In re Los Angeles Dodgers LLC

465 B.R. 18 (2011)

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In re Los Angeles Dodgers LLC

United States District Court for the District of Delaware
465 B.R. 18 (2011)

Facts

In November 2001, the Los Angeles Dodgers LLC (LAD) entered into a contract (Fox agreement) with Fox Sports Net West 2 (Fox) (defendant) for Fox to broadcast Dodgers games through 2013. Per the Fox agreement, between October 15 and November 30, 2012, Fox would have an exclusive window to negotiate a new contract starting with the 2014 season. During this exclusive period, LAD could not solicit offers from or negotiate with other bidders. In addition, Fox could match third-party bids under certain circumstances. In June 2011, LAD and several affiliates (collectively, the debtors) sought bankruptcy protection in Delaware, where each was established. In November 2011, the debtors and Major League Baseball (MLB) agreed (MLB agreement) that the debtors would sell the Dodgers by April 2012. The MLB agreement permitted the debtors to sell future broadcast rights to Dodgers games along with the team if desired. Accordingly, the debtors asked the bankruptcy court to modify the Fox agreement to advance the exclusive-negotiation period to the 45-day period starting November 30, 2011, and dispense with Fox’s matching rights. Fox objected. In support of the debtors’ request, their expert testified that the proposed changes would help maximize the bankruptcy estate’s value and would not materially change the Fox agreement. However, the debtors’ expert did not state that the estate’s value could not be maximized without the proposed changes. Fox presented expert testimony that (1) it likely would win a renewal contest conducted pursuant to the Fox agreement, (2) the proposed changes would materially modify the contract, and (3) the proposed changes were not necessary to fully satisfy the debtors’ debts or maximize the estate’s value. The bankruptcy court granted the debtors’ motion, ruling, among other things, that an exclusive negotiating period is unenforceable against bankrupt entities and that permitting the proposed changes was necessary to ensure full payment to creditors and maximization of the estate. Fox filed an emergency stay motion with the district court.

Rule of Law

Issue

Holding and Reasoning (Stark, J.)

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