## Facts

- Dewey Ranch Hockey, LLC and affiliates owned the Phoenix Coyotes, an NHL franchise located in Glendale, Arizona, and filed Chapter 11 on May 5, 2009.
- The Coyotes had sustained significant operating losses for years after relocation to Arizona.
- Glendale financed construction of a new arena and entered an agreement requiring the Coyotes to play home games there, backed by a liquidated-damages remedy for breach.
- On the petition date, the principal owner executed an asset purchase agreement with PSE Sports & Entertainment, LLP, conditioned on court approval of relocating the franchise to Hamilton, Ontario, notwithstanding the Glendale agreement.
- NHL rules required league approval for transfers of ownership and franchise relocation; the NHL unanimously rejected the proposed buyer’s ownership application based on a bylaw “character and integrity” standard.
- An auction produced two remaining bids: (1) PSE’s higher-priced bid conditioned on relocation and overcoming NHL rejection, and (2) the NHL’s lower and more complex bid structured to keep the team in Glendale and respect league approval requirements.
- The bankruptcy court was asked to approve a sale of substantially all assets under 11 U.S.C. § 363 based on the auction results.

## Issues

1. Whether a debtor may use 11 U.S.C. § 363 to sell an NHL franchise “free and clear” of league ownership-approval and relocation rules, effectively compelling relocation.
2. Whether the bankruptcy court may override the NHL’s refusal to approve a proposed owner or relocation based on bankruptcy sale powers or asserted antitrust objections.
3. Whether either competing bid, as structured and conditioned, satisfied Bankruptcy Code requirements for approval of a § 363 sale, including the effect on key contracts and creditor treatment.

## Decision

- The court denied approval of both the PSE bid and the NHL bid.
- The court held it could not approve a § 363 sale that would require ordering relocation and compelling the NHL to accept an owner it had rejected under its bylaws.
- The court declined to resolve broad antitrust and league-governance disputes within the accelerated posture of a § 363 sale hearing.
- The court found the PSE bid could not close absent relief the court lacked authority to grant and would substantially impair Glendale’s contractual rights.
- The court concluded the NHL bid, though consistent with keeping the team in Glendale, was not presented in an approvable form due to structural and creditor-treatment concerns.

## Legal Principles

- A § 363 sale may not be used to compel a professional sports league to approve a transfer of ownership or franchise relocation where league rules condition participation on consent.
- League governance rights concerning ownership approval and team location are not treated as merely monetary encumbrances that can automatically be eliminated through a “free and clear” sale order.
- Complex antitrust challenges to league rules generally are not decided within the limited scope and expedited timetable of a contested § 363 auction approval process.
- A bid conditioned on relief beyond the court’s sale authority, or that cannot close without forcing third-party consent, may be denied even if it offers a higher headline price.
- A proposed § 363 transaction must be sufficiently definite and compliant with Bankruptcy Code requirements, including creditor treatment and the handling of significant contractual obligations, to be approved.

## Conclusion

The bankruptcy court refused to approve either proposed § 363 sale of the Coyotes, ruling that it could not use the sale process to mandate franchise relocation or override the NHL’s ownership-approval decision, and that neither bid satisfied the requirements for an approvable transaction on the record presented.


In re Dewey Ranch Hockey, LLC, 414 B.R. 577 (Bankr. D. Ariz. 2009)