In Lou We Trust vs. the CBA

SBN blog “In Lou We Trust” has a post up describing its case defending the legitimacy of the Kovalchuk contract. They are understandably pretty upset over there. However, there are a few points in his post that are inaccurate or misleading.

The NHL-Rejected Ilya Kovalchuk Contract with the New Jersey Devils & Article 50 of the NHL CBA – In Lou We Trust

Jumping back within Article 50, I’d like to point out Article 50.2.(b).(i), which governs bonuses in a contract. As far as I know, Ilya Kovalchuk‘s contract doesn’t have any performance bonuses. In fact, there can’t be any performance bonuses in Kovalchuk’s contract. There is something in that section that is vitally important for all to understand. Starting from Article 50.2.(b).(i).(C) [...]:

(C) “Performance Bonuses.” (1) “Performance Bonuses” means any Bonuses set forth in a Player’s SPC, the payment of which is contingent on the Player’s achievement of some agreed-upon benchmark(s) related to his performance as a Player or his Club’s performance during a particular League Year. (2) Performance Bonuses shall be allowable under this Agreement only for:

(i) Players with Entry Level SPCs under Article 9 of this Agreement;

(ii) Players aged 35 or older as of June 30 prior to the League Year in which the SPC is to be effective, who have signed a one-year SPC for that League Year; and

(iii) Players who are “400-plus game Players” for pension purposes, and who: (i) in the last year of their most recent SPC, spent 100 days or more on the injured reserve list; and (ii) have signed a one-year SPC for the current or upcoming League Year. As to paragraphs (C)(2)(ii) and (C)(2)(iii), such Playersare not limited in the length of an SPC they may sign, but in the event any such Player signs an SPC with a term of longer than one (1) year, the SPC shall not be permitted to contain Performance Bonuses.

[...] Based on these sections of Article 50 that I’ve referenced and/or quoted, and assuming I am not missing or misunderstanding anything, let me get this straight: Per the CBA, there is an explicit statement that says that there is no limit to how long a contract can be for a player per Article 50.2.(b).(i).

I will resist saying “Oh my God.”

What you say would be true, if it weren’t for the fact that:

  • The 50.2(b)(i)(C)(2)(ii-iii) provisions only deal with performance bonuses for over-35 contracts. Kovalchuk’s deal, as he points out, has no performance bonuses, because it can’t. His contract is not an over-35 contract because, well, he is 27.
  • The phrase “such players.” This tells us exactly who this sentence applies to. Players who were injured for more than one hundred days the previous season.
  • The phrase ILWT is clinging to for dear life is “such players are not limited by the length of SPC they may sign…” Forgetting for the moment the fact that the sentence expressly excludes Kovalchuk because he wasn’t injured for more than 100 days last year, there’s another problem. Namely, the rest of the sentence: “…but in the event any such Player signs an SPC with a term of longer than one (1) year, the SPC shall not be permitted to contain Performance Bonuses.” Translation: if a player was injured more than 100 days the previous season, he may sign an SPC with performance bonuses in it, provided that it’s a one year contract. But, if it’s for longer, it can’t have performance bonuses. That’s all.
  • His conclusion: “Let me get this straight: Per the CBA, there is an explicit statement that says that there is no limit to how long a contract can be for a player per Article 50.2.(b).(i).”  No. Per the CBA, there is an explicit statement saying that if you were injured for 100 days or more the previous season, you may have performance bonuses in your contract only if you sign a one-year deal.

Per Article 50.2.(b).(i), a team can certainly offer a contract of 2, 3, 12, 15, 17, 20, 40, or even 100,000 years long to a player.  As explicitly stated in CBA, there is no limit.  Whether it’s extreme or never been done before or rare that any player ever played in the NHL for that long does not matter at all per the CBA. 17 years is a valid contract length.

