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Legal Fallout from Phoenix Coyotes - NHL Saga

By Rick Karcher, Michael McCann, Geoffrey Rapp, Greg Skidmore, and Howard Wasserman

Over on the American Lawyer Daily, Zach Lowe has a good piece on the legal fallout of the Phoenix Coyotes likely sale to the NHL. He interviews me for his story, and I tie-in the American Needle case. Here's an excerpt:

The [NHL] apparently doesn't want the Coyotes for long, and they are already in talks to sell the team to an investment group represented by Cadwalader, Wickersham & Taft . . .

Monday's hearing at the federal bankruptcy court in Phoenix . . . was the first major gathering of the main legal players since the federal judge handling the case took the unusual step last month of tossing out both bids for the team--the NHL's $140 million bid and a much larger offer from Canadian business mogul Jim Balsillie, who wanted to move the team to Ontario. As we've written before, Judge Redfield T. Baum tossed the bids for very different reasons . . .

. . . But what really happened, according to four lawyers on the case, is that the NHL simply clarified the final bid it submitted more than a month ago. At the outset of the hearing, lawyers for the NHL and the creditors committee (represented by Paul Sala of Allen, Sala & Bayne) pointed out to Judge Baum that the NHL was not actually proposing to pay some unsecured creditors ahead of others. Rather, the lawyers told Baum, the league was offering to purchase the claims of those allegedly favored creditors--about $11.6 million, mostly owed to local vendors. The rest of the NHL's bid price--$128.4 million---would go to the bankrupt estate to be distributed to secured and unsecured creditors in the proper manner . . . .

Judge Baum is expected to approve the deal as soon as Monday. The next step would be for the NHL to sell the team . . .

One interesting note from McCann: Baum's earlier ruling allowing the NHL in as a bidder reinforces the notion that sports leagues have some momentum in getting around antitrust laws. Earlier this year, the U.S. Court of Appeals for the Seventh Circuit ruled that the National Football League could act as a so-called single entity--exempt from antitrust laws--in signing apparel licensing agreements. (The U.S. Supreme Court had previously reserved single entity status for parents and their wholly owned subsidiaries, McCann says.) One apparel maker (American Needle Co.) has objected, claiming that the 32 NFL teams are separate businesses, and that apparel makers should be able to negotiate separately with all of them. The appeals court rejected that argument, holding that the NFL could be considered a single entity for the purpose of licensing agreements even though the teams are very clearly separate businesses, McCann says. The case is now headed to the U.S. Supreme Court.

The NHL cited the Seventh Circuit's ruling in the Coyotes case, in effect saying the league could bid for and own an individual team. That suggests how much importance leagues are placing on the outcome of the American Needle case, McCann says.

Full post as published by Sports Law Blog on November 06, 2009 (boomark / email).