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Thursday, October 01, 2009
Big Win for NHL as Judge Rejects Balsillie Bid for Coyotes

Opening Night for the NHL's new season just became a more festive occasion as bankruptcy judge Redfield Baum rejected Canadian billionaire Jim Balsillie $242 million bid for the Phoenix Coyotes, concluding that it would interfere with the league's relocation rights and procedures. As many know, Balsillie sought to move the ailing team to Hamilton, Ontario, causing consternation to both the Toronto Maple Leafs and the Buffalo Sabres and to the league itself. "In the final analysis, the court cannot find or conclude that the interests of the NHL can be adequately protected if the Coyotes are moved to Hamilton without first having a final decision regarding the claimed rights of the NHL and the claims of the debtors and (Balsillie)," he ruled.

There was no love lost between the league and Balsillie, as the NHL Board of Governor rejected his application for ownership by a 26-0 vote in July. Click here for more. But what was particularly sweet was the fact that the judge dismissed the bid "with prejudice" so that Balsillie cannot rebid. He is out of the running for the team and accepted the result in a public statement.

However, it was not a complete victory for the NHL. Judge Baum rejected the NHL's bid of $140 million because it failed to satisfy two important unsecured creditors, owner Jerry Moyes and former head coach Wayne Gretzky.

I have not read the 28-page opinion as of yet, but based on the media reports, this is a victory for league governance. To have a candidate take control of a team by judicial fiat, despite the strong feelings of the league and its owners, would greatly weaken the traditional control sports leagues have over admissions, relocations and sales of franchises.

I suspect that the league will attempt to find a new bidder (or maybe get Jerry Reinsdorf to make another bid) or will have to bid a higher amount to take control of the team during its period of uncertainty. The NHL could well live with both of these alternatives.


Yep, it's a great result. Glendale continues to be screwed, the franchise loses value, the fans Southeast of Toronto continue to have to go across the border to see professional hockey, and there will be less money available to the creditors.

But Gary Bettman's Southern Strategy is intact, and the NHL can be assured that corrupt monies (Reinsdorf) are desirable and that bankruptcy does not mean that the NHL's skill at selecting owners to protect its value is at all questionable, let alone impaired.

The biggest celebrants of this ruling will be the fans of the team that finishes 8th in the East this year, who will get to attend and/or watch a few playoff games that might otherwise have been played in Toronto, where they have no incentive at all to field a good team.

Blogger Ken Houghton -- 10/01/2009 11:34 AM  

I'm writing an article about this whole fiasco for a sports and entertainment law journal.

I'm looking at Balsillie's attempt to buy/relocate the team in Bankruptcy court as opposed to a court where antitrust concerns are more pressing. I was wondering if anyone was aware of articles or even blogs where the author discusses the legal precedent of the situation, specifically Judge Baum leaving open the door for future franchises to be sold in Bankruptcy court.

The situations is too new for any law review or journal to have written about. Any help would be much appreciated.

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Blogger poll -- 10/03/2009 1:48 AM  

It will definitely be interesting to see how the decision to reject both bidders ultimately plays out and what the final results will be for the creditors.

Anonymous Chris -- 10/04/2009 8:13 PM  

Perhaps this is a legal victory for the NHL but the decision of this judge does not change a very basic fact: The Phoenix Coyotes do not generate sufficient interest in that area of the world to show a profit. The judge's decision did not change that; he does not have the jurisdiction to change that.

If a couple other NHL franchises find themselves in financial situations similar to the Coyotes in the near future, I wonder how this victory will assist the NHL in keeping their enterprise in the black.

This smells like a Pyrrhic victory to me...

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