NHL Buyout Article

[J.I.A.H.N]

at – May 2, 2013. NHL Postseason Morning Coffee Headlines – Friday, May 3, 2013.

First Loophole in the New NHL CBA?

By Lyle Richardson On May 2, 2013 · 8 Comments ·

A recent report in The Buffalo News caught my eye regarding the possibility of the Sabres trading for another club’s potential amnesty buyout candidates.

As per John Vogl:

“A trade to watch for involves amnesty buyout candidates. Each team can get salary cap relief by buying out two players over the next two summers, and the Sabres may use owner Terry Pegula’s wealth on other teams’ unwanted players for a draft pick or prospect.

“You can acquire a player and buy him out if somebody wants to pay you enough to do that, some other currency other than the dollars,” (Sabres GM) Regier said. “Whether it happens or not, it’s one of the options.”

For example, if the Philadelphia Flyers were to package Daniel Briere (assuming he waived his no-movement clause) with a pick or prospect to the Sabres in return for a cheaper player, a draft pick, a prospect, or any combination of those three, the Sabres would then buy out the remainder of Briere’s contract, either with one of their own amnesty buyouts, or via the regular buyout process of two-thirds the remaining value of the contract spread over twice the remaining term.

Briere would then become an unrestricted free agent, and ineligible from re-signing with the Sabres for a full season following the buyout.

Another example could be Ryan Malone of the Tampa Bay Lightning (assuming he’d accept a trade), as the Bolts might prefer to trade him rather than go the buyout route.

Another is the NY Islanders’ Rick DiPietro, who lacks a trade clause. The Isles are still paying for their buyout of Alexei Yashin, and owner Charles Wang might prefer trading DiPietro’s contract (which expires in 2021) over a buyout.

It’s also possible the bought-out player subsequently signs a more affordable contract with his former team. In other words, the Flyers trade Briere to the Sabres, who buy out his contract, allowing him to sign a more affordable deal with the Flyers.

Such a move, however, raises the specter of salary cap circumvention.

The current collective bargaining agreement (CBA) has yet to be finalized and publicly released, but from reading the Memorandum of Understanding (MOU) between the NHL and NHLPA, there’s nothing preventing a team from acquiring a player via trade and then buying him out, or subsequently preventing that player from signing with the team which traded him.

Article 26 of the previous CBA, (specifically, 26-3) addressed salary cap circumvention and it’s a safe assumption that’ll be carried over (with updates) into the new agreement. As with the MOU, it doesn’t specifically prohibit the aforementioned scenarios.

“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.”

I sought the advice of TSN legal analyst Eric Macramalla. Here’s his response:

“The MOU provides as follows:

“A Player that has been bought out under these Compliance Buy-Out provisions shall be prohibited from re-joining the Club that bought him out (via re-signing, Assignment, Waiver claim or otherwise) for the duration of the 2013/14 League Year”.

This provision only precludes the buyout team from re-signing that player. Subject to the language in the new CBA (which is close to being done), the scenario you have described would not be expressly excluded. However, and as you noted, that’s where the legal principle of circumvention is worthy of consideration. This is a legal test open to interpretation and whatever ultimate determination is made is based upon the factual matrix, the surrounding circumstances and a key governing principle of the CBA, namely, promoting competitive balance.

So let’s say the Canadiens trade Tomas Kaberle to the Bruins along with his $4.25 million cap hit in return for a 7th round pick (can’t do worse). Then the Bruins buy Kaberle out and the Habs resign him at minimum wage. While the Canadiens found a way to retain Kaberle with a minimal cap hit, they may not have circumvented the cap. They received consideration from the Bruins, and the Bruins knew full well they would not retain him. Still, the transaction is suspicious as it may suggest the Bruins had no intention of keeping Kaberle and further that the teams struck a deal. If it could be shown that the incentive was to gain an unfair competitive advantage, then circumvention talk may be warranted. Again, though, tough one.

Perhaps a more contentious scenario is the Canadiens sending Kaberle and Rene Bourque to the Bruins and the Bruins buyout Bourque and the Habs re-sign him. In this scenario it does not strike me as unreasonable for other clubs to complain.

