NHL Rejects Kovalchuk Deal

The National Hockey League has reportedly rejected the blockbuster contract the New Jersey Devils signed Ilya Kovalchuk with. The league is claiming his 17 year, $100 million dollar deal circumvents the salary cap, because both parties are aware that Kovalchuk won’t play until the end of the contract:

“The NHL has rejected Ilya Kovalchuk’s 17-year, $102 million contract with the New Jersey Devils on the grounds that it circumvents the NHL’s salary cap.

Kovalchuk was slated to earn $95 million over the first 10 years of the deal and then just $7 million over the last seven seasons. That would translate to an annual cap hit of $6 million per year.

TSN Insider Darren Dreger explains that the deal was rejected due to the fact that the NHL does not believe that either Kovalchuk nor the Devils expected the 2004 Rocket Richard trophy winner would be playing near end of the contract and that it is a case of artificially lowering the annual average value of the contract. The Devils must now either file the contract once again or the Players’ Association can file a grievance.

Should the NHLPA decide to file a grievance, the contract would remain dead until an arbitrator determines otherwise. The current CBA explains circumvention as the following in section 26.3:

(a) No Club or Club Actor, directly or indirectly, may: (i) enter into any agreements, promises, undertakings, representations, commitments, inducements, assurances of intent, or understandings of any kind, whether express, implied, oral or written, including without limitation, any SPC, Qualifying Offer, Offer Sheet or other transaction, or (ii) take or fail to take any action whatsoever, if either (i) or (ii) is intended to or has the effect of defeating or Circumventing the provisions of this Agreement or the intention of the parties as reflected by the provisions of this Agreement, including without limitation, provisions with respect to the financial and other reporting obligations of the Clubs and the League, Team Payroll Range, Player Compensation Cost Redistribution System, the Entry Level System and/or Free Agency.

Should the deal have been approved, the 17-year pact would have been the longest contract in NHL history, topping the 15-year deal that the New York Islanders handed goaltender Rick DiPietro and the 13-year offer agreed to by two-time Hart Trophy winner Alexander Ovechkin and the Washington Capitals. The contract was to include a no-movement clause for the first seven seasons and a no-trade clause for the last nine.

The 27-year-old rejected a $101 million, 12-year extension from the Atlanta Thrashers before being dealt to the Devils in February.

Kovalchuk had 41 goals and 44 assists last season, including 10 goals and 17 assists with the Devils.” {TSN.ca}

Still more details emerging, but it looks like the contract will at the very least have to be reworked. The contract was an extension of the trend we’ve seen with the big-name players in the NHL – guys like Marian Hossa and Chris Pronger signed similarly backloaded deals to minimize their yearly cap hit on their respective teams.

I’m not surprised at all that the NHL put their foot down on this loophole. If they didn’t draw the line at 17 years, where would they? 20 years? 30 years? It’s an issue the league knew they would have to look at in the next CBA, but Bettman and company decided not to let this one slide. No word yet on what implication this has on Kovalchuk’s decision, or if voiding this contract means he’s free to leave Jersey. More details as they come out.

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