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Kovy Salary Arbitration from Law Professor's Point of View


Daniel

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This is the key part:

Does it hurt the NHL's case that the CBA does spell out rules about salary increases and decreases, and that this does follow them?

Yeah, because the arbitrator's going to have to construe the terms of the CBA. And the more evidence that the terms of the contract are permitted, that there's no express prohibition against this, and that it's structured in such a way that they can point to a particular provision and say, "Hey, look, this is permitted," then they've got a stronger argument that the NHL was trying to unilaterally prohibit it, and this would violate the terms of the CBA.

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Yeah but does Lou's strongly implying that the contract is ridiculous as are all the other approved contracts prove that HE does not expect Kovachuk to play the full term of the contract?

Personally I like the little one year of no "No Trade/Movement" inserted in the middle - it's an escape clause which to my mind implies they DO expect him to play for the duration and SUCK! This term also justifies the significant decrease in salary - a sort of we want to get what we pay for kind of logic hmeh but who care what the hell I think. :blahblah: We'll just have to wait and see. i dont expect any resolution until Sept at best <_<

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Yeah but does Lou's strongly implying that the contract is ridiculous as are all the other approved contracts prove that HE does not expect Kovachuk to play the full term of the contract?

Personally I like the little one year of no "No Trade/Movement" inserted in the middle - it's an escape clause which to my mind implies they DO expect him to play for the duration and SUCK! This term also justifies the significant decrease in salary - a sort of we want to get what we pay for kind of logic hmeh but who care what the hell I think. :blahblah: We'll just have to wait and see. i dont expect any resolution until Sept at best <_<

The one year in the middle implies that we don't know if he's gonna be durable and shows that we want to be able to get rid of him if need be. Remember, the "movement" year takes place 8 years into the contract. So even if he plays 5 more years after that, he'll still only be 40 and there will still be 3 years left on the contract. The league will argue that at the very most we could expect him to play until 41 but not 44. They'll argue that if we restructure the contract to 14-15 years then it would be legitimate and would match up with other recent long-term contracts that were approved.

The small money on the back end also doesn't work in our favor. The league will argue that if we thought he was going to play at the end of the contract, then why didn't the Devils put even just a little more money on the backend and a little less in the front and middle. After all, if he's going to play out the contract then he's getting the same amount (102) whether it's on the front or backend of the contract.

Edited by ben00rs
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The one year in the middle implies that we don't know if he's gonna be durable and shows that we want to be able to get rid of him if need be. Remember, the "movement" year takes place 8 years into the contract. So even if he plays 5 more years after that, he'll still only be 40 and there will still be 3 years left on the contract. The league will argue that at the very most we could expect him to play until 41 but not 44. They'll argue that if we restructure the contract to 14-15 years then it would be legitimate and would match up with other recent long-term contracts that were approved.

The small money on the back end also doesn't work in our favor. The league will argue that if we thought he was going to play at the end of the contract, then why didn't the Devils put even just a little more money on the backend and a little less in the front and middle. After all, if he's going to play out the contract then he's getting the same amount (102) whether it's on the front or backend of the contract.

Small money on the back end doesn't matter, imo.

If it was 102 million over 17, and structured to pay 3 mill in the last 4 seasons, we'd have the same problem.

The NHL thinks that the Devils and Kovalchuk agreed to add on extra years that both sides know will never happen.

It doesn't matter whether those years are 2 mill, 5 mill or 500k, if they bring down the cap hit and both sides agree that he will retire before those years come into play, that is circumvention.

Also, as another user pointed out on HFboards, Kovalchuk makes over 50 mill dollars MORE by frontloading the contract in the way it is structured as opposed to 6 mill straight.

More money up front, not only protects him from possible career ending injuries, but also gives him money he can invest and turn into more money.

It's not about the $$$ being paid in those "extra" years, its about the years themselves.

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Thank you for your response ben00r. I actually did understand that position -- I think that's pretty much the common one. I was just offering up an alternative interpretation. Judging from your reaction an arbiter would be hard pressed to see it that way though I guess... :giggle:

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Small money on the back end doesn't matter, imo.

If it was 102 million over 17, and structured to pay 3 mill in the last 4 seasons, we'd have the same problem.

The NHL thinks that the Devils and Kovalchuk agreed to add on extra years that both sides know will never happen.

It doesn't matter whether those years are 2 mill, 5 mill or 500k, if they bring down the cap hit and both sides agree that he will retire before those years come into play, that is circumvention.

Also, as another user pointed out on HFboards, Kovalchuk makes over 50 mill dollars MORE by frontloading the contract in the way it is structured as opposed to 6 mill straight.

More money up front, not only protects him from possible career ending injuries, but also gives him money he can invest and turn into more money.

It's not about the $$ being paid in those "extra" years, its about the years themselves.

I see it the opposite way. I've written how no one can pinpoint 44 as illegitimate, as several players (while a very small number) do play into their 40s. Mark Recchi playing until almost 43 by the end of 2010-2011 is but one example.

I feel the small dollars in the final years is the biggest hurdle. Since, on average, money loses half its value every 20 years -- it's hard to imagine 550,000 being a realistic salary 17 seasons from now. It would be like playing for ~ 300,000 in today's dollars.

