Friday, March 15, 2013

Interview: Stu Grimson - Former NHL Enforcer and Lawyer

We had a great discussion with former NHL enforcer (and now lawyer) Stu Grimson. We addressed the utility of fighting in the NHL and the business and legal cases against and for fighting.

As a born again in the 1990s, Stu also speaks to reconciling his faith with punching people in the face.

Stu is very articulate. A wordsmith. That made for a compelling interview.

Click here to listen.

Interview: Stephen Fehr, NHLPA

I recently spoke with Stephen Fehr. Very good and candid discussion.

Click here to listen.

Thursday, March 14, 2013

Part 2: The Islanders, Tim Thomas & Cap Circumvention

by Fraser Blair - @fmblair

What the New York Islanders decide to do with Tim Thomas after this season might provoke a legal challenge under the new CBA. Circumvention anyone?

As we explored in Part 1 of this series, Thomas has been suspended without pay for failing to report to the team. By rule, the $5 million cap hit on Thomas’ contract counts towards the calculation of the Islanders compliance with the Lower Level. Technically, the cap hit does not count towards the team’s Upper Limit.  

If Thomas stays home for the entire season the Islanders will have the right to ‘slide’ the remaining year on the contract to 2013. If he refuses to report next season, he will once again be suspended and the Islanders’ Lower Level will be credited with $5 million. 

In a vacuum, there is nothing wrong with this conduct. Extending the contract of a player who was suspended for failing to report is neither new nor offensive in and of itself. However, the precedent set by the Kovalchuk case tells us that circumvention matters aren’t analyzed outside of their full context. 

The anti-circumvention rules of the CBA are contained in Article 26. Article 26.3(a) describes the elements of a circumvention offence. It reads: 

“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 or has the effect of defeating or Circumventing the provisions of this Agreement or the intention of the parties as reflected by this Agreement...”

This was the provision at issue in the Kovalchuk case. In that case, arbitrator Richard Bloch determined that the 17-year $104 million back-diving contract between Ilya Kovalchuk and the New Jersey Devils amounted to cap circumvention. Eric has a nice summary of the decision on this site.

Bloch’s decision contains a high level analysis of the purpose of the Upper Limit of the salary range system. He concludes that the purpose is to promote ‘competitive balance’ amongst NHL clubs by ensuring a degree of payroll parity within the league. 

Circumvention, then, can arise due to conduct that defeats the principle of competitive balance. Following this reasoning, Bloch concluded that Article 26 is wide enough to capture conduct that is not explicitly prohibited by the CBA but nevertheless offends competitive balance. As a result, Article 26 necessitates for a deep contextual inquiry into all the relevant factors surrounding the transaction. 

This reasoning trumped the NHLPA’s argument. The union had argued that none of the terms of Kovalchuk’s contract actually broke any explicit rules in the CBA and that by extension, the CBA and the salary range system were not circumvented. However, since Bloch determined that a contextual approach was the most appropriate method for analysis for Article 26 issues, the context of the transaction became the determinative issue in the case.  

The relevant contextual factors were the combination of a substantial drop in salary over the last 6 years of the contract, the fact that only one NHL player has played past his 43rd birthday (the contract would have paid Kovalchuk until he was 44) and the switch from a ‘no-move’ clause to a ‘no-trade’ clause. Together, this proved that it was “reasonably unlikely” that Kovalchuk would or was intended to fulfill the full extent of his contract. 

Note how the standard of proof was reasonableness. The evidence doesn’t have to be unequivocal. In other words, the evidence must form an intelligent and logical basis for the facts its trying to prove. 

In sum, the Kovalchuk decision determined that a wide range of conduct may be caught by Article 26. Regardless of intent, Article 26 prevents otherwise permissible transactions that, when examined in their full context, have the effect of offending competitive balance. 

Using the template provided by the Kovalchuk decision, would the Islanders violate Article 26 were they to extend his contract with the knowledge that he will not play next season?

To make a persuasive argument, the NHLPA would first have to establish that the purpose of the Lower Level is the same as the Upper Limit: to ensure competitive balance within the league. This would not be a difficult hurdle to clear as the Upper and Lower Levels create a fixed player salary range within which every team must operate. In other words, they promote salary parity together. 

The more difficult aspect of the union’s case would be its ability to prove that the Islanders extended Thomas’ contract despite knowing that it was “reasonably unlikely” that he would play in 2013-2014. As was the case with Kovalchuk, none of the conduct that would be undertaken by the Islanders would violate a specific provision of the CBA. As a result, the NHLPA would have to show that the sliding of Thomas’ contract constitutes circumvention in the specific context. 

The NHLPA would likely discharge this burden if Thomas is publicly adamant about his intention to not play next season or simply tells the Islanders that he will not report to the Club. However, the NHL would point to Thomas’ has public statements of his intent to compete for the United States at the 2014 Olympics as evidence that it was reasonable for the Islanders to believe that he intended to fulfill the remaining year of his contract. 

