Why P.K. Subban Is Not Underpaid & Why He Got A Good Deal

by Fraser Blair

Restricted Free Agent (RFA) P.K. Subban and the Montreal Canadiens recently agreed to a 2 year $5.75 million contract, and the consensus is that the Habs ‘won’ the deal. Subban was reportedly seeking a 5 or 6 year contract worth an average north of $5 million. It is therefore easy to see how many could view the actual deal as a significant bargain for the Club. 

But I’m not convinced. Before I justify my position, I need to explain how the market for RFAs operates. 

The Collective Bargaining Agreement that governed the market for NHL players between 2005 and 2012 dramatically changed the market for RFAs. The last agreement (as will the new agreement) allowed players to qualify for unrestricted free agency after 7 NHL seasons. Prior to 2004, players could only qualify for UFA status following 10 seasons in the NHL. The major consequence of this new system was an increase in the number, value and length of long-term contracts handed out to players after the completion of their Entry-Level Contracts (ELCs). 

Many of these contracts consumed the entirety of a player’s RFA years as well as a number of his first years of UFA eligibility. For example, Erik Karlsson’s 7 year $45.5 million contract with the Ottawa Senators covered all four of his RFA years as well as first three UFA seasons. Tyler Myers’ 7 year $38.5 million deal with the Buffalo Sabres did the same.

The annual average value (AAV) of these two contracts takes account for the player’s value at several stages of his career: his four individual seasons as an RFA and the block of UFA seasons. As a result, the AAV doesn’t accurately gauge the player’s market value in any respective seven seasons, especially not his value during his first two seasons as an RFA. 

So if we’re going to determine whether or not Subban is underpaid under this current deal, we can’t look at the RFA-UFA extensions. Rather, we have to compare the AAV of Subban’s contract to the AAV of similar contracts signed by similar players. 

In determining who and what was similar, I limited my search to defencemen who signed two year contracts covering the two seasons immediately following the expiration of their ELCs. For the purposes of ensuring salary cap neutrality, I restricted my focus to contracts signed after 2010, when the upper limit was $59.6 million. 

Here are the top 5 most expensive contracts of this type by AAV. Subban’s contract tops the list: 

P.K. Subban (Montreal Canadiens): 2 years/$5.75M ($2.875 AAV) 

Erik Johnson (St. Louis Blues): 2 years/$5.2M ($2.6 AAV)

Michael Del Zotto (New York Rangers): 2 years/$5.1M ($2.55 AAV)

Dimitri Kulikov (Florida Panthers): 2 years/$5M ($2.5 AAV)

Zach Bogosian (Winnipeg Jets): 2 years/$5M ($2.5 AAV)

Even if you think that Subban’s the best player in this class (hint: he is, both by advanced and conventional metrics), he’s still the highest paid player on that list by a significant margin (10% is a big difference). 

Furthermore, the backloaded nature of his contract also insures that Subban will receive a qualifying offer of $3.75M for the 2014-2015 season. No other player in this class was accorded that benefit to that degree. (Players making over $1 million must be offered 100 percent when made qualifying offer).

In conclusion, these players show the two-year value of a top-4 defenceman following the expiration of his ELC. Based on the salaries of these players, it appears that Subban has been paid fairly relative to his peers. He’s receiving more money than any other defenceman in recent history on a 2 year contract following his ELC. The structure of the deal also ensures a healthy salary for the 2014-2015 season. 

New NHL CBA: Could We See Sign-And-Trade?

by Fraser Mackinnon Blair (@fmblair)

Although the NHL season has only just begun, some are already looking forward to seeing how the new CBA will effect this summer’s free agent period.

We know that one of the NHL’s main requirements for the new CBA was a term limit on player contracts. The NHL and the NHLPA agreed to impose a general contract limit of 7 years, with the exception that a team may re-sign its own player to an 8 year contract. The rule is there to give teams an advantage in negotiating contracts with their home-grown stars.

However, it’s possible that the contract limits add an additional layer to the new CBA: the sign and trade. The sign and trade is very popular in the NBA. Not so long ago, both Lebron James and Chris Bosh were acquired by the Miami Heat via the ‘sign and trade.’ 

A sign and trade occurs where a pending free agent signs an extension with his current team on the understanding that he will be immediately traded to another team. It became popular in the NBA as the rules allowed a free agent to sign a longer and more expensive contract extension with his current team than he could with another team.

