Bankruptcy case filings in public interest
Fans of the Los Angeles Dodgers will have to wait at least another six weeks for a resolution to the 24-month long ownership drama. A crucial set of hearings in the club's Delaware bankruptcy cases scheduled for next week will begin instead on Nov. 29.
Through their lawyers, Frank McCourt and Major League Baseball traded barbs this week in anticipation of the now-postponed hearings. The key issue: whether Frank McCourt will be allowed to sell the club's future television rights over the objections of Major League Baseball and the club's current-and-possible-future broadcast partner, Fox Sports.
The question involves a host of legal issues, including good faith, fair dealing, due process, conflict of interest and breach of fiduciary duty. Those issues will inform Judge Kevin Gross' decision on the TV rights. But, as was the case in McCourt's contentious divorce from his ex-wife, Jamie, attorneys for both parties seem keenly aware their filings may reach thousands of eyes beyond the pair belonging to Gross.
The escalation of hostility between the sparring sides in the case reflects the public nature of the battle. Attorneys for baseball commissioner Bud Selig, called to represent the league and its 29 other teams, portray McCourt as a person motivated by greed with no care for those he tramples -- a symbol of recession-era corporate avarice in America. McCourt harkens further into the American narrative, attempting to cloak himself in the garb of the underdog, persecuted by the merciless man in charge, railroaded toward a certain outcome, and a victim of circumstance above all else.
Having followed this situation since it blew up publicly nearly two years ago, it's clear to me that neither characterization is completely -- or even mostly -- accurate. But as they say, perception is reality. If there is one lesson to be taken from the saga, it is that every aspect of a public figure's life has a public relations component. Court filings are no exception, so the attorneys write with a public audience in mind.
Major League Baseball, for its part, alleges that McCourt has taken nearly $190 million out of the Dodgers. Mind you, he's only owned the team since the 2004 season.
Baseball arrives at that figure by adding the amounts it alleges McCourt took to pay his personal debts ($61.16 million), the parking revenue he diverted from the Dodgers ($73 million) and the cash distributions McCourt claims violated none of baseball's rules ($55 million). While revealing the total of McCourt's alleged "looting" of the team was bold, baseball's filing goes a touch further.
The league claims McCourt brought the Dodgers into bankruptcy "specifically to override the Commissioner's approval rights with respect to a Media Rights Transaction." Calling McCourt's plan to sell the TV rights "a waste of time," baseball goes so far as to say those rights should not be sold until the team is sold, because "Mr. McCourt's role as an owner will depress value." Baseball summed up its position as follows:
"Mr. McCourt has monetized or otherwise exploited the Dodgers' ticket sales and parking revenue, siphoned off almost $190 million in direct and indirect cash distributions from Club revenues, forced the [Dodgers] into bankruptcy, and proposed to divert funds from a sale of the Media Rights away from the Club to himself."
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The final dig refers to baseball's suspicion that, similar to McCourt's proposed use of the up-front cash from a TV deal baseball nixed in June, proceeds from the sale of the club's television rights would be used to fund the $130 million divorce settlement McCourt reached with his ex-wife last week.
McCourt objects to baseball's assumption of how the cash would be used: "[A]ny and all proceeds of the transaction -- whatever form it may take -- will be distributed to, and retained by, the [Dodgers] or their subsidiaries, and not Mr. McCourt." McCourt's attorneys call baseball's position "simply make believe," and indicate the money to pay Jamie will come from other sources.
McCourt contends Selig has violated baseball's rules, particularly in appointing a monitor over the club's operations before conducting a good-faith investigation and attempting to have the Dodgers sold against McCourt's wishes and without approval of three-fourths of the other teams. McCourt, through the Dodgers, alleges baseball's actions have been predetermined and baseball has refused to respond to the team's attempts to work out a meaningful solution.
How the Dodgers emerge from bankruptcy depends on the plan eventually approved by the club's creditors and the court. The Dodgers' plan relies completely on selling the future TV rights by a process in which Fox would have a 45-day exclusive negotiation window. Should those 45 days pass without a deal, the rights would be auctioned off.
Citing numerous recent broadcast deals, McCourt contends that selling the TV rights would solve the club's liquidity issues. Baseball disagrees, claiming "the only way for the Dodgers to emerge from bankruptcy is through a sale of the club." The league goes so far as to threaten to terminate the Dodgers' Major League Baseball franchise -- rendering the TV rights worthless -- should McCourt not sell the team.
Characterizing baseball's position as "using a sledgehammer to crack a nut," McCourt's attorneys pose the question: "Does the Commissioner truly believe that the best interests of the Dodgers and of MLB are served by permanently refusing [the Dodgers] access to the benefits of league membership (thereby depriving the other MLB teams of the Dodgers' revenue-sharing contributions)?"
Whether baseball would follow through on its threat is a matter for another day. And, as has been too often the case for Dodgers fans, another day just got a little further away.Josh Fisher is an attorney in Kansas City, Mo., and the author of dodgerdivorce.com.
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