Jim Balsillie is vowing to press ahead in his battle to buy the Phoenix Coyotes and move the NHL club to Hamilton, but legal experts say he is facing an uphill struggle given Monday's court ruling that quashed his initial proposal.
"I think they're losers, and I think his legal team is getting rich on Mr. Balsillie's tab while fighting a losing battle," said Gary Roberts, dean of law at Indiana University. He added that the ruling is "a strong signal that the plaintiffs, Mr. Balsillie and those folks, aren't on very solid legal footing."
On Monday, U.S. Bankruptcy Court Judge Redfield T. Baum dismissed Balsillie's motion to approve a relocation of the Coyotes by June 29 and override the objections from the NHL. Baum rejected many of Balsillie's key arguments, including allegations the NHL's opposition violates antitrust laws. The judge said sports leagues are entitled to set rules governing relocation and added, "There are no reported bankruptcy court decisions ordering a relocation of the magnitude proposed here." He also said Balsillie had not given the league enough time to consider his relocation application.
Richard Rodier, a Toronto lawyer who has spearheaded much of Balsillie's legal strategy, said yesterday that Balsillie's legal team plans to file a new motion on the issues and he expressed confidence they will prevail.
"At the end of the proceeding and the whole process, I think the Phoenix Coyotes are going to end up in Hamilton," Rodier told reporters. "There are other hooks on which the judge can hang his hat to order relocation other than antitrust."
Rodier dismissed suggestions Balsillie's $212.5-million (U.S.) offer is in trouble, saying it is still the only bid for the club.
He said Baum indicated that he wants to see how the NHL handles Balsillie's relocation application before overruling the league. Balsillie's lawyers have alleged in court that the league has already applied its rules unreasonably, which is a violation of antitrust laws.
Baum "needs to see how the relocation application is dealt with, or if it's not dealt with at all," Rodier said. "And then the question becomes, well why haven't you dealt with it? Or if you said no, why?"
Rodier also said Balsillie's team is prepared to discuss a relocation fee with the NHL. Baum said the league would be entitled to a fee as compensation if he allowed the club to move to Hamilton. And he encouraged both sides to negotiate a deal.
Bill Daly, the NHL's deputy commissioner, expressed little interest when asked yesterday if the NHL would consider mediation. "Not on the relocation fee issue, because in our view it's entirely premature," he said in an e-mail.
"This whole process since May 5 has been another in what has now become a long line of issues and troubles that he has caused for the board and for the league," Daly added. "I think it's fair to say that a large number of governors don't look kindly on the process that he's put us through."
The NHL wants to hold an auction for the Coyotes in September, supervised by Baum. However, only bidders who will keep the club in Phoenix would be eligible. The league says it has four potential bids.
If that auction does not succeed, the NHL would hold a second auction to relocate the club. Balsillie could participate in that bidding, the league has said. Baum has been critical of the league for not offering details about the other bids. He has also expressed concern the NHL's auction would not produce bids comparable to Balsillie's.
The Coyotes filed for Chapter 11 bankruptcy protection on May 5 and the club's creditors are divided on Balsillie's offer. Majority owner Jerry Moyes and a group of unsecured creditors favour the offer, but it's opposed by the City of Glendale, which built the arena where the Coyotes play, and Aramark Corp., which handles food services in the arena.
Gabe Feldman, director of the sports law program at Tulane University Law School in New Orleans, said Balsillie's best options are to negotiate a settlement or keep his offer on the table and wait out the league.
"At some point the issue of dollars to the creditors will have to be considered. … There's a difficult legal question to be resolved as to how that can be balanced with the interests of the league," Feldman said.
Another legal scholar called Baum's ruling "surprising" in that "he has effectively decided not to decide because it can't be done quickly."
"That's some reason to leave so many tens of millions on the table," said Charles Tabb, a leading U.S. bankruptcy expert and law professor at the University of Illinois.
Tabb also said the NHL, which "has won so far by keeping it murky and complicated," could end up defending legal actions brought by creditors, including Moyes, if the eventual sale price drops far below Balsillie's offer.
"This could end up being a Pyrrhic victory. … No sports league wants to get mired in an antitrust dispute."
With reports from The Canadian Press