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The Dodgers file for bankruptcy

Jun 27, 2011, 8:46 AM EDT

Frank McCourt AP

A mere three days before the payroll comes due — payroll that Frank McCourt can’t meet — the Dodgers have filed for bankruptcy, reports Richard Sandomir. With that, the legal game begins.

Obviously the situation is fluid, and more details will stream in as the morning and day progresses, but for the time being, this could buy McCourt some time. Why? because a bankruptcy filing puts a halt on all legal action with respect to the bankruptcy estate (i.e. the Dodgers).  McCourt will certainly argue that this will prevent a takeover from Major League Baseball, though the court may decide differently when it gets a chance to weigh in, likely in the next few days.

The problem for McCourt is that the kind of bankruptcy the Dodgers have certainly filed is designed to reorganize the financial house.  Frank McCourt, however, does not have a plan available to him to do such a thing or else he would have already done it.  The filing isn’t yet circulating (UPDATE: here it is) but my guess is that he’s going to ask the court to order that the Fox TV deal be executed — assuming Fox wants to still do it, which it has been reported it may not — thereby providing funding.

The problem with that, of course, is that the bankruptcy court won’t approve of anything that is not seen as in the best interests of the Dodgers the Dodgers’ creditors,* it’s obvious that Major League Baseball and others would come in and make a strong case that the Fox deal is not the best deal they could make.

If McCourt can do no better, the court may very well order a sale of the team. Perhaps auctioning it off, Texas Rangers-style. Which, by the way, would also put Major League Baseball in the same position it was in with respect to the Rangers: less-able to control who owns the team than it would otherwise be.  Mark Cuban bid on the Rangers, after all. If his or some other non-chosen person’s money looked green to the bankruptcy court in such a scenario, Bud Selig would be hard-pressed to stop them from participating in a team auction.

But let us not get ahead of ourselves. For now, we simply have Frank McCourt where he was inevitably headed: bankruptcy court. And some time has been bought. A little anyway. The end game for McCourt, however, doesn’t look all that better than it did before.

*As always, remember that I am kind of a moron, at least as far as lawyers go, when it comes to bankruptcy. We have a lot of people familiar with bankruptcy law who hang out in the comments, however, so by all means, explore them a bit if the subject interests you. I’ll do my best to update with better information when I screw up.

  1. uyf1950 - Jun 27, 2011 at 8:53 AM

    What a loser this guy is. All is doing is prolonging the inevitable. The Dodgers in the long run are either going to be taken over by MLB and sold or ordered sold by the courts.

  2. joshfrancis50 - Jun 27, 2011 at 9:04 AM

    Phase 1 of Project Mayhem.

    • ditto65 - Jun 27, 2011 at 9:41 AM

      The first rule of Project Mayhem is…

      • explodet - Jun 27, 2011 at 2:26 PM

        …don’t ask questions. Which he didn’t.

  3. klbader - Jun 27, 2011 at 9:16 AM

    Craig,

    I am a little rusty on my bankruptcy law, but I think the bankruptcy court will look at all issues in this case, including the Fox TV deal, and consider the best interests of the Dodgers creditors, and not the Dodgers themselves. It’s a small difference, but it could be important depending on the circumstances.

    • Craig Calcaterra - Jun 27, 2011 at 9:20 AM

      Thanks klbader. I corrected. I know near nothing about bankruptcy law, but I knew that, so why I messed it up is beyond me.

      Folks: please correct me early and often when I screw up bankruptcy law stuff in these Dodgers posts. It’s easily my biggest blind spot when it comes to the law.

      • dbilson - Jun 27, 2011 at 9:40 AM

        “It’s easily my biggest blind spot when it comes to the law”

        So you’re saying if something pops in baseball that relates to Maritime Law (Giants off-season Cruise for season ticket holders sinks), we might get a a more thorough critique?

      • omniusprime - Jun 27, 2011 at 9:44 AM

        Craig – the judge in bankruptcy court can’t force Fox to consumate the tv deal if they don’t want to. This is just a red herring McCourt is floating around.

      • jwbiii - Jun 27, 2011 at 10:57 AM

        Wouldn’t maritime law be more likely to apply to the Seattle franchise vis-a-vis players imported from the Far East?

      • pologirl487 - Jun 27, 2011 at 12:29 PM

        As to the Fox deal, that is contract law. The court can only force Fox into the deal if there was 1. A meeting of the minds, meaning there was a mutually agreed upon deal. 2. There was an offer and an acceptance. If there was a counter-offer, there was no acceptance. Also, performance and an exchanging of value plays a huge part as well.

