As the Houston Astros prepare for Game 1 of the World Series, an attorney for team owner Jim Crane told the Texas Supreme Court on Tuesday that his client was duped into paying $332 million for a stake in a regional sports network when he bought the team.
But Crane’s demand for hundreds of millions of dollars in damages was met with a skeptical eye when a justice pointed out that the value of his investment has climbed nearly 600 percent since he purchased the Astros more than a decade ago.
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 in 2011 for $615 million.
The main issue is whether HBP was misled about what 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, which is 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.
McLane and Comcast appealed to the Texas Supreme Court, which heard oral arguments Tuesday.
Crane’s attorney, Thomas Farrell of McGuireWoods, said his clients have the right to sue because the sellers provided false or misleading information during the due diligence phase of the purchase 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 franchise at $1.98 billion. Crane purchased the Astros for about $283 million in 2011.
“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,” Justice 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, Justice Blacklock asked Farrell to explain what the damages model would be.
“This network interest was represented to have a value of $332 million, and we say in reality it had a value of zero,” Farrell said. “So, the damage model is very simple: the difference in value as represented and as delivered.”
But before the case can proceed to trial, the state’s high court must decide three issues:
- Does Crane’s entity, Houston Baseball Partners, have standing to sue or did it sign away that right to an affiliate when purchasing the Astros?
- Does the TCPA apply to this lawsuit?
- Did the sale and purchase agreement contain a “disclaimer of reliance” clause forbidding HBP from bringing suit based on representations — such as the projected value of the network stake — not in the parties’ contract.
According to court documents, 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. 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 HRSN would sign similar agreements with other distributors for the same rates.
Crane and his Houston Baseball Partners purchased the Astros and its stake in HRSN in November 2011. Not long after, the network became insolvent.
Comcast filed an involuntary bankruptcy petition against HRSN in September 2013 and HBP sued the team’s former owner, McLane, Comcast and others involved in the sale, alleging fraud, civil conspiracy and breach of contract.
HBP alleged that Comcast and McLane had lied in two specific ways: when Comcast vouched that the affiliate rates HRSN intended to charge were “reasonable” and “achievable,” and when it was told that it was Comcast — not the Astros — that had come up with the affiliate rate figure.
The lawsuit languished for years after Comcast removed it to federal court where the bankruptcy was pending, and it was subsequently abated for five years. After it was remanded to Harris County District Court in 2019, McLane and Comcast asked for dismissal under the TCPA.
The Fourteenth Court of Appeals upheld the trial court’s order denying dismissal after finding in part that even though HBP transferred all its rights under the purchase and sales agreement to an affiliate, HBP Team Holdings, it could still bring this suit.
During oral arguments Tuesday, Justice Debra Lehrmann asked McLane’s attorney, Chip Babcock of Jackson Walker, to explain how the TCPA applies to this case.
Babcock said that Crane held a press conference when he filed this lawsuit in 2013 and said the outcome of the case will affect millions of Astros fans. That means the case presents a “matter of public concern,” which brings it under the TCPA’s umbrella, Babcock said.
Justice Rebeca Huddle asked whether the Texas Supreme Court’s 2019 holding in Creative Oil & Gas v. Lona Hills Ranch — which held the TCPA excludes private communications except in specific circumstances — means that the court shouldn’t look at whether there’s a relationship between the statement and a public concern but rather if the statement or transaction itself was a matter of public concern.
“So, here wouldn’t the analogous question not be ‘Do the Astros have millions of fans?’ Undoubtedly, they do,” Justice Huddle said. “But, is the statement about the [affiliate rate] an issue of public concern?”
Babcock said the court can look at the petition filed by Crane in this case, or the transcript of his press conference that’s in the record, to make that call.
“He said these statements are going to affect Astros fans and our city of Houston,” he said. “So, they clearly are a matter of public concern.”