Coyotes Staying Put (at least, for now)

by Garrett Bauman on June 15, 2009 in Uncategorized - 3,680 Comments

Judge Redfield T. Baum has ruled that Jim Balisillie cannot use bankruptcy law to force his purchase of the Phoenix Coyotes.   The judge has also ruled that the NHL’s relocation requirements do not violate anti-trust legislation.

Specifically, Baum’s ruling means:

• The NHL has a right to determine who the owners of its teams are
• The NHL has a right to determine the locations of its teams
• NHL procedures do not violate antitrust law
  (EDIT: anti-trust legislation does not apply in this particular case since no relocation request has been filed on behalf of the team)
• Bankruptcy law cannot be used to force the sale and/or relocation of a league franchise

This is incredible.  I am watching the talking heads react to this one, and in typical fashion they are taking the “Canada got screwed” and “Bettman is out to get us” approach.  It is actually somewhat embarrassing how little attention these supposed experts seem to have been paying to this case.

I find it amazing that one could make an argument, with a straight face, that the league should have no role whatsoever in determining where its teams play … seriously, how can one possibly make the argument that the league should have no input into the very structure and organization of its own operations?  Wow.

Some will argue that Balsillie should get the team based on the size of his offer.  Truth is, the issue of money has nothing to do with the decision whatsoever.   Many will argue that the judge’s role is to decide what is best for the creditors, and nothing else.   That is true, however there is a caveat.  Before the judge can decide if an offer of purchase can satisfy the creditors, that offer must be proven to be in valid standing first.

In an earlier court session, Baum tore a strip off the Balsillie camp for not involving the league in its offer to purchase the franchise … in other words, for storming through the back door in a hostile manner (the Balsillie camp has since submitted a formal offer of purchase to the NHL).   The judge is essentially upholding the NHL’s policies and practices of determining ownership, and his ruling clearly indicates that an individual making an offer of purchase must make their offer in accordance with league guidelines.

Yes, Hamilton would be a good home for a franchise, and yes the team would be a huge financial success.  But that only becomes relevant when and if a legitimate offer of purchase is made (no matter how much the media tried to spin it as us-versus-them).     This entire thing has never been about money — it has been about rules, and the league’s ability and autonomy to enforce those rules.

You will no doubt be encouraged to rip on Gary Bettman for this, but the case is hardly a win for him, personally.   Rather, it is a win for the board of governers.    Bettman is no white knight, and is to be blamed for many things, but the fact remains that he has no agenda against another team in Canada.   Such a statement simply cannot be factually proven.  It will be spun that way by sensationalist writers looking to capitalize on fan fury, but a little research into what happened with Quebec and Winnipeg, as well what happened with Edmonton and Ottawa (who remain in Canada because of Bettman, not in spite of him) quickly dispels any such notion.

At the end of the day, the league’s autonomy was threatened, and Bettman did his job by defending that autonomy.    The NHL’s position on the Phoenix franchise has nothing to do with who the prospective owner is, or where the team could be going.    The NHL went to court to argue its basic right to having control over who its franchise owners are, and where those teams play.    The NHL did not argue at any point that Jim Balsillie should not be an owner, or that the team should not move to Canada.   Rather, they argued that ownership could not be assumed without league approval based on existing ownership transfer procedures. From the NHL’s perspective the case was about that, and that alone … nothing else.

And today, the court agreed with that stance.   At this point, it looks as though an auction will be held in September (meaning the team will likely stay in Arizona for one more year).    Look for Balsillie to spend the summer sweet-talking league owners before making another bid, this time through the proper channels, at the auction.

This court case was never about Balsillie vs. Bettman.   It was about whether or not league rules for ownership were legitimate (they are), and whether or not there  was a legal loophole available to circumvent those rules (there doesn’t appear to be).    This case was never truly about Hamilton in that sense, either.  That is why it should come as no surprise to anyone if Bettman eventually does one day grant Balsillie a franchise in Southern Ontario … provided that the league’s rules, which are designed to protect and respect the rights of the other 29 franchise ownership groups, are followed.

UPDATE: Balsillie is still holding out hope that a deal can be struck …

Statement from Bill Walker, spokesman for the Balsillie camp:

“The court did not approve either our approach or the NHL’s. Judge Baum did state he does not have time to decide all the relocation issues, but the court still controls the sale process. As a result, we look forward to hearing from the NHL soon on its view of our relocation application and an appropriate relocation fee … The court invited mediation on these issues and Mr. Balsillie is willing to participate in such mediation if the NHL is also willing to do so.”

Statement from Bill Daly, NHL Deputy Commissioner:

“We’re pleased the Court recognized the validity of League rules and our ability to apply them in a reasonable fashion. We will turn our attention now toward helping to facilitate an orderly sales process that will produce a local buyer who is committed to making the Coyotes’ franchise viable and successful in the Phoenix/Glendale area.”

ADDENDUM:

The most important thing to remember in all of this – and perhaps the most neglected fact in all of the media reports surrounding this case – is that the Phoenix Coyotes are not an individual enterprise.  This is not a stand-alone business that Jim Balsillie is attempting to purchase.  Rather, it is a franchise – a registered entity of a larger corporate body.    NHL owners do not own a singular business that they can do with whatever they please; rather, they own a the right to operate a particular franchise (the team) within a corporate body (the NHL), and thus that entity must be operated within the parameters of that corporation.

It is no different than any other franchise operation, in any other industry.  For instance, I could purchase a Tim Horton’s franchise, but if I do so I am mandated to operate that franchise within the guidelines of the TDL corporation.   It seems like a somewhat tacky example, but is directly analagous nonetheless.

Tags: antitrust law, Arizona, Balsillie camp, bankruptcy law, Bill Daly, Bill Walker, Canada, Commissioner, Edmonton, Gary Bettman, Jim Balisillie, Jim Balsillie, judge, media reports, National Hockey League, NHL, NHL Deputy, ottawa, Phoenix, Phoenix Coyotes, Phoenix Coyotes bankruptcy, Quebec, Redfield T. Baum, Southern Ontario, spokesman, the NHL, Tim Horton, UN Court, Winnipeg Print article