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CC-254464.1 900202.11000/22064281v.1
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: LOS ANGLES DODGERS LLC, et al.,1 Debtors.
) ) ) ) ) ) ) ) )
Chapter 11 Case No. 11-12010 (KG) Jointly Administered Objection Deadline: October 11, 2011 at 4:00 p.m. (ET) Hearing Date: October 25, 2011 at 10:00 a.m. (ET)
NOTICE OF MOTION OF THE AD HOC COMMITTEE OF THE LOS ANGELES DODGERS SEASON TICKET HOLDERS FOR APPOINTMENT
OF AN OFFICIAL COMMITTEE OF SEASON TICKET HOLDERS
TO: (i) Office of the United States Trustee for the District of Delaware; (ii) counsel for the Debtors; (iii) Counsel to the Official Committee of Unsecured Creditors; (iii) Counsel to the Office of the Commissioner of Baseball (dba Major League Baseball); (iv) and all parties requesting special notice
PLEASE TAKE NOTICE that the Ad Hoc Committee of The Los Angeles Dodgers
Season Ticket Holders has filed the Motion Of The Ad Hoc Committee Of The Los Angeles Dodgers Season Ticket Holders For Appointment Of An Official Committee Of Season Ticket Holders (the “Motion”).
PLEASE TAKE FURTHER NOTICE that responses to the Motion, if any, are to be
filed on or before October 11, 2011 at 4:00 p.m. (Eastern Time). At the same time, any response must be served on the undersigned attorneys.
PLEASE TAKE FURTHER NOTICE that a hearing on the Motion will be held on
October 25, 2011 at 10:00 a.m. (Eastern Time).
1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number are: Los
Angeles Dodgers LLC (3133); Los Angeles Dodgers Holding Company LLC (4851) LA Holdco LLC (2567); LA Real Estate Holding Company LLC (4850); and LA Real Estate LLC (3029). The location of the Debtors’ corporate headquarters and the service address for the Debtors is: 1000 Elysian Park Avenue, Los Angeles, CA 90012.
2 CC-254464.1 900202.11000/22064281v.1
PLEASE TAKE FURTHER NOTICE THAT, IF YOU FAIL TO RESPOND IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF REQUESTED BY THE MOTION WITHOUT FURTHER NOTICE OR HEARING.
Dated: Wilmington, Delaware September 27, 2011 STEPTOE & JOHNSON LLP
Robbin L. Itkin, Esq. (CA Bar No. 117105) (pro hac vice pending) Katherine C. Piper, Esq. (CA Bar No. 222828) 2121 Avenue of the Stars, Suite 2800 Los Angeles, CA 90067 Tel. No.: (310) 734-3200 Fax No.: (310) 734-3300 Email: [email protected] [email protected]
-and-
BLANK ROME LLP /s/ Bonnie Glantz Fatell Bonnie Glantz Fatell, Esq. (DE 3809) 1201 Market Street, Suite 800 Wilmington, DE 19801 Phone: (302) 425-6400 Fax: (302) 425-6464 Email: [email protected]
Proposed Counsel for the Ad Hoc Committee of Los Angeles Dodgers Season Ticket Holders
CC-253063
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: LOS ANGLES DODGERS LLC, et al.,1 Debtors.
) ) ) ) ) ) ) ) )
Chapter 11 Case No. 11-12010 (KG) Jointly Administered Objection Deadline: October 11, 2011 at 4:00 p.m. (ET) Hearing Date: October 25, 2011 at 10:00 a.m. (ET)
MOTION OF THE AD HOC COMMITTEE OF THE LOS ANGELES DODGERS SEASON TICKET HOLDERS FOR APPOINTMENT
OF AN OFFICIAL COMMITTEE OF SEASON TICKET HOLDERS
1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number are: Los
Angeles Dodgers LLC (3133); Los Angeles Dodgers Holding Company LLC (4851) LA Holdco LLC (2567); LA Real Estate Holding Company LLC (4850); and LA Real Estate LLC (3029). The location of the Debtors’ corporate headquarters and the service address for the Debtors is: 1000 Elysian Park Avenue, Los Angeles, CA 90012.
i CC-253063
TABLE OF CONTENTS
I. INTRODUCTORY STATEMENT .....................................................................................2
II. JURISDICTION ..................................................................................................................5
III. BRIEF BACKGROUND .....................................................................................................5
IV. RELIEF REQUESTED AND BASIS FOR RELIEF ..........................................................6
A. The Season Ticket Holders Are Not Adequately Represented in These Cases. .......................................................................................................................6
B. Season Ticket Holders Are Creditors of the Debtors’ Estates. ..............................11
1) The Transactions Between The Season Ticket Holders and the Debtors Creates A Creditor Relationship. .................................................12
2) Season Ticket Holders Have Renewal Claims Against the Debtors. .........17
3) The Debtors and Creditors’ Committee Have Admitted That the Season Ticket Holders Will Have Administrative Claims Against These Estates. .............................................................................................20
4) Season Ticket Holders Have Contract Claims Against the Debtors. .........21
5) Season Ticket Holders Are Third Party Beneficiaries of The Arrangement Among Dodger Tickets, LAD and RealCo. .........................24
6) Dodger Tickets is an Alter Ego of The Debtors. .......................................25
7) Dodger Tickets is a Mere Agent For The Debtors. ....................................28
V. CONCLUSION ..................................................................................................................29
ii CC-253063
TABLE OF AUTHORITIES
Page(s) CASES
Charpentier v. L.A. Rams Football Co., 89 Cal. Rptr. 2d 115 (Cal. App. 2000) ...............................................................................19, 22
Del E. Webb Corp. v. Structural Materials Co., 176 Cal. Rptr. 824 (Cal. Ct. App. 1981) ..................................................................................24
E.I. Dupont De Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187 (3d Cir. 2001).....................................................................................................28
Fletcher v. Atex, Inc., 68 F.3d 1451 (2nd Cir. 1995)...................................................................................................25
General Motors Corp. v. Superior Court, 15 Cal. Rptr. 2d 622 (Cal. Ct. App. 1993) ...............................................................................25
Geyer v. Ingersoll Publ’ns Co., 621 A.2d 784 (Del. Ch. 1992)..................................................................................................26
Gilbert Financial Corp. v Steelform Contracting Co., 145 Cal. Rptr. 448 (Cal. Ct. App. 1978) ............................................................................24, 25
Golden West Baseball Co. v. City of Anaheim, 31 Cal. Rptr. 2d 378 (Cal. Ct. App. 1994) ...............................................................................21
Harper v. Delaware Valley Broadcasters, Inc., 743 F. Supp. 1076 (D. Del. 1990) ............................................................................................26
In re Garden Ridge Corp., 2005 WL 523129 (Bankr. D. Del. 2005) ...................................................................................7
In re Hills Stores Co., 137 B.R. 4 (Bankr. S.D.N.Y. 1992) .....................................................................................7, 10
In re I.D. Craig Svc. Corp., 138 B.R. 490 (Bankr. W.D. Pa. 1992) ...............................................................................19, 22
In re McLean Indus., Inc., 70 B.R. 852 (Bankr. S.D.N.Y. 1987) .......................................................................................10
In re Platt, 292 B.R. 12 (Bankr. D. Mass. 2003) .................................................................................18, 19
CC-253063 iii
In re Toyota Motor Corp., 754 F. Supp. 2d 1145 (C.D. Cal. 2010) ...................................................................................25
Johnson v. Home State Bank, 501 U.S. 78 (1991) ...................................................................................................................11
Matthau v. Superior Court, 60 Cal. Rptr. 3d 93 (Cal. Ct. App. 2007) .................................................................................23
Mekhior v. New Line Prods., Inc., 131 Cal. Rptr. 2d 347 (Cal. Ct. App. 2003) .............................................................................23
Miami Dolphins, Ltd. v. Genden & Bach, P.A., 545 So. 2d 294 (Fla. Dist. Ct. App. 1989) ...............................................................................22
National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc., 89 Cal. Rptr. 3d 473 (Cal. Ct. App. 2009) .......................................................................25
Oshinsky v. N.Y. Football Giants, Inc., 2009 WL 4120237 (D. N.J. 2009) ...........................................................................................18
Phoenix Canada Oil Co. v. Texaco, Inc., 842 F.2d 1466 (3d Cir. 1988)...................................................................................................28
Skalbania v. Simmons, 443 N.E. 2d 352 (Ind. Ct. App. 1982)......................................................................................22
Spinks v. Equity Residential Briarwood Apartments, 90 Cal. Rptr. 3d 453 (Cal. Ct. App. 2009) ...............................................................................25
United States v. Golden Acres, Inc., 702 F. Supp. 1097 (D. Del. 1988) ............................................................................................26
West Am. Ins. Co. v. Park, 933 F.2d 1236 (3d Cir. 1991)...................................................................................................19
STATUTES
11 U.S.C. § 101(5) .........................................................................................................................11
11 U.S.C. § 101(10)(A)..................................................................................................................11
11 U.S.C. § 105(a) ...........................................................................................................................5
11 U.S.C. § 1102 ....................................................................................................................5, 6, 10
28 U.S.C. § 157 ................................................................................................................................5
28 U.S.C. § 1334 ..............................................................................................................................5
CC-253063 iv
28 U.S.C. § 1408 and 1409 ..............................................................................................................5
Cal. Civ. Code § 1559 ....................................................................................................................24
Cal. Civ. Code § 1589 ....................................................................................................................23
Cal. Civ. Code § 3521 ....................................................................................................................23
2 CC-253063
The Ad Hoc Committee of The Los Angeles Dodgers Season Ticket Holders (collectively
referred to as the “Ad Hoc Committee”), by and through its undersigned proposed counsel,
hereby files this motion (“Motion”) for entry of an order authorizing the appointment of an
official committee of season ticket holders in the above-captioned Chapter 11 cases of the Los
Angeles Dodgers LLC and certain of its affiliates (collectively, the “Debtors”). In support of this
Motion, the Ad Hoc Committee respectfully states as follows:2
I. INTRODUCTORY STATEMENT
1. These bankruptcy cases present a unique situation in sports team bankruptcy
jurisprudence; the Debtors have admitted that all creditors will be paid in full and that these cases
are essentially a two-party dispute – one between Frank McCourt and Major League Baseball
(the “MLB”). Despite this fact, the Office of the United States Trustee (the “UST”) has
appointed an Official Committee of Unsecured Creditors (the “Creditors’ Committee”) to protect
the interests of unsecured creditors. However, the posture of these cases begs the question: who
are the true creditors that should be protected in these bankruptcy proceedings? The Ad Hoc
Committee submits it is the interests of the approximately 17,000 season ticket holders that
represent the essence of the Dodgers’ franchise – the real stakeholders in these cases.
