MLB Commissioner Bud Selig, left, hopes a bankruptcy judge will allow the… (Jim Mone / Associated Press;…)
Frank McCourt would be signing "a deal with the devil" by accepting a loan offered by a commissioner intent on stripping McCourt of his team, attorneys for the Dodgers owner argued in a bankruptcy court filing Monday.
The bare-knuckle filing foretold a legal "collision course" between McCourt and Commissioner Bud Selig over who has the final say in selling a team's television rights and, ultimately, whether the court would honor or override baseball rules that authorize Selig to kick out McCourt.
The immediate issue — whether the Dodgers should be financed during the bankruptcy case by a loan arranged by McCourt or one proposed by Major League Baseball — is set to be decided at a court hearing Wednesday. The MLB loan could save the Dodgers close to $15 million in interest and fees, a committee of creditors said in a filing Monday.
"There can be no question the [proposed MLB financing] is economically superior," according to the committee filing.
However, the fine print of the proposed MLB financing includes terms tilted toward triggering defaults that would enable the league to take over the Dodgers, attorneys for McCourt wrote in calling that loan "nothing but a pretext … for the commissioner's ulterior motive of seizing control of the [Dodgers] and ousting Mr. McCourt."
The league is willing to consider relaxing some of those terms, said a person familiar with the matter but not prepared to comment publicly in advance of the hearing. Bruce Bennett, an attorney for the Dodgers, declined to discuss whether McCourt's lender might sweeten its deal.
On Aug. 16, the Dodgers plan to ask the court to approve a sale of the team's cable television rights, a sale McCourt says would enable the Dodgers to repay their creditors and exit bankruptcy by the end of 2011, according to Monday's filing. The league is expected to oppose that plan and, before then, to ask the court to uphold MLB rules entitling Selig to approve all television contracts as well as to strip owners of their teams upon filing for bankruptcy.
Although MLB papers filed last week redacted the amount the league alleged McCourt had taken out of the Dodgers, McCourt's filing revealed the figure at "more than $180 million." Selig had approved the McCourt business structures to which he now objects, the filing read, including the splitting of the team, stadium and land into separate entities.
As a result, McCourt's attorneys said their client had "taken distributions 'from the Dodgers' of less than $30 million." In addition, the attorneys argued that Selig had "no authority" over the real estate assets separated from the team. The league disputes that position, referring in part to the powers granted to Selig under the MLB constitution. McCourt has challenged Selig's use of those powers as arbitrary and inequitable.
Bennett said Selig should not be allowed to provide the interim financing because he is not a disinterested lender — and, in fact, is only in the lending business now for the purpose of shoving out McCourt.
"Baseball has said, 'We don't believe this is a commercial deal,' " Bennett said. "They're looking at it from another perception, one that we believe is not appropriate."
Rob Manfred, MLB executive vice president, said the Dodgers have made no effort to work with the league to provide a better loan to the team.
"We're disappointed the Dodgers have not made an offer to get to an agreement on financing that is clearly better," Manfred said.
On June 20, Selig rejected a proposed contract with Fox, citing in part a divorce settlement that would have diverted almost half the $385 million upfront payment from the Dodgers. On June 24, McCourt says he offered to dedicate the entire $385 million to the team, but "the commissioner still expressed no interest." The Dodgers filed for bankruptcy June 27, saying Selig had forced the move by rejecting the Fox deal.
McCourt's attorneys also claimed in Monday's filing that Selig's "unfounded criticism" of the Dodgers' stadium security and operations after the Bryan Stow beating led "directly to fan unease and attendant declines in attendance."
In a separate filing, McCourt's attorneys acknowledged the Dodgers had halted severance payments to former team executive Charles Steinberg and would not resume them until after they "investigate whether Steinberg may have taken any actions while an MLB employee that were adverse to the [Dodgers]." Steinberg now works as a senior advisor to Selig.