After commending plans for stadium improvement, “We commend Frank and Jamie McCourt for their vision and their dedication to grow the game in the 21st Century.” (Commissioner) April 24, 2008 When asked if worried about McCourt’s ownership dispute, “Look, the Dodgers are in good hands. . . There’s no reason to get into any debate about what’s going to happen.” (Commissioner) November 19, 2009 “Over the past year, Frank McCourt has demonstrated his steadfast commitment to building a strong and healthy franchise in Los Angeles. The success of this private placement [Tickets I] is another example of Frank’s outstanding stewardship. It is good for the Dodgers and it is good for baseball.” (Commissioner) May 13, 2005 McCourt’s announce separation. October 2009 MLB representatives assured Mr. McCourt he had full support of February – April 2010 MPA Invalidated December 7, 2010 At meeting to discuss plan to raise capital, Commissioner’s office offered full support including MLB executives participating in road show, noting the Dodgers are “a model franchise.” May 24, 2010 2004 2005 2006 2007 2008 2009 2010 Commissioner Fully Supports McCourt Before MPA Invalidated “There’s no doubt in my mind that [Mr. McCourt] will be a good owner of a very storied franchise.” (Commissioner) January 30, 2004
Transcript
After commending plans for stadium improvement, “We commend Frank and Jamie McCourt for their vision and their dedication to grow the game in the 21st Century.” (Commissioner)
April 24, 2008
When asked if worried about McCourt’s ownership dispute, “Look, the Dodgers are in good hands. . . There’s no reason to get into any debate about what’s going to happen.” (Commissioner)
November 19, 2009“Over the past year, Frank McCourt has demonstrated his steadfast commitment to building a strong and healthy franchise in Los Angeles. The success of this private placement [Tickets I] is another example of Frank’s outstanding stewardship. It is good for the Dodgers and it is good for baseball.” (Commissioner)
May 13, 2005
McCourt’s announce separation.
October 2009
MLB representatives assured Mr. McCourt he had full support of MLB.
February – April 2010
MPA Invalidated
December 7, 2010
At meeting to discuss plan to raise capital, Commissioner’s office offered full support including MLB executives participating in road show, noting the Dodgers are “a model franchise.”
May 24, 2010
2004 2005 2006 2007 2008 2009 2010
Commissioner Fully Supports McCourt Before MPA Invalidated
“There’s no doubt in my mind that [Mr. McCourt] will be agood owner of a very storied franchise.” (Commissioner)
January 30, 2004
Commissioner Rejects Fox Version 1 (overruling Dec. 10, 2011 staff recommendation to approve)
First Week of Jan.
Commissioner rejects Fox Version 2
February 2011
z
Commissioner would be “extremely disappointed” if Mr. McCourt decided to go forward with personal loan of $30 million from Fox.
April 11, 2010
“Should you proceed with loan, I will have to take into account the risk and other potential consequences associated with this increase in your personal indebtedness in evaluating the other [Fox] transactions you have proposed.”
MPA Invalidated
December 7, 2010
Commissioner rejects Fox Version 3
June 20, 2011
Dodgers file for bankruptcy protection under Chapter 11
June 27, 2011
Jan. Feb. March April May June July August 2011
Commissioner Acts in Bad Faith After MPA Invalidated
Commissioner “cannot at this time conceive of approving any transaction with any party (including but not limited to Fox) that would enlarge the Dodgers’ enterprise debt, impair future revenue and artificially depress enterprise value.”
February 24, 2010
Commissioner insists on providing DIP financing.
AUGUST 8, 2011
The Dodgers are “prepared to modify the Fox transaction so that all $385 million of proceeds will be invested directly into the team. I hope that this change will cause you to reconsider and give the transaction your speedy approval.” (McCourt letter to Commissioner)
June 24, 2011
Commissioner begins investigation and appoints “monitor” to oversee operations. Monitor immediately seizes control of team in violation of MLB constitution.
April 19, 2010Commissioner never responds.
Commissioner’s Authority is Subject to a Duty of Good Faith and Fair Dealing
The Major League Constitution is a contractual agreement (Article I)“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” (Restatement (Second) of Contracts § 205 (1981))
• “It is well settled that, in California, the law implies in every contract a covenant of good faith and fair dealing.” Edmond's of Fresno v. MacDonald Group, Ltd., 217 Cal. Rptr. 375, 379-380 (1985)
Commissioner’s Authority is Subject to a Duty of Good Faith and Fair Dealing
• “[A] covenant of good faith and fair dealing [] is implied by law in all contracts.” Computer Possibilities Unlimited, Inc. v. Mobil Oil Corp., 747 N.Y.S.2d 468, 479 (N.Y. App. Div. 2002)
• Ashland Mgmt. Inc. v. Janien, 604 N.Y.S.2d 912, 915 (1993) (firm breached duty of good faith and fair dealing by refusing to negotiate)
The Commissioner therefore must act in good faith and deal fairly in exercising his authority under the Major League Constitution.
