Tue May 19 12:19pm EDT
It's usually never a good sign when the four major professional sports leagues band together in a united front; outside of providing a nice reminder that the NHL is, in fact, still considered one of the four major professional sports leagues.
The NFL, Major League Baseball, NBA and NHL typically combine their mega-powers for such altruistic causes as, say, suppressing comprehensive performance-enhancing drug testing in their respective sports. But today in Arizona, the NHL enters a U.S. Bankruptcy Court with the full support of its peers; who fear a legal defeat that could, in the words of the NFL, set a "precedent that has the potential to undermine or disrupt the business of professional hockey, football or other major league sports."
The Phoenix Coyotes' bankruptcy case will be heard today by U.S. Bankruptcy Judge Redfield Baum at a hearing beginning at 1:30 p.m. PST. Craig Harris of the Arizona Republic offered a preview and explained the stakes, as owner Jerry Moyes attempts to sell the franchise to billionaire Jim Balsillie with the intention of relocating it to southern Ontario:
Current owner [Jerry] Moyes put the team in bankruptcy after never making money on the franchise, investing more than $300 million since 2001. He could recoup some of his losses by selling the team.
The city of Glendale could lose the Coyotes' millions of dollars in rent and parking payments. Plus, whether Moyes or the NHL controls the team, it appears clear that Glendale will have to make financial concessions to keep the team at Jobing.com Arena. One recent filing says the subsidy could reach $15 million a season even though Glendale has adamantly denied it would provide concessions.
Finally, the NHL contends it has a right to determine where its teams play, through a vote of its owners ...
... Gary Roberts(notes), dean of Indiana University School of Law, said that while a bankruptcy judge has discretion, he thinks it's unlikely Baum would wade into the antitrust waters. "My guess is he would give deference to league rules and legal authority to control who owns a team," said Roberts, who specializes in sports law.
Coming up, more on the hearing and a roundup of the latest news and views about the Coyotes' relocation.
What the argument boils down to is this: Gary Bettman claiming that a proxy Moyes signed in Nov. 2008 gave the NHL total control of the team, from its finances to its potential relocation. Moyes is claiming that the partnership was much more limited, and that he retained the right to file Chapter 11 and sell the franchise to Balsillie.
According to Darren Dreger of TSN, there are four key motions for today's hearing: Who controls the Coyotes? How will the selling of the team proceed? If necessary, is there actually an offer from a Jerry Reinsdorf-led group to buy the franchise? But most interestingly, there's a motion that could end the issue based on a procedural mistake. From Dreger:
Number two: Is the bankruptcy petition admissible?
The NHL says in an effort to get the original bankruptcy petition filed, Coyotes C.F.O. Michael Nealy didn't sign the document which explains what led to Moyes and the Coyotes filing chapter 11 bankruptcy, and therefore the NHL argues it's an inadmissible document and may go so far as to charge the declaration Nealy introduced is fraudulent.
What's interesting is that the NHL isn't making the argument that the Coyotes shouldn't be in bankruptcy, but rather that Moyes shouldn't be allowed to file on the franchise's behalf.
As NHL VP Bill Daly explained, via the Toronto Star:
Even if the NHL wins, the league still could keep the team in bankruptcy court to find a buyer, deputy commissioner Bill Daly told the Arizona Republic. That also would give the league leverage to renegotiate the team's lease at Jobing.com Arena, where the Coyotes were obligated to play for 26 more years.
The league has sought further concessions from Glendale, to the tune of $12 million to $15 million a year, and has a buyer - Chicago sports magnate Jerry Reinsdorf - willing to keep the team in Glendale.
If nothing else, this bankruptcy hearing is shedding light on just how devastated the franchise has been financially in Glendale. The Arizona Republic buried this news deep in a story over the weekend, but it's absolutely mind-blowing:
In its bankruptcy filings, the team also said it struggled even meet minimum standards to qualify for full shares of the NHL's revenue-sharing program, which takes money from rich teams and distributes cash to poorer teams.
Unable to meet minimum paid attendance and revenue-growth figures in 2007-08, the NHL docked the team at least $3.6 million, or 25 percent of a full revenue share. This past season, the Coyotes again failed to meet those standards and received a 40 percent cut, or more than a $6 million reduction, according to Shumway.
The NHL last year told the Coyotes to "do whatever they needed to do" to hit the minimum requirements and receive a full share, Shumway said. The team, through an accounting move, then sold Moyes about 1,000 tickets a game and deducted the cost from the millions of dollars in loans he provided the team. Daly said the NHL, which has contended it has been in control of the team since November, became aware of the situation in January and told the Coyotes to stop.
You have to wonder how many other NHL teams practice this art of deception.
Finally, two NHL cities -- one old, one potential -- have been in the news regarding the plight of the Coyotes. When Bettman mentioned in a a court-submitted email that Winnipeg would be in play if the franchise needed to relocate, it served not only as a nostalgic alternative to placing an existing team in southern Ontario but as catnip to Winnipeggers; even ones whose passion on the matter had waned.
Why should anyone really be surprised? After all, we've been talking about that possibility in this space for over two years, since the fundamental economic restructuring of the league, the new collective bargaining agreement where the players and owners become partners (with salary caps linked to revenue) and since the emergence of Canadian-based teams as the league's financial backbone.
We've also talked about the inevitable collapse of teams in non-traditional markets, such as the Coyotes, and the impending effects of a debilitating recession in America on already struggling NHL teams.
But it was always in the hypothetical. Always "What if?" And given the sensitivity to the subject, always in the context that Winnipeg, if offered a team, would have to prove it could afford the NHL's significant dues long-term.
So here's a question: "What if" it's actually happening? Now. What if the realities which have been long predicted have confronted the NHL in a perfect storm, as to make Winnipeg -- and this is a seismic shift -- a preferred location for Bettman?
And then there's Vegas, a city that the NHL is circling right now for a future franchise. A desert-to-desert relocation? Greg Esposito of Fanster doesn't see it:
If Gary Bettman actually prevents the team from moving to Canada, giving the Phoenix faithful hope, only to allow them to go to Vegas, he will officially seal his legacy as a commissioner. He'll also have to be prepared for headlines that read "Leaving Las Vegas" five years from now when it's realized you can't run a pro sports team in a city known for massive corruption. Then again, with an owner from Chicago, maybe you can.
Our thoughts on this situation have crystallized over the last few weeks. Jim Balsillie is too rich and too passionate not to own an NHL franchise. Bettman and his old boys club need to put politics and pettiness aside and let the guy into the fraternity.
But not now. And not with this team.
While we completely respect the punk rock way Balsillie's tried to jam his foot in the door, he's doing so with the warped objectives of a self-righteous comic book villain: He views his intentions as noble, so he's willing to destroy worlds to achieve them.
This isn't about keeping a team in an American market. It's about invalidating the way professional sports approve franchises and their owners would be a shockwave from which many cities would never recover. So long Atlanta Thrashers. Fare thee well Nashville Predators. Say hello to your mother for us, Tampa Bay Lightning. We hear Quebec City is rather nice.
Balsillie's also costing the NHL hundreds of millions in his bid to move an existing franchise to Hamilton, rather than allowing the NHL its right to place an expansion team there and reap the rewards.
Now, the just thing to do would be to allow Balsillie to own that team when it does arrive; and, in the interest of good PR, to set a time-table for its arrival in light of this Coyotes' mess (economy be damned).
But something tells us that saving face with the millions of Canadian fans that are ready to "Make It Seven" is the last thing on the NHL's mind right now.
Finally, some video on the Phoenix/Hamilton matter: