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Judge to weigh delaying hearing on Dodgers sale

By Randall Chase
AP Business Writer / November 18, 2011

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WILMINGTON, Del.—A Delaware bankruptcy judge is set to hear arguments on a request by Fox Sports to delay consideration of the Los Angeles Dodgers' plan to sell media rights to future games.

Fox contends that the planned media rights sale violates an existing contract giving it television rights through 2013 and priority in negotiating a contract for games starting in 2014. It has filed a lawsuit seeking to enforce its right under the contract and is also asking the judge to postpone a scheduled Nov. 30 hearing on a motion by the Dodgers seeking court approval of the proposed sale process.

Judge Kevin Gross has agreed to hear arguments Tuesday on Fox's motion to postpone the Nov. 30 hearing.

The Dodgers have refused to postpone the hearing, accusing Fox of trying to interfere with efforts to sell the team and its assets so that it can emerge from bankruptcy.

The Dodgers claim Fox attorneys are trying to delay arguments on the sale motion because they are either unprepared or expect to lose.

"Given that the motion has been pending for roughly two months, there is no excuse if they are not prepared. That means they think they will lose," the team said in a prepared statement. "The Dodgers expect that the bankruptcy court will understand Fox's motivations and will deny the motion."

Fox maintains that the sale motion cannot be properly evaluated without an understanding of the terms of a recent settlement in which Major League Baseball and the Dodgers agreed to a court-supervised sale of both the team and the media rights to future games. The settlement agreement has yet to be filed with the court.

The Dodgers sought bankruptcy protection in June, blaming MLB Commissioner Bud Selig for refusing to approve a renegotiated multibillion-dollar TV deal with Fox Sports that Dodgers owner Frank McCourt was counting on to keep the franchise afloat.

Attorneys for Selig immediately challenged the Dodgers' plan to sell media rights to future games in bankruptcy, saying such a sale without the league's approval was "dead on arrival" and would spell the end of the ball club. They also argued that the proposed sale would breach the Dodgers' existing contract with Fox Sports, leaving the team subject to substantial legal claims while providing grounds for termination from the league for failure to abide by its covenants.

But after accusing McCourt of siphoning off more than $180 million in revenues from the club for personal and business obligations, including a costly divorce settlement, MLB announced an agreement with the Dodgers earlier this month under which both the team and the media rights would be sold.

In response to the agreement between MLB and the Dodgers, Fox on Thursday amended its lawsuit seeking to prevent the team and its advisers from soliciting bids for the media rights.

"Fox's latest lawsuit underscores its desperation to maintain its stranglehold on the Los Angeles sports media market in the face of intense competition from Time Warner," the Dodgers said Friday. "The Dodgers and its management team will not be intimidated or distracted from maximizing the value of the Dodgers' assets in connection with the impending sale."

Fox attorney Richard Stone wasted no time firing back.

"It is supremely ironic that McCourt is once again pointing fingers in order to distract attention from his ongoing scheme to line his pockets at the expense of the Dodgers and their fans," Stone said in a prepared statement. "It is clear that the team can be sold at a handsome price that will take care of all creditors without Fox having its rights violated, but McCourt continues to abuse the bankruptcy process in hopes of enriching himself."

Fox plans to file a motion by the end of the month asking Gross to dismiss the bankruptcy case. Fox argues that the case should be dismissed for lack of good faith because the primary purpose of the media rights sale motion is to transfer economic value from Fox's Prime Ticket regional sports network to McCourt.

"Any hearing on the new marketing procedures motion should be adjourned to a new date and after a hearing on that motion to dismiss," Fox attorneys wrote in court papers.

Meanwhile, the Dodgers filed a motion Thursday seeking court approval of a settlement with Facility Merchandising Inc., a Dodger Stadium souvenir vendor. The settlement would resolve a dispute over royalty payments and alleged fraudulent inducement of FMI to enter into a concession agreement with the team.

Under the proposed settlement, the Dodgers would take possession of some $740,000 worth of inventory from FMI and assume an estimated liability of $380,000 for outstanding and pending purchase orders for merchandise to be sold during the 2012 season. FMI would use a $300,000 advance from the Dodgers to repay obligations under a separate financing agreement so that any existing liens on the inventory would be released. FMI has agreed to repay $250,000 of that advance by March 1.

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