Sports and the Law: a National Niche and A
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SEPTEMBER 2012 SPORTS and the Mary K. Braza and Kevin Schulz replay their role in the purchase of the L.A. Dodgers – a baseball deal to remember SPORTS and the A National Niche and a Baseball Deal to Remember by Joe Forward n late April 2012, Milwaukee attorney Kevin Schulz local telecast had a week of frenzied days and sleepless nights rights, had to in Los Angeles, working with a team of lawyers to unfold before the Beneath America’s favorite pastime lives a complex legal and business world. With insight from sports industry meet a short deadline: purchase of the Los Angeles Dodgers could be lawyers Mary K. Braza and Kevin Schulz, replay the purchase of the Los Angeles Dodgers for a record $2.15 billion – Dodgers for a record $2.15 billion. The work sold at auction. completed, the mergers and acquisitions attorney Finally, unlike a deal they helped bring about – and the rise of Foley & Lardner in sports law. made his way to L.A. International Airport, heading some deals that home to Milwaukee as the client, Guggenheim can take upwards Baseball Management L.P. – led by Mark Walter, of a year to transpire, this one closed within only a few Stan Kasten, and Earvin (Magic) Johnson – became months of announcement of the Dodgers’ sale. the biggest spender in sports history. “I remember walking away thinking I was just part of I Back in the Milwaukee office of Foley & Lardner something pretty significant,” said Schulz, a Foley partner LLP, Schulz discussed the historic deal with Milwaukee who worked on the commercial transactions. “It’s pretty lawyer Mary K. Braza, cochair of Foley’s sports industry cool to be a sports fan and then have an opportunity to help team. The two had worked on big sports deals before – develop the inner workings of a sports deal like this.” including the purchase of the Chicago Cubs in 2009 ($845 Underneath America’s favorite pastime lies a complex million) and the Texas Rangers in 2010 ($593 million) legal and business world. With insight from local sports – but this deal had been more complicated in a number industry lawyers, this article tracks the Dodgers transaction, of ways. For starters, then-Dodgers owners Jamie and as well as Foley’s rise to national prominence in sports law. Frank McCourt were submerged in lengthy and bitter It also highlights underlying rules of baseball, including the divorce proceedings, which had implications for the deal. Major League Baseball Commissioner’s authority under the Second, battles in bankruptcy court, largely relating to Major League Constitution. 6 – Wisconsin Lawyer – September 2012 Expanded Recovery Beneath America’s favorite pastime lives a complex legal and business world. With insight from sports industry lawyers Mary K. Braza and Kevin Schulz, replay the purchase of the Los Angeles Dodgers for a record $2.15 billion – a deal they helped bring about – and the rise of Foley & Lardner in sports law. Baseball’s Best Interest Includes Dodgers Sale Major League Baseball (MLB) is an unincorporated association of 30 professional baseball teams, divided into two leagues with three divisions in each league. The Major League Constitution, originally adopted in 1921, constitutes an agreement between the league and its teams.1 It establishes a commissioner, who governs MLB as its chief executive officer.2 Milwaukee’s own Allan “Bud” Selig, who formerly owned the Milwaukee Brewers and served as the club’s president, has served as the MLB commissioner for the past 20 years.3 The commissioner has the power to act “in the best interests of baseball.”4 Thus, the commissioner has authority to investigate acts, transactions, or practices considered “not September 2012 – Wisconsin Lawyer – 7 Sports Law best interests power to seize control of the Dodgers’ daily operations, an unprecedented measure.10 Frank Joe Forward, St. Louis Univ. 2010, is the legal writer for the State McCourt, who acquired wealth by Bar of Wisconsin. He covers and reports court decisions, legislative investing in Boston real estate, was actions, and other legal developments related to the practice of entrenched in an expensive divorce law. Forward was a sports reporter and editor for newspapers in from Jamie McCourt.11 Frank McCourt Wisconsin and Oregon before attending law school. He can be had purchased the Dodgers, Dodger reached at [email protected]. Stadium, and surrounding real estate for $420 million in 2004, and Jamie (a in the best interests of baseball.”5 other Chicago White Sox players from lawyer, and the Dodgers’ former chief Like a judge, the commissioner can baseball for fixing the 1919 World executive officer) claimed half ownership summon individuals, order document Series.8 Another commissioner, A. of the team.12 Selig questioned the club’s production, and impose preventive, Bartlett Giamatti, banned 17-time all- financial viability. In a press release, Selig remedial, or punitive