August 15, 2022

Dodgers File for Bankruptcy, Increasing Tension With Selig

The team said in court filings Monday that it planned to hold a competitive sale of its cable television rights within 180 days, a move that could permit McCourt to hold onto the team because a deal would allow it to pay its debts and would be overseen by a bankruptcy judge instead of Major League Baseball.

“He’s certainly not going to go quietly into that good night with Selig,” Robert Boland, a professor of sports business at New York University’s Tisch Center, said of McCourt. “He’s opened a new front.”

But Selig could seek a judge’s permission to remove McCourt as owner of the team because of a league provision that allows baseball to terminate the franchise of owners who file for bankruptcy protection. Baseball has taken the position in the past that it has the right to approve any television deal.

A court hearing is scheduled for Tuesday in Delaware, where the Dodgers and four affiliated companies are incorporated.

In the short term, the filing will give the team access — with a judge’s approval — to $60 million in financing that will cover the team’s expenses for about a month, said Bruce Bennett, the lawyer representing the Dodgers in bankruptcy court. The team said Monday that it had secured a total of $150 million in financing that would allow operations to continue as usual: ticket prices will remain the same, the team will continue to sign and acquire players, and the salaries of Dodgers employees will continue to be paid.

The Dodgers and Major League Baseball released dueling statements Monday, with each accusing the other of causing the team’s financial distress.

“We brought the commissioner a media rights deal that would have solved the cash-flow challenge I presented to him a year ago, when his leadership team called us a ‘model franchise,’ ” McCourt said in his statement. “Yet he’s turned his back on the Dodgers, treated us differently and forced us to the point we find ourselves in today.”

Selig accused McCourt of saddling the Dodgers with debt and dipping into team funds to pay for personal expenses.

“To date, the ideas and proposals that I have been asked to consider have not been consistent with the best interests of baseball,” Selig said. “The action taken today by Mr. McCourt does nothing but inflict further harm to this historic franchise.”

McCourt has burdened the Dodgers with $ 400 million in debt since he took over ownership in 2004, and the team has been at the center of a contentious divorce between McCourt and his wife, Jamie, who claims that half of the team belongs to her.

In April, Selig took control of the team and named a trustee, Tom Schieffer, to oversee it.

The most recent 17-year television deal with Fox was to have been part of a divorce settlement between the McCourts, but Selig canceled the agreement after he said it would have served only to enrich Frank McCourt and would place the team’s future in doubt.

In a statement Monday, David Boies, a lawyer for Jamie McCourt, called the bankruptcy filing “disappointing and disturbing” and said “the rule-or-ruin philosophy that appears to have motivated today’s filing is bad for everyone who cares about, or has an interest in, the Dodgers.” A lawyer is expected to appear in court Tuesday on her behalf, according to a representative.

Lawyers for the Dodgers said in filings that the team was “on the verge of running out of cash, the result of a perfect storm of events” and said it would be able to satisfy its debts if it could negotiate a new media deal.

Court documents show that the Dodgers’ largest creditor is Manny Ramirez, who retired from baseball in April but is owed nearly $21 million, followed by Andruw Jones, an outfielder who now plays for the Yankees and is due $11 million, and pitcher Hiroki Kuroda, who is owed $4.5 million. The team also owes $153,000 to Vin Scully, who has been calling Dodgers games for 62 years.

Bennett, the lawyer for the Dodgers, said he did not expect baseball’s argument, that it must approve any television deal, to be successful.

“There are certain decisions that the bankruptcy court should make based upon the bankruptcy law and not based upon what the commissioner would like to do,” he said.

Similarly, the provision allowing Selig to seize ownership from teams that file for bankruptcy is “simply not enforceable as a matter of bankruptcy law,” Bennett said.

A spokesman for baseball declined to comment on whether it would try to terminate McCourt’s franchise.

Baseball is often seen as a special case because of its status as a sports league, but bankruptcy judges are concerned with the rights of creditors and not necessarily those of the league, said Jon Henes, a lawyer who has worked on several cases involving companies seeking Chapter 11 protection, including Citadel Broadcasting and Ion Media Networks.

Indeed, the judge overseeing the bankruptcy filing last year by the Texas Rangers made it clear that he, not Selig, would decide the case. Even so, the team was eventually sold at auction to a group of buyers, including the Hall of Fame pitcher Nolan Ryan, that was favored by Selig.

Richard Sandomir contributed reporting.

Article source:

Speak Your Mind