Saturday, September 12, 2009

So I Guess I've Got To Write Something

The court hearings are over. Mercifully. We now wait for Judge Tom to return his decision.

I am sorry but I am past the point of being worked up about this process. It sucks. It sucks for the fans, it sucks for the players, it sucks for the Coyotes staff members that have not yet bailed out and it sucks for anyone remotely connected with the Coyotes.

As I remember it, only one person (Jerry Moyes) had any interest in having Jim Balsillie stick his ample nose and bald head into our mess. Nothing would make me happier than to see Mr. Balsillie get run out of town by Judge Tom, followed closely by the moving van carrying Jerry Moyes' furniture. And nothing will make me happier than not seeing one more stock photo of Balsillie wrapped up in a Canadian flag.

Most of the people who attended the hearing this week have reported that Judge Baum has dropped several hints that he sees no precedent in bankruptcy law anything close to what Jim Balsillie is proposing.

As I pointed out earlier this week, reading his June 15th decision make it clear he understands and respects legal precedent. His prior judgement quoted a number of legal decisions relating not only to bankruptcy code but also to franchise law. The Judge, if not quick to pull the trigger, does seem to be thorough before making any call.

Let me expound a little on the bankruptcy code. Bankruptcy laws were overhauled in 1978 and the bankruptcy code is the same across the country. There is no different treatment from one state to another. Accordingly, there is a 31 year history of bankruptcy rulings that form the precedent that Judge Tom will lean on to make his decision. Something you may not know is that the legal community that handles bankruptcies is relatively small. It is a legal specialty. While even ambulance chasers like Lerner and Rowe will do a bankruptcy filing for you, most people who go this route rely on the lawyers who practice bankruptcy law extensively. And with a relatively small number of judges and attorneys, it is a close knit community that knows what is and is not good bankruptcy law.

There's also another large body of law at work here called franchise law. While franchise law does vary from state to state, there is much common ground in the franchisee/franchisor relationship and the legal covenants and commitments that come with this process. Having spent much of my professional career in franchising, I saw very clear indications from Baum's June 15th ruling that he understands franchise law and how that works to protects all franchisees of a company or association. He understands that you just can pull up the McDonald's in El Dorado and move it to Times Square.

There are 5MM people in the Toronto metropolitan area. For the uneducated, Hamilton is part of that market. This is not Phoenix and Tucson. If a business considers an area to be under served, their first step is to talk to the existing franchisee about expanding their service or modifying their agreements to allow additional franchisees. There is no law or precedent that allows another franchisee to buy a bankrupt business and drop it into a protected territory.

As a Phoenix hockey fan, I really could care less whether Southern Ontario is over or under served by the NHL. That is not my problem. What I do care about is that if the Coyotes moved to Hamilton, Kansas City or anywhere else, Phoenix and the surrounding area would become the second largest television market in the United States without professional hockey. Oh and did I mention that Phoenix, even during tough times, is still the fastest growing major market in the US and projected to be the 4th largest metropolitan area int he country in the next 25 years.

So given all of the precedent, hundreds of pages of filings and what seems like weeks of testimony and posturing, where do we end up?

There seem to be three possible scenarios;

First is the award of the team to Balsillie, direction to the NHL to approve Jimberry as an owner and the move to Hamilton and an all purpose screwing of the City of Glendale, hockey fans in Arizona and the National Hockey League. Chances of happening? Highly unlikely. My bankruptcy expert tells me that there is simply not enough precedent nor latitude within existing laws for this to happen. That also seems to be the consensus of many who have covered the recent hearings.

The backside of this ruling would be that Glendale and the NHL will both be in the 9th District Court immediately to get stays. Then the long drawn lawsuits will commence. How long could this drag on? I know of one complicated bankruptcy that is in its' 6th year of court action. No kidding. And once a decision gets stayed, payments to creditors get frozen. That's another complication that Judge Tom wants to avoid.

The second option is to send Balsillie on his way and award the team to the NHL. Certainly the cleanest outcome for the franchise and Phoenix hockey fans. If there is any hope of hockey pulling a dramatic revival in Arizona, a clear path to new ownership is necessary as quickly as possible. NHL control, which by no means makes everything perfect, will help move the focus back on the ice and give the league the latitude to make the necessary deals with new owners the City of Glendale and other creditors. All of which need to happen quickly.

And finally, there a chance that Judge Tom will rule no sale to any party. That of course leaves the NHL in control of the franchise as debtor in possession and likely sets off another legal battle as the league officially repossesses the franchise from Moyes. Not sure of all the ramifications here but it is essentially NHL ownership without clarity. That doesn't sound too promising to me.

No matter what happens, grievous damage has been done to the short term prospects of the Coyotes. We don't know who the coach is, players face uncertainty over what is really important -- their families -- and ticket sales are so far behind, there's no telling when they may catch up. One can only pray that the team has a good road trip before the home opener. A lousy start by the Suns (who by the way have season ticket renewal problems of their own) wouldn't hurt either.

Oh, I can add one additional thing. If Jim Balsillie doesn't win this legal battle, he is dead forever as a potential NHL owner. After the costs the NHL has incurred over this mess and the resulting damage to the Coyotes franchise, he'll never get into the league. Ever.

