Sep 182009
 

Yesterday Bob McCown interviewed Ottawa Senators owner Eugene Melnyk discussing mostly the Phoenix Coyote situation. For the most part it wasn’t a very interesting interview and Melnyk often played dumb claiming he really didn’t know much about the situation. Particularly intriguing was that Melnyk stated he really knew nothing regarding the permission the NHL board of governors gave Bettman in purchasing the Phoenix Coyotes through bankruptcy. He stated he was not at the meeting and knew nothing about anything including the cost, what they would do with the franchise if they gained control of it, who would put up money to pay for it, etc. That seems odd to me considering it may cost him millions of dollars and that he is a relatively involved owner in the Senators team itself. Me thinks he was just playing dumb. Even if he wasn’t at the meeting that granted permission you’d think he’d have received a briefing or at the very least asked a question or two to someone once it became public that the NHL was in fact going to bid on the team.

But the most interesting part of the interview came squeezed in right at the end when Bob McCown asked him a hypothetical question about whether he could block a team wanting to move to Hull (for those who don’t know, Hull is really part of the metro Ottawa area on the Quebec side of the border).

McCown: Do you have the constitutional ability to block that.
Melnyk: I believe we do, yeah, we have territorial rights. Yeah, absolutely.

Maybe Melnyk accidentally let that slip out but that feeds right into the Balsillie argument regarding the Leafs having a veto to any team relocating to Hamilton. If Melnyk and the Senators have territorial rights to Hull and could block a relocation to Hull then the Leafs have the same rights to Hamilton and could block a relocation to Hamilton. Balsillie believes the league voted against him being an owner and are fighting to the end to stop him from getting his hands on the Coyotes and relocating them to Hamilton because the league cannot allow a team to relocate to Hamilton which would violate the Leafs constitutional rights with the league and could result in a lawsuit from the MLSE.

It really was a surprising statement from Melnyk who was generally cautious and reserved about giving out any information on anything important during the rest of the interview.

  8 Responses to “Melnyk: No team in Hull!!”

  1.  

    This comes as no surprise and only confirms what many of us have suspected for many years. In 1990, Hamilton had the best bid for an expansion team and was denied for a trivial reason. Ottawa and Tampa Bay ended up getting in. I think Hamilton should have gotten in first over Tampa Bay at the very least. We all know it is Toronto standing in the way.

  2.  

    A question instead of an opinion for once:

    Can you elaborate on what you mean by “but that feeds right into the Balsillie argument regarding the Leafs having a veto to any team relocating to Hamilton”. This is something that gets repeated but never quite elucidated (for me anyway). How does the admission by the nhl, in court, that such a right is indeed a “constitutionnal” (as per league constitution) right ? and that there would therefore be an additional matter of preoccupation before it in the matter of JB’s moving the team ? HELPS JB at all?

    Is it because THEN JB will be able to bring a sherman Act (antitrust) suit? I am no lawyer and i don’t know the details about antitrust and sports leagues’ jurisprudence, but is this the place where it “feeds right into JB’s argument”, because it feeds some (anticipated) antitrust suit potentiality?

    Or is it about some obscure part of bankruptcy law that would suddenly change things in the favor of JB ?

    Or … ?

  3.  

    It is all about antitrust as well as a Canadian Competition Bureau report a few years back that said it is OK with the NHL having a majority vote requirement on a franchise relocating to Hamilton but would frown on the Leafs having a veto. Balsillie believes that he would win an antitrust case, especially if he can show that the Leafs have a veto vote.

    The NHL itself has always claimed there is no such thing and relocation is only subject to a majority vote as outlined in the relocation section of the NHL by-laws (Balsillie believes that any reasonable person reading the NHL bylaws will concluded that relocation of the Coyotes from Phoenix to Hamilton should be allowed based on the criteria outlined). And if you read the NHL by-laws that is exactly what it states. The problem is the NHL constitution discusses exclusive territorial rights and no other NHL team can host a game within a teams territorial rights without permission from the team with those territorial rights. In other words, no team can play in Hamilton without the Maple Leafs permission (same as a team in Hull).

    The last thing that the NHL wanted to do is to test antitrust law by having to vote no to relocation (which, as stated above, every governor should vote yes based on the guidelines outlined in the by-laws for such a vote) or worse force the Maple Leafs to envoke their veto rights so instead they voted against Jim Balsillie as being an acceptable owner.

  4.  

    David: Thx for getting back right on the money. I like your work. So i understand that the (canadian) Bureau of Competition expressed some reserve with regard to a veto right against relocation appended to territory rights (for distribution and the like).

    Pardon me again for inquiring but this is a fascinating subject i find, and it so happens that you seem to have more answer than many “traditionnal” analyst ….

    But isn’t the FTC the one (competition organ) that is likely to be seized with any antitrust matter? Again, i am no expert of antitrust law canadian or usa but being a network economic student i come accross many analysis with some antitrust angle to it and i just can’t imagine the Bureau of Competition delving in league matters. Surely, it would have to be the FTC. Maybe JB has some forum shopping options and can go to both depending on which he think would be more attentive but i would rather think that this “choice of law” problem must have been foreseen, and contracted upon (i.e. the signatories recognise the FTC as the authority for matters antitrust …”). Than again, maybe no foresight is sufficient and maybe both jurisdiction could be seized because of the nature (fundamental) of an antitrust action. Can you shed some light on this?

