Article 11.6, Not Article 26.13 is Happening After Ilya Kovalchuk Contract Rejection

On Wednesday morning, the NHL officially released the following statement from Deputy Commissioner Bill Daly to confirm that the league has rejected the contract between Ilya Kovalchuk and the New Jersey Devils.

The deal that was worth $102 million over 17 years, broken down as per Tom Gulitti here, now sits in limbo. It has been rejected. As the news rocked the world of the hockey media, the big question has been about what happens now.  I can conclude that based on the reports by Tom Gulitti, Rich Chere, Scott Burnside at ESPN.com, the National Post, and the Canadian Press via The Hockey News among other outlets is that one of the next steps is falls on the NHL Players Association on whether they will file a grievance claim about the rejection. This is especially bolstered by Lou Lamoriello stating that  This is per procedure in the NHL Collective Bargaining Agreement (CBA). In fact, it is actually called out in Article 50.9.(b):

It is important to understand Article 11 to realize what will happen next since the NHL rejected  the contract between Ilya Kovalchuk and the New Jersey Devils.  Likewise, it's important to understand what procedures aren't being followed.  I'll be referring to the NHL CBA quite a bit, so here is a link to the NHL CBA 6+ MB .PDF file from the NHL's site.  My citing of the CBA and my reasoning continues after the jump.  Be forewarned, this is a long piece and I could very well be wrong in interpreting some of this or missing something important.  I want to have the facts and a proper understanding based on the CBA above all, so if I do have something wrong, please let me know where I got it wrong and why it's wrong. It'll be appreciated by all who read this.

Let's Read Article 11.6

Article 11 is entitled "Rules and Procedures Governing Standard Player's Contract."  Within this article is a subsection devoted solely to rejected Standard Player's Contract (SPC).  That's Article 11.6 and it's vital for all Devils fans interested in this saga to fully grasp.    Let's go through it section by section. First off, here's the provision that justifies the NHL's rejection to begin with, Article 11.6.(a).(i)

Before continuing with the two sub-clauses, I've already proven that it can't be A or B here.  C is the crucial one and will undoubtedly be the main point to prove in any future procedures from here on out.   Anyway, there are two options that follow after the SPC (the Kovalchuk contract) was rejected:

(x) if the NHLPA does not timely dispute and refer to the Arbitrator such rejection in the manner set forth in Section 11.5(g) above, then immediately upon the expiration of the time period within which the NHLPA may dispute and refer to the Arbitrator such rejection, the SPC or Offer Sheet, as the case may be, will be deemed null and void ab initio (i.e., the Player's Free Agency and/or contractual status shall revert to the status he held prior to signing his SPC or Offer Sheet, as the case may be), and the Player shall not be entitled to any of the rights or benefits provided for under the rejected SPC or Offer Sheet, as the case may be; or

(y) if the NHLPA does timely dispute and refer to the Arbitrator such rejection in the manner set forth in Section 11.5(g) above, then such dispute over that rejection shall be both heard and decided by the Arbitrator within fortyeight (48) hours of such referral, during which period the Player shall not be entitled to play under such SPC or Offer Sheet, as the case may be, and shall not be entitled to any of the rights and benefits provided for under such SPC or Offer Sheet, as the case may be, pending a resolution of such grievance by the Arbitrator.

The NHL rejected Kovalchuk's contract, the NHLPA has 5 days to file a grievance.  If they do, per Article 11.6.(a).(y), there will be an arbitration hearing to either sustain or overrule the NHL's rejection.  If they don't, per Article 11.6.(a).(x), then the rejection is taken as-is.  The contract will be null and voided; Ilya Kovalchuk goes back to being an unrestricted free agent; and there is no other penalty.  The New Jersey Devils could certainly sign him as could any of the other 29 teams in the NHL.   

While we wait for the NHLPA to make a move, Kovalchuk is essentially in limbo. He's not a free agent, but he's not a member of the New Jersey Devils or getting anything from the contract that has been rejected.

Since it was called out in these two sections, let's quickly look at Article 11.5.(g). The top-level article section covers the timeliness of the filing and approval process of contracts. Here's the relevant part of 11.5.(g) that backs up what has been reported (for example, this post by Gulitti)

In the event the League rejects an SPC or Offer Sheet pursuant to Section 11.6(a) below, or challenges and/or de-registers an SPC pursuant to Section 11.6(b) below, if the NHLPA disputes such rejection, challenge and/or de-registration, the NHLPA must notify the League, in writing via facsimile and e-mail, by no later than 5:00 p.m. New York time on the day following the day such notice of rejection, challenge and/or de-registration is received by the NHLPA...except that the NHLPA may provide such notice by no later than five (5) days from the day such notice is sent by the League if the League's notice is sent between July 1 and the date which is seven (7) days prior to the commencement of the Regular Season (provided that a notice sent by the League after 5:00 p.m. New York time shall be deemed to have been sent on the following day for purposes of this provision). Such notice from the NHLPA shall set forth the specific reasons that are the basis for such NHLPA dispute.

