Monday, September 13, 2010

Kovalchuk: Why NHL's Sanctions Are Suprising; Players Less Likely to De-Fehr Putting Donald At Helm?

In a surprise ruling, the NHL has come down very hard on the Devils for its circumvention of the collective bargaining agreement (CBA) in connection with the Kovalchuk deal.

The NHL has imposed the following penalties on the Devils:

1) A $3 million fine;

2) Forfeiture of its 3rd round pick in the 2011 draft; and

3) Forfeiture of its 1st round draft pick in one of the next four drafts, and the Devils must let the NHL know what pick they will forfeit a day after the Cup final this season.

The CBA provides for a loss of cap space equal to a fine. However, the parties at the outset agreed that any fine wouldn't count against the cap, so the Devils aren't taking a $3 million cap hit.

This, however, is likely little comfort to the Devils, as the club will have to give up 2 draft picks. In a salary cap world, that's a steep price. Very steep.

This past Saturday, I wrote that it wouldn't be a surprise if the NHL imposed a monetary fine since it wouldn't count against the cap. While the Devils wouldn't welcome a fine, a fine alone wouldn't be a game changer since it wouldn't count against the cap.

However, the NHL's ruling that the Devils will have to forfeit draft picks is a surprise. 


Arbitrator Richard Bloch went out of his way in the Kovalchuk 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. Findings of bad faith at law generally carry stiffer penalties than cases where someone has done something wrong but didn't intend to.

Here's what Bloch wrote in is decision on the issue of intention (read the decision here):
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.
So without a finding of bad faith, it's surprising to see the NHL impose such a serious penalty on the Devils in the form of the forfeiture of draft picks.

Clearly, the NHL is making sure that's its message is being heard loud and clear.

Earlier today, in an exclusive story, I reported that Donald Fehr would only agree to head up the Union if the players "overwhelmingly" voted to accept his appointment. At present, some players have yet to endorse Fehr.

Fehr ran the MLB player union for 27 years before he stepped down in 2009. He was instrumental in making the union the most powerful in sports, and masterfully guided the players through the collusion grievances in the 80s (which resulted in an award of $280M to players) and the 1994-1995 strike. He also guided the players through CBA negotiations in 2002 and 2006, the first negotiations since 1970 that were achieved without a work stoppage.

Given the way the NHL has quite convincingly handled the Union, the players may well turn to Fehr sooner rather than later.


Dan said...

It seems like this was the NHL answering to the angry mob of other GMs who have been upset with what Lamoriello and the Devils have gotten away with for years (getting out of cap trouble by putting Mogilny on LTIR when he may not have been hurt and trading cap space away in the Malahkov deal without getting anything in return).

I don't think Bettman or Daly wanted to fine the Devils this harshly, but so many GMs and executives were public with these deals including a few that carry a lot of pull like Burke and Leonsis. To me, this is a lot of GMS and owners who weren't smart enough to think outside the box. Leonsis has to be upset that he has Ovechkin for a flat contract when he could have been more creative. And Burke complaining is pretty funny after all his questionable actions before trading for Phil Kessel.

I thought Greg Wyshynski said it best on a possible appeal: They could appeal to the Board of Governors, which would be like a mouse appealing its death sentence to jury of alley cats.

Eric Macramalla said...

Agreed - there were many upset GMs and owners. Perhaps, however, a fine alone would have been sufficient. After all no real harm flowed from this for other teams as the contract was never put in place.

Dan said...

The Devils are just lucky that part of the new agreement reached with the league and the NHLPA is that no cap space can be taken away because that would have been a devestating blow for the Devils.

I don't think the loss of a 1st round pick is a gigantic deal because they can chose what year to use it up to 2014 and if chosen that year, it wouldn't even hurt the team until at least 2017. And they have the option of making a decision after the Finals, so hypothetically they could win the Cup and a day later give up the 30th pick overall. The Devils could find a weak draft year as well.

The $3 million fine, while not big for say the Leafs or Canadiens, is actually quite a lot of money for the Devils. This is a team that hasn't turned a profit in a number of years and was hoping that the Kovalchuk signing would bring in a lot more fans. The $3 million would offset any revenue from a long playoff run.

Back to the ruling itself. I definitely believe the Devils took it too far, but this was a case of circumventing the cap just like the Hossa, Luongo, Savard and Pronger deals were. I don't like the idea of the NHL potentially hurting one team with a loss of draft picks when other teams got away scott-free.

I do find it amusing that the Devils are getting punished harder than the Patriots when the NFL handed down their fines and loss of draft pick for Spygate.