PHOENIX – A decision by a U.S. bankruptcy judge in the blazing Arizona heat could allow Jim Balsillie to continue his pursuit of putting an NHL team in Hamilton, or test the cold resolve of the Canadian billionaire to fight the league in court.
If Judge Redfield T. Baum decides during a bankruptcy court hearing Wednesday to ignore an overwhelming vote by NHL owners rejecting Balsillie’s bid to purchase the Phoenix Coyotes, it opens the door for him to participate in a Sept. 10 auction for the franchise.
But if Baum upholds the NHL’s vote, Balsillie will have to decide if he has the will and deep pockets to battle the league in an antitrust suit.
“It is certainly still open to him to bring such a lawsuit,” said Penn State professor Stephen Ross, a sports law and antitrust scholar.
Such litigation might take four years and cost more than US$10 million, Ross estimated. By then, the Coyotes could have a new owner and may not even be playing in Phoenix.
“Depending on who is owning the team and where they are, the remedy may be different,” he said. “A court could conceivably order the NHL to add another team (in Ontario) or give him the right to buy another team or may just award him money damages.
“But certainly, even if he loses in the bankruptcy court, he still has a viable antitrust claim under either Canadian law or American law.”
Eric Schaffer, a senior bankruptcy partner at the international law firm Reed Smith in Pittsburgh, believes if Wednesday’s decision goes against Balsillie it could convince the co-CEO of BlackBerry maker Research In Motion it’s time to give up the fight.
“If he loses on this one, then he probably is done as a potential owner,” said Schaffer, who was involved in the Pittsburgh Penguins bankruptcy case. “It means you have a court decision that says the NHL does not have to take him in under any circumstances.”
Both sides can appeal Baum’s decision, but Ross doubts another court would overturn the ruling.
“The district judge is given a substantive degree of latitude on factual matters and predictive matters,” he said. “It’s going to take a very strong basis to overturn the discretion of the bankruptcy judge on that matter.”
Balsillie has offered US$212.5 million to buy the Coyotes, a bid that is contingent on moving the team to Hamilton.
The NHL, which favours keeping the franchise in Phoenix for the time being, has bid $140 million.
The league made its surprising offer last week after Jerry Reinsdorf, who owns baseball’s White Sox and the NBA’s Bulls, withdrew his $148-million bid.
Reinsdorf walked away from the bargaining when he could not reach an agreement with the city of Glendale, the Phoenix suburb where the Coyotes play, to make the team viable in Jobing.com Arena.
The other bidder is Ice Edge Holdings LLC, a group of American and Canadian businessmen who plan to play five games in Saskatoon. Their offer is also contingent on reaching an agreement with Glendale.
The NHL owners voted 26-0 to reject Balsillie as an owner, saying he was perceived to be untrustworthy. Balsillie has also had failed bids to buy the Pittsburgh Penguins and Nashville Predators.
Ross said to win an antitrust case, Balsillie would have to prove the NHL objected to moving the Coyotes to Hamilton because they would be competition for the Toronto Maple Leafs and Buffalo Sabres.
If the NHL succeeds in buying the Coyotes, the league could sell the team to another owner who may relocate the franchise. It’s even possible Reinsdorf could make another offer.
The Coyotes have lost more than $30 million in each of their last three seasons playing in Glendale.
Schaffer said there is a chance Baum could allow Balsillie to participate in the auction.
“I think a judge might say the NHL does not have complete discretion to make a decision without having some basis to decide, that they can not be simply arbitrary,” he said.
“Remember, the judge is there to try and obtain the highest and best offer in the interest of maximizing distribution to creditors.”
Ross isn’t so sure, pointing out the court has rejected some of Balsillie’s earlier arguments.
“If the judge were sympathetic to Balsillie’s position, which is the NHL is behaving in a manner that is illegal under the antitrust laws and bankruptcy will not permit people to enforce rules that are illegal under federal law . . . he would have ruled in favour of Balsillie the first time,” Ross said.
If Balsillie is blocked in his attempt to relocate the Coyotes, his chances of ever buying an NHL franchise are slim.
The battle between Balsillie and the league has been bitter, with both sides exchanging insults and allegations.
“In terms of him getting in by knocking on the door, and them inviting him in, there is no chance of that,” Schaffer said.
“One way or another, he decided he wasn’t going to get in there by being courteous. There seems to be a decision on both sides that this is total war.”
Ross agreed the only way Balsillie might ever own a team is by muscling his way into the NHL.
“Balsillie has never taken that sort of sycophantic, brown-nosing approach to try and get a franchise,” he said. “For a billionaire that has already shown that he is not trying to get into the league by schmoozing up the owners and the commissioner’s office, it seems to me this alternative strategy is a viable one.”
The fight over ownership of the Coyotes began on May 5 when owner Jerry Moyes surprised the league by taking the club into Chapter 11 bankruptcy with a plan to sell the franchise to Balsillie.
Moyes said he would be able to recoup $104 million of the $300 million he loaned the team if Balsillie bought them. He would get nothing under the NHL and Ice Edge bids.
The City of Glendale contends the Coyotes can not move unless they pay a $794-million penalty to get out of their current lease.