So it’s not clear cut either way (again subject to the language in the CBA). However it shouldn’t be – circumvention is open to interpretation. Best argument wins – see Kovalchuk.”

In short, there doesn’t appear to be anything in the new CBA expressly prohibiting a player being dealt to another club, receiving a buy-out and re-signing with his former club, but it could result in a legal challenge, akin to the league’s rejection of the New Jersey Devils signing Ilya Kovalchuk to a heavily front-loaded, 17-year contract.

Proving intent of circumvention is the key, which might not be easy to do, as it would have to be determined both clubs made this deal with the understanding the traded player would be bought out in order to sign a cheaper deal with his former club. On the surface, it appears obvious, but as we saw with lengthy, front-loaded contracts under the previous CBA, it would take an extreme case to prompt the league into rejecting such a move.

If circumvention cannot be proven, this could become the first significant loophole in the new CBA, adding some potential intrigue into the first off-season under the new agreement.

Tagged with → CBA • circumvention • NHL ANY THOUGHTS? IS IT EVEN STILL CURRENT? THIS JUST ADDS TO THE POSSIBILITIES IF POSSIBLE????

[goalie13]

I have no problem with the idea that a team may trade a player to another team strictly for the purpose of being bought out. Once Team A has traded the player away, they should have absolutely no concern what Team B does with that player. It's not their business.

What the article doesn't seem to consider though, is why would any player want to re-sign with their former team at minimum salary? There are likely at least a few among the other 28 teams that would be willing to part with a few dollars more. Regardless, if the player and Team A have an agreement to re-sign with them after being bought out by Team B, that would be tampering and doesn't need to have specific language written into the CBA to cover it.

It comes down to the basic fact that you cannot have any kind of arrangement with a player on another team. Once Team A trades that player away, he ceases to be Team A's employee and becomes Team B's employee. And it is not allowed in any way for Team A have agreements with Team B's employees, even if they know that Team B intends to buy that player out.

[RunningWild]

For the last month, I've been saying Canucks need do this. Take on a buyout contract....then..... raid their prospect cupboard. Sounds like the Canucks are planning on doing this. Would hate to see other teams doing it as well - flooding the market.

[elvis15]

For the last month, I've been saying Canucks need do this. Take on a buyout contract....then..... raid their prospect cupboard. Sounds like the Canucks are planning on doing this. Would hate to see other teams doing it as well - flooding the market.

[Phil_314]

For the last month, I've been saying Canucks need do this. Take on a buyout contract....then..... raid their prospect cupboard. Sounds like the Canucks are planning on doing this. Would hate to see other teams doing it as well - flooding the market.

[Pears]

So we could esentially trade Booth and Ballard to seperate teams for them to buy out, and then if we wanted to we could sign them to cheaper contracts?

[goalie13]

So we could esentially trade Booth and Ballard to seperate teams for them to buy out, and then if we wanted to we could sign them to cheaper contracts?

[elvis15]

So we could esentially trade Booth and Ballard to seperate teams for them to buy out, and then if we wanted to we could sign them to cheaper contracts?

[J.I.A.H.N]

Does anyone else want to comment on this article?

[RunningWild]

"Sounds like" is pretty suggestive that you have some sort of evidence that's what they're considering. I haven't heard anything about that, in fact I've heard the opposite from Gillis' interviews on the subject where he doesn't want to take back bad contracts to make a deal happen.

Now a version of the main point above hasn't been suggested for us; no one's suggesting we take back DiPietro in a trade to buy him out so NYI can re-sign him for cheap. That said, the NHL could find fault with anyone trading for a player with the consideration of buying them out. I don't see that as being as likely to be considered cap circumvention as the re-signing for cheap with their old team option, but you never know.

I wouldn't be opposed to us taking back a buyout candidate (again, no 'agreement' so he could re-sign with old team on our part) for an increased return, but I don't see it as likely for Gillis to do so. Partly it's his past comments I mentioned, but also his style is not to flaunt the intent of a rule in the CBA (the only exception being the Luongo deal, which Aquilini may have pushed on Gillis to some degree).

