The NHL's position on the Balsillie bid: 'There is only a front door'
by James Mirtle on Aug 11, 2009 9:45 AM CDT
36 comments
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, and well within any duty of good faith and fair dealing the NHL Board may have to Mr. Moyes. Thus, in the absence of any other relocation bidders (and none has emerged in the current circumstances), this Court should proceed without PSE's fictional bid looming over the Glendale community and continuing to harm the value of the Club.
Additional arguments the NHL has made against Jim Balsillie's bid as quoted directly from the above document:
- Pursuant to Article 3.5 of the NHL Constitution: "No membership or ownership interest 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 . . . ."
- The Debtors and Mr. Balsillie are under the misimpression that his character as a potential new owner should be ignored because some current owners have had their own legal issues (for which some have been disciplined by the League). Mr. Balsillie both ignores the critical difference between him as an applicant and someone who already is in the League, as well as the nature of his untrustworthiness as found by the Board of Governors. It is not so much the significant and highly publicized legal troubles that Mr. Balsillie has had in the past that influenced the owners' votes; rather, it was how he interacted directly with these owners and how, as a result, they could not trust him as a good business partner.
- The bankruptcy code cannot be invoked to abrogate the NHL's transfer consent rights (there's a whole section dedicated to this one — ed.)
- Mr. Balsillie cannot assure adequate performance of the Constitution and By-Laws under section 365(b)(1)(c). While Balsillie has mouthed his commitment to comply with the NHL Constitution and By-Laws (other than By-Laws 35 and 36), his past and current behavior toward League members belie these assurances.
- ...because the NHL has the legal right, beyond the Bankruptcy Code, to determine who may license its intellectual property, it similarly has the right to determine who may use that intellectual property in the context of a proposed transfer of a Club.
I'm really just picking out some of the greatest hits, but if you're a sucker for punishment, dive right into all 26 pages that are there and post what you find below. This is a basic idea of what will be up for debate today (and likely the coming weeks) with 30 days until the auction.
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I assume you highlighted the “intellectual property” clause in reference to the Hamilton Predators season ticket sales fiasco of two years ago?
Anyway, just based on the highlighted excerpts, it seems that short of tossing the NHL Constitution out the window altogether, Balsillie’s stuck. I’m sure there will be litigation well past September 10 in that regard, but I can’t imagine that Balsillie will even be eligible to bid, never mind assume control of the team, against the NHL’s wishes.
SNN Sports - A theoretical Oilers blog (i.e. theoretically, I write stuff there)
by Doogie2K on Aug 11, 2009 11:17 AM CDT reply actions 0 recs
The sticky point is, what if the Reinsdorf bid falls apart?
Amongst other things, he may not be able to extract the concessions he want from the city (see Mirtle’s post on why it might be better for Glendale to have an empty arena instead of giving the asked concessions).
If Reinsdorf ends up not bidding, the NHL is in a world of hurt because JB just might be the last guy standing, at which point the court could change its views of what makes a bidder ‘eligible’…
by Habs on Aug 11, 2009 11:28 AM CDT up reply actions 0 recs
Someone on another thread speculated that the NHL might just end up running this thing for a year before moving the team and given the problematic bids outside of JB’s, I am willing to bet dollars to donuts this is the end result.
The population of Pominville keeps rising!
by Blackcapricorn on Aug 11, 2009 11:53 AM CDT up reply actions 0 recs
If the Reinsdorf bid actually falls apart, I would love to see how far the NHL feels it can go (with the support of its owners) to prop it up.
Glen Sather is a Hockey Genius.
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by poploser on Aug 11, 2009 12:14 PM CDT up reply actions 0 recs
Just FYI...
…a somewhat boring 28-page legal brief mailed to me and the rest of the Coyotes’ STH by Tom Salerno indicates in a footnote that apart from Reinsdorf (whose offer Moyes and his cronies naturally hate), there are not one, but TWO other potential bids that aim at keeping the Coyotes in Glendale.
One is Ice Edge. I have no idea who the other one is unless Breslow is mounting his own bid after all.
You are validating my inherent mistrust of strangers.
by zyllyx on Aug 11, 2009 12:32 PM CDT up reply actions 0 recs
Breslow’s the minority owner, right? I was wondering what happened to his bid. I just assumed he lost interest after his accountants got a good look at the books.
