In October 2010, Liverpool Football Club (“LFC”), one of the world’s most storied professional soccer franchises, was the subject of a bitter, highly publicized legal tug-of-war, with two American ownership groups vying for control. The dispute pitted then owners Tom Hicks and George Gillett Jr. – former owners of the Texas Rangers and Montreal Canadiens, respectively – against Boston Red Sox owners New England Sports Ventures (“NESV”), which had launched a bid to take-over the English club for 300 million pounds (or approximately 476 million U.S. dollars). Raising fodder for legal scholars, the ensuing litigation unfolded in two disparate jurisdictions – the Royal Courts of Justice in London and Texas state court — with NESV ultimately winning decisively in London and assuming control of the club.
The legal wrangling does not end there, however. The parties stand poised to battle again tomorrow in London, with England’s High Court set to determine the fate of Hicks’ and Gillett’s $1.6 billion damages lawsuit in Texas.
From England, to Texas, and Back Again
The battle for control of LFC resembles an international litigation case study. In April 2010, Hicks and Gillett announced that they were offering LFC for sale — a development that delighted the legions of passionate LFC supporters, who blamed the owners for the glut of recent trophies in LFC’s display case.
By early October, several buyers, including NESV, had emerged, albeit with bids well below Hicks and Gillett’s valuation of the club. The exigency of the sale process intensified when negotiations deteriorated between Hicks and Gillett and the Royal Bank of Scotland (“RBS”), which had provided acquisition loans to Hicks and Gillett (through investment vehicles). RBS set a deadline of October 15, 2010 for repayment of Hicks’ and Gillett’s indebtedness, which had then ballooned to approximately $350 million pounds.
With the RBS deadline looming, a power struggle ensued between Hicks and Gillett and LFC’s Board of Directors. Following an October 5 Board meeting during which three of the Directors on LFC’s Board selected NESV as their preferred bidder over Hicks’ and Gillett’s dissent, Hicks and Gillett attempted to block the sale by passing a “special resolution” to replace two of the directors with friendly designees, including Hicks’ son.
Then the international legal whirlwind began.
On October 13, Hicks and Gillett and RBS sought competing relief in the Royal Courts of Justice in London. The court sided with RBS, paving the way for the completion of the sale to NESV. The court denied Hicks’ and Gillett’s application for an injunction restraining the sale, and granted RBS a mandatory injunction that reconstituted the LFC Board and reinstated the two deposed directors. The court reasoned that Hicks’ and Gillett’s “special resolution” constituted an unlawful act under the terms of Hicks and Gillett’s refinancing agreement with RBS.
Having been foiled in London, Hicks and Gillett quickly made their way across the pond to more familiar legal territory – Texas. There, Hicks and Gillett obtained a temporary restraining order against LFC’s Chairman, RBS and NESV that, in effect, blocked the sale from proceeding.
On October 14, RBS and the others responded by returning to the English courts, this time seeking a reportedly unusual remedy called an anti-suit injunction. Finding that Texas had no connection with the dispute and that Hicks and Gillett had acted unconscionably, the London High Court granted the anti-suit injunction, restraining Hicks and Gillett from pursuing or continuing legal proceedings in Texas or any other jurisdiction, and giving them until 1 p.m. (GMT) to comply with the order.
The next day, Hicks and Gillett agreed to dissolve the Texas restraining order, yet reportedly sought to engineer the sale of their interests to Mill Financial (“Mill”), a U.S.-based hedge fund with links to Hicks and Gillett, as part of a final (unsuccessful) effort to scupper the sale to NESV.
Ultimately, on October 15, NESV completed its acquisition of LFC.
The Next Chapter
The drama returns to London’s High Court tomorrow, when Hicks’ and Gillett’s legal team will seek to lift the anti-suit injunction so that they can pursue their damages claims in Texas. The odd couple of LFC fans and legal scholars will watch with interest.
Story By: Ryan M. Philp, contributing editor