With the MWJHL board of governors meeting slated for Saturday June 1st, 2013, some team officials are starting to talk about proposed league organization agreements.
TJHN has learned that some team officials are not too happy with the proposed documents, or how the proposed documents have been presented.
Specifically the MWJHL has included what amounts to a “non compete” clause in their “Midwest Junior Hockey League Affiliation Agreement”. It is important to note the title of the document presented to teams is not a “membership” but an “affiliation” agreement. The difference between the two phrases under the law are quite different.
Because the documents are said to be ruled by State of Michigan Law, “membership” would be interpreted as having membership in the Midwest Junior Hockey League LLC. a legal Limited Liability Company registered in Michigan. “Affiliation” is not the granting of membership rights within the LLC, but is likely to be interpreted as an “at will” working contract only. This in itself is really not a bad thing for team owners as they are not legally responsible for funding the LLC and can walk away from any problems concerning the LLC should they arise.
Where things become problematic for teams is the words and phrases written into the “Affiliation Agreement”.
Though team owners would not have ownership of the league LLC, they would be subservient to the league LLC by virtue of the language in the agreement. More importantly, teams would also be agreeing to not leave the league, and if they do leave the league the owners make themselves personally liable to not compete against the league by joining a different league for three years.
Statements such as;
“That the damages to hockey operations and the future expansion potential of the
League and the other Member Teams, arising from any withdrawal from, or termination
of, a League membership by any Member Team during the term of this Agreement
would be materially harmful and damaging to the League; and that in such event, the
League and remaining Member Team’s would not have an adequate remedy at law.”
“In the event of a breach of any commitment of this Agreement, the League, in addition to any
other rights and remedies that may be available at law or in equity, all of which are hereby
specifically reserved, shall have the right to injunctive relief restraining the breach of the
Member Team, and its Related Entities from participating, directly or indirectly, in any other
hockey league in any Home Territory of the MWJHL for a three (3) year period of time. This
right of injunctive relief, may be obtained from a court of competent jurisdiction. The Parties
agree that this right to injunctive relief shall not be limited by any other remedy provision of
any of the Governing Documents and shall not be the exclusive remedy in the case of a breach.”
The interpretation of these phrases would make it impossible for any team that signs these documents to leave for another league for a period of three years after withdrawal from the MWJHL.
So, if an owner discovers that there are problems with the league they are left with no real remedy to cure those problems by leaving the league. Also key inf the phasing is the phrase “Related Entities”. Related entities would likely be considered to be the owners of the teams as people. This would preclude a team owner from dissolving his team in the MWJHL and starting a new team in another league under a different business name.
The MWJHL actually spells this scenario out in its description of “Related Entities” contained in the document as quoted below;
“The term “Related Entities” as used herein shall be defined broadly so as not to allow any of the individual
Member’s respective owners (including by example, but not by way of limitation, corporations, partnerships,
partners, members, limited partners, limited liability companies, proprietors, shareholders, trustees, or any other
ownership entity of any kind or description whatsoever) to utilize one corporate entity to hold the MWJHL
membership, then attempt to utilize a new or another corporate entity to operate in another hockey league in the
Member’s former MWJHL Home Territory, and thereby avoid the commitments, obligations and responsibilities
set forth in this section. Nothing herein is to suggest or imply a prohibition against any related entity of a Member
owning a team in another hockey league, so long as that ownership does not involve an MWJHL Home Territory.
Nor is anything herein to suggest or imply a prohibition against a Member undertaking a geographic transfer of its
Home Territory, provided the transfer is made consistent with the Bylaw provisions dealing with graphic
transfers. Provided further, that such transfer shall not be in concert or in any other combined fashion with any
other Member during the Member’s affiliation with the league.”
Also contained in the MWJHL’s proposed documents are terms and conditions that would allow the “Commissioner” to terminate teams memberships or affiliations without a vote of the other teams. While this in itself could prove to be a protective measure that can assist the league at some point down the road, conflicts of interest are clearly present when the “Commissioner” is also and owner or coach of a team. It is for this reason that leagues hire “commissioners” that do not have a financial or competitive stake in the league to manage the league.
A close examination of the proposed documents shows that they seem completely one-sided and offer no protections to the teams involved from mismanagement of the league or from the league failing in its duties to its affiliates.
While non-compete type of agreements are not uncommon in minor professional hockey, they are not common place in pay to play junior hockey. The potential for restriction of commercial transactions by corporate entities through this type of agreement could be interpreted as violations of the Uniform Commercial Code by some.
Clearly the agreements were well thought out and quite well written by the attorney working for the league. While that is a good thing it does go back to ask the question; “Who owns the league?’ If member teams are simply affiliates and are not listed on the LLC filing, then those that are listed are the only ons who could benefit from the implementation of these documents and their described policy.
Specifically missing from these documents are financial reporting standards, and income disbursement provisions. Do the affiliates not have right to know where the money goes?
The conversations this weekend should be interesting to say the least. With the prospect of a new Mid West based league gaining momentum for 2014-2015 one would have to believe MWJHL team owners will make decisions carefully.
