Coyotes Situation: Preparing for the Auction

Moneypuck -Contributor IAugust 17, 2009

Thanks to James Mirtle and the minutes he posted of the previous hearing over the Coyotes, we now know the principle debates being covered for the upcoming auction that according to the documentand Mirtle have to be resolved before the September 10th auction.

The key issues here are the first, which state a violation of Jim Balisille according to Article 3.5 of the NHL Constitution, to avoid the mass amount of jibber-jabber, I'll just show the excerpt that's important:

No membership or ownership interested in a Member Club may be sold,
assigned or otherwise transferred except (a)with the consent of three-fourths of the members of the League.

There's more to the article, but that's the important part.

The other violation is of By-Law # 35, although a humorous section I found was 35.1.b on how a Member should determine whether a new owner would be a good fit, this is 1 of the 2 major criteria apparently for evaluation:

Whether the persons who would be holders of an ownership interest in the Member Club are of good character and integrity.

That should knock some off right away, the other major criteria is a financial one, but the major point again is a new owner has to be voted in by the Members.

Point #6 is the big one too, that being:

Can the court force the NHL to accept a relocation?

The NHL's biggest argument is that all of these maneuvers by Moyes and Balsille go against their constitution and bylaws, however the issue at hand is can the court overrule the leagues bylaws.

In a bankruptcy court, the answer is yes, under normal circumstances a court cannot overrule a private company's constitution unless its breaking a public law of the geographical location it resides in. However when a company decalres bankrupt, it as a company is no longer considered part of the private entity because it has no assets and therefore in the world of business, the bond between the company and the private entity no longer exist, which would be the agreement to the League's constitution.

The trustee in this situation, is assigned to get the most money for the creditors in a bankruptcy court as possible. This may be Balsille if its deemed he can do this with his bid of 212.5 million, however the NHL has claimed that the bid is misleading and there may be some deductions, however until we see some hard details that's all smoke and mirrors.

The only real case the NHL has in my opinoin, is that if they can prove Moyes was not legally allowed to declare bankruptcy, a point brought up my Mirtle at number 2:

A "renewed motion" from the NHL for control over the Coyotes

This was brought up by the allegation the NHL had documentation showing ownership of the Coyotes, but last time around Baum deemed their evidence insufficient, they better have something new next time around.

Also on the matter is whether or not Balsille has the best offer, in raw money he may seem to, but there's the mystery deduction that Bettman has eluded to before and of course the Glendale lease and how much they would be owed, brought up by Mirtle at number five:

Can the arena lease be rejected by the bankruptcy court? Is Glendale entitled to damages and are those damages capped?

However the major issue may be the timeline, the season is under two months away, and theres an issue at court that has almost never been seen before, a private company in a private entity declares bankruptcy and the high bidder to take ownership of the private company conditional on breaking the private entity's constitution.

Even if the NHL can't prove ownership, and Baum declares Balsille the best bid to reimburse the creditors, due to the uniqueness of the case, the NHL can appeal and take this case to another level, and if Balsille loses he can appeal his bid was the best deal (unless Moyes can clearly prove that Glendale was that big a creditor and would be very damaged by losing the team, which I'm not optimistic about).

This case is nowhere near over and I have a sinking feeling the Coyotes won't be playing hockey in the next season if Balsille wins his case, I can see the NHL appealing the break of their constitution and that the team cannot be relocated, which can prolong the process and due to the time structure and the slow way the higher level of courts operate, there's no way the Coyotes can open the season.

However if Balsille loses and he appeals, in my opinion Baum will and/or should deem the appeal process valid if Balsille shows he has a case to best reimburse the creditors but only allow the court hearing to happen after the NHL League Year and grant the NHL a temporary ownership, in which they can't deem a new owner or make any drastic moves in regard to the Coyotes, they can only allow them to play hockey. This would be conditional if the NHL and their owners are in favor of financially supporting the club.

Basically, strap on for a long ride because this is nowhere close to over.