Featured News 2012 The Los Angeles Dodgers: A Baseball Bankruptcy Story

The Los Angeles Dodgers: A Baseball Bankruptcy Story

Baseball may be America's pastime, but when money is tight, going to a game may be one of the first luxuries people forego. The Los Angeles Dodgers have felt the weight of this, and filed for bankruptcy in June of last year. According to the Huffington Post, the Dodgers filed for bankruptcy protection in a Delaware courthouse. The team blamed the MLB for their misfortune. They say that if the association had approved their TV deal, they wouldn't have sunk to the position they are currently in. Along with the failed TV deal, the Huffington Post claims that the Dodgers former owner, Frank McCourt, used his money for ostentatious purposes. Only ten percent of the bankruptcy is the result of lower attendance at games, and $22 million of the incurred debt is deferred compensation.

For a while, McCourt was able to stay afloat by taking out loans, but in June of 2011, as payday loomed ahead, he knew that he could not afford to satisfy the payroll. It was at that time that he declared bankruptcy, still casting the blame on the MLB and their disapproval of a Fox television deal. According to this owner, the deal would have provided the team with $385 million dollars up front to satisfy debts and costs. At the end of the day, the cost of the bankruptcy case put the team back another $20.18 million. Sporting News claims that this may be the most expensive sports team bankruptcy case in history when factoring in legal fees and costs.

This cash catastrophe is still holding the Dodgers captive. Rumors are suggesting that the new owners may utilize property outside the Los Angeles stadium to make some extra crash and help erase the hefty debt. The Dodgers franchise was recently handed to the Guggenheim Partners LLC CEO in partnership with the famous former Los Angeles Laker Magic Johnson. People expect that the bankruptcy case will be over and done with on April 13th when a court hearing in Wilmington will review the sale and bring the franchise out from bankruptcy. The new owners will pay $2.15 billion dollars in exchange for the entire franchise. This constitutes one of the largest baseball team sales in history.

The MLB is skeptical about the Dodgers resurrection after the sale is finalized. LA Times writes that the MLB wants the baseball team to settle $8.3 million in owed bills before they can be declared free of bankruptcy. This issue is not expected to delay the sale of the sports team, but it will complicate things after the trade is officiated. A court-appointed mediator will be reviewing this claim before action is taken. Currently, that mediator is inspecting the situation to see whether or not the Dodgers should be obligated to pay the MLB for all court-related expenses. All but $400,000 of the money in this debt is incurred legal expenses from the lengthy and messy bankruptcy.

The MLB constitution claims that teams cannot have "any form of litigation" against another team or against the league itself. The commissioner can pursue reimbursement for the legal costs of any club that does not comply with these rules. Because of the legal fiasco between the Dodgers and the MLB which surfaced because of the TV deal, the MLB is insisting repayment for court costs. The Dodgers are fighting this claim, saying that they should not be bound by the constitution. They also use the excuse that the commissioner did not follow his own rules and used a premeditated effort to push the Dodger's former owner out of the league.

Related News:

Chapter 11, the Business Bankruptcy

When a business is struggling to keep its doors open and pay its debts, its owners may decide to file for bankruptcy protection, a Chapter 11 bankruptcy, under the Bankruptcy Code. Chapter 11 ...
Read More »

Debts That Can’t Be Discharged Through Bankruptcy

When you file for bankruptcy, chances are that you are trying to discharge an overwhelming amount of debt. Yet before you make the bankruptcy official and begin your refinancing and/or liquidation, ...
Read More »

Adversary Proceedings in Bankruptcies

Adversary proceedings in bankruptcy are lawsuits which are typically filed by your creditors when they don't get the finances that they expected. Normally, creditors are not allowed to sue or take ...
Read More »