I still think the contract will be ruled valid, but I feel the final 4-5 year's salaries is the biggest problem, and not the term nor the ending age.

We'll find out by Wednesday night !

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We'll find out by Wednesday night !

I thought it was supposed to take forever? Like into September to get an arbitrator and get it resolved if a grievance was filed.

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Yeah but does Lou's strongly implying that the contract is ridiculous as are all the other approved contracts prove that HE does not expect Kovachuk to play the full term of the contract?

Personally I like the little one year of no "No Trade/Movement" inserted in the middle - it's an escape clause which to my mind implies they DO expect him to play for the duration and SUCK! This term also justifies the significant decrease in salary - a sort of we want to get what we pay for kind of logic hmeh but who care what the hell I think. :blahblah: We'll just have to wait and see. i dont expect any resolution until Sept at best <_<

Great Article and find

I think the only way you can prove for sure he does not plan to play until the end of his contract is if he has made plans or has something showing he will not be playing hockey for the (Devils) NHL in say 2022. there has to be evidence it can not be based on belief its a yes or no answer not a maybe, INMO Thats the way I am reading it.

Edited by Devs1965
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Great Article and find

I think the only way you can prove for sure he does not plan to play until the end of his contract is if he has made plans or has something showing he will not be playing hockey for the (Devils) NHL in say 2022. there has to be evidence it can not be based on belief its a yes or no answer not a maybe, INMO Thats the way I am reading it.

One thing that stood out to me, was the potential argument the NHL might make that the arbitrator should look at the contract from an objective point of view and determine whether the intent was to circumvent. That is, would a reasonable person conclude that there is no way Kovalchuk will see the deal to its conclusion, rather than whether there's any evidence that the Devils and/or Kovalchuk intend for him not to play through the life of the deal. If it's the latter, we're in good shape. Not so much if it's the former.

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I think anyone can clearly look at it and go this was designed to circumvent the cap. It's blantantly obvious.

There's cap circumvention and then there's CAP CIRCUMVENTION. I would imagine that there are plenty of contracts out there, although not of the Hossa/Lunogo/Kovalchuk variety, that at the very least, are designed to "massage" the salary cap, tacking on an extra year or two or mild front loading that you otherwise might not do if there was no salary cap. In a strict sense this is circumvention, but I think even the bigggest league office lackey would agree that it wouldn't violate the CBA's circumvention provision.

Again, the whole thing's a toss up. I would not take bets on the outcome.

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Daniel - all of your worry posts are predicated on an arbiter not being allowed to take precedent into account in rendering his decision. You never EVER say the contract is not far out of line with previously approved. You appear to consciously disregard any existing agreements.

The question is not a straight forward: is the contract built to circumvent the cap, using the CBA and the contract exclusively to render a decision. You seem to think an arbiter will say well - obviously the DiPeitro, Hossa, etc and so forth contracts were also designed to circumvent the cap. No - that will not be said because the NHL has agreed that they were not. So the question is - if the NHL agrees that these existing contracts were legally constructed within the framework of the CBA with no intent to circumvent the cap, then what makes the Kovalchuk contract significantly different. That is really the question. Why do you think it's not?

NHL cannot say well they WERE OBVIOUSLY duh? But we let them slide but we can't do that anymore.

What has the Devils organization done that the NHL has not previously approved?

OR

Can the NHL prove that there is no expectation from either party that Kovalchuk will play to the end of the contract? or whatever their additional claim is - whatever they say is the reason this was designed to circumvent be it length - 17 as opposed to 15, age - 44 as opposed to 42 - front loading to significantly -- have the final years below 1mil. whatever....

Edited by Pepperkorn
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There's cap circumvention and then there's CAP CIRCUMVENTION. I would imagine that there are plenty of contracts out there, although not of the Hossa/Lunogo/Kovalchuk variety, that at the very least, are designed to "massage" the salary cap, tacking on an extra year or two or mild front loading that you otherwise might not do if there was no salary cap. In a strict sense this is circumvention, but I think even the bigggest league office lackey would agree that it wouldn't violate the CBA's circumvention provision.

Again, the whole thing's a toss up. I would not take bets on the outcome.

Agreed, No one in vegas would be able to give you odds on this one! Arbitration has been known to either way and can suprise the best. IMO I still believe Lou would not have taken a risk like this without having another plan!

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Daniel - all of your worry posts are predicated on an arbiter not being allowed to take precedent into account in rendering his decision. You never EVER say the contract is not far out of line with previously approved. You appear to consciously disregard any existing agreements.

The question is not a straight forward: is the contract built to circumvent the cap, using the CBA and the contract exclusively to render a decision. You seem to think an arbiter will say well - obviously the DiPeitro, Hossa, etc and so forth contracts were also designed to circumvent the cap. No - that will not be said because the NHL has said they were not. So the question is - if these existing contracts constructed within the framework of the CBA, then what makes the Kovalchuk contract significantly different. That is really the question. Why do you think it's not?

What has the Devils organization done that the NHL has not previously approved?