Now, suppose the PA does file a grievance within 5 days, the sticking point becomes getting an arbitrator.  The PA and NHL must agree on who it is and there's no time limit  called out in Article 11 on how long it can take to get someone.  It could be days. It could be weeks.  Once someone is decided upon, then the 48 hour window of argument-and-decision by the arbitrator kicks in.  So there is a way this could be dragged out.  

In any case, once someone is found and the dispute is argued, there are two outcomes. The first is the arbitrator finds that the NHL's rejection is indeed valid.  In that case, Article 11.6.(a).(iii) takes effect:

(iii) If the Arbitrator sustains the League's rejection of any such SPC or Offer Sheet, as the case may be, pursuant to subsection (i) above, then the Arbitrator shall order that the rejected SPC or Offer Sheet, as the case may be, will, immediately upon the League's receipt of the Arbitrator's decision, be deemed null and void ab initio (i.e., the Player's Free Agency and/or contractual status shall revert to the status he held prior to signing his SPC or Offer Sheet, as the case may be), and the Player shall not be entitled to any of the rights or benefits provided for under the rejected SPC or Offer Sheet, as the case may be, other than the right to be paid such Paragraph 1 Salary and Bonuses (other than Signing, Roster or Reporting Bonuses, if any) earned during the period, if any, such Player played for the Club pursuant to such SPC.

The effect is largely the same as Article 11.6.(a).(x); Kovalchuk's contract is voided, he becomes a UFA again, and the Devils are back at square one.   Please note that the only addition is that the player does get paid for any salary earned while playing.  Given that it's the offseason, that would likely be nothing for Kovalchuk.   Still, do note that there are no subsequent penalties called out here.

Now, the other outcome is that the arbitrator finds that the NHL's rejection of the contract was not valid.  Article 11.6.(a).(v) goes over what happens:

(v) If the Arbitrator rules that the League's rejection of an SPC or Offer Sheet, as the case may be, pursuant to either subsection (i) or (ii) above was not proper, then the sole remedy the Arbitrator shall be authorized to provide shall be to direct the League promptly to approve and register such SPC and to direct the Club to pay to the Player such Paragraph 1 NHL Salary or Paragraph 1 Minor League Salary, as the case may be, and Bonuses, including such Signing, Roster or Reporting Bonuses, if any, that the Player would have earned had the SPC been registered and approved as of the deadline set forth in Section 11.4(d) above through the date that such SPC is in fact registered and approved (i.e., the period of time missed solely as a result of the League's improper rejection). Further, if the Player missed a games-played bonus by one (1) game, then the Arbitrator shall have the discretion to award the Player such bonus. The Arbitrator shall not be authorized to award any other bonuses, payments, damages or other equitable or legal relief to the Player.

Essentially, the NHL has to accept the contract as-is without penalty.  Kovalchuk is a Devil with a cap hit of $6 million per year.  What Gulitti reported as possible outcomes from arbitration are all valid outcomes from Article 11.6.(a).  Therefore, the NHL and PA are going through the procedures outlined in this Article 11.6, as defined in the CBA.  That much is apparent.

As far as what could go on in the arbitration, who knows? Provided the PA representation are on their "A" game, it shouldn't be too difficult to point out that the Kovalchuk contract originally signed does meet Article 50, which governs the team's Upper Limit of the Averaged Club Salary and the Maximum Player Salary.  The issue is circumvention, though, and that's in Article 26.

Now, I got a fun discussion question.  Article 11.6.(b) goes over the NHL being allowed to challenge and de-register approved SPCs.  Could the NHL follow Article 11.6.(b).(iii), which will de-register the contract for circumvention; leading to this similar process with the same possible outcomes (de-registration is sustained, it's overruled, or it's not challenged and just accepted) for a SPC that has already been through this process after initial rejection?  I'd like to say no, but I'm not seeing anything in Article 11 that's clear.

Speaking of what I'm not seeing in Article 11, it's any call out of Article 50, which regulates SPCs with respect to the team's payroll, or Article 26, which defines circumventions.   Odd that Article 11.6.(a).(i) allows for circumvention to be a reason for rejection, yet it doesn't refer to either article for additional information or procedures.  Would it be fair to assume that they could be used in the arbitration hearing?  I don't know for certain.  Either way, I am taking that to mean that the procedures outlined in Article 11.6.(a) stands on its own.

