Fox Sports, a division of News Corp, sued the Los Angeles Dodgers late on Tuesday to stop a proposed sale of television rights that the team has said is key to emerging from bankruptcy protection.
The Fox complaint was largely expected but it opens another legal front for the team, which is already battling Major League Baseball for control of the team.
In a filing with a bankruptcy court in Delaware, Fox Sports said any steps taken by the team to sell media rights would be in violation of its current broadcast agreement with Fox.
Earlier this month, the Dodgers proposed an auction of the rights to broadcast the baseball team's games. The auction is expected to bring in billions of dollars to stabilize the team's long-term finances and allow it to emerge from bankruptcy.
In order to conduct the auction, the team had to break its current broadcast agreement with Fox, which grants Fox exclusive negotiating rights till November 2012.
Fox's lawsuit also alleges that the team is already in breach of contract by sharing confidential information about the agreement, "even after direct and explicit warnings."
The Dodgers said in a statement they "fully complied with all of their obligations under the existing contract with Fox."
Bankruptcy gives debtors latitude to break burdensome contracts, as airlines have done with labor agreements, according to Anthony Sabino, a law professor at St. John's University.
The team filed for bankruptcy in June after baseball's commissioner, Bud Selig, rejected a proposed $3 billion, 17-year media rights deal with Fox.
Sabino said the Dodgers might have been better off by reviving the agreement that the league rejected and asking the judge to approve it, rather than making an enemy of Fox by holding an auction.
"Bankruptcy is very much like a military battle," said Sabino. "You don't open a two-front war if you can help it."
The case is In re: Los Angeles Dodgers LLC, U.S. Bankruptcy Court, District of Delaware, No. 11-12010.
(Reporting by Tom Hals in Wilmington, Delaware, and Tanya Agrawal in Bangalore, editing by Gerald E. McCormick)