Dan Snyder’s legal actions heat up as he targets Scot McCloughan’s wife; tries to prevent sale of minority shares as a block

I’ve seen a bunch of news items float by about Dan Snyder’s legal maneuvering over the past few weeks. He’s filed motions and law suits in countries around the world, and they get occasional one-paragraph mentions here and there. He has a single overall battle with his business partners — three minority owners who have created quite a public stir through their words and actions in the past few months that have made Dan Snyder uncomfortable enough to announce a name change for the Washington NFL franchise and perhaps make a number of other business concessions as well.

His battle is being fought on two main (and related) fronts. One is his battle with respect to the attempt by the three minority shareholders to sell their stake in the team, while the second is an aggressive attempt by Snyder to uncover and expose an alleged smear campaign against him this off-season ahead of one of the explosive Washington Post articles. The Washington Post published articles earlier in 2020 that alleged and detailed a history of sexual harassment in the the organization spanning more than a decade. The revelations led to a number of senior executives and staff resigning or being fired.

However, in the days prior to the initial Post article being published, speculation about its content was rampant on social media and a number of online platforms, with some of that speculation suggesting that Dan Snyder himself would be identified in the Washington Post article as having behaved inappropriately. Some of the suggestions that gained traction painted Snyder in a horrible light, not just as a business owner and manager, but as a human being. None of the speculation about what the Washington Post would publish about Dan Snyder personally turned out to be accurate, however. The article did not actually ascribe specific inappropriate action to the team owner, though it did suggest that he should have been aware of what was happening in his organization and that he was broadly culpable for the dysfunctional organizational culture and lack of systems that led to or enabled the harassment described in the Post article.

Still, a certain amount of stink may have clung to Snyder as a result of what turned out to be unsupported allegations against him in social media.

Snyder seems to believe that at least some of the nastiness that appeared online at the time was part of a coordinated effort to embarrass him and force his hand on certain business issues, including changes to the team ownership — or so it would appear from subsequent legal actions that have been reported.

My goal here is not to provide a comprehensive overview of Snyder’s legal actions in the months since the Washington Post story. Suffice to say that his lawyers have pursued legal actions in a number of countries in recent months as they have attempted to uncover evidence of wrongdoing by others attempting to discredit Snyder. Most of those legal actions have been reported via tweets or very short articles published by DMV news outlets that have trickled out a little at a time.

This week, however, two major publications have published stories that put a lot of meat on the skeleton that had been, up to now, pieced together one small news item at a time. The first was a report by The Athletic saying that Dan Snyder is accusing Jessica McCloughan, the wife of former GM Scot McCloughan, of spreading lies about Snyder. The second is a New York Times article that reports that Snyder is trying to block the sale by three minority shareholders of their combined 40 percent stake in the franchise for $900 million.

Let’s look first at the story from The Athletic.

Washington Football Team owner Daniel Snyder is accusing the wife of his team’s former general manager, Scot McCloughan, of spreading lies about him that he claims aided the publication of articles in July that, without evidence, linked Snyder to sex trafficking and the late convicted pedophile Jeffrey Epstein.

The article quotes papers filed by Snyder’s lawyers.

“Petitioner has obtained documents confirming that Mrs. McCloughan communicated with at least one former Team employee on at least forty-four (44) occasions both in the days leading up to and immediately following the publication of the [Washington Post] Articles.”

The volume and timing of these calls suggest that Respondents had advance knowledge of the publication and contents of the...Articles, and/or the publication and contents of a forthcoming July 16, 2020 article in the Washington Post about the Team. Further, the 44 calls...were frequently preceded or followed by calls that same day – sometimes within minutes – between the former Team employee and representatives of the Washington Post and/or one of the minority owners of the Team.

Those words highlighted at the end of the quote provide the link to the other battle Snyder is waging with the minority owners. There are three limited partners outside of Snyder’s family who own 40% of the franchise — Frederick Smith, the chairman of FedEx; Robert Rothman, an asset manager; and Dwight Schar, founder of a home building company.

Many of the legal actions reported in recent months have indicated that Snyder suspects Schar of being part of the alleged smear campaign aimed at him, apparently in an effort to create business leverage. The reference to “one of the minority owners of the Team” in the legal filing quoted above would appear, in light of the numerous reports of recent months, to implicate Schar in the coordinated scheme alleged by Dan Snyder via his lawyers.

