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Judge Baum's third option: Balsillie, NHL might both end up without Coyotes

Canadian billionaire Jim Balsillie arrives Thursday, Sept. 10, 2009 at Federal Court in Phoenix for the Phoenix Coyotes bankruptcy hearing. (THE ASSOCIATED PRESS/Matt York)

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Canadian billionaire Jim Balsillie arrives Thursday, Sept. 10, 2009 at Federal Court in Phoenix for the Phoenix Coyotes bankruptcy hearing. (THE ASSOCIATED PRESS/Matt York)

PHOENIX - It turns out there's a surprise third option available to the judge charged with deciding the fate of the Phoenix Coyotes - and it probably won't be to the liking of either Gary Bettman or Jim Balsillie.

Judge Redfield T. Baum raised the possibility that he might not award the team to either the NHL or Balsillie's company PSE as a two-day auction for the bankrupt franchise began Thursday.

The revelation came early in the proceedings and sent a ripple through the courtroom. Jordan Kroop, a lawyer for former Coyotes majority owner Jerry Moyes, was speaking about the potential bids when he was interrupted by the judge.

"There is a third opportunity when we're done here - no sale," said Baum.

"Theoretically," Kroop responded.

"I think it's more than theoretical," said Baum. "You all ought to keep that in mind."

The exchange set an uncertain tone to an auction process that most observers believed would end with a new owner for the money-losing franchise. Evidently, that's no longer a certainty.

"I'm not going to predict (what might happen)," said Bettman. "We all heard him say it, we'll all have to see what happens."

The full-day hearing produced one final surprise just as it was ending, when the NHL's lawyers informed the judge that they don't wish to cross-examine Balsillie on Friday morning. He and the commissioner had each been scheduled to take the stand.

There was no reason given for the sudden change in plans.

"You'll have to draw your own conclusions," offered Bettman.

The parties will each have the opportunity to tweak their bids before the auction wraps up.

Baum reaffirmed the offers from the two sides at the outset of Thursday's hearing and asked the court if there was any other bids to be considered in the auction. No one else stepped forward.

It left the only bidders as Bettman and Balsillie - men that were both on the sidelines on the first day of hearings, leaving the floor to lawyers and the stand to a handful of experts from each side.

If what took place is a prelude of what's to come, it should make for compelling theatre when Bettman is questioned before Friday's auction.

Balsillie lawyer Jeffrey Kessler and NHL lawyer Shep Goldfein took turns cross-examining economic experts on Thursday, hammering away with probing questions that aimed to undermine declarations and reports they had previously filed in U.S. Bankruptcy court. The exchanges were at times compelling.

Each lawyer managed to pluck some interesting admissions from those on the witness stand - PSE economic expert Andrew Zimbalast conceded that an expansion team could work in Glendale (with a US$15-million yearly subsidy from the city) while NHL experts Franklin Fisher and Michael Rabkoch each admitted that a team in Hamilton, where Balsillie wants to move the Coyotes, would rank in the top five in league revenues by their calculations.

Ultimately, the hours spent asking questions about franchise values and relocation fees is not likely to play into the judge's decision regarding the auction. Baum even spoke up at one point during the afternoon and expressed concern that the issues didn't seem to warrant the attention they were receiving.

The judge has seemed reluctant throughout the four-month case to make a ruling that would be precedent-setting for the other major pro sports leagues and it's starting to look less likely that he'll break from that pattern this week. Not that any of the principles were speculating on how things might turn out.

"In the final analysis, the judge will make a decision and we'll all know what it is," said Bettman. "This is part of me being a lapsed lawyer - I don't like to second guess judges or prognosticate what they're going to do.

"This is the judge's procedure now. He'll render the decision and conduct the proceedings as he sees fit."

Balsillie enters the auction with the highest bid, as much as US$242.5 million, but it's contingent on moving the Coyotes to Hamilton. He upped his offer over the weekend by extending Glendale as much as $50 million in exchange for the city's claims against a move out of Jobing.com Arena.

The NHL has offered $140 million in a bid that came under heavy questioning from the judge, who seemed unsure of the degree in which it might satisfy the various creditors.

"I can't approve a bid I don't understand," said Baum.

Despite Balsillie's offer being much more lucrative, Glendale stands firmly behind the league's bid.

Glendale lawyer William Baldiga noted that his client would have preferred to back either the Ice Edge Holdings offer or the one headed by Chicago sports mogul Jerry Reinsdorf - groups that dropped out of the auction process after failing to renegotiate a new lease with the city.

"Given the two choices that we have, we are prepared to put our lot in with the NHL," said Baldiga. "It's not our preferred choice ... (the NHL bid) gives us the chance to mitigate our harm.

"We vehemently reject the PSE bid."

Former CFL commissioner Tom Wright was the first to give testimony on the opening day. He prepared Balsillie's relocation application back in June and filed a declaration that claims the NHL will be successful in Glendale.

During Wright's time on the stand, Goldfein dropped a couple interesting details about the Ice Edge bid.

First, he said Toronto Argonauts owners David Cynamon and Howard Sokolowski were among that group of Canadian and American businessmen. He also revealed that Coyotes coach Wayne Gretzky was involved with the bid as well, saying that the Great One had agreed to take a pay cut from $8 million to $2 million if it was successful.

Gretzky's name was raised in court just two days before he's scheduled to oversee the opening of the team's training camp. It's unclear what his role will be with the Coyotes moving forward and perhaps that's only fitting - the franchise, and this court case, is still in need of some clarity.

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