What’s Happening?
Peter Seidler owned Major League Baseball’s San Diego Padres through his Trust. Peter passed away at the end of 2023, and his nominated Successor Trustees have taken control of the team. Now, another interested party has filed a lawsuit in a Texas Probate Court to seek control of the Franchise.
Peter had 9 siblings and his wife, Sheel. In her complaint, Sheel alleges the Trustees are breaching their fiduciary duties and are self-dealing in assigning one of Peter’s brothers as the control person for the team. Every MLB team needs a “control person” who reports to the league. Currently, Peter’s brother John is awaiting approval from MLB.
According to reports, Sheel is the sole beneficiary of the Trust and therefore the team’s largest stakeholder. However, attorneys for the Trust have stated that the Trust explicitly excludes Sheel from ever serving as a Trustee. Sheel, however, feels that her intentions regarding the team will be ignored. She desires more control of the team as its value is vital to her and her children as beneficiaries of the Trust. You can find a copy of the Probate Court filing here.
Why Does a Trust own an MLB Team?
Incorporating a Trust into your Estate Plan has many benefits. Not only does it avoid probate, but it further dictates how your assets will be distributed, or in the event of the San Diego Padres, managed for future generations to benefit from and enjoy.
There are different types of Trust that provide different benefits depending on the value and complexity of your Estate. For assets intended to be preserved for generations, you need a more complex Trust to ensure your intentions as Grantor are satisfied. Learn more about the difference between “Dynasty Trusts” and Simple Trusts here.
Who Currently Controls the Trust?
Peter’s brothers Matt and Robert are the current Co-Trustees of the Trust. According to their attorney’s, the Trust explicitly states that Sheel shall not be Trustee, and that the Co-Trustees have the full power and authority to appoint the MLB’s “control person”
Who are the “Key Players” within a Trust?
A Trust contains three primary groups of individuals: the Grantor(s), the Trustee(s), and the Beneficiaries.
A Grantor is the individual(s) who create and establish the Trust. They fund the Trust with their assets and dictate how their assets should be distributed and managed when they are gone through their Trust Instrument.
A Trustee is the individual or institution that is tasked with managing and controlling the Trusts assets. The Trustee has to abide by the terms of the Trust. The Trustee also has fiduciary responsibilities to the beneficiaries. These duties can vary by jurisdiction, but typically include duty of loyalty, duty of impartiality, and a duty to be a “prudent investor.”
A Beneficiary is the individual(s) who are entitled to use and/or receive the benefits of the Trust assets. The Grantor establishes a Trust for the benefit of their beneficiaries, but the beneficiaries must adhere to the conditions left for them by the Grantor, if any.
How Does This Relate to my Estate Plan?
While most of us don’t own assets as valuable or notable as the San Diego Padres, most of us own assets that we care deeply about and want our loved ones to enjoy years after we’re gone. Having clear guidelines in the Trust for how assets will be handled and distributed is crucial to the seamless and efficient transition at death. Another way to avoid this situation is to incorporate an Integrity Agreement
What is an Integrity Agreement?
The Integrity Agreement is an alternative dispute resolution agreement to help avoid lawsuits and family disputes. This includes four stages of dispute resolution including communication, negotiation, mediation and arbitration. This agreement may be incorporated into many other agreements and adopted by business entities. By signing this document, the beneficiaries and other interested parties in your Estate agree not to bring suit regarding any Trust dispute. They must solve it out of court.
What Will Happen with Sheel Seidler and the San Diego Padres?
If the Trust explicitly states that Sheel shall not be Trustee, it is likely that she will not be successful in her claim, absent any foul play by the Trustees. Probate Courts will adhere to the terms of the Trust assuming they are legally binding.
Timing is everything, and the current on-field situation for the Padres may complicate matters. Under Peter Seidler’s leadership, the Padres were extremely aggressive financially, competing on the field and on their books with the other financial powers of the league in the New York Yankees and Los Angeles Dodgers. However, in the first season since Peter’s passing, the team cut their payroll by nearly one-third.
the MLB’s San Diego Padres is in Probate Court