Of course, that may prove to be a pyhrric victory for those of us following this mess.


  1. The funny thing is, no matter who wins, the Coyotes will be moved within 5 years, max. Nobody is going to buy a team and bleed money for long. Outside of Balsillie, not one of the "interested" parties has pursued the team with much vigor.

    I appluad the passion shown by the 'Yotes fans who have made their voices heard, but there simply aren't enough of you.

  2. Great article!! I just wish management interns for
    JimBerry and Swifty would quit surfing the net for comments and blogs, and writing negitive comments like the one above!!

  3. I couldn't have said it better myself! As an avid Coyotes fan, I am often asked if I think the Yotes are moving. My standard answer is that I have faith in the system and that they are not going anywhere. The judge clearly has a good head on his shoulders and I do not foresee him wanting to make matters worse by giving my team to some lowlife businessman who wants to do nothing but destroy my team’s good name (as he has done to this point). He is not good for the Yotes or the NHL. I predict that the third time will be the charm and that the NHL will not have to deal with this jack*** once this is finished. JimBerry can go crawl in a hole for all I care, but my Yotes will remain strong in Phoenix! We will replace our coach (as any other team would have done in our predicament) and get on a winning streak, which will increase ticket sales. That is how things work here in Phoenix. If Moyes was paying attention to his market, he would known that and would have replaced our coach 2 years ago (as any other team has done, or would do) and got things back on track. Phoenix is a fair weathered town and ticket sales will only go up as the win’s column goes up….it’s just that simple people. EW

  4. Good synopsis! Everything over the last week points to PSE and Moyes losing this battle, they are making ovetures everywhere and receiving the cold shoulder from every creditor. Last gasp efforts of the dead and gone.

    Moyes cooked his own goose. In his depositions he admits to leaving the team in inept hands. He only attended 3 games and maybe 3 board of governors meetings personally! What businessman worth the name does this kind of crap?

    Once the uncertainty is over, the fans will return, Ulf is doing a shockingly fantastic job as interim coach, Maloney continues to make sensible good deals and the team could be in for a resurgence on the ice very quickly. More wins = more fans = more money = more fun flippin the bald billionaire of blackberry the bird.

  5. Is no one worried about the NHL's bid that allows only 3 more months to find a local buyer? Does that sound like confidence in the Pheonix market to you?

    I think the NHL will sell this team to move next year. They want to recoup all the money spent on this auction and legal battle, and Glendale has shown they are unwilling to make any deals (see JR and IEH dropping out).

    How can anyone think somebody's going to step up and save the team now?

  6. It's more about the confidence in the COG to get a new deal done with a new local owner.

    Odds are very good that Reinsdorf and Ice Edge are sitting on the sidelines, waiting for the NHL to get the team. They can then move quickly, without the BK distractions, to get a deal done by year's end. Both were close and had agreements (MOUs) in place with the COG, but lacked the time to formalize the complex deals because of court deadlines.

    We may also see others get involved as well as the local sales price will now be $140M with a city motivated to renegotiate a lease, not the $200M Moyes was seeking with the existing lease before the BK.

    The NHL cannot afford to leave the COG holding the bag. If it does, the NHL is screwed. It relies on public-private partnerships to build arenas. If you're the NHL how do you pitch that in the future with the ashes of the Glendale fiasco sitting there for all to see?

    Finally, I doubt the COG turns down $50M cash unless it was confident a local owner is waiting in the wings and a deal can be made.

  7. "If Moyes was paying attention to his market, he would known that and would have replaced our coach 2 years ago (as any other team has done, or would do) and got things back on track."

    This is why Phoenix is a huge joke to the NHL community. You just said they need to toss the greatest player in the league's history, and its prodigal son, out on his butt. You know nothing about this sport, despite all these losing years to learn it and support it. Edmonton and Calgary were on the brink, put loser teams out every year, fans showed up to get them on track, and both made Cup finals runs. 5 loud people with Twitter accounts don't save hockey teams. Rogue commissioners who hate being proven wrong despite all the evidence proving it save hockey teams. Winnipeg put 10,000 more paying customers in the seats every game.

    The NHL doesn't need to worry about the arena issue right now. With the exception of Long Island, every arena is modern, and prospective cities like Hamilton, Kansas City, Houston & Portland have modern arenas to suit their needs. Phoenix is only a case of bad management and bad planning on the part of the local community. Put a venue for a sport no one watches in a part of town no one can get to... Yeah, fine decision there. The decision to award the franchise to them is incredible too when you consider the fact that all those cities had NHL-ready venues, but Phoenix got to host games in a venue where thousands of people in attendance couldn't even watch! Ridiculous!

    I love how everyone trashes Balsillie for being an awful businessman. Look at how hard the NHL worked to get dirt on him, and failed miserably. If only they put that kind of effort into finding dirt on Boots Del Biaggio, or Charles Wang, or Bruce McNall, or... do I need to continue? Sad the NHL is now arguing Boots has more integrity and character than Balsillie. Goes to show you what kind of people we're stuck with killing our game.