It made sense for the Cleveland Cavaliers to entertain the possibility of a sign and trade when they knew that LeBron James was going to sign with another team and that they were otherwise going to lose him for nothing. Given that there were many teams interested in James, including the New York Knicks, the Cavaliers were able to obtain a couple of draft picks from the Miami Heat in exchange for their superstar. A small pittance, but a pittance nonetheless.

Let’s take this back to the NHL.

Corey Perry and Ryan Getzlaf of the Anaheim Ducks headline the list of potential unrestricted free agents this summer. At 27 years old, Perry and Getzlaf are likely to receive a maximum length contract, whether they sign with the Ducks or elsewhere. The question is whether another team (say the Leafs) would approach the Ducks with a sign and trade offer.

Assuming that Perry or Getzlaf will not re-sign in Anaheim and are happy to play for Toronto, then the sign and trade is a win for all sides. The players get their 8 year contracts and move to a preferred location. The Leafs get their players and the Ducks get some form of compensation.

But not so fast.

 

According to the Summary of the CBA that has been posted on the NHLPA’s website (we’re using a summary because the final document hasn’t been completed), a team’s 8-year rights cannot be ‘traded’ after the trade deadline of the previous season. As a result, the Leafs could not trade for the rights of Perry/Getzlaf during the exclusive negotiating period between the end of the season and July 1st and subsequently sign the players to 8-year contracts.

In addition, the 8 year contract rights in the case of a UFA expire on July 1st. So such a deal would have to be constituted between the end of the season and the beginning of free agency. By design, this is also the period during which teams have exclusive negotiating windows with their pending UFAs.

So what does this all mean?

The sign and trade in the NBA has created this weird situation where the new (Heat/Leafs) team negotiates with the player (James/Bosh/Perry/Getzlaf) through the old team (Cavaliers/Raptors/Ducks). This may look like tampering, but the fact that it has gone on for this long in the NBA suggests otherwise.

This also seems like a blatant circumvention of the CBA but the summarized CBA doesn’t speak directly to whether the sign and trade is forbidden. Given (1) this silence, (2) the known history of the sign and trade in the NBA and (3) the fact that the same law firm (Proskauer Rose) has handled the CBAs of both leagues, the presumption would likely be that they are allowed.

At this point we don’t know for sure, but I expect that savvy teams with pending UFAs will reach out to potential suitors for their UFAs, and potential suitors will look to get a jump on their competitors prior to July 1st. The end result will be fewer UFAs available at-large on July 1st.

Of course, this could all be meaningless if the final CBA outlaws these maneuvers. But at this point it appears that the sign and trade will be allowed and will impact the way teams approach free agency.

TSN SportsCentre Hit: Me & Bruce Arthur Chat Lance Armstrong with Dan O'Toole

I appeared on TSN's SportsCentre last night after the big Oprah-Lance interview. I talked about the legal side, and why Lance did what he needed to do on the criminal side.

After the clip, I surprised the whole TSN staff with new cars. Everyone screamed.

Click here to watch the clip.

TSN Article: Lance Armstrong Interview & the Key to the Interview

I wrote an article late last night on the Lance Armstrong-Oprah Winfrey interview. I didn't write about Stedman, but I kept coming back to him in my mind. Not sure why. 

In my article I address the most important part of the interview and what it was critical for Lance to get it right. And he did.

Click here to read the article.

TSN Article: Gomez/Redden Deal - Less Courtesy, More Concession In New Buyouts

I wrote an article for TSN about the new buyout rules. This follows the Habs sending Scott Gomez home without pay. Were the Habs really doing Gomez a favour by letting find a place to play this season?

The article is entitled Less Courtesy, More Concession In New Buyouts and can be found here.

CTV National News: Sandie & I Chat Lance Armstrong

I joined Sandie Renaldo at CTV National News today to talk about Lance Armstrong, his Oprah confession and the impact of his admission on his legal struggles.

Click here to watch.

CBS Article: Scott Gomez expulsion - Grounds for NHLPA grievance?

I wrote an article for CBS Sports entitled Scott Gomez expulsion: Grounds for NHLPA grievance?. This is on the heels of the Canadiens sending Gomez home with pay to preserve their option to buy him out next season.

Could this lead to a grievance being filed by the NHLPA?

Click here to read the article.