SNN Sports - A theoretical Oilers blog (i.e. theoretically, I write stuff there)
by Doogie2K on Aug 11, 2009 1:16 PM CDT up reply actions 0 recs
Breslow is a minority owner who also runs the Phoenix Coyotes Charities arm of the team. He lives in Las Vegas, IIRC. He expressed interest in his own bid, then apparently “coalesced” his support behind first Reinsdorf, and then I think Ice Edge. But that may have been before Ice Edge decided that it would be fun to turn Saskatoon into a “home away from home” for the Mutts.
Breslow certainly hasn’t lost interest. Where exactly his interest lies right now is another question.
You are validating my inherent mistrust of strangers.
by zyllyx on Aug 11, 2009 1:23 PM CDT up reply actions 0 recs
Isn’t he going to run out of time? If he’s part of the “coalescing” behind Reinsdorf, and he wants to pull out and do a bid separately, is he going to be able to get a “qualified bid” with a “definitive agreement” in by August 25? I find it hard enough to believe Reinsdorf will be able to do that – and it appears he’s been working with Glendale the longest to work out concessions.
Glen Sather is a Hockey Genius.
http://glensathersucks.com/
http://twitter.com/ThGeneralissimo
by poploser on Aug 11, 2009 3:42 PM CDT up reply actions 0 recs
As a minority owner, could he fast-track his qualification since he’d likely have been vetted to some degree by the NHL, even if it was after the fact?
2008-2009 Colorado Avalanche: Dry Humping Mediocrity
by Mike @ MHH on Aug 11, 2009 4:18 PM CDT up reply actions 0 recs
The intellectual property aspect is relevant not because of the “Hamilton Predators” aspect per se, but because there are particular rules and caselaw relating to the transfer of intellectual property.
It would appear that, although there are circumstances where contracts can be assigned in bankruptcy even though there is an anti-assignment provision in said contract (I believe it is section 365(f) of the Bankruptcy code, IIRC), that rule has been held in the case law to be inapplicable for intellectual property rights. As such, even if somehow the court ruled that the NHL’s consent is not required (an odd suggestion, since he decided already to build their consent rights into the sale procedures previously), he could not force the assignment of the team’s intellectual property rights.
by Gerald on Aug 11, 2009 11:55 AM CDT up reply actions 0 recs
I haven't read any of this stuff yet...
But does Balsillie give a shit about owning the intellectual property rights to the term “Coyotes”? I’m sure he’s just going to name them something else anyway with some new logo and such. The NHL would want him to be using their marks on his jerseys and such and a Hamilton team would, at least initially, be a big seller in terms of licensed merchandise. It kind of seems to me that the NHL would want/need Balsillie as part of their little intellectual property cabal more than the other way around.
by mc79hockey on Aug 11, 2009 12:04 PM CDT up reply actions 0 recs
Balsillie would still need a license to use the other team names/logos and the league name in advertising and on local television/radio broadcasts, right?
That 17-year-old Hokie sitting in the rafters in Greensboro didn't see any of this coming.
by JoshCVT on Aug 11, 2009 12:51 PM CDT up reply actions 0 recs
THe greater concern is the NHL marks and IP. Without them, local TV revenue = zero in perpetuity. Licensing revenue without the NHL marks is impacted significantly IMO. Frankly, I am not even sure how he can even do a game. He cannot even put the other teams’ names on his tickets – “Hamilton Whositwhatsits vs. _______________”. How does he advertise games? The more I write here, the more convinced I am that the NHL IP is integral to the functioning of the team.
by Gerald on Aug 11, 2009 4:21 PM CDT up reply actions 0 recs
This is an absurd concern. It would basically be the NHL cutting off its nose to spite its face. The Hamilton Whatevers would be forced to retaliate and nuke the other NHL broadcasts involving their team, cut the NHL out of the relocation merchandise windfall, etc, etc. All of this is possible in perpetuity as well and serves the best interests of no one.
If the bazillion other problems with this deal are overcome and we’re left with IP rights, it’s barely a speed bump. This sort of conflict won’t happen even assuming the rights are not agreed upon and included in the sale in the first place.
by RiversQ on Aug 12, 2009 3:03 AM CDT up reply actions 0 recs
Call it absurd if you want, but your suggestion that the Hamilton franchise could retaliate is more abusrd to me. That would be the proverbial gnat on an elephant. It would not be required to continue in perpetuity, since no Hamilton franchise could survive in that environment.