This is a very important distinction to make.

The Procedure of Article 26 & Why There's No Reason to Believe It's In Process (Now)

Article 26 covers circumvention and it's a very serious and broad set of provisions with it's own set of judgment procedures.  It's set up quite differently than Article 11.6.(a), and the consequences are more serious than just voiding the contract.  That said, there's no reason to believe this is on-going.   The best way to describe this is to go backwards.

First, here is Article 26.13.(c) which describes the punishment scenario:

(c) In the event that the System Arbitrator finds that a Circumvention has been committed by a Player or Player Actor, the System Arbitrator may impose any or all of the following penalties and/or remedies set forth below. In the event that the System Arbitrator finds that a Circumvention has been committed by a Club or a Club Actor, the Commissioner may impose any or all of the following penalties and/or remedies set forth below:

(i) Impose a fine of up to $5 million in the case of a Circumvention by a Club or Club Actor, but in no circumstances shall such fine be less than $1 million against any Club or Club Actor if such party is found to have violated Article 50 of this Agreement. If such a fine is assessed against a Club (except in the case of a financial reporting violation), that Club's Payroll Room shall also be reduced by such amount for the following League Year, and if such reduction of the Club's Payroll Room renders the Club out of compliance with the Payroll Range (i.e., the Club does not have sufficient Payroll Room to accommodate its Player commitments
comprising Club Salary) for such following League Year, then the Club must take such steps as are necessary (e.g. Assignment, Buy-Out, Waivers, etc.) and as are permitted by this Agreement to ensure that the Club will be in compliance with Article 50 of this Agreement upon commencement of the following League Year;

There are 5 additional penalties ranging from a smaller fine, a loss of draft picks, voiding the contract, forfeiture of wins during the period of the circumventing contract, and suspension of parties involved. I've only quoted the first one because it actually calls out Article 50.

Well, I don't believe this contract violates Article 50. In fact, the contract and the team are compliant with it's regulations. Ergo, I think this penalty can't be enforced.   In fact, I don't believe that things will ever get as far as Article 26.13.(c).   Here's the two sub-sections prior in Article 26.13:

This is quite different from Article 11.6.(a).  There's more flexibility in the allowed lengths of time for decisions.  The arbitrator doesn't need definitive evidence.  The goal isn't to uphold a decision, it's to determine whether circumvention has taken place.  I'll get to how that's defined a little later.  Still, there's no grievance to be filed by the PA that makes this arbitration happen, just a claim that there has been circumvention.

While some will point to 26.13.(b) and start feeling nervous on how broad it is; let me point out that there's a call out for an earlier section of Article 26.  Most of all, look at the very beginning in 26.13.(a).  Article 26.13 does not take effect unless there is a failure of a joint conference per Article 26.12.   Joint conference?  What?  Let's head right on up to Article 26.12.

26.12 Joint Discussions on Possible Circumventions. Each Investigator shall notify the other after he has concluded an investigation under Section 26.10. Within three (3) days after such notification, and prior to the Investigator's issuance of a report concerning the results of such investigation, the parties shall meet and confer to try to resolve the matter. If the parties reach a resolution, the Investigator reserves the discretion as to whether to issue a report concerning the alleged Circumvention. If the matter is not resolved, the Investigator shall issue a report concerning the alleged Circumvention. Neither the NHL nor NHLPA may commence any action before the System Arbitrator pursuant to Section 26.13 below prior to the parties having met and conferred pursuant to this Section 26.12.

The bolded text is my own and it's the most important part to focus on.  The only way things go to a Systems Arbitrator per Article 26.13 and that judgment is the NHL and the parties involved don't reconcile on a disputed claim of circumvention. The league can't skip to the arbitration, this must be followed.  As far as I can tell, if the NHL alleged circumvention and investigated the Kovalchuk contract, they have to sit down with the Devils and/or the PA and hammer out some sort of compromise that ends the issue.     Since that hasn't happened, there's no need to worry about 26.13.  It's not happening unless this is accomplished

These actions can't be done without qualification either. The parties can't meet until they have been notified about the conclusion of an "investigation."  So what in the world is an investigation?  That's described in Article 26.10. There's quite a bit, so let's go through it one-by-one:

26.10 Investigations.
(a) The Commissioner of the NHL or the Executive Director of the NHLPA (the "Investigator") may, sua sponte or based upon reports or complaints received by either, commence an investigation regarding whether a Circumvention has occurred.

The NHLPA doesn't have an executive director yet, so I would think only Gary Bettman can commence an investigation at this juncture.

