The NHL is taking direct aim at Canadian businessman Jim Balsillie, calling his bid to move the Phoenix Coyotes to Hamilton a sham and alleging he is trying to undermine the “fundamental structure of the thirty-team NHL venture.”
The league attacked Mr. Balsillie in a series of strongly worded filings in an Arizona court, alleging his offer for the Coyotes smacks of “duplicitous dealing” and, along with his two previous attempts to buy NHL teams, demonstrates an unwillingness to follow league rules.
“Apparently, Balsillie does not want to face the scrutiny that comes with the NHL Board of Governor's standard review and approval process,” Bill Daly, the league's deputy commissioner, said in an affidavit.
Mr. Daly and the league criticized Mr. Balsillie's dealings with Coyotes majority owner Jerry Moyes, alleging they struck a secret deal that violated ownership agreements. Mr. Moyes also had no authority to sell the club because he gave up control to the National Hockey League last year in return for financing, the filings alleged.
“It is now clear to me that this agreement, at bottom, was nothing more than a scheme to misuse this court and sidestep the NHL's transfer of ownership and relocation processes,” Mr. Daly alleged.
Mr. Balsillie's $212.5-million (U.S.) offer for the Coyotes emerged last week when Mr. Moyes put the club into Chapter 11 protection in Arizona. It's Mr. Balsillie's third attempt to bring a team to Hamilton, coming after unsuccessful bids for the Pittsburgh Penguins in 2006 and Nashville Predators in 2007.
Mr. Moyes has said the club never made money in Phoenix and Mr. Balsillie's proposal to move the team to Hamilton was the only viable solution. He has also alleged NHL rules governing the relocation of teams amounted to an illegal cartel and violated anti-trust laws.
On Thursday, Mr. Balsillie said he would respond to the NHL's allegations in court, but he added in a statement that he “made a generous, good-faith offer to buy the Coyotes.”
“Who owns or controls the team is a distinction without a difference,” he said. “The team itself is still bankrupt, voluntarily or not. The owner of the team has a fiduciary obligation towards the creditors.”
Some observers questioned Mr. Balsillie's strategy.
“I look at it and say, ‘Gosh, what an amateur [Mr. Balsillie is],' ” said Chuck Greenberg, a Pittsburgh lawyer who worked with Penguins co-owner Mario Lemieux when Mr. Balsillie tried to buy that club.
“He's not the first person to buy a franchise. He seems to repeat the same mistakes over and over again. Leagues are an unusual being. You're a competitor; you're a partner. When a guy takes the same action and circumvents the rules in the same way, it's pretty reasonable to ask if he would be willing to follow any rules.”
Mr. Greenberg added that Mr. Balsillie has “probably done more to hurt the chance of a second team in Southern Ontario.”
Harley Hotchkiss, former head of the NHL's board of governors and co-owner of the Calgary Flames, said franchises aren't moved easily and that loyalty of the fans needs to be respected. Prospective owners need to work within NHL rules, he added. “Jim Balsillie has the money and credentials to be an owner, but he's going around the NHL system,” Mr. Hotchkiss said.
It's clear from court filings that the NHL is now waging a two-pronged legal attack on Mr. Balsillie and Mr. Moyes.
First, the league is trying to have the Chapter 11 filing overturned by alleging Mr. Moyes violated ownership and voting agreements when he unilaterally put the club into protection. If successful, the NHL would retain control of the club and Mr. Balsillie's offer would expire.
If the NHL loses that motion and the court rules Mr. Moyes was in control, the league would then attack the bidding process for the Coyotes.
Mr. Moyes has proposed a court-supervised auction for the club with Mr. Balsillie's offer as the initial bid. He wants the bidding wrapped up by the end of June, with Mr. Balsillie having a chance to match or better any offer. Proceeds from the sale would be divided among creditors, which include Mr. Moyes and the NHL.
The league argues that Mr. Moyes' proposal is flawed because Mr. Balsillie's offer is conditional on moving the club to Hamilton. Since only the league controls where clubs play, his offer cannot succeed and should be withdrawn, the NHL argues.
It is “a matter of indisputable fact and law that the NHL, rather than [the Coyotes], owns any franchise opportunity in Southern Ontario,” the league said in filings. “Accordingly, any bid for the sale of the Phoenix Coyotes solely for relocation to Ontario is a sham and should be rejected by this court.”
The league said courts have consistently upheld the right of sport leagues to approve owners and govern where teams play. If the NHL Board of Governors decided to put another team in Southern Ontario, the NHL would charge an expansion fee and provide compensation to the neighbouring members, the filings said.
The league added that if there was an auction for the Coyotes, it would have to go far beyond June to allow adequate time for proper NHL consideration. The earliest the Coyotes could be moved would be for the 2010-11 season, the league said.
The NHL has indicated it had a potential offer to keep the club in Phoenix from Chicago businessman Jerry Reinsdorf, owner of the Chicago White Sox and Chicago Bulls. However, it has not provided details.
David Carter, executive director of the USC Sports Business Institute, said the NHL is doing the right thing by being aggressive.
“If the NHL doesn't live up to the expectations of the owners in the league by ensuring that their agreed-upon approach to business is going to be made clear, reinforced and implemented, then you've got nothing,” he said.
The NHL has to view Mr. Moyes “as a rogue owner who is doing things only for himself.
“That's when the NHL has to make a statement that they run the league and dictate policy – not react to the actions of a single owner who found a better deal without informing the league.”
With reports from Allan Maki, David Naylor and Dawn Walton