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Judge says NHL entitled to fee if Coyotes move to Hamilton

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The Canadian Press
6/9/2009 11:24:15 PM
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PHOENIX -- The future of the Phoenix Coyotes appears to rest on how much the NHL would charge Jim Balsillie for the right to relocate the insolvent team to Hamilton, and whether the Canadian billionaire is willing to ante up US$100 million or more to do it.

Judge Redfield T. Baum said during a riveting and often combative bankruptcy court hearing Tuesday that he believes the NHL has a right to demand payment for its territorial rights in Hamilton, and suggested he might force the league to establish a price by granting the motion to relocate the Coyotes in order to settle the bitter standoff.

When a lawyer for the NHL said there wasn't enough time to set the figure before a proposed June 22 auction date for the team if it's allowed to move, Baum warned "you may be forced to do that on a very expedited basis," and added later, "if that means this is over, it might be better for everyone."

Baum intends to consider the matter overnight "before letting everyone know sometime" Wednesday on how he wants the sides to proceed.

The amount is crucial for several reasons, as earlier in the day Balsillie lawyer Susan Freeman told the court her client would walk away if the fee was too exorbitant, something Richard Rodier confirmed on the courthouse steps once the proceedings had ended.

"I don't know if he would necessarily pay any (fee)," said Rodier, a Balsillie representative. "I did have a brief discussion with Jim about it this morning and the contract gives us the right to walk away if there's any transfer fee at all."

Should Balsillie walk away from a third attempt to buy an NHL team with his $212.5 million offer for the Coyotes, conditional on a move to Hamilton and closing by month's end, the other myriad thorny legal issues before Baum would not need to be solved since if not paid by the buyer, the relocation fee would leave too little money for the creditors.

And under that scenario, it appears the NHL would get its wish for a Sept. 10 auction for the club, with at least one more Coyotes season in Phoenix.

Freeman said she expects the NHL to demand $100 million as a relocation fee -- a number the league hasn't confirmed and that was blacked out in court documents -- and deputy commissioner Bill Daly refused to speculate afterwards on how much would be enough.

"I don't think we are prepared to put out a number," Daly told reporters. "That's something that is generally determined by the board of governors in the context of a relocation application and from our perspective, we have a couple of steps before we get to a relocation application."

Yet the figure emerged as the key issue after nearly seven gruelling hours of legal grappling over bankruptcy, antitrust, contract and commercial law. There appeared to be in excess of 40 lawyers either taking part or taking in the proceedings in courtroom No. 703, and when it was suggested the Coyotes don't have much value, Baum quipped that the more suits there were, the more something was worth, "and there are a lot of suits here today."

Baum was in many ways the star of the show, dropping witty one-liners and picking apart every single one of the many lawyers to argue before him. But his pointed questions and precise reasoning helped bring at least some of the other issues into focus.

He essentially dismissed the NHL's assertions of four expressions of interest from potential buyers interested in operating the Coyotes in Phoenix -- including Toronto Argonauts owners Howard Sokolowski and David Cynamon, and Chicago White Sox and Bulls owner Jerry Reinsdorf -- as little more than hearsay. He added there was only one real offer, that of Balsillie.

When lawyers for the NHL suggested that was because current Coyotes owner Jerry Moyes wasn't making the team's books available, Baum retorted "if someone wants access, they're going to get access."

And while he didn't seem keen on the NHL's repeated assertions that no sale can be made until the court establishes what is being bid on, a team in Phoenix or a team that can be relocated, he repeatedly said it was "significant" that the NHL was willing to fund the team, through the 2009-10 season if necessary, in order to try and find a local buyer for the Coyotes, and then moving them afterwards if one could not be found.

Baum also consistently challenged the various assertions made by the Balsillie camp that the NHL has already prejudged the ownership and relocation applications, arguing that the league hasn't done anything of the sort and was still sorting through it all.

At other points he complained about the tight timelines the Balsillie bid had set up and the demands for speeding up various processes.

"We're not selling a used car here," Baum said.

All sides in the matter -- including lawyers for the City of Glendale, where the Coyotes play; Moyes; the committee of creditors; and for Major League Baseball, the NBA and NFL -- searched for relevant precedents to use in a case they all agreed was the first of its kind.

The process began when Moyes caught the NHL by surprise and filed for Chapter 11 protection on May 5 and the wrangling hasn't stopped since. More than 300 documents have been filed with the Arizona bankruptcy court, a stack 10 feet high complained Baum, leaving lots for the judge to sort through.

"He's obviously struggling with the issues," said Daly. "I think he openly admitted it's an unprecedented case with difficult legal issues in a lot of different areas of the law that are conflicting, and he's got to work those out."

Balsillie's side tried to argue that the Quebec Nordiques' move to Denver was carried out under a similar timeline to the one they are proposing, but the NHL countered by saying that they had much more lead time in that situation and that they had prepared by working on dual schedules for either alternative.

There was also great debate over how much money in the Balsillie offer was actually available to creditors. The NHL argues his offer is actually $165 million once the $25 million payable to the league and $22.5 million due to coach and part owner Wayne Gretzky is factored in.

The committee of creditors is relatively happy with the return from the Balsillie bid, while the lawyer for Glendale argued that the city, as a unsecured creditor, would suffer tremendous harm at the expense of other creditors.

Also at issue is the nearly $100 million Moyes believes he has loaned to the club, although the league believes he should not be considered a "legitimate" creditor.

The lawyers for Moyes and the committee of creditors argued waiting for the NHL to try and find a local buyer while it funds the Coyotes operations would end up eating away at the money available to creditors once a sale was made.

Still, NHL repeated its belief the Coyotes could be viable where they are under new ownership and with new concessions of about $15 million annually Glendale is apparently willing to make.

And NHL lawyer Tony Clark, again stating the league's belief that Balsillie's bid is an attempt to skirt the league's rules on the transfer of ownership and relocation, said creditors would not be harmed if the league prevailed.

Baum later took issue with the various leagues' contention that allowing this move would wreak havoc with their teams. He pointed to the unauthorized departures of the Baltimore Colts to Indianapolis and the San Diego Clippers to Los Angeles as moves that did not harm the fate of their respective leagues.

He later dismissed notions by Glendale that the $300 million in losses since the franchise moved to the desert from Winnipeg in 1996 were overstated.

NHL commissioner Gary Bettman dodged questions as he hopped into a waiting limo headed to the airport after the hearing broke for lunch. Bettman had to be in Pittsburgh in case the Detroit Red Wings won the Stanley Cup, which they didn't, losing 2-1 to the Penguins.

"We're not going to get into the specifics, it's obviously before the courts," said Bettman. "The judge has a lot of facts and legal issues before him and we believe the judge was extremely well informed and my hope is he comes to right conclusion."

Gary Bettman (Photo: The Canadian Press)

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(Photo: The Canadian Press)
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