On Tuesday, within hours of the press conference introducing their new $102 Million Dollar Man, the New Jersey Devils received word that the league had rejected the contract on grounds that the deal was trying to circumvent the salary cap.
The deal is now in a holding pattern, waiting for an arbiter to rule, with the team and player considering how much to fight the league’s opinion.
Kovalchuk would earn $98.5 million of the $102 million in the first 11 years of the deal, but only $550k in each of the final five seasons. The star forward would be 44 when the deal expires.
Empty seasons at the end of a contract has been an issue in the Commissioner’s Office for the last 13 months because of two deals that took a similar route last summer: Philadelphia’s deal with Chris Pronger and the Blackhawks ’ contract with Marian Hossa.
Because the CBA uses the average annual salary of a player to calculate the number used for the salary cap, stretching a deal out with empty seasons at the end is a loophole that effectively allows a team to lower the cap number for a player while still paying them what they want.
There are a number of significant factors that play into this contract and the league’s ruling, perhaps the biggest of which has been widely ignored.
New Jersey’s president and general manager Lou Lamoriello was aware of the league’s plans to deny the deal prior to Tuesday afternoon’s news conference, but went ahead with the blockbuster introduction anyway. Lamoriello has long been against contracts that tweak the CBA like this, which is why many observers were surprised the Devils would offer Kovalchuk a deal like this.
Add to that knowledge the reality that the Devils have a cap specialist on staff that worked intimately with the league office when the current CBA was put together, and the dominoes don’t appear to fall in a straight line.
It appears that perhaps Lamoriello, one of the most respected and influential figures in hockey, may have been using this deal to accomplish three goals.
First, clearly New Jersey wanted the elite forward. They traded for him during the 2009-10 season, and there’s no question that Kovalchuk brings a special ability to their roster. Since the lockout, only Washington’s Alex Ovechkin has been a more prolific scorer; Kovalchuk has just done it in relative silence because he was stuck in Atlanta.
The second and third goals of Lamoriello might be more mischievous than a surface level analysis would lead one to believe.
Because Lamoriello has never been a fan of deals like Pronger’s or Hossa’s, could it be that he intentionally went so far over the line that he knew the NHL would reject the deal on principle?
The league’s ruling now sets a standard by which future deals can be judged, allowing the league to keep tighter control on the abuse of this loophole. Lamoriello has never been accused of being dishonest, but he could be doing the league a favor by giving them a blockbuster deal to use as ammunition in future CBA negotiations.
The other part of this deception could be that Lamoriello could, with a commitment from Kovalchuk and his agent, Jay Grossman, have a third party force the deal to be restructured to a level that’s more acceptable to the Devils than his enormous salary demands allowed them to offer originally.
If the arbiter simply eliminates the junk years at the end of the contract, the Devils could be put in a rough financial position. Kovalchuk’s cap number would jump to $8.955M, which is bigger than Sidney Crosby and Evgeni Malkin of the Pittsburgh Penguins. With the Devils needing to negotiate new deals with stars like Zach Parise in the near future, this could handcuff them significantly.
But if the arbiter comes back with a ruling that the two sides need to negotiate a new contract to spread the money out more, lowering the base salary for a number of the seasons in the middle of the contract down from $11.5M (which is right at the peak salary for an individual player under the current CBA), the Devils might actually save money on a new contract and still get their guy.
The long-term implications for the league could be massive, though. This rejection clearly draws a line in the sand and will make this loophole something that will be addressed in any future negotiations between the NHLPA and the league regarding a new CBA. Deals like the one the Hawks gave Hossa last summer will probably become a thing of the past.
Which makes the Hawks’ deal with Hossa that much more significant. It also makes future negotiations, like the extension talks that will likely take place with Jonathan Toews and Patrick Kane in four years when they are nearing the end of their respective contracts, more tricky within the constraints of the CBA and salary cap.
Whether or not this ruling and the subsequent actions (and reactions) from the league lead to any changes with how the NHL figures the salary cap will be an evolving story in the days, months, and years to come. But no matter where the evolution of the cap goes from this point, the Kovalchuk contract will serve as a turning point in NHL history.