KOVALCHUK VS. THE WORLD

As we all await the historic arbitration that has the NHLPA, the New Jersey Devils and Ilya Kovalchuk pitted against Bettman and the NHL, I want to take a moment to further examine the camp that Bobby described as Group Precedent.

In the case of Kovalchuk’s $102 million, 17 year contract, precedent has supposedly been established by other ‘retirement’ contracts, signed by Roberto Luongo, Marian Hossa, Vincent Lecavalier, Johna  Franzen and Henrik Zetterberg.

Luongo signed a 12 year, $64 million deal.

Zetterberg signed for 12 years and $73 million.

Lecavalier for 11 years and $85 million.

Franzen got 11 years and $43.5 million.

Hossa, the most oft used ‘comparable’ is in the 2nd year of a 12 year, $63.3 million deal.

First of all, strictly from the a superficial perspective, Kovalchuk’s contract blows the others out of the water.  5 years longer and $17 million more than any other contract.  However, when dealing with cap circumvention, one must consider other factors, like, how old was the player when he signed said deal and what age will he be when the deal expires.

Luongo wil be 43.

Hossa will be 42.

Vinny, 40.

Zetterface, 40.

Franzen, 40.

Kovalchuk will be 44 at the end of his deal.  Once again, Kovy trumps all others, even if only by a single year in this case.

OK, so there is some serious precedent here.  You can’t really say that Kovalchuk WILL retire before 44, but give Luongo the benefit of the doubt to play until 43.  Those hairs are too small to split.

But there is a big chunk of hair missing here, clogging an important drain.

Maximum Salary.

But its all about the cap… right?

Wrong.

Cap only matters as it relates to salary, at least in terms of circumvention.  Had Kovalchuk signed a 17 year deal that pays him $6 million in actual salary every single year, I’m willing to bet the NHL would have never bothered to reject the contract in the first place.  Why?  Because that isn’t circumvention.  That deal, in regards to the cap, is the same whether it is a 1, 10 or 20 year deal.  If New Jersey wants to commit $6 million to a 44 year old player when that player is still just 27, fine, more power to them.  It only becomes circumvention because the Devils want to pay Kovalchuk $11.5 million for 5 years and $10.5 for a 6th year.

These top actual salary numbers matter.

Let’s look at the other deals.  The so-called comparable contracts the league has previously approved.

Lecalvalier’s cap hit is 7.7 mill. His maximum salary is $10 mill.  That is a cap to max salary differential of 2.3M, or in other terms the cap hit is of 77% of the max salary.

Zetterface – 6.083 cap hit, max salary, 7.75. Differential, 1.667M or cap hit is 78% of max salary.

Luongo – cap hit – 5.33, max salary $10 mill. Now Luongo is a unique case, because the 10 mill is really just a signing bonus, its only for 1 year. His topical max salary is 6.716, which he gets for 7 years (technically 6 of those years are 6.714, but in these extreme scenarios, 200k is chump change).   Luongo’s differential is 1.386, or 79% of the topical max salary.

Franzen’s cap hit is 3.955, while his max salary is 5.5, which he gets this year.  He gets between 5 and 5.25 for the majority of the deal.  If we use 5.5, that’s a differential of 1.545, or a cap hit that is 71% of the max real salary paid.  If we use the more relevant number of 5.25, the differential becomes 75%.  Close to the rest of the percentages, but creeping down.

Finally we have Hossa, the closest comparable and the one Kovalchuk supporter’s are hooting and hollering about.  Hossa has a cap hit of 5.275 and a max salary of 7.9. That’s a differential of 2.625M, or 67% of max salary.  OK, so that’s different than the rest of the lifetime deals.  A whole 10% different.   This contract pushes the boundaries, and was only narrowly allowed by the league to stand.

And now we come to Kovalchuk.   His cap hit is 6 mill. His max salary is 11.5… well its not just his max salary, its THE max salary.  That is a differential of 5.5M, a measly 52% of max salary.  Now many will say that he only makes 11.5 for 5 years, not even 1/3 of the contract.  However, the only other salary he makes for 5 years is $550K during the last 5 years.  Is that really the leg Group Precedent wants to stand on?  Maybe is they like hopping with their hands tied around their backs.  $11.5 million is the most relevant number here.  Kovy makes $6 mill for two years, 6.5 for another, 10.5 for one, 8.5 for one and 3.5 for one more.  $11.5 for 5 years trumps all.

