McCourt has maintained that the FOX deal was essential for the financial health of the Dodgers and had urged the Commissioner to approve it since Spring Training. McCourt's attorney on Monday hinted that a lawsuit could follow.
Selig said in a statement that he'd given the contract -- reported to be as high as $3 billion with a sizable upfront payment -- a great deal of consideration, but in the end it didn't conform with the best interest of the ballclub or Dodgers fans. The deal called for an upfront payment of $385 million from FOX, with $173.5 million going to the McCourts and their attorneys.
Selig's veto power comes from his authority based on the debt-service rule, which doesn't allow franchises to borrow on future assets in order to pay current bills. Under the rule, owners must sell equity in the team to raise revenue, decrease spending or both.
"Critically, the transaction is structured to facilitate the further diversion of Dodgers assets for the personal needs of Mr. McCourt," Selig said. "Given the magnitude of the transaction, such a diversion of assets would have the effect of mortgaging the future of the franchise to the long-term detriment of the club and its fans."
Selig appointed former Texas Rangers president Tom Schieffer to monitor the team's business operations on April 25 because of "deep concerns regarding the finances and operations of the Dodgers" and further ordered an investigation into the club's finances and related entities.
Last week, McCourt and his ex-wife, Jamie, reached an agreement out of court that would give Frank control of the club contingent upon Major League Baseball's approval of the deal between the Dodgers and FOX. With Monday's ruling by Selig, that agreement is null and void.
McCourt has said repeatedly that he needs the upfront payment from the TV deal to pay his bills. A payroll of $30 million that includes $8 million in deferred payments to ex-Dodger Manny Ramirez is due by the end of the month.
Of the $385 million FOX would have paid McCourt upfront in the rejected deal, $80 million would have repaid debt, $23.5 million would have repaid a personal loan from FOX used to meet last month's payroll, $10 million would be for legal fees, $10 million would have gone to the McCourts and $50 million could go toward a $100 million payment to Jamie McCourt if the club ultimately was ruled Frank McCourt's property through the divorce proceedings.
Selig said he sent McCourt a letter on Monday that detailed the reasons why he could not approve the media deal.
"Mr. McCourt has been provided with an expansive analysis of my reasons for rejecting this proposed transaction," Selig said. "As I have said before, we owe it to the legion of loyal Dodger fans to ensure that this club is being operated properly now and will be guided appropriately in the future. This transaction would not accomplish these goals."
Divorce court documents have revealed that the McCourts took more than $100 million of Dodgers funds for personal use. McCourt has said the new FOX deal was structured in accordance with MLB guidelines and similar to those of other clubs.
Steve Susman, senior partner of Susman Godfrey, issued this statement on behalf of McCourt:
"We are extremely disappointed with the Commissioner's rejection of the proposed FOX transaction which would inject $235 million into the Los Angeles Dodgers. As Commissioner Selig well knows, this transaction would make the Dodgers financially secure for the long term and one of the best capitalized teams in Major League Baseball.
"For weeks Major League Baseball has consistently made public pronouncements asserting that Jamie McCourt's agreement of the FOX transaction also was needed; that the Court adjudicating the McCourt divorce grant its approval of the transaction; and the Dodger organization provide all data requested by Major League Baseball to satisfy the so-called investigation ordered by Commissioner Selig last April -- the latter also being the excuse he gave at that time for delaying his approval of the proposed FOX transaction.
"All the requirements for the Commissioner to approve the FOX transaction were put in place by last Friday: Frank and Jamie McCourt entered into an agreement based on the proposed transaction; the Court ordered, among other things, that the FOX transaction is 'in the best interest of the Los Angeles Dodgers and should be consummated immediately;' and all information requested by Major League Baseball under its so-called investigation has been provided by the Dodgers.
"Commissioner Selig's letter of rejection is not only a disappointment, but worse, is potentially destructive to the Los Angeles Dodgers, and Major League Baseball. Accordingly, we plan to explore vigorously our options and remedies with respect to Commissioner Selig's rejection of the proposed FOX transaction and our commitment to protect the long-term best interests of the Los Angeles Dodgers."
McCourt has insisted that the television rights were a club asset and previously accused the Commissioner of withholding approval to force a sale. The current rights, which were part of FOX's sale of the club to the McCourts seven years ago, expire in 2013.
Now, based on widespread speculation and media reports, McCourt is unlikely to be able to make the team's payroll at the end of the month. Should that happen, MLB could seize the club, assume operations and put the business up for sale. McCourt said Friday he would make this month's payroll.
If the club were seized by MLB, it could trigger a lawsuit from McCourt to regain control and have the FOX contract approved, even though MLB bylaws state that owners can't sue the Commissioner or the sport. New owners sign documents to that effect upon purchasing a team.
Still to be decided between the McCourts is whether the team belongs only to Frank and whether it should be considered community property in the divorce and splitting of assets.