March 28, 2012 6:40 PM
Three Firms Circle the Bases on $2.15 Billion Dodgers Bankruptcy Sale
Posted by Brian Baxter
Dewey & LeBoeuf, Foley & Lardner, and Sullivan & Cromwell are advising various parties on an investor group's $2.15 billion acquisition of Major League Baseball's Los Angeles Dodgers, the highest price ever paid for a professional sports team, and a deal that has thrilled fans and players and shocked some economists.
Lawyers from nearly a dozen other Am Law 200 firms took part in the bidding process and bankruptcy proceedings for the Dodgers, who sought Chapter 11 protection in Delaware last June amid a two-year divorce battle between team owner Frank McCourt and his ex-wife Jamie McCourt.
The American Lawyer examined the McCourts' bitter split—the heart of which was a fight for control of the Dodgers that drew in the couple's former lawyers from Bingham McCutchen—in a feature story last year.
The pair eventually settled their divorce case last October, with Jamie McCourt getting about $130 million from her ex-husband, who now stands to reap a substantial windfall from the sale of a team he bought for $430 million in 2004.
Dewey, a firm whose recent woes have made plenty of headlines, has been representing the Dodgers since the team entered bankruptcy last summer. Bruce Bennett, the managing partner of Dewey's Los Angeles office, is leading a team from the firm advising the storied franchise.
"This case started out very contentious and there were many controversies throughout that were litigated and settled," says Bennett, who joined Dewey with nine other lawyers last year from L.A. bankruptcy boutique Hennigan Bennett & Dorman. (McKool Smith absorbed what was left of the Hennigan firm in September.)
Along with Bennett, Dewey M&A partner Richard Climan has been leading the firm's efforts on behalf of the storied franchise, which have involved corporate as well as bankruptcy work.
Others Dewey lawyers pitching in on the matter include bankruptcy partners Sidney Levinson and Joshua Mester—both of whom arrived as part of the same lateral group that brought Bennett aboard last year—and M&A partners Paul Chen and Eric Reifschneider, the managing partner of the firm's Northern California offices and the chair of its IP and technology group. (Climan and Reifschneider, who announced this month that he will leave Dewey in May for a position at Qualcomm, joined the firm in another high-profile lateral move from Cooley two years ago.)
Bennett declined to discuss Dewey's fees for representing the Dodgers, nor would he delve into some of the firm's recent troubles, other than to note that they've had "no impact on the firm's operations—period," as far as advising the team on its bankruptcy and subsequent sale.
According to documents filed by Dewey with the bankruptcy court, the firm has so far billed the Dodgers for nearly $10.2 million in fees and expenses on work performed through February of this year. Court records also show that both Bennett and Climan are billing $1,000 per hour for their services. (Click here and here for Dewey's last two requests for compensation in the Dodgers' Chapter 11 case.)
Bennett notes that Dewey picked up the Dodgers' bankruptcy work based on referrals, including one from Frank McCourt's personal lawyers at Sullivan & Cromwell. He says Dewey worked hand-in-hand with S&C in reaching an agreement with MLB last year on the process for finding a new buyer for the team.
"I've got an enormous amount of respect for Joe Shenker," says Bennett, referring to the S&C chairman who led a team from his firm representing Frank McCourt. "We've been working closely together throughout the case."
As previously noted by The Am Law Daily, McCourt hired S&C almost a year ago to advise the owner on his efforts to secure new financing for the team. MLB commissioner Bud Selig responded by appointing Akin Gump Strauss Hauer & Feld senior counsel J. Thomas Schieffer to take day-to-day control of the Dodgers in April 2011.
Two months later, the league scuttled a tentative divorce settlement between the warring McCourts that hinged on revenue from a proposed 17-year television contract between the Dodgers and Fox Sports, essentially forcing the team to file for bankruptcy. The decision earned Selig the enmity of S&C and Frank McCourt's divorce lawyers from Susman Godfrey, according to our previous reports.
S&C's Shenker, real estate finance and M&A partner Ivan Deutsch, real estate partner Robert Schlein, tax partner Andrew Mason, L.A. office managing partner and litigator Robert Sacks, litigation partner Adam Paris, and M&A partner Eric Krautheimer are leading a team from the firm representing McCourt on the proposed sale of the Dodgers to Guggenheim Baseball Management.
The group gets its name from New York- and Chicago-based Guggenheim Partners, a privately held global financial services firm with more than $125 billion in assets under management that is using money from its control of two insurance companies to provide the bulk of the financing for the Dodgers purchase.
David Korman serves as chief legal officer for Guggenheim, whose ownership group turned to Irwin Raij, the cochair of the sports industry team at Foley & Lardner, for outside counsel on the Dodgers deal. Foley, which has its roots in Bud Selig's hometown of Milwaukee, has deep ties to MLB.
The firm advised an ownership group that won a similar bankruptcy auction for the Texas Rangers with a $593 million bid in 2010. In 2009, Foley represented Thomas Ricketts on his $845 million purchase of the Chicago Cubs, a team that went on the block after former owner the Tribune Company filed for bankruptcy in late 2008. Last year former MLB president and COO Robert DuPuy rejoined Foley, having left the firm in 1998 to serve as the league's chief legal officer.
