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The NHL says Jim Balsillie is breaking fundamental rules in his attempt to purchase the Phoenix Coyotes and move them to southern Ontario. ((Nathan Denette/Canadian Press))

Jim Balsillie's offer to buy the Phoenix Coyotes and the process surrounding the sale of the struggling NHL team are "illusory, at best, and a sham, at worst," according to court documents filed by the NHL.

In an objection filed to a U.S. bankruptcy court in Arizona, the NHL says the Canadian billionaire and co-CEO of BlackBerry maker Research In Motion Ltd. has broken fundamental rules in his Coyotes purchase proposal.

Balsillie, 48, offered $212.5 million US on the basis that he can move the team to southern Ontario, an offer that went public last week after Coyotes majority owner Jerry Moyes announced bankruptcy.

Balsillie fired back, arguing that no matter the league's claim, the Coyotes remain bankrupt.

"Who owns or controls the team is a distinction without a difference," Balsillie said in a statement Thursday. "The team itself is still bankrupt, voluntarily or not. The owner of the team has a fiduciary obligation towards the creditors."

The news of the bankruptcy took the NHL by surprise, and the league is now challenging the move on several fronts, including whether Moyes has the authority to seek bankruptcy protection.

In court documents outlining the NHL's objections to the proposed sale of the team, the league argues that the bid offered by Balsillie's company, PSE Sports and Entertainment, breaks fundamental rules in the NHL constitution, including:

  • The proposed bid for the sale of the Coyotes doesn't acknowledge it needs NHL approval to transfer ownership.
  • Ownership of a team can change quickly, but relocating the team can't happen in the same timeframe under NHL rules. The constitution states the deadline to submit an application for relocation is Jan. 1 of the year before a team wants to move. This gives the NHL ample time to review the proposal.
  • A team can apply to the league for permission to relocate, but "the relocation right is an asset of the NHL as a whole and not of any individual team."
  • The bid is based on a conditional move to southern Ontario, and the bidders are asking the court to change parts of the NHL constitution it "finds inconvenient," the court documents state.

Structure of league at stake: NHL

The league argues if the team is sold while breaking rules in the league's constitution, it sets a precedent that could be dangerous for all sports.

"The right of the collective NHL venture to choose who owns a member club franchise and the location in which that franchise may operate are two of the most valuable rights that any professional sports league — whether the NHL, the NFL, the NBA or MLB — possesses," the court document states.

"Thus, what is at stake here is not simply an ownership interest in a stand-alone business but, rather, the fundamental structure of the 30-team NHL venture itself." 

The NHL asked the court that the bid to purchase the Coyotes be denied, or that an order approving bid procedures that align with the league's constitution be entered.

"At the end of the day, this is about the passion Canadians feel for the game of hockey and a chance to provide those fans with the opportunity to support a seventh NHL team," Balsillie said.

"That's what this is all about: great hockey fans in a great hockey market."