MLB denies TV deal to Dodgers. Law Suits to follow?

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The "Dodgers" are one of the most recognizable sports franchises in the world. From Brooklyn and the days of Jackie Robinson to Tommy Lasorda and the World Series of 1977 the Dodgers have been considered one of baseballs best franchises. The Dodgers kept this mystic through the 1994 strike, steroid era, and even the Manny days.

Jamie McCourt purchased the Dodgers from News Corp. in 2004 for 430 million dollars. Since McCourt's ownership the Dodgers have been the worlds first MLB shooting star. That is, they burned bright for a short period of time (2004-2009) only to burn out and fall further than was ever imaginable.

Yesterday, Bud Selig, the commissioner of Major League Baseball, vetoed a 17 year 2.1 billion dollar television deal between Fox Sports and Jaime McCourt's Dodgers. If your not aware of the back story, Jamie McCourt has been involved with a highly publicized divorce which through the proceedings as revealed that the McCourts borrowed heavily against the Dodgers to support a lavish lifestyle. Specifically, the McCourt's borrowed over 100 million dollars to purchase lavish homes in California. This discretion, in Major League Baseballs opinion, has led to the recent financial concerns and solvency of the LA Dodgers and led in the commissioners decision to veto any television deal that financial involves the McCourts personal life. Two months ago, MLB's commissioner Bud Selig, vetoed the Fox Sports deal as 100 million of the 385 million loan was allocated to the divorce settlement between himself and his wife. Mr. Selig followed the veto by seizing control of the day to day operations of the Dodger franchise.

For the past two months, McCourt has argued that MLB's takeover was "UnAmerican" and possibly against the law. Unfortunately for McCourt, Bud Selig is a Marquette Law alumnus and very astute in legal regulations and governing laws. Thereby, making it unlikely that Selig legally over stepped his bounds. Specifically, Bud Selig was able to seize control of the team in response to the Opening Day beating outside Dodger Stadium. It was found that Dodger Stadium security was less than adequate and the teams lack of financial solvency led to the decision to lower security standards which directly led to safety concerns for fans/customers and the overall image of MLB's ability to provide a family oriented product.

McCourt has continued to push for the Fox Sports deal and has argued that all financial concerns would be eliminated with the deal. So is this true? The Wall Street Journal reports, the deal with Fox would have given Mr. McCourt a 35% stake in the regional sports network Prime Ticket, which broadcasts the team's games. It included a $385 million loan to Mr. McCourt to be paid off with his share of future profits from sports network. So, yes. I believe McCourt would have had the capital injection needed to continue operating the team within the financial guidelines of MLB laws. McCourt also had the deal approved by the courts and supposedly met all standards required by MLB laws.

However, Bud Selig, again, vetoed the television deal yesterday stating, "Such a diversion of assets would have the effect of mortgaging the future of the franchise to the long-term detriment of the club and its fans. We owe it to the legion of loyal Dodger fans to ensure that this club is being operated properly now and will be guided appropriately in the future."

McCourt may take the issue to court. According to the Wall Street Journal, who is owned by News Corp. and who also owns Fox Sports, has reported that Jamie McCourt plans to vigorously fight MLB's decision. MLB and Bud Selig didn't comment on any pending suit.

McCourt's argument is that MLB can only seize control of the team itself and not the companies that support it. What does that mean? The Wall Street journal reports that when McCourt purchased the Dodgers in 2004, he did so with two purchases. First, 300 million for the team itself and secondly a 100 million dollar purchase of the stadium and the land surrounding it. Furthermore, the Wall Street Journal reports, the team was broken into several companies such as putting the team itself into a holding company known as The McCourt Broderick Limited Partnership. The stadium was then held by an entity known as LA Real Estate LLC. The land is held by Blue Landco LLC. Dodgers Tickets LLC controls the team's ticket-selling operations. The latter company made two deals in 2005 and 2007 to borrow a total of $367 million against future ticket sales. The first $10 million in ticket sales each year goes to pay down debt on the interest-only loans, with Mr. McCourt using the additional ticket revenues to pay for team expenses.

With the television deal dead, McCourt will most likely be unable to meet payroll obligations past June. At that time, Major League Baseball will seize control of the entire team (all assets included) and most likely auction them off to the highest bidder. Of course, that's if McCourt doesn't file suit against MLB before hand. Stay tuned.