It will be interesting to monitor how Thomas’ age (39) factors into the arguments. The NHLPA would argue that his advanced age adds to the unlikelihood of him playing in the NHL. However, the NHL could argue that his age doesn’t help the NHLPA given the number of goaltenders of his age or older who have recently played in the NHL. I’m not sure how this factor would be interpreted, but it is clear that the relevance of age would be more contentious that it was in the Kovalchuk case. 

Another contextual factor might be the upcoming changes to the calculation of a team’s compliance with the Lower Level. As we explored recently, the new rules will prevent performance bonuses from counting towards the Lower Level. We also showed that the Islanders will be seriously impacted next season by this change.   

Might the NHLPA argue that the acquisition of Thomas is an attempt by the Islanders to mitigate the changes to the Lower Level that take effect next season? It’s a circumstantial but plausible argument and Article 26 allows the consideration of circumstantial evidence. It’s clear that Thomas’ $5 million cap hit would significantly help the Islanders reach the floor without actually having to spend the money.

In any event, the Islanders are definitely a team to monitor over the next few months. The new CBA appears to close some of the loopholes he has exploited. I’m looking forward to how he will react to the new rules. 

Saturday, March 9, 2013

Radio Hit: Mandatory Visors in the NHL

I join Lee Versage and Shawn Simpson to chat Family Ties, mandatory visors in the NHL and the Getzlaf signing.

TSN Article: Mandatory Visors

Marc Staal getting hit in the eye with a puck has once again sparked a discussion as to whether NHL players should wear visors.

The starting point for this discussion is whether the NHL can force players to wear visors.

Visit TSN's website here for my answer.

Monday, March 4, 2013

Radio Clip: O'Reilly, Pistorius & Bergevin

I join Steve Lloyd and Jason York at the Team 1200 to discuss Marc Bergevin's handling of the club's balance sheet, the O'Reilly situation and a Pistorius plea deal.

CBS Article: Canadiens GM Marc Bergevin Making Strides On Ice And Balance Sheet

I wrote an article for CBS entitled Canadiens GM Marc Bergevin Making Strides On Ice And Balance Sheet. Bergevin has cleared significant cap space with some shrewd moves, while not compromising the quality of the team.

Sunday, March 3, 2013

Next For Ryan O'Reilly: A Cut In Pay?

By Rory Johnston (@RnfJohnston)

When the Colorado Avalanche found out yesterday afternoon that RFA centre Ryan O’Reilly had signed an offer sheet with the Calgary Flames, they had 7 days to make a decision on whether to match the Flames’ offer. Instead, it took them only a few hours to decide they wanted to keep him.

Colorado has now secured O’Reilly’s services for the next two years, albeit at a salary that’s a fair bit higher than what they would have preferred. Another downside - they’ve gone without him for the first 19 games of the season and are sitting outside of a playoff spot.

The Flames’ offer came with a twist: the structure of the offer was carefully designed to make it less attractive for the Avalanche to match. It’s only a two-year deal, set up so that O’Reilly will make $6.5 million in 2013-14, and only $3.5 million this year ($2.5 million of which comes as a signing bonus). By jacking up the salary in year two, O’Reilly will be guaranteed a rich payday if the Avalanche want to retain him.


The structure of the Flames’ offer was meant to be a ‘Poison Pill’. The high second-year salary of $6.5 million will set the bar for future negotiations and salary arbitration such that O’Reilly may never be cheap again. That means that the Avs first year offer must be $6.5 million – subject to possible conditions.

So the Flames purposely torpedoed any long-term savings on the contract in an effort to make it a less attractive option for the Avalanche to match.

‘Poison Pill’ is a term I’m borrowing from NBA offer sheets, which use a different salary cap trick to make it hard to match offer sheets, but the concept is the same: it’s a contract term that could hurt whichever team signs the player, with the goal of keeping a team from matching an offer.

Some have noted that the higher salary in year two means that the qualifying offer necessary to keep O'Reilly will be a steep $6.5 million for 2014-15. Quite possible - but not the only option.

At the end of the 2013-14 season, O’Reilly will be a restricted free agent once again, and instead of tendering a qualifying offer, the Avalanche could file for ‘cut-down’ arbitration in the hopes that they can retain O'Reilly at a lower price than his $6.5 million 2013-14 salary. 'Cut-down' arbitration is a rarely-used CBA provision that allows teams to file for arbitration with the hopes of giving their player a pay cut of up to 15%. 

In 2012, the Vancouver Canucks filed for cut-down arbitration for Mason Raymond – and he settled with the team, agreeing to take a 14% pay cut after injuries had slowed down his performance.

In O’Reilly’s case, the 15% pay cut would be measured against his $6.5 million 2013-14 salary. So the lowest possible salary he could get at arbitration would be $5.525 million. Though it might be counter-intuitive to give a pay cut to a player on the rise, NHL salary arbitrators may look at other RFA-eligible players at similar age and experience levels and conclude that few players at O’Reilly’s age make as much money. 

