The Los Angeles Dodgers filed for bankruptcy protection in a Delaware court Monday, blaming Major League Baseball for refusing to approve a multibillion-dollar TV deal that owner Frank McCourt was counting on to keep the troubled franchise afloat.
McCourt, upset that baseball Commissioner Bud Selig rejected the proposed TV deal last week, hopes a federal judge will approve $150 million in financing to be used for daily operations, which would give him more time to seek a more favorable media contract. A hearing is set for Tuesday at 1:30 p.m. (EDT) in Wilmington, Del.
"The action taken today by Mr. McCourt does nothing but inflict further harm to this historic franchise," Selig said in a statement.
Former players are owed millions and even beloved Hall of Fame announcer Vin Scully is owed more than $150,000 as part of his contract, court documents show.
The filing by a cash-starved McCourt comes just days before he was expected to miss a team payroll on Thursday and possibly be confronted with an MLB takeover.
Legal observers expect MLB to contest McCourt's request for filing bankruptcy, arguing the dispute should remain within the confines of baseball. Baseball's constitution allows Selig to take control of a team that seeks Chapter 11 protection.
MLB would have to file a motion to seek termination of the franchise. A person familiar with the filing, who spoke to The Associated Press on condition of anonymity because the situation is still in flux, said MLB will wait to see what happens in the hearing before deciding which way to go.
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 Dodgers are playing below .500 this season, though they beat the Twins 15-0 in Minnesota on Monday night. First-year manager Don Mattingly acknowledged it was odd to think of the team filing for bankruptcy.
"Obviously a franchise as storied as we are and entrenched in the history of the game, in a big city like LA, a great fanbase, to look at that and say this is happening," Mattingly said before Monday night's game at Minnesota. "It is different."
The Baltimore Orioles in 1993 and the Texas Rangers last year were sold in federal bankruptcy court, though in neither case did MLB seize the team first. In 2009, the Chicago Cubs went into bankruptcy for several weeks as part of the sales process after Tribune Co. agreed to sell the team to the family of billionaire Joe Ricketts.
"For somebody who grew up as a Dodger fan since he was 6 in Brooklyn, this makes me very, very sad," said Bob Daley, the Dodgers' managing partner when Rupert Murdoch's Fox Entertainment Group Inc. sold the team to McCourt in 2004.
The real estate developer bought the team in a highly leveraged $430 million deal that was the second-highest for a baseball team at the time.
He became just the fourth owner in franchise history, and the sale marked the return of the team to family ownership, although the McCourt clan has been nothing like the O'Malleys.
The O'Malleys owned the Dodgers or a stake in them for more than 50 years, an old-fashioned tenure of stability and tradition. Any problems were kept in-house, and employees were treated like family.
The O'Malley family's business was baseball. The McCourt family's business has become everybody's business.
Two years ago, McCourt and his wife and former team CEO Jamie McCourt decided to divorce, prompting a tawdry fight over who owns the team.
Their court filings revealed a lifestyle of excess, extreme even by the standards of LA's super-rich: multiple lavish homes, private security, country club memberships, even a six-figure hair stylist on call for the couple.
Daley rues the day the team was sold to McCourt.
"Fox, myself, and MLB made a horrible mistake in not doing the proper due diligence on Frank McCourt," he said. "I helped get him approved and for my piece, I feel very bad about it."
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 lists assets of up to $1 billion and debts up to $500 million. The Dodgers are obligated to pay $92.5 million in guaranteed player contracts, not including signing bonuses, and the team has nearly 300 full-time employees.
It also noted a $67 million loan taken out against the parking lots at Dodger Stadium was set to mature 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."
That's quite a contrast from the days of the O'Malleys.
Peter O'Malley's father, Walter, was the team's lawyer when he gained a controlling interest in the Brooklyn Dodgers in 1950, the same year Scully joined the organization.
The team, a fabled fixture of New York's borough of Brooklyn since the 19th century, broke baseball's color barrier when it signed Jackie Robinson as the first black major league player in 1947.
The Dodgers delighted their New York fans by winning their first World Series in 1955, then broke their hearts three years later by moving to Los Angeles, an act never entirely forgiven.
In Los Angeles, the winning ways continued, with World Series championships in 1959, '63, '65, '81 and '88, and memorable performances by Hall of Famers Don Drysdale and Sandy Koufax, who dominated hitters like few pitchers have before or since.
Ten years after Orel Hershiser, Kirk Gibson and Tom Lasorda helped the Dodgers win their last crown, the O'Malley family sold the team in 1998, when News Corp. bought the club, signaling the beginning of changing times for the franchise.
Since then, employees have churned through the club as quickly as wins and losses piled up.
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.
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.
Dodgers pitcher Ted Lilly, who's owed more than $3 million, said he hadn't talked to a single teammate about the bankruptcy filing.
"I'm not too sure what that means," Lilly said before Monday night's game at Minnesota. "As far as I know, I'm pitching tomorrow."
McCourt has defended his stewardship, saying he had made it profitable and successful. He also said the Dodgers have tried for almost a year to get Selig to approve the Fox transaction, which would have provided McCourt with $385 million up front and was vital to a binding settlement reached this month by him and Jamie McCourt.
"He's turned his back on the Dodgers, treated us differently, and forced us to the point we find ourselves in today," McCourt's statement said. He was not made available for further comment Monday.
"He's been an embarrassment to this franchise," Daley said, referring to McCourt. "The sooner he gets the hell out of town, the better off we'll all be as Dodger fans."