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SBJ/February 6-12, 2012/Franchises
Dodgers bankruptcy piles up big numbers
Published February 6, 2012, Page 3
Already poised to become the most lucrative team sale in U.S. pro sports history, the Dodgers are also thought to have become the most expensive American team bankruptcy ever in terms of legal fees and expenses.
According to documents filed last week with the U.S. Bankruptcy Court for the District of Delaware, the Dodgers have spent $15.96 million in bankruptcy-related expenses during the seven months ended Dec. 31, 2011. The club filed for bankruptcy protection June 27, within that window of time.
The sum exceeds fees spent in bankruptcy cases for other sports teams, including the Texas Rangers, Chicago Cubs and Pittsburgh Penguins, many of which have hovered in the $5 million to $8 million range. The Phoenix Coyotes, another hotly contested team bankruptcy case, are believed to have incurred more than $14 million in fees and expenses when including those paid by the team itself and the NHL.
The Dodgers’ sum does not include millions in legal fees paid by MLB, Fox Sports Net and vendor Facility Merchandising Inc. as the club battled with each during the run of the case. The club has since settled with each, and owner Frank McCourt is now on track to sell the team by April 30 as part of his deal with MLB. The more than $20 million in legal fees incurred by McCourt and ex-wife Jamie in their high-profile divorce is also not included.
“This was never a conventional case, even for a sports team bankruptcy,” said Thomas Salerno, partner for Squire Sanders in Phoenix, and lead attorney for the Coyotes in their case. Salerno is not involved in the Dodgers case. “The Dodgers bankruptcy was born in the flames of litigation, and continued to engender a huge amount of litigation in a very short period of time.”
“Is bankruptcy expensive? Yes. But is this surprising? No, not considering all the issues involved with the Dodgers … and the higher costs of the New York and [Los Angeles] law firms involved,” Salerno said.
The club is slated to exit bankruptcy protection in April in conjunction with the sale, meaning more expenses will be incurred between now and then. But with all the major disputes in the case resolved, the escalation in fees will likely slow.
The Dodgers’ highest-paid player in 2011, shortstop Rafael Furcal, earned $13 million, and no Dodgers player this coming season is slated to earn more than the $15.96 million paid to date in bankruptcy expenses.
Dewey & LeBoeuf LLC, the lead law firm representing the Dodgers in the bankruptcy, has been paid $5.46 million thus far, with more yet to come. The firm’s lead attorney on the case, Bruce Bennett, is billing $975 an hour.
The Dodgers’ bankruptcy fees include a hefty $3.91 million for December alone as the club litigated extensively against FSN over how and when the club’s post-2013 cable TV rights would be marketed. The parties settled in early January, with the deal preserving the existing rights deal and precluding the Dodgers from any marketing of the future rights before this fall.
Still, the promise of massive television-related riches to come have made the Dodgers bidding as much of a media rights transaction as it is a sale of one of MLB’s iconic franchises. The Dodgers, aided by advisory firm The Blackstone Stone Group LP, have winnowed the initial bidding to about eight groups, with the final sales price expected to top $1.5 billion.
The figure will smash the $845 million purchase of the Cubs in 2009 by the Ricketts family, which stands as the record for an MLB team sale. Several NFL teams are estimated to be worth more than $1.5 billion, but Stephen Ross’ $1.1 billion deal for the Miami Dolphins in 2008 stands as the high-water mark for an actual transaction. Both the Cubs and Dolphins deals included stadiums. Dodger Stadium also is part of the current sale, though the facility’s surrounding land and parking lots are not.