Is this “clickbait,” as they call it? Sort of. Almost exactly two years ago, we found an excuse to blog about the Houston Astros as they were heading into World Series Game 7 against the Washington Nationals. Before that, we found a more direct October excuse to blog about the formerly-bankrupt Cubs (2016) and the formerly-bankrupt Dodgers (2017).
Our 2019 hook was more indirect, that being the Astros’ entrenched Chapter 11 valuation fight in Houston Regional Sports Network’s Texas Chapter 11 case. The Astros weren’t bankrupt, but it was close enough because they and the Houston Rockets (the “Teams” as they call themselves) had formed the debtor for broadcasting their games. Thus, they were inevitably tangled-up in the 2013 Chapter 11 case and, as we learned this week, it continues.
As we explained in greater detail two years ago, Texas Bankruptcy Judge Marvin Isgur was tasked, on remand from the Fifth Circuit, to resolve a valuation fight regarding an Affiliation Agreement. In short, was it, under § 1111(b), of “inconsequential value” as of the petition date based on its proposed use and disposition? To answer that question, Judge Isgur concluded that he needed to answer at least two questions in the coming months:
- What was the fair market value of the Agreement to the reorganized debtor on the plan effective date?
- What adjustments, if any, should be made to determine the fair market value as of the petition date?
When we left it, the parties had five months of discovery in the lead-up to a March 16, 2020 valuation hearing. That was two years ago. Where does it stand now? Unfortunately, not much has changed. An unsuccessful “meet and concur” led to a December 2019 discovery status conference. That resulted in Judge Isgur ordering competing briefs on a novel bankruptcy valuation issue which, when resolved, should also resolve the parties’ discovery dispute. The parties briefed it in January 2020 but then the March 2020 valuation hearing came off for at least one reason and possibly three reasons.
First, the Houston Chronicle reported in July 2020 that the hearing came off, at a minimum, due to COVID. Second, the discovery issue appears to have been fully briefed and still under consideration as of March 2020. Finally, as the parties reminded the Court at the December 2019 status conference, not one document had been exchanged through that date. In short, some or all of the discovery appears to be on pause while the parties wait for a ruling.
As of today, they’re about 21 months (!) out from the original 2020 briefing without a decision if, indeed, a decision is forthcoming. There is no indication that the parties settled the valuation dispute and, at least as of January 2021, the Houston Chronicle, in itemizing all pending litigation matters involving the Astros, reported that it was still pending.
For now then, we’ll leave you with the transcript from the 2019 status conference and the related briefing (see below), only because they (i) highlight an interesting valuation methodology issue and, most importantly, (ii) help justify another October baseball post. After all, following our 2019 Astros post, the Nationals went on to win it. We’re not bashful about hoping for the same sort of good luck for the Braves as they take the series back to Atlanta with the series tied-up, 1-1—although tonight’s weather isn’t looking good.
As background, one or more of the parties were seeking discovery about internal projections that had been conducted after the relevant valuation date but using data that was relevant to the immediate valuation.
Comcast summarized the disputed requests this way in its brief:
The parties’ remaining disputes . . . relate to discovery that the Teams contend is germane to the valuation of Comcast’s Affiliation Agreement under a purported replacement value theory. In particular, the Teams seek ‘drop analyses’ (i.e., analyses by Comcast Cable seeking to estimate the number of customers who potentially would stop subscribing to Comcast Cable, and the financial impact of losing such customers, if Comcast Cable decided to stop carrying a particular network) . . .
In considering the discovery dispute at the status conference, Judge Isgur sheepishly used a paternity analogy to articulate the puzzling issue, i.e., if a court had determined that a defendant was the father of a child before DNA testing was available and a year later, DNA testing became available, would the court conform to the newly-available science?
More directly, Judge Isgur stated it this way:
And so what I’m hearing now is just an interesting question that I really haven’t thought through, which is, you know, what happens if a different way of looking at the world develops later, but it’s better. Am I supposed to use the better way or am I supposed to use an inferior way if that was the best that people had thought of at the time?
GO BRAVES !