In professional
sports, the most common method of distributing the
rights to
players formerly part of folded
teams. Dispersal drafts are fairly common in
minor leagues, as teams fade into and out of
financial stability, communities lose interest in
Friday night fights, etc., but occasionally take place in the bigs as well. Most recently,
Major League Soccer held a dispersal draft in January 2002 to distribute players following the
contraction of the
Tampa Bay Mutiny and
Miami Fusion.
In general, the remaining teams get a chance to pick, in worst-to-first order or something approaching it, from the players either under contract to the disbanded clubs, or to whom the disbanded clubs own rights (via entry draft, free agency restrictions, or other methods). The player's status with the new team is the same as it was with the old team (if the Hampton Roads Admirals had you under contract for one more season at $8,000, the Richmond Renegades couldn't cut your pay if they picked you up).
The most bizarre variation on the dispersal draft took place in the National Hockey League during the summer of 1991. Former Minnesota North Stars owner Gordon Gund threatened to move the team to San Jose, CA in 1990-91, and was only dissuaded by being awarded an expansion franchise (the San Jose Sharks) for 1991-92, with some additional benefits. San Jose was able to take part in a full-league expansion draft, but prior to that, Minnesota was forced into a mini-dispersal draft where it was only allowed to protect about half of its 1990-91 roster (expansion draft participants protected substantially more players), and the Sharks were given free pick of the rest. It didn't help -- the Sharks were still terrible their first few years -- and it hurt the North Stars both hockey-wise and PR-wise to the point that they did leave just three years later for Dallas.