PHOENIX – The other three major professional sports leagues warned in a court document Friday that a ruling against the NHL in its attempt to block the sale and move of the Phoenix Coyotes would set a dangerous precedent.
The NFL, Major League Baseball and the NBA said in a joint brief that such a ruling “has the potential to undermine the business of professional hockey and other major league sports.”
The three leagues joined in an “amici curiae” brief in U.S. Bankruptcy Court supporting the NHL’s right to determine where a team is located and who owns it.
Judge Redfield Baum set a deadline of midnight Friday for filing briefs in the bitter court fight between the NHL and Canadian billionaire Jim Balsillie, who wants to buy the bankrupt Coyotes for US$212.5 million and move them to Hamilton.
The city of Glendale, largely on the sidelines up until now, weighed in with a 49-page objection to the sale Friday night, contending among many other things that the Coyotes ownership has “terribly mismanaged” the team.
The city cites a lengthy number of cases, including one in 1999 involving the Pittsburgh Penguins, in its argument that the Coyotes should not be allowed to break the 30-year lease they signed in 2001 to play in Jobing.com Arena.
The city spent $183 million to build the arena for the Coyotes in conjunction with the adjacent Westgate Center entertainment district. The Arizona Cardinals’ home stadium is across the street from the arena.
A consultant hired by the city calculated that Glendale would lose $565 million in direct and indirect revenue if the Coyotes are allowed to break their lease. The city, however, said the true loss cannot be determined.
“The city would suffer unquantifiable damage to its goodwill, business relationships and standing in the community,” Glendale’s objection says.
The city also contended that claims made by the NHL, Glendale and others if the Balsillie sale goes through would make it far less attractive than a hypothetical $138 million sale that would keep the team in Glendale.
The city also said Coyotes owner Jerry Moyes’ debt should be subordinate to other creditors.
Moyes, in a declaration filed Friday night, countered that suggestion. Moyes says he has about $300 million invested in the team and would recoup $100 million in the Balsillie sale.
Another $22.5 million would go to hockey great Wayne Gretzky, who owns a small share of the team and is the Coyotes’ coach.
“There are no facts of law that support the effective elimination of Mr. Moyes’ claim,” Moyes’ declarations said.
Baum has set a hearing next Tuesday for arguments on whether he should approve the sale and transfer of the franchise over the objections of the NHL and the city of Glendale.
The Coyotes have never had a profitable season since the franchise was moved from Winnipeg in 1996. Court documents say the team has lost $74 million in the past two years. Last fall, Forbes magazine listed the Coyotes as the NHL’s least valuable franchise, worth $142 million.
Moyes filed for Chapter 11 bankruptcy on May 5, to the surprise of the league, which says it was about to present a letter of intent from Jerry Reinsdorf – owner of baseball’s Chicago White Sox and the NBA’s Chicago Bulls – to buy the team and keep it in Glendale. Moyes’ filing included plans to sell the team to Balsillie, who has failed in previous attempts to buy the NHL’s Pittsburgh Penguins and Nashville Predators.
Moyes and Balsillie argue that the NHL’s opposition to the sale and move represent an unreasonable restraint of trade under antitrust law. Moyes and Balsillie also want the judge to allow the team out of its lease with the city of Glendale without penalty.
The brief filed by the other three sports leagues contends “there is no legal justification for abrogating the NHL’s right … to determine the owner of each NHL franchise and to determine the locations of where the NHL will present its collective product.”
The leagues went on to contend that “even if there were a legal basis permitting such action, this court should not pursue such a course, which would encourage financially challenged franchises to enlist the aid of bankruptcy courts in an effort to circumvent established league rules that govern such league decisions.”
The NHL has contended all along that Balsillie is simply using the bankruptcy court as an end run around the league’s opposition to the sale and transfer of the team to a portion of Canada that is within the territorial rights of the Toronto Maple Leafs and Buffalo Sabres.
Moyes, Balsillie, the NHL and Glendale were expected to flood the court with briefs as the filing deadline approached.
Balsillie says he will withdraw his bid to buy the team if it is not approved by the end of June. The NHL says it would immediately appeal any adverse ruling by Baum to the 9th U.S. Circuit Court of Appeals.
The NHL has blamed much of the Coyotes’ problems to a lack of success on the ice and believes that with a new lease agreement and solid management a franchise in Arizona still could be successful.