(b) The Investigator's authority to investigate (i) a possible Circumvention relating to an SPC shall in no way be limited by the fact that such SPC was approved and registered by Central Registry pursuant to Article 11 of this Agreement; or (ii) a possible Circumvention relating to financial reporting by a Club, Clubs or the League shall in no way be limited by the fact that the Initial, Interim or Final HRR Report has been issued by the Independent Accountants.

Now this is intriguing.  Essentially, any player's contract that has been approved is eligible for investigation for circumvention.   I would think that even if the contract is accepted via Article 11.6.(a).(v), that it still could be investigated later on.

So if the NHL rejects the contract and that rejection is sustained,  does that mean they can't investigate it for circumvention on the basis that the contract would be voided?  I would think so, but 26.10.(b).(i) isn't quite clear.

(c) The Investigator may obtain the authority, upon good cause shown to the System Arbitrator, to require any Player, Player Actor, Club or Club Actor to produce any relevant books and records, including without limitation, insurance records, telephone records, e-mails, tax returns or other relevant tax materials disclosing (i) the income or revenue information of the Player, Player Actor, Club or Club Actor and/or (ii) any information of the Club or any Club Actor in the custody or control of the Player or the Player Agent, which materials and information shall be treated as highly confidential.

In other words, this gives the investigation authority to go through any records to determine intended or blatant circumvention.

(d) There shall be no limitation of time barring the investigation of a Circumvention by the Commissioner.

An investigation can go on as long as possible. Even after the contract in question has begun.

(e) At the conclusion of his investigation, the Investigator shall issue a written determination regarding whether or not, in his opinion, a Circumvention has occurred. The Investigator's determination shall not be binding, but it shall be fully admissible in any hearing commenced before the System Arbitrator pursuant to Section 26.13 below.

Not only that, but before this report is issued, there must be a joint discussion per 26.12.

(f) The Investigator's failure to initiate an investigation of a suspected Circumvention may be grieved under Section 26.13 but such failure shall not itself be considered a Circumvention.

You can complain about the lack of an investigation, but failing to investigation is not an illicit action by the league?  So how in the world does the joint discussions happen as described in 26.12 without an investigation?  I guess the investigator (Bettman/NHLPA executive director) can just call the parties together; but then what happens afterwards? What would he have to introduce?  Of all of the clauses here, this is the most confusing.

Now, let's take a step back to last summer.  Investigations are not secret events that no one talks about.  Definitely not in today's era of the Internet delivering news at any time.  Just like how sources have appeared for all kinds of rumors, imminent signings, and league activity, sources revealed that the Marian Hossa and Chris Pronger contracts (example reports: TSN, ESPN, MLive) were up for investigation for circumvention.  So far, nothing has happened, but per 26.10.(d), the investigation can take all the time in the world before making a conclusion. UPDATE #1: Mirtle pointed me to this article in the Globe and Mail by Eric Duhatschek that notes that the investigations into Hossa's, Pronger's, and Luongo's (!) contracts are actually still active.

Why is this relevant for Devils fans worrying about Ilya Kovalchuk?  Essentially it means you all should rest a little easier.  As far as I know, there aren't any outlets reporting that the NHL is investigating the Kovalchuk contract, only that the NHL has rejected the contract.   That would be a separate, and bigger, story since the potential penalties are much larger.  Since there's no investigation per Article 26.10 right now, the joint discussion described in Article 26.12 isn't happening (and probably would only happen if the investigation found something wrong). Since there's no joint discussion, Article 26.13 isn't happening yet.  Instead, the procedure being followed is in Article 11.6.(a).

Therefore, until there are reports of an investigation, there is no reason to believe that the NHL will hit the Devils with a cap penalty or take their picks according to the CBA.   Would the NHL investigate a contract that was once rejected and overruled by an arbitrator? Possibly, but there's no reason to be concerned about that until then.  If someone tries to tell you that the Devils will face minimum penalties, then you have the facts to tell him or her that's false.

If there is evidence that the NHL is investigating this deal, then that changes things.  Still, it's a long way to go before it would reach the Systems Arbitrator per Article 26.13.

What is the NHL's Issue?  Article 26 Does Hold a Possible Answer

Allow me to speculate for quite a bit after detailing two procedures on contract judgment.

