Sports Meets The Law-Coyotes, Balsillie, Hockey & Bankruptcy

A fairly quiet day today as far as this stuff goes. The court hearing lasted about 30 seconds as all that was done was court scheduling. I love that folks got send out there from here to cover ….drum roll please….NOTHING.

I know I sound like a mayna bird, but the National Post really did a great job in their paper today. Of all the papers I read, there coverage was the best. They had a great layout, superb quotes….all good stuff. I love that the gloves have come off from the NHL side:

“Mr. Balsillie is acting, again, in total disregard of any rules, or any structure. . . . I would be very surprised if the board would look favourably on the way that Mr. Balsillie has conducted himself in this instance. He makes his own decisions and he’s making a decision that this is the way he wants to get into the National Hockey League. We don’t usually like to pick fights, but we end them.”

That from Bill Daily, Bettman’s right hand man. It is ironic that during the last work stoppage it was the PA who was slinging mud in the press and the league which was taking the higher ground. Here it is the other way around. Both Bettman and Daily are heaving it pretty good right now. As for the response from the Balsille camp:

“This is not about personalities or curious notions of a `fight.’ It’s about a logical business proposal to serve a Canadian market where nearly 100,000 people have already indicated their support for an NHL franchise.”

This isn’t going to end anytime soon. It’s interesting reading how Daily interprets Balsillie’s actions:

“Well certainly to the extent he’s attacked virtually every rule that’s in existence in the National Hockey League, I don’t think the governors will look kindly to the posture he’s taken in this proceeding, that’s for sure.”

I know why Daily says that, however I think it is the least credible of all his points. Any owner with a brain, and most of them are pretty smart, are very familiar with the history of anti-trust suits in the sports world. Balsillie’s attorneys have crafted legal arguments that force a judge, should it come to that, to answer the anti-trust questions as they pertain to the NHL’s franchise agreement. Somewhere Jerry Jones, Al Davis and Mark Cuban are smiling.

The Star had Kevin Mcgran on site for the big hearing in Arizona:

“As far as the NHL is concerned, deputy commissioner Bill Daly has been installed as the team’s chief executive officer. The league contends it has the legal right to remove owner Jerry Moyes from all positions of authority after he went behind their back to put the team in bankruptcy and get an offer from Balsillie to buy the team for $212.5 million on the premise he will move the team to Hamilton.”

I wonder which issue gives the NHL the right to remove Moyes, or if it is both of them. I guess one of the questions the court is going to have to answer is if the owner of a team has a legal responsibility to notify a league of it’s impending bankruptcy.

“The court gave both sides time next week to determine who is in charge. The NHL will make its case May 13. Moyes will make his argument on May 15, and a final hearing will be held May 19.”

That is really all you need to know about what happened in Arizona today in the courtroom.

Damien has a really fun rant on his blog, wherein he attacks the competition, the Globe and Mail:

“Great to see the country’s “national newspaper” has taken on the task of being the propaganda arm for Jim Balsillie. Normally businessmen of that stature have to pay for such services. The way that media outlet talks it is as though southern Ontario hockey fans are some great oppressed people straining under the rule of the tyrant Bettman, with the liberator Balsillie prepared to set them free. Guess the NHL commissioner’s trips to Calgary and Edmonton in recent months to push for new arenas to support NHL teams in those cities was also about somehow denying Canadians their national birthright. And here I was just thinking it was about the business of hockey.”

In fairness to the Globe, every major media outlet has been covering this story as if we had found a cure for cancer. The CBC has been leading it’s news coverage with it. The Post, as I said earlier had a front page spread, a cover story and then more in the sports section. Damien’s own paper had a writer in the courtroom. As for the angle, Bettman has long been portrayed as the evil empire in these parts. Balsillie is the great Canadian success story. Love him or hate him he has built a Canadian company into a world leader. Consider this, while RIM was fighting a patent infringement case, and a motion was before the court to shutdown the rim “system”, the white house and US government filed briefs in support of keeping the RIM network alive. We Canadians are constantly looking for world recognition and the fact the one of our own has done so well on the world stage and wants to further our game and can’t kills many a people. There is also one point that Damien fails to address. Certain members of the media are complete shills. That is they only repeat that which is whispered in their ears by a reputable source. I think many of you may have noticed that certain media member’s opinions often mimic the opinions of one side of a story as opposed to the other, just a little to closely. So if one scribe sounds a little to close to what one side is saying, it is probably because they are simply repeating that which the party is saying itself.

David Shoalts has a good column in tomorrow’s Globe..

“The group backing Canadian billionaire Jim Balsillie’s bid for the Phoenix Coyotes unleashed its sharpest attack yet on the National Hockey League, alleging in a lawsuit that the league is operating like an “illegal cartel” by blocking Mr. Balsillie’s effort to move the Coyotes to Hamilton. ‘The NHL is excluding competition and restraining trade in [the United States and Canada] through the application of unreasonable restrictions in its constitution and bylaws, which are preventing the relocation of the Coyotes from Phoenix, Ariz., to Hamilton, Ont.,’ said the lawsuit filed Thursday in Phoenix.”

