By Ryan C. Wood

On August 16, 2011, a group of season ticket holders filed documents with the bankruptcy court to attempt to form an ad hoc creditors committee.  This ad hoc creditors committee would represent the interests of season ticket holders of the Dodgers.  The parties seeking to create the ad hoc committee are Frank Sinatra and Jeffrey Berkowitz (1958), Wershow Ash Lewis (1964), Roland and Susan Simons (1981), Jack/Vera/Mark Stutman (1962) and Custom Services (1981).

The formation of a committee by unsecured creditors is common in large chapter 11 bankruptcy cases when significant assets are at stake.  Section 1102 provides authority for the United States Trustee to appoint a committee.  In large chapter 11 cases there can be hundreds of unsecured creditors all with the same interests.  It is not efficient for each unsecured creditor to hire an attorney, so a committee of the largest unsecured creditors is formed and the same attorney will represent the committee to make sure the unsecured creditors’ interests are protected.  The unsecured creditors committees’ attorney is paid by the debtor’s estate and not directly by the unsecured creditors.

The Dodgers Season ticket holders are not unsecured creditors though, or creditors at all.  It is not common for groups with other interests to form a committee to oversee the reorganization of a bankruptcy company.  Members of the committee have a fiduciary duty to represent the entire class they represent and make sure the entity that filed bankruptcy treats them properly under the bankruptcy code.

What will the committee of season ticket holders actually accomplish?  It will be interesting to see whether the United States Trustee and the bankruptcy court see the value of a committee to represent the interests of the season ticket holders at all.  None of the season tickets holders have a direct claim or are owed money from the Dodgers.  They will still be able to go to all of the games they have paid for during the season.  Will the formation of a committee of season ticket holders somehow make the Dodgers field a better team or somehow help to reorganize the Dodgers?

The formation of a committee of season ticket holders will increase the cost to administer the bankruptcy case.  The committee’s attorney is usually paid from the estate of the entity that files for bankruptcy.  The Dodgers will most likely argue that this additional expense is unnecessary.  You never know though.  Arguably the season ticket holders are the lifeblood of any organization.  Without the loyal season ticket holders that renew their seats each year most professional sports teams would not enjoy much financial success.  The Dodgers may recognize this and allow the season ticket holders to be part of the process that creates the new Dodgers post-bankruptcy.  Time will tell.

If you need additional information about creditor committees or bankruptcy in general you may contact our Redwood City bankruptcy lawyers or Fremont bankruptcy lawyers.