Saturday, July 24, 2010

Will Lamoriello Challenge The NHL? Will Be Business Decision

New Jersey Devils President, CEO, General Manager Lou Lamoriello has issued the following statement in response to the NHL’s rejection of the team’s contract with Ilya Kovalchuk:
“We are extremely disappointed that the NHL has decided to reject the contract of Ilya Kovalchuk. The contract complies with the terms of the Collective Bargaining Agreement. We will have no further comment until the process outlined in the CBA is complete.”
Steps Under The CBA

The CBA prescribes specific steps to address and resolve disputes. So where are we now?

At this point, the NHL has advised the Devils that the Kovalchuk contract has been rejected on the basis that it circumvents the CBA. In the opinion of the NHL, the contract was designed strictly to get around the CBA by artificially pushing down the yearly salary cap hit by adding on throwaway years.

Remember that the salary cap hit is not what a player makes that year; rather it’s the yearly salary average across the life of the contract. The yearly cap hit on the Kovalchuk contract is $6 million a year, even though Kovaluchuk is slated to make $11.5 million in 2011 and $550,000 in the last year of his contract.

Under Paragraph 26.12, after the NHL advised the Devils of its decision, the Devils get up to 3 days to decide what to do next: either agree with the NHL’s ruling or contest decision by going to arbitration. The Devils are still considering what to do.

If the Devils decide to go to arbitration, as per paragraph 26.13(a) of the CBA, they have 48 hours to advise of the choice. A decision from the arbitrator would then issue within 10 days (7 days to decide and 3 days to issue the decision). However, the parties need to agree on an arbitrator; if they can’t then there would be delays. The parties can also agree to extend deadlines.

If the arbitrator makes a finding that the Devils circumvented the CBA, it then falls on Commissioner Gary Bettman to impose a penalty - Paragraph 26.13(c). In this case, while there are a bunch of penalties under the CBA, like big fines, the likely penalty would be a ruling that the contract is void. (If the arbitrator made a finding of circumvention against a player, then the arbitrator would decide the penalty and not Bettman).

Will He Or Won't He - Does Lamoriello Go To Arbitration?

So we should know by early next week if the Devils intend to contest the NHL’s ruling. Lamoriello’s statement that the Devils are “extremely disappointed” by the ruling and “will have no further comment until the process outlined in the CBA is complete” may suggest they are considering challenging the NHL. However, this is mere speculation.

In the end, whether the Devils elect to challenge the ruling will ultimately be a hockey decision and not strictly whether they think they could win at arbitration. Can the Devils re-work the contract in a way that will still allow them to address their other needs. Can the Devils re-do the deal without jeopardizing their ability to sign Zach Parise to a long term extension.

As well, before this season, the Devils were in need of a puck-moving defensemen with offensive punch. While recently signed defensemen Anton Volchenkov and Henrik Tallinder were good acquisitions, both are defensive minded. Paul Martin was a mobile defenseman for the Devils, but he’s gone after signing a 5 year deal with the Penguins. That means that Andy Greene will be counted on to provide some offensive punch, and some are not convinced that he can do so consistently. This may become an issue the Devils need to address and they will need cap space to do so.

Don’t forget that had the Kovalchuk contract been approved, there would have been cap causalities. Rumoured names as far as trades go included Dainius Zubrus, Travis Zajac, Bryce Salvadore, captain Jamie Langenbrunner and Patrick Elias. Some of these contracts would be tough to move; the point, though, is that Kovalchuk’s existing contract would have had a domino effect and a restructured deal could remove further cap dollars forcing more moves. That may not be something Lamoriello feels comfortable with, and may therefore give arbitration a chance.

If the NHL’s ruling has significantly disrupted Lamoriello’s best laid plans, then a challenge could well materialize. If it does, the NHL may characterize the last 6 years of the Kovalchuk contract as throwaway years, with the player making $750,000 in that first year, and $550,000 the last 5. While there have been other long contracts signed recently (Zetterberg, Franzen, Luongo, Savard), the only one that had conquerable throwaway years was that of Hossa, with 4 years – and that contract was investigated by the NHL. The structure of the contract, the NHL may argue, was designed strictly to circumvent the CBA and for no other reason.

Lamoriello would argue, in part, that the CBA does not expressly exclude these deals and that the NHL can’t know whether Kovalchuk will play into his 40s.

Indeed, both sides have reasonable arguments.

This coming week will be interesting and will play a big part in defining the NHL landscape particularly with a number of star players looking to sign lucrative deals before the current CBA expires in 2012, including Joe Thornton, Steven Stamkos, Zdeno Chara, Shea Weber, Parise, Drew Doughty, Brad Richards, Andrei Markov, Jeff Carter, Patrice Bergeron, and Alexander Semin. The NHLPA may want to see an arbitration case so it can better predict the validity of future contracts.

Should be an interesting week – strap yourself in.

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