The Work

June 22, 2011 2:00 PM

Susman, S&C Partner Call Out Selig for Wrecking Dodger Divorce

Posted by Brian Baxter

Major League Baseball commissioner Bud Selig on Monday rejected a proposed $3 billion television contract with Fox that threatens to unravel a divorce settlement reached on Friday between Los Angeles Dodgers owner Frank McCourt and his former wife Jamie, according to sibling publication The National Law Journal.

The TV contract with Fox would have provided money to both the Dodgers franchise, which needs about $30 million to make payroll on June 30, and Frank and Jamie McCourt. Selig's decision, presented in an 11-page letter to Frank McCourt, could strip the latter of ownership of a team he bought for $430 million from News Corporation in 2004, according to the New York Daily News. Selig defended his decision on Monday.

"This decision was reached after a full and careful consideration of the terms of the proposed transaction and the club's current circumstances," he said in a statement. "It is my conclusion that this proposed transaction with Fox would not be in the best interests of the Los Angeles Dodgers franchise, the game of baseball, and the millions of loyal fans of this historic club."

Selig's decision to scrap the Fox deal also effectively scuttles the divorce agreement between the McCourts, since revenue from the TV contract won't be available to either party to settle their respective debts and other obligations, and has lawyers for Frank McCourt crying foul.

"As Commissioner Selig well knows, this transaction would make the Dodgers financially secure for the long term and one of the best capitalized teams in [MLB]," said Stephen Susman of Susman Godfrey in a statement issued by the Dodgers late Monday. As a result of Selig's decision, Susman noted that his client intends "to explore vigorously our options and remedies" in order to "protect the long-term best interests of the [Dodgers]."

In an interview with The Associated Press, another of Frank McCourt's lawyers, Sullivan & Cromwell L.A. office managing partner Roberts Sacks, said that Selig's decision appeared to be an attempt to force his client out of the game of baseball.

"There seems to be a predetermined result to drive Frank out of baseball without a good-faith basis," Sacks said. "This isn't going to go away quietly."

The terms of the divorce settlement would allow Frank McCourt to receive a $385 million loan and equity infusion from the TV money, The NLJ reported last week, including a $235 million payment to the cash-strapped Dodgers. The settlement also would set $50 million aside into a separate account to be awarded to either McCourt by a judge at a later date, and another $20 million to cover attorneys' fees and discretionary costs by both litigants.

Robert Manfred, Jr., MLB's executive vice president for labor relations and human resources and a former partner at Morgan, Lewis & Bockius, told the AP that the league has treated Frank McCourt fairly and that Selig wasn't interested in seeing the Dodgers take on more debt or use future revenue streams for nonbaseball expenses.

"Mr. McCourt was told early on he needed an equity solution," Manfred said. "The entire history with Mr. McCourt and baseball shows he's been given numerous exceptions that were club-specific to assist him. If anything he's been treated more favorably than other clubs."

In a statement released earlier this week by MLB, The NLJ notes that Selig appeared particularly concerned about money from the TV deal that would be used to pay off personal expenses. Court records in the McCourt divorce case show that the ex-couple took out more than $100 million in loans from Dodger-related businesses like the team's parking lot and stadium at Chavez Ravine.

"Critically, the [Fox] transaction is structured to facilitate the further diversion of Dodgers assets for the personal needs of Mr. McCourt," Selig said. "Given the magnitude of the transaction, such a diversion of assets would have the effect of mortgaging the future of the franchise, to the long-term detriment of the club and its fans."

Frank McCourt claims he's met the criteria put forth by MLB officials last month when the league retained Proskauer Rose to review reams of financial records for the struggling Dodgers franchise. The team, which Selig put under the control of Akin Gump Strauss Hauer & Feld senior counsel J. Thomas Schieffer in April, will see its current TV deal with Fox expire in 2013.

S&C's Sacks told the AP that Selig should have warned Frank McCourt that he was not inclined to approve the TV deal, which effectively voids the divorce settlement agreed to on Friday.

"If the commissioner wasn't prepared to approve the transaction, he should have told Frank so he could pursue other avenues," Sacks said. "I think I would say the commissioner has put the team in a cash-flow bind, and Frank is reviewing his options to address that situation as best he can under MLB's unwarranted action."

A one-day trial scheduled for August 4 to determine ownership of the Dodgers could now be postponed, Sacks told the AP. It will be up to L.A. County superior court judge Scott Gordon to decide how best to divide the couple's assets at some later date, said Sacks, who also spoke with the Los Angeles Times about the potential for litigation should MLB seek to strip Frank McCourt of the Dodgers and order the team sold.

"There is the possibility of some fairly acrimonious and extreme litigation going forward, which Frank is hopeful will not occur," Sacks told the LAT. "If baseball were to act precipitously against Frank, which has been threatened, then there will be a showdown on that issue."

As previously reported by The Am Law Daily, Frank McCourt is already engaged in litigation with his former lawyers at Bingham McCutchen over a 2004 marital property agreement that Gordon tossed in December, throwing the ownership of the team into flux. For more on the Dodger divorce drama, click here for a feature story on the case from The American Lawyer's March issue.

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