OR

Can the NHL prove that there is no expectation from either party that Kovalchuk will play to the end of the contract?

All of your points are valid, and the NHLPA is going to make all of those arguments. However, the league will have its arguments, and while my opinion is that the league has the harder case to make, arbitration, by its very nature, is unpredictable. There is no appellate court the arbitrator has to answer to. While there are basic principles of contract law that the arbitrator can't avoid if he wants to maintain some credibility, there is no prior ruling on any of these deals that the arbitrator can look to. Yes, he can look to the fact that league has at least tacitly approved very similar deals, but that doesn't necessarily mean that they would have passed muster if the league had challenged those. So the Hossa/Pronger/Luongo deals are certainly relevant, but are not dispositive.

It is even possible that the arbitrator only has to say which side wins, and doesn't even have to issue a reasoned decision. In that case he can simply rule with his gut, and not have to justify the decision in any way.

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But the league DID challenge Hossa's - they announced it was under investigation - it was an internal investigation and it was found to pass muster. So that pretty much kills any front loading objection. It doesn't help in the age objection - 42 vs 44.

These are contracts and agreements we're talking about, not kids stealing cookies from a jar. You can't say take as many as you want -- but not THAT many! Lou is embarrassed he's made a rude pig if himself, but he's done nothing out of line with current accepted practices (and beyond that nothing illegal regardless of intent).

I just dont feel an arbiter can say well I'm disregarding the NHL's findings in previous cases because they were just being accommodating -- they didn't HAVE to be and now they decide they won't be and that's.. ok.

and of course we all get it's up to chance. If we have Judge Judy riding the rag, things might not go the Devils way :noclue: that is understood -- but probably not very likely since both parties must accept the arbiter named.

Edited by Pepperkorn
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But the league DID challenge Hossa's - they announced it was under investigation - it was an internal investigation and it was found to pass muster. So that pretty much kills any front loading objection. It doesn't help in the age objection - 42 vs 44.

Or the league felt they couldn't prove circumvention well enough to win an arbitration. The league can say, "Look, we let everyone know that Hossa contract was almost enough for us to ax it and this one is even farther, so nobody should be surprised it got the ax."

I would guess the league is going to argue these other contracts are comparable enough to matter and that most of the contracts the NHLPA brings up probably do have circumvention issues but the league couldn't show it as well as they can with the KOvy contract. The NHLPA will of course argue that the NHL is wrong in this.

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One thing that stood out to me, was the potential argument the NHL might make that the arbitrator should look at the contract from an objective point of view and determine whether the intent was to circumvent. That is, would a reasonable person conclude that there is no way Kovalchuk will see the deal to its conclusion, rather than whether there's any evidence that the Devils and/or Kovalchuk intend for him not to play through the life of the deal. If it's the latter, we're in good shape. Not so much if it's the former.

Sorry to go back to your earlier post but I'm joining late.

What does looking at the contract from an "objective" POV mean? Does that mean that he doesn't factor in other similiar contracts? Does that mean he just reads the rules in the CBA, then reads the contract and then makes his ruling without any other info? That's exactly what the lawyer in the article you posted said wouldn't happen.

There is no way to be completely objective unless the arbitrator knows nothing of recent NHL contracts. Objectively there is no doubt that there was intent to circumvent. The Devils know they can't aargue that. Thaat's why Lou and the NHLPA have only said things like, "the contract fully complies with the CBA." The PA's arguement to going to be based on the standard the NHL has already set with similiar contracts and on the fact that the contract follows the CBA rules in a "literal" sense. Take away subjectivity and the Devils lose this case.

Edited by ben00rs
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NHL cannot say well they WERE OBVIOUSLY duh? But we let them slide but we can't do that anymore.

What has the Devils organization done that the NHL has not previously approved?

OR

Can the NHL prove that there is no expectation from either party that Kovalchuk will play to the end of the contract? or whatever their additional claim is - whatever they say is the reason this was designed to circumvent be it length - 17 as opposed to 15, age - 44 as opposed to 42 - front loading to significantly -- have the final years below 1mil. whatever....

We did add 2 years (in terms of age and I think length of contract) to any previous deal and are paying the least at the end of the deal. Also, we have more really lean years at the end than most of the previous contracts. I have any number of issues with what the NHL's doing, but there is no question that this contract circumvents the cap more. The arbitrator could honestly go either way.

Basically, we're hoping we get someone who thinks that the CBA was flawed, teams legally took advantage of it, and the NHL is now deciding to put its foot down arbitrarily. The NHL is hoping the arbitrator thinks this deal is more blatant and less fair. Either one could happen, since the relevant precedents are slightly different from this deal.

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We did add 2 years (in terms of age and I think length of contract) to any previous deal and are paying the least at the end of the deal. Also, we have more really lean years at the end than most of the previous contracts. I have any number of issues with what the NHL's doing, but there is no question that this contract circumvents the cap more. The arbitrator could honestly go either way.

As I said before, the arbitrator ain't ruling that the Devils contract is invalid because it circumvents the cap a bit "more" than any previous contract. There is no line in the sand in the CBA saying yes to 15 with 1M in the end years but no to 17 with 600K in the end years.

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