A bankruptcy judge in Delaware on Wednesday approved a settlement between the Los Angeles Dodgers and FOX Sports that clears the way for the sale of the team.
The settlement, reached late Tuesday and quickly approved at a brief court hearing Wednesday morning, ends a contentious legal battle between the ballclub and FOX.
”The agreement with FOX clears the path for the Dodgers to sell the team on schedule and to maximize the value of the debtors’ estate,” Dodgers attorney Sid Levinson told Judge Kevin Gross.
FOX Sports attorney Greg Werkheiser said FOX was glad to have resolved its differences with the Dodgers, and attorneys for Major League Baseball and the Dodgers’ committee of unsecured creditors told Gross they support the settlement.
Gross quickly signed off on the settlement, saying it was in the best interest of all parties in the Dodgers bankruptcy case.
The settlement was reached with the help of a court-appointed mediator after a federal district court judge said last month that FOX likely would win an appeal of a ruling by Gross that authorized the Dodgers to begin a process to market the media rights to future games starting in 2014.
FOX Sports Net West, part of Rupert Murdoch’s News Corp., claimed that the media rights marketing plan violated its rights under an existing telecast contract with the Dodgers.
Under the settlement, the Dodgers will abide by the terms of the existing contract with FOX. That contract gives FOX an exclusive 45-day period starting in October to try to negotiate a contract extension with the Dodgers. The contract also prohibits the Dodgers from talking to other potential buyers of the media rights before Nov. 30 and gives FOX a limited right of first refusal on competing offers received after that date.
Gross had ruled that those ”no-shop” provisions were unenforceable in bankruptcy and approved a marketing process that moved up the exclusive negotiating period by about 10 months. That would have forced FOX to try to strike a new deal with the Dodgers this month and made any agreement subject to approval by the successful bidder for the team, a condition FOX said would decrease its leverage in negotiations.
But the Dodgers and the creditors committee insisted the media rights needed to be marketed in conjunction with a sale of the team itself to maximize value.
The Dodgers backed away from that position after U.S. District Judge Leonard Stark, granting a stay in an appeal by FOX, indicated that Gross likely erred in approving the media rights marketing process. Stark’s decision threatened plans to sell the team by an April 30 deadline called for in an agreement between the Dodgers and Major League Baseball.
”We’ve learned that the bidders for the team fully appreciate how lucrative the team’s future media rights are in the current market,” Levinson said Wednesday, adding that the Dodgers are far more confident now than they were last year that the full value of the media rights will be reflected in the sale price for the team.
The Dodgers sought bankruptcy protection in June after baseball Commissioner Bud Selig rejected a new TV deal with FOX that team owner Frank McCourt was counting on in order to make payroll and keep the franchise solvent. After the bankruptcy filing, attorneys for Selig successfully fought to force the Dodgers to accept bankruptcy financing from Major League Baseball, arguing at the same time that McCourt should be forced to sell the team.
After threatening to try to sell the media rights in bankruptcy without the approval of MLB, the Dodgers reached an agreement with the league in November that called for a sale of both the team and the media rights. The April 30 sale deadline in the settlement coincides with the deadline for McCourt to pay $131 million to his ex-wife, Jamie, as part of their divorce settlement.
In opposing the settlement between the Dodgers and MLB and the media rights plan, FOX argued that a sale of the team itself without the media rights would generate enough money to pay Dodgers creditors in full without subjecting the team or its new owner to damages for breaching the existing contract with FOX.
”We look forward to working with new ownership on future television rights discussions,” FOX Sports said in a statement issued early Wednesday.
As part of the settlement, McCourt still owes FOX $30 million that he borrowed in April to make the team’s payroll. FOX also retains the right to object to any purchase of the team by any entity owned directly or indirectly by Time Warner Cable or affiliated with Time Warner.
In a story posted late Wednesday, the Los Angeles Times reported that FOX has reached out to potential partners in an attempt to buy a stake in the Dodgers. The report stated that FOX has no interest in running the club but rather wants to become part owner to lock up long-term broadcasting rights.
Initial bids for the team are due by Jan. 23. Among potential buyers who have expressed interest in the team are groups that include former Dodgers players Orel Hershiser and Steve Garvey, former team manager Joe Torre, former owner Peter O’Malley and former general manager Fred Claire.