Canada's Competition Bureau investigating the NHL's franchise relocation policies?

GSC2k2*

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I'm kind of on board with this, at least insofar as it relates to choice of forum, if not choice of law. That said, I have a harder time thinking that you can contract out of Canadian competition law, which is what you're effectively suggesting. Contract law, at least in Canada, is always subject to the law of the land. If you're an expert in jurisdictional law, I'll defer to you on this point and I'm too lazy to research it at the moment, but I've got serious difficulties in thinking that Canadian law is simply irrelevant in a situation like this. This isn't like choosing what state's law will govern a transaction. Otherwise, you'd think that NHL teams would agree that all of their disputes would be subject to the law of Russia, or some state where there is no competition law and then just do whatever the **** they wanted.

You toddle off to watch a basketball game, and all of a sudden a legal discussion springs up in one's absence. That will teach me.

Having done many an international transaction in my life, I think I feel pretty confident in opining on these matters. I can certainly understand the confusion and differing opinions that appear to be raging on these points. MCG, I am not sure if there is such a thing as a pure "jursdictional law" expert. It is kind of one of those things you pick up if you get involved in matters requiring an understanding of the issues. Even then, it is often not all that clear cut. To be frank, this is an extremely murky fact situation even for me, and I do have some experience in this stuff.

That beng said, there are a couple of things worth pointing out:

1. It is trite law that, in a commercial setting, the parties are free to contract in or out of whatever they wish to do so. The one exception to that is that they cannot do so in such a way as would violate public policy. One cannot enforce a contract between two parties to engage in criminal behaviour, for example. However, it is not contrary to public policy to select the choice of laws and/or the choice of forum, which was the matter under discussion. This is routinely done. In theory, perhaps a North American court might have difficulty if the choice of law involved, say, the laws of some middle eastern country that employed "eye for an eye" laws. However, as for this scenario, if the NHL requires that all disputes be governed by the laws of New York and that the parties must attorn to the courts of New York, that certainly is enforceable.

2. In referring to the above exception regarding "public policy", please do not think that is a way out. In the current fact situation, IB is not suggesting that the parties would agree that the "laws of the land" would not apply. IF he is, he would be wrong. What I think he would be saying is that US competition law would apply instead of Canadian competition law in a dispute between the NHL and Balsillie, if the constitution or the NHL's consent agreement so provides.

3. I hate to give a wishy washy opinion (as those who read my posts here can attest to), but in fact you are both partially right in what you are saying. MCG, when you say:

Sort of. It gets to choose who owns a team, sure. As for the conditions, those are of course subject to the law of the land. In Canada, at least, an illegal contract is unenforceable. If there are provisions on relocation that contravene the Competition Act, than they're out of the contract.

That is partly right. Contracts are subject to the laws of the land, but in a commercial context it is primarily (but not entirely) the laws of the land which have been selected by the parties as the governing law of the contract. Again, that is subject to the public policy exception I noted above. Again, it is not illegal in Canada to contract with a party that US laws apply, although two parties could not (for example) decide that the Criminal Code does not apply as between them. In that sense, the Competition Act would not apply as between the parties. THe anti-trust provisions for the US would arguably apply, if the parties have a dispute as between themselves. Balsillie would be estopped from arguing otherwise, being a sophisticated commercial party.

However, that is not to say that the Competition Act disappears. It is designed as an act that acts to protect the public. As such, if someone other than Balsillie made a complaint, or if the Act permits the Bureau to act unilaterally, then the Act would apply. It would not be a contractual matter as between the parties.

Overlaid on top of all that is whether Balsillie would be stopped before it becomes a matter within the jrisdiction of the Canadian entities. IF Balsillie is rejected as an owner, for example, I seriously doubt whether the Canadian authorities would be seized of the matter. At that point, it is a US entity (the NHL) being accused of acting anti-competitively against another US entity (Balsillie's acquisition vehicle to purchase the Preds - I assume US to avoid potential tax consequences) with respect to a US-located team (the Nashville Predators). See, at that point, Balsillie's team is not even a Canadian-located team, so it probably does not even matter if Balsillie's acquisition vehicle is a US or Canadian entity, as its operations are outside Canada.

