LA Dodgers bankruptcy hearing opens in Delaware

A power line-up of lawyers for the Los Angeles Dodgers and Major League Baseball arrived in Wilmington for the first day of proceedings in the team’s bankruptcy case. 

Attorneys delivered opening arguments, of sorts, and began to call witnesses in a crowded sixth-floor courtroom Wednesday. The team is seeking approval of a $150-million financing plan, which has been rejected by Major League Baseball partially because the team sought, and obtained, a separate deal on media marketing rights with Fox.

It is the latest high-profile corporate case to make its way through the court system in Delaware.  The state’s reputation for business-friendliness and fairness in the courts has also drawn cases that involved Disney, World Wrestling Entertainment and many other well-known corporations.

Early in the proceeding, Judge Kevin Gross stopped attorneys from addressing each other and asked that questions be directed through him. “I’m concerned the conversations will not be so pleasant otherwise,” Judge Gross said.

Dodgers attorney Bruce Bennett said Major League Baseball was displaying arbitrary behavior toward the Dodgers, compared to other teams and their media rights agreements. 

Thomas Lauria, attorney for Major League Baseball, said the Dodgers refused to negotiate with Major League Baseball as a possible lender, when the team’s financial difficulties became apparent in 2010. He added that the Dodgers appeared to be using their bankruptcy filing as an attempt to avoid playing by the MLB rules. “Three strikes and you’re out. The Dodgers don’t get four strikes,” Lauria said.

“We aren’t here to harm the Dodgers. We’re here to protect the Dodgers,” Lauria stated.

Dodgers Assistant Treasurer Jeffrey Ingram was the first witness called to the stand. He discussed the various options the team explored and discussions with potential lenders before settling on a proposed agreement. Ingram said baseball was supportive of a proposed financing agreement at the time, but negative publicity over the bitter divorce involving team owner Frank McCourt “chilled the market” for investors.

The Dodgers pursued other alternatives, including the deal with Fox. Ingram said Major League Baseball was rejected as a potential lender because of an “adverse relationship.” The team is concerned that MLB wants to take over its operations. The Dodgers are seeking approval of their own financing plan negotiated with Highbridge Capital Management, an affiliate of JP Morgan-Chase.

At the lunch break, Judge Gross estimated that the day’s proceedings were in “about the third inning.”

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