the jury was expected to enter the courtroom for the second day of testimony in the trial that was expected to last three weeks — Thomas M. Farrell of McGuireWoods, who represents Crane’s Houston Baseball Partners, entered the room and asked David Beck of Beck Redden, who represents McLane, to step outside the courtroom for a chat.
Both men returned a few minutes later and asked Harris County District Judge Sonya L. Aston for permission to approach the bench. Much of what was said could not be heard from the gallery, save for a few comments from Judge Aston.
“Call me flabbergasted,” she said. “Take your time, take your time.”
Both men then left the courtroom together.
Crane entered the courtroom a few minutes before 9:30 a.m. and took a seat in the well of the gallery. McLane came in at 9:30 a.m., as counsel for both sides was already at the bench speaking with Judge Aston.
“Do you want to hear my rulings on the deposition clips?” Judge Aston asked after some undiscernible discussion, prompting laughter from the lawyers.
Farrell then addressed the court loudly enough for everyone present to hear.
“Your honor, I’m pleased to announce we reached a settlement of the case,” he said. “The settlement is confidential.”
The jury was brought in, and Judge Aston addressed the panel of 12 jurors and three alternates.
“I have some disappointing news,” she began. “You will not be coming back next week. The case has settled.”
Several jurors began silently clapping and smiling broadly.
“You will not get to listen to these talented attorneys any more in this case,” Judge Aston said.
Farrell thanked the jury for their service and then Crane also thanked the panel.
“I hope you come to some games,” he said, garnering a few laughs.
Paul Dobrowski of Dobrowski Stafford & Pierce, who represents McLane Champions, also thanked the jury, as did McLane himself, who said in part, the jury system is “what makes America so great.” Beck said he echoed “all those things,” and the jury was dismissed.
Lawyers for both sides declined to comment, citing the confidential nature of the settlement.
“We’re moving on,” McLane said as he exited the courtroom.
Crane and Houston Baseball Partners, the entity created to purchase the Houston Astros from McLane in 2011, alleged in the lawsuit they were misled, or fraudulently induced, into buying the team and a stake in Houston Regional Sports Network at an inflated rate based on misrepresentations.
Crane bought the assets for $615 million and filed this lawsuit two years later.
During opening statements Thursday, counsel for the defendants raised the argument that any potential damages suffered by Crane and Houston Baseball Partners as a result of the deal were tied to his team’s lack of due diligence.
The first witness called by the plaintiffs, George Postolos, told jurors on Thursday why he felt that characterization was inaccurate.
Postolos, a graduate of Harvard University and Harvard Law School, was a mergers and acquisitions lawyer at Wachtell Lipton before serving as chief of staff for former NBA Commissioner David Stern. He left that job to serve as president and CEO of the Houston Rockets and later as president and CEO of the Astros.
He told jurors he first met Crane in 2006, when Postolos was working for the Rockets and Crane had courtside seats. Their relationship, he said, was close. The Crane and Postolos families spent time together socially, he said, and had many friends in common.
He explained that Crane was interested in buying a professional sports franchise and that he and Crane had worked together doing due diligence a half dozen times, including when he tried to purchase the Astros in 2008, followed by the San Diego Padres, Atlanta Hawks, Texas Rangers and Chicago Cubs.
Those experiences, Postolos said, made him comfortable and knowledgeable about the due diligence process in this realm. Farrell asked him whether the due diligence he and others had done leading up to the 2011 purchase was “rushed,” as the defense had suggested.
“This is what we were living and breathing,” he said, describing his work researching the deal as something that consumed his “every waking hour” for months.
“We did everything we could think of,” he said. “And we were very experienced at it.”
Postolos also answered questions about what led Crane to back out of a 2008 deal to buy the Astros, which Beck had told jurors during opening statements was a last-minute decision just before a press conference was to begin to announce the deal.
Postolos explained that McLane had not publicly announced his intentions to sell the team back then.
“Drayton was not clearly motivated to sell,” he said, adding that McLane had tweaked the deal a handful of times in the final days of negotiations.
“I think enough was enough from Jim’s standpoint,” Postolos said of the final proposed change to the terms of the agreement. “The deal didn’t close, and it was a tough thing to get past, I think, for both sides.”
Jurors heard on Thursday that the second time around, prior to inking the 2011 deal to buy the Astros, Crane and Houston Baseball Partners were told that Comcast — an industry leader with expertise in the market — had determined companies like AT&T, DirecTV, Time Warner and others would pay $4.50 per household each month to carry HRSN, which would broadcast Rockets and Astros games.
That aided in what Farrell had described as McLane’s attempt to inflate the value of the stake in HRSN, which Crane bought for $332 million. The $4.50 rate, he said, actually came from the Rockets and the Astros.
Postolos also testified that during due diligence, he and others working on the deal spent significant resources verifying the origin of the $4.50 number and Comcast’s confidence that it was a market-clearing rate.
“We were told Comcast had high confidence in the plan,” he said. “It was important because Comcast was in the best position to know what would clear the market, probably anywhere, but especially in Houston where they were the dominant cable provider.”
“So being told this was Comcast’s evaluation was very material, and the seller knew it was material because they were telling us it was Comcast’s plan. And that wasn’t true.”
Farrell also asked Postolos discuss how diligently the team had asked direct questions of Comcast executives about that rate and its viability. He called the idea that not all of the tough, direct questions had been asked “false.”
“I want to get it right, and that’s my whole career, and this was my job here,” Postolos said. “We wanted to get it right, and we did everything we could to get it right.”
Houston Baseball Partners is also represented by Charles B. Hampton of McGuireWoods and Ronald G. Franklin of Houston.
McLane Champions is also represented by Shane L. Kotlarsky and Jared A. McHazlett of Dobrowski Stafford & Pierce and Harris J. Huguenard of Jackson Walker.
McLane is also represented by Geoff Gannaway and Cassie Maneen of Beck Redden.
The case is Houston Baseball Partners v. McLane Champions et al., case number 2013-70769, in the 80th District Court of Harris County.
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