      • marinersnate - Jun 27, 2011 at 12:38 PM

        “Wouldn’t maritime law be more likely to apply to the Seattle franchise vis-a-vis players imported from the Far East?”

        Don’t go draging the M’s into this mess. We may pay in Yen instead of greenbacks, but all employees’ are paid in a timely manner. And I think that you will find that it is all legal tender. In fact most employees’ seem very satisfied with both their workplace and their salary. Why, we even have one “King” of a starting pitcher who is so content with his situation that he has absolutely no plans to relocate to a certain northeastern city for the foreseeable future.

        But I think that this begs a larger question- and perhaps Craig could chime in with his legal opinion. Are we legally bound to pay Chone Figgins for what he claims is his best effort to impersonate a MLB player? Could not taking money for what he produces on the field be termed as “theft”? I believe that his performance could be discribed in court documents as “suckatude to a moral certainty”.

      • jwbiii - Jun 27, 2011 at 10:31 PM

        No offense intended to the Seattle team, their players, or their fans. I just thought that the juxtaposition of ‘maritime law’ and ‘Mariners’ was humorous. Sorry to have to explain a joke.

    • churchoftheperpetuallyoutraged - Jun 27, 2011 at 9:32 AM

      So what happens to the players? is mccourt still responsible for the 6/30 payroll or do they get in line with the rest of the creditors?

      • ditto65 - Jun 27, 2011 at 9:45 AM

        My guess is MLB still steps in and becomes another creditor being wronged by that lizard of a man.

      • Kevin S. - Jun 27, 2011 at 9:45 AM

        When the Rangers were in bankruptcy, there was no question about their players getting paid. I do wonder about Manny’s payments, though. A-Rod was considered an undecided creditor. Maybe the deferred money he was owed was just structured differently.

      • mattjg - Jun 27, 2011 at 9:47 AM

        Frank McCourt (or the entities that he controls that control the Dodgers) have a duty to run the business to maintain value for their creditors. Of course, if he doesn’t have the cash, he can’t pay the players. I’m guessing MLB steps in with a loan so that the Dodgers can make payroll.

      • Kevin S. - Jun 27, 2011 at 9:48 AM

        Urgh, unsecured, not undecided. Damn T9. No need for that shit on a smartphone.

      • headbeeguy - Jun 27, 2011 at 10:18 AM

        In chapter 11 you can raise “debtor-in-possession” (DIP) financing, which allows you to take out a loan that gets paid off before any other creditors are paid. The following press release indicates that they have a $150 million DIP commitment. They’ll probably use these proceeds for payroll.

        http://www.prnewswire.com/news-releases/los-angeles-dodgers-file-for-chapter-11-bankruptcy-protection-124589423.html

      • sabathiawouldbegoodattheeighthtoo - Jun 27, 2011 at 10:36 AM

        Oh No! How will those poor millionaire athletes eat if their paychecks are delayed? Hopefully Ted Lilly or another veteran will take Dee Gordon out for lunch anyway. If he loses another pound he’ll end up on a Sally Strouthers commercial.

  4. montanared - Jun 27, 2011 at 9:20 AM

    Mark Cuban looks pretty good right now.

  5. ajt00 - Jun 27, 2011 at 9:25 AM

    How does this help the employees and ball players get paid on thursday?

  6. omniusprime - Jun 27, 2011 at 9:40 AM

    I hope the judge screws that deadbeat loser McCourt the way he and his wicked witch wife screwed the Dodger organization. This rich and greedy jerk doesn’t deserve any breaks from the courts. Time for MLB to step up and take away the Dodgers and sell them to a good owner who will try to make the Dodger organization great again.

  7. mattjg - Jun 27, 2011 at 9:52 AM

    Here’s a copy of the filing: http://online.wsj.com/public/resources/documents/dodgers.pdf

    Some interesting notes: Manny is (not surprisingly) the biggest unsecured creditor at over $20 million.

    Andruw Jones is second at over $11 million.

    The Dodgers still owe $3.7 million to Kaz Ishii and $2.7 million to Marquis Grissom.

    Just based on these numbers it’s no surprise (1) the Dodgers are in financial trouble and (2) haven’t sniffed a World Series since the McCourts took control of the team.

