The fight in bankruptcy court for control of the Los Angeles Dodgers has already generated millions of dollars in requests for legal fees.
And that’s just to cover the preliminary innings. The game’s not over: Lawyers will be intimately involved in an auction this spring to sell the team.
“There was a lot of fighting in the first few months, and fighting is expensive,” said Thomas Lauria, head of the financial restructuring and insolvency group at White & Case and lead counsel for Major League Baseball (MLB) in the Dodgers’ case. “Hopefully, now there’s a lot of peacemaking, and maybe it’ll be a lot less expensive.”
When all is said and done, the legal fees in the case for the estate, including fees charged by the unsecured creditors’ committee, could reach $10 million, said Dan Schechter, a professor at Loyola Law School, Los Angeles. “This involves many parties, multilateral negotiations, tricky and unsettled issues of law, factual disputes. This couldn’t be a more difficult bankruptcy,” he said. “Even in comparison to an ordinary Chapter 11, this is a mess.”
Ever since the baseball team filed for Chapter 11 bankruptcy protection on June 27, the case has proved contentious. (Scroll to the bottom for a timeline of NLJ articles.) Owner Frank McCourt adamantly refused to give up the team he bought in 2004, despite the insistence of Baseball Commissioner Bud Selig that he must. Things promised to go more smoothly in light of a deal he and MLB reached on Nov. 2 to sell the team.
As of Sept. 30, the lead bankruptcy counsel for the Dodgers — Dewey & LeBoeuf of New York and Wilmington, Del.-based Young Conaway Stargatt & Taylor — had requested more than $3.7 million in fees and expenses, according to an interim expense report filed on Nov. 9. Based on an average of more than $1.2 million in legal fees requested during the bankruptcy’s first three months, attorneys for the Dodgers are certain to have exceeded $5 million as of the end of October.
A hearing on the fee requests was scheduled for Nov. 30 before U.S. Bank­ruptcy Judge Kevin Gross in Wilmington.
The highest-paid attorneys have been Dewey’s Bruce Bennett, a Los Angeles partner who charged $975 per hour, and New York partner Jeffrey Kessler, co-chairman of the sports litigation practice, whose rate is $1,000 per hour, according to court documents. During the first month, a bitter battle over immediate financing for the Dodgers generated $1.1 million of the more than $3.1 million in legal fees that Dewey has requested thus far. Young Conaway, led by Robert Brady, billed nearly $500,000 in fees and costs during the first three months.
By comparison, New York-based Weil, Gotshal & Manges and Forshey Prostok in Fort Worth, Texas, which represented the Texas Rangers in that team’s bankruptcy last year, were awarded $5 million in fees and expenses for the entire case, which lasted about 2 1/2 months.
The Dodgers’ fee requests haven’t gone unchallenged. The U.S. trustee objected to $350,000 in fees and expenses charged by the team’s counsel, arguing that some of the work associated with the immediate financing during the first month was “not reasonably likely to benefit” the team. Gross overruled the trustee’s claims on Nov. 8.
About 35 attorneys at Dewey and nine at Young Conaway have appeared in the case. Other firms have charged thousands of dollars for handing the team’s regular business operations. Los Angeles-based Sheppard, Mullin, Richter & Hampton, for instance, handles labor and employment work, and Latham & Watkins is dealing with some litigation matters, according to court documents. Others include trademark counsel from Pasadena, Calif.-based Christie Parker & Hale and Headrick Rizik Alvarez & Fernández, based in Santo Domingo, Dominican Republic, which provides advice on Dominican law.
In addition to the Dodgers’ counsel, Morrison & Foerster and Pinckney, Harris & Weidinger of Wilmington, which represent the unsecured creditors committee, have applied for $650,000 in fees and expenses. That’s nearly three times what K&L Gates, counsel to the unsecured creditors committee in the Rangers’ bankruptcy, was awarded for the entire case. Morrison & Foerster’s Brett Miller, a New York partner, charges $925 per hour.