Interview with Former NHLPA Head Paul Kelly

Lats night on my radio show Offside, we interviewed Paul Kelly, the former head of the NHLPA. As is always the case with Paul, the interview was very well received. He provided tremendous and unique insight on the CBA talks.

Paul has been a lawyer for over 30 years. He was selected by his peers as one of the top 100 Super Lawyers in Massachusetts. Paul is a Partner at the law firm Jackson Lewis LLP.

In the past, Paul has represented and performed legal services for the Boston Red Sox, Marty McSorley (then of the Boston Bruins), Bobby Orr and Terry O’Reilly. Paul is currently involved in sports-related matters on behalf of Penn State University, Harvard University, the LPGA and the KHL.

Click here to listen to the interview. If you have been following the NHL lockout, this is a must listen.

Canadiens Have No Choice But To Part Ways With Gomez

In 38 games last season, Montreal Canadiens forward Scott Gomez scored recorded 2 goals and 9 assists for 11 points. The season before, Gomez scored 7 goals and ended the season with 38 points over 80 games.

In light of the new CBA, what are the chances that Gomez will still be a Hab when his current contract expires after the 2013-14 season?

None. Zero. Zip. Just Not going to happen.

Let’s look at his contract. He has about 1.5 years left on a deal that will pay him $5.5 million this season and $4.5 million next season. The cap hit, which is key, will remain $7.357 million – what it’s been all along. Remember the cap hit is the average yearly value of a contract and not what a player makes that year.

Here’s the problem. The salary cap for the 2013-14 season will be $64.3 million per team. Next season, the Canadiens already have about $60.2 million allocated to 16 players. There are 23 roster spots on a team. So if they keep Gomez, they will only have $4.1 million to sign 7 players. That's a problem.

As well the minimum salary for 2012-2013 is already at $525,000. When you divide $4.1 million across 7 players, that's $585,000 per player. Problem two.

Oh yes – the Canadiens haven’t signed P.K. Subban yet. Meet problem three.

So if even the Canadiens believe that Gomez has value in a new system coached by Michel Therrien, the team simply cannot afford to dedicate $7.357 million dollars of cap space to Gomez. It is not only impractical, but given the math, it’s just not feasible. This is not to diminish Gomez. He is a tremendously talented hockey player and great in the room. Problem is his price tag is just too high.

So what to do with the Gomez contract?

First what they can’t do: bury his contract in the minors a la Wade Redden. Under the terms of the new CBA, his contract would still count against the cap.

So now on to what they can do: (1) buy him out, or (2) trade him.

Under the terms of the new CBA, teams will be provided with two amnesty buyouts. This will allow a team to buyout a player and not have his salary count against the cap. This is new. Under the old CBA, the buyout amount counted against a team’s salary cap.

So the Canadiens could apply one of these amnesty buyouts to the Gomez contract. That will happen unless the Canadiens can trade him to another team.

A trade is not out of the question. In 2013-14, at $4.5. million Gomez will be paid about $2.86 million less than his cap hit of $7.357. Low payroll teams that need to make the salary cap floor could find Gomez to be an attractive option since they would be paying him less than his cap hit. That means they would enjoy a net gain on his salary. As it stands now, there are 11 teams below the $44 million cap floor for 2013-14. So certain teams may see value in acquiring Gomez.

So it looks like Gomez's days with the Montreal Canadiens are numbered.

TSN Radio Clip: The End of the NHL Lockout

I joined Jim Tatti at TSN Radio Toronto in between NFL games to talk about the end of the NHL lockout and the shrinking NHL middle class.

Click here to listen.

CTV National News Clip: NHL Lockout Is Over

I join CTV National News to talk the end of the NHL lockout.

Click here to watch.

TSN Television: We Talk NHL Lockout & Disclaimer

I joined Cory Woron on TSN's SportsCentre to talk NHL lockout and the NHLPA's authority to disclaim and/or blow itself up.

Click here to watch.

CTV National News: D-Day for the NHL

I appeared on CTV National News to discuss the possibility of the NHLPA disclaiming interest today and things subsequently falling apart.

Click here to watch.

CTV National News: NHL Lockout Talk

I join CTV National News to talk the latest on the NHL lockout.

Click here to watch.

TSN Radio Clip: NHL Lockout & What's Next

I joined Jim Tatti at TSN Radio Toronto to chat NHL lockout, the disclaimer and what's next.

