Phoenix Coyotes majority owner Jerry Moyes gave NHL commissioner Gary Bettman an "irrevocable proxy" to control his franchise on Nov. 14 in exchange for $38 million US in league money to stay afloat, according to court documents filed in Arizona.
"As a condition to providing this support, the league required Mr. Moyes … to execute proxies in favour of the commissioner of the NHL to control the equity and operation of the [club]," the NHL argues in its objection to the bankruptcy proceedings.
"Moyes asked that he be allowed to retain his titles to avoid public embarrassment, and the league so agreed, but with the express understanding that he had no authority … to take any action outside the normal course of business, including filing for bankruptcy".
The NHL was caught by surprise last week by the team's Chapter 11 bankruptcy filing and an offer by Canadian billionaire Jim Balsillie to buy the club, and is now challenging whether Moyes had the authority to seek bankruptcy protection.
Moyes has been removed "from all positions of authority to act for or on behalf of the club," NHL deputy commissioner Bill Daly said in a statement last week.
The Coyotes have countered by saying the proxy amounts to nothing more than giving the league a right to vote on certain matters, and taking the team into bankruptcy is not a voting matter.
The NHL has until Wednesday to file arguments to further its case beyond the objections it filed last week.
The Coyotes, who have until Friday to respond to the NHL's case, have already issued a counteroffensive on the proxy.
"The NHL apparently believes that its commissioner controls [the franchise] by virtue of certain voting proxies," Moyes says in his statement as a debtor.
"What the NHL and the commissioner fail to recognize (or simply ignore) is the fact that the voting rights that were granted to the commissioner under the proxies are expressly limited to only matters, if any, that actually require a vote."
Taking the team into bankruptcy is not a matter that requires a vote, says the statement.