Skip to main content

Strip away all the rhetoric, all the legal posturing, and the showdown between Jim Balsillie and Gary Bettman comes down to one question: Can Balsillie buy the Phoenix Coyotes and move them to Hamilton over the objections of the NHL commissioner and league owners?

That is what the U.S. Bankruptcy Court's auction of the Coyotes turns on. Now time is getting short for Judge Redfield T. Baum, who has jumped through many figurative hoops to avoid a precedent-setting decision, to rule one way or the other.

Legal arguments on relocation and a relocation fee, plus a few other issues connected to them, will be heard Thursday and early Friday by Baum, followed by the auction, which the judge vowed will be completed by 4 p.m. local time Friday. The problem is, Baum could overturn his decision on a winning bidder if he later decides against Balsillie.

Story continues below advertisement

"It all comes down to what the judge has not yet clearly ruled on, which is: Is it illegal for the league to keep the team from moving to Hamilton?" said Stephen Ross, a law professor at Penn State University and a leading authority on sports and antitrust law. "That one issue is what Judge Baum has been trying to avoid because he's not an antitrust specialist. But he's got to try and reach a decision."

Ross's opinion is Balsillie, the co-chief executive officer of Research In Motion Ltd., and his legal team are right. The NHL should be overruled, both as a bidder and as the arbiter of who can join the league and where teams can play but, Ross said, that does not mean the judge will agree.

"There are people who disagree with me," he said.

The NHL is arguing it only wants what is best for Phoenix and all sports leagues have the legal right to determine who can join as an owner. It also says any move has to clear the NHL's bylaws, which this one does not. But, Ross said, simple logic indicates the only reason the NHL does not want Balsillie to move the financially crippled Coyotes to Hamilton is because of the objections of the Toronto Maple Leafs.

The Leafs have hinted they are willing to sue the league if it happens. Balsillie's lawyers are making the same argument with Baum and have added a big gun in the antitrust field, New York lawyer Jeff Kessler, to their team to handle it.

"The NHL's claim that this has nothing to do with keeping an NHL team out of Hamilton is transparently false," Balsillie's lawyers argued in a document filed with the Arizona court. "The NHL's evasion on this issue and it's use of pretextural [sic]reasons to reject the [Coyotes']requests, is a quintessential breach of the duty of good faith and fair dealing."

Ross agreed, saying sports leagues can legally move teams for almost any reason unless "you are blocking relocation if you are protecting some other team."

Story continues below advertisement

Ross also wonders why Canada's Competition Bureau is silent on the matter. Two years ago, it accepted the NHL's argument it was not acting as a monopoly in preventing a franchise move to Southern Ontario, but was careful to say it was not a decision to be used in a legal case and could be revisited.

"Since the whole thing started up again [the Competition Bureau]has been completely silent," he said.

Ross thinks Canadian politicians have been too quiet as well. He wonders why the federal Minister of International Trade, for example, has not told Bettman the government would consider legislation to pressure the league into accepting a team in Hamilton.

And the law professor thinks the NHL is making the battle too personal. He said the league is missing a tremendous business opportunity, not only by passing up what should be a successful team in Hamilton but a chance for joint ventures with the man whose company makes the highly successful BlackBerry.

However, Ross does not think Balsillie is right on every legal issue in this case. He thinks he does not stand much chance of winning his point that the NHL is in a conflict of interest because it is acting as both a bidder and a judge of which bid can be accepted.

Theoretically, Ross said, Balsillie's lawyers are correct. However, since the NHL only made its bid because there were no competing offers to Balsillie and it pledged to give any net profit from the sale to the Coyotes' creditors, it is not likely the court will agree.

Story continues below advertisement

In any event, that issue is relatively minor because all Balsillie is asking is the NHL not be allowed to block his bid - and it appears the auction will proceed with both bids. But it could play a role in the judge's deliberations, likely after the sale, to accept or reject Balsillie's plans to move the team.

Also playing a role in that decision is whether the league acted in good faith in rejecting Balsillie as an owner on character grounds.

The big issue remains the NHL's motives on blocking relocation and, if Balsillie is successful, what relocation fee he should pay.

There was an interesting mention of the fee in Balsillie's filing. While the actual amount of the last relocation fee paid by an NHL owner was redacted in the filing, a calculation based on other figures mentioned shows what it may have been. Balsillie protested the NHL's proposed relocation fee, between $101-million and $195-million (all currency U.S.), was more than 1,200 per cent to 2,400 per cent higher than any other.

That would mean Carolina Hurricanes owner Peter Karmanos paid about $8-million to leave Hartford in 1997. Balsillie's experts have proposed a relocation fee of between $11.2-million and $12.9-million.

Balsillie's antitrust arguments concern whether NHL teams have an absolute veto over another team wanting to enter their territory. His lawyers insist there is one and it remains in the NHL constitution. The league argues it may appear that way, but in actual practice a move only requires a majority vote of the governors.

Ross said in the league's actual practice it is hard not to believe a veto exists. He drew a comparison to Major League Baseball, where it took a long time for the Montreal Expos to move to Washington because of the objections of Baltimore Orioles owner Peter Angelos.

"There is no official veto in baseball for a single owner but it took 51/2 years for the Expos to move because of the de facto veto Baltimore had," Ross said. "The other owners did not want to do this because of the objections Angelos had and it would set precedents."

In addition, Ross said, a Coyotes move to Hamilton would clearly produce more revenue not only for the team owner but for the league.

"So why is the league doing this?" he said. "The only reason I can think of is the protection of the Leafs and [Buffalo]Sabres."

<iframe src="" height="600" width='600' frameborder='0' scrolling='no' ></iframe>

Report an error
About the Author
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

Comments are closed

We have closed comments on this story for legal reasons. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.