Frank McCourt playing bankruptcy court against MLB
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Frank McCourt has staked his ownership of the Dodgers on the hope he can persuade a bankruptcy court to override the rules of Major League Baseball.
‘You’ve got an interesting clash -- league dominance vs. the bankruptcy court, which has a broader mandate,’ said Thomas Salerno, the lead attorney for the NHL‘s Phoenix Coyotes in that team’s bankruptcy case.
In that case, a bankruptcy judge sided with the NHL and rejected a bid that would have resulted in the Coyotes moving to Canada. However, Salerno said that decision would not be binding upon the judge in the Dodgers’ case and might not even be all that relevant.
‘I don’t think the Coyotes’ precedent is really that strong,’ Salerno said.
In the Coyotes’ case, the judge affirmed the league’s power to act in what it deems is its best interests. Major League Baseball would make the same argument in the Dodgers case. However, Salerno said, the Coyotes case might have turned out differently had a potential buyer promised to keep the team in Arizona.
In the Dodgers’ case, McCourt wants the bankruptcy court to authorize the auction of cable television rights that he says would pay off all creditors and secure the Dodgers financially for years to come. Commissioner Bud Selig last week rejected a proposed cable television contract between the Dodgers and Fox, and Salerno said MLB shouldn’t come into bankruptcy court without a financing plan of its own.
Under MLB rules, Selig must approve all television contracts -- and he could strip McCourt of ownership because his team filed for bankruptcy.
‘MLB may have the perception of the sanctity of its own rules, but the Dodgers are a business and the business has a cash flow,’ Salerno said. ‘It is entirely possible MLB can say, ‘We have our own solution to cash flow.’ ‘
That solution might well involve those television rights being awarded to a new owner, presumably one not saddled with the Dodgers’ debts, which now include an additional $150 million in interim financing, subject to bankruptcy court approval. The league could argue the Dodgers’ total debt of about $775 million puts the team out of compliance with the very MLB rules that McCourt is challenging.
‘It wouldn’t surprise me to see MLB come into court and say, ‘We can solve all this,’ but they’re going to have to come up with more,’ Salerno said. ‘They really have to come up with a solution.’
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-- Bill Shaikin