to the 2012 TMA
for their year-
round support of
a high-risk proposition for both McCourt
and Major League Baseball because it left
the fate of the Dodgers in the hands of a
bankruptcy judge. McCourt essentially
asked the court to override baseball’s
rules and instead to focus solely on
ensuring that his creditors were paid.
Baseball could argue that McCourt, as a
franchisee, should be removed and the
league given control of the club, because
he had violated terms of ownership.
The league could also pursue a longer,
more traditional but less baseball-like
path to control that would involve letting
the bankruptcy process play out.
In one sense, the Dodgers’ bankruptcy
was unusual in that McCourt was filing
to preserve his ownership, rather than
to get the best deal he could in getting
out. To that end, the team immediately
sought permission to borrow $150
million in expensive money— 10 percent
interest, plus significant fees—that
would be senior to all other debts.
Major League Baseball countered both
with an offer of cheaper money— 7
percent interest with no fees—and with
the observation that the new borrowing
would mire the team deeper in violation
of the league’s debt guidelines, another
rule that could seemingly be thwarted
by the Bankruptcy Court. Despite the
superior economics of Major League
Baseball’s offer, the Dodgers viewed
the league as an adversary that was
trying to influence, if not dictate,
the team’s fate in bankruptcy.
Under bankruptcy rules, McCourt
traditionally would have the exclusive
right to put together a restructuring
plan and would be entitled to retain the
Dodgers if he could submit a plan that
satisfied the judge and the creditors. As
the debtors, the Dodgers also would be
entitled to pick the loan they preferred,
the standard under bankruptcy law.
But the judge’s ruling in favor of the
league indicated that the court would
not necessarily exercise traditional
judgment that an owner can best
determine what is good for his business.
In the weeks that followed the
bankruptcy filing, the league argued
that compliance with the baseball
agreements is the price of membership
in Major League Baseball and that the
commissioner’s authority to approve
television contracts is not challengeable.
The league alleged that McCourt had
broken no fewer than 10 of its rules—the
violation of any one of which provided
grounds for termination of his franchise.
The judge considered whether the
proposed local television rights sale was
in the best interest of the team and the
league and whether the Dodgers had
violated Major League Baseball’s rules.
He essentially agreed with the league,
noting that the position and powers of
the commissioner were long-standing
and had been intentionally established
and ordained by the owners themselves.
It was becoming clear that it would be
an uphill fight for McCourt to achieve his
desired outcome of a television rights
auction. Not only would the court have
to overturn the commissioner’s decision
and permit the auction over baseball’s
objections, but it also would need to
restrict the league’s ability to approve
how McCourt would spend the proceeds
and how much would be deducted for
Major League Baseball’s revenue sharing.
Settlement talks ensued and a resolution
was achieved that allowed both sides
to claim victory. McCourt agreed to sell
the Dodgers, but secured the ability
to achieve the highest possible sale
price by offering prospective buyers
the chance to bid on the team, its
television rights, and the stadium and
surrounding land in whole or in part.
McCourt’s advisors would submit
bidders to the league for approval.
In return, the league would provide a
small group of approved bidders, and
McCourt could conduct the bidding,
with the winning bidder needing no
further ratification from the league.
Given its right to approve bidders, the
league could consider and reject bids
that did not pass muster (e.g., financing
structures that would not be viable
without immediate television money).
The team officially was put up for sale
in January 2012, and upwards of 100
potential buyers were either solicited
or otherwise indicated interest. Fifteen
initial bids were received, some
prospective buyers were eliminated, and
a court-appointed mediator selected
three bidders for a final auction. After
Major League Baseball owners approved
those three bidders (30-0 in the case
of the winning bidder), McCourt
agreed to a deal with the high bidder
on the eve of the scheduled auction.
In the aftermath, baseball registered
concerns over what sale details must