Monday, June 27, 2011

So which "Los Angeles Dodgers" company actually filed for bankruptcy?

When the news broke this morning that the Los Angeles Dodgers have filed for bankruptcy, the first thing that occurred to me was that Frank McCourt has actually split the Dodgers into multiple companies. So which one actually filed?

According to bankruptcy papers as shared by the Los Angeles Times, the business entity that filed for bankruptcy was "Los Angeles Dodgers LLC." A myriad of other companies are mentioned in the document:

Los Angeles Dodgers Holding Company LLC
LA Holdco LLC
LA Real Estate LLC
LA Real Estate Holding Company LLC

According to The Big Lead, a total of five companies filed for bankruptcy, presumably including the four companies listed above. So much for the claim that the companies are separate entities.

But points out that there are other entities involved, including Blue Land Co (not mentioned above), which receives $21 million annually from the Dodgers for the use of the parking lots. Blue Land Co was created in 2006:

In 2006, two years after purchasing the team, Frank McCourt divided the stadium property into three parcels and established Blue Land Co. to own two of them. Those two parcels, parking lots immediately surrounding the ballpark, serve as collateral for a $60-million loan, court records show.

The Dodgers pay rent to Blue Land, which is not involved in stadium operations. Boies said the rental payments offered the McCourts the option of working around restrictions on receiving cash directly from team coffers.

And Blue Land is significant in other ways:

Beginning in 2008 and continuing through at least the first four months of 2010, the Dodgers paid $300,000 per month to an entity called the John McCourt Company for consulting services related to development of the real estate surrounding Dodger Stadium, according to court documents and statements made in court by both sides in April. Earlier this year, the Dodgers stopped paying the fees, but the payments continued to be paid by Blue Landco LLC, a different McCourt-owned entity.

The switch was significant because under the terms of the McCourts' financing arrangement with lenders, Frank McCourt cannot receive more than $5 million in compensation from the Dodgers -- but there are no such restrictions on payments from Blue Landco LLC.

Of course, if you accept the common legal idea that a corporation is a person, the bankruptcy of the five companies has had an adverse effect upon Blue LandCo - which raises the prospect that Frank McCourt could end up suing himself.

While the fact that the five Dodgers entities filed bankruptcy in lockstep may make it easier for Bud Selig to gain control of all five in a single blow, the situation with Blue Landco is a little muddier - although conceivably the city of Los Angeles could use eminent domain to take over Blue Landco. After all, the city has a precedent for taking over property at Chavez Ravine - why not use it to wrest a parking lot from The Parking Lot Guy?
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