Summer 2011 • Issue 40, page 26

Legal Eagles Attempt to Unsnarl McCourt's Fiscal Shenanigans & Predict L.A. Dodgers Future

By Rense, Kirk*

A blue-ribbon legal panel scrutinized the red-ink Rorschach that is Frank McCourt’s and the L.A. Dodgers’ financial structure with an eye toward predicting an outcome of the Major League Baseball – Frank McCourt titanic bankruptcy court tussle, at two L.A. and Orange County locations earlier this month.

Convened by Robert Mosier, past chair of the CRF, the L.A. panel was presided over by the Umpire Crew Chief, recently-retired Bankruptcy Judge John E. Ryan, assisted by bankruptcy guru Michael Tuchin, Esq. (Klee, Tuchin, Bogdanoff & Stern LLP) and sports law specialist Maidie Oliveau, Esq. (Arent Fox LLP). Jess Bressi, Esq. (Luce, Forward, Hamilton & Scripps LLP) called the game and kept the players hustling.1

Traditional singing of the Star-Spangled Banner and “Take Me Out to the Ball Game” by all present got things underway at the seminar/luncheon.

First up was an examination of the terms of two competing debtor-in-possession financing loan proposals presented to the bankruptcy court: Mr. McCourt’s private lender proposal and the loan proposal of Major League Baseball (“MLB”). The court ejected the fully-secured private proposal in favor of MLB’s unsecured lower-cost alternative (which, unlike the private proposal, did not provide any funds for the McCourts’ personal use). The panelists strongly endorsed the MLB proposal as best for the debtor, in light of the bankruptcy court’s assurances that MLB would not be allowed to leverage its DIP loan for strategic advantage in the Chapter 11 contests to come.

Next, the remarkably rococo corporate structure into which Mr. McCourt has splintered the Dodger franchise rights was probed and puzzled over by the panel (see the attached schematic). A spider web of partnerships (general and limited), domestic and out of state corporations and more LLC’s than Nolan Ryan has no-hitters now own aspects of the franchise the McCourts’ acquired with MLB’s approval in 2004.

Ticket concessions have been split off into a second entity by the McCourts, then securitized (for quick cash) through a third, as an example. The plot of ground where Dodger Stadium sits has been legally separated from its surrounding parking lots, torn asunder, and placed into separate entities. Parking revenues have in turn been conveyed, reconveyed, packaged and securitized through another clot of artificial entities.

A further complication – the fact that only some of the entities that now “own” some aspect of the McCourt-acquired L.A. Dodger rights are technically before the bankruptcy court – poses additional hurdles to any resolution, the panel explained. The court’s jurisdiction over some of these non-debtor entities – ultimately required if there is to be a comprehensive re-selling of all aspects of the franchise – is problematic-to-non-existent. See that accompanying “Line Up Card” for a quick run-down of these entities and the interests they purportedly own.

After an hour of pondering imponder-ables and explicating inexplicabilities each panelist estimated the probability the L.A. Dodgers will have new ownership within three years – through the bankruptcy process or otherwise. The lowest estimate was 80%, and one called it a certainty, prompting applause from the audience, which began performing The Wave.

If proven correct, the panel’s predictions will be a fair resolution to a foul situation. –Ed.

1 The Orange County panel was comprised of Bankruptcy Specialist William Lobel, Esq. (The Lobel Law Firm) and sports law counsel Todd Theodora, Esq. (Theodora Oringher) in addition to Judge Ryan and Mr. Bressi.