SBD/August 10, 2011/Franchises

Dodgers, Facility Merchandising Inc. Facing Off In Bankruptcy Court

FMI is hoping for decision before having to order merchandise for '12 season
The Dodgers are now battling with their merchandise vendor, Facility Merchandising Inc., as part of their ongoing bankruptcy case, adding to the still-mounting legal woes surrounding Owner Frank McCourt. FMI, which replaced Delaware North's Sportservice beginning last year, wants Delaware Bankruptcy Court judge Kevin Gross to order the Dodgers to decide whether to honor or reject the FMI contract by the end of the season. Bankruptcy law allows the club an option to walk away from the contract, in which FMI pays the Dodgers at least $4.5M per year in guaranteed royalties and signing bonus installments. But FMI, which says it has lost $2.5M thus far in the Dodgers concession deal, wants a quick decision before having to buy merchandise for the '12 season and make its next payment to the club. "FMI should not be put to the task of spending, quite literally, millions of dollars of additional funds while being left in limbo as to whether FMI will ever obtain the benefit of its bargain, while (the Dodgers) take advantage of that uncertainty," the company said in its filing with the court. FMI added sharply declining attendance at Dodgers Stadium has depressed merchandise sales revenue by about 25% thus far this season, and that a "business-threatening event" could soon be facing the outfit. "Because of the difficulty in selling the merchandise due to the low attendance numbers and lack of fan support, FMI is experiencing a liquidity squeeze, which has resulted in difficulties with FMI's own suppliers, many of whom have imposed credit holds," the company's filing continued.

OTHER SIDE OF THE STORY: The Dodgers counter that they should continue their reorganization on their own timetable, and that FMI owes the club more than $333,000. The merchandising deal, the club said in its objection to the FMI motion, carries no attendance guarantees of any type, and as a result, Dodgers lawyers said FMI is using the bankruptcy as an opportunity to amend the original deal. "Eager to get its foot in the door at a time when (the Dodgers) were enjoying unparalleled success at the box office, FMI made a deal that it now regrets," the club said in its response.

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Los Angeles Dodgers, Franchises

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