Judge Rejects Both Bids to Buy Phoenix Coyotes

A federal judge in Arizona has rejected competing bids by the National Hockey League and BlackBerry magnate Jim Balsillie to purchase the Phoenix Coyotes franchise from its bankrupt owner.

The NHL won a partial victory Sept. 30 when U.S. Bankruptcy Judge Redfield T. Baum, rejecting Balsillie's $242 million bid, ruled that the league has rights to decide who controls its teams and where those teams play.

Balsillie had sought to move the team, without the league's consent, to Canada.

The NHL had struck down the Canadian billionaire's ownership application, saying he lacked the "character and integrity" required by the league's bylaws, citing, among other things, his conduct regarding previous unsuccessful attempts to buy the Pittsburgh Penguins and the Nashville Predators.

Judge Baum also rejected the NHL's $140 million bid for the Coyotes, saying the offer does not treat the creditors equally because it excludes any claims by the team's current owner, Jerry Moyes, and its recently resigned coach, hockey great Wayne Gretzky.

Moyes and Gretzky both say they sunk millions of dollars into the Coyotes franchise.

While Judge Baum effectively killed Balsillie's attempt to buy the team, he left the NHL the opportunity to amend its proposal to treat Moyes and Gretzky more fairly.

"In hockey parlance, the court is passing the puck to the NHL, who can decide to take another shot at the sale net or it can pass off the puck," the judge said.

Moyes owns the Coyotes through Dewey Ranch Hockey LLC and several subsidiaries. Dewey Ranch and its affiliates filed a Chapter 11 petition May 5 in the U.S. Bankruptcy Court for the District of Arizona.

Immediately after the bankruptcy filing, Moyes sought approval of his assets sale agreement with a group led by Balsillie, the co-CEO of BlackBerry mobile communications device maker Research in Motion. The proposed sale was contingent on relocation of the team to Hamilton, Ontario.

The bankruptcy and proposed sale set off a firestorm, with the NHL and the city of Glendale, where the Coyotes play, strongly objecting to the Balsillie deal.

Eventually, with no other bidders stepping forward, the NHL proposed its own competing offer to buy the Coyotes franchise and keep it in Glendale.

Judge Baum said the various parties "inundated" the court with numerous motions, lengthy briefs and expert opinions on antitrust and other esoteric issues, etc.

The NHL argued that Balsillie's bid was not valid because the league retained the contractual right to decide the ownership and location of its franchises.

Balsillie argued that once the NHL became a competing bidder for the team, it forfeited its right to decide whether he could own and move the team. He further argued that there was no economic basis for the NHL to refuse to consent to the relocation, insisting that Hamilton, unlike Glendale, is a financially viable market.

The Canadian mogul asserted that Judge Baum had authority under the Bankruptcy Code to excise the league consent provisions from the franchise contract and approve the sale.

Judge Baum acknowledged that the NHL has legitimate rights to determine the ownership and location of its teams.

"The very nature of professional sports requires some territorial restrictions in order both to encourage participation in the venture and to secure to each venturer the legitimate fruits of that participation," the judge said.

He noted that the Bankruptcy Code prohibits any bid "where the interests sought to be removed by the proposed sale ... cannot be adequately protected."

Concluding that he could not adequately protect the NHL's interest by allowing the sale and resulting relocation of the Coyotes, the judge rejected Balsillie's bid.

Turning to the NHL's bid, the judge said the offer allowed the league to choose which unsecured creditors would be paid in full. The league selected all the unsecured creditors except Moyes, Gretzky or any entity affiliated with them.

The judge said there has been no determination that Moyes and Gretzky are not "legitimate creditors."

"It would be inherently unjust for this court to deprive them of their possible rightful share of any proceeds without first providing all involved a fair trial on their claims," Judge Baum held.

The NHL had not submitted an amended bid by press time.

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