2. The Debtors previously have represented to this Court that: “the ‘integrity’ of
baseball and the public’s ‘confidence’ in the game, of course, are not interests recognized by or
protected under the Bankruptcy Code.”3 Now, to support their application to employ a
communications consultant, the Debtors assert that “it is self evident that the financial success of
the Dodgers depends heavily on the goodwill of its fan base” and that “the general public [has]
an interest in LAD’s bankruptcy.”4 The reality is that the Debtors have opposed the basic desire
2 The facts and circumstances set forth herein are supported by the (a) Declaration of Jeffrey Berkowitz, (b) the
Declaration of Robbin L. Itkin and (c) the Declaration of Bonnie Glantz Fatell, all of which are filed concurrently herewith.
3 See Debtors’ Reply In Support of DIP Financing Mot. [Dkt. No. 303], at ¶ 2. 4 See Debtors Application to Employ Kekst and Company Incorporated as “Corporate Communications
Advisor” [Dkt. No. 443], at ¶ 16 (emphasis added).
CC-253063 3
of its most loyal and financially invested fans on whose goodwill they are dependent – the season
ticket holders – to have a seat at the table in this reorganization.
3. The Debtors have publicly stated that the season ticket holders will not be harmed
by these bankruptcy proceedings and, therefore, there is no reason for season ticket holders to be
heard by this Court – in fact, the Debtors have not even noticed their 17,000 season ticket
holders as creditors in these cases. Debtors’ assertions that the interests of the season ticket
holders will not be adversely affected during these bankruptcy cases is just plain wrong. First, as
clearly demonstrated herein, the season ticket holders are significant creditors of Debtors Los
Angeles Dodgers LLC (“LAD”) and LA Real Estate LLC (“RealCo”). Second, the season ticket
holders as a group have invested hundreds of millions of dollars into the Dodgers. Their
significant annual investments in the Dodgers franchise made over decades, their interests in
preserving the Dodgers as a storied team, and their stake in the quality of the Dodger Stadium
“experience” and in the ultimate location, ownership, management, financial wherewithal,
reputation, integrity and longevity of the Dodgers makes these creditors different and distinct
from general unsecured creditors – who the Debtors have represented will be paid in full, and
which season ticket holders’ interests may in fact be harmed in these cases. Clearly what
transpires in these cases and how funds of the Debtors are utilized impacts the season ticket
holders. Are funds of the estates being utilized to provide the season ticket holders the rights and
benefits to which they are entitled? Are they being used to acquire key new players, meet payroll
obligations, fund needed renovations and efficiently operate concessions so that the expected
season ticket holder and fan experience can be maintained and the Dodgers’ storied history can
be preserved? Is the value of season tickets, which season ticket holders have a right to sell,
being preserved or adversely affected by actions taken by the estates during these cases? The
answers to these questions and the issues regarding such answers significantly impact the season
ticket holders.
4. Further, it is not up to the Debtors to pick and choose which creditors may
participate in their bankruptcy proceedings. Indeed, the Debtors have represented that all
CC-253063 4
creditors will be paid in these cases, suggesting that the unsecured creditors have no interests to
protect, yet the Creditors’ Committee has been formed. All creditors have a voice under the
Bankruptcy Code, and the Debtors must answer to their largest creditor constituency – the
approximate 17,000 season ticket holders that help fund the Debtors’ operations and are
significantly impacted by what occurs during the course of these cases. Further, that individual
season tickets holders in the Los Angeles area should bear the burden of retaining separate
counsel to represent their interests in bankruptcy cases the Debtors voluntarily chose to file
thousands of miles away is unfair, punitive and totally inapposite to the purpose for creating
official committees prescribed by the Bankruptcy Code.
5. Given the particular interests of season tickets holders described above, the
Creditors’ Committee does not provide season ticket holders with adequate representation in
these cases. The Creditors’ Committee, comprised of five creditors of the Debtors (none of
which are season ticket holders), are duty bound to seek to maximize payments to unsecured
creditors in these cases – not to protect the described disparate interests of the season ticket
holders or even address issues arising in these bankruptcy cases that may impact the value of
season tickets or the rights and benefits of season ticket holders. Indeed, the Debtors and the
Creditors’ Committee have both admitted to the Office of the United States Trustee (“UST”)
that, upon renewal of their season tickets, season ticket holders will have administrative claims,
thus making them even more unique among creditors.
6. Absent the appointment of an official season ticket holders committee to represent
the unique interests of this creditor constituency, they will be deprived of a meaningful voice in
this case. Almost by definition, the season ticket holders live close to where the Dodgers
actually play their home games for which season tickets are purchased, are located thousands of
miles from where the Debtors chose to file these cases, and for the most part may hold individual
claims that are far too small to justify any of them engaging counsel to represent their interests in
a case halfway across the country and confront counsel who are compensated by the estates.
Moreover, even if individual season ticket holders could justify the expense of retaining counsel
CC-253063 5
to represent their interests in these cases, the Debtors and the Committee are joined at the hip in
arguing that these stakeholders are not even creditors who are entitled to be heard in these cases.
Thus, it is fairly clear that the unique interests of season ticket holders will be ignored in these
cases unless an official committee is appointed to represent their interests.
7. For all the foregoing reasons, the Ad Hoc Committee requested that the UST form
an official committee of season ticket holders that will be able to represent the unique interests of
this massive and critical body of creditors. The Debtors and the Creditors’ Committee, as
discussed below, each opposed that request and the UST, ultimately, denied the request. As such,
the Ad Hoc Committee is compelled to bring this matter before this Court in an effort to
adequately protect the interests of the season ticket holders in these cases.
II. JURISDICTION
8. This Court has jurisdiction over this Motion under 28 U.S.C. § 157 and 1334.
Venue is proper before this Court under 28 U.S.C. § 1408 and 1409 and this matter is a core
proceeding under 28 U.S.C. § 157(b)(2).
9. The statutory predicates for the relief requested herein are Sections 105(a) and
1102 of the Bankruptcy Code.
III. BRIEF BACKGROUND
10. As noted above, there are approximately 17,000 season ticket holders that license
“premium” and non-premium seats in Dodger Stadium. The total price for season tickets can
range from a few thousand dollars per year to well over $150,000 per year.