    • mattjg - Jun 27, 2011 at 9:56 AM

      Err, I meant to say they owe Ishii $3.3 million.

    • Roger Moore - Jun 27, 2011 at 10:17 AM

      I fairness to the McCourts, the Dodgers hadn’t sniffed a World Series under Fox or for the last decade plus of the O’Malleys, either. In fact, they came closer to the Series under the McCourts (making it to the NLCS in 2008 and 2009) than any time since 1988.

    • headbeeguy - Jun 27, 2011 at 10:26 AM

      2010 first round draft pick Zach Lee is owed $3.4 million.
      Alexander Santana, a draft pick they signed like two weeks ago, is owed $500 thousand.
      Vin Scully is owed $153 thousand.

      I’d love to see these lists for other teams.

  8. jimatkins - Jun 27, 2011 at 9:56 AM

    I get the impression that the Fox deal is a dead issue, because Fox really, really doesn’t want to cross MLB and Selig on this issue. Obviously, who’s more important to Fox Sports’ bottom line; McCourt or MLB as a whole?

  9. newyorkrich - Jun 27, 2011 at 10:09 AM

    Hearing the bad news about the Dodgers makes my day. I hope the team name dies and it’s the end of the infamous Dodgers. They let their fans down when they left Brooklyn and as a Brooklyn Dodger fan, I am glad.

    • chicago240 - Jun 27, 2011 at 10:33 AM

      You know, it’s been 54 years….don’t you think you can move on from it now. Walter O’Malley died over 30 years ago, his family’s ownership ended over a decade ago. It’s really time to move on……

      • PanchoHerreraFanClub - Jun 27, 2011 at 10:46 AM

        Obviously you are a White Sox fan.

    • lanflfan - Jun 27, 2011 at 10:44 AM

      *IF* you were a Brooklyn fan, then perhaps your anger should be directed at New York City. If they had allowed Mr. O’Malley to replace aging Ebbets Field, the Dodgers may never have moved. But by denying his request, they allowed the move to become reality. You can still hate on O’Malley, but the city and borough deserve 50% of that blame as well.

      And yes, its been over 50 years, let it go already.

    • sportsdrenched - Jun 27, 2011 at 10:51 AM

      You do realize there are two to three generations of people who have no conginative memory of the Dodgers in Brooklyn right?

      It should be noted, but that’s about all it should be.

    • spaman67 - Jun 27, 2011 at 11:51 AM

      Rich, get over it and put on your big girl panties. The Los Angeles Dodgers will NEVER die, and the sooner we throw out the garbage in Mccourt, the faster we can get a real owner who will retsore this team to a better position to compete year in, and year out.

    • SmackSaw - Jun 27, 2011 at 1:51 PM

      Look up Robert Moses. He’s the reason NYC is a mess. He’s also the reason O’Malley vacated Brooklyn.

  10. uberfatty - Jun 27, 2011 at 10:44 AM

    Who is Chad “Billingsly” and what did he do with the Dodgers’ starting pitcher?

  11. bobwsc - Jun 27, 2011 at 10:46 AM

    Frank is looking like the older version of Eddie Bracken (he of the Home Alone 2 variety). some hair dye and a penciled-on mustache and he’d be a lock for the Mr. Walley version from Vacation.

  12. tellyspop - Jun 27, 2011 at 10:51 AM

    I noticed in the bankruptcy petition the Dodgers filed, Exhibit C, asks: “Does the debtor own or have possession of any property that poses or is alleged to pose a threat of imminent and identifiable harm to public health or safety?” The bankruptcy petition preparer checked the box “NO.” I believe this is an error as the Parking Lot at the stadium has certainly demonstrated a public health menace.

    • jwbiii - Jun 27, 2011 at 11:07 AM

      You are forgetting the McCourt table of organization. The Dodger Holding Company is filling for bankruptcy. It only owns the team. The parking lots are owned by another McCourt entity.

  13. sabathiawouldbegoodattheeighthtoo - Jun 27, 2011 at 11:05 AM

    If they are in bankruptcy protection, will they be hindered from trading players? I see Kuroda as one of their biggest creditors. Maybe the Yankees could give Frankie a hand with that one.

  14. dparker713 - Jun 27, 2011 at 11:22 AM

    It’ll be interesting to see how the bankruptcy court deals with all the separate legal entities Frank created. Seeing as he and his wife used the Dodgers as their personal piggy bank, he may not be afforded the protection he’s expecting. Plus, you’ve got to figure this has to accelerate any IRS investigation. This could all get very ugly, very quickly.

