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Dodgers win approval for two vital settlements

by Jamie Mason | Published January 11, 2012 at 4:43 PM

A Delaware judge on Wednesday, Jan. 11, approved two key settlements reached by bankrupt Los Angeles Dodgers LLC, one with Fox Sports Net West 2 LLC over the baseball team's media rights and another with Major League Baseball regarding a sale of the franchise, its stadium and future telecasts by April 30.

Chief Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware in Wilmington approved the two agreements Wednesday after blessing the marketing procedures for selling the team's media rights on Dec. 13. Fox Sports appealed the order the same day.

The Fox Sports settlement, filed Tuesday, will end the team's media rights sale and the team instead will assume its existing contract with Fox Sports.

Under the deal, the marketing procedures order will be vacated and the appeal will be dismissed.

Through the proposed marketing procedures, the Dodgers had hoped to license the rights to telecast roughly 150 preseason and regular season games each year beginning with the 2014 MLB season. The licensing deal would have had at least a five-year term.

But Fox Sports Net West 2 sued the Dodgers on Sept. 27 for breach of contract by embarking on a process to market its TV rights for sale. The adversary proceeding will also be dismissed as part of the agreement.

The majority of the Dodgers' games are broadcast by FSN Prime Ticket as part of deals that run through the 2013 baseball season. The Fox Sports affiliate has the right to telecast 100 regular season games, and a local CBS station can telecast 50 regular season games.

Under the current contract, Fox Sports has the exclusive right to negotiate a contract for future telecast rights with the debtor beginning Oct. 15, court papers said.

The Dodgers had wanted to negotiate exclusively with Fox Sports through the end of Jan. 19 and with other prospective licensees if a deal hadn't been reached by then.

Fox Sports also sought to dismiss the baseball team's Chapter 11 case by alleging the case fails the good-faith test and was nothing more than a vehicle for team owner Frank McCourt to breach the telecast agreement to extract more value from the debtor for his personal benefit.

But now that motion to dismiss will be withdrawn as part of the settlement.

"We are pleased that these matters between our two organizations have been resolved. We were never in favor of litigation, but it was imperative that we protect our exclusive media rights," Fox Sports said in a statement. "Under the terms of the settlement, Fox's media rights remain in place and we look forward to working with new ownership on future television rights discussions."

The MLB settlement, meanwhile, goes to the heart of the Dodgers' reorganization plan, which is built around the sale of 100% of the baseball team's equity or all its assets by April 30.

The debtor hasn't yet filed a reorganization plan or sale motion with the court.

The Dodgers' financial adviser, Blackstone Advisory Partners LLC, will handle the sale process.

Under terms of the agreement with MLB, reached on Nov. 1 and filed Dec. 6, the Dodgers will sell the team, its stadium and its future telecast rights. (The Dodgers have filed a motion to market the latter initially through a separate process. The sale of the telecast rights would be subject to final approval from the buyer of the Dodgers.) The parking lots and surrounding land won't be required to be included in the sale.

Buyers can bid for the parking lots and surrounding land, but the decision to sell will be left to McCourt, court papers said.

McCourt can't retain any interest in the Dodgers, the agreement said.

Through the settlement, the auction of the team must be completed by April 1 and a sale must close by April 30.

The debtor and MLB hoped to have initial bids for the team by Jan. 13, but the deadline was extended to Jan. 23 because the sale of the team has garnered so much interest, a Dodgers spokesman said.

The spokesman wouldn't comment on the identity of interested bidders, but media reports have named former team manager Joe Torre, former owner Peter O'Malley, former general manager Fred Claire, and former players Orel Hershiser and Steve Garvey, among others.

The debtor and MLB reached the agreement after being ordered into mediation by the bankruptcy court in October. Joseph J. Farnan Jr. of Farnan LLP oversaw the mediation.

Farnan also oversaw the mediation between the debtor and Fox Sports.

Shortly before filing for Chapter 11 on June 27, the Dodgers struck a new 14-year deal with FSN Prime Ticket, but MLB's commissioner, Bud Selig, didn't 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, faulted McCourt for the bankruptcy case. In court papers filed Oct. 24, MLB said McCourt "was free to take almost $190 million from the Dodgers, putting them into bankruptcy, because there is no rule that bars distributions to owners."

The adverse publicity surrounding McCourt's messy divorce proceedings also worried MLB. McCourt only recently agreed to a $131 million settlement with his ex-wife, Jamie, in the divorce proceedings.

The Dodgers and MLB later reached a settlement of their dispute.

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 another $100 million to acquire Dodger 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 is 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.

Paul J. Laurin, C. John M. Melissinos, Christian A. Jordan and Neeta Menon of Rutter Hobbs & Davidoff Inc., Robert J. Dehney and Gregory W. Werkheiser of Morris, Nichols, Arsht & Tunnell LLP and Richard L. Stone and Kenneth D. Klein of Jenner & Block LLP are counsel to Fox Sports.

Brett H. Miller, Lorenzo Marinuzzi and Todd M. Goren at Morrison & Foerster LLP and Donna L. Harris and Joanne P. Pinckney at Pinckney, Harris & Weidinger LLC represent the official committee of unsecured creditors.

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