11. Season tickets are required to be purchased several months before the pertinent
baseball season begins. However, some season ticket holders purchase multiple seasons at once
and, therefore, may hold rights to seasons beyond the current one at any given time. The
historical practice of the Debtors is to reserve the seats of each season ticket holder year after
year, so that each season ticket holder is able to purchase the same seats for each season or, for
those season ticket holders that purchase multi-season packages, the seasons purchased every
few years. Thus, many season ticket holders have held the same seats in Dodger Stadium for
CC-253063 6
many years, even decades, such as the members of the Ad Hoc Committee. See Berkowitz
Decl., at ¶ 5.
12. The Ad Hoc Committee, through its counsel, made its initial request for the
appointment of an official season ticket holders’ committee to the UST on July 26, 2011. See
Itkin Decl., at ¶ 3. Since that time, counsel for the Ad Hoc Committee has been in an ongoing
dialogue with the UST regarding the requested appointment, including responding to numerous
requests for additional information from the UST.
13. Ultimately, in response to the UST’s August 18, 2011 request for additional
information regarding the relationship of the season ticket holders to the Debtors, on August 24,
2011, counsel for the Ad Hoc Committee submitted a detailed letter further substantiating the
bases for its request for the appointment of an official season ticket holders’ committee. See
Aug. 24, 2011 Letter (attached hereto and incorporated herein as Exhibit 1). On September 6,
2011, the Debtors and the Creditors’ Committee each submitted letters to the UST in opposition
to the appointment of an official committee of season ticket holders. See Sept. 6, 2011 Letters
(attached hereto and incorporated herein as Exhibit 2 and Exhibit 3). On September 14, 2011,
the UST issued its decision to deny the request “at this time.” See Sept. 14, 2011 UST Decision,
(attached hereto and incorporated herein as Exhibit 4).
IV. RELIEF REQUESTED AND BASIS FOR RELIEF
14. By this Motion, the Ad Hoc Committee seeks an order from this Court directing
the UST to appoint an official season ticket holders’ committee in the Debtors’ cases pursuant to
11 U.S.C. § 1102 and based upon all of the compelling reasons and evidence presented herein.
The Ad Hoc Committee requests that any such official season ticket holders’ committee be
initially comprised of the members of the Ad Hoc Committee, with additional members to be
appointed at the discretion of the UST.
A. THE SEASON TICKET HOLDERS ARE NOT ADEQUATELY REPRESENTED IN THESE
CASES.
15. Section 1102 of the Bankruptcy Code provides, in relevant part, as follows:
CC-253063 7
(1) … as soon as practicable after the order for relief under chapter 11 of this title, the United States trustee shall appoint a committee of creditors holding unsecured claims and may appoint additional committees of creditors or of equity security holders as the United States trustee deems appropriate. (2) On request of a party in interest, the court may order the appointment of additional committees of creditors or of equity security holders if necessary to assure adequate representation of creditors or of equity security holders. The United States trustee shall appoint any such committee.
11 U.S.C. § 1102(a)(1)-(2).
16. Accordingly, while the UST has discretion to appoint additional committees of
creditors in a Chapter 11 case, the Court may order such appointment when it is “necessary to
assure adequate representation of creditors.” Id. Such is the case presented here.
17. The Bankruptcy Code does not provide courts with the factors that should be
evaluated in determining “adequate representation” for creditor constituencies. However,
jurisprudence in the Third Circuit has determined that a court should consider the facts and
circumstances of the particular Chapter 11 case, including, among other things: a. The ability of the original committee to function; b. The size, complexity and nature of the Chapter 11 case; c. The delay and additional costs that would result from the appointment of
the additional committee; d. The timing of the motion relative to the status of the Chapter 11 case; e. The motivation of the movants; and f. The tasks to be performed by the additional committee.
See, e.g., In re Garden Ridge Corp., 2005 WL 523129, at *2 (Bankr. D. Del. 2005).
18. The above factors are not determinative, rather they are guidelines for the court to
consider in evaluating whether a particular creditor constituency’s interests are adequately
represented. Id.; see also In re Hills Stores Co., 137 B.R. 4, 6 (Bankr. S.D.N.Y. 1992). Thus,
whether there is adequate representation of a particular creditor group, is determined by the
specific facts of each case. Hills, 137 B.R. at 6.
19. The circumstances of these cases dictate that an additional season ticket holders’
committee must be appointed under the above guidelines. First, there is no question that these
CC-253063 8
cases are complex – the varied and tiered ownership structure of the McCourt enterprise, the
litigation with the MLB and complications associated with the sale of the telecast rights alone
evidence the complexity of these cases.
20. Second, the Debtors have made clear their position that unsecured creditors will
be paid in full and, thus, these cases are simply a two party dispute – between Mr. McCourt and
the MLB. The five-party Creditors’ Committee – comprised of trade creditors and one
contingent, unliquidated and disputed litigation claimant – is, thus, marginalized in these cases.
The Creditors’ Committee’s duties run to ensuring payment in full to the unsecured creditors – it
does not represent the interests of the season ticket holders as claimants with rights to renewal
and specific performance each season, and further as parties with a stake in the ultimate location,
ownership, management, financial wherewithal, reputation, integrity and longevity of the
Dodgers, or as the ultimate team investors whose primary interest is in preserving the Dodgers as
a storied league.
21. Nor can the Creditors’ Committee advise the season ticket holders regarding how
any of the transactions regarding the Debtors will impact the season ticket holders, the value of
their season tickets (which they have a right to trade or sell), or their enjoyment of the rights and
benefits afforded season ticket holders. This includes, for example, actions of the Debtors (and
not the Dodgers’ players) that may adversely affect the rights and benefits of season ticket
holders, such as actions that may devalue the season tickets, including the sale by the Debtors of
prime seats for a fraction of the price paid by season ticket holders due to declining attendance at
games, or mismanagement such as the closure of needed concession stands and operation of
understaffed and inefficient concession stands remaining that causes ticket holders to miss one or
more innings while standing in insufferable lines for food. These interests, together with the
renewal rights held by season ticket holders, create claims that are very different from those of
the trade and personal injury claimants comprising the Creditors’ Committee.
22. Importantly, the Creditors’ Committee’s interest may diverge from the season
ticket holders completely in connection with the type of transaction that is likely to be the
CC-253063 9
Dodgers “ticket” out of Chapter 11 – whether that transaction is a sale of the team, or a sale of
television broadcasting rights. For example, if the Dodgers were to be sold, the Creditors’
Committee may have no interest in who purchases the team or how the purchaser finances the
purchase, so along as all creditors are paid in full; in contrast the season ticket holders have a
vested interest in the owner of the team, how the franchise will be operated and how the season
ticket holders will be impacted thereby. Similarly, with respect to a sale of television
broadcasting rights, the interest of the Creditors’ Committee will be satisfied if (as is virtually
inevitable) the proceeds are sufficient to pay creditors in full; after that, the Creditors’
Committee has no reason to care how the Dodgers dispose of the remaining proceeds. In
contrast, season ticket holders may care very much about whether the use of the remaining
proceeds is restricted in a fashion that ensures that they are used to benefit the team, i.e., by
providing adequate funding for player development and signings and the proper maintenance and
upgrading of a fifty year old stadium, or the use of such proceeds is unrestricted and can be
distributed to affiliated entities and the ultimate equity holder to fund the McCourts’ internecine
warfare and solve their personal financial issues.
23. Moreover, the season ticket holders, as admitted by the Creditors’ Committee and
the Debtors, will hold additional administrative claims against these estates upon their renewal of
their 2012 season tickets (or administrative claims should their season tickets not be renewed by
the Dodgers for the 2012 season) causing further divergence in the goals of the season ticket
holders and the Creditors’ Committee as these cases move forward. This is similarly why the
appointment of one season ticket holder to a Creditors’ Committee already comprised of five
members seeking to get creditors paid on their claims simply will not suffice.
24. Third, the season ticket holders are creditors whose contributions in the aggregate
are one of the primary funding sources for the Debtors, but on an individual basis can range from
a few thousand dollars per year to well over $150,000 per year. These are individuals and
companies who, if left without a committee to represent them, may not have the sufficient
financial means, or in any event should not have the financial burden, to ensure that their
CC-253063 10
interests are adequately protected in these cases.5 This is even more true in these cases where the
Los Angeles Dodgers are located in Los Angeles, but the Debtors’ voluntarily chose to file the
bankruptcy cases across the country in Delaware. The protection served by an official committee
under these types of circumstances was precisely what the optional appointment of additional
creditors’ committees under Section 1102 was enacted to promote.