Those are the classic allegations from the classic anti-trust cases. The US government, isn’t a big fan of restraints on trade or anti-competitive actions. Lots of money is spent in both defending this types of actions and in attacking alleged cartels. Balsillie’s lawyers are following the playbook word for word and tactic by tactic. I still can’t believe that the NHL really wants this to be decided by a court.

“The league argued in a court filing that Mr. Balsillie and Jerry Moyes, the Coyotes majority owner, cut a secret deal that has no legitimacy. Mr. Moyes gave the NHL voting control of the club last summer in return for badly needed financing, the league argued. Mr. Moyes allegedly asked to be allowed to keep his titles of chairman and chief executive officer “to avoid public embarrassment,” but he had no authority to put the club into Chapter 11 protection and announce the proposed sale to Mr. Balsillie, the league argued.”

That is interesting becuase we had yet to see where the basis of the leagues argument that Moyes couldn’t put the team in bankruptcy originated from. For the league to make these allegations it must, I mean must have some documentation to support that claim, an email, signed contract…something.

“Mr. Balsillie and the Coyotes argue the NHL has no hope in Phoenix and that depriving hockey fans in Ontario while forcing an owner to remain in Arizona makes no sense. “After 12 years in the desert … the Coyotes have been unable to build a large fan base,” the group alleged.They pointed out that while Phoenix is the fifth largest city in the United States, the Coyotes ranked 24th out of 30 teams in attendance despite having ticket prices that are $12.21 below the league average. They added that the club has never made money, lost $73-million over three seasons and did so badly financially this season that the league penalized the club by slashing the amount of revenue sharing it was to receive.”

That just can’t be good for business. It is not so dissimilar to an arbitration hearing in sports. The player gets bashed by his boss and all is supposed to be forgotten when the board room doors open. By taking this route the league is allowing this market (others will logically follow) to be scrutinized and criticized like never before and then tried in the court of public opinion. Of course there is the credibility problem as well. when stories surfaced that the league was running the Coyotes, too many people lied. Now they are asking the public to believe them. If they lied then, how do we know they aren’t lying now??? Bettman kept saying how fine things were in Phoenix. If they were so fine then why did he remove the owner???

Brunt, meanwhile asks many of the questions above and I think he is right on in asking them:
“Understanding the grave consequences, how could the NHL have allowed the Phoenix Coyotes to fall into bankruptcy? Could it be that commissioner Gary Bettman badly overplayed his hand?….In the past three seasons alone, the Coyotes lost upward of $73-million (all currency U.S.), which isn’t the kind of picture you’d want to paint in a business in which franchise values — and, more significantly, the money borrowed against them — might be called into question. Without the bankruptcy, for all of the speculation, no one would have known any of that for certain. So what was Bettman thinking?”

Exactly! How did the commish allow this to happen, and how did he allow it to happen right now of all times? What’s more amazing is that all the warts are going to come out in the most public of forums. How many times have we heard the league say things like we don’t agree with those numbers, we don’t comment on those types of stories etc. Well all the dirty little secrets are going to be discoverable and part of a very public record. If the antitrust suit moves forward ALL the numbers, all the facts that they try to hide will come to light. How can that be good for the league?

“Some time last winter, Moyes, who was being squeezed in his main trucking business thanks to collapsing economy, tired of paying the Coyotes’ bills. As was reported in this newspaper (and as was vigorously denied by league executives), the NHL began advancing future revenues to the club in order to keep it solvent. The NHL could have allowed Phoenix to miss payroll and then revoked the franchise, putting the Coyotes directly under league control. But that would have been impossible to keep quiet, and it would have been terribly embarrassing, an admission of failure that might lead to panic, with several other franchises teetering on the brink. That would have also headed off the possibility of Moyes declaring bankruptcy”

Forget the arguments that Bettman is losing his board. The question is how did a control freak lose so much control. This lawsuit he is embarking on is not going to be under his control. If there was such a thing as a home run in the law, there would be no need for lawyers. The law isn’t cheap and it isn’t predictable. Why and how Bettman allowed the league to get to this is quite amazing and totally uncharacteristic for the little man.

“Bettman finally managed to come up with a cash-poor offer from Chicago Bulls owner Jerry Reinsdorf (who earlier had said no thanks when he was asked to consider buying the Coyotes). Moyes could take that, take his lumps, and play the good soldier for a league from which he was going to be happily freed in any case. Or he could enter into a plan that must have been carefully vetted by both his and Balsillie’s lawyers, taking the team into Chapter 11 with Balsillie’s offer to purchase right there on the table. Bettman sure didn’t see that one coming. He rolled the dice, largely for the sake of appearances, and he lost. And now, as he argues before the bankruptcy court that Moyes really isn’t the owner, as he pleads with individual governors to fight this battle to preserve the sanctity of their own territorial rights, as he sets them up for what could be a protracted, wildly expensive legal battle, it might just occur to them that Bettman was playing this game with their money.”