  • Per above, it is not explicitly stated that there is no limit.
  • “Whether it’s extreme or never been done before or rare…doesn’t matter at all per the CBA.”  The league will undoubtedly argue that a contract neither party intends to uphold is a circumvention of the CBA. You can disagree that this is a valid argument (as the NHLPA will), but my response to that would be this:
  • You say a 100,000 year term is allowed. That’s a great example. Why not have Kovalchuk’s contract be 100,000 years? $102MM/100,000 years, cap hit of about 100 bucks. Okay, we would have to fudge it so that it’s the league minimum. So say we do that, and his cap hit is $550K, but he’s paid $10MM for the first ten years and $5MM for a year (remember that 100% rule!) then $551K for the next 99,989 years. According to you that’s just as legal as a 40, 20 or 17 year contract.
  • Since there’s nothing stopping every club from making every (non ELC) contract 100,000 years long, that means that (if the league and the arbiter were to agree with you) soon everyone would have 100,000 year long contracts. So everyone would have a cap hit of $550K, or whatever the league minimum is in the year the contract is signed.
  • Since a league in which every non-ELC player has exactly the same (league minimum) cap hit regardless of actual salary undermines just about every letter of Article 50, there is simply no doubt that the 100,000 year contract is a circumvention. It renders the entire CBA useless.
  • Rendering the entire CBA useless is a circumvention of the CBA.  :)
  • And, as you say, it doesn’t matter if it’s 17, 40, 100,000 or even googleplex years. You say there is no explicit limit on term and so 17 and 100,000 are equally valid. I say there is an implicit limit and so 17 and 100,000 are equally invalid. Any contract would be similarly invalid, if the player cannot reasonably be expected to play to the end of the contract.
  • This alone is enough reason for the arbiter to rule in favor of the league. It’s also the reason I think there’s some chance (not a great big chance, politics being what they are) that the NHLPA won’t even dispute.
  • Because of the reductio ad absurdum that follows from your assertion that a 100,000 year contract does not undermine and is not a circumvention of the CBA, the only conclusion possible is that the CBA intends (and yes, intent of the CBA is mentioned in the CBA) for parties to apply common sense (say, with regard to the average lifetimes of humans, or the statistical odds that an NHL player will play at age 44 — I believe there have been so few such players that the odds are around 1:1000 — in other words, indistinguishable from zero).
  • The league will argue that the CBA intends and in fact requires for there to be an implicit line somewhere, factoring in a player’s age. Just as 100,000 years is absurd, so is 50 years (players don’t play at 77), 30 years (don’t play at 57). There is no reasonable expectation that a player will make it to age 50. What about 49? 48? Yes, Chelios. One guy. 47? And so on. Where’s the line?
  • The NHL will argue that this contract crossed the line. 
  • If you think there is no line, as undoubtedly you do, that’s fine. You’re back at every player has a contract with a cap hit of $550K which I think is circumvention on an incontrovertible scale.

You may think it’s dumb, stupid, ridiculous, risky, outrageous, unreasonable, terrible for the NHL, and so forth. You can keep coming up with extreme scenarios and whine about all of this until you’re blue in the face. You may feel that any team should not commit a large amount of money to any player for a period of time defined as “extremely long.”  You can think this should be prevented in the next CBA.

That’s fine – that’s just your opinion, though; as the written rules in Article 50 allow for this sort of contract.  This serves as another reminder that dumb, stupid, ridiculous, risky, outrageous, terrible for the NHL, etc. was not, is not, and will not be the same as illegal.

  • But just because it’s dumb doesn’t make it legal, either.
  • As far as “extreme scenarios,” you are the one who mentioned 100,000 year contracts. I would argue that contracting a player to play to an age which maybe 1 in 1000 players ever reach qualifies as an “extreme scenario.” Actually, the fact that it is an extreme scenario is why we’re all here.
  • Nobody thinks that a team “should not commit a large amount of money to any player for a period of time defined as ‘extremely long.'” The whole point is — as you know — they’re not really committing any money to the “extremely long” part. Because if he retires, that comes off the books. They’re only committing the money on the 1:1000 odds that he actually gets that far. Which is the same thing as not committing the money.
  • But you know that. Your point is that this loophole is absolutely allowed by the CBA. My point is thatstrategy (longer term/lower cap hit) is allowed up to a point. The other contracts you mention employ this strategy up to a point. But beyond a point — the point at which is it is not reasonable to expect the player to play out the full contract — it is not allowed, and the proof is, if you allow essentially infinite length of contract, everything falls apart.

