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Dodgers strike out on discovery request

by Jamie Mason  |  Published October 10, 2011 at 3:43 PM
LADodgersHat227x128.jpgThe Los Angeles Dodgers LLC can't conduct discovery into other Major League Baseball club teams, a Delaware judge has ruled.

Chief Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware in Wilmington on Oct. 7 denied the bankrupt baseball team's request to expand its scope of discovery, court papers said.

"The discovery [Los Angeles Dodgers] seeks would improperly shift the spotlight to the 29 other teams," Gross said in the order.

The court originally ruled on Sept. 30 that the bankrupt baseball team wouldn't be permitted to conduct discovery into other MLB teams.

The Dodgers, however, sought to amend that order during an Oct. 5 hearing so that the team would be allowed to pursue discovery into other baseball clubs to determine if the commissioner has acted in good faith, court papers said.

Gross scheduled a four-day hearing spanning Oct. 31, Nov. 1, Nov. 2 and Nov. 4, on both the team's desire to obtain a new television deal and MLB's request to terminate the debtor's exclusivity to present a reorganization plan so that it can be sold to a new owner.

Dodgers owner Frank McCourt Jr. and MLB Commissioner Bud Selig will testify at the hearing.

"We appreciate Judge Gross' careful consideration of our arguments. We look forward to the opportunity to demonstrate that Commissioner Selig has not acted in good faith with respect to the Dodgers, and that the Dodgers have fully complied with the Baseball Agreements and have not engaged in any wrongdoing," the Dodgers said in an Oct. 7 statement.

According to court filings, the four-day hearing starting on Oct. 31 will explore if the debtor has breached its MLB agreements, if McCourt or the Dodgers have misappropriated or misused the debtor's assets, what condition the team is in financially and if the sale of the telecast rights is in the best interest of the debtor and MLB.

The hearing will also address the implications of rejecting its agreement with Fox Sports Net West 2 LLC, if McCourt is acting in his own best interests at the expense of the team and if Selig has acted in bad faith, court filings said.

MLB wants to terminate the debtor's exclusive right to file a plan because it believes the Dodgers' only path to emerge from Chapter 11 is through the sale of the team.

MLB's plan would sell the company to a well-capitalized owner able to fix the team's problems and position it for success in the future, MLB said.

Meanwhile, the Dodgers want court approval to begin marketing its television rights for sale.

Through the sale of its media rights, the Dodgers would license the rights to telecast roughly 150 preseason and regular season games each year, beginning with the 2014 MLB season. The deal would have at least a five-year term.

Licensing the telecast rights would provide the baseball team with enough liquidity to pay all creditors in full, repay its $150 million debtor-in-possession loan from MLB, meet its operational needs over a longer term and provide a significant return to its equity holders, court documents said.

Shortly before filing for Chapter 11 on June 27, the Dodgers struck a new 14-year deal with FSN Prime Ticket, but Selig did not approve the transaction, in part because of restrictions in the current deal that prevented negotiations with other potential purchasers.

The team blamed the bankruptcy filing on Selig's refusal to approve the TV deal, as well as underlying cash flow issues stemming from sliding attendance, some $22 million in deferred compensation due to players and the need to share its revenue with other clubs.

The Dodgers also said the appointment of a receiver by MLB in April "generated adverse publicity."

MLB, however, has faulted McCourt for the bankruptcy case.

McCourt bought the team in early 2004 from Fox Entertainment Group Inc., the parent of FSN Prime Ticket. McCourt paid $330 million for the team and spent a further $100 million to acquire its stadium and real estate surrounding the stadium.

Debtor counsel is Bruce Bennett, Sidney Levinson, Martin Bienenstock and Philip Abelson of Dewey & LeBoeuf LLP and Robert S. Brady of Young Conaway Stargatt & Taylor LLP.

Counsel to MLB are Mark Thomas, Bradley I. Ruskin and Jeffrey Levitan of Proskauer Rose LLP; Thomas Lauria, Glenn Kurtz and John K. Cunningham of White & Case LLP; and Jeffrey M. Schlerf of Fox Rothschild LLP.

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Tags: Baseball Agreements | Bud Selig | Chapter 11 | Dewey & LeBoeuf LLP | Fox Rothschild LLP | Fox Sports Net West 2 LLC | Frank McCourt Jr. | FSN Prime Ticket | LA Dodgers | Major League Baseball | Proskauer Rose LLP | U.S. Bankruptcy Court | White & Case LLP | Young Conaway Stargatt & Taylor LLP

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