Could the Dodgers Benefit from a Bankruptcy Claim?

The Dodgers filed for bankruptcy in 2011 under former owner Frank McCourt. This was widely seen as a shocking turn of events for the major league baseball team. Why?

Well, baseball teams rarely have to deal with bankruptcy lawyers in Howard County or elsewhere. (Can you think of any others?) But now new information has come to light suggesting that the Dodgers’ new owners, Guggenheim Baseball, could stand to benefit immensely from confidential terms of the U.S. Bankruptcy Court settlement.

These benefits involve special media agreements that would enable the Dodgers to get out of paying a surcharge to pursue a regional sports network. This could enable the Dodgers to make millions of dollars in profits unavailable to other sports franchises.

Sports team owners typically negotiate contracts sports networks such as ESPN, Time Warner Cable and Fox Sports. Each team pays 34 percent of the money they receive from those contracts to MLB. If a sports team seeks to establish or pursue a relationship with a regional cable sports network, they have to pay a surcharge to MLB in addition to the 34 percent media rights fees if the network lowballs the team. For the Dodgers, thanks to a stipulation in the bankruptcy agreement, they do not have to pay this surcharge.

The Dodgers — due to litigation resulting from the actions of an irresponsible former owner — might have access to a financial opportunity that other teams don’t. According to an L.A. Times report, Guggenheim Baseball may take advantage of this opportunity and start their own media network, which could then lowball the team on a sports media contract, allowing all the profits to go straight into the Dodgers owners’ pockets. They may also use the new set of rules to combine two broadcasts, in English and Spanish, under one set of payments to MLB.

There are many potential ways this ruling could cause tension for MLB Comissioner Bud Selig and other team owners. Because it comes from a Federal Bankruptcy ruling, it would not be easy to overturn. Only time will tell what comes of the situation.