Los Angeles Dodgers File for Chapter 11 Bankruptcy – Lessons for Small Business

Posted by David Leibowitz on June 27th, 2011 in Bankruptcy, Chapter 11, Uncategorized

The Los Angeles Dodgers couldn’t make payroll. The McCourts, their owners, are involved in a nasty divorce. They are having trouble with their franchisor – Major League Baseball. This is making headlines. But it could be anyone’s story. Divorce, cash flow difficulties, franchisee problems and an inflated payroll have been the downfall of many businesses. But when it happens to a major league baseball team, it’s a big story.

What does the Dodger’s chapter 11 mean to you?

• Chapter 11 can be caused by turmoil in the personal lives of the owners
• Costly financial commitments can be a problem – they need to be addressed in chapter 11
• A franchised operation must make peace with the franchisor
• Financing is critical in any chapter 11 case

Look how this plays out with the Dodgers.  Divorce is frequently accompanied by financial stress. It’s certainly a distraction to the management of any business. The McCourts don’t seem to have their eye on the ball, figuratively or literally. They have a great big contract with Manny Ramirez. It doesn’t seem like he is going to perform up to the standards set for him. But the Dodgers still have to pay.

They say that all they need is to sign up their $3 Billion (that’s with a “B”) television contract and everything will be OK. Of course, this TV contract seems not to be OK with the franchisor, Major League Baseball.

What lessons can we learn? Big business frequently has the same problems as little ones.

Chapter 11 may be a good answer for the Dodgers. Small businesses can take advantage of chapter 11 too. In order to be successful, you need counsel who knows how to deal with small businesses in chapter 11, one who will work efficiently and cost effectively. David Leibowitz has close to 40 years of experience representing debtors large and small.