Judge orders NHL, Coyotes owner into mediation

PHOENIX Tue May 19, 2009 9:54pm EDT

1 of 3. Steve Roman, with Squire Sanders and Demsey LLP, who is representing Phoenix Coyotes owner Jerry Moyes, talks with the media after a full day in Federal Bankruptcy Court in Phoenix, Arizona, May 19, 2009.

Credit: Reuters/Rick Scuteri

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PHOENIX (Reuters) - The National Hockey League and the owner of the bankrupt Phoenix Coyotes must seek mediation to settle their differences on who controls the hockey team, a federal bankruptcy judge ruled on Tuesday.

"Let me make a partial ruling," Judge Redfield Baum said in U.S. Bankruptcy Court in Phoenix. "The court is ordering the parties to attempt to go mediate the control issue.

"The court expects the two parties to pursue that as quickly as possible," he added.

The Coyotes filed for bankruptcy in Arizona on May 5 in a move intended to facilitate a sale and a move to Canada. The NHL has sought to overturn the bankruptcy filing by club owner Jerry Moyes, arguing he did not have the authority to file because the league controlled the team.

At the time of the filing, trucking magnate Moyes said he had an offer to sell the Coyotes to Jim Balsillie, co-chief executive of Canadian smartphone maker Research in Motion, for $212.5 million. Balsillie has said his offer is contingent on moving the team to southern Ontario.

The judge, who ordered a report from the two sides on May 27, said it was necessary to settle the issue of the team's possible relocation before a sale could be addressed.

"We will certainly do what the judge has asked and we will put every ounce of energy that we have into making it work," Steve Roman, a spokesman for Moyes said.

NHL Deputy Commissioner Bill Daly said the league's attorneys would talk to Moyes' lawyers.

"I will go in with an optimistic view that cooler heads can prevail and that we can come up with some way to manage this team that will preserve the asset," he said.

The Coyotes joined the NHL as the Winnipeg Jets in 1979, after the World Hockey Association folded. In 1996, the team moved to Phoenix and renamed itself the Coyotes. In 2001, it was sold to a group that included Moyes, who assumed majority control five years later.

Moyes, in court documents filed on Friday, disputed the league's contention that he turned over control of the Coyotes last November in exchange for financing.

In a separate filing, Earl Scudder, an attorney who has advised Moyes, claimed NHL Commissioner Gary Bettman told him April 3 the league would not approve relocation of the Coyotes to Hamilton, Ontario, because the city's arena is too old.

Bettman said if the team returned to Canada, it would be to Winnipeg, Scudder said in court documents. Bettman also said southern Ontario would only get a team through expansion, Scudder said.

NHL officials have said the league is committed to keeping the team, valued last October by Forbes magazine at a league-low $142 million, in Phoenix.

The Coyotes have never made a profit since moving to Arizona in 1996 and lost a combined $73 million from 2005 to 2008, according to court documents.

NHL officials had called the filing a move to skirt league rules governing franchise sales and relocation, which must be approved by a majority of the 30 NHL clubs. They are also attempting to block the sale to Balsillie.

The other major U.S. sports leagues -- the National Football League, Major League Baseball and the National Basketball Association -- submitted statements supporting the NHL's ownership transfer and relocation rules. They warned the court that setting new precedent on those issues could undermine the business of all sports leagues.

Balsillie, a passionate hockey fan who regularly plays in pickup games, has made attempts in recent years to buy teams in Pittsburgh and Nashville, Tennessee, and move them to Canada.

Even if Balsillie wins court backing, the NHL still could make life difficult by withholding the team's share of league revenue or even dissolving the squad, said analysts and attorneys who follow the league.

The case is in Re: Dewey Ranch Hockey LLC, U.S. Bankruptcy Court, District of Arizona, No. 09-09488.

(Additional reporting by Phil Wahba in New York, writing by Ben Klayman; Editing by Steve Orlofsky, Richard Chang and Carol Bishopric)

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