THAT BEING SAID, one of the unfortunate aspects of jurisdictional law (unfortunate in that it creates uncertainty) is that sometimes the courts simply decide that they want to be seized of a matter. As such, if Balsillie were to launch a Competition Act challenge, the Competition Bureau could decide that it wants to go ten rounds with the NHL through the courts. IF the courts decide they want to be seized of the matter, there are a number of different criteria that determine forum conveniens and there is some flexibility in deciding whether contracts are in violation of public policy. If I had to choose, I would suspect (not having seen the documents) that the NHL would have the better position, but certainly not an impregnable one.
 

Semantics

PUBLIC ENEMY #1
Jan 3, 2007
12,150
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San Francisco
All of this is a delicate balancing act. The BoG should be VERY careful in granting any franchise the right to relocate. Host cities deserve a chance to protect their investment. (If Nashville rises to the challenge then the Preds should stay). However, the potential to relocate needs to be there.

Good post, one of the most thoughtful ones I've read on this topic.

I don't doubt that if the city really gets behind the Predators then Balsillie will have a much harder time moving them. But if the financial numbers that have been thrown around are accurate, they need to do a *lot* more than average a thousand more fans per game to remain viable. As for the suggestion that's popped up in this thread that Balsillie can't break the lease, which is surely wrong, couldn't he just move the team anyway and continue to pay the rent? $1.8 million a year until 2028 is an easy write-off.

IF it's really Balsillie's intention to move the team, and the sale goes through, then I would think relocation is a done deal at that point. The only way relocation won't happen, IMO, is if either a) it's not actually a priority for Balsillie to move the team, or b) the sale isn't allowed to go through. I'm not sure why the BoG would allow the sale and then block the move, which seems like a recipe for drama, when they could just disallow the sale in the first place.

History suggests that once you're a member of the owners club you have leeway to do practically whatever you want. This is the same board of governors that has allowed Wirtz to get away with destroying the fanbase in the league's 3rd largest market, which likely hasn't even been in his own financial interests. If they're not willing to step in and do something about a depressing situation like that, I have a hard time believing they'd block a move of a very poorly performing franchise to a solid "can't miss" market.
 
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Semantics

PUBLIC ENEMY #1
Jan 3, 2007
12,150
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San Francisco
Answer: an expansion team in Mississauga.

IMO, an expansion team in Mississauga would drive a stake through a Hamilton or KW team. It would kill it. Stone dead.

Keep in mind that there would never actually HAVE to be an expansion team in Mississauga. As long as there is talk of it, that could at least be enough to prevent companies from making 10-year commitments for boxes, sponsorships, etc.

...

I hope that this explains why it would be a horrible strategy for Balsillie to pursue such an avenue of attack IMO. Hopefully, it also explains the curious-to-some leak regarding expansion franchises.

Lol, that sounds a little far fetched, like something out of a legal drama on TV, it's amusing that it actually happened.

If the NHL was prepared to go to that kind of extreme to control where the team plays, threatening the owner and such, why would they approve the sale in the first place? Do they have a legal obligation to proceed only on the basis of what Balsille has said in public and in conversations with the league, and not infer what his real intentions may be? It defies all logic that they would approve the sale and then put up such a strong fight against moving the team.
 

GSC2k2*

Guest
As for the suggestion that's popped up in this thread that Balsillie can't break the lease, which is surely wrong, couldn't he just move the team anyway and continue to pay the rent? $1.8 million a year until 2028 is an easy write-off.

Balsillie's counsel confirmed that there is a covenant in the lease requiring the team to play there as long as the lease is in effect.
 

GSC2k2*

Guest
Lol, that sounds a little far fetched, like something out of a legal drama on TV, it's amusing that it actually happened.

If the NHL was prepared to go to that kind of extreme to control where the team plays, threatening the owner and such, why would they approve the sale in the first place? Do they have a legal obligation to proceed only on the basis of what Balsille has said in public and in conversations with the league, and not infer what his real intentions may be? It defies all logic that they would approve the sale and then put up such a strong fight against moving the team.
It would apply if Balsillie essentially bullied/threatened them to approve the sale despite there not being the usual understandings and conditions.
 