25. Fourth, the motivations of the season ticket holders are pure and obvious – they
seek to stay informed in these complex cases and to protect their interests relative to the ongoing
operations of the Dodgers franchise. They have moved quickly to assert these rights – contacting
the UST in July to request the appointment of an official committee and filing this Motion soon
after the UST issued its decision not to move forward with such appointment.
26. Finally, here the Debtors have asserted that the costs of an additional committee
are unduly prohibitive. As has been aptly noted by other courts: “The potential added cost is not
sufficient in itself to deprive the creditors of the formation of an additional committee if one is
otherwise appropriate.” Hills, 137 B.R. at 6 (citing In re McLean Indus., Inc., 70 B.R. 852, 860
(Bankr. S.D.N.Y. 1987). Here, if an official committee of season ticket holders were appointed,
its tasks would be limited to monitoring these cases and protecting the unique interests of the
season ticket holders. The committee could and would coordinate with the Creditors’ Committee
to ensure minimal, if any, overlap on any issues of common interest. Thus, avoiding any
potential for unreasonable delay or costs attendant to its duties to its membership. Indeed, the Ad
Hoc Committee anticipates that the fees and costs for counsel for a season ticket holders’
committee would be modest – certainly pale in comparison to the fees currently being incurred
by the Debtors’ and the Creditors’ Committee’s various advisors.
5 Indeed, to date proposed counsel for the Ad Hoc Committee has performed services on behalf of the Ad
Hoc Committee without compensation.
CC-253063 11
B. SEASON TICKET HOLDERS ARE CREDITORS OF THE DEBTORS’ ESTATES.
27. The Debtors and the Creditors’ Committee take the position that the season ticket
holders do not represent creditors of the Debtors’ estates. The Bankruptcy Code defines a
“creditor” broadly: an “entity that has a claim against the debtor that arose at the time of or
before the order for relief concerning the debtor.” 11 U.S.C. § 101(10)(A) (emphasis added). The
Bankruptcy Code defines a “claim” as:
(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or
(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.
11 U.S.C. § 101(5).
28. The Supreme Court has explained “that Congress intended by this language to
adopt the broadest available definition of ‘claim’” and further that a “‘right to payment’ [means]
nothing more nor less than an enforceable obligation.” Johnson v. Home State Bank, 501 U.S.
78, 83 (1991) (internal citations omitted) (brackets in original).
29. Here the season ticket holders purchase their tickets several months before each
baseball season begins, sometimes several years at a time. Thus, the season ticket holders hold
claims for, inter alia, direct access to Dodger Stadium for all games that they have purchased, a
designated seat in the stadium, pre-paid access to preferred parking lots, services at the stadium
including, without limitation, food and non-food concessions and merchandise, security,
maintenance of the stadium and parking lots, the right to renew their season tickets, the right to
purchase tickets for playoff games and other rights and services afforded to patrons with season
ticket holder status. Depending on the ultimate outcome of these bankruptcy cases, they may
hold other claims as well.6
6 For the reasons set forth below, this Motion reflects only a few of the theories under which season ticket
holders are creditors of the Debtors and is in no way intended to be an exhaustive recitation of all possible legal
CC-253063 12
30. Despite these facts, the Debtors assert that season ticket holders are not creditors
of the Debtors for two reasons: (a) the Dodgers 2011 home game season ended on September 22,
2011, and (b) the season ticket holders purchase their tickets from Dodger Tickets LLC
(“Dodger Tickets”) and not directly from one of the Debtors. The deficiencies in each of these
arguments are addressed below.
1) The Transactions Between The Season Ticket Holders and the Debtors Creates A Creditor Relationship.7
31. Each year the Debtors provide season ticket holders with, among other items, an
invoice, the back of which purports to be a license agreement granting the season ticket holders
access to Dodger Stadium (including parking) for each regular season home game and post-
season playoff game (for those season ticket holders who purchase post-season game tickets,
they have a claim for a refund if the post-season games do not take place). The current license
purports to be with Dodger Tickets8. However, as set forth below, there is no doubt that ticket
holders are dealing with, and believe they are dealing with, the “Dodgers”, or “LAD” as referred
to in all of the Debtors’ pleadings and herein, at all times. See Berkowitz Decl., at ¶ 8.
32. While the season ticket holders’ individual license agreements may be with
Dodger Tickets, Debtor RealCo is the sole owner of Dodger Tickets and the owner of Dodger
Stadium. See Cash Mgt. Mot. [Dkt. No. 5], at ¶ 7. According to the Debtors’ cash management
motion filed in these cases, Debtor RealCo leases Dodger Stadium to Dodger Tickets, and
Dodger Tickets subleases the stadium to Debtor LAD. See Cash Mgt. Mot. [Dkt. No. 5], at ¶ 7.
theories. All members of the Ad Hoc Committee reserve all of their rights to assert any and all claims, rights and remedies against the Debtors under any theory.
7 This Motion is limited by the fact that the Ad Hoc Committee does not have access to pertinent documents of the Debtors, particularly regarding the intercompany transactions among the Debtors and among the Debtors and other non-Debtor entities owned by Frank McCourt. Thus, the details of prior financing transactions, intercompany leases regarding Dodger Stadium or otherwise, and other significant information is not available to the Ad Hoc Committee. Notwithstanding this lack of available documentation, however, this Motion provides more than sufficient support to establish the season ticket holders’ claims against the Debtors, including, without limitation, against Debtors LAD and RealCo.
8 Prior to 2005, such invoices listed Los Angeles Dodgers LLC as the counterparty.
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Significantly, the Debtors have represented that the only asset not subleased to LAD by Dodger
Tickets is the “general admission seats.” See Cash Mgt. Mot., at ¶ 14. Moreover, according to the
Debtors, “LAD also receives revenue from premium seating, parking, national licensing, spring
training, and in some years, sales of postseason tickets.” See Cash Mgt. Mot., at ¶ 19.
33. This arrangement was elaborated further at the Debtors’ Meeting of Creditors
under Bankruptcy Code § 341 (“Meeting of Creditors”), when the Debtors’ Chief Financial
Officer, Peter Wilhelm (“CFO”), explained that pursuant to the intercompany contracts among
LAD, RealCo and Dodger Tickets, the only portion of season ticket sales actually “owned” by
Dodger Tickets is the base ticket price for the applicable seat and not any premium charged for
the seat location. See Fatell Decl., at ¶ 4. As an example, the CFO explained that a seat behind
the dugout might have a face ticket price of $85, however, a premium is charged for that seat
such that a season ticket holder might pay $500 for the seat. See id. at ¶ 5. Of that seat purchase
price, only $85 is owned by Dodger Tickets. See id. at ¶ 5. The balance of the funds are paid to
LAD and only $85 is paid to Dodger Tickets. See id. at ¶ 5. The CFO similarly explained that
LAD, RealCo and Dodger Tickets are all parties to the lease of Dodger Stadium whereby LAD is
the lessee. See id. at ¶ 6.
34. The Debtors also disclose in their Periodic Report Regarding Value, Operations
And Profitability Of Entities In Which The Debtors’ Estates Hold A Substantial Controlling
Interest [Dkt. No. 349] (“Periodic Report”), that Dodger Tickets, an insolvent entity,9 “leases the
Dodger Stadium from RealCo, and sub-leases the stadium, other than general admissions seating,
to LAD. This entity earns revenues from the sale of general admissions seating at Dodger
Stadium.” See Periodic Report [Dkt. No. 349], Tab 7, at p. 2. Thus, season ticket holders’ seats
are leased directly to LAD. As explained by the CFO at the Meeting of Creditors, this complex
arrangement was structured for tax purposes and all of the funds that are paid to Dodger Tickets
9 The Periodic Report provides that Dodger Tickets has (a) total assets of $192,473,000 and total liabilities of
$419,646,00, (b) a total net loss of $20,059,000 for the year 2010, and (c) a book value of (- $242,875,253). See Periodic Report [Dkt. No. 349], Tab 7, at p. 2-3.
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(a) go to debt service on the two securitizations (the proceeds of which were used by the
Debtors), or (b) are released to Debtors LAD or RealCo. See Fatell Decl., at ¶ 7.
35. The Debtors and Creditors’ Committee have asserted that season ticket holders
are not creditors of the Debtors’ estates because Dodger Tickets is a non-debtor. However, Mr.
