Tuesday's Coyotes Hearing Should Be A Good One

((HT: GlobeSports/Shoalts))

Declarations filed with the U.S. Bankruptcy Court last night by the NHL on the heels of filings by Phoenix Coyotes owner Jerry Moyes and prospective buyer Jim Balsillie ((pictured, thanks GlobeSports file)) promise that what was supposed to be a scheduling hearing next Tuesday will be a donnybrook.

Moyes and Balsllie fired first when they asked the court to rule at Tuesday’s hearing that the NHL has to turn over documents relating to the sale and consent to the examination of commissioner Gary Bettman and deputy commissioner Bill Daly by Moyes’ and Balsillie’s lawyers.

The NHL fired back by filing a lengthy argument that Balsillie’s $212.5-million (all currency U.S.) bid for the Coyotes should be rejected by the court because Balsillie was already rejected as an owner by the NHL governor. The league’s lawyers said in the filing, backed up by declarations from Boston Bruins owner Jeremy Jacobs, the chairman of the league’s board of governors, and from Minnesota Wild owner Craig Leipold, that the NHL’s constitution and by-laws should be upheld ahead of the bankruptcy code and anti-trust law.

“In short, this court should put an end to Mr. Moyes' and Mr. Balsillie's jointly devised scheme to force entry into the league through the bankruptcy ‘side door;’ there is only a front door, and it is now unavailable to Mr. Balsillie in accordance with the NHL's constitution and by-laws, consistent with the bankruptcy code,” the league’s declaration said. “Thus, in the absence of any other relocation bidders [and none has emerged in the current circumstances], this court should proceed without Balsillie’s] fictional bid looming over the Glendale community and continuing to harm the value of the club.”

The joint request from the Moyes and Balsillie camps said they plan to ask Bettman and Daly about a relocation fee and the NHL’s methods for determining the fee. They also want to grill them about the decision by the NHL’s governors to reject Balsillie as an owner and their refusal to consider his application to relocate the Coyotes. Bettman and Daly will also be asked to explain their argument that it is not possible to move the Coyotes in time for the opening of the 2009-10 season in October.

Balsillie’s bid is conditional on the team moving to Hamilton. His bid will be considered at an auction sale conducted by the court on Sept. 10 along with bids from Chicago White Sox owner Jerry Reinsdorf and a group called Ice Edge Holdings LLC. The latter two bidders plan to keep the Coyotes in suburban Glendale.

“It is critical that [Moyes and Balsillie] obtain the requested documents … so their counsel and their expert witnesses have adequate time to analyze the documents and prepare any reports or declarations that will be utilized or relied upon at the sale hearing,” the request said.

The NHL responded that since it rejected Balsillie as an owner there is no need to discuss a relocation fee or procedures. The league also accused Balsillie of being evasive in his answers when he was questioned by the board of governors’ executive committee in late July just before they rejected his application to be an owner.

“The NHL board of governors has unanimously voted that Mr. Balsillie is not qualified as a matter of character and integrity to be the owner of an NHL team,” the league’s declaration said. “Unless and until that determination is invalidated under league rules, Mr. Balsillie's relocation application is moot, the NHL will not investigate or consider his application (at enormous time and expense), and he cannot become a qualified bidder within the meaning of the bidding procedures order.”

Jacobs said in his declaration that Balsillie was rejected because of the governors felt he was not honest about his intentions on relocation when he tried to buy the Pittsburgh Penguins in 2006 and the Nashville Predators in 2007. The governors also had concerns about Balsillie’s involvement in a stock back-dating scandal at Research In Motion that led to him paying a settlement in a civil suit by the U.S. Securities and Exchange Commission without admitting any wrong-doing.

In his declaration, Leipold, the former owner of the Predators, accused Balsillie of misleading him in 2007 when he agreed to buy the Predators from Leipold. Balsillie publicly declared his intention to move the Predators to Hamilton and started taking deposits on season tickets, and Leipold said he had no idea Balsillie planned to do this.

The NHL’s lawyers said the governors rejected Balsillie in good faith as an owner and there is ample precedent in law for the bankruptcy court to uphold the decision. They also objected to Moyes’ and Balsillie’s request to examine Bettman and Daly.

“The board had good cause to reject Mr. Balsillie: His perceived unwillingness to comply with the NHL Constitution and By-Laws and his lack of trustworthiness are legitimate business reasons to deny his application,” the filing said. “[Examining Bettman and Daly] over the board's motive would be highly wasteful where the undisputed facts before the board more than provide good cause for its decision.

“The procedures employed by the league and the grounds on which the board's decision was based amply demonstrate that the NHL acted in good faith in denying Mr. Balsillie's ownership application, and the court should not second-guess the board's decision.”