There are no guarantees, though. Since the Mason Raymond case was settled before going to arbitration, O'Reilly would be a real test case for cut-down arbitration. It’s tough to know how that would unfold (if we get there). While there may be reasonable arguments justifying a drop from the qualifying offer, if O’Reilly has a reasonably good season in year two of his deal, it will probably be tough to get an arbitrator to cut his salary. Honoring the intent of the qualifying is the starting point and there will need to be good reason to move off that.

Why did the Avalanche match so quickly? Avs GM Greg Sherman had presumably given a lot of thought to this ahead of time, including making a decision on how high an offer he would match. Sherman was Colorado’s Assistant GM before graduating to the big job in 2009. In his previous role, he was the team’s lead contracts man, handling contract negotiations, a bit like the old role occupied by Leafs GM Dave Nonis. Sherman, no doubt, had the various possibilities (including, possibly, the option for cut-down arbitration) in mind well in advance before the offer sheet dropped.

These guys are generally prepared – we just don’t hear about it.

Friday, March 1, 2013

Flames: O'Reilly Waiver Issue Open To Interpretation

By Fraser Blair (@fmblair) & Eric Macramalla

Earlier today, reporter Chris Johnston reported that Ryan O'Reilly, who signed an offer sheet with the Calgary Flames last night, would have had to clear waivers before he could play with the Flames this season.

Johnston wrote: 
"In a bizarre twist to an already unusual story, has discovered that the Flames were not only in danger of losing 2013 first- and third-round draft picks as compensation if the Avs hadn’t matched the O’Reilly contract, but they also would likely have had to surrender the player before ever getting him in uniform.

That’s because O’Reilly would have needed to clear waivers before joining the team’s roster.
The unsigned forward spent part of the NHL lockout playing with his brother, Cal, for Magnitogorsk in Russia. According to Metallurg coach Paul Maurice and KHL spokesman Shawn McBride, he appeared in games on Jan. 21 and Jan. 23 – both after the shortened NHL schedule was back underway – which meant that waivers were required before O’Reilly could return to the NHL as a free agent midway through the season."
Johnston raises a very interesting point, the consequences of which would have been serious and embarrassing for the Flames and General Manager Jay Feaster.

Under the old CBA, Article 13.23 provided that any player who signed an NHL contract while he was playing overseas at the beginning of the NHL season had to clear waivers before playing with the Club with which he signed. You may recall that in December 2011, forward Antti Miettenen was signed out of the Finnish Elite League by the Tampa Bay Lightning. According to 13.23, the Lightning placed him on waivers and he was subsequently claimed by the Winnipeg Jets.

The old CBA would have required waivers for O'Reilly regardless of whether he signed with the Avalanche or another Club because O'Reilly played in two KHL games after the 2013 NHL season began.

However, since the old CBA expired and the new CBA has yet to be ratified, reference is had to the Memorandum of Understanding (MOU). On page 19 of the MOU (which is a summary of the terms that govern the relationship between the parties moving ahead until the new CBA is drafted), it states as follows:
 “All Players on a Club’s Reserve List and Restricted Free Agent List will be exempt from the application of CBA 13.23 Waivers in the case of a mid-season signing.”
So some have reasoned that this provision eliminates the need for a player to clear waivers if he is re-signing mid-season with his current club only.

However, there is the argument that the conditions for avoiding waivers are only limited to the following:

1) A player must be on “a” Club's Reserve List and Restricted Free Agent List, and;

2) He must sign a contract mid-season.

In other words, the language doesn't expressly provide that a player may only avoid waivers if he re-signs with the team that holds his rights (in this case the Avs). Instead, it states that so long as the player is on “a” Club's Reserve and Restricted Free Agent list, he will not be subject to waivers before playing, regardless of where he signs.

Put another way, the Flames likely interpreted the MOU to provide that O’Reilly being on the Avs reserve list makes him waiver exempt for all teams.

Articles 10 and 13 of the old CBA, the portions that govern offer sheets and waivers, are chalk full of references to the “Prior Club” (the Avalanche) and the “New Club.” (the Flames) This is significant because it shows that the NHL and the NHLPA have treated the Prior Club and the New Club differently in other provisions of the CBA.

So the MOU does not distinguish as to the club signing the player. So the language is such that the parties understood there would not be a distinction between the Prior and New Clubs in this regard.

This gives the Flames an arguable case that O’Reilly should not have been placed on waivers. Not surprisingly, the Flames have stated that their interpretation is not consistent with the League’s interpretation on this point. This is perhaps a strained argument since arguably the idea between the provision was to let current teams bring their players back post-lockout without a penalty. Still, the language utilized by the sides casts some doubt in its interpretation.

If the O’Reilly did indeed go on waivers, we may have seen the case go to arbitration by way of a Flames grievance. That would have been messy.

So it's fair to conclude that the Flames weren't totally out in left field on this one. Maybe Texas Leaguer area but not left field.

Finally, this issue will likely be cleared up in the final collective bargaining agreement, which we expect will be ratified soon.