Jim got me all riled up.

Click here to listen.

Team 1260: NHL Breakdown with Jason Gregor

I joined Jason Gregor today on the Team 1260. We talked about all that broke on the NHL front today, including the disclaimer re-vote and the NHLPA response to the lawsuit.

Here's a link to that discussion.

NHLPA Response to NHL Lawsuit: Please Punt

Special contribution by Jacob Zelmanovitz, Lawyer - @lawjz

Well it’s happened again, the lawyers have muddied the already murky lockout waters some more, and the PA’s attorneys have filed a motion with the Manhattan court today asking that it throw out the League’s lawsuit.  The timing of the motion is interesting, coming the day after the union’s executive committee's authority to disclaim had lapsed, but more on that later.

The motion essentially makes two arguments, (1) that the league’s lawsuit was filed prematurely and (2) it is an improper attempt to win the race to the courthouse. 

On that first point, the union makes the obvious arguments – it hasn’t disclaimed yet, and it may not disclaim.  Courts cannot pass judgment on hypothetical questions; it’s like asking a boxing judge to decide now who’d win in a fight between Manny Pacquiao and Floyd Mayweather. 

As the legal brief says, there are too many ‘ifs’ in the league’s complaint:  The league wants to court to decide what happens if a majority of the players vote to authorize the NHLPA to disclaim, and if the NHLPA decides to exercise such authority, and if individual players decide to then sue the NHL under the antitrust laws, and if those players ask that the lockout be declared illegal. 

And here’s where the timing of this motion come to play: while the first of those ifs did happen – the majority of the players did vote to authorize the NHLPA to disclaim – none of the others have.  Furthermore, the union argues, there must be a non-hypothetical question at the time the lawsuit was commenced.  Recall that the lawsuit was filed shortly after we learned that the union was going to vote on disclaimer, but before the voting was anywhere near done.  And now, on January 3, 2013, we know that this vote was a false alarm, and the union did not disclaim.  So, the union argues, the point is moot and why bother with this lawsuit? 

Now that last rhetorical question has an easy answer, and it leads to the second argument mentioned above, that this is all a ploy by the league to get the case heard in a court thought to be more sympathetic to the owners.  Essentially, the union is saying that in the race to the courthouse, the League cheated and took a head start.

This reads to me as a play to judges’ frequent distaste for these races to the courthouse, or "forum shopping" as attorneys call it.  By timing this right, the union has shown that the main 'threat' that the league relied on, the union’s vote to authorize disclaimer, was not really a threat, as nothing came of it.  Now that such a vote, the first of the 'ifs' listed above, has been shown to be meaningless in the conflict between the NHL and the union, the union might now better argue that the second 'if', actual disclaimer, is similarly inconsequential, and so not deserving of the court's attention.  In fact, they will likely argue that the only time a court should intervene is if and when the last of those 'ifs' happen and a player tries to have the lockout declared illegal by filing a lawsuit.  

Copy of NHLPA Request to Have NHL Lawsuit Punted

Today the NHLPA filed its response to the NHL's lawsuit, where the league asked the Court to declare the lockout valid if the NHLPA dissolved. As well, the NHL wanted the Court to declare that the player contracts were all void if the NHLPA dissolved.

Here's a copy of the NHLPA's response.

CTV National News: About Last Night

I jumped on CTV National News today and talked about last night's very riveting NHL evening.

Would the NHLPA disclaim?

Well, the Union didn't dissolve. What does that mean?

Click here to watch.

TSN Article: Up Against A Deadline - Time for the NHLPA to Disclaim?

I wrote an article for TSN today entitled Up Against A Deadline - Time For NHLPA To Disclaim?.

To read the article, click here.

CTV National News: I talk NHL Lockout

I joined CTV National News today to talk NHL lockout and the disclaimer of interest looming over these talks.

Click here to watch the clip.

ESPN Article: Burnside and I Chat NHL Lockout & Disclaimer

I was interviewed last night by ESPN's Scott Burnside. We chatted about a possible disclaimer of interest and what it means.

Click here to read the article.

TSN Radio Clip: January 2 & What It Means

I joined Scott MaCarthur today on TSN Radio in Toronto talk NHL lockout. We addressed today's  NHLPA disclaimer deadline and what it means. 

Are we close to settlement?

Click here to listen.