Friday, April 22, 2011

New Sports Illustrated Column: Can Bud Selig legally take Dodgers away from Frank McCourt?

I have a new SI column on Bud Selig's decision to remove operations power from embattled Dodgers owner Frank McCourt, who will retain his equity interest but effectively be barred from any decision-making. Here are excerpts from the column:

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. . . McCourt could argue that Selig and Major League Baseball have violated the terms of the franchise agreement and have consequently caused him financial harm. To advance that claim, McCourt would insist that Selig lacks the specific authority to take over a franchise, particularly a franchise that is allegedly in compliance with MLB's financial guidelines.

McCourt could also emphasize that other ownership groups have demonstrated numerous failings -- be they professional or personal -- and yet Selig has not exiled those owners from their teams. For instance, Selig has allowed Mets owner Fred Wilpon to remain in charge despite his exposure to lawsuits brought by victims of Bernie Madoff. McCourt could probably find other instances of owners having some combination of financial, legal or family troubles, or instances of fans outside other clubs' stadiums who have been hurt due to inadequate security. His goal would not be to slander other owners, but rather to portray his problems as far from extreme and certainly not worthy of expulsion from MLB.

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In addition to the "best interests of the game" clause, MLB could also highlight the "waiver of recourse" clause found in the MLB constitution. The waiver of recourse clause prevents clubs from engaging in litigation against the commissioner, the league or other owners. Indeed, by virtue of becoming a franchise owner, an owner waives away the right to seek remedies that would normally be available through the legal system. The clause also compels owners to resolve their differences internally and to accept the commissioner's judgment as binding.

Waiver of recourse clauses can be found in a wide range of business contexts. Generally, it is difficult for purportedly aggrieved parties to overcome these clauses, especially if the clauses were freely and voluntary negotiated by sophisticated business parties (all of which would hold true with McCourt in his purchase of the Dodgers).

A waiver of recourse clause helped MLB prevail over Finley. The court held Finley could only overcome the clause if he could show that commissioner Bowie failed to follow baseball's internal rules or violated basic due process. Basic due process requires the commissioner to act fairly and not arbitrarily or with bias; the furnishing of fair notice, use of substantive hearings, reliance on neutral experts and uniform application of consistent rules all help the commissioner show that a fair and substantive process was used.

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To read the rest, click here