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With speculation swirling regarding its future, the Phoenix Coyotes, a National Hockey League (NHL) franchise, have ended up in bankruptcy. For months the team has been battling the league for approval on a proposed sale. Like any seller, Jerry Moyes, the Coyotes’ current owner, wants to sell the team to the highest bidder. Currently, the highest bidder is Jim Balsillie, co-CEO of Research in Motion, who has a very public desire to move the team to Southern Ontario, Canada. Balsillie has reportedly offered $212.5 million. Valuing the Phoenix market, the NHL has opposed any proposal that could lead the team out of Phoenix. The prospect of Balsillie is especially unattractive to the NHL since it already has a team in Ontario, the Toronto Maple Leafs, and another Ontario-based team would likely eat into the Maple Leafs’ market share rather than add to the NHL’s market as a whole.
According to the league’s bylaws, any sale or relocation of a team is subject to approval by all of the league’s team owners. In an effort to avoid these rules, Moyes (on behalf of the holding company that owns the team in name) has filed a Chapter 11 bankruptcy petition, in which he is: (1) challenging the validity of the league’s rules as violative of antitrust laws; and (2) proposing to auction the team to the highest bidder. Moyes’ complaint (filed as an “adversary proceeding” within the bankruptcy case) alleges that the NHL’s exercise of its rules is “excluding competition and restraining trade” in the North American “major league men’s professional ice hockey contests” market. Objecting, the NHL has raised a superseding issue: that Moyes signed away control of the team to the NHL in exchange for operating loans; thus, Moyes has no right to put the team in bankruptcy or, for that matter, sell it.
Notwithstanding the issue of who has the rights to operate the Coyotes, a ruling by the bankruptcy judge that the NHL’s rules violate antitrust laws would effectively diminish the power of all major professional sports leagues, which all utilize similar procedures, to control the sale or movement of an existing team. It is no surprise then that Major League Baseball, the National Football League, and the National Basketball Association have each filed amicus curiae briefs in support of the NHL. Each amicus brief says, in some form, that rules and procedures governing franchise ownership transfer and relocation are “critical” to the “ability to produce the collective [sports] product and to the success of [a] league as a whole,” and that an adverse ruling would “severely disrupt the business” of all major professional sports.
Recognizing the “10,000 pound elephant in the room,” the U.S. Bankruptcy Judge presiding over the case has expedited the matter and will hear the parties’ arguments on June 9. The judge could dismiss the bankruptcy case altogether, without addressing the tantalizing antitrust issue, if he agrees with the NHL that Moyes no longer has control over the Coyotes.
– Faisal Delawalla
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