Major League Baseball has rejected a proposed contract that would have extended Fox’s rights to televise Los Angeles Dodgers games for 17 years, setting the stage for a bruising fight between the sport’s leadership and Dodgers owner Frank McCourt over control of the team and its smallscreen future.

In the latest chapter of a saga that has seen baseball’s flagship West Coast franchise run through multiple tribulations, Fox (which is also MLB’s primary national baseball TV partner) will now watch as baseball and the Dodgers head toward a lawsuit that could be one of the most significant showdowns in the sport’s long history.

Because of McCourt’s distressed position, it is believed that Fox had negotiated favorable terms for itself to extend its hold on the Dodger television rights (and forestall the team from going off to form its own cable network, as the Los Angeles Lakers are doing in a deal with Time Warner Cable).Time Warner Cable).

The Dodgers’ future has been in crisis ever since the marital separation of Frank and Jamie McCourt in 2009. A settlement in their divorce case was reached Friday, but it was contingent on approval of the Fox deal. Without that deal, which was to include an immediate advance of $385 million even though the extension (valued in reports from $1.7 billion to $3 billion) was not to go into effect until 2014, many speculate that Frank McCourt will default on the team’s next player payroll payment, due June 30.

The manner in which Frank and Jamie McCourt used Dodger revenues — including income from the current Fox TV agreement — to support a luxurious lifestyle became public record in court last year.

MLB’s rejection of the Fox deal came as little surprise, save for the possibility that MLB and commissioner Bud Selig might approve the deal rather than face a lawsuit that could bring much of the sport’s confidential financial operations into the open. Instead, it can be inferred that Selig and baseball’s other 29 owners are united against McCourt.

Selig had signaled his stance in February by denying approval of a $200 million advance loan from Fox to McCourt and then in April launching an almost unprecedented investigation into McCourt’s operation of the Dodgers.

The fact that more than a third of the $385 million Fox advance would be going to address McCourt personal financial issues, per the now-moot divorce settlement, also weighed heavily against Selig’s approval.

“This decision was reached after a full and careful consideration of the terms of the proposed transaction and the club’s current circumstances,” Selig said. “This proposed transaction with Fox would not be in the best interests of the Los Angeles Dodgers franchise, the game of baseball and the millions of loyal fans of this historic club.

“Critically, the transaction is structured to facilitate the further diversion of Dodgers assets for the personal needs of Mr. McCourt. 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.”

Susman Godfrey partner Steve Susman, representing McCourt, telegraphed that the Dodger owner is not going to respond passively.

“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,” Susman said. “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.”