Fox Threatens to Withhold ‘Seven-Digit’ January Royalty Payment to Dodgers

Fox Sports may withhold a January royalty payment to the Los Angeles Dodgers in a dispute over rights to televise the Major League Baseball team’s games, a lawyer for the network said.

“We’re not going to be able to sit around and wait to see whether we are being injured and then cough up a significant sum of money,” the lawyer, Gregory W. Werkheiser, said at a court hearing today in Wilmington, Delaware, where the Dodgers are in bankruptcy. Werkheiser said the payment was at least in the “seven digits” range.

The team and Fox Sports Net West 2 LLC are fighting over a proposal to solicit bids for future TV rights. Fox Sports, a unit of New York-based News Corp. (NWSA), can broadcast games through the 2013 season and has an exclusive right to negotiate a new contract until December 2012, according to court records.

Fox opposes any early effort to garner competing bids for TV rights, claiming that Frank McCourt, the Dodgers’ owner, is wrongly trying use bankruptcy to break the team’s contract with Fox’s Prime Ticket unit.

The Dodgers are seeking to accelerate the bidding process and start talking to potential TV-rights buyers now. The team would begin by giving Fox 45 days to extend its contract. Should those negotiations fail, the team would seek other offers, according to court documents.

Sale Approval

Under an agreement between the Dodgers and Major League Baseball, no sale of the TV rights can go forward without approval from MLB, U.S. Bankruptcy Judge Kevin Gross and whomever wins the bidding for the team.

At the beginning of the hearing, Gross approved the team’s request for an additional six months to file its reorganization plan. That plan, which would be based on a sale of the team, is now due in April. This month Fox will try to persuade Gross to throw out the bankruptcy case.

During the hearing today, David J. Teklits, a Fox attorney, challenged the Dodgers’ claim that the broadcaster wouldn’t be harmed financially by allowing the team to solicit bids for the TV rights about a year early.

Teklits said the change amounts to a breach of the current Fox contract, which would open the team to a large damages claim. Timothy Coleman, the Dodgers’ financial adviser, said he disagreed.

Cross-Examination

Teklits spent more than three hours cross-examining Coleman, a senior managing director with Blackstone Group LP.

After Teklits repeatedly asked about Fox’s potential breach-of-contract claim, the judge interrupted him to say that the questions were repetitive. Gross also warned Teklits that if he was trying to delay the hearing by keeping Coleman on the stand, it would “work against your client.”

“We are going to end the hearing tomorrow at 5 p.m.,” Gross said. “You are going over the same questions over and over. If this is a delaying tactic, it is not going to work.”

Fox and the Dodgers are scheduled to return to court tomorrow.

The case is In re Los Angeles Dodgers LLC, 11-12010, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporters on this story: Steven Church in Wilmington at schurch3@bloomberg.net

To contact the editors responsible for this story, John Pickering at jpickering@bloomberg.net.

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