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Can Bud Selig invoke Best Interests o the Game Clause to Seize Control of Texas Rangers?

By Rick Karcher, Michael McCann, Geoffrey Rapp, Greg Skidmore, and Howard Wasserman

The basic issue here is that Major League Baseball seems to want a prospective ownership group led by Nolan Ryan and Attorney Chuck Greenberg to purchase the Rangers, which have been owned by Tom Hicks (who last year defaulted $525 million in loans) and a group of lenders, but Hicks et al., are opposed to the sale.

Could MLB sidestep Hicks and the lenders? Zach Lowe of The American Lawyer considers that in a new piece. Here's an excerpt:

If the Phoenix Coyotes bankruptcy was the first major test of whether business interests and courts can override the power of professional sports leagues, the sale of the Texas Rangers to a consortium headed by a Pepper Hamilton partner is shaping up to be an even more dramatic sequel.

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The vote to reject the Greenberg deal has set up a possible mega-clash between the lenders and Major League Baseball, which is being advised by Jordan Yarett of Paul, Weiss, Rifkind, Wharton & Garrison. (Yarett declined to comment today). Selig recently sent a letter to the lenders in which he threatened to invoke a rarely-used rule allowing him to take extreme steps in the "best interests of baseball." Among the possible steps: Selig could seize the Rangers, invalidate the creditors' liens on Hicks and hand the team over to the Greenberg group for the agreed-upon price, the Sports Business Journal reports. Selig has used the "best interests" clause in an ownership transition before--in 2001, when MLB purchased the Montreal Expos as part of a complicated series of deals involving three teams. (The league eventually moved the Expos to Washington.)

And if Selig uses this option? The lenders are prepared to sue and file an involuntary bankruptcy on behalf of the Rangers, the SBJ reports. The documents are prepared already, the story says.

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"I think Major League Baseball has a preferred set of owners, and that purchase price isn't the only consideration," says Michael McCann, a professor at Vermont Law School who specializes in sports law and contributes often to Sports Illustrated. McCann says he would expect creditors to pursue a court order temporarily barring any transfer of ownership if Selig does invoke the "best interests" clause.

To read the rest, click here. For additional coverage, see Daniel Kaplan's commentaries in the Sports Business Journal.

Full post as published by Sports Law Blog on May 13, 2010 (boomark / email).