Dodger ball

June 28, 2011

By Paul Bowen

The Los Angeles Dodgers filed a Petition under Title 11 of the United States Code today. To put it in layman’s terms, otherwise widely known as English, the Dodgers filed a Chapter 11 in the United States Bankruptcy Court in Delaware.

First some background. Chapter 11 is a business reorganization. You may recall that Chrysler and GM both reorganized under this provision of the Code. You may ask why Delaware? And the answer would be that many, if not most, major corporations incorporate under the laws of Delaware because of Delaware’s corporate-friendly organization and tax laws. Chapter Elevens are time consuming and expensive. And in my experience with smaller corporate debtors, rarely successful in reorganizing the business.


Some more background. In 2004, the Dodgers were acquired by Frank H. McCourt, who made all of his money in the parking business in Boston. His wife Jamie will figure into these chronicles soon enough. Long story short: In 2010, the Dodgers started experiencing what the Emergency Motion for Interim Financing dryly refers to as “cash flow difficulties.” According to the Motion this was due to a decline in attendance and failure to make the playoffs. Oh. That and a whopping 22 million in deferred compensation to current and former players.


In April Selig ousts McCourt and appoints a monitor to run the Dodgers. The Motion refers to Selig’s authority to do this as “questionable.”

McCourt cuts a deal with Fox Sports that will get him well financially. Here’s where Jamie comes in. As if the Dodgers don’t have enough drama in sufficient supply, the McCourts are embroiled in an exceedingly nasty divorce. One of the issues in the divorce is whether the Dodgers are marital property along with the numerous other entities created by McCourt. Indeed, a hearing on the issue is set for August. Or was until the bankruptcy filing. Anyway, part of the deal with Fox was that if Jamie McCourt prevailed in divorce court on her theory that the Dodgers were marital property, she would get 100 million (Yes. You read that right.) which would be partially funded by the loan. The other part would come from a loan from Fox to Frank.

Selig doesn’t approve the deal because of the proposed payment to Jamie. That, and the McCourts have run the business like their own personal candy store. The Dodgers are officially broke by June 30 if they don’t close with Fox Sports. So off to Bankruptcy Court we go.

Which if nothing else, will serve to piss off everybody in Major League Baseball. Let me count the ways.

1) The Debtor in case 11-12010 isn’t Wally’s Pizza. It’s the Los Angeles frigging Dodgers. One of the crown jewels of professional sports. Broke the color barrier with Jackie Robinson. Won 6 World Series. Created everlasting enmity in Brooklyn when the franchise moved to LA in 1962. This is a black eye on the sport. Which leads to……

2) The other owners will be pissed — especially the Chicago White Sox to whom the Dodgers owe 3.5 million. This filing is a black eye for baseball.

3) The Commissioner will be pissed. His powers to act “in the best interests of baseball” are damn near plenary. Until they run into the Automatic Stay provisions of 11 U.S.C. 362. If MLB wanted to sell the Dodgers, no can do without a fight in Bankruptcy Court.

4) The Major League Baseball Players Union will be pissed. Most of the Dodgers’ unsecured creditors are current and former players. They owe Manny Ramirez 22 million. They even owe Marquis Grissom 3 million. He played for then what? A year? These insane contracts were made possible by a collective bargaining agreement. Expect the player’s union to bring hell if the Dodgers try to impair (again, in English the word would be screw) these claims.

5) Speaking of collective bargaining agreements, ask the United Auto Workers how their contracts held up in the GM and Chrysler bankruptcies.

I’m just getting started good.

I may have no life. But it is for these moments that I indeed live.

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