    • gogigantos - Jun 27, 2011 at 4:53 PM

      http://www.dodgerdivorce.com/
      The most interesting part of the filings, to me, is that all five Dodger entities which are now in bankruptcy list between $500 million and $1 billion in assets. Just one, however, shows any significant debt. That one: the Los Angeles Dodgers baseball team.

  15. jsco2 - Jun 27, 2011 at 11:28 AM

    $20 M is ridiculous just because you can hit a baseball – it’s time professional sports came back down to earth with their wages – While the average working man can’t even keep food on the table, make enough money to keep the bank from re-possesing his home, etc., etc. – These guys make 10 – 20 times as much as the President of the USA – Get real. I’m tired of seeing multi-million dollar salaries to people that can hit a baseball, throw a football, or slam dunk a basketball – someone has to do something about this. It even has all of our colleges doing nothing except vieing for the best sports teams, the best coaches, the best of everything athletic – and how many of them are caught breaking the rules? – MOST – because it’s win at any cost – the athletes are cheating to become the best known, for one reason only – to get to the professional stage of their carrer, so they to can become instant millinoaires – a lot don’t even finish college because of it. It’s becoming ridiculous.

    • spaman67 - Jun 27, 2011 at 11:57 AM

      And if YOU had an ounce of talent, YOU would be in line to get paid. While we are at it, why not add actors and singers to your Nazi list? There is a reason they get paid that kind of money. Its called ENTERTAINMENT. You and I can’t do it, so we watch those who can. Now, go back to work flipping those burgers junior.

    • bklynbaseball - Jun 27, 2011 at 1:37 PM

      It’s called “Supply and Demand” sir, the cornerstone of our free society. There’s only about a thousand people on the planet who can do what they do at that level. What they do is now a multi-billion dollar industry. If someone were to offer you $5 million a year to do what you do, you would turn it down because “the average working man can’t keep food on the table, make enough money to keep the bank from re-possessing his home, etc, etc…..?” I’m quite sure this will be the first thought on your mind next time you get offered a raise or a promotion.

    • JBerardi - Jun 27, 2011 at 5:09 PM

      “While the average working man can’t even keep food on the table, make enough money to keep the bank from re-possesing his home, etc., etc. – These guys make 10 – 20 times as much as the President of the USA – Get real.”

      Please to be explaining how the hardships of working people in America and high salaries for athletes are connected.

  16. whitneymuse - Jun 27, 2011 at 11:51 AM

    Please sell this team.
    The most beautiful park in the NL; the greatest play-by-play announcer; and, the owner has really messed up. Fans don’t go to this place anymore. Visitor gets beat up by fan? Clearly something is not right, here.

  17. brianpmoore - Jun 27, 2011 at 12:07 PM

    <>

    Translation: I am a bitter, grouchy loser!

  18. polebeing - Jun 27, 2011 at 12:12 PM

    So Frank is a (DIP)! I lie that part.

  19. polebeing - Jun 27, 2011 at 12:27 PM

    Frank has the Dodgers in great shape! Lets see: how could he field a team with a Ranger like 36 mil payroll. OK Manny gets 20mil, Andruw gets 11 mil, and you bring up the AAA Isotopes! No problem Judge, the fans won’t even notice.

    • churchoftheperpetuallyoutraged - Jun 27, 2011 at 3:34 PM

      how could he field a team with a Ranger like 36 mil payroll

      According to Cot’s the Rangers have a $92M payroll (Beltre + Young + Hamilton = $38.75M). Slight exaggeration there don’t you think?

  20. whitneymuse - Jun 27, 2011 at 2:54 PM

    This team is so messed up; the former players own a huge hunk of the debt; cry if an ownership team of Ramierez and Andruw Jones and company.
    How did this happen?

    • jwbiii - Jun 27, 2011 at 4:37 PM

      The players agreed to contracts with deferred compensation. Such contracts are generally referred to as ‘team friendly,’ and the players who agree to them are Good Guys®.

  21. whitneymuse - Jun 27, 2011 at 5:38 PM

    It will be so nice to have the ownership go to some of the former Dodgers players syndicate. (think I saw a Garvey headed one some place).

    • jwbiii - Jun 27, 2011 at 10:37 PM

      Yeah, Steve Garvey would fit right in!

