The NHL, which was granted more time to think about its position by Judge Redfield T. Baum yesterday, had better be careful just how much it demands in relocation and indemnification fees for moving the Phoenix Coyotes.
Otherwise, says an expert in sports economics and law from Stanford University, the U.S. Bankruptcy Court could let Jim Balsillie move the Coyotes to Hamilton and leave the NHL empty-handed.
Roger Noll, an economics professor at Stanford, said indemnification fees, which may be paid to teams when another team enters its territory, are not allowed under U.S. law. That was proven in the landmark antitrust case in which Oakland Raiders owner Al Davis moved his NFL team to Los Angeles in 1982 without paying the fee.
Canadian law is not as clear on the matter, Noll said. "There are some [previous]cases in other industries but nothing has ever been decided with sports," he said.
But, Noll added, since this case involves jurisdictions in both Canada and the United States, Balsillie has the legal standing to sue in both countries. And the U.S. Bankruptcy Court could be decidedly unfriendly because Baum's primary responsibility is to get as much money as possible for the creditors.
"The nature of bankruptcy is that you just run over people if they get in the way of the creditors," Noll said.
Bill Daly, the deputy commissioner of the NHL, was reluctant to comment on Noll's remarks "without understanding the entire context of the statement." But Daly said the NHL's opinion is that "any talk about potential relocation fees and indemnity fees is entirely premature."
Daly said there is no need to calculate a "relocation [or]indemnification fee" until the NHL board of governors decides to approve a franchise relocation.
Thanks to Baum, the NHL will have more time to think about a suitable fee. The judge decided yesterday he will not hold a separate hearing about a relocation fee and will make one ruling on all of the issues heard in Tuesday's court hearing about relocation.
"The court advised those present that he [Baum]will not be setting a separate hearing on the relocation and fee issue. It will be dealt with in the court's ruling from the [June 9]hearing," said a court statement, written by Baum.
This means the judge might not issue a ruling on whether the Coyotes can be relocated and what a fee might be until June 22. That is the date requested by Coyotes owner Jerry Moyes for an auction to sell the team.
Balsillie, the co-chief executive officer of Research In Motion, indicated he is willing to pay a relocation fee but did not say how much. He has already offered $212.5-million (all currency U.S.) for the Coyotes but it is conditional on moving the team to Hamilton. Balsillie's lawyers have said he is not legally bound to pay a territorial rights fee.
The numbers discussed so far range wildly, from an additional $100-million mentioned in court to $300-million suggested by an NHL owner.
"I'm sure the NHL knows its on legally shaky ground," Noll said, suggesting Daly's talk of an indemnification fee was a negotiating ploy. "The NHL wants to get paid something. They want to have something to distribute to the other clubs as a result."
Noll said the previous indemnification fees paid by NHL teams were voluntary because the owners involved did not want to get in a legal fight. John McMullen paid around $35-million, including the purchase price for the franchise, when the Colorado Rockies became the New Jersey Devils in 1982.
The last time an NHL team was placed in another team's territory, the incoming owner refused to pay an indemnification fee. Michael Eisner, the head of Walt Disney Co., paid $50-million for the expansion Anaheim Ducks, which was the going rate for expansion teams in 1993.
Eisner would not pay anything more, so in the end the NHL gave half of the $50-million to Bruce McNall, who owned the nearby Los Angeles Kings at the time, and called it an indemnification fee.
McNall confirmed this yesterday. He said the other NHL owners decided not to press for money because they felt their franchises were worth more with a prestigious owner such as Disney in the fold.
The NHL's problem, Noll said, is that the main responsibility of the bankruptcy judge is to get the highest amount of money possible for the creditors. If the league insists on too much money for a relocation fee, it could have an impact on the auction for the Coyotes, meaning there would be less money for the creditors.
"The judge well knows that," Noll said. "So the NHL is not in a great position."