Friday, September 10, 2010

Awaiting Possible NHL Sanctions on Kovalchuck Deal: The CBA, The Decision and What The NHL May Do

The Devils are waiting on the NHL to rule whether they will fine the club for circumventing the cap on the first Kovalchuk deal.

Here's what you need to know about the possible sanctions:

1) Article 26.13(c) of the CBA sets out the possible penalties that can be imposed by Bettman. Note that since the Devils were found to have circumvented the CBA, Bettman himself imposes the fine. This is interesting since Bettman is generally seen as acting for the NHL owners, although arguably a Commissioner should be neutral working for the best interest of players and clubs. This also explains why Daly was front and centre on this and not Bettman - optics. Bettman can't be seen as advocating one position then imposing a penalty at a later date.

Article 26.13(b), if the player was found to have circumvented the cap, then the arbitrator would be the person determining the penalty.

2) Under Article 26.13(c), should Bettman elect to fine the Devils, he can go as high as $5 million, and can't go below $1 million. If you are hearing the range as $1 to $3 million, that may be people trying to guess the ultimate fine. However, as per the CBA the range it $1 to $5 million. In particular, the CBA provides that the NHL may
"Impose a fine of up to $5 million in the case of a Circumvention by a Club..., but in no circumstances shall such fine be less than $1 million..."
3) Bettman can also rule that the Devils will need to forfeit draft picks - Article 26.13(c)(iii).

4) Any fine would come out of the salary cap. This is significant for the Devils. With the Kovalchuk deal, the Devils are already $3 million over the $59.4 million cap. Players like Zubrus, Salvador and Rolston could be on the way out, although Rolston is effectively untradeable at $5 million a year.

Richard Bloch's arbitration decision in the Kovalchuk case may influence the NHL's decision as to the amount it will fine the Devils, or whether it will fine the Devils at all. Remember that Bloch went out of his way in the decision to find that the Devils did not intend to circumvent the cap, and rather made his finding of circumvention based on the net effect of the contract (intention aside). At law, if a finding of intention was made it would have suggested that the Devils operated in bad faith - which is pretty serious. That didn't happen. Here's what Bloch wrote on that point:
Nothing in this Opinion should be read as suggesting that either the Club or Mr. Kovalchuk operated in bad faith or on the basis of any assumption other than that the SPC was fully compliant with the CBA. While intent is specifically listed as a potentially relevant factor in a proceeding such as this, the System Arbitrator here concludes the SPC [player contract] terms themselves demonstrate this agreement “has the effect of defeating” the provisions of the CBA, with particular reference to the Team Payroll Range language.
Given that no finding of bad faith was made, I would be surprised to see the NHL impose a stiff penalty on the Devils. Frankly, if any penalty materializes at all, I will be surprised.

Absent a finding of bad faith, imposing a penalty would certainly be a bold move by the NHL. That being said, that may be precisely what the NHL may consider doing to send (another) message. However, in my opinion, the message has already been received loud and clear.

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