An Early August Surprise
Talking to people throughout the hockey industry this morning, it was clear most expected that while Ilya Kovalchuk's 17-year contract with the New Jersey Devils was a rather obvious - blatant? - attempt to circumvent the NHL's salary cap system, a number of similar contracts allowed in recent years by the NHL was going to make it difficult for arbitrator Richard Bloch to side with the league in its rejection of Kovalchuk's deal.
But Bloch did just that, saying the Kovalchuk contract "has the effect of defeating" the NHL's cap system.
"That's the thing with arbitration - you never know what might happen," said one surprised NHL general manager in the wake of the decision.
"Now is where it gets really interesting. What will happen with the contract now? Will the Devils re-work it? It will be interesting to see."
Kovalchuk's contract was heavily front-loaded to the extent $99 million was to be paid within the first 12 years, with the salary dwindling to $550,000 in the final seasons.
"In this case, the record strongly supports the claim this contract is “intended to, or has the effect” of defeating or circumventing the Salary Cap provisions of the CBA," wrote Bloch in his decision.
"The overall structure of this (contract) reflects not so much the hope that Mr. Kovalchuk will be playing in those advanced years, but rather the expectation that he will not. This is a long contract --17 years -- the longest in NHL history. That, in itself, poses no contractual problem. . . . . But Kovalchuk is 27 years old, and the agreement contemplates his playing until just short of his 44th birthday. That is not impossible, but it is, at the least, markedly rare. Currently, only one player in the League has played past 43 and, over the past 20 years only 6 of some 3400 players have played to 42."
The decision - an enormous victory for the Bettman administration - means Kovalchuk is now again a free agent, and its possible the Los Angeles Kings may again jump into the picture and try to sign the 27-year-old Russian sniper.
In theory, the KHL might also take another run at Kovalchuk.
The arbitration decision is an embarrassing result for the Devils, but also for the NHL Players Association, who filed a grievance when the contract was rejected even though these type of contracts not only benefit the minority of NHL clubs who can afford to pay for them, but also the vast minority of players in the NHLPA.
In fact, you can make the case average NHLers end up paying a price when contracts designed to lower the annual salary cap hit are signed because of the current escrow system.
The NHLPA is without an executive director after a coup d'etat unseated Paul Kelly last year, and even with former baseball union leader Donald Fehr acting in an advisory role these days, it's difficult to believe the hockey union was able to mount the kind of effective grievance that might have been possible had its house been in order.
After all, similar contracts to players from Miikka Kiprusoff to Marian Hossa to Henrik Zetterberg to Chris Pronger to Marc Savard have previously been approved by the league.It's a stunning development in a summer that has included some surprising financial developments such as the Stanley Cup champion Chicago Blackhawks walking away from a salary arbitration award to goalie Antti Niemi after Niemi backstopped the club to the NHL championship.
The Kovalchuk decision, meanwhile, addresses a growing sentiment among teams that the front-loaded, long-term deals were becoming a competitive advantage to a handful of teams since two-thirds of the league's clubs couldn't dream of signing such contracts.
Some GMs said the NHL needed to put it's foot down when Kiprusoff became the first to sign this type of contract back in 2007.
"I wish the NHL had started this five years ago," lamented one GM. The NHL says it is still investigating the contracts signed by Hossa and Pronger. In theory, the Kovalchuk decision could give the league new ammunition to go back and challenge old contracts, and even punish teams that signed them.
"Bettman's got the hammer," said one GM. "It's up to him whether to use it."