More than 20 additional law firms represent creditors, lenders, debt holders and other parties. Most prominent are counsel for Major League Baseball and Fox Sports Net West 2 LLC, broadcaster of Dodgers games. “This is more like a very large corporate bankruptcy,” Schechter, of Loyola Law School, said. “There are so many operations — the parking and the revenue, the broadcast revenues — it’s really a very big business.”
The involvement of MLB is one key difference between the Dodgers’ bankruptcy and most Chapter 11 cases. Lauria, a partner at White & Case, represents the league alongside partners John Cunningham and Glenn Kurtz, global chairman of commercial litigation, as well as 10 associates. Although the firm hasn’t handled a bankruptcy for the league before, Lauria had some potentially helpful experience: Last year, he represented Nolan Ryan and Chuck Greenberg in their purchase of the Rangers.
“When the Dodgers filed, or were about to file, the general counsel of MLB called me and said, ‘We are very impressed with the work you did on the other side of the table from us in the Rangers’ case, and recognized you got a very difficult deal done, and we’d like you to help us with that,’ ” he said.
The cases turned out quite differently. Former Rangers owner Tom Hicks had filed for bankruptcy in order to sell the team, Lauria said. McCourt hoped to avoid a sale. The Dodgers’ case took a turn when Gross sided with MLB’s financing proposal, rather than McCourt’s.
“It’s unusual for the debtor not to get the financing approved,” Lauria said. “The court required that the team take financing from MLB, which was a very important fork in the road in terms of how this case was going to go early on.”
New York-based Proskauer Rose and Philadelphia’s Fox Rothschild also represent MLB. Before the bankruptcy, Proskauer Rose served as general counsel, handling labor and employment matters including collective bargaining. At the start of this year, the firm took up the league’s investigation of the Dodgers’ finances. More than half a dozen attorneys have continued to advise the league throughout the bankruptcy case. Fox Rothschild serves as Delaware counsel.
Complicating matters is the involvement of Fox Sports, which vigorously fought McCourt’s proposal to sell the team’s media rights as part of his reorganization plan. Representing Fox Sports, a unit of News Corp., is Los Angeles-based Rutter Hobbs & Davidoff, with lead partner Paul Laurin; and Morris, Nichols, Arsht & Tunnell of Wilmington.
Additional parties weighed in. Blank Rome and Steptoe & Johnson LLP represented five individuals who wanted to create a special committee to represent the team’s 17,000 season ticketholders. Robbin Itkin, one of three Steptoe partners involved, said her firm took the matter pro bono. “We did it with the understanding that if we prevailed and got a committee appointed, under the bankruptcy code, the bankruptcy estate would pay for fees going forward,” she said.
Gross denied that request but ordered that two season ticketholders, including Jeffrey Berkowitz of Los Angeles-based Jeffer, Mangels, Butler & Mitchell, serve on the unsecured creditors committee. Itkin said she considered the result a success, given that no committee has ever been created for season ticketholders in a baseball bankruptcy and few of them have played major roles on the unsecured creditors committee.
Itkin declined to say how much the firm seeks in fees. “What we would have incurred would have been relatively slight compared to what the other fees were,” she said.
With an agreement now in place, the overall fees could be lower going forward. But Lauria doesn’t expect the bankruptcy to wrap up for another six months. “There’s going to be work to do until the team is actually sold,” he said. “We hope it’s not the same volume that it was. But we still have a lot of things to do together with the team to make sure the sale process is robust and successful.”
In perspective, legal fees could end up looking paltry compared with other costs associated with the Dodgers’ bankruptcy. The team is expected to sell for $1 billion, and McCourt’s personal debts are close to $160 million, according to court documents. “If anyone’s doing a calculation of how much the Dodgers had to pay for each game Manny Ramirez played as a Dodger, versus the cost, you’ll find these lawyers come out as pretty cheap alternatives,” said Schechter, of Loyola Law School.
As it happens, Ramirez — a retired outfielder who is the highest owed unsecured creditor to the Dodgers — is claiming $21 million.
Amanda Bronstad can be contacted at firstname.lastname@example.org.