AdmiralPred

Registered User
Jun 9, 2005
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Good post, one of the most thoughtful ones I've read on this topic.

I don't doubt that if the city really gets behind the Predators then Balsillie will have a much harder time moving them. But if the financial numbers that have been thrown around are accurate, they need to do a *lot* more than average a thousand more fans per game to remain viable. As for the suggestion that's popped up in this thread that Balsillie can't break the lease, which is surely wrong, couldn't he just move the team anyway and continue to pay the rent? $1.8 million a year until 2028 is an easy write-off.
People seem to think that a "write-off" can just magically appear and benefit that taxpayer. You still have $1.8 million flowing out, that check still needs to be cut. Balsillie is then paying an extra $1.8 million per year for the remainder of the lease to Nashville just to have a team in Southern Ontario, or where ever.
 

Northern Dancer

The future ain't what it used to be.
Mar 2, 2002
15,199
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5 K from the ACC
I would expect the only two owners who will have a major problem with this scenario are the owners of the Leafs and the Sabres. The other 27 owners are not threatened by such a move, nor will they ever be so threatened, as there isn't another region where this is feasable.

Moreover, the other 27 owners are likely to be more concerned about how this sale makes them all richer men, given that Balsillie is driving the price of the NHL's weakest market through the roof. That will have an inflationary effect on everyone else. Also, the more conditions the BoG places on allowing a franchise sale, the harder it becomes for them to sell their own teams when the time comes. It can be a self-defeating plan.

And, of course, there is the thought that if an NHL team in Hamilton or K-W is going to generate more revenue for the NHL than a team in Nashville does, it will have an affect on how everyone does their business, who gets revenue sharing, and how much of it, etc.

There are a lot of reasons why the BoG would approve this sale. In some cases, I would even think specifically screwing Toronto would factor in.

I disagree completely. Each NHL team (owner) has little in the way of assets except a license to play in the NHL and a city to play in. Each professional sports league have rules and regulations concerning moving franchises and territorial fees. Each owner has a vested interest in protecting their own turf from rogue owners who might want to move in. If you think New York, Philly, Detroit, Montreal ,Chicago, Dallas, Vancouver, L.A. etc. are indifferent to NOT protecting their turf then I think you are dead wrong. I will admit some of the smaller markets may not give a rat's a** as nobody will move into their territory however with revenue sharing now a staple to their very survival they will support the status quo.
And why possibly would they want to screw the team (Toronto) that provided more revenue sharing dollars than the rest of the League COMBINED ???????!!!!!!
 

Resolute

Registered User
Mar 4, 2005
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AB
Because it isnt likely that the revenue sharing dollars themselves will change, just who pays what. Also, it is unlikely that Toronto would be singificantly harmed by having another team in the area, so the argument is dubious at best.

Basically, this argument is centred around the assumption that another team in the Toronto area is a bad thing. I don't buy it, and I doubt many owners do either.
 

Northern Dancer

The future ain't what it used to be.
Mar 2, 2002
15,199
13
5 K from the ACC
Because it isnt likely that the revenue sharing dollars themselves will change, just who pays what. Also, it is unlikely that Toronto would be singificantly harmed by having another team in the area, so the argument is dubious at best.

Basically, this argument is centred around the assumption that another team in the Toronto area is a bad thing. I don't buy it, and I doubt many owners do either.

I am NOT saying that at all. I am just saying each and every NHL owner has a vested interest in having territorial fees paid and the higher the better. In the past the Ducks, the Devils, the Islanders have all paid fees, when Hamilton lost its expansion bid to Ottawa, they had agreed to paying both Buffalo and Toronto.

Heck if there are no protection rights for teams then why not have 5 teams in Toronto? And if Toronto is such a hot market for another team then why would not the NHL simply give Toronto an expansion team (in time for the Tavares draft) and the rest of the 30 teams could then split the expansion fee which will be in the ridiculous neighbourhood of 250 million ?????

The answer is because ALL owners respect the territorial rights of each other and have NO interest in changing that.

Baslillie will NOT get into the Toronto area without paying a hefty price and the other NHL owners will support that, it will not be a 28-2 vote with only Buffalo and Toronto opposing as you stated earlier.
 

