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L.A. has done it again. The city’s baseball team is starring in a drama so “Hollywood” that it appears scripted. Even in the modern days of huge salaries, epic betrayals, and remorseless lockouts, the bankruptcy of the Los Angeles Dodgers is truly a sacrilegious debacle. America’s storied franchise is going to court, where it will spend much of its near future figuring out how to pay off about $500 million to creditors and stay afloat.
The best interests of the Dodgers organization will be overshadowed by battles between owner Frank McCourt, his wife Jamie, and Major League Baseball’s commissioner, Bud Selig. Selig and other members of the organization have criticized McCourt’s conduct in running the team for a long time and would like to facilitate new ownership. The league recently appointed a monitor to oversee management of the team. Selig also vetoed a potential deal between the Dodgers and Fox that could have been worth $3 billion allegedly because he believed McCourt would use the money to pay his own debts. His assumption wasn’t totally rash, considering the ongoing divorce proceedings between the McCourts, which revealed they had siphoned over $100 million from the organization to support their Hollywood lifestyles. They allegedly owned side-by-side homes (two near the playboy mansion and two in Malibu), an olympic-sized swimming pool (which they installed themselves), a private jet, and, of course, closets full of designer clothing. In the divorce proceedings, Ms. McCourt is claiming she should be awarded half of the Dodgers organization.
Frank McCourt filed for Chapter 11 bankruptcy in an attempt to save his ownership in the flailing franchise. The key issues in the initial bankruptcy hearing were whether the Dodgers would 1) be forced to accept funding from the MLB or be able to obtain it from outside sources and 2) be permitted to hold a competitive auction to secure a new cable television contract. The MLB has an interest in funding the Dodgers and preventing an auction of their media rights. Funding from the MLB would give it more control during the bankruptcy proceedings, and preventing an auction of media rights would cut off McCourt’s main source of cash, which could enable him to maintain ownership of the team. The judge approved $60 million of outside funding, but struck language from the loan agreement that would have mandated an auction within 6 months. Most likely, the MLB will file a motion to seize control of the Dodgers before the next court date. The MLB’s constitution allows the commissioner to take control of a team that files for Chapter 11 bankruptcy, so long as the league files a motion to terminate the franchise and is backed by 75% of the other teams in the MLB.
During the coming proceedings, Ms. McCourt will continue to fight for half ownership of the team. She has already agreed to accept $100 million if she loses the battle and allegedly made clear that she would like the team to be sold, presumably because that would mean a bigger payoff for her. In this respect, her interests and those of the MLB align because a trial over ownership of the team may result in its expedited reorganization under Chapter 11 proceedings.
The great irony is that the Dodgers’ largest creditor is none other than Manny Ramirez, the epic slugger turned clubhouse cancer. Manny arguably could have been the savior of the franchise if he had played to his potential in L.A. Instead, he tested positive for steroids and retired after performing the same antics that led to his departure from the Boston Red Sox. The entire fiasco has already placed one of baseball’s treasured teams at the mercy of legal proceedings fueled by personal feuds and greed. The only proper finale would entail Mark Cuban purchasing the team and promising the continuance of all that is Hollywood’s favorite pastime.
– Andrew Farrell
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