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Mediator to referee Dodgers-Fox Sports feud

by Jamie Mason  |  Published November 22, 2011 at 7:45 AM
LADodgersHat227x128.jpgFox Sports Net West 2 LLC and Los Angeles Dodgers LLC are set to enter mediation to avoid a bench-clearing brawl.

Chief Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware in Wilmington on Monday, Nov. 21, appointed Joseph J. Farnan Jr. of Farnan LLP to mediate talks between the broadcaster and the professional baseball club owner. The two sides have fired litigation brushback pitches over the debtor's move to market its future telecast rights, filing rival lawsuits with the bankruptcy court.

According to Gross' order, the Dodgers and Fox Sports will share equally in the payments of Farnan's fees and expenses during the process, which will commence Nov. 28. Major League Baseball commissioner Bud Selig does not have to attend the confidential talks, but he must be "readily available" by telephone.

Farnan, who served as a U.S. district judge in Delaware from 1985 to 2010, will file a report at the end of mediation that will state solely whether it was successful or not. Both sides' lawsuits will be stayed during the negotiations, but the scheduled Nov. 30 hearing on the Dodgers' motion for approval of the procedures for the sale of its telecast rights will proceed barring a further order.

The order did not address whether Gross would consider Fox Sports' recent motion to dismiss the Dodgers' case before mediation had concluded. Fox Sports spokesman Chris Bellitti said a hearing has not been set on the request for Gross to punch out the baseball club.

According to the Nov. 18 dismissal motion, the Dodgers' bankruptcy case fails the good-faith test and is nothing more than a vehicle for team owner Frank McCourt to breach its telecast agreement to extract more value from the debtors for McCourt's benefit.

The Dodgers license their TV rights to Fox Sports and want bankruptcy court approval to market their future telecast rights beginning in October 2012, despite the fact that under its contract Fox Sports has the exclusive right to negotiate a contract for future telecast rights with the debtor.

"It is time for McCourt to stand down," Fox Sports said in court filings.

According to Fox Sports, McCourt can honor the future telecast rights agreement with Fox Sports or he can step aside and allow the new Dodgers owner to negotiate its own future telecast rights. "Neither option requires these bankruptcy cases to continue," the network said.

"McCourt has chosen to repeatedly abuse the bankruptcy process by, among other things, attempting to invoke the Bankruptcy Code and the equitable powers of this court, not to assume or reject the telecast agreement, but rather to destroy [Fox Sport's] valuable contract and property rights when no legitimate bankruptcy purpose is served by doing so," Fox Sports continued.

The Dodgers' viewpoint, of course, differs substantially.

The motion to dismiss is "an act of utter desperation by Fox," a Dodgers spokesman said.

The Dodgers on Nov. 16 sued Fox Sports for breach of the automatic bankruptcy stay. According to the suit, Fox sent a cease and desist letter to Dodgers financial adviser Blackstone Advisory Partners LP on Nov. 9, ordering it to stop soliciting bids for the sale of the telecast rights. The letter "was intended to interfere with the sale of the Dodgers and their assets in bankruptcy," the lawsuit said.

Fox Sports had sued the Dodgers on Sept. 27 for breach of contract, citing the debtor's commencement of a process to market its future TV rights for sale.

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.

Through the proposed marketing procedures, the debtor would begin exclusive negotiations with Fox Sports the day after Gross signed off on the marketing process, instead of Oct. 15, 2010. The exclusive negotiations would last for 45 days.

If an agreement were not reached by Jan. 14, the debtor would be allowed to negotiate with other prospective licensees. Fox Sports would have until Jan. 23 to make a final written offer and until Feb. 22 to accept the Dodgers' final offer. If Fox Sports didn't, the team would have the right to enter into a telecast rights agreement with other parties, court filings said.

If the debtor reached an agreement with another party that were less favorable than its final offer to Fox Sports, the broadcaster would have the right to match it, court papers said.

The sale of telecast rights would be subject to final approval from the buyer of the Dodgers. The debtor plans to sell the team through a separate process, but it has yet to file a sale motion.

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

The Dodgers reached an agreement with Major League Baseball on Nov. 2 to sell the team to a new owner.

McCourt bought the team in early 2004 for $330 million from Fox Entertainment Group Inc., the parent of FSN Prime Ticket.

Debtor counsel Bruce Bennett, Sidney Levinson, Martin Bienenstock and Philip Abelson of Dewey & LeBoeuf LLP and Robert S. Brady of Young Conaway Stargatt & Taylor LLP couldn't be reached for comment.

Counsel to Fox Sports, 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, also couldn't be reached for comment.


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Tags: bankruptcy | Fox Sports | Fox Sports Net West 2 LLC | L.A. Dodgers

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