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Desert storm: NHL vs. Balsillie

United States bankruptcy court judge Redfield T. Baum will likely make a decision sometime in the next 48 hours that will determine whether the Phoenix Coyotes have any chance of moving to southern Ontario under Jim Balsillies ownership or whether theyre staying put in a town that could care less either way. But the dispute wont end there. Both sides have made rumbling noises about appeals and/or pursuing other legal avenues in the event they lose.
Balsillie and the NHL filed their respective arguments Saturday morninga little past the June 5 deadlineand they were filled with accusations, threats and insults. But we didnt learn much new. Balsillies side continues to claim that Hamilton is ready, willing and able to support an NHL franchise and that the bankruptcy court has the right to override the leagues constitution, which is filled with anti-trust issues anyway.
The NHL says only it can determine where a team is locateda move supported by the three other major North American sports leaguesand that there are four bidders ready to keep the team in Glendale, Ariz. Of course, none of those bidders is apparently prepared to pay anything close to Balsillies US$212.5-million offer, and one of themToronto Argonauts co-owners Howard Sokolowski and David Cynamonprobably doesnt have any interest in keeping the Coyotes down south. They would move the team to Toronto and play out of a new facility.
Of the two arguments, Balsillies proposed move makes the most sense. Hamilton likes hockey: Phoenix does not. Hamilton may be a profitable location for the NHL; Phoenix is not and likely never will be. The NHL Players Association thinks the team should move if it cant be profitable, but it doesnt care wherejust get the Coyotes out of Phoenix.
But all of that doesnt mean anything if Baum rules the NHL has the right to force a team to stay in a town where it can never be profitable. Many just see the NHLs actions as just a vain attempt to attract a lucrative American television deal. And that could trigger a flurry of litigation, including an anti-trust filing by Balsillie in the U.S. The Canadian Competition Bureau could also consider looking into the matter.
The Bureau found nothing wrong with the NHLs policies regarding ownership transfers and relocations when it examined them in 2008. That was after Balsillie unsuccessfully tried to buy the Nashville Predators even though he offered millions more than the eventual successful bidder.
But the Bureaus laws have changed since then and Balsillie might be able to make a case, says Tony Baldanza, chair of Fasken Martineau’s Antitrust and Competition Law Group in Toronto. He says the 2008 investigation was done using the abuse provision of the Competition Act, which looks at anti-competition issues from a criminal point of view. It seems oftentimes that its a bit of a heavy stick in the context of what are at the end of the day commercial disputes, says Baldanza.
But as of March 12, another provision came into effect that lets the Bureau look at such a case from a civil point of view, which is closer to the rule of reason approach that the U.S. has under Section 1 of the Sherman Act. Under rule of reason, a court would consider whether any restrictions placed on the teams are for pro-competitive reasons, either between leagues or between teams. The court would also have to consider whether such restraints are reasonably necessary for and ancillary to the broader legitimate agreement that allows the NHL to create a league, organize games and award prizes.
Thats when most observers point to a landmark case, Los Angeles Memorial Coliseum Commission vs. NFL, where a federal court decided that the leagues rule requiring a team to get approval from three-quarters of the other teams before it can move was an unreasonable restraint of trade. Baum has already indicated he feels there are few similarities between that case and the one Balsillie is making, but for the sake of argument lets say that caseknown colloquially as Raiders since it involved the Oakland Raiders moving to Los Angelescarried some weight.
The Raiders case is a classic case that said the league cant prevent this type of move, says Salil Mehra, a law professor at Temple University Beasley School of Law in Philadelphia. But it left open the concept that to the extent that the move costs the league or its other members, the league might seek reasonable reimbursement.
In this case, the NHL could charge Balsillie a fee because Hamilton is located inside the territories of both the Toronto Maple Leafs and the Buffalo Sabres. That fee could be distributed equally amongst all NHL clubs, but would likely be given to just Toronto and Buffalo. The NHL could also ask a fee for vacating a large market such as Phoenix because it reduces interest in that market. (Although how it could go any lower is beyond most rational peoples comprehension.)
Salil says that if the Coyotes were going to fold or fail without Balsillies purchase, then that would make his case for relocation even stronger than the one Al Davis had for moving the Oakland Raiders, because that team was going to survive in any case.
But Gil Fried, a professor and chair of the Sport/Hospitality and Tourism Management Department at the University of New Haven in West Haven, Conn., says the courts in past antitrust cases have generally concluded that antitrust laws apply to player transactions (such as free agency), but not team transfers.
And even if Balsillie wins, the NHL may not be under any obligation to schedule games with his team, says Fried. What Balsillie is buying are the assets such as the players, intellectual property, etc., he says. The owner, not the team has a contract with NHL, so the NHL could always argue that they are not going to schedule any games for a rogue team in Canada.
Which would no doubt launch even more legal actions. Oh yeah, the Stanley Cup playoffs resume tonight (Tuesday), with the Detroit Red Wings poised to capture their second consecutive triumph over the Pittsburgh Penguins.