NHL Rejection of Kovalchuk Contract Upheld, League May Revisit Prior Contracts (Confirmed: League Is Investigating)

Systems arbitrator Richard Bloch has ruled that the NHL’s rejection of Ilya Kovalchuk’s 17-year, $102m contract will be upheld and Kovalchuk once again becomes a free agent.

NHL Deputy Commissioner Bill Daly released the following statement:

“We want to thank Arbitrator Bloch for his prompt resolution of a complex issue. His ruling is consistent with the League’s view of the manner in which the Collective Bargaining Agreement should deal with contracts that circumvent the Salary Cap.”

The next steps for the league, New Jersey Devils, and Kovalchuk still remain unclear.  Under the Collective Bargaining Agreement, it’s possible that the Devils can be fined up to $5m as well as a loss of draft picks.  Kovalchuk himself can be fined anywhere from $250,000 to $1m.  New Jersey is free to work out a new contract with Kovalchuk, but we may see original suitors such as the Los Angeles Kings and New York Islanders re-enter the picture.

And the fallout from the decision isn’t strictly limited to the members of the Kovalchuk-Circus.

Moving forward, how will this impact negotiations with next summer’s crop of big-name free agents such as Joe Thornton, Zdeno Chara, Zach Parise, and Steven Stamkos?  If strict reasoning for Bloch’s decision (and the “manner” Daly refers to) is not detailed in the coming days, NHL general managers will find themselves in the dark when it comes to where the league’s line in the sand really exists.  Greg Wyshynski at Puck Daddy summed up the decision with this:

Kovalchuk making below minimum wage (by then) at 44 was deemed preposterous by an arbitrator. Hossa making $1 million at 42 and Roberto Luongo still tending goal at 43 while making $1 million were deemed — every bit the insult to our intelligence that Kovalchuk’s career projections were — were deemed possible by the NHL in its approval of the contracts.

This is where today’s decision may simply be the tip of the iceberg.  At the Winter Classic Press Conference in Pittsburgh July 27th, commissioner Gary Bettman revealed that if the league’s rejection was upheld in arbitration as it was today, they may revisit other long-term contracts in the hopes that they can have those overturned as well.  He did not elaborate on which contracts may be subject to investigation, but it’s safe to assume that Marian Hossa’s and Roberto Luongo’s would be at the top of that list.

Whether the NHL has the ability to reopen investigations into earlier contracts could be a hot topic of debate in the coming weeks, should the league choose to pursue this route.  Most people I’ve spoken to have written Bettman’s words off as simple progaganda, but with very few official comments from all sides in this situation it’s hard to determine where these violations will fit in regards to the ambiguous Articles 11, 26, and 50 of the CBA.  (Jewelsfromthecrown.com has had some  interesting discussion on this topic in recent weeks should you find the desire to develop your own speculation.)

One example to keep in mind is that an investigation into circumvention surrounding the Marian Hossa’s contract was initiated over four weeks after the deal was originally rubber-stamped by the league.  Take from this what you will, but unless this was simply a warning shot, the NHL must have felt they had the right to overturn the Hossa contract after the fact if they could produce evidence of circumvention.

If the Kovalchuk contract had been upheld, the floodgates would have been open for a rash of 17, 20, or 25-year deals.  Bettman and the NHL have certainly stopped the bleeding temporarily with today’s decision, but with Kovalchuk a free agent and plenty of questions left unanswered in this drama, today may simply signal the start of a new chapter.

Update 8/9 9:55pm:

James Mirtle of the Globe and Mail has released quotes from Bloch’s ruling in which he confirms that previously registered contracts are now under investigation:

Bloch also noted that several other long-term contracts are under investigation for circumvention, listing deals given to Vancouver Canucks netminder Roberto Luongo, Boston Bruins centre Marc Savard, Philadelphia Flyers defenceman Chris Pronger and Chicago Blackhawks winger Marian Hossa as raising similar red flags to Kovalchuk’s rejected contract.

“While the contracts have in fact been registered, their structure has not escaped league notice,” the decision reads. “Those players’ contracts are being investigated currently with at least the possibility of a subsequent withdrawal of the registration.”

While Marian Hossa’s 12-year contract kicked in last season as he joined the Blackhawks on the way to a Stanley Cup; Pronger, Savard, and Luongo have yet to receive money on their contract extensions signed last year. By withdrawing the registration of these deals, the players would in effect become free agents – a mess that would send enormous ripple effects throughout the entire league.

Stay tuned to TheHockeyWriters.com for continuing coverage of this story.