• Ryan Lake

NHL EXPANSION: THE FORMATION OF THE VEGAS GOLDEN KNIGHTS

NHL EXPANSION: THE FORMATION OF THE VEGAS GOLDEN KNIGHTS

written for and first published by LawInSport


For US sports, Las Vegas is generally regarded as one of the most intriguing new markets in the United States, and has long been one that leagues and teams have had their eye on.

The city of Las Vegas refers to itself as the Entertainment Capital of the World.[1] However, it is still without one of the world’s most popular entertainment platforms, major league professional sports. For years, several leagues in the United States have considered moving there, including the National Football League (which is currently considering moving the Oakland Raiders to the city[2]).

However, it was the National Hockey League (NHL) that made the first move. As is well known, on June 22, 2016, the NHL Board of Governors (the equivalent to a board of directors for the NHL) voted to expand the league and add a new franchise in Las Vegas.[3] On November 22, they and the new franchise’s owner, Bill Foley, announced that the new club would be named the Vegas Golden Knights. They will start playing in the city in the 2017-18 season.

The NHL and the Golden Knights face a variety of interesting legal and commercial issues that come with entering a new market and creating a new team. This article is the first in a series that will explore the most pressing of those issues. This piece begins by setting the scene, and will look at:

  1. The NHL’s history of expansion – to provide a broader context to the history of expansion in the league and understanding behind the decision to move to Las Vegas;

  2. The current Las Vegas expansion – a brief review of the NHL governing documents and the process that allowed Las Vegas Golden Knights to be established;

  3. Allocation of the players – a brief explanation of the system devised by the NHL to allocate players currently under contract to NHL clubs to the new Vegas team. [/vc_column_text][/vc_column][/vc_row][vc_row full_width=”stretch_row_content” parallax=”content-moving” parallax_image=”5155″ parallax_speed_bg=”2.5″ css=”.vc_custom_1487286021584{padding-top: 200px !important;padding-bottom: 200px !important;}”][vc_column][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

BRIEF HISTORY OF THE NHL’S EXPANSION

The NHL has a long tradition of expansion. The league was founded in 1917 when its predecessor, the National Hockey Association, ceased operations.[4] The NHL competed with several other leagues including the Pacific Coast Hockey Association and Western Canada Hockey League.[5]

The NHL was initially comprised of ten teams and started to gain an advantage over the other competing leagues.[6] In 1942, the league was forced to disband four teams due to the Great Depression and the start of World War II.[7] The remaining six teams included the Toronto Maple Leafs, Montreal Canadiens, Boston Bruins, Chicago Blackhawks, Detroit Red Wings and New York Rangers, these teams became known as the Original Six.[8]

The NHL remained comprised of six teams until 1967 when the league added six new teams and the expansion era was born.[9] The six new clubs included the Los Angeles Kings, California Seals, Philadelphia Flyers, Pittsburgh Penguins, St. Louis Blues and Minnesota North Stars.[10] The decision to double the size of the league and to open franchises throughout the United States was largely driven by the desire to obtain a national television agreement.[11]

By 1974 the league had grown to 18 teams.[12] In 1979 the league added another four teams to bring the total number of clubs to 21.[13] Throughout the 1990s and early 2000s, the league would add another nine clubs.[14] Prior to the addition of the Las Vegas team, the Minnesota Wild and Columbus Blue Jackets were the newest members of the league. These teams were added in 2000 and brought the total number of clubs to 30.[15]

The Las Vegas Golden Knights are the 31st club to join the league and might be the start of a new era of expansion. It has been wildly rumored that the NHL is looking to add clubs in Seattle, Quebec City, Toronto[16] and Europe.[17]

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LAS VEGAS EXPANSION

On June 22, 2016, the NHL Board of Governors voted to expand the league once again and add a franchise in Las Vegas.[18]

The NHL is governed by a body known as the NHL Board of Governors, as codified in the NHL Constitution.[19] The Board of Governors is made of up all 30 clubs, and each member of the Board appoints a Governor and two alternate Governors to sit on the Board. The Governor is typically the majority owner of each club. The main purpose of the Board is to develop and implement policies and regulations and uphold the principles of the constitution of the league.[20]

The Board is also responsible for the following:

  1. hiring and firing the commissioner of the league;

  2. approving the salary caps for the clubs;

  3. development of the game schedule;

  4. approving the purchase, sale, or relocation of any club; and

  5. approving the playing rules of the league.[21]

Section 3.3. of the NHL Constitution governs the admission of new members. The members of the NHL are the individual clubs that have been voted into the league by the Board of Governors.

