NHL doesn't have a leg to stand on, because they have two?
by Quisp on Jul 21, 2010 9:33 PM PDT
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PrintCAA is the biggest and most powerful agency in the world, and it's arguably the most successful agency ever. They've done more contracts than anyone. And they have lots of lawyers. So I take it seriously when they speak. Even if I don't agree with them.
NHL can’t win Ilya Kovalchuk contract showdown, says prominent agent
The National Hockey League [...] may not have a legal leg to stand on in its rejection of Ilya Kovalchuk's [...] contract [...], one prominent agent said Wednesday. J.P. Barry of CAA Sports, whose large roster of clients includes Vancouver Canucks forwards Daniel and Henrik Sedin and Mason Raymond, said he doesn't see how the league can win [...]"I have already done quite a few contracts that were front-end loaded and there is no language in the CBA addressing the term of contracts," Barry said. "So I am not sure what grounds they intend to rely upon." Barry has negotiated front-loaded contracts in recent years for the likes of Dany Heatley, Daniel Alfredsson and Mattias Ohlund, but none of those deals flatline in the final years quite the way Kovalchuk's does. [...]
"Obviously, there is no contract that has ever had the maximum and the minimum in the same deal and there is no contract that has had five minimum salaries going out the back end and there is no contract that takes a player past age 42," Barry said.[...]
Barry doesn't think the NHL could win its case. "To me the only grounds they can possibly use is that he is not going to play those years and this is somehow a cap circumvention," he said. "That would be their only argument because there is no limit on term in the CBA."
What I like about this article is that Barry is exactly right. There is no language in the CBA that specifically limits the length of a contract. He is also right in his characterization of the contract, that it contains several elements not before seen in one package. Last but not least, he is right about what the league's grounds are. Oh, another thing, he's right that it's their only argument.
I personally think it's the only argument they need.
Presumably, his clients' contracts are not circumventions of the CBA because his clients can plausibly be expected to play to the end of their contracts. Kovalchuk cannot plausibly be expected to play to the end of his contract.
Nine players, I keep reading, in the history of the league have played to 44. Nine out of thousands. That's much less than 0.9%.
If I negotiate a contract to pay you to get in a rocket ship and fly to the moon, despite the fact that the likelihood of you being able to do this is 0.9% (for the sake of argument), is this a valid contract? No. And it's not an enforceable one, either. I can't make you do something you have essentially zero chance of doing, nor can you sign a contract that commits you to doing something you have no reason to believe you will be able to do.
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Never trust an agent, anyway, they think they are lawyers.
Plus, “in the biz” there are at least 10 alternatives for what CAA might really stand for, none of them printable.
End Corporate Personhood.
I am not fond of the big agencies...
… even less so after hearing what one of them put a filmmaker friend through if he wanted to use their client(s) (fortunately, the film got off the ground with a stellar cast despite the agency’s interference).
Two things
Kovy’s cap hit is 5.5 under his max salary, Hossa was only 2.6
Isn’t there a rule that says you can only lower a players salary according to what the first two years of his contract are. Which is why his contract has him at 6 million for the first two seasons before jumping up.
Wheel of Location, Turn Turn Turn. Tell us the location that we will play.
Contributor to Lighthouse Hockey not sure if I'm the Sniper or the Enforcer.
You're referring to the 100 Percent Rule
which says (watch me try to boil this down)
look at the first two years of the contract.
the difference between the two can’t be more than the amount of the smaller of the two.
(e.g. 1st year 10MM, 2nd year 5MM is okay; 2nd year 4MM is not okay)
for every year after the second year, no year-to-year increase can be more than the amount of the smaller of the two first years (year one or two).
(in the example above, no increase can be more than $5MM)
and no decrease can be more than 50% of the amount of the smaller of the first two years.
(in the example, no decrease can be more than $2.5MM)
Wait till this year.
Always a possibility
See The fertile octogenarian
"Impossible" Contracts
I don’t recall if we ever addressed contracts that are impossible to execute in law school, but it would make for an interesting case. I actually don’t think there’s any reason why one couldn’t sign a contract he cannot possibly perform; it would just be stupid because he is definitely going to breach it. But in the case of a personal services contract the performing party can breach any time he chooses to and he just gets paid the amount he has earned to the point when the breach occurs.
So legally speaking, I would say Kovalchuk and the Devils would be free to enter into such a contract. But the fact is that there is a superseding contract in play here- the CBA. It’s essentially a contract between NHL and NHLPA that sets up the rules governing players’ contracts. And I think the best argument under it that this contract is an attempted circumvention of the salary cap rules is that so few players have ever played to the age of 44. No player at 27 can actually plan to play that long. If they are going to, it’s just sort of going to happen.
Ok, the huge drop in salary once he hits 38 is a pretty damn good argument too.
The NHL will win this case, I am quite positive. The real problem is that while it goes on Kovalchuk’s fate remains in doubt and that will keep a lot of teams from making other moves, so several other free agents– especially the forwards– are stuck in limbo. I mean, teams are unlikely to sign guys like Alex Frolov and Ponikarovsky until the Kovalchuk catastrophe ends because teams just don’t know if they should go after them when there is a bigger fish still available. It also messes with both the Kings’ and Devils’ plans as they seem to be the only 2 teams with continuing interest in Kovy (although now I hear the Rangers are also circling). Who would ever have thought Kovy would be more trouble than Lebron??
you're right, of course, but there's a part of the argument i was too tired to get into
but which i outlined in another post. The one entitled “No, Lou.”
