Coyotes: Surprise change in direction

With many watchers expecting bankruptcy magistrate Redfield T. Baum to rule on which side controls the Phoenix Coyotes, the Arizona judge threw a wrench into the proceedings on Tuesday.

Arizona judge sends NHL and Moyes into mediation mode


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With many watchers expecting bankruptcy magistrate Redfield T. Baum to rule on which side controls the Phoenix Coyotes, the Arizona judge threw a wrench into the proceedings.

Instead, Baum ordered both the NHL and Coyotes majority owner Jerry Moyes to head to mediation on Tuesday, a move aimed at resolving the ownership and potential sale of the franchise.

Baum wants a progress report by May 27.

Ever since Moyes put the NHL franchise into Chapter 11 bankruptcy protection on May 5 with the intention of selling the club for $212.5 million US to Canadian billionaire Jim Balsillie, there has been a power struggle for control of the team.

The NHL has argued that it took control of the Coyotes through proxy documents Moyes signed last November, and any ownership change must be approved by the league's board of governors.

Moyes believes Balsillie's bid is the best way to satisfy most of the team's creditors.

Balsillie, the co-CEO of BlackBerry maker Research in Motion Ltd., wants to purchase the team and relocate it to Hamilton.

With the mediation set to begin, Rob Becker, a New York attorney and legal analyst on sports issues, spoke to about how the process works, and the possible reason Baum may have decided on this course of action. Now that Baum ordered the parties into mediation, what is the process moving forward?

Becker: The mediator is a neutral person whose job, if he can do it, is to get the people to settle on a mutual agreement. He'll try and get the two sides to meet on common ground. Sometimes he'll meet with the parties together, sometimes he'll meet with one side with the other side out of the room, and vice-versa. He'll try and get them to agree on things and come up with creative compromises. How is this situation different from a judge or an arbitrator ruling on the case?

Becker: In arbitration, a decision is made by a neutral person, whether it's the arbitrator or the judge. He's going to listen to the arguments from both sides and then he's going to make a ruling. That's not the case here.

The mediator can't make one side give in. He can't make a ruling about who's right and who's wrong. The only thing he can do is speak with them. He can't order them to take a certain position, or rule on any facts. The mediator has a deadline of May 27 to get the two parties to agree on the issue of control. Can the mediator ask for an extension if the parties are close?

Becker: Let's say the mediator feels he's making a lot of progress and feels "I've got them very close but can't get it done by [May 27]." What I would assume would happen is the mediator would go to the judge and ask for [an extension]. I would say that the judge would certainly say yes, because the mediator is neutral. Why would the judge order mediation if the NHL and Moyes couldn't agree on the state of the team prior to the franchise heading to bankruptcy?

Becker: He may find it's a difficult case that deals with things he doesn't normally deal with. But he also may sort of look at the issues and think for financial reasons there should be middle ground here. There should be a way to have an economically rational solution, but the parties are not going to reach that solution on their own because they hate each other. And therefore, "I'm going to bring in a neutral person and that guy will reach the economically rational solution that overcomes the personal animosity that creates irrationality." What happens if the parties can't come to an agreement by May 27?

Becker: Then the judge will have to make his ruling. In other words, we're exactly where we were at the moment before the judge said he wanted to have mediation. It's sort of like time is stopping now, and if they fail, time will resume at some point during the hearing Tuesday. In the end, this judge is paid by the United States government to make a decision, and he will have to do that. The judge knows that the mediator may fail. So what I think will happen is judges have law clerks, or top law students, who research the law and help him figure out what his opinion should be.

So what he'll probably do while the parties are with the mediator is he's probably going to be reading all these papers and research what he has to research so that if it gets thrown back in his lap, I predict he'll be much closer to reaching a decision. He'll take advantage of his time so that it may take him only a day or two. I would certainly hope that he's working on this, because he knows the mediator may fail. Many view this as a Gary Bettman-Jim Balsillie feud, but isn't there significant animosity between the NHL and Moyes?

Becker: It does seem like the two sides are really at odds. Not just in a sense that their positions are far apart, but also you have all this personal animosity. We all know that Balsillie and Bettman seemed to hate each other, but if you look at what's been in the court papers, there is huge animosity between the NHL and Moyes. The league said Moyes falsified papers, and when you start saying stuff like that and question someone's integrity, people can get very set in their ways. Many expected Baum to make a decision on who controls the Coyotes on Tuesday. Were you surprised that he called for a mediator?

Becker: I was not at all surprised that he didn't make a ruling Tuesday. I don't even think he would make a ruling by Wednesday, because there's so many papers filed at the last minute. He has to read this stuff. Judges are human beings, and sometimes when they read it they also have to research the law, and that takes time to make a decision. I do agree that the [mediation] is a curve ball. Regardless of whether the judge could do this or how often this is done in general, I don't think anyone saw this development coming. It's a surprise. What does this mediation mean to Balsillie's bid to purchase the team and relocate it to Southern Ontario, specifically Hamilton?

Becker: I don't think it means much from a [negative or positive standpoint]. I will say this: The judge was giving the NHL lawyer a hard time on the question of who controls the franchise. The judge's point was, "Look, it is not nearly as clear as the NHL has been saying that Moyes signed these proxies that gave up his right to control the team."

I think Tuesday, I'm not going to call it a victory for Balsillie and Moyes, but it made them look like they had a better chance of jumping over that first hurdle on who controls the team. They have a better chance than when they woke up [Tuesday] morning, and certainly we can conclude that it's not simple that [Moyes] signed the proxy so he doesn't control the team. It's not that simple. I would say in that respect, Balsillie and Moyes's hand is one of some strength.