Snyder this week also filed a similar legal action against NFL agent Peter Schaffer, who has represented Scot McCloughan. The owner has filed four other similar cases across the country seeking to subpoena people he believes were behind the articles on New Content Media’s website, meaww.com. The information gathered would then potentially support his defamation lawsuit in India against the website and its owners.

This quote hints at the breadth of Snyder’s legal battles with its mention of his defamation lawsuit in India. It is this lawsuit in India that seems to be the linchpin to all of the legal actions being undertaken by lawyers on Snyder’s behalf. The actions described in the Athletic article seem to have one goal: to get documents that would expose the coordinated attack that Snyder has alleged.

Here is a quote from the documents filed by Snyder’s lawyers:

Respondents likely possess highly relevant documents and information relating to...the creation of the [Washington Post] Articles..., the parties behind payments made in order to procure the posting of the...Articles; the sources of information upon which the...Articles were based; and third party efforts to discredit and damage [Dan Snyder] and the Team.

Snyder is not suing Jessica McCloughan or others in this action, only asking the court to allow him to subpoena and depose them, per the Athletic. Snyder alleges that his limited partners, seeking to sell their shares, spread the rumors to force him to sell.

And that’s the link between Jessica McCloughan and the “other” ongoing legal battle with Snyder’s minority partners, Smith, Rothman and Schar.

Which brings us to the New York Times story published on 13 November.

The increasingly bitter battle for control of the Washington Football Team took a significant turn on Friday when three of the team’s limited partners, who together own 40 percent of the club, asked a federal judge to allow them to sell their shares as a group.

The three limited partners...said in their filing in United States District Court in Maryland that they had received an offer of $900 million for their combined shares.

Snyder has given legal notice to the limited partners that he will exercise his right of first refusal, but buy out only Smith and Rothman, who together own 25 percent, not Schar, who holds 15 percent of the team.

This prompted the limited partners to ask a judge to let them sell their shares as a block and stop Snyder from trying to split up the group.

This story tells us some really interesting things, but it also raises a number of questions that are unanswered.

Firstly, it’s interesting that the three limited partners have found a buyer for their combined 40% stake, though the article said the buyer’s identity was not disclosed in the court papers.

The $900m price tag for the 40% holding implies a value for the franchise of $2.25 billion. This ‘cash’ price is significantly lower than the estimated overall value of $3.5 billion recently published by Forbes in their annual estimate.

It’s also interesting that Snyder wants to use his rights to purchase some, but not all, of those shares. It’s not clear whether he simply doesn’t have the financial wherewithal to come up with the full $900m, if he wants to keep Schar in place for legal or other reasons, or if Snyder has some entirely different reason for offering to buy the 25% owned by Smith and Rothman, but not the 15% owned by the builder.

According to the NY Times article, the court filing states, “Mr. Snyder’s position also threatens to disrupt an orderly process — including, among other things, necessary due diligence — for plaintiffs” to sell their shares. Further, according to the article, the filing does not say who has offered to buy out the limited partners, but that the partners have said their window to negotiate with the potential buyer would expire on Nov. 25, which is just a week away.

This is pretty interesting as well — and potentially highly significant. If the limited partners get their way in court, they could possibly strike a deal to sell their shares by the middle of next week, paving the way for a new ownership structure in the coming months.

While the buyer is not disclosed, the fact that the offer is for a block of shares amounting to a 40% ownership stake seems significant. It’s possible that the potential buyer is interested in a passive investment with annual dividends and lots of upside in capital value. However, if those shares are consolidated in the hands of a single individual who is walking into the current situation, presumably, with his or her eyes wide open, it could signal a powerful and confident individual who is ready to challenge Dan Snyder and who would have a significant enough stake in the team to make his or her voice count. Either possibility could be the case, but it seems clear that Snyder does not want the sale to eventuate.

Reading between the lines, this all appears to be a battle primarily between Snyder and Schar, whom Snyder suspects of having played dirty. If the limited partners prevail in court and are able to complete the sale of their shares as a block in the near future, then much of the other legal maneuvering may become moot, as most of what Snyder’s lawyers have been doing in court has seemed aimed directly at Schar, possibly in an attempt to prove bad faith that would trigger an opportunity for Snyder to get the best of the minority owner in his exit from the ownership structure.

We certainly haven’t seen the end of this story (or these stories) as the saga will continue to unfold over the coming days, weeks and months.