(Updates with response from Fox in 10th paragraph.)
Nov. 13 (Bloomberg) -- The Los Angeles Dodgers, the Major League Baseball team being sold in bankruptcy, may seek bids for future television rights under a proposal that could trigger a court fight with current rights-holder News Corp.’s Fox Sports.
The Dodgers asked U.S. Bankruptcy Judge Kevin Gross to approve a marketing process under which the rights and the team sale would move forward separately, according to court papers filed yesterday in Wilmington, Delaware. The entire process would stretch into next year, the team said.
By marketing the rights separately, the Dodgers “will be able to provide prospective buyers of the team with real-world information about what the value of the telecast rights would be if openly marketed,” the team said in the filing.
The Dodgers filed for bankruptcy in June after Major League Baseball Commissioner Bud Selig rejected a television deal that team owner Frank McCourt negotiated with Fox. Selig and McCourt fought over how best to reorganize the team until earlier this month, when they both agreed that McCourt would sell the team.
The television rights may not be sold unless MLB and the winner of an auction for the team approve the deal. Before the team can begin talks with bidders for the rights, it must win approval from Gross. The judge has said that he will give the unit of New York-based News Corp. and others a chance to object to any proposed sale process.
The Dodgers asked Gross to consider approving the TV rights motion at a hearing on Nov. 30.
Fox has opposed any effort to negotiate a new television deal, claiming that its current contract, which expires in 2013, gives it an exclusive right to negotiate for future games until November 2012, according to court papers.
Fox, operating through its unit Fox Sports Net West 2 LLC, sued the team in bankruptcy court in September, asking a judge to prevent the Dodgers from trying to negotiate with any potential TV rights bidders. Fox Sports Net told Gross in a Nov. 10 court filing that it intends to amend its lawsuit.
The Dodgers accused Fox of having a conflict of interest in the bankruptcy case because it wants to spend as little as possible to retain the TV rights. The Dodgers accused Fox of sending a letter to the team’s financial adviser, Blackstone Group LP, threatening legal action for interfering with the current TV contract.
“We fully support a change in ownership of the Dodgers,” Fox said in a statement. The company has rights “that cannot be violated, as MLB has previously stated,” according to the statement. “Those rights were negotiated and paid for by us and approved by MLB. We will take all necessary steps to aggressively protect and defend those rights, including opposing the amended motion and actively pursuing our still-pending lawsuit.”
Under the team’s proposed sale process, Fox would have an exclusive right to negotiate an extension of its contract for 45 days. Other bids may then be entertained if a deal isn’t reached.
The team must seek a special hearing to determine what, if any, monetary damages Fox may be entitled to if the rights are sold to another bidder, according to court papers. The hearing would take place before a sale of the television rights can be completed.
This would give the Dodgers the flexibility of canceling a proposed deal and allowing the team to be sold with the current Fox contract in place, including restrictions on negotiations.
The settlement between MLB and the Dodgers, which are controlled by McCourt, has not yet been submitted to the bankruptcy court for approval. That agreement requires a sale of the team to close by April 30, according to court records.
The case is In re Los Angeles Dodgers LLC, 11-12010, U.S. Bankruptcy Court, District of Delaware (Wilmington).
--Editors: Andrew Dunn, Sylvia Wier
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