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Who Decides Who can Own a Professional Sports Team; a Sports League or a Court of Law?

CoyotesAn interesting case coming from the NHL will most likely decide whether a sports league or a court of law may decide who may purchase a professional sports franchise

The Phoenix Coyotes of the NHL filed for bankruptcy earlier this year in which the bankruptcy court will decide whether Jim Balsillie, a wealthy businessman from Canada, may purchase the team.  If Balsillie is successful he intends to move the team to Hamilton, Ontario, Canada, a move that the NHL apposes.   Balsillie had previous run ins with U.S. regulations and NHL owners have already voted 26-0 in favor of not allowing Balsilli to own an NHL team.

“Balsillie and the NHL have accused each other of negotiating in bad faith.  Balsillie claims NHL Commissioner Gary Bettman holds an unreasonable grudge against him, while the NHL has claimed Balsillie is hurting the value of the Coyotes by smearing greater Phoenix as a hockey market.”  Balsillie currently has placed the highest bid for the franchise at $212.5 million while other lower bids have been placed by the NHL and private investors group entitled Ice Edge Holdings who bid $150 million.  Creditors of the Coyotes are hoping that Balsillie is allowed to purchase the team so that they can recoup the debts owed by the Coyotes.

Generally a sports league and other owners in the league must approve a new owner and an owners request to move a franchise.   The reason behind this is that most leagues engage in profit sharing among the franchises.  If the current owners do not feel that a new owner will be profitable for the league or the owner wishes to move a team to a new smaller market location, the rest of the league and franchises may lose money.   In this case, a judge must weigh whether paying off the Coyotes creditors is more important than current NHL rules and potential damage to the NHL brand.  Even if Balsillie is allowed to purchase the team I don’t think the court can force the NHL to approve moving the franchise.  The ruling on whether Balsillie can continue to be a bidder for the franchise is expected on September 2, 2009 and the team is expected to be sold on September 10, 2009.  The outcome of this case will have an impact on all other major sports leagues in the future.

UPDATE 10/1/09 – Bankruptcy judge Redfield Baum rejected Canadian billionaire Jim Balsillie $242 million bid for the Phoenix Coyotes, concluding that it would interfere with the league’s relocation rights and procedures.

For more on this top please contact Seattle Bankruptcy attorney, Richard Symmes

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Richard J. Symmes, Esq
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