Hossa’s deal is still closest but while Hossa’s deal undercuts the rest by ~10%, Kovy’s take it another 15% beyond what was already barely acceptable. Hossa’s deal is looking over the edge of circumvention, even feeling the air beneath with one foot, while Kovy’s deal is just a complete ‘fuck it all’ jump off the cliff.

Consider the precedent nonexistent.



Categories: L.A. Kings News

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10 replies

  1. That’s probably the best argument that I’ve heard yet on this issue.

    Looking at both the max salary allowed by the league, and the min salary, and then finding them both within the same contract, it appears to be a blatant cap circumvention to me. Hossa is not a valid precedent.

    The Kovalchuk deal is a precedent setter, and quite frankly is the only way that New Jersey can keep both Kovi and Parise in 2011, coincidentally before the expiration of the current CBA.

  2. What’s very interesting about this whole thing to me is the implication of the bigger picture here. This deal has gone way beyond Kovalchuk at this point even in the Kings’ perspective. Can you imagine what a NHLPA favorable ruling would do for the Kings one year away from a new CBA when all of Doughty, Bernier, Simmonds, Johnson, and Moller are free agents? It has to be a big reason why Doughty has not signed a long term extension yet.

    I for one hope it doesn’t happen since the CBA was written to even out the playing field, even though it has the potential to significantly improve the Kings’ lot in the Western Conference for the next decade.

  3. I agree with you Joel…I am willing to bet that DL is waiting for the outcome on this and I think the NHL knows that if the NHLPA and Kovy camp win this challenge, what does that say to the rest of the GM’s, players and agents across the entire NHL? If the Kovy deal is allowed by the arbitrator, does DL then say OK, well then I will sign DD to a 20 yr deal? If not DL, someone will, such as Sather etc. This is a big fork in the road for the NHL, because if this contract is deemed legal, what is the boundary for an unacceptable contract before the new CBA?

    I think a lot hinges on this decision, and in my mind that will probably be voiced in the debate with the arbitrator. Saying that if this passes, it definitely will give other GM’s and agents a shot at pushing it even a step further.

    Should be interesting to see the outcome because DD (and others) may just be tied to the results. I could see DL saying “OK, FU*K IT THEN!” and sign DD to something crazy to prove a point and to get his franchise #1 defense man locked up for his career with a nice little cap hit to boot.

  4. I have to agree with Joel as well, they have to sit back and wait on this decision, and if the contract is upheld, then throw caution (and money) to the wind and lock up who you can for as long as you can, and drop the bottom out of the last third (at least) of the contract to mediate the cap hit.

  5. I would be more measured about this approach of signing guys for a long period of time with front loaded salary. Long after Kovalchuk retires, that yearly cap hit will still persist which will then limit a team’s access to quality talent. That creates a LOT of liability down the road. Tyring to put together an elite team now could mean a shitty team years later. Not good.

    What I don’t know–and maybe one of you fellas can help here–is what happens to deal like this if the CBA is totally restructured. Do the cap implications of these contracts become meaningless or impertinent?

    • From what I understand, the owners are going to be hellbent on dropping the salary cap significantly through the next CBA. I’m also guessing there’s going to be more continuity to the terms of the contracts signed after 2012, i.e., no more front loaded deals.

      Lamoriello knows this and that’s why he’s trying this test case to see if he can somehow mitigate his risk by signing both Kovalchuk and Parise to long term front loaded contracts. The current front loaded deals would be grandfathered in, providing a significant advantage to the teams who took advantage.

      But it’s also a risky move if he loses because I bet the NHL gets vindictive if it wins and will subsequently penalize him cap space next season.

  6. My understanding is that the cap hit remains with the deal and carries into the new CBA, hence the motivation to get these long term deals under this incarnation of the CBA. We have to assume that major attention will be paid to closing this loophole during the negotiations, and that’s where I think the greatest chance for a work stoppage lies in the upcoming negotiations.

    • A work stoppage ends the NHL. You cannot have two labor strikes in 10 years and expect to survive as a league. Recall what one did to MLB? That is the National Past Time (allegedly). The NHL will become the laughing stock of professional sports and will lose credibility with both the mass media and the general public.

      • Agreed. Another lockout/strike would be devastating for everyone.

        This arbitration case will be a key starting point for the next CBA. I sure hope the NHL wins, that would best for all teams.

  7. Why are there arbitrator’s for all of these other contracts in the league, and none for this one? Did Verbeek and Lamoriello know that there would be no arbitrator for this case and deliberately set up a contract that they knew the league would reject to cash in on the run up of ticket sales when the deal was announced?

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