Bankruptcy judge to base Dodgers decision on bottom line
Reporting from Wilmington, Del. — The day was long, the barbs plentiful. The commissioner of baseball was likened to “the devil” and the Dodgers were compared to “a miscreant 13-year-old,” but the judge said he would decide the Dodgers’ immediate financial future on a bottom-line basis.
U.S. Bankruptcy Judge Kevin Gross said he hoped to rule Thursday whether Dodgers owner Frank McCourt could use a loan he arranged to finance the team during the bankruptcy process rather than one offered by Major League Baseball.
“This is about dollars and cents,” Gross said. “This is not a control issue.”
In a nine-hour hearing Wednesday, the Dodgers’ assistant treasurer — the day’s lone witness — acknowledged that the financial terms of the MLB loan were better than the one obtained by McCourt. Bruce Bennett, an attorney for McCourt, argued that the Dodgers need not take the cheaper loan from MLB because the league is an adversary more interested in ousting McCourt than helping the team through bankruptcy.
Gross said the court would oversee how the loan money was used. He could rule MLB would be the lender, but with strict controls to ensure the league could not leverage short-term financial control into an accelerated ownership change.
“This [proposed MLB loan] agreement isn’t giving us any control,” MLB attorney Thomas Lauria said outside court. “That’s their whole argument, that we’re sneakily getting control. All we’re trying to do is save ‘em a few bucks.”
Bennett indicated the Dodgers could work with an MLB loan as long as it included modifications — “If he allows the MLB [loan], it would be a loan we could live with,” he said. Lauria told Gross the league would make concessions to satisfy the Dodgers’ concerns.
In calling MLB a hostile lender, Bennett noted that the league has withheld the Dodgers’ share of national television and merchandising revenue since the team filed for bankruptcy.
The McCourt legal team also persuaded Gross to allow into evidence a recounting of a conversation between McCourt and MLB executive vice president Rob Manfred in the days before the Dodgers filed for bankruptcy. Commissioner Bud Selig already had rejected three versions of a proposed television contract with Fox; McCourt asked for $80 million in interim financing and renewed consideration of the Fox deal.
“Sell the team,” Manfred told McCourt, according to the deposition of another MLB executive, John McHale Jr.
Said Bennett: “They don’t want a reorganization. They want a forced sale.”
Fox and the U.S. trustee joined MLB in opposing the McCourt loan. McCourt wants to refinance the Dodgers by voiding the current contract with Fox — one under which the Dodgers would get $75 million in 2012-13, a Fox attorney said — and auctioning or otherwise brokering a sale of cable rights. McCourt would need the Bankruptcy Court to override Commissioner Bud Selig’s authority.
All creditors in the case would be repaid in full, Lauria said, “unless a rejection of the Fox contract results in a massive damage claim.”
The trustee’s attorney chided the Dodgers for acting like a teenager by failing to immediately disclose a loan fee, an allegation denied by McCourt’s lender.
McCourt claims Selig’s rejection of the Fox deals forced the Dodgers into bankruptcy; the league claims McCourt took $180 million out of the Dodgers and has himself to blame for the Dodgers’ financial plight. (McCourt puts that figure at $30 million, not counting distributions from related entities.)
“We’re not here to harm the Dodgers,” Lauria said. “The Dodgers are part of the league — although, from some of the papers that have been filed, I’m not sure the Dodgers really understand that.”
The allusion to Selig as the devil originated in court papers in which McCourt’s attorneys said that the Dodgers accepting a loan from Selig would be akin to a “deal with the devil.”
Bennett said the line was a “literary allusion” and said he could not truly say that Selig represented the devil in this case.
“We’re not ready to decide that yet,” Bennett said.
Lauria criticized the Dodgers for profiting from their membership in MLB while wanting to selectively ignore some league rules, among them the requirement that the commissioner approve television contracts.
“They’ve already done the deal with the devil. They’re part of MLB,” Lauria said. “They’re the devil’s spawn.”
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