Last week, the National Hockey League filed a counterclaim in the Southern District of New York, seeking permission to sanction Madison Square Garden, L.P. (“MSG”) — the parent company of the New York Rangers — for violating the NHL Constitution by failing to follow league rules, including a rule against suing the league. According to an MSG spokesperson, the NHL’s counterclaims are just “bullying tactics,” intended to intimidate Rangers ownership into dropping its original lawsuit.

As some of you may remember, back on September 28, 2007, MSG — through its attorneys, Jones Day — filed a 35-page antitrust complaint, arguing that the NHL had acted anti-competitively by voting to implement a New Media Policy that required all teams to turn over control of their independent websites to the NHL. MSG contended that it uses the Rangers website “as a competitive tool to generate and maintain fan interest in the Rangers in competition with other NHL teams,” and that by seeking to control competition in Internet and new media markets, “the NHL has become an illegal cartel.”

Ironically, MSG has not sued the NBA, which for years has enforced a nearly identical policy. (Note: MSG also owns the NBA’s New York Knickerbockers.)

MSG’s antitrust lawsuit has already led to its share of rulings in favor of the NHL. First, on November 2, 2007, Judge Loretta Preska (S.D.N.Y.; the same judge from Cleary Gottlieb fame) rejected the Rangers’ motion for a preliminary injunction against the NHL, finding that under antitrust law’s Rule of Reason, “it is far from obvious that [the New Media Policy] has no redeeming value.” On March 19, the Second Circuit affirmed her ruling. The Rangers have now proceeded toward a full trial on the merits.

This is not the first time that a professional sports club has sued a league under antitrust law for purportedly encroaching on club-based property rights. In the mid-1990s, the Dallas Cowboys, New York Yankees, and Chicago Bulls each brought separate antitrust lawsuits against their respective leagues for attempting to reallocate property rights. The Cowboys and Yankees claims involved the use of club trademarks for sponsorship purposes. Meanwhile, the Bulls’ suit involved an attempt to limit the club’s television broadcast rights. Ultimately all three cases settled out of court, although the Seventh Circuit first issued several rulings in the Bulls case. In none of these cases did the league then seek to punish the plaintiff club.

Here, the NHL is seeking the court’s permission to vote on at least the following three sanctions: (1) fining Rangers ownership; (2) requiring MSG to sell the Rangers; and (3) terminating altogether the Rangers franchise. Although these remedies are purportedly each allowed by the NHL Constitution with a three-fourths vote of approval, actually enforcing the two latter sanctions would cross into nearly uncharted territory.

So, what are the NHL’s chances of being allowed to impose these sanctions?

Find out, after the jump.

The answer seems to depend upon the actual language in the NHL League Constitution (not publicly available), as well as both whether the NHL follows procedural safeguards provided in its constitution, and whether the proposed sanction complies with all other bodies of law. On that last point, one of the critical issues for a court to consider is whether any of these proposed sanctions would violate antitrust law.

From an antitrust perspective, fining the Rangers does not seem to present much of a problem. Similarly, requiring MSG to sell the Rangers might be okay based on past precedent upholding sports leagues’ right to refuse membership to prospective owners. See Mid-South Grizzlies v. NFL, 720 F.2d 772 (3d. Cir. 1983); Seattle Totems Hockey Club v. NHL, 783 F.2d 1347 (9th Cir. 1986). However, any attempt to terminate the Rangers’ franchise altogether poses a serious antitrust problem because that sanction is essentially a concerted attempt by club owners to decrease the number of NHL jobs by one-thirtieth, as well as to decrease the net output of professional hockey games. It is extremely unlikely that any court would allow the NHL to terminate the Rangers franchise and in effect unilaterally implement team contraction.

As this case moves forward, it will be interesting to see whether the NHL’s latest move induces MSG to drop its original lawsuit. If not, Judge Preska could be in line to issue a monumental opinion, significantly shaping the future relationship between professional sports clubs and their leagues.

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Marc Edelman is an attorney, business consultant, published author and professor, whose focus is on the fields of sports business and law. You can read his full bio by clicking here, and you can reach him by email by clicking here.