Brunt’s recount of the events of the last several months is fascinating. I am not sold on this whole the owners are turning on him, simply because the evidence suggests otherwise. He is right though, the leagues dirty laundry is going to be aired and that can’t make either Bettman or any of the owners very happy. My prediction is that, at some point either one owner or a group of them will mediate this thing. In the alternative, I see a spiteful Bettman opening up the bidding for a team in SW Ontario and picking an owner not named Balsillie for that team.

Shoalts was very busy today. He spent a good amount of time talking to league governors:

“Balsillie has come to believe the Toronto Maple Leafs will never agree to accept a reasonable amount of money to waive any territorial rights it may have and allow a second NHL team to operate in Southern Ontario. Thus, they say, he and his advisers feel they have no choice but to try to kick the door to the clubhouse down by going to court to force a bankruptcy sale of the Phoenix Coyotes so he can move them to Hamilton. Balsillie’s gamble is that enough NHL governors — 20 of the league’s 30 clubs, a two-thirds majority, is needed to approve a franchise move — will love the fact that his $212.5-million (all currency U.S.) offer for the Coyotes will inflate the value of their franchises and therefore vote in favour of his wishes.”

Depoliticize yourself for a second. Ask yourself this, if you are the Toronto Maple Leafs, why would you ever agree to allow a competitor into the market? The Leafs own a license to print money. It is every cheap line you can imagine including the goose that lays the golden egg. So if you are Balsillie you want a piece of that pie. What do you do? You get the best and the smartest around you to figure out the best way into the club. That is, what you would do right? That is what Balsillie has done.

“The Balsillie side counters that the NHL only selectively plays by its own rules. They point to moves such as the Anaheim Ducks landing in the Los Angeles area in 1993 or the arrival of the New Jersey Devils on the New York Rangers and New York Islanders’ turf in 1982, both with payments of territorial rights fees negotiated by the league, and ask why the NHL is so opposed to doing the same in Southern Ontario. None of the governors, even those on Balsillie’s side, would speak on the record, considering what is at stake in the court battle. While one governor said Bettman did not send out a specific gag order concerning the Coyotes to the NHL clubs, no one wants to anger him by commenting publicly. However, one Eastern Conference team did offer its unconditional support when asked about Balsillie. “You have to have a reason to vote no,” one of the team’s governors said. ‘The league needs good owners. What’s the problem here? I don’t get it.'”

All that makes sense and seems reasonable. The problem is that little ever makes sense and we know that reasonable is never an ingredient in these types of stories. This has a long way to go. I will start to believe when these unnamed people go on the record.

Theresa Tedesco again comes to the table with stuff no one else has at this late hour (12:30am), a new entrant(s) in the play:

“However, sources confirmed some members of Hamilton city council, including Mayor Fred Eisenberger, informed Mr. Balsillie’s lawyer they would like to entertain other potential suitors, including Vancouver-based Tom Gaglardi, instead of dealing exclusively with the RIM executive. It was an unexpected irritant for Mr. Balsillie, who has been working to bring an NHL team to the economically depressed city for the past few years.”

Enter, Mr. Bettman’s white knight! A viable alternative to Mr. Balsillie in the market of Mr. Balsillie’s choosing. What, happens should someone else get the team in SW Ontario? Is he going to go for 8??? This is the way folks like Mr. Bettman work. If you don’t think it to be true, do some research and look into how the Toronto Raptors came to be.

Where Theresa excels is in the follow up work. Check this out:

“”Mr. Moyes asked that he be allowed to retain his titles to avoid public embarrassment, and the league so agreed, but with the express understanding that he had no authority to cause the debtors to take any actions outside the normal course of business, including filing for bankruptcy,” the NHL’s legal objection declared. Lawyers for Mr. Moyes filed documents refuting the league’s claim, saying Mr. Bettman was given voting rights into the future of the team when the league started paying the hockey club’s bills in February. However, those voting rights do not trump Mr. Moyes’ ownership rights. “What the NHL and the commissioner fail to recognize (or simply ignore) is the fact that the voting rights that were granted to the commissioner under the proxies are expressly limited only to matters, if any, that actually require a vote by the members of the applicable entity,” the document stated.

You see, others have the first part. We learn that Moyes asked to keep his title for embarrassment purposes. No one else has the portion in bold. Moyes gave the league proxies to act on his behalf for specific reasons only, reasons which are limited to those events in where a vote is required. That completes the circle and answers the ambiguity of the situation. Will the court buy it? I have no clue, but at least we know can understand the basis for each argument!

For those legal buffs out there, the Post also has copies of the legal documents from today’s hearings. You can find them here.

And there you have it folks, a run down of the day in what is shaping up to be a great case. My Sports Law Professor, Professor Watters, who is no longer living would be loving this. Without question, he loved the anti-trust cases and it drove him nuts that baseball had the exemption. I wonder if he is following this mess. I hope so.


TSN/CP article and Daily comments are here
Mcgran is here
Damien is here
Shoalts is here and here
Brunt is here
Theresa is here

About the Author