(CN) – Fox and the Los Angeles Dodgers settled their dispute Wednesday over a lucrative broadcasting deal that came into question when the team went bankrupt this summer.
After Chief U.S. Bankruptcy Judge Kevin Gross signed the settlement Wednesday in Delaware, Fox wrote to the federal judge presiding over its lawsuit with the Major League Baseball outfit, asking for dismissal of the case. U.S. District Judge Leonard Stark signed the order to dismiss Wednesday.
Five L.A. Dodgers entities filed for bankruptcy in June 2011, while their sole equity holder, Frank McCourt, fought the MLB for control of the team.
McCourt has also been ordered by a California court to pay his ex-wife, Jaime, $131 million by April 20, 2012.
Fox Sports Net West 2 dba FSN Prime Ticket penned a deal for cable television rights of Dodgers games in late 2001. That agreement allows it to show 100 regular season Dodgers games through the end of the 2012 MLB season. Fox also had the exclusive right to negotiate cable television rights for another five years of Dodgers games, beginning with the 2014 season.
When Dodgers debtors entered into a settlement agreement with the MLB late last year, they agreed that the team’s future owner would preserve the current cable rights agreement with Fox.
Despite that agreement, the Dodgers debtors sought authorization to negotiate television rights with third parties more than 10 months before the date set in the agreement with Fox.
A Delaware bankruptcy court found that the “no-shop” provision of Fox’s agreement was unenforceable against a bankruptcy entity and failed under state law.
On appeal, Stark sided with Fox and granted an emergency stay, finding it had “shown a strong likelihood of success on the merits of its appeal.”
“In particular, appellant has demonstrated that the bankruptcy court likely erred in concluding that the ‘no shop’ provision is unenforceable in bankruptcy and further that the bankruptcy court likely made at least two clearly erroneous findings of fact,” Stark wrote in a Dec. 27 explanation of that order.
Stark said the bankruptcy judge had improperly found “that the marketing of the Dodgers’ future telecast rights separate from the sale of the team is necessary to ensure full payment to all creditors … and that the marketing of the Dodgers’ future telecast rights separate from the sale of the team is necessary to maximize the value of the debtors.”
Fox had demonstrated “irreparable harm” because without an order in its favor it would be “less likely to obtain the future telecast rights for Dodgers games in the 2014 MLB season and beyond, the 31-page opinion states.
“The court concludes that the amended procedures make it less likely that Fox will be the winning bidder in the forthcoming competition to obtain the right to telecast Dodgers games after the 2013 season,” Stark wrote.
“This harm is irreparable because the right to telecast Dodgers games is a unique asset that cannot be replaced,” he added.
Absent the emergency stay, “Fox would be forced to negotiate with [the Dodgers] with less leverage than it contracted for, and this, too, is irreparable harm,” the judge said, noting the contrast between the “voluntary negotiations” that Fox entered into in 2011, and “the compelled negotiations in which Fox must engage under the bankruptcy court’s order.”
“Fox paid for the opportunity to have an exclusive negotiating window with the Dodgers in late 2012; forcing it to ‘enjoy’ this exclusive negotiating window at an earlier time, not of its own choosing, when it perceives itself to have reduced leverage, imposes on Fox irreparable harm,” he added.
In the face of that opinion, the Dodgers backed away from their maneuver and settled with Fox.