Monday, August 9, 2010

Kovalchuk Rejection: A Few Things to Keep In Mind As We Await Copy of Decision

While we wait for a copy of the decision, here are a couple of things to bear in mind:

1) Penalty for Circumvention

As per Section 26.13(c), if the arbitrator makes a finding of circumvention against the Devils (and not Kovlachuk), then the NHL and not the arbitrator decides on the penalty. The league can impose a variety of penalties, including up to a $5 million dollar fine, forfeiture of draft picks and voiding of contract.

In this case, I would be surprised to see anything beyond the voiding of the contract. This is not a case where the conduct by the Devils was so outrageous that it deserves more.

2) Appeal of Decision

Will the NHLPA appeal the arbitrator's ruling? Section 45.8(e) of the CBA provides as follows:
"Awards of the System Arbitrator shall upon their issuance constitute full, final and complete disposition of the dispute, and shall be binding upon the parties to this Agreement and upon any Player(s) or Club(s) involved".
At law, this is called a privative clause. What it means is this: the losing party can appeal the decision to a court of law. However, a Court will generally not interfere with the ruling of the arbitrator unless there was a pretty obvious and big mistake by the arbitrator. The parties agreed that decision will be binding, and a judge will be sensitive to that and not want to interfere.

So barring exceptional circumstances, it is unlikely that we will see an appeal. Anything is possible though.

3) NHL Can Challenge Previous Contracts

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).

So in theory, the NHL could look to challenge previously approved contracts like those of Hossa, Zetterberg, Savard, Luongo and Franzen.

If it does, it 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.

For full discussion on #3, please read Uh-Oh: NHL Could Move to Challenge Hossa, Luongo & Others

4) New Standard for NHL Contracts

What will be the new standard for NHL contracts? Is the Hossa deal the limit (12 years, 4 throwaway years and playing to 42)? Would another 'Hossa' type deal be challenged? Will this win inspire the NHL to be more aggressive?

The arbitrator's decision may provide some clarity.

Stay tuned.

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