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Arguments set in Dodgers bankruptcy appeal by Fox

By Randall Chase
AP Business Writer / December 16, 2011
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DOVER, Del.—A federal district court judge in Delaware has scheduled a hearing next week in an appeal by Fox Sports of a federal bankruptcy judge's order allowing the Los Angeles Dodgers to sell the media rights to future games.

U.S. District Judge Leonard Stark told attorneys at the conclusion of a teleconference Friday that he will hear arguments next Thursday on Fox's request for an emergency stay of the bankruptcy judge's order until a ruling on the appeal.

Stark said he would hear arguments on the merits of Fox's appeal on Jan. 12. The briefing schedule he set is similar to the timetable suggested by Fox. The judge rejected arguments by a Dodgers attorney that the appeal process was being rushed.

"We think that schedule is way too expedited," said Dodgers attorney Sid Levinson.

Stark said that, given the planned April 30 deadline for a sale of the Dodgers and the rights to games starting in 2014, he needs to make timely rulings both on the stay motion and on Fox's appeal itself.

The appeal involves a ruling by U.S. Bankruptcy Judge Kevin Gross authorizing the Dodgers to begin the process of marketing future media rights as part of the team's plan to emerge from bankruptcy.

The Dodgers sought bankruptcy protection in June after baseball Commissioner Bud Selig rejected a new TV deal with Fox that Dodgers owner Frank McCourt was counting on to keep the franchise solvent.

After threatening to seek bankruptcy court permission to sell the media rights without the approval of Major League Baseball, the Dodgers reached an agreement with MLB that calls for a sale of both the team and the media rights.

But Fox is challenging the proposed media rights sale process, saying it violates Fox's exclusive rights under its existing contract with the Dodgers. That contract gives Fox an exclusive 45-day period starting in October 2012 to negotiate a contract extension with the Dodgers.

Fox Sports attorney Catherine Steege told Stark that Gross had no authority to approve a contract that was unilaterally written by the Dodgers and deprives Fox of negotiating rights that it bargained and paid for. She noted that the plan approved by Gross allows the Dodgers to take any agreement reached with Fox and try to find a better deal with someone else.

"We're being forced into the position of an involuntary stalking horse," she said, using the term for an initial bid solicited by a bankrupt company as a starting point for seeking higher bids.

Levinson argued that the proposed sale process would not deprive Fox of any leverage during the exclusive negotiating period, which the Dodgers want to move up by about 10 months. Given that the value of media rights is increasing, Fox would pay more if it negotiates a contract extension next year rather than now, Levinson added.

The settlement between the Dodgers and MLB calls for the team and the media rights to be sold by April 30, which also is the deadline for McCourt to pay $131 million to his ex-wife, Jamie, as part of their divorce settlement.

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