Wednesday, August 11, 2010

The Kovalchuk Decision, My Take

As you are already aware, the 17 year contract that the Devils and Ilya Kovalchuk agreed to has been invalidated by an arbitrator. As a result of this arbitration ruling, Kovalchuk is once again an unrestricted free agent. However, I think that most would agree that it's highly likely the Devils and Kovalchuk restructure some type of deal that falls within the NHL's rules. (As I type that I smile because many would argue that the first contract was within the rules, having exploited a major loophole that was left in the CBA, but I digress).

Sportslawblog.ca has provided a .PDF version of the decision, if you are interested in reading it.

The NHL's argument against allowing the contract was that the 17-year deal “is intended to or has the effect of defeating or Circumventing the provisions of the CBA."

The NHL substantiates that argument by stating the contract
is for a term of 17 years, and provides for almost 97% of the SPC’s total Salary to be paid in the first 11 years of the contract term. The SPC provides for the Player to be paid the remaining 3% of the SPC’s total Salary over the final six years of the SPC, at the conclusion of which the Player will be 44 years old, which is well beyond the typical retirement age for NHL players.
I think you will be hard pressed to find a single person familiar with the situation and the rules of the CBA that believes that the Devils didn't intend to circumvent the salary cap. The issue with the NHL stepping in here is that they have failed to do so in the past when other players signed similar deals that were also obviously structured to "circumvent the cap."

Many have argued that although Kovalchuk is only 27 years old now, that clearly he has no intention of playing until he is 44 years of age. The arbitrator put a lot of weight into the statistics provided to him.
Kovalchuk is 27 years old, and the agreement contemplates his playing until just short of his 44th birthday. That is not impossible, but it is, at the least, markedly rare. Currently, only one player in the League has played past 43 and, over the past 20 years only 6 of some 3400 players have played to 42.
Remember when your English teacher told you to always read footnotes because they are important. Well, perhaps one of the most important aspects of the arbitrator's report was stated in the footnotes on the 19th page of a 20 page document. The report points out the various contracts in recent years that seem to have the same effect of circumventing the cap that Kovalchuk's deal attempted.
It is true, as the Association observes, that the NHL has registered contracts with structures similar to the Kovalchuk SPC PA Exh. 8 reflects a list of 11 multi-year agreements, all of which involve players in their mid to late 30’s and early 40’s. Most of them reflect reasonably substantial “diveback” (salary reductions that extend over the “tails” of the Agreement). Of these, four such agreements, with players Chris Pronger, Marc Savard, Roberto Luongo, and Marian Hossa reflect provisions that are relatively more dramatic than the others. Each of these players will be 40 or over at the end of the contract term and each contract includes dramatic divebacks. Pronger’s annual salary, for example, drops from $4,000,000 to $525,000 at the point he is earning almost 97% of the total $34,450,000 salary. Roberto Luongo, with Vancouver, has a 12-year agreement that will end when he is 43. After averaging some $7,000,000 per year for the first 9 years of the Agreement, Luongo will receive an average of about 1.2 million during his last 3 years, amounting to some 5.7% of the total compensation during that time period. The apparent purpose of this evidence is to suggest that the League’s concern is late blooming and/or inconsistent. Several responses are in order: First, while the contracts have, in fact, been registered, their structure has not escaped League notice: those SPCs are being investigated currently with at least the possibility of a subsequent withdrawal of the registration. It is also the case that the figures in Kovalchuk’s case are demonstrably more dramatic, including a 17-year term length, a $102,000,000 salary total and precipitous drop that lasts for the final six years of this contract.
Basically, the report says that the NHL is looking into these prior contracts that have already been registered with the league. I had a serious issue with the NHL stepping in and invalidating the Kovalchuk contract when it was first announced. I believe 100% that contracts like these are bad for the NHL. However, I also feel that the NHL should have stepped in a long time ago. How can you honestly look at the Marian Hossa or Chris Pronger contracts and allow them and then a year later invalidate a very similar contract.

The Kovalchuk contract has been invalidated. Fine. The end result in my opinion is correct, even if the NHL should have stepped in when previous similar contracts were registered with the league.

But, the league will be an absolute joke if it uses this decision to go back and analyze the Pronger, Luongo, Hossa and Savard deals. Some of the contracts were registered over a year ago. The NHL had their chance to step up then. They had their chance to "investigate," to invalidate the contract back then. Now? Just because an arbitrator has ruled in the NHL's favor doesn't make it fair game to go back and review these deals. If NHL was sleeping at the wheel then they are just SOL.

No comments: