Frontload Threat: Smokescreen for Definition

Frontload Threat: Smokescreen for Definition

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*Warning:  More analysis and opinion concerning the Kovalchuk decision. For those who want to talk hockey, as opposed to the now perpetual indiscretions of the league office etc. Alex has a post beneath.

When Richard Bloch decided to rule in the favour of the NHL in the case of Ilya Kovalchuk and the ridiculous contract, he set in place a new precedent that the league hope will stem the flow of cap-circumventing front loaded contracts. In lieu of a concrete definition, the cover-all bases nature of Bloch’s ruling was expected to draw a line under the types of long, frontloaded contracts the NHL saw as detrimental to the spirit of equality the CBA and its salary cap was supposed to theoretically harbour.

To quote Bloch’s case summary in conclusion:

The elements of this Agreement are unique. They include the age of the Player, the dramatic diveback after 11 years, the notable frontloading of the compensation, the relative minimal payment during the 6-year tail of the contract and the clear incentives and ability of the team to move the Player out and likely rid itself of the continuing salary cap burden during the out years of the contract. All this supports the League’s conclusion that it is reasonably unlikely the last years of this contract will be performed.

Touching repeatedly on articles 26 (No Circumvention) and 50 (Team Payroll Range) throughout the 20-page document, Bloch used this particular case to outline the numerous facets of legally unbinding circumvention many clubs have adopted in the face of a hard revenue based cap to gain an financial advantage with the tacit exception of contract term.

A landmark ruling and a victory for Bettman et al then, most felt the league would use Bloch’s decision as a deterrent in future contract negotiations and draw a metaphysical line under both the Kovalchuk fiasco and the increasingly farcical use of frontloaded contracts.

But per the now infamous 23rd footnote of Bloch’s document, addressing the NHLPA’s observation of similar contracts, the arbiter notes:

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.

Expanding rightfully upon precedents set prior to this case, Bloch’s assertion that the league has been continually investigating the other spurious contracts listed above segues into an ominous portal of retroactive contract withdrawal. A move that, were it enacted, would likely result in further arbitration and further dismantling of the leagues already withered reputation.

Simply put, retroactively withdrawing your own ratification will do little to increase faith between the NHL and its fans, let alone an NHLPA increasingly influenced by player agents that is likely to steel itself for hardballing in the face of a humiliating defeat.

From a league office perspective, there was obviously some concern a quick resolution between New Jersey and Kovalchuk following the initial contracts dismissal would trivialize their victory and minimize the impact of the ruling in future contract negotiations. By verbally addressing the possibility of revisiting questionable contracts past, the league is looking to capitalize on its advantage while also putting the brakes on a speedy resolution between Kovalchuk and the Devils.

In action, were the league to withdraw contracts previously registered, the NHLPA would grieve on a matter of principal. With Bloch likely out of the picture for further participation he would leave in his wake the league and PA in a pitched battle between precedents, both those set in the Kovalchuk case and those the league created by ratifying the investigated contracts. Were a new arbiter to rule in the favor of the NHLPA, the league would have effectively smeared any definition their line in the sand metaphor ever had and reset the table for GM’s looking to frontload their stars. After all it is one thing to defend a decision against an unregistered contract, than one previously signed off.

Subsequently it seems unlikely that the NHL will opt to rescind previous contracts such as Luongo’s or Hossa’s, but regarding Bettman’s track record the possibility stands. If this is in actuality the leagues effort to create some definition around Bloch’s ruling it has been received as an aggressive statement of intent and has achieved nothing save for setting a rocky path on the road to the next CBA negotiations.

Meanwhile the NHLPA is taking a backseat and digesting the fallout of the last couple of days. With no identifiable leadership to speak of, the PA has assumed a beleaguered role that is unlikely to auger well, or shouldn’t. If reports are to be believed the majority of players concerning themselves with union matters are erring on the side of Donald Fehr to spearhead the associations negotiating efforts at the close of 2011-12.

Fehr of course, was the former president of the MLBPA who shot down an attempt by owners to establish a salary cap in the MLB and was later serenaded by Yankees fans with the chant “You ruined the game.”

So what does this all boil down too? Aside from a deep sense of foreboding regarding the upcoming battle for a new CBA, the league appears to be once again threatening back door litigation to right its own mistakes from the past, surely tarnishing itself in the process. While one can argue the league now have the precedents and the right to challenge previous contracts (cue the architect Lamoriello conspiracy bandwagon), would it be ethical to do so?

Agents predictably don’t seem to think so; in fact most of the agents who have waded into the discussion believe the initial ruling by Bloch was merely subjective and supported by the most ambiguous recesses of the CBA’s vernacular. Speaking to the Vancouver Sun about further retrospective action, player agent Kurt Overhardt who represents, amongst others, Marty Turco and Matt Carle said:

“Any and all speculation that the league is going to claw back these other contracts … would be in complete violation of the collective bargaining agreement and it would be a complete infringement of the players’ rights under the CBA… Any attempt to do so would be absolutely predatory behaviour by the league, would be in bad faith and not in the spirit of the CBA.”

Time is now of the essence if the league office wants to act on its threat. With the upcoming weeks likely to illustrate Bettman’s intent the headless NHLPA may have to gear up for renewed hostilities or risk being thrown under the bus. The catalyst may prove a timely resolution to Kovalchuk’s status or the values of the contract tendered in a restructured deal. With the NHL putting the squeeze on contracts that have a structure many proffered as an out for New Jersey in the case of the initial deals rejection, chances of Kovalchuk being tied up in short shrift is now more marginal than many previously thought.

In that respect the longer this progenitor case drags on the more defined the line becomes, even if no actual wording or contingencies are put in place. For the sake of the remainder of the leagues integrity and a commissioner who managed to pour scorn over an unprecedentedly popular victory as fast as it was doled out, one can only hope the Devils take their time to establish an appropriate reimagining of the original contract and avoid setting us all down a potentially destructive road.