Commissioner of Baseball Must Not Act Arbitrarily
Various courts construing the Commissioner of Baseball’s authority have stated that such authority cannot be applied arbitrarily:
• Atlanta Nat’l League Baseball Club, Inc. v. Kuhn, 432 F. Supp. 1213, 1218-1219 (N.D. Ga. 1977) (unauthorized or arbitrary decision by Commissioner is subject to review and potential reversal by the court)
• Finley & Co. v. Kuhn, No. 76C-2358 (N.D. Ill., September 7, 1976) (same)
• Milwaukee Am. Ass’n v. Landis, 49 F.2d 298, 303 (N.D. Ill. 1931) (Commissioner’s discretion is not unlimited and may not be exercised arbitrarily)
Commissioner’s Actions Must Comport with Procedural Due Process
• A court has the authority to review and reverse an action of the Commissioner of Baseball where the Commissioner fails to follow basic procedural due process. Finley & Co. v. Kuhn, 569 F.2d 527, 544 (7th Cir. 1978)
• The MLB Constitution requires the approval of ¾ of the clubs before a club may be sold, or before the club’s rights, privileges and other property rights may be terminated. (Art. V, §§ 2(b)(2) & (8); Art. VIII)
Commissioner’s Actions Must Comport with Procedural Due Process
• In an effort to oust McCourt as owner, the Commissioner forced the team into bankruptcy and has insisted in the bankruptcy that the club must be sold. (Dkt. 476 ¶¶10, 54)
• By not obtaining the required approval of the clubs before seeking to force a sale of the Dodgers, the Commissioner has failed to follow the basic due process owed to Mr. McCourt and has circumvented the protections afforded McCourt under the MLB Constitution.
Major League Constitution Article II, Section 3Does Not Contemplate Forced Sale of a Team
In the case of conduct by Major League Clubs, owners, officers, employees or players that is deemed by the Commissioner not to be in the best interests of Baseball, punitive action by the Commissioner for each offense may include any one or more of the following:
(a) a reprimand; (b) deprivation of a Major League Club of representation in Major League Meetings; (c) suspension or removal of any owner, officer or employee of a Major League Club; (d) temporary or permanent ineligibility of a player; (e) a fine, not to exceed $2,000,000 in the case of a Major League Club, not to exceed $500,000 in the case of an owner, officer or employee, and in an amount consistent with the then-current Basic Agreement with the Major League Baseball Players Association, in the case of a player; (f) loss of the benefit of any or all of the Major League Rules, including but not limited to the denial or transfer of player selection rights provided by Major League Rules 4 and 5; and (g) such other actions as the Commissioner may deem appropriate.
Major League Constitution Article II, Section 3Does Not Contemplate Forced Sale of a Team
Motion of Major League Baseball to Disqualify Dewey & LeBoeuf LLP
and Young Conaway Stargatt & Taylor LLP as Attorneys for the Debtors
(September 23, 2011)
“A sale of the Media Rights now as proposed by the Debtors will . . .
subject[] them to severe discipline, including possible involuntary
termination of the Dodgers’ franchise under the Major League
Constitution (“MLB Constitution”)
possible involuntary
termination of the Dodgers’ franchise under the Major League
Constitution
possibility of involuntary termination of the
Dodgers franchise
The proposed Media Rights transaction also will. . ., subject[] them to severe
discipline, including the possibility of involuntary termination of the
Dodgers franchise under the MLB Constitution .
involuntary termination of the Dodgers franchise
P]ursuit of the Media Rights Motion for the benefit of Mr. McCourt also conveniently
ignores that the Dodgers exist only as part of Major League Baseball under the
Baseball Agreements. Yet, the Debtors propose in the Media Rights Motion to breach
the Baseball Agreements by seeking to install a judicial review of Major League
Baseball’s approval rights over a sale of the Media Rights. Such a breach is grounds
for involuntary termination of the Dodgers franchise under the MLB Constitution.
Motion of Major League Baseball to Terminate Exclusivity
( September 23, 2011)
The Bankruptcy Code does not displace Major League Baseball’s
approval rights and powers under the Baseball Agreements. Moreover,
a sale of the Dodgers’ Media Rights without Major League Baseball
approval would subject the Debtors to potentially severe discipline,
including possible termination from the League.possible termination from the League.
The inability of the Debtors to cure these breaches would preclude
the Debtors from assuming the Baseball Agreements, which would
eliminate essentially all of the Debtors’ value. Indeed, no one will
pay the Debtors to broadcast Dodgers games if the Club is not part
of Major League Baseball. Consequently, the Debtors’ path in this
case is a dead end or worse. The only path to emergence is through
