NHL Expansion in Toronto – is sharing caring?

December 19, 2014

Uncategorized

by Michael Truong – Thompson Rivers University 3L JD Student

As long as Canada remains the hockey mecca of the world, rumour and speculation over National Hockey League (“League”) expansion in Toronto will not subside. With the Toronto Maple Leafs being the most valuable franchise valued at over $1 billion, a second team in the Greater Toronto Area (GTA) seems inevitable. While many Canadians, and in particular those living in Hamilton, support League expansion in the GTA, the Toronto Maple Leafs have refused to endorse any such idea.

A second team in the GTA would be a contentious expansion destination, not because the market could not handle a second team, but because the Toronto Maple Leafs would undoubtedly fight to prevent any potential market dilution. A second team means splitting the corporate support and the fan base, which may reduce the value of the existing franchise. Thus, it seems only natural that the Toronto Maple Leafs would vigorously defend their territorial rights before ever conceding their hockey monopoly.

The Toronto Maple Leafs have defended their territorial rights once before. In 2009, Jim Balsillie, the former CEO of Research in Motion, attempted to purchase the former Phoenix Coyotes and move them to Hamilton. The Toronto Maple Leafs took the position that the relocation of a team into their home territory was not subject to a majority vote and that they held de facto veto over whether a new team could move into the region. Though a legal battle never materialized, the NHL Constitution seems to support the Maple Leaf’s case.

Under section 12.2 of the NHL Constitution, each member “accepts and agrees to abide by the … Constitution and each and every alteration, amendment and repeal.” Therefore, the Toronto Maple Leafs are bound by section 3.3, which provides that before any new teams are admitted to the League, the only requirement is a favourable vote of three-fourths of the Board of Governors.

More importantly, however, is the issue of territorial exclusivity. Section 4.3 of Article IV of the NHL Constitution states that each NHL team has exclusive control within its “home territory,” which means “exclusive territorial rights in the city in which it is located and within fifty miles of that city’s corporate limits.” The provision further states that “No franchise shall be granted a home territory within the home territory of a member, without the written consent of such member.” Section 4.3 appears to be the legal weapon with which the Toronto Maple Leafs could mount a defence against the League’s expansion into the GTA. So long as any expansion plans fall within the Leaf’s “home territory,” the League faces an uphill battle.

By virtue of Section 4.3, all NHL member teams seemingly hold a veto over the League if the expansion plan is in the respective team’s backyard. It seems odd that the League would leave a loophole open for teams to potentially handcuff them. Nevertheless, there are a few ways for the League to defend itself against a veto argument.

First, the “city’s corporate limits” in Section 4.3 is ambiguous enough that the NHL can argue for the most restrictive interpretation of territorial exclusivity so as to place them outside the scope of the Toronto Maple Leaf’s territorial rights as set out under Article IV. If successful, this would open up Southern Ontario as a potential destination.

The NHL may even argue that any potential expansion opportunity belongs solely to the League itself, an argument which has been successful in US courts (See, e.g., L.A. Mem’l Coliseum Comm’n v. NFL, 791 F.2d 1356 (9th Cir. 1986); NBA v. SDC Basketball Club, Inc., 815 F.2d 562 (9th Cir. 1987); St. Louis Convention & Visitors Comm’n v. NFL, 154 F.3d 851 (8th Cir. 1998).

If and when the Toronto Maple Leafs are faced with an expansion team in the GTA, any reservations regarding potential depreciation in the value of the franchise may be offset by the projected expansion fee of $1-1.5 billion. If Anaheim serves as an example, the Maple Leafs would stand to receive a sizable share of that expansion fee likely amounting to an influx of $500-750 million, a sum that would cause any owner to think twice.

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