Resolute

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Mar 4, 2005
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AB
Umm, my argument had nothing to do with the paying of fees. It was a challenge to the argument that the BoG wouldnt support the sale to Balsillie given how obvious it is he is looking to get into Hamilton/K-W. This isn't even at the point of relocation yet, just sale of the team.

It goes without saying that Balsillie would likely end up paying territorial rights fees to get into the market. At no point have I challenged this. I merely challenged that the BoG will see Balsillie's attempt to put another team in the Golden Horseshoe as being a bad thing.

Also, at no point did I state the vote would be 28-2 either. I stated that the only two teams that would have a major problem with moving into Hamilton would be Toronto and Buffalo. The other 27 voting governors would likely be voting for or against based on other concerns.
 

Ted Hoffman

The other Rick Zombo
Dec 15, 2002
28,856
8,110
The owners would be voting with the collective interests of the group in mind just like the players union makes decisions with the collective interests of the entire group in mind. Whether the NHLPA is truly looking out for the guys at the bottom end of the pay scale is debateable - but they ask, "does this benefit us in aggregate?" and then move accordingly. There's no reason to think the owners wouldn't do the same.
 

Semantics

PUBLIC ENEMY #1
Jan 3, 2007
12,150
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San Francisco
People seem to think that a "write-off" can just magically appear and benefit that taxpayer. You still have $1.8 million flowing out, that check still needs to be cut. Balsillie is then paying an extra $1.8 million per year for the remainder of the lease to Nashville just to have a team in Southern Ontario, or where ever.

Keep the team in Nashville for 20 years and lose $200+ million, or move it to a market where they break even, say, and lose $1.8*20 = $36 million. If those are the only two options then it's not a hard choice.
 

Ted Hoffman

The other Rick Zombo
Dec 15, 2002
28,856
8,110
Keep the team in Nashville for 20 years and lose $200+ million, or move it to a market where they break even, say, and lose $1.8*20 = $36 million. If those are the only two options then it's not a hard choice.
You're omitting the $150 million it would cost to get Copps to the minimum NHL standards, which he'd have to pay for. Not "top of the line", not "middle of the pack" - up to NHL standards. If he's going to build a new arena, then we're talking at least $250 million or more - and that has to play into the calculations.
 

Semantics

PUBLIC ENEMY #1
Jan 3, 2007
12,150
1,449
San Francisco
It would apply if Balsillie essentially bullied/threatened them to approve the sale despite there not being the usual understandings and conditions.

How likely is it he will try to threaten or bully the NHL? Most of the talk seems to revolve around edge cases. I think the most probable sequence of events is far less extreme.

My prediction is the BoG approves the sale, under the guise that he will try to keep the team in Nashville, but knowing it's been a very weak market that would have to change drastically. Balsille maneuvers his way out of the lease, possibly by paying off the city. Once relocation is a certainty, the league won't prevent him from moving it wherever he wants. This scenario is exactly what has played out several times before, and furthermore the NHL has no history in recent times of exterting much control over the owners.

So I conceed that *in theory* the BoG has ways to block this from happening, but I can't imagine them doing so. As much as Bettman wants to grow the game in the US and so forth, if Balsillie becomes an owner he will be one of Bettman's bosses, and the board of governors will treat one of their bretheren as they themselves would expect to be treated were they in his situation.
 
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Semantics

PUBLIC ENEMY #1
Jan 3, 2007
12,150
1,449
San Francisco
You're omitting the $150 million it would cost to get Copps to the minimum NHL standards, which he'd have to pay for. Not "top of the line", not "middle of the pack" - up to NHL standards. If he's going to build a new arena, then we're talking at least $250 million or more - and that has to play into the calculations.

When I said the relocated franchise would break even I was including their arena rent or financing. The point is that they aren't going to avoid moving the team because of a measly $1.8 million/year.
 

GSC2k2*

Guest
I am NOT saying that at all. I am just saying each and every NHL owner has a vested interest in having territorial fees paid and the higher the better. In the past the Ducks, the Devils, the Islanders have all paid fees, when Hamilton lost its expansion bid to Ottawa, they had agreed to paying both Buffalo and Toronto.