McCourt’s complicated ownership structure does nothing to shield LAD or the other Debtors
from liability associated with the ownership and operation of Dodger Stadium and the team, as
further described herein. Season ticket holders have no reason to believe they are dealing with
anyone other than LAD when they renew, purchase and use their season tickets. At all times,
season ticket holders deal with representatives of the “Los Angeles Dodgers” regarding their
tickets:
Season ticket holders are provided with a personal “My Dodgers Account” through which they have computer access to use “Advanced Services” such as transfer or sell a ticket, purchase “Group Tickets” or “Season Tickets,” and post tickets for sale on the secondary market. The Terms of Use Agreement makes clear that: “These Terms shall constitute a valid, binding and enforceable legal agreement among you [the season ticket holder], the Los Angeles Dodgers, MLBAM (MLB Advanced Media, LLP) and Ticketmaster”. There is no mention of Dodger Tickets LLC. A copy of the terms of the Terms of Use Agreement for “My Dodgers Account” extracted from the Dodgers.com website is attached as Exhibit B to the Aug. 24, 2011 Letter.
A season ticket holder is contacted by a representative of the “Los Angeles Dodgers” or contacts the “Los Angeles Dodgers” for tickets; see Exhibit C to the Aug. 24, 2011 Letter;
Season ticket holders receive letters from LAD’s officers, sometimes the Chief Operating Officer, on “Dodgers” letterhead upon purchasing their season tickets informing them about the benefits of the season tickets and thanking them for their purchase; see Exhibit C to the Aug. 24, 2011 Letter;
All directors and officers of the Debtors are listed prominently on Dodgers.com without any mention of the legal entity for whom such directors and officers serve; see Front Office Directory, available at http://losangeles.dodgers. mlb.com/team/front_office.jsp?c_id=la;
Transactions for season tickets are consummated through the “Dodger Ticket Office” and if there are problems season ticket holders are instructed to contact the “Dodger Ticket Office;” see Exhibit C to the Aug. 24, 2011 Letter;
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Season ticket holders can pay for their tickets on Dodgers.com and check the status of their season tickets; see My Dodgers Tickets, available at http://losangeles.dodgers.mlb.com/la/ticketing/season.jsp;
Season ticket holders can buy, sell or trade tickets on the Dodgers.com “StubHub” website; see Los Angeles Dodgers StubHub, available at http://www.stubhub.com/los-angeles-dodgers-tickets/; and
The “Los Angeles Dodgers” ostensibly operate and manage Dodger Stadium where all season ticket holders hold rights to their seat(s).
36. The all-encompassing and very public role of LAD in the marketing, sale and
distribution of the season tickets is evidenced not only by the facts set forth above, but also in the
season ticket packages themselves. These season ticket packages (a sample for the 2011 season
is attached as Exhibit C to the Aug. 24, 2011 Letter) contain, among other things:
A letter from an officer of the Los Angeles Dodgers on “Dodgers” letterhead (some seasons this letter is from the “Chief Operating Officer” or “President” and some seasons it is from the “Senior Director, Ticket Sales”);
An opening benefits letter that begins: “At Dodger Stadium, we reserve our lowest ticket prices and best locations for our Season Ticket Holders …;”
An offer to upgrade to a “Prime Ticket Club” and “Experience a different side of Dodger Stadium;”
Directions for season ticket holders to contact the “Dodger Season Ticket office” or go to “Dodgers.com” with any questions; and
A list of benefits and services to which season ticket holders are entitled.
See Sample 2011 Season Ticket Pkg., Exhibit C to the Aug. 24, 2011 Letter.
37. An invoice is included in the package to the season ticket holder. The front of the
invoice reflects “Dodgers” and “Dodgers.com” on the top face of the invoice, and under that it
says “Dodger Tickets LLC”. See Sample 2011 Season Ticket Pkg., Exhibit C to the Aug. 24,
2011 Letter.
38. To the extent a season ticket holder even reads the back of its invoice (as there is
nothing indicating a signature is to be provided by the ticket holder), a license is stated to be
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created with “Dodger Tickets LLC.” See Exhibit 5. Similarly, that purported license with
Dodger Tickets is in nearly microscopic print on the back of the actual tickets when they are
received months after the season tickets are paid for. Even on the back side of both the invoice
and actual tickets, however, LAD is mentioned in multiple places:
By using this ticket, the holder agrees that 1) he or she shall not transmit or aid in transmitting any information about the game (including any pre- and postgame activities) to which this ticket grants admission, including but not limited to, any account, description, picture, video, audio, reproduction, and/or any other information concerning the game (collectively, “Game Information”); 2) Los Angeles Dodgers, LLC is the exclusive owner of all copyrights and other intellectual and proprietary rights in the game and Game Information; and 3) Los Angeles Dodgers, LLC, the visiting Club, the Office of the Commissioner of Baseball, Major League Baseball Properties, Inc., and Major League Advanced Media, Inc., shall have the unrestricted right and license to use and exploit the holder’s image, voice and likeness as it appears in any film, photograph, broadcast, telecast and/or recording made in connection with the game in any manner, in all media, worldwide, in perpetuity, including without limitation, in any advertisements and/or promotional materials for any of the aforementioned entities.
This ticket may not be used for advertising promotions (including contests and sweepstakes) or other trade purposes without the express written permission of Dodgers Tickets LLC and Los Angeles Dodgers, LLC.
See Sample Season Ticket (in actual size and enlarged so that it can be read) attached hereto and
incorporated herein as Exhibit 5 (emphasis added).
39. The fact is that there is no public distinction among the “Los Angeles Dodgers,”
“Dodgers Tickets,” the “Dodgers” or any other entity in the Dodgers’ enterprise – they are all the
Dodgers. Thus, season ticket holders believe they are doing business with the “Dodgers,” and
there is no attempt by Dodger Tickets or LAD to suggest otherwise. In fact the opposite is true.
Despite the use of “Dodger Tickets” on the invoices, everything suggests LAD is the party to the
season ticket holders’ license agreement including, without limitation, the letters sent to season
ticket holders, the Terms of Use Agreement, the references to the Dodgers Ticket Office, the
Dodgers letterhead, and the expansive Dodgers web site where LAD is broadcast on every page.
In fact, if a ticket holder were to purchase tickets online through Stub Hub or Ticketmaster for
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example, he or she may never be informed of the existence of Dodger Tickets and certainly
wouldn’t be expected to know its distinction from LAD or the “Dodgers.”
40. Indeed, prior to 2005, when Dodger Tickets was created as part of the Dodger
enterprise, the contract that season ticket holders received from LAD was substantially the same
as the current contract, except the counterparty listed was the Debtor LAD. See Sample 2005
Season Ticket Invoice, attached as Exhibit E to the Aug. 24, 2011 Letter. Many of the season
ticket holders purchased their season tickets from LAD in this fashion for years, if not decades.
When ownership changed and corporate shells were created, no one sent these season ticket
holders notice that, from now on, they would have rights only against Dodger Tickets, an
insolvent intermediary corporation, and not against LAD. Even now, it is highly unlikely
Debtors’ PR campaign will disclose this fact. The fact is that, notwithstanding what “Dodger”
names appear on the tickets or invoices, season ticket holders, most of whom have held their
tickets for decades, would not realize they were continuing to deal with anyone else but the Los
Angeles Dodgers. Instead, season ticket holders reasonably have always assumed they were
dealing with LAD in purchasing their season tickets and in their relationship with the Dodgers
franchise. See Berkowitz Decl., at ¶ 8.
2) Season Ticket Holders Have Renewal Claims Against the Debtors.
41. As noted above, many season ticket holders have renewed their tickets each
season for decades. Indeed, some of the members of the Ad Hoc Committee have held their
season tickets since the opening of Dodger Stadium in 1962 – for nearly 50 years. See
Berkowitz Decl., at ¶ 4. Each year the Dodgers automatically give season ticket holders the
option to renew their season tickets (every few years for those who hold multi-year season
tickets). See id. at ¶ 5.
42. Before each season, season ticket holders automatically receive a renewal
package in the mail from the Dodgers – ticket holders merely need to pay the invoice to retain
their current seats. See id. at ¶¶ 6-7. Season ticket holders are also given the option to upgrade,
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exchange or add seats to their season ticket account each year at a “Select-A-Seat” event held at
Dodger Stadium. See, e.g., Jan. 12, 2011 Select-A-Seat Letter attached hereto and incorporated
herein as Exhibit 6. The longer the period of time that season ticket holders have held their seats,
the earlier they are able to select any different seats and, thus, the better the opportunity they
have to upgrade to new seats before others do so. See Select-A-Seat Letter, Exhibit 6.