[elvis15]

I don't have an inside info. I was referring to 2 Botchford articles where he says Canucks are looking to use their compliance buyouts to purchase assets. I wasn't referring to the sentiment about 'said' buyout player returning to old team. They don't have to be tied together.

The only interviews I've seen Gillis say he won't take back a bad contract is when he's referring to a Luongo trade. Buying assets via compliance buyouts doesn't have to be tied to a Luongo trade.

I don't think it's any GM's intention to flaunt CBA rules. Their job is to operate 'within' that CBA, and if there isn't any rules about buying assets via compliance - then they're doing their jobs. According to the article above, there doesn't appear to be any clauses against it.

I think this is exactly the type of opportunity a progressive GM like Gillis would use. When we heard about the 2 compliance options in the new CBA, my first thought was "Gillis, and other smart/wealthy GMs, are gonna use for other opps". Why not if it's within the rules?

...

[RunningWild]

Botchford's article was more of his opinion than anything based on fact, iirc. He was suggesting it as a good option considering the Luongo situation and how it's dragged on. Apart from the Luongo trade, I'm just not as sure what other assets we'd be moving that would have a benefit for us to take back a contract, since players like Booth and Ballard would be cheaper for us to buy out than most contracts we could take back.

I'd say there aren't any GMs that want to flaunt the rules either, but there are a few that will definitely push the limits of what is acceptable. The initial set of back diving contracts was proof of that, with it finally resulting in New Jersey forfeiting draft picks for the Kovalchuk deal. On top of that there's always mistakes like the offer sheet on O'Reilly that would have cost Feaster not only the compensation, but also the player once he hit waivers. Certainly someone trading a player to be bought out elsewhere so they could re-sign them would come under heavy scrutiny at least, although a trade and buyout with no attempt to re-sign would be ok I think.

Gillis may be progressive in a number of things, but I don't see him as someone that would do this for anyone of significance, like Bryz or DiPietro as some have suggested. I could be wrong, as it's only my opinion, but I think it's highly unlikely even if I can see some merit in doing a deal like that - after all, it's not my money!

[Wiznac]

I'd take Dipietro's contract if it got us a good player back like

To Van - Strome , Dipietro

To NYI - Luongo , 1st

[elvis15]

Jason Botchford ‏@botchford 18 May

This doesn't suggest it's his 'opinion'. He's saying he heard this. Of course it's Botchford so who really knows.

I'm not sure what assets Canucks'd move in a buyouts package, probably a contract like Tockin? Maybe Sauve? Maybe they say 'futures or conditional' which is something teams seem to do when nothing actually goes the other way (see Thomas trade to NYI). Not sure.

Ya, I'm guessing a trade which immediately results in a compliance buyout will be reviewed by the league. It's a new CBA, I'm sure a lot of things this summer will be reviewed by the league to determine the legitimacy under a new CBA. Lots of GMs testing the waters.

I'm also not sure about 'how far' Gillis/Acquilini are wiling to go on this buyout option. Are they looking at a $5M Upshall? Or $24M Dipeitro? It will really depend on their internal valuations, I'm guessing we won't know until a deal actually happens (if it happens). Should be interesting.

[VIC_CITY]

I'd take Dipietro's contract if it got us a good player back like

To Van - Strome , Dipietro

To NYI - Luongo , 1st

[RunningWild]

Exactly, he also suggested in his article today on Eakins being in town that Todd McLellan should be at the top of Gillis' list if he was available. He isn't a bad coach, but he's had a similar team in San Jose that has a very good core with regular season success but is ageing and hasn't seen playoff success. Even when they'd made it to the Conference finals, they got blown out 4-0 and 4-1. We've at least made it to the SCF in AV's time despite some other issues and a transitioning core during his early years here.

Fair enough though as I hadn't seen the tweet. It still goes against Gillis' comments around a Luongo deal, but perhaps there is another deal to be made where it fits and we get something else back in return? I still see it as unlikely though, we'll have to see what happens.