NHL rejects Kovalchuk contract for salary cap circumvention

TSN.ca Staff
7/21/2010 1:20:56 PM
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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.

The announcement was made just hours after a smiling Kovalchuk had been introduced by the Devils at a press conference.

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.

National Hockey League Deputy Commissioner Bill Daly issued the following statement on Wednesday morning:

"The contract has been rejected by the League as a circumvention of the Collective Bargaining Agreement. Under the CBA, the contract rejection triggers a number of possible next steps that may be elected by any or each of the NHLPA, the Player and/or the Club. In the interim, the player is not entitled to play under the contract, nor is he entitled to any of the rights and benefits that are provided for thereunder. The League will have no further comment on this matter pending further developments."

In a statement, Devils general manager Lou Lamoriello denied any wrongdoing.

"We are extremely disappointed that the NHL has decided to reject the contract of Ilya Kovalchuk," Lamoriello said. "The contract complies with the terms of the Collective Bargaining Agreement."

"We will have no further comment until the process outlined in the CBA is complete."

Kovalchuk's agent Jay Grossman had little to say about the matter on Wednesday.

"Please note that our firm will have no further comments until this matter is resolved," Grossman said.

The players' union was also mum on the topic.

"The NHLPA is currently analyzing the basis upon which the NHL rejected the contract between the New Jersey Devils and Ilya Kovalchuk," commented Jonathan Weatherdon of the NHLPA. "We are evaluating the options available to us under the terms established in the CBA. The NHLPA will have no further comment at this time."

While the NHL has investigated front loaded contracts in the past, most notably Chris Pronger's $34.9 million contract spread over seven years and the deal that Marian Hossa signed with the Chicago Blackhawks for $62.8 million over 12 years, all were eventually allowed as it proved too difficult to prove that they were not negotiated in good faith. 

The current collective bargaining agreement states that a player who signs a contract before the age of 35 can retire and have his contract come off a team's salary cap; however, teams must negotiate the contract in question in a good faith effort to have the player remain in the league for the duration of the contract.

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.  He also reportedly rejected offers from the Los Angeles Kings and SKA St. Petersburg of the KHL.

Kovalchuk had 41 goals and 44 assists last season, including 10 goals and 17 assists with the Devils.

Ilya Kovalchuk (Photo: Bruce Bennett/Getty Images)


(Photo: Bruce Bennett/Getty Images)
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