43. This historical practice of automatically offering season ticket holders renewal of
their season tickets each year creates in each season ticket holder an expectancy interest in the
acquisition of season tickets year after year. This expectancy interest arose prior to the Debtors’
petition dates and is not extinguished by the conclusion of the 2011 season.
44. The Bankruptcy Court for the District of Massachusetts aptly described this
expectancy interest in a case involving the proposed sale of Red Sox season tickets and their
accompanying renewal rights as follows:
Despite the Red Sox misplaced reliance on the non-transferability language contained in the Season Ticket Subscription Agreement and invoice, the practice of automatically renewing season tickets coupled with the pattern of arbitrarily and even capriciously permitting transfers creates a property right in the season ticket holder…. There is a right to renew a Red Sox season ticket from year to year based upon the historical practices of the Red Sox and the reasonable expectations that behavior encourages. The account holder does not even need to solicit a renewal letter from the Red Sox; rather the Red Sox automatically send the renewal letters to the previous season ticket holders. The ticket holder need only sign his invoice and pay the amount owed, and although he may wait in eager anticipation that this year will be the year the Red Sox win the World Series and shed the “curse of the Bambino,” he need do nothing else. This pattern gives rise to a reasonable expectation that season tickets are automatically renewable by their previous year’s holders.
See, e.g., In re Platt, 292 B.R. 12, 17 (Bankr. D. Mass. 2003) (emphasis added).
45. The Platt Court’s analysis of the expectancy interest created by the historical
practice of the renewal of season tickets is not unique. See, e.g., Oshinsky v. N.Y. Football
Giants, Inc., 2009 WL 4120237 (D. N.J. 2009) (unpublished) (plaintiff that had continually
renewed season tickets for 24 years “sufficiently alleged renewal rights” cause of action against
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New York Giants and New York Jets football teams, regardless of the revocable license granted
for each particular game); I.D. Craig Serv. Corp., 138 B.R. 490, 502 (Bankr. W.D. Pa. 1992)
(“[T]he season ticket holders’ interest in season ticket renewal may be better termed an
expectancy interest rather than a contractual interest. The expectancy interest has been created
and fostered by [the team] in the public, including season ticket holders, by virtue of [the team’s]
long practice of offering to renew season tickets to the current registered holder on an annual
basis.”); see also Charpentier v. L.A. Rams Football Co., 89 Cal. Rptr. 2d 115, 121 (Cal. App.
2000) (recognizing that the historical automatic renewal practices of the Rams fostered a renewal
expectancy in season ticket holders only so long as the team was located in Los Angeles, but not
upon their move to Missouri).
46. Here, the Dodgers have participated in a similar historical practice of
automatically renewing season tickets each year – a Dodgers season ticket holder, like a Red Sox
season ticket holder in Platt, need do no more than await receipt of its renewal package and pay
the invoice for the season tickets. Accordingly, season ticket holders hold claims against the
Debtors for the renewal of their tickets. Such claims fall well within the definition of “claim”
under the Bankruptcy Code and are not extinguished by the conclusion of the 2011 Dodgers
season.
47. Moreover, the Dodgers are estopped from denying such renewal rights. See, e.g.,
I.D. Craig, 138 B.R. at 497 (addressing equitable estoppel with respect to the renewal rights of a
season ticket holder and describing it as “a doctrine of fundamental fairness” intended to protect
the “reasonable expectations” of parties who have relied to their detriment on the conduct of the
inducing party) (citing West Am. Ins. Co. v. Park, 933 F.2d 1236, 1240 (3d Cir. 1991)).
48. The Dodgers’ course of dealing over decades, in some cases for nearly half a
century, of repeatedly and automatically renewing the tickets of their season ticket holders every
year establishes an expectation in its season ticket holders that cannot be denied. See, e.g., id.
(“Over the past sixty years [the team] intentionally created, encouraged and promoted the
expectation that all season ticket holders of record will have the opportunity to renew their status
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on an annual basis …”). This expectation arose pre-petition and continues, unabated, each year
as the season ticket holders continue their investments in the team. For the Debtors to now
attempt to deny these claims would be inequitable at best and actionable.
3) The Debtors and Creditors’ Committee Have Admitted That the Season Ticket Holders Will Have Administrative Claims Against These Estates.
49. The Debtors and Creditors’ Committee assert that, even if the season ticket
holders are creditors, they are not creditors of the Debtors – instead, they submit that the season
ticket holders’ claims are exclusively against Dodger Tickets. However, at the same time the
Debtors and the Creditors’ Committee have admitted that once season ticket holders purchase
their tickets for the 2012 season, they will hold administrative claims. See, e.g., Sept. 6, 2011
Debtor Letter, Exhibit 2, at p. 2 (“Season tickets that are sold for the 2012 season will create
post-petition obligations, which if not satisfied, will give rise to administrative expenses and
no pre-petition claims.”) (emphasis added); Sept. 6, 2011 Creditors’ Committee Letter,
Exhibit 3, at p. 4 (“Should members of the [Ad Hoc Committee] decide to renew their season
tickets for the 2012 season, any potential claims arising from those post-petition purchasers
would be administrative claims not entitled to representation by an official committee.”)
(emphasis added).
50. Thus, the Debtors and the Creditors’ Committee assert that season ticket holders
do not hold prepetition claims against any Debtor (because of the purported contractual
relationship with Dodger Tickets), but upon renewal of their season tickets for the 2012 season
such ticket holders will have administrative claims against the Debtors. The Ad Hoc Committee
does not dispute that season ticket holders will hold administrative claims upon their renewal for
the 2012 season – in fact, season ticket holders’ dual role as prepetition creditors and post-
petition administrative claimants provides even further evidence of the unique claims held by
season ticket holders and the inadequacy of the Creditors’ Committee to represent such
claimants. Simply, the admissions of the Debtors and the Creditors’ Committee believe their
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protestations that the season ticket holders are not creditors of the Debtors’ estates. The season
ticket holders are the largest creditor constituency in these cases.
4) Season Ticket Holders Have Contract Claims Against the Debtors.
51. Despite admitting that the season ticket holders will be administrative claimants
upon their renewal for the 2012 season, the Debtors’ submit that the season ticket holders’ claims
are exclusively against Dodger Tickets. It is clear that season ticket holders have a license
agreement with Dodger Tickets. However, on the back of the ticket holders’ invoice, each
season ticket holder is granted a “personal license” for their season tickets and a “revocable
license that enables the Bearer [of each ticket] to enter the premises of Dodger Stadium on the
day of the game and to sit in the seat location shown on the Ticket for that game.” See Season
Ticket Agt., Exhibit C to the Aug. 24, 2011 Letter at ¶1 (emphasis added). Accordingly, at the
very least, season ticket holders hold licenses for ingress and egress to Dodger Stadium and for
the particular seats purchased, as well being invitees of LAD and RealCo, as the owner, lessee
and apparent operators of the stadium.
52. This license is enforceable against Debtor RealCo, as the owner and lessor of
Dodger Stadium, against Dodger Tickets as the lessee and sublessor, and enforceable against
Debtor LAD as the sublessee and apparent operator of Dodger Stadium. See, e.g., Golden West
Baseball Co. v. City of Anaheim, 31 Cal. Rptr. 2d 378, 394-95 (Cal. Ct. App. 1994) (explaining
that a “licensee has express or implied authority from the owner to perform an act or acts upon
property.”).10
53. RealCo and LAD, the owners and operators of Dodger Stadium, authorize and
invite the season ticket holders into Dodger Stadium under the terms of the season ticket holders’
tickets and invoices. As such, the season ticket holders have specific performance rights of
direct access to Dodger Stadium and their purchased seat(s), which are directly against RealCo
10 While the Debtors have not provided the Ad Hoc Committee with copies of the agreements among RealCo,
Dodger Tickets and LAD, the CFO testified at the Meeting of Creditors that all three entities are parties to the stadium lease. See Fatell Decl., at ¶ 6.
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and LAD, as the owner and lessee of the stadium, as well as of enjoyment of the rights and
benefits granted them by the Los Angeles Dodgers.
54. Courts have recognized that season ticket holders have actionable claims against
professional sports teams under certain circumstances and have even certified season ticket
holders as a class. See e.g., Miami Dolphins, Ltd. v. Genden & Bach, P.A., 545 So. 2d 294, 295-
96 (Fla. Dist. Ct. App. 1989) (upholding enforcement of fee abatement provision in club seat
license agreement because Miami Dolphins used replacement players during strike); Skalbania v.