sanctions deemed star Pete Rose from baseball on Aug. 23, said the action was necessary to address appropriate.6 The commissioner may 1989, for gambling. Rose was accused of “deep concerns regarding the finances also adopt regulations in the best betting on MLB games, including ones and operations of the Dodgers and to interests of baseball.7 involving the Cincinnati Reds, while he protect the best interests of the Club, Kenesaw Mountain Landis, a was the Reds’ manager. Coincidentally, its great fans and all of Major League federal judge, was baseball’s first Giamatti died of a massive heart attack Baseball.”13 commissioner and permanently banned one week later.9 A commissioner’s decisions are “Shoeless” Joe Jackson and seven In April 2011, Selig invoked the difficult to challenge. For one, they are final and unappealable.14 The clubs agree to refrain from litigation between or among themselves, or with MLB entities, including the commissioner.15 Clubs “severally agree to be finally and unappealably bound” by the commissioner’s decisions and “waive a right of recourse to the courts.”16 Historically, challenges to the commissioner’s best interests authority have failed.17 In June 2011, Selig again invoked his best interests power to nix a potential 17-year telecast deal between Frank McCourt and television broadcaster Fox Sports West 2 – which is under contract with the Dodgers until 2013 – worth a reported $3 billion.18 Under the proposed renewal, McCourt would receive an up-front payment of $385 million, which he desperately needed to keep the Dodgers solvent and pay expensive players like Manny Ramirez.19 However, nearly half the $385 million would be diverted to pay McCourt’s personal debts, including legal fees to attorneys.20 In a statement, Selig concluded that the “proposed transaction with Fox would not be in the best interests of the Los Angeles Dodgers franchise, the game of baseball and the millions of loyal fans of this historic club.”21 That same month, the Dodgers filed for 8 – Wisconsin Lawyer – September 2012 Sports Law bankruptcy protection. MLB.com, delivering live audio and Bay Packers but wanted to expand “When the team went into video Internet streaming and real- its sports industry work beyond the bankruptcy, there was early speculation time baseball information. MLB clubs borders of Wisconsin and MLB. that the Dodgers would be sold by grant Internet rights to MLBAM, now Professional sports leagues and McCourt, or forced to be sold by a lucrative arm of baseball’s business.23 teams were expanding beyond mere MLB,” Braza said. “We started to Braza provides legal representation to presentation of games with ticketing, talk with people who were interested MLB and MLBAM, with the assistance merchandise, and concession revenues. in buying the team. They came to of sports industry lawyers from different The “game” was changing. The firm us because we had experience in Foley practice areas. saw a national sports industry need for purchasing sports franchises, and we “Shortly after MLB put the two different kinds of sophisticated legal eventually took on a relationship with leagues into one entity in 1998, it allowed services. the Guggenheim group.” the teams to combine their Internet “We had lawyers all over the In November 2011, Frank McCourt rights and to start their own technology country working for sports clients, but agreed to sell the Dodgers through a company to run Internet activities,” no official practice group. In 2002, we court-supervised auction. He reached Braza said. “It has really exploded. MLB developed a national, cross-disciplinary an agreement with Jamie McCourt to has become a frontrunner in delivering team of lawyers, people from various pay her $131 million upon the sale. online content.” substantive areas in both transactions With a concentration of sports industry In ensuing years, Braza and her and litigation,” Braza said. “It made lawyers in place, Foley’s due diligence Foley partners continued to recognize a whole lot of sense to connect local would soon begin. increasing opportunities in the sports lawyers with the resources to offer industry. Foley’s Milwaukee office full-service legal work in the sports represents the Brewers and the Green industry.” The Rise of a Sports Industry Practice When the Milwaukee Brewers took Photos: Corey Hengen center stage in the 1982 World Series, Braza, originally from Ithaca, New York, had just started working for Foley’s litigation group in Milwaukee. Her mentor was Robert DuPuy, a Foley partner and the Brewers’ outside legal counsel. In 1989, MLB asked DuPuy to serve as outside legal counsel. After four years, Bud Selig hired DuPuy as MLB’s chief legal officer, a position he held until October 2010, when he left MLB and returned to Foley as a partner in the firm’s New York office. “I came in because Bob was a mentor,” said Braza, a litigator who helped MLB defend its exemption from state antitrust laws in Major League Baseball v.