  22. Chris Ross - Jun 28, 2011 at 2:20 AM

    I think it’s sad that Frank Mccourt could screw up a team as established, storied and reputable as the LA Dodgers. They play in such a big market and it’s unbelievable that he could file for bankruptcy. It’s amazing that his divorce has caused not only himself but a huge franchise so much turmoil. The Dodgers obviously aren’t going anywhere but it’s pretty bad that he could let this happen. It’s going to be interesting to see who the Dodgers are sold to because that guy or those guys are going to be awful lucky to get such a storied franchise.

    http://chrisross91.wordpress.com/2011/06/27/mark-cuban-is-perfect-for-the-dodgers/

  23. jsco2 - Jun 28, 2011 at 9:06 AM

    spaman67 – JBerardi – bklynbaseball

    Sorry I didn’t get back to you last night, but I watched a good baseball game – S. Carolina & Florida in the CWS. Very good game even tho the winning run scored on a couple of errors.

    I’ll start by saying that I have always been a sports fan, but thought it was much better in the porfessional game when the players came up within an organization, stayed with that organization and made their name with that organization – that’s called loyality. The only ting these guys are loyal to now days is the dollar. Do you remember the Marlins team from a few years ago that won the WS then the next year did not have most of those players. They all had gone somewhere else – that’s called following the money.

    I’ve always been a fan of LA (bklyn) sports. Who can ever forget Duke Snider – probably my all time favorite – followed closely by the likes of Pee Wee Reese, Gil Hodges, Roy Campanella, Sandy Koufax, Don Drysdale, Johnny Roseboro, Don Newcomb, Fernando Valenzuela, Kirk Gibson, Ron Cey (the Penguin) and of course the incomparable Jackie Robinson. other teams had stars that I followed also, Berra, Mantle, Maris and Whitey Ford – Yankees – Bob Lemon, Bob Feller – Indians. Hank Aaron, Nolan Ryan, Say Hey Willie Mays – Juan Marichel, Willey McCovey. – Most of these guys basicly played for 1 team or maybe 2 – exception – Nolan Ryan.

    I was fortunate enough to get to see some of these guys play the game & I loved it and loved them.
    I also liked LA Rams football – do you remember Crazy legs Hirsch or Big Daddy Lipscomb. Also SF 49 ers Joe Montana, or the LA Lakers Jerry West or Magic Johnson? I had a hard time in Basketball because I also liked the Celtics – Bob Cousey and Bill Russell – Larry Bird, remember the classic battles Bird & Johnson had? Now days what do you get? You get the likes of Mark McGuire and Barry Bonds and their man made muscle. Anything for the all mighty dollar and to get into the record books – These two should never be in any record books or in the hall of fame (hall of shame maybe). Look what happened to Pete Rose just for placing a bet – these guys have had no repurcusions from their doping and the Bonds trial was an absolute sham. Do you remember coaching little league and telling those kids, “Winners never cheat and Cheaters never win.”? I do.

    Yes, this is entertainment. But at what cost? Oh, I forgot, you believe that every team should have such a big payroll that it puts that team into bankruptcy. I have a little trouble with that – must be more of that new math. I don’t flip burgers (hopefully I’ll never have to) and I am not a junior, but thanks for that thought. Although last night I did “flip” some cat fish on the BBQ for fish tacos while the wife made a salad – then we watched the CWS game. And if you believe this is what a Nazi is – You really need to go back & check your history – you’re not even close!

    As for Supply & Demand – isn’t that what the housing market just went through? Another Multi-Billion dollar industry. That didn’t work out so well, now did it? I fear that is the way pro sports and their big salaries are headed.

    This also accounts for the “hard times” of which I spoke. I was fortunate enough, in my younger days to be able to see some of these guys perform – I certainly wish I could take my 4 grand kids to a ball game, but that will never happen. I’ve been priced right out of their market – maybe I’ll be able to take my Great Grand Daughter to a game one of these days – but things better happen fast, as she’s already 11 years old & pretty soon will be on her own and interested in other things. Like Boys!

    Speaking of being priced out of the market – do you remember when Shaq came to the Lakers? They had to raise their ticket prices by 1/3 (that’s a little over 33% – for you math wizards) – just to pay his salary – what kind of sense does that make? Of course that didn’t phase most of the Laker fans, who are mostly from the actors and singers (entertainment) industry. They are the only ones that could afford that kind of an increase.

    Lastly – What is the first thing that most people cut down on in hard times?? Entertainment!!

    Have a nice day & be sure to watch the CWS.

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