Simmons, 443 N.E. 2d 352, 354-63 (Ind. Ct. App. 1982) (affirming certification of season ticket-
holder class where Indiana Racers did not finish season because of team’s business collapse)); In
re I.D. Craig Svc. Corp., 138 B.R. 490, 494-95 (Bankr. W.D. Pa. 1992) (finding that season
ticket holders had an expectancy interest in renewal rights and recognizing that ticket holders
have brought suits to enforce ticket rights); cf. Charpentier v. Los Angeles Rams Football Co., 89
Cal. Rptr. 2d 115 (Cal. Ct. App. 2000) (season ticket holder adequately plead fraud and reliance
on team’s misstatements that team was not moving from Los Angeles, in purchasing additional
season tickets).
55. Moreover, Debtor LAD by virtue of its intercompany contracts and leases with
RealCo and Dodger Tickets, may be the direct assignee under the season tickets. The Debtors’
CFO testified at the Meeting of Creditors, for example, that LAD owns the revenues from the
season ticket sales other than the de minimis face amount of the particular seat sold. See Fatell
Decl., at ¶ 5. Without access to the Debtors’ intercompany agreements, it is unclear how RealCo
and/or Dodger Tickets have assigned such rights to LAD. However, the intercompany
relationship testified to by the CFO and the language on the tickets themselves, as well as the
circumstances here, suggest that LAD is in fact the assignee of the season tickets, and as such
may have direct contractual privity with the ticket holders, in addition to its relationship with
them as invitees, notwithstanding what the language itself on the back of the ticket or in any
agreements provides.
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56. Such contractual privity may exist even if LAD is not an assignee of the season
tickets. See Cal. Civ. Code § 1589 (“A voluntary acceptance of the benefit of a transaction is
equivalent to a consent to all the obligations arising from it…”); Cal. Civ. Code § 3521 (“He
who takes the benefit must bear the burden.”); see Matthau v. Superior Court, 60 Cal. Rptr. 3d
93, 99 (Cal. Ct. App. 2007) (Section 1589 applies to “a party to the original contract, to an
assignee of the contract, to a person who accepts all of the benefits of the contract, or to a person
who expressly assumes the obligations of the contract.”); Mekhior v. New Line Prods., Inc., 131
Cal. Rptr. 2d 347, 349 (Cal. Ct. App. 2003) (holding that where film company accepted the
benefits of an author’s rights and services under an agreement with another film company, as
well as the obligations of original film company that optioned rights from author, the film
company was liable for payments stated in release agreement between the author and original
film company).
57. We understand from the testimony of the Dodgers’ CFO at the Meeting of
Creditors that RealCo, LAD and Dodger Tickets are all parties to the lease documents. In fact,
prior to 2005, Dodger Tickets did not exist. At that time LAD was the direct lessee of stadium
owner RealCo. The 2005 restructuring of the Dodgers enterprise may have added Dodger Tickets
to the ownership structure, but as far as season ticket holders are concerned they have continued
to deal with the Los Angeles Dodgers. That relationship between LAD and season ticket holders
is further confirmed by how the season ticket revenue is allocated.
58. As set forth above, while Dodger Tickets retains the revenues from general
admission tickets, other ticket revenues appear to go directly to Debtors LAD and RealCo from
Dodger Tickets. Indeed, the cash management motion specifically states that the source of
revenue for RealCo is “from Tickets, ... sublease payments by LAD and ticket sales by Tickets.”
See Cash Mgt. Mot., at ¶ 21. The Debtors further explained to the UST that: “Season ticket
holders who purchase non-premium seat season tickets are entitled to purchase preferred parking
passes, which are bought directly from Dodger Tickets, which then remits the money to LAD.”
Sept. 6, 2011 Letter, Exhibit B, at p. 4.
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59. The status of the season ticket holders as creditors of Debtors LAD and RealCo is
clear and tangible. Even if the claims of such ticket holders are contingent, they are still “claims”
under the Bankruptcy Code. It is only due to the complicated corporate structure of the Dodgers
enterprise and the lack of transparency that one might even question whether season ticket
holders are creditors in these cases. The Ad Hoc Committee submits that they are.
5) Season Ticket Holders Are Third Party Beneficiaries of The Arrangement Among Dodger Tickets, LAD and RealCo.
60. Additionally, the season ticket holders are, at the very least, third party
beneficiaries of the intercompany contracts and leases among Dodger Tickets, Debtor RealCo
and Debtor LAD. Cal. Civ. Code § 1559; Gilbert Financial Corp. v Steelform Contracting Co.,
145 Cal. Rptr. 448, 450 (Cal. Ct. App. 1978) (“California cases permit a third party to bring an
action even though [it] is not specifically named as a beneficiary, if [it] is more than incidentally
benefitted by the contract.”); Del E. Webb Corp. v. Structural Materials Co., 176 Cal. Rptr. 824,
826 (Cal. Ct. App. 1981) (same). For example, here there is no question that Dodger Tickets and
the season ticket holders are in contractual privity by virtue of the license agreements, among
other things, that accompany the season tickets. Further, there is no question that Dodger Tickets
is in contractual privity with Debtor LAD by virtue of Dodger Tickets leasing Dodger Stadium to
LAD; and with RealCo as the owner and lessor of Dodger Stadium. The purpose of the lease
arrangement between Dodger Tickets and LAD is clear: LAD uses Dodger Stadium to play
regular season home games and post-season playoff games which season ticket holders attend
and with respect to which games they have rights concerning seats and other benefits. Further, it
is clear that some large portion or all of the funds paid by season ticket holders goes to LAD
and/or RealCo. It also appears that Dodger Tickets and LAD may have additional contractual
arrangements concerning the sale to and interactions and transactions with season ticket holders.
61. Whatever the exact terms of the contractual relationship between Dodger Tickets
and LAD are, the season ticket holders undeniably are more than just “incidentally” benefitted by
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that contractual relationship. As a result, under California law the season ticket holders are third
party creditor beneficiaries to the contractual relationship between Dodger Tickets and LAD,
between Dodger Tickets and RealCo, and among all three entities with the right to enforce the
contractual duties due to them. See Gilbert Financial Corp., 145 Cal. Rptr. At 450-51; General
Motors Corp. v. Superior Court, 15 Cal. Rptr. 2d 622, 628 (Cal. Ct. App. 1993) (holding that in
order for third party beneficiary status to apply, “[i]t is not necessary that the contract identify the
third party by name as long as such third party can show that it is one of a class of persons for
whose benefit it was made.”); Spinks v. Equity Residential Briarwood Apartments, 90 Cal. Rptr. 3d
453, 468 (Cal. Ct. App. 2009) (“If the terms of the contract necessarily require the promisor to
confer a benefit on a third person, then the contract, and hence the parties thereto, contemplate a
benefit to the third person. The parties are presumed to intend the consequences of a performance
of the contract.”); In re Toyota Motor Corp., 754 F. Supp. 2d 1145, 1184 (C.D. Cal. 2010) (relying
on Gilbert in finding that a “contract made ‘expressly’ for a third party’s benefit need not
specifically name the party as the beneficiary; to be deemed a third-party beneficiary, one need
only to have experienced more than an incidental benefit from the contract.”); National Union Fire
Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc., 89 Cal. Rptr. 3d 473, 484
(Cal. Ct. App. 2009) (citing to Gilbert and finding that in order for third party beneficiary status to
attach, “[t]he contract need not be exclusively for the benefit of the third party in order to permit
enforcement, and the third party does not need to be the sole or the primary beneficiary.”).
6) Dodger Tickets is an Alter Ego of The Debtors.
62. Even assuming, arguendo, that season ticket holders did not have licensee and
invitee status with respect to Dodger Stadium, which they do, the facts known to date support
that Dodger Tickets is a mere alter ego of LAD. Delaware courts have found that: “To prevail on
an alter ego claim under Delaware law, a plaintiff must show (1) that the parent and the
subsidiary operated as a single economic entity and (2) that an overall element of injustice or
unfairness ... [is] present.” Fletcher v. Atex, Inc., 68 F.3d 1451, 1457 (2nd Cir. 1995) (quoting
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Geyer v. Ingersoll Publ’ns Co., 621 A.2d 784, 793 (Del. Ch. 1992)). (internal quotation marks
omitted). The factors considered by courts in determining whether a subsidiary and parent
operate as a “single economic entity” include whether:
the corporation was adequately capitalized for the corporate undertaking;
the corporation was solvent;
dividends were paid, corporate records kept, officers and directors functioned properly, and other corporate formalities were observed;
the dominant shareholder siphoned corporate funds; and
in general, the corporation simply functioned as a facade for the dominant shareholder.
