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At The Non-Profit Bar

It is May. The ice is long melted, and the 2004?? 1/2 2005 NHL hockey season never happened. The Stanley Cup was never awarded. And Lord Stanley, the Earl of Derby and the Governor General of the Dominion of Canada, is turning over in his grave.

His soul rests uneasily because the silver cup he purchased in 1892 wasn't awarded to the winning team of a hockey championship game in 2005. Ordinarily this would be merely sad, but because he established a trust to carry out his wishes, this sad result also is illegal. Or so claim hockey-mad fans in Canada. They have a point.

If the Law of Trusts protects anything, it protects the wishes of a trust's creator. Even if a creator wants his trust to carry out silly or outrageous things, his trustees must honor his wishes. The power of a trust--such as the one Lord Stanley established--is so strong it will even overcome the Rule Against Perpetuities. That is why a fan-organized movement called Free Stanley ( commissioned a legal opinion to support their claim that the NHL lost its right to award the Stanley Cup when the league canceled the 2005 season. Based on the legal opinion (available on the Free Stanley Web site), the fans called for the trustees to "free" the Stanley Cup from the NHL so it could be awarded to a non-NHL championship team as Lord Stanley so clearly provided in his trust documents.

The Free Stanley fans rely on an important limitation on the powers of trustees--that trustees may not delegate their discretion to administer the trust, nor may they release their powers to others. But Lord Stanley's trustees did exactly that in 1947 when they reached an agreement with the NHL giving the professional American-based league custody of the cup and the power to determine who could compete for it.

The legal result is that the NHL agreement is now void, and in fact, was unenforceable from the moment it was made. It's on that basis Free Stanley claims the current trustees are free to award the cup to any eligible championship team, preferably a Canadian team. It says Canadian trust law requires the trustees to restore the original terms of the trust, including the requirement that the trust award the cup to a "champion hockey team in the Dominion."

But even if Free Stanley is wrong about the validity of the NHL agreement (and it doesn't think it is) it points out that the NHL lost its rights under that agreement when it cancelled the 2005 season. According to the agreement, the NHL had rights to the cup until it ceased to be "the World's leading professional hockey league." The fans say a league that locks out its players isn't a league worthy of the name, much less the world's most prominent.

Lord Stanley's current trustees are two in number. One is a former executive vice president of the NHL; the other the league's former head referee. Both have publicly supported the NHL's position.

Unfortunately for them, the Law of Trusts has very exacting standards they must meet, and it appears they may not measure up. For one thing, they must act exclusively in the interests of the trust. For another, their past employment may create a conflict with the trust's intent. And they are both under a general duty to maintain equality between the trust's beneficiaries; in this case any hockey team that might be eligible to be awarded the cup.

Clearly, as former NHL employees the current trustees have at least a perceived conflict of interest. That conflict could easily invite a court's intervention if they refuse to consider awarding the Stanley Cup to a team in another league. They could either be ordered to consider that option, or new trustees could replace them and make more careful use of the power granted to them.

Even if the NHL gets its act together and plays a full season, these issues will not go away. Whatever the hockey equivalent of Pandora's box is, it has been opened. The Canadian fans and maybe even the Canadian legal system has been energized. The NHL should break out its treatise on the Law of Trusts (Canadian) and read up during the off-season.


Bruce D. Collins

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