In this scenario, no one is talking about a mutually agreed deal. As such, nothing has been “overcome”. The only way JB gets a franchise is over the NHL’s strenuous objections, which objections will accordingly continue indefinitely until JB bails or is ejected for failing to comply with the NHL Constitution and By-laws.
by Gerald on Aug 12, 2009 10:10 AM CDT up reply actions 0 recs
Well, we completely disagree. I highly doubt Balsillie gets the team, but if he does and the NHL is somehow forced by a bankruptcy court to do business with the man in Hamilton, I think they would be have no choice but to be rational. The scenario you describe would be untenable for all involved. It’s not remotely realistic – sensible businessmen looking out for their own self-interest would not operate that way.
Furthermore the NHLPA would have something to say about how the revenue streams are being handled. The two parties would have immense pressure to behave I think.
by RiversQ on Aug 12, 2009 11:14 AM CDT up reply actions 0 recs
Well, I am such a sensible businessman, and it is rough business indeed, but serious sensible businessmen know that harsh measures are required on occasion, if the circumstances warrant. All of this will come at the beginning, when JB is trying to get his little Hamilton adventure off the ground. The objective will be to prevent him from doing so, and to cut the knees from under a JB-owned franchise, and it would be quite effective IMO.
It would be quite tenable for the rest of the NHL. They could not televise Coyote games? Fine. No cut of Hamilton merchandising? Fine. It is not like they are giving up current revenues. Query how many jerseys they can sell without the NHL logo.
I have considered the NHLPA. For them, they really have no contractual rights. They are under no obligation to maximize revenue. Certainly such decisions have relationship impacts, but if the NHL feels it is worth it, the NHLPA does not have anything to say to which the NHL is compelled to pay attention.
As you suggest, though, we may agree to disagree.
by Gerald on Aug 12, 2009 11:41 AM CDT up reply actions 0 recs
So what’s the endgame in your scenario? And what’s the purpose?
I’ve read your posts on this site on this topic and I agreed with them for the most part. Your opinion has been that this is entirely a business issue where the NHL is committed to controlling their markets in Phoenix and the GTA.
However, in the highly unlikely scenario that Balsillie gets the team and moves it to Hamilton, then they’ve lost IMO. There is no point in trying to cut Balsillie off at the knees because the damage would already be done. Unless of course you’re suggesting that it is personal, which completely torpedos your position over the past few months.
by RiversQ on Aug 12, 2009 2:06 PM CDT via mobile up reply actions 0 recs
Valid questions both.
I thnk the purpose would be to get rid of a partner who they simply cannot trust. I cannot think of a single business in which someone would wish to continue a partnership with someone with whom they do not want to be a partner. I don’t think that it is personal, in that they want to ruin the guy. It is simply that they do not trust him, and for good reason IMO. Regardless of the reasons, though, trust is subjective to the point of being ephemeral. If you don’t trust someone, you don’t trust them. And trust is the essential cornerstone of a partnership (as messrs. Koules and Barrie are apparently finding out the hard way).
If you don’t want someone in the partnership, you will do what you can to get out.
Heck, i have even toyed around with the idea of the 29 teams voting to fold the league and then immediately reconstitute the league without him in it, same teams, same places, same players (just batting that one around, mind you).
All of these situations are fraught with risk for the rest of the NHL, make no mistake. I am simply pointing out that the IP matter is not a minor little issue. IP is a critical component of the identity of both the league and the teams and its marketing AND production.
by Gerald on Aug 12, 2009 2:52 PM CDT up reply actions 0 recs
Hmm… I’ve been thinking of the whole “trust” thing as just posturing. It’s a very easy thing to do and is certainly effective strategy if all you’re doing is keeping an eye on the potential income from a GTA expansion. Just a hunch, but I bet 15-20 teams that voted against him care more about the dough than Balsillie at all. The abstainees definitely don’t care. (Speaking of them – I don’t think that’s at all real. 26-0 is far more compelling than 26-3, so that screams posturing to me too.)
Anyway, I’m pretty sure Balsillie’s done. So it’s all moot.
by RiversQ on Aug 12, 2009 5:17 PM CDT via mobile up reply actions 0 recs
As an aside, it turns out that Toronto was in fact one of the abstainees.
by Gerald on Aug 12, 2009 6:55 PM CDT up reply actions 0 recs
Just to add – so I do see your point if that’s really the case that they think Balsillie is a complete clown. I’m just not sure the owners would see the slash and burn approach as particularly healthy or necessary.
by RiversQ on Aug 12, 2009 5:21 PM CDT via mobile up reply actions 0 recs
To answer your other question:
The endgame? I have not thought that one through as yet. It would be messy and nasty, though. And litigious.
by Gerald on Aug 12, 2009 2:54 PM CDT up reply actions 0 recs
I think Rivers is right — if he gets the team, he gets the team, as incredibly unlikely as that is right now. Can the NHL afford to fight this forever? Surely they can simply have Balsillie on the BOG but marginalize his influence on any decisions, etc.