Id. (quoting United States v. Golden Acres, Inc., 702 F. Supp. 1097, 1104 (D. Del. 1988)).
63. It is important to note, however, “no single factor could justify a decision to
disregard the corporate entity, but [rather] some combination of them [is] required, and … an
overall element of injustice or unfairness must always be present, as well.” Harper v. Delaware
Valley Broadcasters, Inc., 743 F. Supp. 1076, 1085 (D. Del. 1990) “Simply phrased, the standard
may be restated as: whether [the two entities] operated as a single economic entity such that it
would be inequitable for this Court to uphold a legal distinction between them.” Id. (internal
quotations omitted).
64. This is a fact intensive inquiry. Nevertheless, based on the facts we have been
able to glean thus far, it would be inequitable to hold that there is a distinction between Dodger
Tickets and RealCo and LAD vis-à-vis the season ticket holders – the marketing and sale of the
tickets with direct access to Dodger Stadium through the season ticket holder process alone
evidences the minor role of Dodger Tickets and the misleading façade to the public. Moreover,
the Debtors admit that Dodger Tickets is insolvent, and that season ticket holders’ funds are not
owned by Dodger Tickets but are transferred directly to LAD and RealCo. Other facts compel
finding alter ego here as well, including:
CC-253063 27
Dodger Tickets is insolvent and undercapitalized; see Periodic Report [Dkt. No. 349], Tab 7, at p. 2;
The Debtors have admitted that ticket sales are significant sources of revenue for RealCo, LAD and perhaps other Debtors with all funds from the sale of season tickets, other than the base face amount of a particular seat, immediately released by Dodger Tickets to the Debtors’ concentration account and remitted to LAD or RealCo; see Fatell Decl., at ¶ 5;
The funds from the 2005 and 2007 securitizations entered into by Dodger Tickets were used for the benefit of the Debtors, with $250 million generated in 2005 used to refinance McCourt’s acquisition of the Dodgers and $140 million generated in 2007 used to pay the cost of upgrading Dodger Stadium – which is owned by RealCo and leased by LAD; see Cash Mgt. Mot. [Dkt. No. 5], at ¶ 15;
Dodger Tickets’ revenues are used to pay down the debt service on the securitizations with all excess funds being remitted to Debtor LAD; see Cash Mgt. Mot. [Dkt. No. 5], at ¶¶ 14-16, 24 and 45;and
Dodger Tickets maintains a reserve fund for each year in which there is a collective bargaining agreement renewal, despite the fact that the Debtors list the MLB players as creditors of LAD; see Cash Mgt. Mot. [Dkt. No. 5], at ¶ 24.
65. It is clear that the entire Dodgers enterprise is governed by one dominant
shareholder – Mr. McCourt – under the Dodgers name and that the Debtors and other shell
entities are merely a façade for the control by that shareholder. Indeed, in the Debtors’ recent
motion to market and auction the Dodgers’ telecast rights and other pleadings, the Debtors have
admitted that they presume funds will be paid to affiliated non-debtor entities. See Mot. For
Order Approving Marketing Procedures for Licensing of Telecast Rights, Etc. [Dkt. No. 443], at
¶¶ 8-11. Such statements are further evidence of the lack of distinction among the Dodgers’
entities. The fact is that, no matter the complex structure and the intercompany transfers, the
enterprise has held itself out to the public as one single economic unit – the Los Angeles
Dodgers.
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7) Dodger Tickets is a Mere Agent For The Debtors.
66. Even assuming that Dodger Tickets is not merely an alter ego for the Debtors,
which it appears that it is, it is clearly an agent for the Debtors when it comes to the season ticket
holders. As the Third Circuit has explained, under Delaware law:
One corporation whose shares are owned by a second corporation does not, by that fact alone, become the agent of the second company. However, one corporation – completely independent of a second corporation – may assume the role of the second corporation’s agent in the course of one or more specific transactions. This restricted agency relationship may develop whether the two separate corporations are parent and subsidiary or are completely unrelated outside the limited agency setting. Under this second theory, total domination or general alter ego criteria need not be proven.
When one corporation acts as the agent of a disclosed principal corporation, the latter corporation may be liable on contracts made by the agent. Liability may attach to the principal corporation even though it is not a party named in the agreement.
Unlike the alter ego/piercing the corporate veil theory, when customary agency is alleged the proponent must demonstrate a relationship between the corporation and the cause of action. Not only must an arrangement exist between the two corporations so that one acts on behalf of the other and within usual agency principles, but the arrangement must be relevant to the plaintiff’s claim of wrongdoing.
E.I. Dupont De Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d
187, 198 (3d Cir. 2001) (citing Phoenix Canada Oil Co. v. Texaco, Inc., 842 F.2d 1466, 1477 (3d
Cir. 1988)).
67. In sum, “to bind a principal by its agent’s acts, the plaintiff must demonstrate that
the agent was acting on behalf of the principal and that the cause of action arises out of that
relationship.” Id. The facts presented thus far, without even the benefit of discovery, demonstrate
that – at the very least – Dodger Tickets is an agent for RealCo and LAD.
68. As described above, the season ticket holders’ invoices and tickets give the
holders rights to ingress and egress at Dodger Stadium and to their particular purchased seat(s).
The funds raised through such ticket sales are used predominantly by LAD, according to the
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CFO, and, in any event, are securitized in support of the $250 million and $140 million loans
obtained in 2005 and 2007, which were used directly to support RealCo and LAD – not Dodger
Tickets. Aside from the ticket invoices, all marketing, sales and correspondence with the season
ticket holders, as well as the Terms of Use Agreement, is done on behalf of the “Los Angeles
Dodgers” – the only face of the Dodgers enterprise that is seen by the season ticket holders.
V. CONCLUSION
69. The season ticket holders are unique. They are the critical revenue source for the
continued operation of the Dodgers and they are the face of the Dodgers in the stands. Their
goodwill, as the Debtors have admitted, is critical to the success of this reorganization. As
described above, the season ticket holders are creditors with interests far different than those of
general unsecured creditors represented by the Creditors’ Committee who seek to maximize the
dollars to be disbursed on their claims. The season ticket holders are both prepetition creditors
and potential administrative claimants, whose claims are not simply satisfied by cash. This
makes their interests divergent from the members of the Creditors’ Committee. As such the
Creditors’ Committee cannot in any manner adequately represent the interests of season ticket
holders.
70. In this case, the season ticket holders are far more than just consumers of the
Debtors’ product – they are the lifeblood and income stream for the successful reorganization of
the Dodgers. They are entitled to rights and services provided by Debtors LAD and RealCo.
They must have and deserve a voice in these cases. The reasons for forming official committees
directly apply here – there are over 17,000 season ticket holders; presumably all live in the Los
Angeles or nearby areas across the country from the Delaware Bankruptcy Court; they come
from varying financial abilities; and it would not be practicable or possible for them to retain
separate counsel to appear at hearings in Delaware. It serves the interests of the thousands of
season tickets holders, judicial economy and justice for there to be an official committee of
season ticket holders in these cases.
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WHEREFORE, the Ad Hoc Committee of Los Angeles Dodgers Season Ticket Holders
respectfully requests (a) that the Court instruct the United Sates Trustee to appoint an official
committee of season ticket holders pursuant to 11 U.S.C. § 1102 (a)(2) with the rights and
powers of an official committee under 11 U.S.C. § 1103; (b) that any such official season ticket
holders’ committee initially be comprised of the members of the Ad Hoc Committee, with
additional members to be appointed at the discretion of the UST; and (c) such other and further
relief that is proper and just.
Dated: Wilmington, Delaware Respectfully Submitted, September 27, 2011
STEPTOE & JOHNSON LLP Robbin L. Itkin, Esq. (CA Bar No. 117105) (pro hac vice pending) Katherine C. Piper, Esq. (CA Bar No. 222828) 2121 Avenue of the Stars, Suite 2800 Los Angeles, CA 90067 Tel. No.: (310) 734-3200 Fax No.: (310) 734-3300 Email: [email protected] [email protected]
-and-
BLANK ROME LLP /s/ Bonnie Glantz Fatell Bonnie Glantz Fatell, Esq. (DE 3809) 1201 Market Street, Suite 800 Wilmington, DE 19801 Phone: (302) 425-6400 Fax: (302) 425-6464 Email: [email protected]
Proposed Counsel for the Ad Hoc Committee of Los Angeles Dodgers Season Ticket Holders
![Bankr Cont[1]](https://img.dokumen.tips/doc/110x75/577d2ac91a28ab4e1eaa1563/bankr-cont1.jpg)