Let me take another, more forceful step: The NHL didn’t come up with Articles 50.6 and 50.7 just to make contract rules more complex; they [sic] were regulations on SPCs given they were going with Average Amount to determine a team’s cap hit.  The NHL wanted to add limits on contract lengths; but per player-agent and CBA author Ian Pulver, they were unsuccessful as reported by Michael Traikos of the National Post. What other reason could there be to want to add regulations except to limit what teams could do with contracts?  I don’t think it’s out of the realm of possibilty [sic] that someone knew about the potential for long-term, front-loaded contracts given how Article 50 was written and tried to get these limits in there.

It’s also not out of the realm of being irrelevant.

They didn’t full succeed so the potential has been realized multiple times for multiple players by multiple teams prior to the New Jersey Devils signing with Kovalchuk.

This is an important point you make. The NHLPA (presumably) will make the case that it’s just like the other front-loaded mega-deals. The league will make the case that it’s different. We’re all free to disagree on whether or not this “matter of degree” issue is relevant. Wyshynski says not relevant, illegal is illegal. I say, if I get pulled over for going 90, I don’t get off because the cop didn’t pull over the guy going 70.

There is a line.

(There are plenty of analogies; I’m not married to any specific one. If you don’t like the speeding one, I’ll do another.)

If the NHL doesn’t like the Kovalchuk contract (and it’s clear they didn’t since they rejected it outright), they have no one to blame but themselves for writing and agreeing to a CBA that defines cap hits by average amounts of the contract and specifically states that there are no limits on the length of the contract.  They tried to limit that and they failed. To try and establish a “line in the sand” based on the “spirit” of the rules and not the actual written rules after agreeing upon said rules, to me, is beyond Mickey Mouse, it’s just plain Goofy.

(Again, does not specifically state that. See above.)

The CBA specifically says that anything that intends to or has the effect of circumventing the CBA is a circumvention of the CBA. That is written. The league will argue that allowing a contract in which a player agrees to perform services he has no reasonable expectation to be able to perform (using the concrete, objective historical data showing how many people have ever been able to do it), is not a contract that is permitted by the CBA, simply because assuming that there are absolutely no limits to term leads to a total collapse of the CBA. (If you’ve forgotten what I’m talking about, go back to the part about everyone having exactly the same tiny cap hit, despite getting league maximum salary.)

The next post will deal with the on-going procedures now that NHL rejected the Devils’ contract with Kovalchuk.  [...] Here’s a tease; as stated in Article 50.9.(b):

(b) Accounting for New SPCs in Actual Club Salary and Averaged Club Salary. For any newly executed SPC agreed to between a Club and a Player, the averaged Amount of Player Salary and Bonuses provided for in such SPC shall commence counting against a Club’s Averaged Club Salary upon the approval and registration of the SPC with the League. For purposes of determining a Club’s Actual Club Salary and Averaged Club Salary, a rejected or de-registered SPC shall be treated in accordance with Article 11 of this Agreement.

Yep, Article 11. You’ll see what I mean later tonight if you haven’t put the pieces together yet.

However, be careful of confusing 11.6a (i), which applies, and 11.6a(ii) which doesn’t. I’ll be interested to see if you’ve come up with some procedural detour that takes us off the path of (1) NHLPA decides to dispute by Monday, and if they don’t he’s a UFA; (2) if they decide to dispute and file by Monday, they have another day to notify the arbiter; if they fail to do this, he’s a UFA; (3) if the arbiter is notified within that time-frame, the league and the NHLPA meet with the arbiter and the case is decided within 48 hours of when the arbiter is notified. Around next Thursday. The arbiter has two possible verdicts. The contract is bad, in which case it is void and IK is a UFA; or the contract is good, in which case it is instantly and gloriously approved and registered to the sounds of angelic choirs.

 
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