Just days after Frank and Jamie McCourt agreed on a divorce settlement, Major League Baseball rejected a proposed television contract for the Los Angeles Dodgers that was a linchpin of the deal.
The TV deal has been reported to be worth $3 billion and Frank McCourt would receive $385 million upfront. That money was critical to the financial health of the Dodgers. MLB's action nullifies the divorce settlement, sending the McCourts back to the drawing table and thrusts the Dodgers into limbo.
MLB issued a statement explaining the decision.
"This decision was reached after a full and careful consideration of the terms of the proposed transaction and the club's current circumstances," commissioner Bud Selig said in a statement. "It is my conclusion that this proposed transaction with FOX would not be in the best interests of the Los Angeles Dodgers franchise, the game of Baseball and the millions of loyal fans of this historic club."
Selig also said in his statement that he sent a letter to McCourt where "expansive analysis" for his rejection of the TV proposal was explained. The Dodgers' current TV deal with Fox expires in 2013.
Frank McCourt was disappointed with the league's ruling, according to a statement released by Steve Susman, senior partner of Susman Godfrey.
"We are extremely disappointed with the Commissioner's rejection of the proposed FOX transaction which would inject $235 million into the Los Angeles Dodgers," the statement read. "As Commissioner Selig well knows, this transaction would make the Dodgers financially secure for the long term and one of the best capitalized teams in Major League Baseball.
"Commissioner Selig's letter of rejection is not only a disappointment, but worse, is potentially destructive to the Los Angeles Dodgers, and Major League Baseball. Accordingly, we plan to explore vigorously our options and remedies with respect to Commissioner Selig's rejection of the proposed FOX transaction and our commitment to protect the long-term best interests of the Los Angeles Dodgers."
MLB had taken control of the troubled franchise and was investigating the team's finances. Selig said he would not make a decision on the TV deal until that process was complete. But Selig indicated in Monday's statement that the terms of the divorce settlement in which a large chunk of the Fox upfront money would not go to the Dodgers led to his decision.
"Critically, the transaction is structured to facilitate the further diversion of Dodgers assets for the personal needs of Mr. McCourt," Selig said. "Given the magnitude of the transaction, such a diversion of assets would have the effect of mortgaging the future of the franchise to the long-term detriment of the club and its fans."
The statement on behalf of Frank McCourt and the Dodgers also notes that "all the requirements for the Commissioner to approve the FOX transaction were put in place by last Friday: Frank and Jamie McCourt entered into an agreement based on the proposed transaction; the Court ordered, among other things, that the FOX transaction is 'in the best interest of the Los Angeles Dodgers and should be consummated immediately;' and all information requested by Major League Baseball under its so-called investigation has been provided by the Dodgers."
Frank McCourt has struggled to make payroll. He now faces the prospect of failing to meet his obligations on June 30. That could lead to MLB taking over the team and forcing a sale. Sources told the Los Angeles Times, however, that the commissioner expects Frank McCourt to sue the league -- to challenge MLB's right to take over the team and/or to force Selig to approve the FOX deal.
Terms of the divorce settlement had set a one-day trial for Aug. 4 to decide if Frank McCourt owned the Dodgers outright or if it should be a marital asset to be split.
"As I have said before, we owe it to the legion of loyal Dodger fans to ensure that this club is being operated properly now and will be guided appropriately in the future," Selig said. "This transaction would not accomplish these goals."
Jamie McCourt had requested that the courts demand an immediate sale of the Dodgers. She had rescinded that request as part of the settlement. Sources tell ESPN The Magazine's Molly Knight that she had wanted a more global settlement that did not rely on the FOX deal being approved by Selig because she is ready to move on from this nasty, nearly two year legal battle. A spokesman declined to say whether she will go back into court an request a Dodgers sale.
Terms of the settlement spelled out how the $385 million from FOX would be spent. Each party would receive $5 million for lawyers' fees. Each party would receive $5 million to use as they see fit. Approximately $235 million would be used for the Dodgers (including repayment to Frank McCourt money that was advanced to the team in 2011 but not exceeding $23.5 million). Another $80 million would be used to pay off indebtedness. And the remaining $50 million would be put in an account subject to the court's orders.
Frank McCourt had said all other issues in the divorce were settled, and a hearing set for last Wednesday where Jamie McCourt was expected to ask Superior Court Judge Scott Gordon to order the sale of the team was canceled.
Until ownership of the Dodgers is decided, the terms of settlement stipulated that Frank McCourt pay Jamie McCourt $650,000 monthly for support.
In April, former Texas Rangers president Tom Schieffer was appointed to monitor the team on behalf of Selig. Selig said he took the action because he was concerned about the team's finances and how the Dodgers are being run.
The former couple's lavish lifestyle was exposed in court documents, where it was revealed that they took out more than $100 million in loans from Dodgers-related businesses. Their spending habits were likened to using the money from the team as though it were their personal ATM or credit card.
"I don't think we think about it," Los Angeles first baseman James Loney said. "It's not a part of our daily conversations among each other. I think the distraction is just hearing about something you can't really control and don't have any input in. It's a situation that's happened, and I think for us, we should just go out and play baseball."
Information from The Associated Press was used in this report.