What would likely be brought up in arbitration in Article 11.6.(a) are the definition of circumvention.  Multiple sections in Article 26 go over what circumvention is, per the general section Article 26.1:

As already explained, getting to 26.13 is a far more involved process.  Article 26.15 provides a non-exhaustive list of examples. The Kovalchuk contract doesn't meet those examples on it's own, but it is a non-exhaustive list that's really only there for reference as far as I can tell.   Articles 26.3.(a) and 26.3.(b) basically define a broad range of circumvention by either a player, a player actor (e.g. an agent), a club, or a club actor (e.g. member of management).   Article 26.4 just states that both the PA and NHL are subject to committing circumvention; 26.5 goes over the situation of circumvention involving someone who has yet to become a player; 26.6 forbids payment to agents; and 26.7 requires players and teams to properly disclose circumventions they are aware of in writing.  Feel free to read all of that at your own leisure, though I will bring up a part of 26.3 in a little bit (See Update #2).

What strikes me is the description of undisclosed agreements, which is called out in Article 26.2. 

This is appropriate considering what sources have said why the NHL rejected Kovalchuk's contract.  Per Tom Gulitti's initial post about the league's rejection of Kovalchuk's contract, the NHL doesn't think Kovalchuk will play out the full length of his contract. 

If this is accurate, then one would think the NHL feels there is an undisclosed agreement; hence they rejected it based on the case of circumvention.  The reasoning is weak according the agents quoted by Michael Traikos in the National Post; most notably by Ian Pulver, player-agent and CBA author. After all, Article 50 doesn't have a limit on contract length (I may be wrong in saying there was an explicit statement saying no limit, but there's no explicit limit either), there's nothing else in Article 50 that the contract violates, and short of psychics getting involved, definitively proving that Kovalchuk won't play until he's 44 is going to be a gargantuan challenge.

Perhaps that would help explain why the NHL decided to just outright reject the contract instead of going through all of Article 26?  An investigation may not yield proof of an undisclosed agreement; so if they just reject it, take the contract through Article 11.6.(a) and the situation ends much more cleanly for everyone involved.  Kovalchuk goes back to UFA; the Devils aren't penalized beyond the contract being voided and can re-sign him to a different deal if they want to retain the player; and the NHL makes their point about Article 26 in arbitration without going through an investigation and a joint discussion.   The union would look weak, but without a leader right now, they looked weak to begin with.

So ends my speculation, do note that I fully would accept that I am wrong since this is, well, speculation.  Take it with a grain of salt, just like you should with anyone fretting about 26.13 at this juncture. 

UPDATE #2: Would you believe I forgot this important bit from Article 26.3? Section (i) is something to remember:

(i) Any act, conduct, or activity that is permitted by this Agreement shall not be a Circumvention.

So contracts that would be valid per Article 50 can't be seen as circumvention on that basis, right? Basically, the NHL would have to justify circumvention on something that isn't permitted in the CBA. An undisclosed agreement would definitely fall under that, but so could other matters.  Again, just speculating at the end here.  End Update #2

The Takeaways & Your Take

To sum up: This rejection is based on circumvention of the club upper limit or maximum player salary - despite that neither has been violated per Article 50.  The next step are the procedures listed in Article 11.6.(a) and has three outcomes: The NHLPA files a grievance, subsequent arbitration rules in favor the NHL's rejection, and the contract is dead per 11.6.(a).(iii).  The NHLPA files a grievance, subsequent arbitration rules against the NHL's rejection, and the contract is accepted per 11.6.(a).(v).  The NHLPA doesn't file a grievance and the NHL's rejection takes hold, leaving the contract void per 11.6.(a).(x).    

Articles 26.10 through 26.13 (and it's associated penalties) aren't involved until there is an investigation by the NHL or NHLPA into cap circumvention per 26.10 which will kick that procedure off.  They would have to find evidence of sorts per Articles 26.2 - 26.7 or 26.15, put a report together presuming that there is reason to believe there is circumvention, and have a joint discussion with all parties to resolve issues before issuing said report in 26.12 before going to the Systems Arbitrator in 26.13.

I speculated that based on what sources have said so far that led the NHL to reject the contract.  I could be very wrong, but I made my guess all the same.  Regardless, the next steps are outlined in Article 11.6, which does not call out or refer to Article 26 or 50 specifically in any part of Article 11.

In other words, Devils fans and others who may be reading this, we're waiting for a grievance to be filed by the NHLPA by Monday.  That's all.  Until that happens or the deadline is reached, take a deep breath and relax.

Now it's your turn. Did I get something wrong? Did I misinterpret something?  Is there additional information that changes the whole scope of what will happen next?  Please let me know your feelings in the comments.  Like with the last post, I'm not interested in conjecture and definitely not interested in saying bad things about other blogs or whatever.  Talk about Articles 11 and 26.  Talk about the procedures.  Talk about the CBA.  Bring facts. 

And if you get this far, you have my sincere thanks for getting through all of this. I hope you found at least some of this to be worth your while.