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RIM CEO Jim Balsillie

MARK BLINCH/Reuters File

Canadian billionaire Jim Balsillie is not conceding defeat in his bid to buy the Phoenix Coyotes and move the club to Hamilton, despite a court ruling Monday night that said his current offer did not meet the requirements of bankruptcy laws.

"We're still here," Mr. Balsillie's spokesman, Bill Walker, said in a statement.

Arizona bankruptcy court Judge Redfield T. Baum ruled that Mr. Balsillie's bid to buy the club for $212.5-million did not meet the requirements under U.S. bankruptcy law. While Mr. Balsillie's offer would compensate many of the creditors of the club, "such an outcome does not lessen the requirements under the [bankruptcy]Code before the court can authorize the sale of estate property."

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The judge also threw out an auction for the club that was supposed to be held on June 22, with Mr. Balsillie's offer as the first bid. Mr. Balsillie could submit a new offer, providing it met the judge's ruling. And Judge Baum opened the door to that possibility by encouraging both Mr. Balsillie and the NHL to negotiate a solution.

"It was suggested by some parties at the hearing [June 9]that the parties should attempt to resolve the relocation issue by mediation; if the parties are willing to mediate this and the related issues, the court encourages, as strongly as it can, to do so: sooner rather than later."

Mr. Walker said Mr. Balsillie "is willing to participate in such mediation if the NHL is also willing to do so." He added that Mr. Balsillie believes he has made the best offer for the team, and there is still time to close the sale and move the Coyotes to Hamilton by September.

The bankruptcy court "still controls the process," Mr. Walker said. "As a result, we look forward to hearing from the NHL soon on its view of our relocation application and an appropriate relocation fee, so as to allow the court to determine if that fee is reasonable."

The Coyotes filed for Chapter 11 protection on May 5 and announced that Mr. Balsillie had made an offer to buy the club and move it to Hamilton. Mr. Balsillie's bid was set to expire on June 29. The National Hockey League had objected to the bid, arguing that it violated league rules governing relocation. The NHL said it had offers from investors who planned to buy the club and keep it in Phoenix.

Mr. Balsillie's lawyers argued the judge could overrule the NHL under bankruptcy law because league rules violated anti-trust laws, and the offer would pay out most of the creditors, who are owed more than $200-million. Lawyers for the NHL argued that the judge could not, and they cited several legal precedents.

The NHL's lawyers added that Mr. Balsillie's offer also had not taken into account a relocation fee.

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Tom Salerno, a Phoenix lawyer representing the club's majority owner, Jerry Moyes, said he was disappointed with the ruling. "We're disappointed and evaluating our options," he said Monday night.

While noting that the case raised many unique legal issues, Judge Baum sided with the league on most of the issues. The judge said the Coyotes had a contract to play in Glendale, a Phoenix suburb, and Mr. Balsillie's offer would violate that contract.

"Simply put, this court disagrees with the assertions by [Mr. Balsillie's lawyers]that the relocation requirement can be excised from the 'contract' because it violates some portion of [the bankruptcy code]or is unlawful under the anti-trust claims alleged by [Mr. Balsillie]" the judge wrote.

The judge added that Mr. Balsillie's offer had to satisfy the relocation fee issue. He said, "this apparent economic right of the NHL must be appropriately resolved for the [offer]to satisfy the requirements [of bankruptcy law]"

During a hearing last week, the court heard that the NHL could seek more than $100-million in compensation. Judge Baum also threw out arguments that the league's rule violated anti-trust laws, noting that the league had not even ruled on Mr. Balsillie's application to move the club.

He said the league only got Mr. Balsillie's application after the club filed for bankruptcy protection and that, given the Stanley Cup playoffs, had not had time to properly consider it. He said Mr. Balsillie's June 29 deadline was far too close for the league to make a decision.

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"The fundamental problem with Balsillie's assertions is that the NHL has never made any decision about the relocation of the Phoenix Coyotes to any site, be it Ontario, Canada or anywhere else," he wrote.

The judge noted that "it is beyond dispute that the Stanley Cup playoffs are occurring at the same time as this case."

He added that he is "unconvinced that [he]should order that the NHL must decide the relocation application to meet the June 29th deadline."

The NHL was backed up by the National Football League, the National Basketball Association and Major League Baseball, who argued that havoc would ensue if Mr. Balsillie succeeded. The judge threw cold water on those arguments, noting that other teams had moved in the past without causing major damage.

"Considering the effect of the conclusions set forth above, the court does not think that unresolved issues can be resolved, assuming they can be favourably resolved by the debtor and PSE, prior to the June 29th deadline," the judge said.

Richard Peddie, the president of Maple Leaf Sports and Entertainment, which owns the Toronto Maple Leafs, said, "We have not had a chance to study it, but would refer questions to the NHL just the same."

Buffalo Sabres part-owner Larry Quinn, who would have faced competition from a team in Hamilton if Mr. Balsillie had won his case, declined to comment. He said he wanted to talk to NHL commissioner Gary Bettman first.

Elsewhere, Calgary Flames co-owner Harley Hotchkiss, the former chairman of the NHL's board of governors, was reluctant to comment because Murray Edwards is now the Flames' governor. But he did say it was a good thing the NHL went to bat for the Stanley Cup champion Pittsburgh Penguins a few years ago when Mr. Balsillie withdrew an offer for the team after a dispute with the league on his right to move them.

"I was concerned at the attention this got during the Stanley Cup playoffs," Mr. Hotchkiss said. "I thought the final was outstanding. I thought the final game was outstanding.

"Pittsburgh, not that long ago, wouldn't have been there. When Jim Balsillie was angling hard for Pittsburgh, had the league not stayed the course, we wouldn't know how things turned out."

While Mr. Balsillie's attempt to buy the Coyotes was not completely rejected by the judge, some owners are happy he upheld the NHL's right to control where its franchises play. But like Mr. Quinn, they did not want to comment on the record until after they've spoken with Mr. Bettman.

Lawyers for Coyotes owner Jerry Moyes said they are reviewing their options. "We're disappointed and evaluating our options," said Tom Salerno, a Phoenix lawyer who represents Moyes. Moyes side could appeal Judge Redfield T. Baum's decision although lawyers for Balsillie have indicated before that they did not expect any appeals to be allowed until after a sale of the team had closed. At that point, the judge could rule that the sale was pending the outcome of any appeal.

With a report from Allan Maki

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About the Authors
European Correspondent

Paul Waldie has been an award-winning journalist with The Globe and Mail for more than 10 years. He has won three National Newspaper Awards for business coverage and been nominated for a Michener Award for meritorious public service journalism. He has also won a Sports Media Canada award for sports writing and authored a best-selling biography of the McCain family. More

Hockey columnist

A native of Wainfleet, Ont., David Shoalts joined The Globe in 1984 after working at the Calgary Herald, Calgary Sun and Toronto Sun. He graduated in 1978 from Conestoga College and also attended the University of Waterloo. More

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