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MLB Rejects FOX Deal for Dodgers, McCourt Threatens Legal Actions PDF Print E-mail
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MLB Club Sales
Written by Maury Brown   
Monday, 20 June 2011 19:46

It came as no surprise today that Commissioner Selig rejected the proposed FOX television contract extension with the Dodgers. The deal, which had $385 million in up-front money as part of a $3 billion deal, was tied to a divorce settlement between Frank and Jamie McCourt.

Commissioner Selig released a statement, saying:

“Pursuant to my authority as Commissioner, I have informed Los Angeles Dodgers owner Frank McCourt today in a detailed letter that I cannot approve the club’s proposed transaction with FOX. This decision was reached after a full and careful consideration of the terms of the proposed transaction and the club’s current circumstances. It is my conclusion that this proposed transaction with FOX would not be in the best interests of the Los Angeles Dodgers franchise, the game of Baseball and the millions of loyal fans of this historic club.

“Mr. McCourt has been provided with an expansive analysis of my reasons for rejecting this proposed transaction. Critically, the transaction is structured to facilitate the further diversion of Dodgers assets for the personal needs of Mr. McCourt. Given the magnitude of the transaction, such a diversion of assets would have the effect of mortgaging the future of the franchise to the long-term detriment of the club and its fans.

“As I have said before, we owe it to the legion of loyal Dodger fans to ensure that this club is being operated properly now and will be guided appropriately in the future. This transaction would not accomplish these goals.”

In a sign that Frank McCourt will most assuredly be suing MLB in order to allow the deal to go through, the Dodgers released a statement through McCourt’s lawyer, Steve Susman of the law firm Susman Godfrey:

“We are extremely disappointed with the Commissioner’s rejection of the proposed FOX transaction which would inject $235 million into the Los Angeles Dodgers.  As Commissioner Selig well knows, this transaction would make the Dodgers financially secure for the long term and one of the best capitalized teams in Major League Baseball.

“For  weeks Major League Baseball  has consistently made public pronouncements asserting that Jamie McCourt’s agreement of the Fox transaction also was  needed; that the Court adjudicating the McCourt divorce grant its approval of the transaction; and the Dodger organization provide all data requested by Major League Baseball to satisfy the so-called investigation ordered by  Commissioner Selig last April – the latter also being the excuse he gave at that time  for delaying his approval of the proposed FOX transaction.

“All the requirements for the Commissioner to approve the FOX transaction were put in place by last Friday: Frank and Jamie McCourt entered into an agreement based on the proposed transaction; the Court ordered, among other things, that the FOX transaction is “in the best interest of the Los Angeles Dodgers and should be consummated immediately;”and all information requested by Major League Baseball under its so-called investigation has been provided by the Dodgers.

“Commissioner Selig’s letter of rejection is not only a disappointment, but worse, is potentially destructive to the Los Angeles Dodgers, and Major League Baseball.  Accordingly, we plan to explore vigorously our options and remedies with respect to Commissioner Selig’s rejection of the proposed FOX transaction and our commitment to protect the long-term best interests of the Los Angeles Dodgers.”

The reason for the rejection lies within the Susman response: just $235 million of the $385 million in money fronted would go to the Dodgers. As highlighted in the proposed divorce settlement between Jamie and Frank McCourt reached last Friday that was contingent on the approval of the FOX extension.

In reading the settlement terms, out of that infusion of cash in the rejected FOX extension , each party would have received $5 million in attorneys’ fees and costs… each party would have received $5 million to use has he or she desires. From there, the approx. $235 million would have gone to the Dodgers, but the caveat was that it would have included repayment back to Frank to advance the Dodgers in 2011, a sum that was not to exceed $23.5 million. An additional $80 million was to be used to pay down indebtedness, and the remaining amount of approx. $50 million would be put into an account subject to McCourt’s orders.

As we wrote last week (see Divorce Settlement Shows Frank McCourt is Rearranging Deckchairs on the Titanic with the Dodgers):

Frank, you’re on the edge. The only thing saving you from losing the Dodgers is the FOX deal. There seems little reason for the league to approve it. It’s clearly needed to deal with a personal matter, not improve attendance at the ballpark or the team on the field.

Frank, you’re rearranging deckchairs on the Titanic now to meet payroll each month. There’s little hope MLB will be willing to let you do so with the FOX television extension.

That was then, and here we are now. On August 4, unless McCourt were to somehow wrangle the TV deal away from MLB, Judge Scott Gordon will likely order the Dodgers sold and the proceeds split between Frank and Jamie. Before then, it’s also likely Frank will be unable to make payroll (although he has somehow been able to reach payroll each of the last 2 months by taking cash advances on sponsorship deals. Eventually, McCourt will be bled dry, and MLB will seize the club.

As far as the chances of Frank winning in court by suing Commissioner Selig, consider this portion from MLB’s Constitution (bolding, author):

The Major League Clubs recognize that it is in the best interests of Baseball that all actions taken by the Commissioner under the authority of this Constitution, including, without limitation, Article II and this Article VI, be accepted and complied with by the Clubs, and that the Clubs not otherwise engage in any form of litigation between or among themselves or with any Major League Baseball entity, but resolve their differences pursuant to the provisions of this Constitution. In furtherance thereof, the Clubs (on their own behalf and including, without limitation, on behalf of their owners, officers, directors and employees) severally agree to be finally and unappealably bound by actions of the Commissioner and all other actions, decisions or interpretations taken or reached pursuant to the provisions of this Constitution and severally waive such right of recourse to the courts as would otherwise have existed in their favor.

To add to the passage in the ML Constitution there's this: Tom Hicks had a TV extension with FOX rejected by the league when the Rangers were falling into bankruptcy. The position of the league was the same: using money to improve the ballpark, or pour into player payroll is acceptable. Allowing money to come in via an extension to deal with personal issues of debt, is not. Frank McCourt, you aren't the first to be told no.


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Maury BrownMaury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey, as well as a contributor to FanGraphs and Forbes SportsMoney. He is available for hire or freelance. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.

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