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National Hockey League commissioner Gary Bettman walks out of Federal Bankruptcy Court during a break in Phoenix, Arizona June 9, 2009. (RICK SCUTERI)
National Hockey League commissioner Gary Bettman walks out of Federal Bankruptcy Court during a break in Phoenix, Arizona June 9, 2009. (RICK SCUTERI)

Judge focuses on relocation fee for moving Coyotes Add to ...

Legal experts observing the showdown between the National Hockey League and the Phoenix Coyotes have consistently opined that bankruptcy judge Redfield T. Baum would gladly seek alternatives to wading into the murky world of sports antitrust law and franchise relocation.

So it was no surprise to them when Baum yesterday directed the sides to meet and suggested the possibility of mediation in order to determine a fee that might satisfy all sides and allow Canadian billionaire Jim Balsillie to relocate the team to Hamilton.

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"Judge Baum is taking every step possible to avoid ruling on the antitrust issue," said Marc Edelman, visiting law professor at Rutgers University. "He is sending the sides to [meet]hoping that the NHL and the Coyotes can reach an agreement on their own to resolve relocation and fee."

"That allows him to focus on his area of expertise, which is how to develop a plan to repay creditors upon bankruptcy. While the antitrust issues related to franchise relocation are extremely important from an antitrust and sports-law perspective, to a bankruptcy judge whose primary responsibility is protecting creditors, the ultimate issue of the location of the team is not the main concern."

Edelman said he believes there has always been room for a negotiated settlement since disagreements between Balsillie and the NHL have always been about power and money.

"Bankruptcy law is about protecting creditors and antitrust law is about getting what's best for the consumer," Edelman said. "The facts that led to this were Balsillie trying to get the lowest price for having an NHL team in (Southern Ontario) and the NHL trying to keep control of where teams are located."

Baum may also have been motivated to force the sides to meet since the NHL was not able to produce an offer in court that would keep the team in Glendale. As such, the judge has had to find a way to keep the only offer - the $212.5-million (U.S.) price conditional on relocation from Balsillie - in play.

"[Relocation]is not going to matter in the same way to a bankruptcy judge if he is looking at a $212-million offer versus no other offer," said Charles Tabb, a bankruptcy scholar at the University of Illinois. "It's not like the NHL can just say no. [Anyone bidding in court to keep the team in Glendale] would have had all kinds of backing from the NHL, back-door and side-door deals and they still couldn't score up anything close because, if they could ,they'd be parading the terms of the offer."

Coming up with a reasonable fee for relocating the Coyotes to Hamilton might seem as murky as the whole issue of antitrust law. But Tabb says the difference is that his kind of matter is within the expertise of a bankruptcy judge.

"Absolutely, that is bread-and-butter bankruptcy stuff, what is a sufficiently large fee to pay for an asset," Tabb said. "That's bread-and-butter bankruptcy and if they mediate and the judge approves it, it's impossible to turn over."

The mediation process would force the NHL to make arguments to justify a relocation fee, rather than pick an unreasonable number out of the air.

"In mediation, the NHL loses power to make the call themselves and pick a number they know would be too high and will be a deal breaker," Tabb said.

Stephen Ross, a sports antitrust lawyer at Penn State University, said the model for how to establish a relocation fee can be found in the example of the Montreal Expos relocation to Washington earlier this decade. Major League Baseball bought the club (although it was not in bankruptcy) and then pocketed the difference when it eventually sold it to a buyer in Washington.

"What's important is the fee has to reflect the value in Hamilton," Ross said.

As to whether the Coyotes would owe an indemnity directly to either the Buffalo Sabres or Toronto Maple Leafs, Ross said that would be difficult without inviting an antitrust challenge.

"There are significant antitrust problems with any kind of compensation scheme that is the product of voluntary agreements in the past," Ross said. "If the Leafs and Sabres say they've spent X dollars promoting their brand in Hamilton and they want compensation, that's likely to be a reasonable expectation. But they should have to show the cheques for what they've spent."

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