Hockey’s Desert Showdown
By Evan Weiner
June 8, 2009
10:00 PM EDT
(New York, N. Y.) -- The Detroit Red Wings could win the Stanley Cup on Tuesday night, the Los Angeles Lakers could take a 3-0 lead in the NBA Finals, Major League Baseball will offer a full schedule of games but the real sports action on Tuesday will take place in a bankruptcy court in Phoenix, Arizona. Jim Balsillie's law team will be arguing why the Ontario billionaire should be able to buy the financially distressed Phoenix Coyotes franchise from Jerry Moyes and move the team to Hamilton, Ontario for the 2009-10 season.
The National Hockey League is fighting Basillie's planned takeover of the debt-ridden franchise and the league claims that four parties are interesting in purchasing the team. But the ramifications of Basillie's planned purchase will be echoing in the United States and Canada not only in hockey but also in Major League Baseball, the National Hockey League and the National Basketball Association for a long time to come.
There is a phrase in the NHL's constitution that could set off a legal battle of unprecedented scope that has not been seen since the owners of baseball's Federal League's Baltimore Terrapins sued baseball's National League and American League and others because the team was not offered a buyout like other Federal League teams after the 1915 season. The Terrapins owners took the case all the way to the United States Supreme Court claiming that the buyout of other Federal League teams and not them was a violation of the Sherman Antitrust Act. In 1922, the United States Supreme Court ruled that baseball was not an interstate commerce and baseball was exempt from antitrust laws of the United States.
Major League Baseball has lived with certain business protections that the other sports have wanted but have been unable to get from the United States Congress.
Because of the antitrust exemption, baseball owners have been able to choose who they want in the ownership group, what areas should have Major League Baseball and what areas should be denied. One of those who had been denied was Frank Morsani who sought a Major League Baseball team in Tampa, Florida beginning in the early 1980s. Morsani ended up buying 42 percent of the Minnesota Twins in 1984 with the intention of relocating the team to a new stadium in Tampa. Morsani never got the team, which stayed in Minneapolis but was promised an expansion team when one became available. Morsani also tried to buy the Texas Rangers and when Major League Baseball did move ahead on expansion in 1990, Morsani was told on December 19th that his group was eliminated from consideration.
Morsani decided to sue Major League Baseball in November 1992 and settled with MLB in September 1993. Major League Baseball did expand to Tampa shortly after the settlement but Morsani was not part of the group awarded an expansion team in 2005.
Major League Baseball has been taken to the mat by the United States Congress numerous times in terms of adding teams in 1962, 1969 and 1993. Major League Baseball has added teams because various lawmakers including Missouri Senator Stuart Symington, Florida's Connie Mack III, Colorado's Tim Wirth have threatened to strip the industry of the exemption unless there were move teams.
Major League Baseball blocked bids by Toronto investors to move the San Francisco Giants to Ontario in 1976 and the Oakland A's to Denver in 1979. Both actions went unchallenged by the United States Congress.
Major League Baseball settled a suit brought on by Seattle, King County and state of Washington in 1970 by awarding Seattle an expansion team in 1976 to start play in 1977 to make up for the city's loss of the Seattle Pilots to Milwaukee in March 1970. Bud Selig and his group purchased the assets of the Pilots after the Pilots owners filed for bankruptcy protection.
Oddly enough, Major League Baseball Commissioner Bud Selig is watching the Phoenix proceedings very carefully. Major League Baseball, the National Football League and the National Basketball Association have a dog in this fight. The leagues try and control matters like territorial rights and have established territories for franchises.
The National Basketball Association blocked the sale of the Minnesota TimberWolves to Louisiana investors in 1994 who planned to move the franchise to New Orleans.
The NHL blocked the move of the St. Louis Blues to Saskatoon, Saskatchewan in 1983 after Ralston Purina sold the team to Canadian buyers.
The leagues were able to use their bylaws to regulate their industries. Basillie's lawyers don't believe that the NHL's bylaw --- No franchise shall be granted for a home territory within the home territory of a member, without the written consent of such member --- is legal and is in fact a violation of both American and Canadian trade laws.
The bylaw apparently gives the Toronto Maple Leafs and the Buffalo Sabres ownership groups the right to block any attempt by anyone to put a franchise in Hamilton, Ontario because the city is within the territory of both franchises.
The bankruptcy case that will be heard in Phoenix comes one day after the 43rd anniversary of the announcement of a merger agreement between the National Football League and the American Football League. During the lead up to the agreement, NFL and AFL officials didn’t know what to do with the New York Jets and Oakland Raiders franchises as both teams had "invaded" NFL territories in New York City and San Francisco. One scenario had the Jets moving to Los Angeles, the Los Angeles Rams moving to San Diego, the San Diego Chargers would then end up in New Orleans and the Raiders going to either Portland, Oregon or Seattle. In the end, the Jets ownership paid a $10 million indemnification to the New York Giants and the Raiders forked up $8 million to the San Francisco 49ers.
New York Islanders owner paid off the New York Rangers NHL franchise when Boe's team joined the NHL in 1972. The cost was $4 million. Boe also had to $4.8 million to the Knicks for invading New York’s territory after the National Basketball Association in June 1976 “expanded” by four teams, taking in four American Basketball Association teams including Boe’s Nets. In 1982, John McMullen had to pay off the Rangers, Islanders and Philadelphia Flyers when he bought the Colorado Rockies and moved the team from Denver to East Rutherford, New Jersey. Four years earlier, the NHL said no to a move from Denver to New Jersey.
There is a history of leagues taking care of business although there have been lawsuits. The NFL refused to take in two World Football League teams after the WFL’s demise in 1975. Memphis owner John Bassett sued the NFL on antitrust grounds because the league would not add his team or the Birmingham Vulcans. The court sided with the NFL.
The 10,000-pound gorilla in Bankruptcy Judge Redfield Baum’s courtroom is the NHL’s constitution and that clause. The Phoenix area judge has to deal with bankruptcy laws but then there are the league’s rules. It is a 10,000-pound gorilla according to the judge and for the owners it is how they conduct business. It is their business, they have made the rules and they enforce them unless they broke the law. Balsillie thinks they have, his potential lodge brothers say no and that may be a bigger problem than whether Glendale, Arizona has an NHL team.