    I have read diagonnlly a few documents regarding antitrust and sports league (the best of which is available here: http://mpra.ub.uni-muenchen.de/5382/1/MPRA_paper_5382.pdf team relocation is covered from page 75-84, but chapter 2 is a must to understand it) and i now understand (a little) more why a “veto” by a member on team relocation could give some legal weight to JB (simply stated : antitrust analysis use many criteria of the efficiency/maximizing types with the LEAGUE as the maximizer, and a veto kind of ring like a political criteria, although it could potentially be shown to have a economic relevance). I could be wrong in my understanding but i meant this as clarification for others like me who wanted to see a bit more into the options (and hence, the merit of the strategies).

    As far as strategies goes, i didn’t understand why JB stuck to its “relocation condition”, almost forcing the judge to side with the nhl. If you are more sharp than me here, i’d appreciate that too.

  5.  

    The way I understand it that the bankruptcy court could rule in favour of Jim Balsillie if there was evidence of an anti-trust violation, but I am no lawyer. In Judge Baum’s June 15th ruling (http://docs.bmcgroup.com/phoenixcoyotes/docs/azb_2-09-bk-9488_341_0.pdf) he basically ruled they he cannot rule in favour of allowing Balsillie to relocate the team, and in doing so override the NHL rules, because there was no ‘bona fide’ dispute with respect to there being an anti-trust violation. I believe that Balsillie had filed an anti-trust lawsuit against the NHL, but just the existence of a lawsuit did not amount to a ‘bonafide dispute’. By that he meant he found no evidence that the league was unlawfully (i.e. violating anti-trust laws) by not allowing a Coyotes to be relocated to Hamilton because there was no direct evidence that the NHL had ever done so. At that time Balsillie hadn’t even filed a relocation request to the NHL let alone had the NHL rejected it. In short, if the NHL has never blocked a relocation to Hamilton, how can anti-trust laws have been violated? If anti-trust laws haven’t been violated then he cannot force relocation on the NHL. Judge Baum did cite several cases where courts allowed for relocation of sports franchises without league consent so he didn’t shoot down the idea altogether, just that Balsillie’s arguments haven’t met the appropriate threshold yet.

    So the question is, since that ruling has the required conditions been met. Well, since then Balsillie has filed a request to purchase the Coyotes franchise as well as filed a request to relocate the franchise to Hamilton. The NHL in turn has voted against allowing Balsillie as an owner on the basis that he has been fined and penalized by the SEC and OSC and because of how he behaved in his previous attempts to purchase the Penguins and Predators. In both cases he backed out of supposed agreed upon deals. Balsillie’s defense to that is that there are several instances of NHL owners in the past having criminal records (including Del Biagio who ended up being part owner of the Predators) or having been fined or disciplined by SEC or OSC (including Eugene Melnyk of the Ottawa Senators). He also argued that the NHL had approved Jerry Reinsdorf as an acceptable owner when as owner of the Chicago Bulls he sued the NBA and that the owners of the New York Rangers sued the NHL over control over their website and there were no negative ramifications towards the Rangers ownership as a result of that lawsuit (which the Rangers lost). If the league has accepted all these owners then they surely should be able to accept Balsillie.

    Balsillie’s next argument is that the league has voted down him as an owner solely because they didn’t want to have to vote against relocation because based on the relocation guidelines then clearly the Coyotes should be able to relocate to Hamilton. In fact, the NHL has now agreed that the franchise may not be able to remain in Phoenix and in their arguments on relocation fees they argued that Hamilton would be a top 5 franchise in the NHL in revenue. Balsillie’s argument is that the League has a territorial rights clause in its constitution and they have voted against Balsillie as an owner to enforce the Leafs territorial rights without having to directly violate anti-trust laws by having to vote down relocation to Hamilton or having the Leafs utilize their veto powers. It is not an easy argument to make, but it is certainly a viable one.

    That said, I agree with you. Balsillie should have just bid on the team and dealt with relocation later as I wrote a couple weeks ago (http://www.hockeyanalysis.com/?p=894). But now that I consider what have just written above that may not have been possible as he still would have had to get the judge to overrule the NHL’s vote against him as an owner and the only way, or at least the easiest way, he could do that was to claim the did so so they didn’t have to vote on the relocation issue, and thus their vote is evidence if anti-trust violation.

    I am not sure I explained that all perfectly clearly but hopefully it clears up the issue. Definitely go back and read Judge Baum’s June 15th ruling as it brings up the hurdles that the Balsillie camp has to overcome for the judge to even consider his bid viable in a legal sense.

  6.  

    Oh, and to finish up, yeah, he idea of a Leafs veto is at the core of Balsillie’s arguments so what Melnyk said is quite interesting in that perspective.

  7.  

    That is as clear and concise as it gets. And, wow, Melnyk’s comments DO indeed tend to give plausability to the alleged events (that nhl knew that by using either the veto or a relocation vote they would then have to test the murky waters of antitrust theory and that therefore the no-approval vote should be consider as either a disguised veto or relocation vote)!!!!

    So, in hindsight, i think we might even be able to pinpoint the exact moment of JB’s failed strategy: he should have drop the relocation condition before the owner’s approval vote. Then the argument that some owners with a somewhat shady-er past were approved would not have had to be one that also claim that the vote was therefore about something else but could have had been ONLY about the unreasonnableness of that turn-down.

    Thx for the great analysis.

  8.  

    Just an information : The real problem about a team in Hull (we’d better say Gatineau, Hull is only a part of this new town) is that Ottawa and Gatineau can be considered as part of the same urban area. In fact, there would only have one city, if it wasn’t the problem of the language.

    So it seems logical that Ottawa couldn’t bear to have another NHL team so near (there is only the Gatineau river between Ottawa and Gatineau). Hamilton and Toronto are not so near.

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