Was New Senators Owner Wrongly Misled About a Trade Violation?

Ottawa Senators owner Michael Andlauer, who took over the team in September after buying it for $950 million, suggested in a press conference Wednesday he was misled about the seriousness of a trade violation that occurred in 2021, which has now cost the Senators a coveted first-round draft pick.

The NHL announced Wednesday the Senators will forfeit a future first-round pick because the team failed to disclose in its trade of right wing Evgenii Dadonov to the Vegas Golden Knights that Dadonov’s contract contained a no-trade list. When the Knights traded Dadonov a year later to the Anaheim Ducks, the Knights weren’t aware that the Ducks were on the list. The trade was voided and the Knights later traded Dadonov to the Montreal Canadiens.

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The pick forfeiture comes five days after the NHL suspended Senators center Shane Pinto for 41 games for “activities relating to sports wagering.”

Ottawa on Wednesday fired general manager Pierre Dorion. The team’s president of hockey operations, Steve Staios, will assume the GM duties on an interim basis.

The Senators’ ownership fell into question last year after then-owner Eugene Melnyk died. Following his death, Melnyk’s daughters, Olivia and Anna, worked with an investment bank to sell the team to a group led by Andlauer.

Andlauer acknowledged he technically knew about the investigation into the voided trade through the “due diligence process” that occurs in the sale of a team. But as Andlauer sees it, the seller unfairly, if not unethically, downplayed the probe as “really a non-issue.” Andlauer then half-kiddingly told reporters, “I don’t know if [a] first round [draft pick penalty] is a non-issue to you guys, but it is to me.”

Andlauer also directed blame towards the NHL. “Maybe [the NHL] didn’t want to disrupt [the sale process] to make sure the seller got the best price possible,” Andlauer is quoted by The Daily Faceoff’s Frank Seravalli as saying.

It is unlikely Andlauer will take legal action over what he describes as being wrongfully denied information. He now owns a team and is part of an exclusive club of wealthy individuals who almost never sue each other or their leagues. (The New York Knicks recently suing the Toronto Raptors over alleged theft of trade secrets is an exception.)

Andlauer also admits the Senators’ handling of the 2021 trade was “downright negligent,” a comment indicating he recognizes punishment is appropriate.

But the new owner may have nonetheless been harmed in a way that law ought to remedy. It’s possible he would not have offered as much for the team, which hasn’t made the playoffs since the 2016-17 season and is in a rebuilding mode, if he had been made aware of the seriousness of the trade violation. Andlauer, who openly questioned why he must “inherit” the penalty when it occurred under someone else’s watch, might argue the league deliberately waited until after the sale closed to announce a decision. He could say he’s a victim of bad faith and fraud and is owed monetary damages.

To that point, in contract law there is often a duty to disclose material facts that the other party doesn’t know or have reason to know. That is particularly true when one side controls the information—as in this case—and that information is likely to impact the negotiations and price. A duty can also be found when there is precedent and expectation of transparency in a sales process.

But the sellers and the NHL would have legal defenses.

Both could say the botched 2022 trade was no secret, as it attracted significant media coverage and intrigue. Both could also argue Andlauer admits he knew there was an investigation, even if he feels he wasn’t properly assessed of its severity. Both might also say Andlauer and his representatives had opportunities to inquire further but perhaps failed to ask the right questions or failed to raise enough follow-up questions.

Further, the NHL could point out it was not able to fully disclose information about a pending investigation without jeopardizing privacy obligations or prejudicing the investigation and its witnesses.

The NHL could separately stress that Andlauer was hardly a disadvantaged bargaining partner. He is a seasoned and successful businessperson and was represented by skilled attorneys during the negotiations.

Most important, Andlauer is already an experienced NHL owner. For about 14 years, he owned 10% of the Montreal Canadians and, as Sportico exclusively reported on Wednesday, sold his stake at a $2.5 billion enterprise value. Andlauer was arguably in a uniquely advantageous position to gain intel on the Dadonov investigation and what could happen.

Kurt Badenhausen contributed to this story.

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