NHL Prevails in Arbitration Over Rejected Kovalchuk Contract
August 17 (NEW YORK) – Proskauer advised its longtime client, the National Hockey League, in a successful, private arbitration proceeding that upheld the rejection of Ilya Kovalchuk's 17-year contract with the New Jersey Devils, which the league claimed flouted its salary cap rules.
The NHL Players Association filed a grievance against the league seeking to reinstate Kovalchuk's contract after it was voided by the NHL. The NHL objected to the 17-year term, the longest in NHL history, and to the fact that 97 percent of the full contract value was to be paid within the first 11 years, as well as to a “No Move” clause that extended through 2017 before converting to a “No Trade” clause for the balance of the term.
The NHL claimed that it acted within its rights in voiding the contract as an attempt to defeat or circumvent the team payroll range provisions of the collective bargaining agreement, which establish and detail the negotiated salary cap system. The NHL argued that the last six years of the contract were “illusory” in that one could not reasonably conclude the agreement will be, or was intended to be, fulfilled. In support, it cited Kovalchuk’s advanced age (43) at the end of the contract, the front-loaded salary structure and the “No Move”/“No Trade” conversion, which signaled that the team would be relieved from its $6 million salary cap if Kovalchuk were to retire or be sent to the minors by the club.
The arbitrator agreed, finding that the effect of the contract was to artificially extend the term of the agreement, decreasing the annual salary cap figure and increasing the club’s payroll room in a manner that would defeat the intentions of the parties as outlined in the team payroll range provisions.
Bob Batterman, who has a record of success on behalf of the NHL, served as lead counsel in the two-day hearing held in Boston.