A mere three days before the payroll comes due — payroll that Frank McCourt can’t meet — the Dodgers have filed for bankruptcy, reports Richard Sandomir. With that, the legal game begins.
Obviously the situation is fluid, and more details will stream in as the morning and day progresses, but for the time being, this could buy McCourt some time. Why? because a bankruptcy filing puts a halt on all legal action with respect to the bankruptcy estate (i.e. the Dodgers). McCourt will certainly argue that this will prevent a takeover from Major League Baseball, though the court may decide differently when it gets a chance to weigh in, likely in the next few days.
The problem for McCourt is that the kind of bankruptcy the Dodgers have certainly filed is designed to reorganize the financial house. Frank McCourt, however, does not have a plan available to him to do such a thing or else he would have already done it. The filing isn’t yet circulating (UPDATE: here it is) but my guess is that he’s going to ask the court to order that the Fox TV deal be executed — assuming Fox wants to still do it, which it has been reported it may not — thereby providing funding.
The problem with that, of course, is that the bankruptcy court won’t approve of anything that is not seen as in the best interests of
the Dodgers the Dodgers’ creditors,* it’s obvious that Major League Baseball and others would come in and make a strong case that the Fox deal is not the best deal they could make.
If McCourt can do no better, the court may very well order a sale of the team. Perhaps auctioning it off, Texas Rangers-style. Which, by the way, would also put Major League Baseball in the same position it was in with respect to the Rangers: less-able to control who owns the team than it would otherwise be. Mark Cuban bid on the Rangers, after all. If his or some other non-chosen person’s money looked green to the bankruptcy court in such a scenario, Bud Selig would be hard-pressed to stop them from participating in a team auction.
But let us not get ahead of ourselves. For now, we simply have Frank McCourt where he was inevitably headed: bankruptcy court. And some time has been bought. A little anyway. The end game for McCourt, however, doesn’t look all that better than it did before.
*As always, remember that I am kind of a moron, at least as far as lawyers go, when it comes to bankruptcy. We have a lot of people familiar with bankruptcy law who hang out in the comments, however, so by all means, explore them a bit if the subject interests you. I’ll do my best to update with better information when I screw up.