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Can MLB Terminate the Dodgers?

FILE - In this Feb. 28, 2006, file photo, Major League Baseball commissioner Bud Selig, left, and Los Angeles Dodgers owner Frank McCourt wait for the Urban Youth Academy opening ceremony to begin in Compton, Calif. Major League Baseball is taking over the Dodgers, a team financially paralyzed by the divorce of its owners, Frank and Jamie McCourt. Selig says in a release Wednesday, April 20, 2011, that he will appoint a representative to oversee the "business and the day-to-day operations of the Club." (AP Photo/Ric Francis, File)
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The attorneys for Frank McCourt and MLB have agreed that McCourt can use the $150 million loan he obtained to continue to finance the Dodgers. The U.S. bankruptcy court will hold a hearing on July 20 where MLB will seek to replace the hedge fund financing for their own. The loan carried an interest rate of at least 10% with a $4.5 million fee while the MLB loan would only carry an interest rate of 7%.

MLB will also seek to reinstate monitor Tom Schieffer and will also request a trustee for the team in the coming days.

As many questions as there are that surrounds the Dodgers now, it is clear that MLB Commissioner Bud Selig wants McCourt ousted. But what happens if Selig doesn’t get his way?

Like the “death penalty” bomb that the NCAA can use against schools, MLB holds one of their own. Simply put, Selig can terminate the Dodgers and create a National League expansion team in Los Angeles with a new ownership group. This is the exact thing that Selig threatened to do last year if the bankruptcy court didn’t award the Texas Rangers to the ownership group of Chuck Greenberg and Nolan Ryan. In a story by Richard Sandomir and Ken Belson in the New York Times on July 18, 2010:

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One of Selig’s lawyers vowed profanely in a conference call that if the judge did not approve the team’s prepackaged bankruptcy plan, which would have sped approval of the Greenberg-Ryan bid, M.L.B. would terminate the franchise, according to a person on the call.

That didn’t happen because the Greenberg-Ryan group did eventually win the auction in bankruptcy court.

Because McCourt has separated every single asset, it is unknown if by folding the Dodgers all assets and companies associated with Dodgers would be part of the termination. If not, then there is a question where the new expansion team would play since I doubt that either McCourt or MLB would allow the team to play at Dodger Stadium.

Judging by how toxic things have become around the Dodgers, this scenario shouldn’t be overlooked. After all who would have thought the Dodgers would ever have to declare bankruptcy?