LOS ANGELES — Facing the painful prospect of stiffing players and employees, the Los Angeles Dodgers filed for bankruptcy protection in a Delaware court Monday, adding to off-the-field troubles that have hobbled one of baseball’s most storied franchises and setting up another showdown with Major League Baseball.
Team owner Frank McCourt, upset baseball Commissioner Bud Selig rejected a multibillion-dollar TV deal last week, now hopes a federal judge will approve $150 million in financing to be used for daily operations and give him more time to seek a more favorable media contract. A hearing is set for Tuesday.
The move by a cash-starved McCourt comes just days before he was expected to miss team payroll Thursday and possibly be confronted with an MLB takeover. The filing also means it’s unlikely a resolution over team ownership, a fight that began two years ago when McCourt and his ex-wife and former team CEO Jamie McCourt decided to divorce, will be found any time soon.
Jamie McCourt was born in Baltimore and is the daughter of Jack Luskin, who ran the Luskin’s chain of appliance stores in Maryland.
Selig said in a statement that the bankruptcy filing has inflicted further harm upon the Dodgers.
“We have consistently communicated to Mr. McCourt that any potential solution to his problems that contemplates mortgaging the future of the Dodgers franchise to the long-term detriment of the club, its loyal fans and the game of baseball would not be acceptable,” he said. “To date, the ideas and proposals that I have been asked to consider have not been consistent with the best interests of baseball.”
Legal observers expect MLB to contest McCourt’s request for filing bankruptcy, arguing the dispute should remain within the confines of baseball and the league’s constitution allows Selig to take control of a team that seeks Chapter 11 protection.
The main issue is whether “the bankruptcy court maintains control of the proceedings or acquiesce to baseball,” said Edward Ristaino, who chairs the sports practice at the law firm Akerman Senterfitt. “The courts recognize the special interests of the commissioner and give him great deal of deference. My sense is that won’t happen very quickly at all.”
In court documents, team Vice Chairman Jeff Ingram cited a significant drop in attendance, contributing about 10 percent of Dodger revenues to the league’s sharing program last year and paying about $22 million in deferred compensation, as reasons for filing bankruptcy.
“To date, LAD has remained current in its obligations,” Ingram wrote. “However, LAD is now on the verge of running out of cash, the results of a perfect storm of events.”
McCourt has taken out loans to stay afloat this season but his mounting financial problems were expected to balloon this week, when he owed tens of millions of dollars to meet payroll and other obligations.
About $20 million is slated for current and deferred compensation by Thursday, while more than $18 million is required as a reserve to prefund money to be paid to players in 2012 under terms of the collective bargaining agreement, court documents show.
The bankruptcy filing also noted a $67 million loan taken out against the parking lots at Dodger Stadium was set to mature on Thursday. It was expected McCourt was going to refinance the loan.
“He’s clearly running very low on options right now,” said David Carter, executive director of USC Sports Business Institute. “What seems to be the case is a high-stakes chess game between Frank McCourt and MLB, and he’s running out of pieces. This is one of the uglier weeks in Dodger history.”
Among the 40 largest unsecured claims, totaling about $75 million, are former Dodgers slugger Manny Ramirez at nearly $21 million; Andruw Jones at $11 million; pitcher Hiroki Kuroda at $4.4 million; and the Chicago White Sox, which share a spring training facility with the Dodgers in Arizona, at $3.5 million. Longtime Dodger announcer Vin Scully is owed more than $150,000 as part of his contract, court documents show.
The McCourts have been embroiled in a contentious divorce where their lavish spending habits were detailed in court documents. The former couple took out more than $100 million in loans from Dodger-related businesses, records show.
In April, MLB took the extraordinary step of assuming control of the troubled franchise. Former Texas Rangers President Tom Schieffer was appointed to monitor the team on behalf of Selig, who said he took the action because he was concerned about the team’s finances and how the Dodgers are being run.