Section 3.3 articulates the requirements that must be met by any applicant wishing to become a member of the NHL. Section 3.3 of the Constitution states:

Section 3.3. Admission of New Members. Each applicant for membership shall make a written application to the League on the official Application Form approved by the Board of Governors. Such form shall designate the information and documents required to be submitted and the payments required to be made by the applicant. The form shall also include a statement that, upon and in consideration of election to membership, the applicant will subscribe to and agree to be bound by the Constitution and all amendments thereof, and all By-Laws, Resolutions, Agreements and Rules of the League. Upon receipt of any application for membership, the Commissioner shall conduct such investigation as he deems appropriate. Upon completion of the investigation, the Commissioner shall submit the application to the members for approval, together with his recommendations thereon and all such information that the Commissioner deems pertinent. A favorable vote of three-fourths of the members of the League shall be required for election to membership. The Board of Governors by majority vote shall determine from time to time the amount that shall be paid for a membership in the National Hockey League, but no application for membership shall be considered unless the application be in writing on the official Application Form, and be accompanied by a deposit check payable to the League in such amount as determined by the Board of Governors, and such proof as the Governors may require as to the organization, financing, playing facilities, and personnel of the applicant. In addition to the amount fixed by the Board of Governors of the League as the price to be paid for a new franchise in the League, such new member shall pay, on demand, such further sum as may be determined by the Board of Governors as represented by each member’s interest in the assets, surplus, if any, and reserve accounts of the League.[22]

On June 22, 2016, the NHL Board of Governors were presented with an application, in accordance with the terms of Section 3.3, submitted by Black Knight Sports and Entertainment LLC, a consortium led by Bill Foley. Upon review of the application, the NHL Board of Governors voted to expand the league and add a franchise in Las Vegas.[23] The creation of the new franchise is contingent upon the transfer of a $500 million expansion fee that is to be paid by Foley to the NHL. According to Pierre LeBrun of ESPN, “the plan is for Vegas to complete its final payment around March 1 [2017].”[24]

On November 22, 2016, the NHL and Bill Foley announced that the new club will be named the Vegas Golden Knights. The name chosen by Bill Foley and the NHL has become somewhat problematic due to trademark issues around the name.

Prior to the announcement of the new name for the Las Vegas franchise the NHL and Bill Foley, and his Black Knight Sports and Entertainment LLC, the company that owns the franchise, filed trademark applications with the U.S. Patent & Trademark Office (USPTO). The USPTO subsequently rejected the applications for the name Golden Knights based on the likelihood of confusion with a mark owned by the College of Saint Rose. Ryan Hilbert has provided an in-depth review of the reasons behind the USPTO’s denial of the applications, in his article Trademarks in US sports: a review of the Vegas Golden Knights & Milwaukee Bucks applications. [25]

While the USPTO office action on the mark may appear to be the result of poor planning and name choice, this type of action is actually fairly common when registering marks, especially in the sports industry. Moreover, these issues can be overcome in a variety of ways, easiest of which is entering into coexistence agreements.

Despite the rejection of the applications, it is likely that the team and the NHL will be able to enter into coexistence agreements with the owners of the similar marks. Typically, when two marks are confusingly similar, but the owners of the marks agree that they believe they can coexist without confusion, the USPTO will allow the applied-for mark to become registered, subject to the coexistence agreement. Therefore, if the NHL and Black Knight Sports and Entertainment LLC, are successful in getting coexistence agreements with the College of Saint Rose and any other owners of registered marks that may be confusingly similar to the Golden Knights mark, the USPTO will likely approve the application and allow the Golden Knights mark to register.

The trademark issue is not the only interesting aspect of the new club. Once the Board of Governors voted to add a new franchise, the NHL and the NHL Players Association (“NHLPA“) also had to determine how the new club would fill its roster.

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