Foley's client that won the bidding for the Dodgers is composed of Guggenheim CEO Mark Walter, Guggenheim president Todd Boehly, Mandalay Entertainment CEO Peter Guber, former Los Angeles Lakers star Earvin "Magic" Johnson, oil and gas investor Bobby Patton, and Columbia Law School graduate Stan Kasten, a former president of MLB's Atlanta Braves and Washington Nationals. Walter, a graduate of Northwestern University Law School, will serve as controlling partner of the group, which beat out several other bidders for the right to buy the Dodgers.
Joseph Farnan, Jr., a retired federal judge serving as mediator between Selig's office and the Dodgers in the team's bankruptcy case, has been overseeing the process under which the historic franchise is being auctioned off. Earlier this week, the number of suitors for the Dodgers was whittled down to three, before the Guggenheim group was selected as the winning bidder.
The two runners-up were a $1.4 billion bid by a group led by hedge fund billionaire Steven Cohen (represented by Munger, Tolles & Olson name partner Ronald Olson, corporate partner Robert Knauss, and Willkie Farr & Gallagher) and a $1.5 billion bid by real estate billionaire E. Stanley Kroenke (advised by Irell & Manella and SNR Denton), according to Dewey's Bennett. (Irell and SNR Denton legacy firm Sonnenschein Nath & Rosenthal both advised on Kroenke's $750 million acquisition of the National Football League's St. Louis Rams in 2010.)
Other contenders for the Dodgers that fell out of the bidding in recent weeks included Beverly Hills real estate developer Alan Casden (Manatt, Phelps & Phillips), L.A. civic leader Stanley Gold and the family of the late Roy Disney (Latham & Watkins and Gene Salomon of Beverly Hills–based Gang, Tyre, Ramer & Brown), and a partnership of Memphis Grizzlies owner Michael Heisley and Ares Management cofounder Antony Ressler (McDermott Will & Emery and Latham).
Bennett says that Magic Johnson, the subject of an acclaimed documentary film released this month, was in the firm's New York office last night as Guggenheim and the Dodgers negotiated the final terms of their landmark deal. News of the sale broke shortly before midnight.
The deal includes $412 million in debt held by the Dodgers, as well as $150 million to create a joint venture with Frank McCourt connected to the parking lots and land surrounding the team’s 56,000-seat stadium at Chavez Ravine, according to The New York Times.
Bennett says the next major milestone in getting the Dodgers out of bankruptcy is a confirmation hearing scheduled for April 13 on the proposed sale to Guggenheim. The transaction itself, which requires the approval of both MLB and the bankruptcy court, is expected to close by April 30. Upon closing, Frank McCourt is expected to make the roughly $130 million payment due to his ex-wife under the terms of the couple's divorce settlement.
The sale price commanded by the Dodgers is by far the highest ever fetched by a pro sports team, easily topping the $1.47 billion paid for British soccer club Manchester United in 2005 by U.S. billionaire Malcolm Glazer and his family, as well as the $1.1 billion paid by fellow billionaire Stephen Ross for the NFL's Miami Dolphins in 2009.
Covington & Burling, which advised the NFL on the sale of the Dolphins, is also serving as special counsel to the Dodgers on its negotiations with Fox Sports and others over the team's media rights. While those rights have been a subject of dispute, Fox and the Dodgers managed to settle their grievances with one another in January. Covington has billed $235,731 for its efforts in the case through February, according to court records.
Jenner & Block, Barnes & Thornburg, and Delaware's Morris, Nichols, Arsht & Tunnell are advising Fox Sports in the Dodgers' bankruptcy. Proskauer Rose is serving as corporate counsel and White & Case bankruptcy counsel to MLB, which has also turned to Fox Rothschild for local counsel in the Chapter 11 case.
Morrison & Foerster and Delaware's Pinckney, Harris & Weidinger are advising an official committee of unsecured creditors in the Dodgers' bankruptcy. Young Conaway Stargatt & Taylor is serving as local bankruptcy counsel to the team.
One firm with a particular interest in the outcome of the Dodgers saga is Bingham, which sued the team and former client Frank McCourt last year in Massachusetts state court, seeking a declaratory judgment that it should not be liable for any losses McCourt might suffer as a result of his divorce.
At issue in the litigation was a marital property agreement between Frank and Jamie McCourt drafted by a Bingham partner that was ruled invalid by a Los Angeles superior court judge in December 2010. After the ruling, which allowed Jamie McCourt and her lawyers from Boies, Schiller & Flexner to claim she was a co-owner of the Dodgers and thus entitled to a portion of any proceeds should the team be sold, Frank McCourt terminated his relationship with Bingham and hired S&C as finance counsel.
As previously reported here, S&C and MLB's lawyers from Proskauer spent several months wrangling over the Dodgers' financial records as McCourt sought additional capital to run the team's operations prior to the club's bankruptcy filing in June.
In August, a Massachusetts judge dismissed Bingham's declaratory judgment motion against the Dodgers and McCourt, clearing the way for McCourt to pursue a massive malpractice case against Bingham seeking reimbursement for damages incurred during his divorce battle.
A Bingham spokeswoman declined to comment Wednesday on the proposed sale of the Dodgers, as did Glen Summers, a partner at litigation boutique Bartlit Beck Herman Palenchar & Scott, which was hired by McCourt last summer in connection with his looming fight with Bingham.
The American Lawyer named Bartlit Beck its Litigation Boutique of the Year in 2009, and Bingham figures to be on the lookout for any notifications from the Chicago-based shop in early May, should the sale of the Dodgers close next month as expected.
Photo: Dodgers Stadium at Chavez Ravine, Frederick Dennstedt, Wikimedia Commons
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