By: Andy Holloway

Jim Balsillie’s bid to move the Phoenix Coyotes to Hamilton has stalled, albeit temporarily say his minions. What’s next? An application to buy the team and relocate it through official NHL channels. The front door, if you will, seeing as Judge Redfield T. Baum slammed the side door closed.

The first part, buying the team, should be easy enough. Balsillie has more than enough dough to trump any competing bid, unless one was to come from, say, someone wanting to move the team to Toronto. And he’s already been pre-approved. “It appears to the court that the NHL can not object or withhold its consent to PSE [Balsillie’s corporate entity] becoming the controlling owner of the Phoenix Coyotes,” noted Baum, the judge presiding over the Coyotes’ bankruptcy case, in his ruling denying Balsillie’s purchase.

The second part is more problematic and likely involves hundreds of millions of dollars in relocation fees, indemnity fees and contract-breaking fees if the NHL approves the relocation proposal at all. If not, that could spur antitrust litigation since there would then be a bona fide dispute, something Baum noted has been missing in the case so far.

However, “it is not an antitrust violation for professional sports leagues to have terms and conditions on relocations of member teams,” stated Baum. Indeed, some restrictions are necessary to create a league, organize games and award prizes—something covered by ancillary restraints doctrine, says Anthony Baldanza, chair of Fasken Martineau’s Antitrust/Competition & Marketing Law Group and a senior partner of the firm. “That really means the restraint is reasonable necessary for, and ancillary to, a broader legitimate agreement, and there is clearly a broader legitimate agreement namely the NHL arrangement as a whole.”

Restrictions such as deciding where a team can be located might be seen as pro-competitive, says Baldanza, in the sense that it may strengthen the NHL against other forms of sports and entertainment. The same restrictions may also dampen competition amongst the teams within a specific league. That’s why the court would apply a rule of reason approach to decide which side has the stronger case.

But antitrust laws as they apply to sports leagues are still developing so what may seem obvious—propping up the Coyotes is a detriment to the other teams as well as the league—is not so simple.

For example, Canada’s Competition Bureau looked at Balsillie’s previous attempt to buy the Nashville Predators in 2008 and found nothing in the NHL’s restrictions that contravened the Competition Act—this country’s equivalent to the Sherman Antitrust Act in the U.S. Since then, the Competition Act has been changed so the Bureau might come to a different conclusion if it were to look into the Phoenix case.

An antitrust lawsuit in this case is still just a lawyer’s dream, but it’s one option Balsillie could turn to if rulings continue to go against him

In the meantime, let’s have some fun. Here’s what the principal players in the Coyotes case have had to say about Baum’s ruling:

Balsillie’s spokesman Bill Walker:
“Jim Balsillie’s bid to bring a seventh NHL team to Canada continues. We’re still here. The court did not approve either our approach or the NHL’s.”

Um, Baum clearly sided with the NHL in most of his ruling.

Jerry Moyes, principal owner of the Phoenix Coyotes:
“Now the most important thing for us to do is work towards an open and transparent sales process that will result in obtaining the most money for the team’s creditors. The case depends upon whether the NHL denies relocation under any circumstances and thus violates anti-trust laws, or specifies a relocation fee that is reasonable in this case.”

Cue the lawsuits.

NHL deputy commissioner Bill Daly:
“We’re pleased the court recognized the validity of League rules and our ability to apply them in a reasonable fashion. We will turn our attention now toward helping to facilitate an orderly sales process that will produce a local buyer who is committed to making the Coyotes’ franchise viable and successful in the Phoenix/Glendale area. We are confident that we will be able to find such a buyer for the Coyotes and that the claims of legitimate creditors will be addressed.”

The Coyotes can be successful in Phoenix? Bill Daly’s attempt at humour falls flat.

The city of Glendale:
“Clearly the court recognized the significance of these issues and the unique interests of the City of Glendale and its taxpayers. The court based its decision on the law and facts and not on countless rumors and innuendo regarding this matter.”

Smart investors know when to cut their losses. Glendale doesn’t.

Hamilton mayor Fred Eisenberger
“Mr. Balsillie released a statement to suggest that it is not over and that they continue to aspire to getting a team in Hamilton. We’ll continue to try and impress upon [the NHL] that hockey is very viable in Hamilton and there is lots of community support.”

If you’re going to pay a huge fee to break into someone’s territory, wouldn’t it make more sense to be in that person’s rich backyard instead of down the road? Just a thought.