Blogging on hockey at fromtherink.com
by James Mirtle on Aug 12, 2009 4:33 PM CDT up reply actions 0 recs
So would that mean, in a theoretical sale, Balsillie could wind up with the franchise, but none of the rights to the old Coyotes/Jets IP? Sort of like the ‘Canes have no IP rights to the Whalers’ marks and whatnot?
SNN Sports - A theoretical Oilers blog (i.e. theoretically, I write stuff there)
by Doogie2K on Aug 11, 2009 1:18 PM CDT up reply actions 0 recs
It could happen...
…but I’m not sure that’s of concern to Balsillie. He’s going to rename the team and sell a ton of jerseys no matter what. Of greater concern is his ability to market a team without, possibly, license to any other NHL marks.
The reason the Canes have no rights to the Whalers’ marks is that Connecticut insisted on Pete Karmanos transferring those rights to a state agency in order to abrogate his lease at the Hartford Civic Center, and he was in such a rush to move the team that he agreed to it. (He’s since expressed regret at doing so.) I don’t know that the Coyotes’ marks are of significant value post-move to anyone in or out of Arizona, particularly with how they’re being dragged through the mud now. (The Jets’ marks are a different story, but are we sure those still belong to the franchise, or have they been transferred already at any point to NHL Enterprises LP? Presumably all of the franchise’s IP would revert there if not part of the bankruptcy award.)
That 17-year-old Hokie sitting in the rafters in Greensboro didn't see any of this coming.
by JoshCVT on Aug 11, 2009 5:00 PM CDT up reply actions 0 recs
I wonder if Karmanos or the NHL would be able to buy them back for some fee now?
SNN Sports - A theoretical Oilers blog (i.e. theoretically, I write stuff there)
by Doogie2K on Aug 11, 2009 5:10 PM CDT up reply actions 0 recs
Not until “bring back the Whalers” loses political value in Connecticut, and that’ll require an entire generation to die off and/or get realistic about the size and wealth of the Hartford market. No sign of that yet.
That 17-year-old Hokie sitting in the rafters in Greensboro didn't see any of this coming.
by JoshCVT on Aug 11, 2009 6:24 PM CDT up reply actions 0 recs
As i said above, josh, the issue is not the PHO marks, but rather the NHL marks and the marks of all of the other teams. Without them, JB could not even sell tickets with the other teams’ names on them. He could not put the NHL’s mark on anything. He could not sell the broadcast rights. What else is left?
by Gerald on Aug 11, 2009 5:44 PM CDT up reply actions 0 recs
Yeah, I actually asked that question well before your post above. Look up one message. ;-)
That 17-year-old Hokie sitting in the rafters in Greensboro didn't see any of this coming.
by JoshCVT on Aug 11, 2009 5:54 PM CDT up reply actions 0 recs
I’m kind of surprised that the trademarks are owned by the individual teams rather than the NHL, or whatever the licensing subarm of it is. I’m pretty sure that’s the case in MLB.
by J. Michael Neal on Aug 11, 2009 7:57 PM CDT up reply actions 0 recs
It would seem that the team marks “are the property of the NHL and the respective NHL member clubs” (per NHL site). That might seem to imply some sort of joint ownership. The NHL entity is NHL Enterprises, L.P. The interest of the Coyotes therein is the subject of the various asset purchase agreements in the Coyotes deal.
by Gerald on Aug 11, 2009 8:14 PM CDT up reply actions 0 recs
I believe that's a recent development in MLB.
And I’m not sure it’s universal — I recall a gigantic mess when the Yankees made a licensing deal with Adidas for replica jerseys etc. that appeared to conflict with the MLB-wide deal with Majestic.
That 17-year-old Hokie sitting in the rafters in Greensboro didn't see any of this coming.
by JoshCVT on Aug 12, 2009 8:45 AM CDT up reply actions 0 recs
Do we know when the court is expected to respond to this request by the league? Does it have a firm time line to decide if it allows JB as a bidder or not?
by Habs on Aug 11, 2009 11:29 AM CDT reply actions 0 recs
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