Phoenix Coyotes' mess heads to court
http://www.thestar.com/sports/hockey/article/647063
Former NHLer Dave Scatchard is owed $1 million, the only player caught up in the Phoenix Coyotes' bankruptcy mess.
It's a mess that could blow up in the NHL's face in court tomorrow, according to one legal expert who believes Canadian billionaire Jim Balsillie has a strong enough case to win because his offer of $212.5 million (all figures U.S.) for the team ought to carry a lot of weight with Judge Redfield Baum.
"(If) Judge Baum is focused on helping creditors, (it) means Balsillie should win," says Penn State law professor Stephen Ross. "But many judges are reluctant to challenge the tradition of sports, which helps the NHL."
Scatchard is listed as an unsecured creditor, meaning he'd be among the last in line to collect money from the sale of the team. He's in the same category as Coyotes coach and minority owner Wayne Gretzky, who is owed $9.3 million in deferred compensation.
The money due Scatchard is listed as a debt by the team because he was bought out by the Coyotes for $2.1 million in 2007.
Gretzky came under fire from the city of Glendale, which is opposing the relocation of the team in court this week, in court filings over the weekend. According to city documents, Gretzky's salary is one of the reasons the team is losing money.
A consultant who went over the Coyotes' books for the city attributed $15 million to mismanagement by Coyotes owner Jerry Moyes, with Gretzky's compensation the biggest part.
The consultant said Gretzky ought to have his salary slashed from $8 million to $2 million as part of a reorganization that would help turn the team into a financial success, thereby negating the need to relocate.
The NHL went on the offensive in court filings as well, saying four suitors – including Toronto Argonauts owners David Cynamon and Howard Sokolowski – were interested in buying the team. Three of them – White Sox owner Jerry Reinsdorf, minority owner John Breslow and an unnamed Phoenix businessman – said they'd keep the team in Phoenix.
But the NHL went farther, painting a picture of chaos if the Coyotes left town, disrupting schedules, broadcast rights and forcing realignment with a ripple effect on rivalries.
"The fundamental essence of the NHL venture is who the members are and where the teams play," commissioner Gary Bettman said in his declaration to the court. "Both aspects have an integral and direct correlation to the overall business success of the league."
Ross, who specializes in sports antitrust suits at Penn State University, believes the NHL will have trouble with that argument.
"The NHL overstates the need for cooperation among clubs," Ross said in an email exchange." This league is run like the United Nations, not McDonald's. Clubs vote their own interest, not the interests of the whole league."
The NHL believes its method for approving ownership and relocation – through a vote of the board of governors – will withstand a court challenge.
Not so fast, said Ross.
"They have a conflict of interest," Ross said. "Courts need to closely scrutinize sports league decisions where there is a serious risk that the NHL decision is not being made in the best interest of the league but just to protect individual owners."
Balsillie argues league efforts to stop the move to Hamilton are anticompetitive, protecting the Maple Leafs and Buffalo Sabres from healthy competition. Precedent set in the NFL case of Raiders owner Al Davis's successful move from Oakland to Los Angeles helps Balsillie.
"The Raiders' trial lawyer persuaded a jury that the NFL's justifications for refusing to allow the move were bogus and that the only logical explanations were personal malice directed at the Raiders' owner and a desire to protect the L.A. Rams from local competition," Ross said. "Balsillie is basically making the same argument here."
Another leader in the antitrust field, Michael Kelly, said he wouldn't be surprised if Balsillie won given the Raiders' legal precedent. But the former lawyer for Major League Baseball said antitrust laws "have evolved," giving hope for the NHL.
"It would take guts for a bankruptcy court judge to foist a new owner or new territory upon a league," Kelly said.
Whatever the judge decides following tomorrow's airing of legal arguments, this case is far from over.
"The decision is sure to be appealed to the Ninth Circuit Court of Appeals and who knows what the three-judge panel of that court will think about?" Ross said.
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