Heck if there are no protection rights for teams then why not have 5 teams in Toronto? And if Toronto is such a hot market for another team then why would not the NHL simply give Toronto an expansion team (in time for the Tavares draft) and the rest of the 30 teams could then split the expansion fee which will be in the ridiculous neighbourhood of 250 million ?????

The answer is because ALL owners respect the territorial rights of each other and have NO interest in changing that.

Baslillie will NOT get into the Toronto area without paying a hefty price and the other NHL owners will support that, it will not be a 28-2 vote with only Buffalo and Toronto opposing as you stated earlier.
You have it exactly, Northern.

Why would the BOG refuse Balsillie's move? They would reject it because of two reasons:

1. Another team in Toronto proper (not KW or Hamilton or other far-way place) is the biggest expansion asset that they have. It is probably worth $200-250 million to the existing owners as an expansion fee. Balsillie moving into the are gives the other NHL owners nothing in their own pants.

Can people not see that (and I am looking at you, Res)?

2. The specter of an extra team moving to Toronto is the single best piece of leverage that all NHL teams (other than the Leafs) can employ to their advantage in squeezing the governments in their own market to provide them with more concessions to avoid moving. Some teams like NYR and DET do not need such leverage, but many teams can definitely use it.
 
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Jonjmc

Registered User
Feb 7, 2006
1,498
1
When I said the relocated franchise would break even I was including their arena rent or financing. The point is that they aren't going to avoid moving the team because of a measly $1.8 million/year.

You cant just pay off the remainder of the lease and be done with it, it simply doesnt work that way. Balsilles own attorney said exactly that. The lease is for the Preds playing there, not just renting a venue. Could it be bought out? Possibly, but certainly for a lot more than the face value of the lease.

And in response to the BOG denying Balsille because of the perception that he may move the team.... thats exactly what happened with the Pens and Balsille. It didnt get so far as to deny him, but the conditions they required were the same as denying him.
 

william_adams

Registered User
Aug 3, 2005
1,942
0
Kyushu
I don't like to play the "I have a law degree" card just for ***** and giggles, and I don't think that it's the end all and be all in legal discussions - there are people without law degrees working in specific areas who know more about the law as it relates to that specific area than I ever will. I don't want to have some huge moronic pissing contest

part of the reason these boards are so much fun is that among the blowhards that compulsively claim to be the be-all end-all expert on every topic they write on, there are extremely intelligent and knowledgable posters that take the time to enlighten us... Enjoyed your series of posts on this topic.... :handclap:

Have to agree with both you and IB (and others) who feel that any manouvering that Blackberry Jim is doing is pure posturing. I kinda like having and owner or two like him in the game, hope he gets his team...
 

GSC2k2*

Guest
part of the reason these boards are so much fun is that among the blowhards that compulsively claim to be the be-all end-all expert on every topic they write on, there are extremely intelligent and knowledgable posters that take the time to enlighten us... Enjoyed your series of posts on this topic.... :handclap:

Have to agree with both you and IB (and others) who feel that any manouvering that Blackberry Jim is doing is pure posturing. I kinda like having and owner or two like him in the game, hope he gets his team...


Always underappreciated ... :p:
 

SoCalPredFan

Registered User
Apr 14, 2007
259
0
Portland, OR
To me, the million dollar question is "can" Balsillie get out of the lease that runs until 2028 in ANY OTHER fashion other than the 14k attendance clause.

If YES, the team is gone. 100%
If NO, I believe Nashville steps up and keeps the team there for at least the foreseeable future (5-10 years).

I've listened to Rodier (Balsillie's attorney) on both FAN590-Toronto (yesterday) and on 104.5 The Zone-Nashville (today) ... and that question was not specifically asked in either interview.

-t
 

Fourier

Registered User
Dec 29, 2006
25,439
19,572
Waterloo Ontario
250% may be an exaggeration but a big price increase is certainly not out of the question. If I wanted to move the team this is the first think I would do.If the fans step up you do great things for your immediate cash flow. If not there is your out.
Nashvilles prices are not the highest in the league. He would have a fair bit of
room before you could argue bad faith if the team was losing money.
 

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