Saturday, July 31, 2010

Uh-Oh: NHL Could Move to Challenge Hossa, Luongo & Others

If the NHL wins the Kovalchuk case, it could turn around and challenge other contracts it previously approved. That means that contracts signed by Luongo, Hossa, Zetterberg, Franzen and Savard, to name a few, could be open to review.


How is this possible? How can contracts that were approved by the NHL a year or more ago now be up for review and possibly voided?

For the answer, we need to turn to the CBA. Under Section 26.10(b) of the CBA, the NHL can investigate a possible circumvention even if the player's contract has been "approved and registered". On top of that, Section 26.10(d) provides that there is no time limitation barring an investigation ("There shall be no limitation of time barring the investigation of a Circumvention by the Commissioner).

Understandably, some player agents are very concerned that the NHL may challenge previously approved contracts if it succeeds in the Kovalchuk case. Hossa anyone?

The next question is whether the NHL would succeed if they tried to void previously approved contracts. Tough to know; however it probably won't be easy. At law, the principle of reliance is really important. If a player can show that he relied on the fact that the contract was approved and structured his life accordingly with the very reasonable expectation that the contract would be honored, then it may be tough for the NHL to go back and prevail.

The player could argue this: "After I signed the contract, and relying on the fact the NHL approved it, I went out and bought a house, a couple of cars, a jewel-encrusted ice bucket and 20 minutes with the cast from The View. Now you're saying a year later that my contract is no good? What do I do with all this debt I now have? And what do I do with Joy Behar, who won't leave my house and keeps prank calling Star Jones?".

So in theory the NHL could challenge some of these older contracts - and agents are worried. In practice, though, the NHL may face some legal challenges.


WayneC said...

Hi Eric...

I figure the NHL could 'review' deals that haven't come into effect yet, i.e. extensions, but, legally, do you think they could review contracts that have been in effect for a year or more, e.g. Hossa and Zetterberg's deals are going into their second years... how can they go back and retroactively toss out the deals they played under last season?


Mike said...

I'm pretty certain the league couldn't challenge contracts that THEY had already approved.

Eric Macramalla said...

it can mike

Jim said...

To me Section 26.10(b) would be applied if the league registered the contract but found out later the team was paying the player "under the table".

Anonymous said...

Look at 11.6(b) of the CBA, Eric. Once an SPC is approved and registered, the league can only challenge within 60 days "from the date upon which the facts of the Circumvention became known or reasonably should have been known to the NHL." An arbitrator's ruling is not a "fact of Circumvention." The NHL can only INVESTIGATE under 26.10 -- and this investigation can lead to fines/penalties on the team, but not the revocation of a contract that's already been approved and registered.

GSC2K2 said...

Interesting blog, Eric. I have been hanging out my shingle, as it were, on HFBoards, Tom Benjamin's blog and Mirtle's old blog for some time. i haven't gone to the extra step of getting my own blog, though. Good show.

Contrary to anonymous' view above, it would be an open question as to whether Bloch's ruling would start the clock on the other contracts. It is an interesting argument to make, IMO; does the clock start from when you merely know the facts, or when you know both the facts and the additional fact that said facts constitute a Circumvention?

MO said...

This is anonymouse again. Also an attorney with a lot of experience in arbitration (albeit, not in labour law).

A legal ruling is not a fact. Indeed, if you look at the language of 11.6, it's pretty clear that the "fact of Circumvention" to which it refers is any evidence that emerges post-approval/registration of an act that an SPC circumvents the cap (e.g., the discovery of an under the table arrangement of some kind to compensate the player outside the SPC, a smoking-gun document that reveals the SPC was designed in a manner to circumvent the cap, and so on).

A legal ruling is not a "fact" that constitutes an act of circumvention -- it's a legal interpretation of the CBA. To argue that the arbitrator's ruling amounts to a "fact of Circumvention" of which the NHL just became aware would border on the absurd and would very likely be rejected out of hand by any court or tribunal.

GSC2k2 said...

I am also a lawyer (a Canadian one, as opposed to an "attorney" :-) ) with 23 years of high-level commercial experience.

One thing that I have found in my 23 years is that the phrase "it is clear that ..." is not much of an argument.

Evidently you seem to feel that it is "clear". Good for you. I am simply pointing out the counter argument. You can find analogous arguments in many limitations acts in various jurisdictions, where the limitation period does not commence until you become aware of the existence of your claim. The argument would be that, while one might be aware of the "facts" (in the sense of the actual contractual details), one may not be aware that such facts constitute Circumvention.

That is the argument in a nutshell. It is rather cavalier (and rather presumptuous as well) to suggest that the same principle that drives the law of limitation periods in many jurisdictions "border[s] on the absurd".