Dodgers win clash with merchandise vendor in Bankruptcy Court

The Dodgers' merchandise vendor must take the financial risk of ordering gear for next season without knowing whether the Dodgers might boot the vendor before the season starts, a federal bankruptcy judge ruled Tuesday.

Facility Merchandising Inc. (FMI) could sue for any damages at a later time, U.S. Bankruptcy Judge Kevin Gross ruled, but the Dodgers have lived up to their end of the contract with FMI and the company must do the same.

Under bankruptcy law, the Dodgers -- as the debtors -- can decide whether to accept or reject certain business contracts. FMI wanted a decision immediately on its contract so that it could avoid the risk of ordering 2012 merchandise now and then having the Dodgers void the contract before next season.

Photos: The Dodgers and the McCourts

The company has $1 million in Dodgers merchandise on hand now, and the Dodgers' bankruptcy has compelled some licensees to ask FMI to pay upfront for 2012 merchandise, FMI attorney Arthur Rosenberg said.

"FMI is being asked to take a leap of faith here, with a lot of money on the hook," Rosenberg said.

Under cross-examination, FMI President Milton Arenson acknowledged that his company has withheld more than $300,000 owed to the Dodgers and that the contract obligates the company to order the merchandise. Dodgers attorney Sidney Levinson said -- and Gross repeated in announcing his ruling -- that the Dodgers have fulfilled their obligations under the FMI contract.

Arneson called the Dodgers' attendance "horrific" and said the small crowds have led to low merchandise sales. Gross, citing a previous case, suggested FMI might simply be unhappy with the contract. The team and the vendor are in the second year of an eight-year deal.

"The first two years, frankly, have been disastrous," Rosenberg said.

Rosenberg had asked that Gross order the Dodgers to accept or reject the FMI contract by Sept. 26 -- effectively, he said, the end of the season.

"Not for the Phillies, we hope," Gross said.

"For the Dodgers, it's pretty much over by then," Rosenberg said.

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-- Bill Shaikin

Photo: Dodgers take part in batting practice before playing the San Francisco Giants on June 27. Credit: Alex Gallardo / Reuters