The argument goes like this. if you enter into a contract you have no intention of fulfilling, and the contract is front-loaded to artificially lower the cap, the effect of this is to drain actual real funds from the players’ own escrow account (because your increased salary relative to cap is reducing the declared revenues of the team, which in turn makes the overall revenues lower, which requires the players’ to forfeit a percentage of their salary). The other effect of having extra salary on the books in a given season is that the lower declared revenues mean less revenue sharing for the poorer clubs. Which in turn means the richer clubs who are circumventing the cap benefit both by getting to sign players they would not ordinarily be able to sign, but by essentially charging the overage to the players’ escrow, and as a nice side effect, they have to give less of their revenue to the losers at the bottom of the food chain.
So when the player is contracted to do somethiing he has no reasonable expectation of being able to do, 17 years down the road, the effect of that is (1) everything I just said, PLUS (2) at the very end of the deal, because the player will have retired, the LOW salary relative to cap hit, which would have BENEFITED THE BOTTOM FEEDING CLUBS because of increased revenue sharing (because the rich team would have less deductible salary relative to cap hit), and which would have BENEFITED the players because they would get more kicked back to them out of escrow (again, because the team can’t deduct as much salary that year, relative to cap hit) is now ELIMINATED exactly when it would have been a financial burden to the team. And the result of that is, screwing the poorer teams and all of the players in the union.
All of which is a circumvention of the cap.
Wait till this year.
That's where labor law gets interesting...
Under labor law (and I am generalizing here), collective bargaining agreements set the terms and conditions for union members’ employment. In many industries, the CBAs pretty much set forth the entire employment framework. But in sports and entertainment, the CBAs have provisions that allow the union members to negotiate terms that are better than the CBA, although they cannot waive any of the rights in the CBA.
It gets intersting with agents. Under the case law, the courts have said that agents serve a function that is traditionally performed by the union – getting union members employment. In setting rules for how their members deal with agents, the union is delegating that traditional function (which is why they can regulate them). Interestingly, in the major sports’ CBAs, there is express reognition of the agents’ role (not the case in the entertainment industry, btw).
Getting back to your point about the superseding contract, what the NHL CBA says with regard to negotiating terms of contracts is: “Players, acting individually or through Certified Agents, and Clubs may, on an individual basis, bargain with respect to and agree upon an individual Player Salary and Bonuses over and above the minimum requirements established herein and other provisions that are not inconsistent with the terms of this Agreement.” The Standard Player Contract also provides: “The Club and the Player severally and mutually promise and agree to be legally bound by the League Rules and by any Collective Bargaining Agreement.” And: “This SPC is entered into subject to the CBA between the NHL and the NHLPA and any provisions of this SPC inconsistent with such CBA are superseded by the provisions of the CBA.”
So the CBA doesn’t just supersede the player’s contract, it is part of it…
by DVLEsq on Jul 21, 2010 11:47 PM PDT up reply actions 3 recs
Wow. (rec)
Thank you for taking the time to write that. I have thoughts but one of them is that I have to get up in four hours. Tomorrow….
Wait till this year.
egos egos egos
I just read the main thread on this story and I’m going right to the comments. These people’s egos are so unbelievably inflated (what did you do last night honey? oh, i was having dinner w the sedins when I was interrupted by a call from cros… he just wanted to know what sounds I’ve been listening to this summer).
Yeah, well maybe from a strictly legal point of view he’s right. But it was this exact sort of attitude (loophole loophole loophole) that created a massive economic crisis via the housing market which plunged our country into economic havoc. So as far as I’m concerned, these guys can do whatever they please. They are the ones that have to go to bed and night and wake up in the morning and live with their thoughts and actions.
Quisp says it here
Quisp said: Presumably, his clients’ contracts are not circumventions of the CBA because his clients can plausibly be expected to play to the end of their contracts. Kovalchuk cannot plausibly be expected to play to the end of his contract.
Nine players, I keep reading, in the history of the league have played to 44. Nine out of thousands. That’s much less than 0.9%.
If I negotiate a contract to pay you to get in a rocket ship and fly to the moon, despite the fact that the likelihood of you being able to do this is 0.9% (for the sake of argument), is this a valid contract? No. And it’s not an enforceable one, either. I can’t make you do something you have essentially zero chance of doing, nor can you sign a contract that commits you to doing something you have no reason to believe you will be able to do.
For those who didn’t read this, it’s worth reading again.
League minimum salary
Kovalchuk is due to make the CURRENT minimum in each of the last five years of the contract. But if the minimum were raised (a likely scenario), his pay in those years (and possibly years 11 and 12) would have to be raised to meet that. Thus the total value of the contract is raised, which would cause the salary cap hit in 2010-11 to rise, which cannot be done retroactively. I see this as a perfectly plausible reason to uphold voiding the deal, as the other “retirement” contracts call for final salaries of $1MM or more. This can REASONABLY be expected to fit into the minimum salary at the time…thus those contracts are OK.
Just my thought, anyway…
the minimum salary for a contract is the minimum the year the contract was signed.
you can’t raise the minimum salary. you can’t alter or re-negotiate the salary in any way, actually. and it’s perfectly okay for for the contract to be at the minimum or the maximum as set forth by the CBA for this year. The current CBA has set no min/max for contracts signed past 2012 (for obvious reasons), but they will. And when they negotiate the new CBA, they will issue guidelines in the new CBA about how to deal with contracts under the old CBA. Probably, they will simply let them stand.
if kovalchuk were to sign a deal at the max for this year, which is 11.8 i think, and then the cap went down, you don’t think he would have to take a lower salary somehow, right? the contract is inviolable and all dollar amounts are fixed.
Wait till this year.
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