A nasty legal war between Jerry Moyes and the NHL has erupted again after the league filed a lawsuit in New York State Supreme Court seeking $61.6-million (all currency U.S.) in damages from the former Phoenix Coyotes owner.
The NHL feels those are the damages that resulted from the long fight in the U.S. Bankruptcy Court that ended when the league bought the club for $140-million last October.
Lawyers for the NHL claimed Moyes broke his ownership agreement with the league by putting the Coyotes into bankruptcy.
Peter Sorenson, Moyes's lawyer, said he may launch a countersuit within a week. Moyes may claim the NHL acted in bad faith by rejecting his attempt to sell the Coyotes to BlackBerry billionaire Jim Balsillie for $242.5-million.
Last May, Moyes said he could not find a buyer for the financially strapped Coyotes, who lost more than $60-million last season. As a result, Moyes sought bankruptcy protection from the court and agreed to sell the Coyotes to Balsillie. Balsillie wanted to move the Coyotes to Hamilton through the bankruptcy court, which could have revoked the club's lease with the Phoenix suburb of Glendale.
The NHL was successful in convincing bankruptcy judge Redfield T. Baum that Balsillie could not move the club because it would violate consent agreements with the league not to violate its constitution. In the latest lawsuit, the league is seeking the $10-million it spent fighting the case in bankruptcy court, $20-million in estimated losses for the club this season and $11.6-million for other creditors, plus additional damages.
Sorenson said the NHL and Moyes were talking about a settlement until late last week when the league filed the lawsuit. He said the NHL is off the mark in its claims.
"Not only are their claims for breach exaggerated, we believe they haven't suffered any damage or loss," Sorenson said. "They got a team worth a lot more than they paid for it, as their own experts testified last fall [in bankruptcy court] plus Jim Balsillie wanted to pay $212.5-million for it."
In the meantime, the attempt to complete the sale of the Coyotes to a group of investors known as Ice Edge Investors LLC for about $140-million is grinding along with no closing in sight.
NHL deputy commissioner Bill Daly said yesterday that Ice Edge is still trying to get its financing in place.
Daryl Jones, a member of the Ice Edge group, said it is a slow process because many contracts between the club, Glendale and other businesses need to be renegotiated. He declined to discuss the matter in detail. However, Daly implied financing was a bigger issue.
"It's more what they need to do - to raise the capital, have the operating cash, do what they need to do to comply with what we normally require in terms of consent," Daly said.
Jones said the group believes the NHL thinks it is on schedule to close the deal and "finalizing terms with lenders is obviously part of the process."
The league hopes to close the sale between May 1 and June 1. Daly said he could not predict if it will but said he will have a better idea next week after a meeting with the Ice Edge principals.
As for Ice Edge's plans to play five games each season in Saskatoon, Daly said it still must be negotiated with the league.
"Ultimately, if we get to a point where [Ice Edge]is prepared to close, that is something the board [of governors]is going to have to consider," he said. "We may have more discussions with them on it."
At this point, the lawsuit between the NHL and Moyes looks to be just as nasty as the fight in bankruptcy court.
"It's not like we're looking for the value of the franchise [in damages]" Daly said. "We're looking for the damages we suffered as a result of having to go through this whole ordeal."
The NHL accused Moyes of secretly negotiating with Balsillie while the league was lining up a potential buyer in Chicago White Sox owner Jerry Reinsdorf. It also said Moyes violated his agreement with the league when he refused to cover any more of the Coyotes losses in the fall of 2008.
Sorenson said Moyes "was not the first owner to do that." In the past year, the Florida Panthers and Tampa Bay Lightning were sold when their principal owners were unable or unwilling to keep paying the losses. But both sales received league approval.
The most recent court documents that contain information about the Coyotes' losses show the team had a net loss of $16.7-million in the five months up to the end of November of 2009. A source close to the club said the losses are down significantly because the NHL's purchase of the club paid off the Coyotes' major creditors, which removed several debilitating debt payments from the books.
However, the club and the NHL have also run into problems collecting money from one of the Coyotes' main sponsors - RideNow, a chain of motorcycle dealers based in Phoenix. Under a two-year sponsorship deal struck in 2008, RideNow was supposed to pay the Coyotes about $100,000 annually in return for advertising, tickets and player appearances at some company events. Last week, the NHL sued RideNow in Arizona alleging the company hasn't made any payments during the 2009-10 season.
For its part, RideNow has gone to court as well and demanded stacks of documentation from the Coyotes, Moyes and the NHL. The company wants reams of information relating to Coyotes' ticket sales, broadcasting contracts and game attendance.